Document:

ex107108.htm

    EX-10.71.08

    
 

    MULTIFAMILY
NOTE

    MULTISTATE
– FIXED TO FLOAT

    (REVISION
DATE 2-15-2008)

    

    

    
      	
              US
      $6,400,000.00

            	
              Effective
      Date: October 16, 2008

            

    

    

    

    FOR VALUE RECEIVED, the undersigned
(together with such party's or parties' successors and assigns, "Borrower"), jointly and
severally (if more than one) promises to pay to the order of KEYCORP REAL ESTATE
CAPITAL MARKETS, INC., an Ohio corporation, the principal sum of Six Million
Four Hundred Thousand and No/100 Dollars (US $6,400,000.00), with interest
on the unpaid principal balance, as hereinafter provided.

    

    1.           Defined Terms.

    

    (a)           As
used in this Note:

    

    "Adjustable Interest Rate"
means the variable annual interest rate calculated for each Interest Adjustment
Period so as to equal the Index Rate for such Interest Adjustment Period
(truncated at the fifth (5th)
decimal place if necessary) plus the Margin.

    

    "Amortization Period" means a
period of 360 full consecutive calendar months.

    "Base Recourse" means a portion of the
Indebtedness equal to zero percent (0%) of the original principal balance of
this Note.

    

    "Business Day" means any day
other than a Saturday, a Sunday or any other day on which Lender or the national
banking associations are not open for business.

    

    "Default Rate" means (i) during
the Fixed Rate Period, an annual interest rate equal to four (4) percentage
points above the Fixed Interest Rate; and (ii) during the Extension Period, a
variable annual interest rate equal to four (4) percentage points above the
Adjustable Interest Rate in effect from time to time.  However, at no
time will the Default Rate exceed the Maximum Interest Rate.

    

    "Extended Maturity Date" means,
if the Extension Period becomes effective pursuant to this Note, the earlier of
(i) November 1, 2019, and (ii) the date on which the unpaid principal balance of
this Note becomes due and payable by

    
      
         

      

      
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    acceleration
or otherwise pursuant to the Loan Documents or the exercise by Lender of any
right or remedy thereunder.

    

    "Extension Period" means the
twelve (12) consecutive calendar months period commencing on the Scheduled
Initial Maturity Date.

    

    "Fixed Interest Rate" means the
annual interest rate of six and four hundred ninety thousandths percent
(6.490%).

    

    "Fixed Rate Period" means the
period beginning on the date of this Note and
continuing through October 31, 2018.

    

    "Index Rate" means, for any
Interest Adjustment Period, the Reference Billâ  Index Rate for
such Interest Adjustment Period.

    

    "Initial Maturity Date"
means the earlier
of (i) November 1,
2018 (the "Scheduled Initial
Maturity Date"), and (ii) the date on which the unpaid principal balance
of this Note becomes due and payable by acceleration or otherwise pursuant to
the Loan Documents or the exercise by Lender of any right or remedy
thereunder.

    

    "Installment Due Date" means,
for any monthly installment of interest only or principal and interest, the date
on which such monthly installment is due and payable pursuant to Section 3 of
this Note. The "First
Installment Due Date" under this Note is December 1, 2008.

    

    "Interest Adjustment Period"
means each successive one calendar
month period during the Extension Period and until the entire Indebtedness is
paid in full.

    

    "Lender" means the holder from
time to time of this Note.

    

    "LIBOR Index" means the British
Bankers Association's (BBA) one (1) month LIBOR Rate for United States Dollar
deposits, as displayed on the LIBOR Index Page used to establish the LIBOR Index
Rate.

    

    "LIBOR Index Rate" means, for
any Interest Adjustment Period after the first Interest Adjustment Period, the
BBA's LIBOR Rate for the LIBOR Index released by the BBA most recently preceding
the first day of such Interest Adjustment Period, as such LIBOR Rate is
displayed on the LIBOR Index Page.  The LIBOR Index Rate for the first
Interest Adjustment Period means the British Bankers

    
      
         

      

      
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    Association's
(BBA) LIBOR Rate for the LIBOR Index released by the BBA most recently preceding
the first day of the month in which the first Interest Adjustment Period begins,
as such LIBOR Rate is displayed on the LIBOR Index Page.  "LIBOR Index Page" is the
Bloomberg L.P., page "BBAM", or such other page for the LIBOR Index as may
replace page BBAM on that service, or at the option of Lender (i) the applicable
page for the LIBOR Index on another service which electronically transmits or
displays BBA LIBOR Rates, or (ii) any publication of LIBOR rates available from
the BBA.  In the event the BBA ceases to set or publish a LIBOR
rate/interest settlement rate for the LIBOR Index, Lender will designate an
alternative index, and such alternative index shall constitute the LIBOR Index
Page.

    

    "Loan" means the loan evidenced
by this Note.

    

    
      	
               
      

            	
              "Margin" means two and
      one-half (2.5) percentage points (250 basis
  points).

            

    

    

    "Maturity Date" means the
Extended Maturity Date unless pursuant to Section 3(e) of this Note the
Extension Period does not or cannot become effective, in which case the Maturity
Date means the Initial Maturity Date.

    

    "Maximum Interest Rate" means
the rate of interest that results in the maximum amount of interest allowed by
applicable law.

    

    "Prepayment Premium Period"
means the period during which, if a prepayment of principal occurs, a prepayment
premium will be payable by Borrower to Lender.  The Prepayment Premium
Period is the period from and including the date of this Note until but not
including the first day of the Window Period.  For this Note, the
Prepayment Premium Period equals the Yield Maintenance Period.

    

    "Reference Billsâ" means
the unsecured general obligations of the Federal Home Loan Mortgage Corporation
("Freddie Mac")
designated by Freddie Mac as "Reference BillsâSecurities" and having
original durations to maturity most comparable to the term of the Reference Bill
Index, and issued by Freddie Mac at regularly scheduled auctions.  In
the event Freddie Mac shall at any time cease to designate any unsecured general
obligations of Freddie Mac as "Reference Bills Securities", then at the option
of Lender (i) Lender may select from time to time another unsecured general
obligation of Freddie Mac having original durations to maturity most comparable
to the term of the Reference Bill Index and issued by Freddie Mac at regularly
scheduled auctions, and the term "Reference Bills" as used in this Note shall
mean such other unsecured general obligations as selected

    
      
         

      

      
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    by
Lender; or (ii) for any one or more Interest Adjustment Periods, Lender may use
the applicable LIBOR Index Rate as the Index Rate for such Interest Adjustment
Period(s).

    

    "Reference Bill Index" means
the one-month Reference Bills.  One-month reference bills have
original durations to maturity of approximately 30 days.

    

    "Reference Bill Index Rate"
means, for any Interest Adjustment Period after the first Interest Adjustment
Period, the Money Market Yield for the Reference Bills as established by the
Reference Bill auction conducted by Freddie Mac most recently preceding the
first day of such Interest Adjustment Period, as displayed on the Reference Bill
Index Page.  The Reference Bill Index Rate for the first Interest
Adjustment Period means the Money Market Yield for the Reference Bills as
established by the Reference Bill auction conducted by Freddie Mac most recently
preceding the first day of the month in which the first Interest Adjustment
Period begins, as displayed on the Reference Bill Index Page.  The
"Reference Bill Index
Page" is the Freddie Mac Debt Securities Web Page (accessed via the
Freddie Mac internet site at www.freddiemac.com), or at the option of Lender,
any publication of Reference Bills auction results available from Freddie Mac.
However, if Freddie Mac has not conducted a Reference Bill auction within the
60-calendar day period prior to the first day of an Interest Adjustment Period,
the Reference Bill Index Rate for such Interest Adjustment Period will be the
LIBOR Index Rate for such Interest Adjustment Period.

    

    "Remaining Amortization Period"
means, at any point in time, the number of consecutive calendar months equal to
the number of months in the Amortization Period minus the number of scheduled
monthly installments of principal and
interest that have elapsed since the date of this Note.

    

    "Security Instrument" means the
multifamily mortgage, deed to secure debt or deed of trust effective as of the
effective date of this Note, from Borrower to or for the benefit of Lender and
securing this Note.

    

    
      	
               
      

            	
              "Treasury Security" means
      the 9.000% U.S. Treasury Security due November 15,
  2018.

            

    

    

    "Window Period" means the
Extension Period.

    

    "Yield Maintenance Period"
means the period from and including the date of this Note until but not
including the Scheduled Initial Maturity Date.

    
      
         

      

      
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    (b)           Other
capitalized terms used but not defined in this Note shall have the meanings
given to such terms in the Security Instrument.

    

    2.           Address for
Payment.  All payments due under this Note shall be payable at
127 Public Square, Cleveland, Ohio 44114, or such other place as may be
designated by Notice to Borrower from or on behalf of Lender.

    

    3.           Payments.

    

    (a)           During
the Fixed Rate Period, interest will accrue on the outstanding principal balance
of this Note at the Fixed Interest Rate, subject to the provisions of Section 8
of this Note. During the Extension Period, interest will accrue on the
outstanding principal balance of this Note at the Adjustable Interest Rate,
subject to the provisions of Section 8 of this Note.

    

    (b)           Interest
under this Note shall be computed, payable and allocated on the basis of an
actual/360 interest calculation schedule (interest is payable for the actual
number of days in each month, and each month's interest is calculated by
multiplying the unpaid principal amount of this Note as of the first day of the
month for which interest is being calculated by the Fixed Interest Rate (during
the Fixed Rate Period) or the applicable Adjustable Interest Rate (during the
Extension Period), dividing the product by 360, and multiplying the quotient by
the number of days in the month for which interest is being
calculated).  For convenience in determining the amount of a monthly
installment of principal and interest under this Note, Lender will use a 30/360
interest calculation payment schedule (each year is treated as consisting of
twelve 30-day months).  However, as provided above, the portion of the
monthly installment actually payable as and allocated to interest will be based
upon an actual/360 interest calculation schedule, and the amount of each
installment attributable to principal and the amount attributable to interest
will vary based upon the number of days in the month for which such installment
is paid.  Each monthly payment of principal and interest will first be
applied to pay in full interest due, and the balance of the monthly payment paid
by Borrower will be credited to principal.

    

    (c)           Unless
disbursement of principal is made by Lender to Borrower on the first day of a
calendar month, interest for the period beginning on the date of disbursement
and ending on and including the last day of such calendar month shall be payable
by Borrower simultaneously with the execution of this Note.  If
disbursement of principal is made by Lender to Borrower on the first day of a
calendar month, then no payment will be due from Borrower at the time of the
execution of this Note.  The Installment Due Date for the first
monthly installment payment under Section 3(d) of interest only or principal and
interest, as applicable, will be the First Installment Due Date set forth in
Section 1(a) of this Note.  Except as provided in this Section 3(c)
and in Section 10, accrued interest will be payable in arrears.

    
      
         

      

      
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               (d)

            	
              (i)

            	
              Beginning
      on the First Installment Due Date, and continuing until and including the
      monthly installment due on November 1, 2010 accrued interest only shall be
      payable by Borrower in consecutive monthly installments due and payable on
      the first day of each calendar month. The amount of each monthly
      installment of interest only payable pursuant to this Subsection 3(d)(i)
      on an Installment Due Date shall vary, and shall equal $1,153.77778
      multiplied by the number of days in the month prior to the Installment Due
      Date.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Beginning
      on December 1, 2010, and continuing until and including the monthly
      installment due on the Initial Maturity Date, principal and accrued
      interest shall be payable by Borrower in consecutive monthly installments
      due and payable on the first day of each calendar month. The amount of the
      monthly installment of principal and interest payable pursuant to this
      Subsection 3(d)(ii) on an Installment Due Date shall be Forty Thousand
      Four Hundred Ten and 27/100 Dollars
  ($40,410.27).

            

    

    

    (e)           Except
as otherwise provided in this Section 3(e), all remaining Indebtedness,
including all principal and interest, shall be due and payable by Borrower on
the Initial Maturity Date.  However, so long as (i) the Initial
Maturity Date has not occurred prior to the Scheduled Initial Maturity Date, and
(ii) no Event of Default or event or circumstance which, with the giving of
notice or passage of time or both, could constitute an Event of Default exists
on the Scheduled Initial Maturity Date, then the Extension Period automatically
will become effective and the date for full payment of the Indebtedness
automatically shall be extended until the Extended Maturity Date.  If
the Extension Period becomes effective, monthly installments of principal and
interest or interest only will be payable during the Extension Period as
provided in Section 3(f).  Anything in Section 21 of the Security
Instrument to the contrary notwithstanding, during the Extension Period,
Borrower will not request that Lender consent to, and Lender will not consent
to, a Transfer that, absent such consent, would constitute an Event of
Default.

    

    (f)           If
the Extension Period becomes effective, beginning on December 1, 2018, and
continuing until and including the monthly installment due on the Extended
Maturity Date, principal and accrued interest shall be payable by Borrower in
consecutive monthly installments due and payable on the first day of each
calendar month.  The amount of the monthly installment of principal
and interest payable pursuant to this Section 3(f) on an Installment Due Date
shall be calculated so as to equal the monthly payment amount which would be
payable on the Installment Due Date as if the unpaid principal balance of this
Note as of the first day of the Interest Adjustment Period immediately preceding
the Installment Due Date was to be fully amortized, together with interest
thereon at the Adjustable Interest Rate in effect for such
Interest

    
      
         

      

      
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    Adjustment
Period, in equal consecutive monthly payments paid on the first day of each
calendar month over the Remaining Amortization Period.

    

    (g)           During
the Extension Period, Lender shall provide Borrower with Notice, given in the
manner specified in the Security Instrument, of the amount of each monthly
installment due under this Note.  However, if Lender has not provided
Borrower with prior notice of the monthly payment due on any Installment Due
Date, then Borrower shall pay on that Installment Due Date an amount equal to
the monthly installment payment for which Borrower last received
notice.  If Lender at any time determines that Borrower has paid one
or more monthly installments in an incorrect amount because of the operation of
the preceding sentence, or because Lender has miscalculated the Adjustable
Interest Rate or has otherwise miscalculated the amount of any monthly
installment, then Lender shall give notice to Borrower of such
determination.  If such determination discloses that Borrower has paid
less than the full amount due for the period for which the determination was
made, Borrower, within 30 calendar days after receipt of the notice from Lender,
shall pay to Lender the full amount of the deficiency.  If such
determination discloses that Borrower has paid more than the full amount due for
the period for which the determination was made, then the amount of the
overpayment shall be credited to the next installment(s) of interest only or
principal and interest, as applicable, due under this Note (or, if an Event of
Default has occurred and is continuing, such overpayment shall be credited
against any amount owing by Borrower to Lender).

    

    (h)           All
payments under this Note shall be made in immediately available U.S.
funds.

    

    (i)           Any
regularly scheduled monthly installment of interest only or principal and
interest payable pursuant to this Section 3 that is received by Lender
before the date it is due shall be deemed to have been received on the due date
for the purpose of calculating interest due.

    

    (j)           Any
accrued interest remaining past due for 30 days or more, at Lender's discretion,
may be added to and become part of the unpaid principal balance of this Note and
any reference to "accrued interest" shall refer to accrued interest which has
not become part of the unpaid principal balance.  Any amount added to
principal pursuant to the Loan Documents shall bear interest at the applicable
rate or rates specified in this Note and shall be payable with such interest
upon demand by Lender and absent such demand, as provided in this Note for the
payment of principal and interest.

    

    (k)           In
accordance with Section 14, interest charged under this Note cannot exceed the
Maximum Interest Rate.   If the Adjustable Interest Rate at any
time exceeds the Maximum Interest Rate, resulting in the charging of interest
hereunder to be limited to the Maximum Interest Rate, then any subsequent
reduction in the Adjustable Interest Rate shall not reduce the rate at which
interest under this Note accrues below the Maximum Interest Rate until the
total

    
      
         

      

      
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    amount of
interest accrued hereunder equals the amount of interest which would have
accrued had the Adjustable Interest Rate at all times been in
effect.

    

    4.           Application of
Payments.  If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply the amount received to
amounts then due and payable in any manner and in any order determined by
Lender, in Lender's discretion.  Borrower agrees that neither Lender's
acceptance of a payment from Borrower in an amount that is less than all amounts
then due and payable nor Lender's application of such payment shall constitute
or be deemed to constitute either a waiver of the unpaid amounts or an accord
and satisfaction.

    

    5.           Security.  The
Indebtedness is secured by, among other things, the Security Instrument, and
reference is made to the Security Instrument for other rights of Lender as to
collateral for the Indebtedness.

    

    6.           Acceleration.  If an
Event of Default has occurred and is continuing, the entire unpaid principal
balance, any accrued interest, any prepayment premium payable under
Section 10, and all other amounts payable under this Note and any other
Loan Document, shall at once become due and payable, at the option of Lender,
without any prior notice to Borrower (except if notice is required by applicable
law, then after such notice).  Lender may exercise this option to
accelerate regardless of any prior forbearance.  For purposes of
exercising such option, Lender shall calculate the prepayment premium as if
prepayment occurred on the date of acceleration.  If prepayment occurs
thereafter, Lender shall recalculate the prepayment premium as of the actual
prepayment date.

    

    7.           Late
Charge.

    

    (a)           If
any monthly installment of interest or principal and interest or other amount
payable under this Note or under the Security Instrument or any other Loan
Document is not received in full by Lender (i) during the Fixed Rate Period,
within ten (10) days after the installment or other amount is due, or (ii)
during the Extension Period, within five (5) days after the installment or other
amount is due, counting from and including the date such installment or other
amount is due (unless applicable law requires a longer period of time before a
late charge may be imposed, in which event such longer period shall be
substituted), Borrower shall pay to Lender, immediately and without demand by
Lender, a late charge equal to five percent (5%) of such installment or other
amount due (unless applicable law requires a lesser amount be charged, in which
event such lesser amount shall be substituted).

    

    (b)           Borrower
acknowledges that its failure to make timely payments will cause Lender to incur
additional expenses in servicing and processing the Loan and that it is
extremely

    
      
         

      

      
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    difficult
and impractical to determine those additional expenses.  Borrower
agrees that the late charge payable pursuant to this Section represents a
fair and reasonable estimate, taking into account all circumstances existing on
the date of this Note, of the additional expenses Lender will incur by reason of
such late payment.  The late charge is payable in addition to, and not
in lieu of, any interest payable at the Default Rate pursuant to
Section 8.

    

    8.           Default
Rate.

    

    (a)           So
long as (i) any monthly installment under this Note remains past due for
thirty (30) days or more or (ii) any other Event of Default has occurred
and is continuing, then notwithstanding anything in Section 3 of this Note to
the contrary, interest under this Note shall accrue on the unpaid principal
balance from the Installment Due Date of the first such unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
the Default Rate.

    

    (b)           From
and after the Maturity Date, the unpaid principal balance shall continue to bear
interest at the Default Rate until and including the date on which the entire
principal balance is paid in full.

    

    (c)           Borrower
acknowledges that (i) its failure to make timely payments will cause Lender
to incur additional expenses in servicing and processing the Loan,
(ii) during the time that any monthly installment under this Note is
delinquent for thirty (30) days or more, Lender will incur additional costs and
expenses arising from its loss of the use of the money due and from the adverse
impact on Lender's ability to meet its other obligations and to take advantage
of other investment opportunities; and (iii)  it is extremely difficult and
impractical to determine those additional costs and
expenses.  Borrower also acknowledges that, during the time that any
monthly installment under this Note is delinquent for thirty (30) days or more
or any other Event of Default has occurred and is continuing, Lender's risk of
nonpayment of this Note will be materially increased and Lender is entitled to
be compensated for such increased risk.  Borrower agrees that the
increase in the rate of interest payable under this Note to the Default Rate
represents a fair and reasonable estimate, taking into account all circumstances
existing on the date of this Note, of the additional costs and expenses Lender
will incur by reason of the Borrower's delinquent payment and the additional
compensation Lender is entitled to receive for the increased risks of nonpayment
associated with a delinquent loan.

    

    9.           Limits on Personal
Liability.

    

    (a)           Except
as otherwise provided in this Section 9, Borrower shall have no personal
liability under this Note, the Security Instrument or any other Loan Document
for the repayment of the Indebtedness or for the performance of any other
obligations of Borrower under the Loan

    
      
         

      

      
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    Documents
and Lender's only recourse for the satisfaction of the Indebtedness and the
performance of such obligations shall be Lender's exercise of its rights and
remedies with respect to the Mortgaged Property and to any other collateral held
by Lender as security for the Indebtedness.  This limitation on
Borrower's liability shall not limit or impair Lender's enforcement of its
rights against any guarantor of the Indebtedness or any guarantor of any other
obligations of Borrower.

    

    (b)           Borrower
shall be personally liable to Lender for the amount of the Base Recourse, plus
any other amounts for which Borrower has personal liability under this
Section 9.

    

    (c)           In
addition to the Base Recourse, Borrower shall be personally liable to Lender for
the repayment of a further portion of the Indebtedness equal to any loss or
damage suffered by Lender as a result of the occurrence of any of the following
events:

    

    
      	
               
      

            	
              (i)

            	
              Borrower
      fails to pay to Lender upon demand after an Event of Default all Rents to
      which Lender is entitled under Section 3(a) of the Security
      Instrument and the amount of all security deposits collected by Borrower
      from tenants then in residence.  However, Borrower will not be
      personally liable for any failure described in this subsection (i) if
      Borrower is unable to pay to Lender all Rents and security deposits as
      required by the Security Instrument because of a valid order issued in a
      bankruptcy, receivership, or similar judicial
  proceeding.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Borrower
      fails to apply all insurance proceeds and condemnation proceeds as
      required by the Security Instrument.  However, Borrower will not
      be personally liable for any failure described in this
      subsection (ii) if Borrower is unable to apply insurance or
      condemnation proceeds as required by the Security Instrument because of a
      valid order issued in a bankruptcy, receivership, or similar judicial
      proceeding.

            

    

    

    
      	
               
      

            	
              (iii)

            	
              Borrower
      fails to comply with Section 14(g) or (h) of the Security Instrument
      relating to the delivery of books and records, statements, schedules and
      reports.

            

    

    

    
      	
               
      

            	
              (iv)

            	
              Borrower
      fails to pay when due in accordance with the terms of the Security
      Instrument the amount of any item below marked
      "Deferred"; provided however, that if no item is marked "Deferred", this
      Section 9(c)(iv) shall be of no force or
      effect.  

            

    

    
      	
               
      

            	 	
              [Deferred]

            	
              Hazard
      Insurance premiums or other insurance
premiums,

            

    

    [Collect]                      Taxes,

    
      
         

      

      
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              [Deferred]

            	
              water
      and sewer charges (that could become a lien on the Mortgaged
      Property),

            

    

    [N/A]                                ground
rents,

    
      	
               
      

            	
              [Deferred]

            	
              assessments
      or other charges (that could become a lien on the Mortgaged
      Property)

            

    

    

    (d)           In
addition to the Base Recourse, Borrower shall be personally liable to Lender
for:

    

    
      	
               
      

            	
              (i)

            	
              the
      performance of all of Borrower's obligations under Section 18 of the
      Security Instrument (relating to environmental
  matters);

            

    

    

    
      	
               
      

            	
              (ii)

            	
              the
      costs of any audit under Section 14(g) of the Security Instrument;
      and

            

    

    

    
      	
               
      

            	
              (iii)

            	
              any
      costs and expenses incurred by Lender in connection with the collection of
      any amount for which Borrower is personally liable under this
      Section 9, including Attorneys' Fees and Costs and the costs of
      conducting any independent audit of Borrower's books and records to
      determine the amount for which Borrower has personal
      liability.

            

    

    

    (e)           
All payments made by Borrower with respect to the Indebtedness and all amounts
received by Lender from the enforcement of its rights under the Security
Instrument and the other Loan Documents shall be applied first to the portion of
the Indebtedness for which Borrower has no personal liability.

    

    (f)           Notwithstanding
the Base Recourse, Borrower shall become personally liable to Lender for the
repayment of all of the Indebtedness upon the occurrence of any of the following
Events of Default:

    

    
      	
               
      

            	
              (i)

            	
              Borrower's
      ownership of any property or operation of any business not permitted by
      Section 33 of the Security
Instrument;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              a
      Transfer (including, but not limited to, a lien or encumbrance) that is an
      Event of Default under Section 21 of the Security Instrument, other
      than a Transfer consisting solely of the involuntary removal or
      involuntary withdrawal of a general partner in a limited partnership or a
      manager in a limited liability company;
or

            

    

    

    
      	
               
      

            	
              (iii)

            	
              fraud
      or written material misrepresentation by Borrower or any officer,
      director, partner, member or employee of Borrower in connection with
      the

            

    

    
      
         

      

      
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    application
for or creation of the Indebtedness or any request for any action or consent by
Lender.

    

    (g)           To
the extent that Borrower has personal liability under this Section 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. To the
fullest extent permitted by applicable law, in any action to enforce Borrower's
personal liability under this Section 9, Borrower waives any right to set
off the value of the Mortgaged Property against such personal
liability.

    

    10.           Voluntary
and Involuntary Prepayments.

    

    (a)           Any
receipt by Lender of principal due under this Note prior to the Maturity Date,
other than principal required to be paid in monthly installments pursuant to
Section 3, constitutes a prepayment of principal under this
Note.  Without limiting the foregoing, any application by Lender,
prior to the Maturity Date, of any proceeds of collateral or other security to
the repayment of any portion of the unpaid principal balance of this Note
constitutes a prepayment under this Note.

    
 

    (b)           Borrower
may voluntarily prepay all of the unpaid principal balance of this Note on an Installment Due Date
so long as
Borrower designates the date for such prepayment in a Notice from
Borrower to Lender given at least 30 days prior to the date of such
prepayment.  If an Installment Due Date (as defined in Section 1(a))
falls on a day which is not a Business Day, then with respect to payments
made under this Section 10 only, the term "Installment Due Date" shall mean the
Business Day immediately preceding the scheduled Installment Due
Date.

    

    (c)           Notwithstanding
subsection (b) above, Borrower may voluntarily prepay all of the unpaid
principal balance of this Note on a Business Day other than an Installment Due
Date if Borrower provides Lender with the Notice set forth in subsection (b) and
meets the other requirements set forth in this subsection.  Borrower
acknowledges that Lender has agreed that Borrower may prepay principal on a
Business Day other than an Installment Due Date only because Lender shall deem
any prepayment received by Lender on any day other than an Installment Due Date
to have been received on the Installment Due Date immediately following such
prepayment and Borrower shall be responsible for all interest that would have
been due if the prepayment had actually been made on the Installment Due Date
immediately following such prepayment.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (d)           Unless
otherwise expressly provided in the Loan Documents, Borrower may not voluntarily
prepay less than all of the unpaid principal balance of this Note.  In
order to voluntarily prepay all or any part of the principal of this Note,
Borrower must also pay to Lender, together with the amount of principal
being prepaid, (i) all accrued and unpaid interest due under this Note,
plus (ii) all other sums due to Lender at the time of such prepayment, plus
(iii) any prepayment premium calculated pursuant to
Section 10(e).

    

    (e)           Except
as provided in Section 10(f), a prepayment premium shall be due and payable by
Borrower in connection with any prepayment of principal under this Note during
the Prepayment Premium Period.  The prepayment premium shall be
whichever is the greater of subsections (A) and (B) below:

    

    
      	
               
      

            	
              (A)

            	
              1.0%
      of the amount of principal being prepaid;
or

            

    

    

    (B)           the
product obtained by multiplying:

    

    (1)           the
amount of principal being prepaid or accelerated,

    by

    
      	
               
      

            	
              (2)

            	
              the
      excess (if any) of the Monthly Note Rate over the Assumed Reinvestment
      Rate,

            

    

    by

    (3)           the
Present Value Factor.

    

    For purposes of subsection (B),
the following definitions shall apply:

    

    
      	
               
      

            	
              Monthly Note Rate:
      one-twelfth (1/12) of the Fixed Interest Rate, expressed as a decimal
      calculated to five digits.

            

    

    

    
      	
               
      

            	
              Prepayment
      Date:  in the case of a voluntary prepayment, the date on
      which the prepayment is made; in the case of the application by Lender of
      collateral or security to a portion of the principal balance, the date of
      such application.

            

    

    

    
      	
               
      

            	
              Assumed Reinvestment
      Rate:  one-twelfth (1/12) of the yield rate, as of the
      close of the trading session which is 5 Business Days before the
      Prepayment Date, on the Treasury Security, as reported in The Wall Street
      Journal, expressed as a decimal calculated to five
      digits.  In the event that no yield is published on the
      applicable date for the Treasury Security, Lender, in its discretion,
      shall select the non-callable Treasury Security maturing in the same year
      as the Treasury Security with the lowest
yield

            

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    published
in The Wall Street
Journal as of the applicable date.  If the publication of such
yield rates in The Wall Street
Journal is discontinued for any reason, Lender shall select a security
with a comparable rate and term to the Treasury Security.  The
selection of an alternate security pursuant to this Section shall be made
in Lender’s discretion.

    

    
      	
               
      

            	
              Present Value
      Factor:  the factor that discounts to present value the
      costs resulting to Lender from the difference in interest rates during the
      months remaining in the Yield Maintenance Period, using the Assumed
      Reinvestment Rate as the discount rate, with monthly compounding,
      expressed numerically as follows:

            

    

    

     

    

    
      	
               
      

            	
              n = the number of months
      remaining in Yield Maintenance Period; provided, however, if a prepayment
      occurs on an Installment Due Date, then the number of months remaining in
      the Yield Maintenance Period shall be
      calculated beginning with the month in which such prepayment occurs and if
      such prepayment occurs on a Business Day other than an Installment Due
      Date, then the number of months remaining in the Yield Maintenance Period
      shall be calculated beginning with the month immediately following the
      date of such prepayment.

            

    

    

    ARR = Assumed Reinvestment
Rate

    

    (f)           Notwithstanding
any other provision of this Section 10, no prepayment premium shall be
payable with respect to (i) any prepayment made during the Window Period,
or (ii) any prepayment occurring as a result of the application of any
insurance proceeds or condemnation award under the Security
Instrument.

    

    (g)           Unless
Lender agrees otherwise in writing, a permitted or required prepayment of less
than the unpaid principal balance of this Note shall not extend or postpone the
due date of any subsequent monthly installments or change the amount of such
installments.

    

    (h)           Borrower
recognizes that any prepayment of any of the unpaid principal balance of this
Note, whether voluntary or involuntary or resulting from an Event of Default
by

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    Borrower,
will result in Lender's incurring loss, including reinvestment loss, additional
expense and frustration or impairment of Lender's ability to meet its
commitments to third parties.  Borrower agrees to pay to Lender upon
demand damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such
damages.  Borrower therefore acknowledges and agrees that the formula
for calculating prepayment premiums set forth in this Note represents a
reasonable estimate of the damages Lender will incur because of a
prepayment.  Borrower further acknowledges that any lockout and
prepayment premium provisions of this Note are a material part of the
consideration for the Loan, and that the terms of this Note are in other
respects more favorable to Borrower as a result of the Borrower's voluntary
agreement to the lockout and prepayment premium provisions.

    

    11.           Costs and
Expenses.  To the fullest extent allowed by applicable law,
Borrower shall pay all expenses and costs, including Attorneys' Fees and Costs
incurred by Lender as a result of any default under this Note or in connection
with efforts to collect any amount due under this Note, or to enforce the
provisions of any of the other Loan Documents, including those incurred in
post-judgment collection efforts and in any bankruptcy proceeding (including any
action for relief from the automatic stay of any bankruptcy proceeding) or
judicial or non-judicial foreclosure proceeding.

    

    12.           Forbearance.  Any
forbearance by Lender in exercising any right or remedy under this Note, the
Security Instrument, or any other Loan Document or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of that or any
other right or remedy.  The acceptance by Lender of any payment after
the due date of such payment, or in an amount which is less than the required
payment, shall not be a waiver of Lender's right to require prompt payment when
due of all other payments or to exercise any right or remedy with respect to any
failure to make prompt payment.  Enforcement by Lender of any security
for Borrower's obligations under this Note shall not constitute an election by
Lender of remedies so as to preclude the exercise of any other right or remedy
available to Lender.

    

    13.           Waivers.  Borrower
and all endorsers and guarantors of this Note and all other third party obligors
waive presentment, demand, notice of dishonor, protest, notice of acceleration,
notice of intent to demand or accelerate payment or maturity, presentment for
payment, notice of nonpayment, grace, and diligence in collecting the
Indebtedness.

    

               14.           Loan Charges (Texas
Only).  Borrower and Lender intend at all times to comply with
the law of the State of Texas governing the Maximum Interest Rate or maximum
amount of interest payable on or in connection with this Note and the
Indebtedness (or applicable United States federal law to the extent that it
permits Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under Texas law).  If the applicable law is
ever judicially interpreted so as to render usurious any amount payable under
this Note or under any

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    other
Loan Document, or contracted for, charged, taken, reserved or received with
respect to the Indebtedness, or as a result of acceleration of the maturity of
this Note, or if any prepayment by Borrower results in Borrower having paid any
interest in excess of that permitted by any applicable law, then Borrower and
Lender expressly intend that all excess amounts collected by Lender shall be
applied to reduce the unpaid principal balance of this Note (or, if this Note
has been or would thereby be paid in full, shall be refunded to Borrower), and
the provisions of this Note, the Security Instrument and any other Loan
Documents immediately shall be deemed reformed and the amounts thereafter
collectible under this Note or any other Loan Document reduced, without the
necessity of the execution of any new documents, so as to comply with any
applicable law, but so as to permit the recovery of the fullest amount otherwise
payable under this Note or any other Loan Document.  The right to
accelerate the Maturity Date of this Note does not include the right to
accelerate any interest, which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of acceleration.  All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of the Indebtedness shall, to the extent
permitted by any applicable law, be amortized, prorated, allocated and spread
throughout the full term of the Indebtedness until payment in full so that the
rate or amount of interest on account of the Indebtedness does not exceed the
applicable usury ceiling.  Notwithstanding any provision contained in
this Note, the Security Instrument or any other Loan Document that permits the
compounding of interest, including any provision by which any accrued interest
is added to the principal amount of this Note, the total amount of interest that
Borrower is obligated to pay and Lender is entitled to receive with respect to
the Indebtedness shall not exceed the amount calculated on a simple (i.e., non-compounded)
interest basis at the maximum rate on principal amounts actually advanced to or
for the account of Borrower, including all current and prior advances and any
advances made pursuant to the Security Instrument or other Loan Documents (such
as for the payment of taxes, insurance premiums and similar expenses or
costs).

    

    15.           Commercial
Purpose.  Borrower represents that Borrower is incurring the
Indebtedness solely for the purpose of carrying on a business or commercial
enterprise, and not for personal, family, household, or agricultural
purposes.

    

    16.           Counting of
Days.  Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.

    

    17.           Governing Law.  This
Note shall be governed by the law of the Property Jurisdiction.

    

    18.           Captions.  The
captions of the Sections of this Note are for convenience only and shall be
disregarded in construing this Note.

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    19.           Notices; Written Modifications.

    

    (a)           All
Notices, demands and other communications required or permitted to be given
pursuant to this Note shall be given in accordance with Section 31 of the
Security Instrument.

    

    (b)           Any
modification or amendment to this Note shall be ineffective unless in writing
signed by the party sought to be charged with such modification or amendment;
provided, however, that in the event of a Transfer under the terms of the
Security Instrument that requires Lender's consent, any or some or all of the
Modifications to Multifamily Note set forth in Exhibit A to this Note may
be modified or rendered void by Lender at Lender's option, by Notice to Borrower
and the transferee, as a condition of Lender's consent.

    

    20.           Consent to Jurisdiction and
Venue.  Borrower agrees that any controversy arising under or
in relation to this Note may be litigated in the Property
Jurisdiction.  The state and federal courts and authorities with
jurisdiction in the Property Jurisdiction shall have jurisdiction over all
controversies that shall arise under or in relation to this
Note.  Borrower irrevocably consents to service, jurisdiction, and
venue of such courts for any such litigation and waives any other venue to which
it might be entitled by virtue of domicile, habitual residence or
otherwise.  However, nothing in this Note is intended to limit any
right that Lender may have to bring any suit, action or proceeding relating to
matters arising under this Note in any court of any other
jurisdiction.

    

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

    
      

    

    
      22.                 State-Specific
Provisions.  N/A.

    

    

    ATTACHED
EXHIBIT.    The Exhibit noted below, if marked with an "X"
in the space provided, is attached to this Note:

    

    [X]             Exhibit
A                                Modifications
to Multifamily Note

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, and in
consideration of the Lender's agreement to lend Borrower the principal amount
set forth above, Borrower has signed and delivered this Note under seal or has
caused this Note to be signed and delivered under seal by its duly authorized
representative. Borrower intends that this Note shall be deemed to be signed and
delivered as a sealed instrument.

    

    EMERITOL EASTMAN ESTATES LLC,
a Delaware limited liability company

    

    
      	
               
      

            	
              By:

            	
              Batus,
      LLC, a Delaware limited liability company, its Sole
  Member

            

    

    

    
      	
               
      

            	
              By:

            	
              Summerville
      Senior Living, Inc., a Delaware corporation, its Administrative
      Member

            

    

    

    

    By:_/s/
Eric Mendelsohn ________

    Name:   Eric
Mendelsohn

    
      	
               
      

            	
              Title:

            	
              Senior
      Vice President Corporate
Development

            

    

    

    

    Borrower's Social Security/Employer ID
Number

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    PAY TO
THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION

    WITHOUT
RECOURSE.

    

    

    KEYCORP
REAL ESTATE CAPITAL MARKETS, INC., an Ohio corporation

    

    

    

    By:
/s/                      Robin
M. Mullenix

    Name:                      Robin
M. Mullenix

    Title:                      Vice
President

    

    Date:                      October
16, 2008

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    MODIFICATIONS
TO MULTIFAMILY NOTE

    

    The
following modifications are made to the text of the Note that precedes this
Exhibit.

    

    
      	
              1.  

            	
              The
      definition of “Margin” in Section 1 is modified to read as
      follows:

            

    

    

    “means two and three-quarters (2.75)
percentage points (275 basis points)”.

    

    
      	
              2.  

            	
              Section
      7(a) is amended by adding the following phrase after “Loan Document” in
      the second line, “other than the payment of the entire outstanding
      principal balance due and payable on the Maturity
  Date,”.

            

    

     

    
      	
              3.  

            	
              Section
      9(c) is amended by adding the following phrase in both subsection (i) and
      subsection (ii), in each case after the word “in” and before the phrase “a
      bankruptcy, receivership, or similar judicial
  proceeding”:

            

    

    

    “or ‘automatic stay’ applicable because
of”.

    

    
      	
              4.  

            	
              Section
      9(d) is amended by adding the following new
  subsection:

            

    

    

    
      	
               

            

    

    
      	
               
      

            	
              “(iv)

            	
              any
      costs, fees, and expenses incurred by Lender as a result of an insurance
      claim not being covered by Borrower’s captive insurer, which claim would
      or should have been covered by the insurance required under Section 19 of
      the Security Instrument, in Lender’s reasonable
      determination.”

            

    

    
      
         

      

      
        A
- 1ex107109.htm

    EX-10.71.09

      

       

      LOAN
AGREEMENT

       

      for a
loan in the amount of

       

      $17,595,000.00

       

      MADE BY
AND BETWEEN

       

      EMERITOL DOWLEN OAKS LLC, a
Delaware limited liability company,

      EMERITOL SADDLERIDGE LODGE
LLC, a Delaware limited liability company, and 

      EMERITOL SEVILLE ESTATES LLC,
a Delaware limited liability company

       

      

       

      as
Borrowers

       

      and

       

      KEYBANK NATIONAL
ASSOCIATION,

       

      a
national banking association

       

      

       

      as
Lender

       

      Key
Healthcare Finance

       

      WA
31-13-2313

      1301
Fifth Avenue, 23rd Floor

      Seattle,
WA 98101

       

      Dated as
of October 17, 2008

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

       

      TABLE
OF CONTENTS

      

        
          	
                  Article
      1.

                	
                  INCORPORATION
      OF RECITALS AND EXHIBITS

                	
                  1

                
	
                  1.1

                	
                  Incorporation
      of Recitals.

                	
                  1

                
	
                  1.2

                	
                  Incorporation
      of Exhibits.

                	
                  2

                
	
                  Article
      2.

                	
                  DEFINITIONS

                	
                  2

                
	
                  2.1

                	
                  Defined
      Terms.

                	
                  2

                
	
                  2.2

                	
                  Other
      Definitional Provisions.

                	
                  11

                
	
                  Article
      3.

                	
                  BORROWERS'
      REPRESENTATIONS AND WARRANTIES

                	
                  11

                
	
                  3.1

                	
                  Representations
      and Warranties.

                	
                  11

                
	
                  3.2

                	
                  Survival
      of Representations and Warranties.

                	
                  16

                
	
                  Article
      4.

                	
                  LOAN
      AND LOAN DOCUMENTS

                	
                  16

                
	
                  4.1

                	
                  Agreement
      to Borrow and Lend.

                	
                  16

                
	
                  4.2

                	
                  Loan
      Documents.

                	
                  16

                
	
                  4.3

                	
                  Allocation
      of Loan.

                	
                  17

                
	
                  4.4

                	
                  Term
      of the Loan.

                	
                  17

                
	
                  4.5

                	
                  Payments.

                	
                  17

                
	
                  4.6

                	
                  Prepayments.

                	
                  17

                
	
                  4.7

                	
                  Late
      Charge.

                	
                  17

                
	
                  Article
      5.

                	
                   LOAN
      STRUCTURE PROVISIONS.

                	
                  18

                
	
                  5.1

                	
                  Cross-Default
      and Cross-Collateralization.

                	
                  18

                
	
                  5.2

                	
                  Loan
      Structure.

                	
                  18

                
	
                  5.3

                	
                  Certain
      Consequences of Loan Structure.

                	
                  19

                
	
                  5.4

                	
                  Allocation
      and Distribution of Loan Proceeds.

                	
                  19

                
	
                  5.5

                	
                  Representations
      Regarding Loan Structure and Terms.

                	
                  19

                
	
                  5.6

                	
                  Representations
      Regarding Borrowers' Solvency.

                	
                  20

                
	
                  5.7

                	
                  Indemnity.

                	
                  20

                
	
                  Article
      6.

                	
                  INTEREST

                	
                  21

                
	
                  6.1

                	
                  Interest
      Rate.

                	
                  21

                
	
                  6.2

                	
                  Interest
      Rate Agreements.

                	
                  21

                
	
                  Article
      7.

                	
                  COSTS
      OF MAINTAINING LOAN

                	
                  22

                
	
                  7.1

                	
                  Increased
      Costs and Capital Adequacy.

                	
                  22

                
	
                  7.2

                	
                  Borrower
      Withholding.

                	
                  23

                
	
                  Article
      8.

                	
                  LOAN
      EXPENSE AND ADVANCES

                	
                  23

                
	
                  8.1

                	
                  Loan
      and Administration Expenses.

                	
                  23

                
	
                  8.2

                	
                  Loan
      Origination Fee.

                	
                  24

                
	
                  8.3

                	
                  Lender's
      Attorney Fees and Disbursements.

                	
                  24

                
	
                  8.4

                	
                  Time
      of Payment of Fees and Expenses.

                	
                  24

                
	
                  8.5

                	
                  Expenses
      and Advances Secured by Loan Documents.

                	
                  24

                
	
                  8.6

                	
                  Right
      of Lender to Make Advances to Cure Borrower's Defaults.

                	
                  24

                

        

        
          
             

          

          
            i

            
              

            

          

          
             

          

        

        
          	
                  Article
      9.

                	
                  CONDITIONS
      TO CLOSING AND DISBURSEMENT OF THE LOAN

                	
                  25

                
	
                  9.1

                	
                  Conditions
      to Closing.

                	
                  25

                
	
                  Article
      10.

                	
                  OTHER
      COVENANTS

                	
                  27

                
	
                  10.1

                	
                  Mechanics'
      Liens.

                	
                  27

                
	
                  10.2

                	
                  Renewal
      of Insurance.

                	
                  27

                
	
                  10.3

                	
                  Payment
      of Taxes.

                	
                  27

                
	
                  10.4

                	
                  Tax
      and Insurance Escrow Accounts.

                	
                  28

                
	
                  10.5

                	
                  Personal
      Property.

                	
                  28

                
	
                  10.6

                	
                  Leasing
      Restrictions.

                	
                  28

                
	
                  10.7

                	
                  Condition
      of Facilities.

                	
                  29

                
	
                  10.8

                	
                  Inventory
      and Equipment.

                	
                  29

                
	
                  10.9

                	
                  Lender's
      Attorneys' Fees for Enforcement of Agreement.

                	
                  29

                
	
                  10.1

                	
                  Appraisals.

                	
                  29

                
	
                  10.11

                	
                  Financial
      Information.

                	
                  29

                
	
                  10.12

                	
                  Financial
      Covenants.

                	
                  30

                
	
                  10.13

                	
                  Lost
      Note.

                	
                  31

                
	
                  10.14

                	
                  Indemnification.

                	
                  31

                
	
                  10.15

                	
                  No
      Additional Debt.

                	
                  31

                
	
                  10.16

                	
                  Compliance
      With Laws.

                	
                  31

                
	
                  10.17

                	
                  Organizational
      Documents.

                	
                  31

                
	
                  10.18

                	
                  Management
      Contracts.

                	
                  32

                
	
                  10.19

                	
                  Furnishing
      Notices.

                	
                  32

                
	
                  10.2

                	
                  Authorized
      Representative.

                	
                  32

                
	
                  10.21

                	
                  Single
      Purpose Entity Provisions.

                	
                  32

                
	
                  10.22

                	
                  Right
      of First Refusal.

                	
                  34

                
	
                  Article
      11.

                	
                  CASUALTIES
      AND CONDEMNATION

                	
                  34

                
	
                  11.1

                	
                  Lender's
      Election to Apply Proceeds on Indebtedness.

                	
                  34

                
	
                  11.2

                	
                  Borrowers'
      Obligation to Rebuild and Use of Proceeds Therefor.

                	
                  35

                
	
                  Article
      12.

                	
                  ASSIGNMENTS
      BY LENDER AND BORROWER

                	
                  35

                
	
                  12.1

                	
                  Assignments
      and Participations.

                	
                  35

                
	
                  12.2

                	
                  Prohibition
      of Assignments and Transfers by Borrowers.

                	
                  36

                
	
                  12.3

                	
                  Prohibition
      of Transfers in Violation of ERISA.

                	
                  36

                
	
                  12.4

                	
                  Successors
      and Assigns.

                	
                  36

                
	
                  Article
      13.

                	
                  DEFAULT

                	
                  36

                
	
                  13.1

                	
                  Events
      of Default.

                	
                  36

                
	
                  13.2

                	
                  Remedies
      Conferred Upon Lender.

                	
                  38

                
	
                  Article
      14.

                	
                  GENERAL
      PROVISIONS

                	
                  39

                
	
                  14.1

                	
                  Time
      is of the Essence.

                	
                  39

                
	
                  14.2

                	
                  Captions.

                	
                  39

                
	
                  14.3

                	
                  Modification;
      Waiver.

                	
                  39

                
	
                  14.4

                	
                  Governing
      Law.

                	
                  39

                
	
                  14.5

                	
                  Disclaimer.

                	
                  39

                
	
                  14.6

                	
                  Partial
      Invalidity; Severability.

                	
                  40

                

        

        
          
             

          

          
            ii

            
              

            

          

          
             

          

        

        
          	
                  14.7

                	
                  Definitions
      Include Amendments.

                	
                  40

                
	
                  14.8

                	
                  Execution
      in Counterparts.

                	
                  40

                
	
                  14.9

                	
                  Entire
      Agreement.

                	
                  40

                
	
                  14.1

                	
                  Waiver
      of Damages.

                	
                  40

                
	
                  14.11

                	
                  Claims
      Against Lender.

                	
                  40

                
	
                  14.12

                	
                  Jurisdiction.

                	
                  41

                
	
                  14.13

                	
                  Set-Offs.

                	
                  41

                
	
                  14.14

                	
                  Notices.

                	
                  41

                
	
                  14.15

                	
                  Waiver
      of Jury Trial.

                	
                  42

                
	
                  14.16

                	
                  Statutory
      Notice.

                	
                  42

                

      

       

       LIST
OF EXHIBITS TO LOAN AGREEMENT

       

      Exhibit
A                                Insurance
Requirements

      Exhibit
B                                Compliance
Certificate

      

       

      

      
        
           

        

        
          iii

          
            

          

        

        
           

        

      

       

      LOAN
AGREEMENT

      “Emeritol-Batus
Facilities”

       

      THIS LOAN
AGREEMENT (“Agreement”)
dated as of October 17, 2008, is made by, between and among EMERITOL DOWLEN OAKS
LLC, a Delaware limited liability company, EMERITOL SADDLERIDGE LODGE LLC, a
Delaware limited liability company and EMERITOL SEVILLE ESTATES LLC, a Delaware
limited liability company (each a “Borrower”
and collectively, “Borrowers”)
and KEYBANK NATIONAL ASSOCIATION, a national banking association, its successors
and assigns (“Lender”).

       

      Recitals

       

      Borrowers
are the owners of the following assisted living facilities (each a “Facility”
and together the “Facilities”):

      
        	
                Name of Borrower

              	
                Name and Address of
  Facility

              
	
                Emeritol
      Dowlen Oaks LLC

              	
                Dowlen
      Oaks

                2250
      N. Dowlen Rd.

                Beaumont,
      TX  77706

              
	
                Emeritol
      Saddleridge LLC

              	
                Saddleridge
      Lodge

                1808
      W. Loop 250

                North
      Midland, TX  70705

              
	
                Emeritol
      Seville Estates LLC

              	
                Seville
      Estates

                7401
      Seville Drive

                Amarillo,
      TX  79121

              

      

       

      Borrowers
have applied to Lender for a loan (the “Loan”) in
the principal amount of SEVENTEEN MILLION FIVE HUNDRED NINETY-FIVE and NO/100
DOLLARS ($17,595,000.00) to be secured by the Facilities.  Lender is
willing to make the Loan on the terms and conditions hereinafter set
forth.

       

      Agreement

       

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

       

      ARTICLE
1.                                

       

       

      INCORPORATION
OF RECITALS AND EXHIBITS

       

       

      1.1 Incorporation
of Recitals.

       

      The
foregoing preambles and all other recitals in this Agreement are made a part of
this Agreement by this reference.

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

      1.2 Incorporation
of Exhibits.

       

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

       

      ARTICLE
2.   

       

      DEFINITIONS

       

       

      2.1 Defined
Terms.

       

      The
following terms as used herein shall have the following meanings:

       

      Adjusted
LIBOR Rate:  The LIBOR Rate plus the LIBOR Margin, adjusting on
the first day of each calendar month throughout the term of the
Loan.

       

      Adjusted
Prime Rate:  A rate per annum equal to the sum of (a) the Prime
Rate Margin and (b) the greater of (i) the Prime Rate, or (ii) one percent (1%)
in excess of the Federal Funds Effective Rate.  Any change in the
Adjusted Prime Rate shall be effective immediately from and after such change in
the Adjusted Prime Rate.

       

      Affiliate:  With
respect to a specified person or entity, any individual, partnership,
corporation, limited liability company, trust, unincorporated organization,
association or other entity which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
such person or entity, including, without limitation, any general or limited
partnership in which such person or entity is a partner.

       

      Agreement:  This
Loan Agreement.

       

      Applicable
Rate:  The Adjusted LIBOR Rate unless the Default Rate is then
applicable or the provisions of Section 6.1 below are
then applicable.

       

      Appraisal.  An
MAI certified appraisal of each of the Facilities performed in accordance with
FIRREA and Lender’s appraisal requirements by an appraiser selected and retained
by Lender.

       

      Assignments
of Rents:  Collectively, the Assignments of Rents and Leases of
even date herewith from each Borrower and each Master Tenant assigning the
rents, Leases and revenues of each Facility to Lender as security for the
Obligations.

       

      Authorized
Representative:  As such term is defined in Section 10.20.

       

      Bankruptcy
Code:  Title 11 of the United States Code entitled “Bankruptcy”
as now or hereafter in effect, or any successor thereto or any other present or
future bankruptcy or insolvency statute.

       

      Business
Day:  A day of the year on which banks are not required or
authorized to close in Seattle, Washington or Cleveland, Ohio.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      Change of
Control:  The occurrence of any of the following:

       

      
        	
                ·  

              	
                Any
      Person (including a Person’s Affiliates and associates) or group (as that
      term is understood under Section 13(d) of the Securities Exchange Act of
      1934, as amended [the “Exchange
      Act”] and the rules and regulations thereunder) shall have acquired
      beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
      Act) of a percentage (based on voting power, in the event different
      classes of stock shall have different voting powers) of the voting stock
      of Emeritus equal to at least thirty percent
  (30%);

              

      

       

      
        	
                ·  

              	
                As
      of any date a majority of the Board of Directors (the “Board”)
      of Emeritus consists of individuals who were not either (i) directors or
      trustees of Emeritus as of the corresponding date of the previous year, or
      (ii) selected or nominated to become directors by the Corporate Governance
      and Nominating Committee of Emeritus which is comprised solely of
      independent directors, as required by the New York Stock Exchange, and
      approved by a majority of the Board of Emeritus, which majority consisted
      of individuals described in clause (i) above, or (iii) selected or
      nominated to become directors or trustees by the Corporate Governance and
      Nominating Committee of Emeritus and approved by a majority of the Board
      of Emeritus, which majority consisted of individuals described in clause
      (i) above and individuals described in clause (ii), above (excluding, in
      the case of both clause (ii) and (iii) above, any individual whose initial
      nomination for, or assumption of office as, a member of the Board occurs
      as a result of an actual or threatened solicitation of proxies or consents
      for the election or removal of one or more directors or trustees by any
      Person or group other than a solicitation for the election of one or more
      directors or trustees by or on behalf of the Board);
  or

              

      

       

      
        	
                ·  

              	
                Emeritus
      consolidates with, is acquired by, or merges into or with any Person,
      unless such Person satisfies all of the Emeritus Covenants and is
      otherwise reasonably acceptable to
Lender.

              

      

       

      Concurrent
Loan:  The loan in the principal amount of $9,802,500.00 being
made by Lender to Emeritol Stonecreek Lodge LLC, a Delaware limited liability
company and Emeritol Meadowbrook LLC, a Delaware limited liability company
concurrently herewith.

       

      Control:  As
such term is used with respect to any person or entity, including the
correlative meanings of the terms “controlled by” and “under common control
with”, shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of such person or entity,
whether through the ownership of voting securities, by contract or
otherwise.

       

      Debt
Service:  (a) For each quarterly period (based on calendar
quarters) commencing October 1, 2008, and continuing through September 30, 2010,
interest-only payments on the Loan (assuming that the Loan was outstanding
commencing October 1, 2008) during such period at the greater of the Applicable
Rate or 6.85% per annum, and (b) for each calendar quarter thereafter, the total
payments of principal and interest which would be required during such period in
order to fully amortize the stated principal amount of the Loan ($17,595,000.00)
over a

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      25 year
amortization period at an interest rate equal to the greater of the Applicable
Rate or 6.85% per annum.

       

      Debt
Service Coverage:  For each calendar quarter commencing with
the calendar quarter ending December 31, 2008, the ratio of the aggregate Net
Operating Income of the Facilities during such period, to the Debt Service
during such period.

       

      Default:  Any
event, circumstance or condition which, if it were to continue uncured, would,
with notice or lapse of time or both, constitute an Event of Default
hereunder.

       

      Default
Rate:  A rate per annum equal to three percent (3%) in excess
of the Adjusted LIBOR Rate, but shall not at any time exceed the highest rate
permitted by law.

       

      Emeritus:  Emeritus
Corporation, a Washington corporation.

       

      Emeritus
Covenants:  The covenants of Emeritus set out in its Guaranty
whereby Emeritus agrees (a) to maintain minimum Liquid Assets of Twenty Million
Dollars ($20,000,000.00); (b) maintain a minimum Fixed Charge Coverage Ratio of
1.10 to 1.00 (measured at the end of each calendar quarter beginning with the
calendar quarter ending December 31, 2008, and building to the previous four
calendar quarters); and (c) to permit no Change of Control without the prior
written consent of Lender; provided, however, that in the event Emeritus agrees
with any other entity providing financing to Emeritus or to any Affiliate of
Emeritus to comply with any more restrictive covenants than the foregoing,
failure by Emeritus to comply with those more restrictive covenants within any
applicable grace period or cure period shall, at the option of Lender, be an
Event of Default hereunder.

       

      Environmental
Indemnity:  The Environmental and Hazardous Substances
Indemnity Agreement from Borrowers of even date herewith.

       

      Environmental
Laws:  All federal, state and local statutes, ordinances,
rules, regulations, and other laws relating to environmental protection,
contamination or cleanup.

       

      Environmental
Proceedings:  Any proceedings under any Environmental Law,
whether civil (including actions by private parties), criminal, or
administrative, relating to any of the Facilities.

       

      Environmental
Reports:  Environmental reports with respect to the Facilities
prepared at Borrower’s expense by a qualified environmental consultant approved
by Lender and addressed to Lender (or subject to separate letter agreement
permitting Lender to rely on such environmental report).

       

      ERISA:  The
Employee Retirement Income Security Act of 1974, as amended, and the regulations
promulgated thereunder from time to time.

       

      Event of
Default:  As such term is defined in Section 13.1.

       

      Federal
Funds Effective Rate:  Shall mean, for any day, the rate per
annum, rounded upward to the nearest on one-hundredth of one percent (1/100 of
1%), announced by the Federal Reserve Bank of Cleveland on such day as being the
weighted average of the rates on overnight federal

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      funds
transactions arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank in substantially the same
manner as such Federal Reserve Bank computes and announces the weighted average
it refers to as the “Federal Funds Effective Rate.”

       

      FIRREA:  The
Financial Institutions Reform, Recovery And Enforcement Act of 1989, as amended
from time to time.

       

      Fixed
Charge Coverage Ratio:  The ratio of EBITDAR to Fixed Charges
where “EBITDAR” means net income computed in accordance with generally accepted
accounting principles, plus income taxes,
facility lease expense, interest expense, depreciation, amortization, asset
impairment and other non-cash charges and plus or minus, as applicable,
non-recurring and/or extraordinary items, and where “Fixed Charges” means
interest expense, facility lease expense and principal payments on
indebtedness.

       

      Governmental
Authority:  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, or any court, administrative tribunal, or public utility.

       

      Gross
Revenues:  For any period, all revenues of the Master Tenant,
determined on a cash basis, derived from the ownership, operation, use, leasing
and occupancy of the Facilities during such period; provided, however, that in
no event shall Gross Revenues include (i) any loan proceeds,
(ii) proceeds or payments under insurance policies (except proceeds of
business interruption insurance); (iii) condemnation proceeds; (iv) any security
deposits received from Residents or tenants of the Facilities, unless and until
the same are applied to rent or other obligations in accordance with the
Residency Agreement or Lease; or (v) any other extraordinary items, in
Lender’s reasonable discretion.

       

      Guarantors:  Emeritus
and Daniel R. Baty (“Baty”).

       

      Guaranty:  Together,
the Unconditional Guaranty of even date herewith from Emeritus to Lender and the
Unconditional Guaranty of even date herewith from Baty to Lender.

       

      Hazardous
Material:  Means and includes gasoline, petroleum, asbestos
containing materials, explosives, radioactive materials or any hazardous or
toxic material, substance or waste which is defined by those or similar terms or
is regulated as such under any Law of any Governmental Authority having
jurisdiction over any of the Facilities or any portion thereof or its use,
including: (i) any “hazardous substance” defined as such in (or for
purposes of) the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C.A. § 9601(14) as may be amended from time to
time, or any so-called “superfund” or “superlien” Law, including the judicial
interpretation thereof; (ii) any “pollutant or contaminant” as defined in
42 U.S.C.A. § 9601(33); (iii) any material now defined as
“hazardous waste” pursuant to 40 C.F.R. Part 260; (iv) any petroleum,
including crude oil or any fraction thereof; (v) natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel; (vi) any
“hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910;
and  (vii) any other toxic substance or contaminant that is
subject to any other Law or other past or present requirement of any
Governmental Authority.  Any reference above to a Law, includes the
same as it may be amended from time to time, including the judicial
interpretation thereof.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      Healthcare
Licenses:  As defined in Section 3.1(u) of this
Agreement.

       

      Healthcare
Requirements:  All Federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions or agreements, in each case, pertaining to or concerned
with the establishment, construction, ownership, operation, use or occupancy of
a Facility or any part thereof as an assisted living facility, and all material
permits, licenses and authorizations and regulations relating thereto, including
all material rules, orders, regulations and decrees of and agreements with
Governmental Authorities as pertaining to such Facility.

       

      Including
or including:  Including but not limited to.

       

      Indemnified
Party:  As such term is defined in Section 10.14.

       

      Interest
Rate Agreement:  As such term is defined in Section 6.2.

       

      Interest
Rate Protection Product:  As such term is defined in Section 6.2.

       

      Internal
Revenue Code:  The Internal Revenue Code of 1986, as amended
from time to time.

       

      Late
Charge:  As defined in Section 4.7.

       

      Laws:  Collectively,
all federal, state and local laws, statutes, codes, ordinances, orders, rules
and regulations, including judicial opinions or precedential authority in the
applicable jurisdiction.

       

      Leases:  The
collective reference to all leases, subleases, Residency Agreements and
occupancy agreements affecting the Facilities or any part thereof now existing
or hereafter executed and all amendments, modifications or supplements
thereto.

       

      Lender:  As
defined in the opening paragraph of this Agreement, and including any successor
holder of the Loan from time to time.

       

      LIBOR
Business Day:  A Business Day on which dealings in U.S. dollars
are carried on in the London Interbank Market.

       

      LIBOR
Margin:  Three percent (3.00%) per annum.

       

      LIBOR
Rate: The rate per annum which Lender determines with reference to the
rate as shown in Dow Jones Markets (formerly Telerate) (Page 3750) at which one
month deposits in United States dollars in an amount comparable to the principal
balance outstanding on the Loan are offered by prime banks in the London
Interbank Eurodollar Market two LIBOR Business Days prior to the last day of
each calendar month.

       

      Liquid
Assets:  The following assets, provided that such assets (A)
are not subject to any lien, claim or other encumbrance; (B) are not the subject
of any arrangement with any creditor to have such creditor’s claim satisfied out
of such asset prior to general creditors; (C) if not cash, may be converted to
cash within five (5) days; and (D) are not subject to any legal or contractual
restrictions (other than those inherent in or typical to the
instrument):

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      (a) cash on
hand;

       

      (b) United
States Treasury notes, bonds, bills, or certificates of indebtedness, or those
for which the full faith and credit of the United States are pledged for the
full and timely payment of principal and interest (including State and Local
Government Series);

       

      (c) obligations,
participations, or other instruments of or issued by a federal agency or a
United States government-sponsored enterprise, the principal of and interest on
which is unconditionally guaranteed by the United States;

       

      (d) any
obligations on which the interest is exempt from federal income taxation and
which are rated by a nationally recognized rating service in one of its two
highest long-term or short-term rating categories;

       

      (e) certificates
of deposit issued by, or time or demand deposits or other banking arrangements
with, a nationally or state-chartered bank or a savings association having a
minimum capital of $500,000,000 and rated within the top two ratings of a
nationally recognized rating service;

       

      (f) taxable
government money market portfolios rated “AAA” by a nationally recognized rating
service and restricted to obligations with maturities of one year or less issued
or guaranteed as to payment of principal and interest by the full faith and
credit of the United States of America, and which are rated by such nationally
recognized rating service in one of its two highest short term rating
categories; and

       

      (g) Readily
Marketable Securities.

       

      Loan:  As
defined in the Recitals.

       

      Loan
Amount:  The amount of the Loan as set forth in Section 4.1, as reduced
by principal payments made from time to time.

       

      Loan
Closing or Loan Closing Date:  The date all conditions to the
disbursement of the Loan have been satisfied.

       

      Loan
Documents:  The collective reference to this Agreement, the
documents and instruments listed in Section 4.2, and all the
other documents and instruments entered into from time to time, evidencing or
securing the Loan or any obligation of payment thereof or performance of
Borrowers’ or Guarantors’ obligations in connection with the transaction
contemplated hereunder and any Interest Rate Agreement, each as
amended.  Notwithstanding any provision of this Agreement or any other
Loan Document, none of the obligations of Guarantors under the Guaranty or the
obligations of Borrowers under the Environmental Indemnity are secured by the
Mortgages or any other collateral for the Loan.

       

      Master
Leases: The leases of each Facility from each Borrower to the Master
Tenant which have been approved by Lender.

       

      Master
Tenant:  ESC
IV, L.P., a Washington limited partnership.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      Material
Adverse Change or material adverse change:  If, in Lender’s
reasonable discretion, the business prospects, operations or financial condition
of a person, entity or property has changed in a manner which could materially
impair the value of Lender’s security for the Loan, prevent timely repayment of
the Loan or otherwise prevent the applicable person or entity from timely
performing any of its material obligations under the Loan
Documents.

       

      Maturity
Date:  October 16, 2011.

       

      Medicaid:  Title
XIX of the Social Security Act, which was enacted in 1965 to provide a
cooperative Federal-state program for low income and medically indigent persons,
which is partially funded by the Federal government and administered by the
states.

       

      Medicare:  Title
XVIII of the Social Security Act, which was enacted in 1965 to provide a
Federally funded and administered health program for the aged and certain
disabled persons.

       

      Mortgages:  Collectively
the Deeds of Trust, Assignment of Rents, Security Agreement and Fixture Filing
of even date herewith encumbering each Facility as security for the Obligations,
subject only to the Permitted Exceptions.

       

      Net
Operating Income:  For the applicable period, the aggregate net
income, computed in accordance with generally accepted accounting principles, of
all Facilities before taxes, depreciation, amortization of intangible assets and
before interest expense, management fees, and rental payments under the Master
Leases, decreased by (i) an annual replacement reserve of $300.00 per Unit in
each Facility, and (ii) an allowance for management fees equal to 5% of the
Gross Revenues of the Facilities.

       

      Note:  A
Promissory Note in the Loan Amount, executed by Borrowers and payable to the
order of Lender, evidencing the Loan.

       

      Obligations.  All
obligations of Borrowers under this Agreement and the other Loan
Documents.

       

      Occupancy.  The
percentage of Units in a Facility which are actually occupied by Residents on a
full rent-paying basis under Residency Agreements in effect as of the date of
this Agreement or, as to Residency Agreements hereafter entered into by
Borrowers, in the form approved by Lender without material
modification.

       

      Organizational
Documents:  (a) For any limited liability company, a true copy
of the articles of organization or certificate of formation of such limited
liability company evidencing the creation of such limited liability company, the
limited liability company agreement or operating agreement of such limited
liability company with all amendments thereto, certified by the manager or such
authorized person of such limited liability company as being true, correct and
complete, together with a current certificate of existence and good standing of
such limited liability company issued by the applicable authority for the state
of organization; and if appropriate, a current certificate of qualification and
good standing (or other similar instruments) from the appropriate authority of
each state in which it must be qualified to do business, (b) for any limited
partnership, a true copy of the certificate of limited partnership of such
limited partnership evidencing the creation of such limited partnership, the
limited partnership agreement of such limited partnership with all amendments
thereto, certified by the

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      general
partner or such authorized person of such limited partnership as being true,
correct and complete, together with a current certificate of existence and good
standing of such limited partnership issued by the applicable authority for the
state of organization; and if appropriate, a current certificate of
qualification and good standing (or other similar instruments) from the
appropriate authority of each state in which it must be qualified to do
business, and (c) for any corporation, a true copy of the articles of
incorporation of such corporation evidencing the creation of such corporation,
together with all amendments thereto, the bylaws of such corporation with all
amendments thereto, certified by a responsible officer of such corporation as
being true, correct and complete, together with a current certificate of
existence and good standing of such corporation issued by the applicable
authority for the state of organization; and if appropriate, a current
certificate of qualification and good standing (or other similar instruments)
from the appropriate authority of each state in which it must be qualified to do
business.

       

      Permitted
Exceptions:  Those matters listed on Schedule B to each of the
Title Policies to which title to the Facilities is subject at the Loan Closing
and thereafter such other title exceptions as Lender may approve in
writing.

       

      Permitted
Transfer:  (a) Residency Agreements entered into in the
ordinary course of business provided the same are in the form reasonably
approved by Lender without material modification and are in compliance with
Laws, (b) arms-length non-residential Leases entered into by the Master Tenant
in the ordinary course of business for premises in the Facilities intended for
non-residential use, (c) Transfers of stock in Emeritus not resulting in a
Change of Control, and (d) any Transfer of shares of common stock, limited
partnership interests limited liability company membership interests or other
beneficial or ownership interests or other forms of securities in any Borrower
or in ESC IV, L.P. or in any direct or indirect owner of membership interests in
any Borrower or in ESC IV, L.P. so long as either Emeritus or Emeritus and Baty
together retain Control of each Borrower and ESC IV, L.P. and continue to own
100% of the beneficial ownership interests in each Borrower and ESC IV, L.P.
either directly or through the ownership of intervening entities.

       

      Person:  Any
individual, corporation, company, voluntary association, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision
thereof).

       

      Prime
Rate:  That interest rate established from time to time by
KeyBank National Association as its Prime Rate, whether or not such rate is
publicly announced; the Prime Rate may not be the lowest interest rate charged
by KeyBank National Association for commercial or other extensions of
credit.

       

      Prime
Rate Margin:  One and one-half percent (1.50%) per
annum.

       

      Pro-Forma
Projection:  A pro forma statement of projected income and
expenses of a Facility.

       

      Readily
Marketable Securities:  Marketable securities listed or
admitted to trading on the New York Stock Exchange or the American Stock
Exchange or quoted on the NASDAQ National Market with a market price equal to or
greater than $2.00 per share, so long as, in the case of any such securities the
transfer of which is restricted by Rule 144, a minimum of two years shall have
elapsed since the later of (a) the date of the acquisition by the owner of such
marketable

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      securities
from the respective issuers thereof or from any affiliate (as that term is
defined in paragraph (a)(1) of Rule 144) of any of such issuers and (b) the date
of payment by the owner of the full purchase price or other consideration paid
or given to acquire such marketable securities from the respective issuers
thereof or from any affiliate (as that term is defined in paragraph (a)(1) of
Rule 144).

       

      Reimbursement
Contracts: All managed care
agreements, and all third party reimbursement contracts or programs for the
Facilities which are now or hereafter in effect with respect to Residents
qualifying for coverage under the same, including Medicare, Medicaid, any
successor or similar reimbursement program and private insurance
agreements.

       

      Resident:  Any
person residing in any of the Facilities.

       

      Residency
Agreements:  All agreements providing for residential occupancy
of a Facility.

       

      Security
Agreements:  Collectively, each Security Agreement of even date
herewith executed by each Borrower and the Master Tenant granting Lender a first
priority security interest in all tangible and intangible personal property with
respect to the Facilities, including, without limitation, all accounts
receivable and healthcare receivables as security for payment and performance of
the Obligations.

       

      Security
Instrument Default:  The occurrence of any default by any
Borrower or the Master Tenant under any Security Instrument which is not cured
within any applicable cure period thereunder.

       

      Security
Instruments:  Collectively, the Mortgages, the Assignments of
Rents and the Security Agreements required hereunder and all UCC Financing
Statements required by Lender in connection therewith.

       

      State:  The
state in which the applicable Facility is located.

       

      Title
Insurer:  Chicago Title Insurance Company, or such other title
insurance company approved in writing by Lender.

       

      Title
Policies:  Collectively, the title insurance policies issued by
the Title Insurer to Lender with respect to each Mortgage, insuring each
Mortgage as a valid first, prior and paramount lien on the applicable Facility
and all appurtenant easements, and subject to no other exceptions other than the
Permitted Exceptions and containing such endorsements as Lender may
require.

       

      Transfer:  (a)
Any sale, transfer, lease, conveyance, alienation, pledge, assignment, mortgage,
encumbrance, hypothecation or other disposition of (i) all or any portion of the
Facilities or any portion of any other security for the Loan, or (ii) all or any
portion of any Borrower’s or the Master Tenant’s right, title and interest
(legal or equitable) in and to the Facilities or any portion of any other
security for the Loan, (b) any issuance, sale, transfer, alienation, pledge,
assignment, encumbrance, hypothecation or other disposition of (i) any
membership interest in any Borrower, or (ii) any ownership interest in the
Master Tenant or in any member of Borrower or in any entity which holds an
interest in, or directly or indirectly controls any member of Borrower or the
Master Tenant, (c) any change in the identity of the manager or managing member
of any Borrower, or (d) any Change of Control.

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      TRICARE:
Collectively, a program of medical benefits covering former and active members
of the uniformed services and certain of their dependents, financed and
administered by the United States Departments of Defense, Health and Human
Services and Transportation, which program was formerly known as the "Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)".

       

      UCC-1
Financing Statements:  As defined in Section 4.2.

       

      Unit:  Each
residential living unit in a Facility.

       

      2.2 Other
Definitional Provisions.

       

      All terms
defined in this Agreement shall have the same meanings when used in any other
Loan Documents, 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.

       

      ARTICLE
3.                                

       

       

      BORROWERS’
REPRESENTATIONS AND WARRANTIES

       

       

      3.1 Representations
and Warranties.

       

      To induce
Lender to execute this Agreement and perform its obligations hereunder,
Borrowers represent and warrant to Lender as follows:

       

      (a) Borrowers
have good and marketable fee simple title to the Facilities subject only to the
Permitted Exceptions.

       

      (b) Except as
previously disclosed to Lender in writing, no litigation or proceedings are
pending, or to the best of Borrowers’ knowledge threatened in writing, against
any Borrower or against any Guarantor, the Master Tenant or any Facility, which
could, if adversely determined, cause a Material Adverse Change with respect to
any Borrower, the Master Tenant, any Guarantor or any Facility.  There
are no pending Environmental Proceedings and Borrowers have no knowledge of any
Environmental Proceedings threatened in writing or any facts or circumstances
which may give rise to any future Environmental Proceedings.

       

      (c) Each
Borrower is a duly organized and validly existing limited liability company and
has full power and authority to execute, deliver and perform all Loan Documents
to which such Borrower is a party, and such execution, delivery and performance
have been duly authorized by all requisite action on the part of each
Borrower.  The sole member of each Borrower is Batus, LLC, a Delaware
limited liability company whose members are owned and Controlled by Emeritus (as
sole shareholder of Summerville Senior Living, Inc., a Delaware corporation) and
Baty.

       

      (d) Emeritus
is a duly organized and validly existing corporation and has full power and
authority to execute, deliver and perform all Loan Documents to which it is a
party, and such execution, delivery and performance have been duly authorized by
all requisite action on the part of Emeritus.

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      (e) ESC IV,
L.P. is a limited partnership, duly organized and validly existing under the
laws of the State of Washington and has full power and authority to execute,
deliver and perform all Loan Documents to which it is a party, and such
execution, delivery and performance have been duly authorized by all requisite
action on the part of ESC IV, L.P.

       

      (f) Except to
the extent the same have been obtained in writing and copies thereof provided to
Lender prior to the Loan Closing Date, no consent, approval or authorization of
or declaration, registration or filing with any Governmental Authority or
nongovernmental person or entity, including any creditor or owner of any
Borrower, any Guarantor or the Master Tenant, is required in connection with the
execution, delivery and performance of this Agreement or any of the Loan
Documents other than the recordation of the Mortgages and the Assignments of
Rents and the filing of the UCC-1 Financing Statements, except for such
consents, approvals or authorizations of or declarations or filings with any
Governmental Authority or non-governmental person or entity which have been
obtained as of any date on which this representation is made or
remade.

       

      (g) The
execution, delivery and performance of this Agreement, the execution and payment
of the Note and the granting of the Mortgages and other security interests under
the other Loan Documents have not constituted and will not constitute, upon the
giving of notice or lapse of time or both, a breach or default under any other
agreement to which any Borrower, the Master Tenant  or any Guarantor
is a party or may be bound or affected, or a violation of any law or court order
which may affect the Facilities, any part thereof, any interest therein, or the
use thereof.

       

      (h) There is
no Default or Event of Default under this Agreement or the other Loan
Documents.

       

      (i) (i) No
condemnation of any portion of the Facilities, (ii) no condemnation or
relocation of any roadways abutting any of the Facilities, and (iii) no
proceeding to deny access to any of the Facilities from any point or planned
point of access to the Facilities, has commenced or, to the best of Borrowers’
knowledge, is contemplated by any Governmental Authority.

       

      (j) The
Facilities and the use thereof do not, to Borrowers’ knowledge, violate
(i) any Laws (including subdivision, zoning, building, environmental
protection and wetland protection Laws), or (ii) any building permits,
restrictions of record, or agreements affecting the Facilities or any part
thereof.  Neither the zoning authorizations, approvals or variances
nor any other right to use the Facilities is to any extent dependent upon or
related to any real estate other than the Land.

       

      (k) No
brokerage fees or commissions are payable by or to any person in connection with
this Agreement or the Loan.

       

      (l) All
financial statements and other information previously furnished by Borrowers,
the Master Tenant or Guarantors to Lender in connection with the Loan are true,
complete and correct and fairly present the financial conditions of the subjects
thereof as of the respective dates thereof and do not fail to state any material
fact necessary to make such statements or information not misleading, and no
Material Adverse Change with respect to any Borrower, any Guarantor or the
Master Tenant has occurred since the respective dates of such

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      statements
and information.  None of Borrowers, Master Tenant or Guarantors have
any material liability, contingent or otherwise, not disclosed in such financial
statements.

       

      (m) Except as
disclosed by Borrowers to Lender in writing, (i) each of the Facilities is in a
clean, safe and healthful condition, and, except for materials used in the
ordinary course of construction, maintenance and operation thereof, is free of
all Hazardous Material and is in compliance with all applicable Environmental
Laws; (ii) no Borrower or the Master Tenant nor, to the best of Borrowers’
knowledge, any other person or entity, has ever caused or permitted any
Hazardous Material to be placed, held, located or disposed of on, under, at or
in a manner to affect any Facility, or any part thereof, and no Facility has
never been used (whether by Borrower or, to the best knowledge of Borrowers, by
the Master Tenant or any other person or entity) for any activities involving,
directly or indirectly, the use, generation, treatment, storage, transportation,
or disposal of any Hazardous Material; (iii) no Facility and no Borrower or the
Master Tenant is subject to any existing, pending, or, to the best of Borrowers’
knowledge, threatened investigation or inquiry by any Governmental Authority,
and no Facility is subject to any remedial obligations under any applicable
Environmental Law; and (iv) there is no underground tank, vessel, or similar
facility for the storage, containment or accumulation of Hazardous Materials of
any sort on, under or affecting any of the Facilities.

       

      (n) Each
Facility is located on a parcel of parcels of real estate which is taxed
separately without regard to any other property and for all purposes each
Facility may be mortgaged, conveyed and otherwise dealt with as an independent
parcel.

       

      (o) Except
for the Master Leases and Leases which have been disclosed to Lender in the rent
roll or census report provided to Lender in connection with the closing of the
Loan, neither Borrowers nor the Master Tenant has entered into any Leases or
other arrangements for occupancy of space within the Facilities.

       

      (p) The Loan
is not being made for the purpose of purchasing or carrying “margin stock”
within the meaning of Regulation G, T, U or X issued by the Board of
Governors of the Federal Reserve System, and Borrowers agree to execute all
instruments necessary to comply with all the requirements of Regulation U
of the Federal Reserve System.

       

      (q) None of
Borrowers, the Master Tenant or Emeritus is a party in interest to any plan
defined or regulated under ERISA, and none of the assets of any Borrower, Master
Tenant or Guarantor are “plan assets” of any employee benefit plan covered by
ERISA or Section 4975 of the Internal Revenue Code.

       

      (r) None of
Borrowers, the Master Tenant or Emeritus is a “foreign person” within the
meaning of Section 1445 or 7701 of the Internal Revenue Code.

       

      (s) Each
Borrower’s place of formation or organization is the State of Delaware and each
Borrower is duly qualified to conduct business in the state in which the
Facility owned by such Borrower is located.

       

      (t) No
Borrower, the Master Tenant or Guarantor is (or will be) a person with whom
Lender is restricted from doing business under OFAC (including, those Persons
named on OFAC’s Specially Designated and Blocked Persons list) or under any
statute, executive order (including, the September 24, 2001 Executive Order
Blocking Facilities and Prohibiting

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other
governmental action and is not and shall not engage in any dealings or
transactions or otherwise be associated with such persons.  In
addition, each Borrower hereby agrees to provide to Lender with any additional
information Lender reasonably deems necessary from time to time in order to
ensure compliance with all applicable Laws concerning money laundering and
similar activities.

       

      (u) All
Medicare, Medicaid and TRICARE provider agreements, certifications, governmental
licenses, permits, regulatory agreements or other material agreements and
improvements, including certificates of operation, completion and occupancy, and
state assisted-living facility licenses or other licenses required by healthcare
Governmental Authorities for the legal use and occupancy of each Facility
(collectively, the "Healthcare
Licenses") have been obtained by the Master Tenant and are in full force
and effect.  The Master Tenant for each Facility owns and/or
possesses, and holds free from restrictions or conflicts with the rights of
others, all such Healthcare Licenses in respect of such Facility, and operates
such Facility in such a manner that the Healthcare Licenses shall remain in full
force and effect.

       

      (v) The
Master Tenant and the operation of each Facility are in compliance in all
material respects with all Healthcare Requirements of all Governmental
Authorities having jurisdiction over the ownership, use, occupancy or operation
of any Facility, including, (i) staffing requirements, (ii) health and fire
safety codes, including quality and safety standards, (iii) accepted
professional standards and principles that apply to professionals providing
services at each Facility, (iv) Federal, state or local laws, rules, regulations
or published interpretations or policies relating to the prevention of fraud and
abuse, (v) insurance, reimbursement and cost reporting requirements, (vi)
government payment program requirements and disclosure of ownership and related
information requirements, (vii) requirements of applicable healthcare
Governmental Authorities, including those relating to each Facility's physical
structure and environment, licensing, quality and adequacy of medical care,
distributions of pharmaceuticals, rate setting, equipment, personnel, operating
policies and services and fee splitting, (viii) Section 1128B(b) of the Social
Security Act, as amended (42 U.S.C. Section l320a-7(b) (Criminal Penalties for
Acts involving Federal Health Care Programs), commonly referred to as the "Federal
Anti-Kickback Statute") and (ix) any other applicable laws, regulations
or agreements for reimbursement for the type of care or services provided with
respect to each Facility.

       

      (w) Each
Master Tenant is in compliance in all material respects with the requirements
for participation in the Medicare, Medicaid and TRICARE programs with respect to
each Facility that currently participates in such programs, including the
Medicaid and Medicare Patient and Program Protection Act of 1987.

       

      (x) To the
best of Borrowers’ knowledge, neither the Master Tenant nor any Facility is a
target of, or participant in, any action, proceeding, suit, audit, investigation
or sanction by any healthcare Governmental Authority or any other administrative
or investigative body or entity or any other third party or any patient or
resident (including whistleblower suits, or suits brought pursuant to federal or
state false claims acts, and Medicaid, Medicare, TRICARE, state fraud or abuse
laws) which may result, directly or indirectly or with the passage of time, in
(i) the imposition of a fine, penalty, alternative, interim or final sanction, a
lower rate certification, recoupment, recovery, suspension or discontinuance of
all or part of reimbursement from any

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      healthcare
Governmental Authority, third-party payor, insurance carrier or private payor,
or a lower reimbursement rate for services rendered, except in each case as
could not reasonably be expected to result in a Material Adverse Effect, or (ii)
any other civil or criminal remedy, in the appointment of a receiver or manager,
or in the modification, limitation, annulment, revocation, transfer, surrender,
suspension or other impairment of a Healthcare License or affect any Borrower's
participation in the Medicare, Medicaid, TRICARE or third-party payor program,
as applicable, or any successor program thereto, nor to its knowledge has any
such action, proceeding, suit, investigation proceeding or audit been
threatened, except in each case as could not reasonably be expected to result in
a Material Adverse Effect.

       

      (y) There are
no agreements with Residents of any Facility, or with any other persons or
organizations, which deviate in any material adverse respect from, or which
conflict with, any Healthcare Requirements and all resident records at each
Facility, including resident accounts records, are maintained in all material
respects in accordance with applicable Healthcare Requirements.

       

      (z) Neither
the execution and delivery of this Agreement and the other Loan Documents, nor
the performance thereof by Borrowers or the Master Tenant will (i) adversely
affect, in any material respect, the right of any Facility to receive Medicaid,
Medicare, TRICARE, insurance company, managed care company, or other third-party
insurance payments or reimbursements or to receive private payor payments or
reimbursements, (ii) materially reduce the Medicaid, Medicare, TRICARE,
insurance company, managed care company, or other third-party insurance payments
or reimbursements or materially reduce private payor payments or reimbursements
which any Facility is receiving as of the date hereof or (iii) materially
adversely affect the Healthcare Licenses.

       

      (aa) Each
Facility is in compliance in all material respects with all requirements and
conditions of each Reimbursement Contract currently in effect with respect to
such Facility and each such Reimbursement Contract is in full force and effect
and in good standing.

       

      (bb) To the
best of Borrowers’ knowledge, all cost reports and financial reports submitted
to any third party payor with respect to each of the Facilities have been
materially accurate and complete as of the date of submission and have not been
misleading in any material respects.  To the best of Borrowers’
knowledge, except as have been disclosed to Lender in writing, there are no
material recoupment claims made or contests pending or threatened with respect
to any Facility.

       

      (cc) Except as
disclosed in writing to Lender, the Master Tenant has not received any notice of
any claim, requirement or demand of any governmental authority, accreditation
body, third party payor or any insurance body having or claiming any licensing,
certifying, supervising, evaluating or accrediting authority over any of the
Facilities to rework or redesign any Facility, its professional staff or its
professional services, procedures or practices in any material respect or to
provide additional furniture, fixtures, equipment or inventory so as to make
such Facility conform to or comply with any Law.

       

      (dd) Borrowers
have delivered or caused to be delivered to Lender true and correct copies of
all inspection reports relating to each of the Facilities, issued by any
governmental

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      authority
or accreditation body during the most recent licensing period, together with all
plans of correction relating thereto.

       

      3.2 Survival
of Representations and Warranties.

       

      Borrowers
agree that all of the representations and warranties set forth in Section 3.1 and elsewhere
in this Agreement are true as of the date hereof, will be true at the Loan
Closing and, except for matters which have been disclosed in writing by
Borrowers to Lender, at all times thereafter.  It shall be a condition
precedent to the Loan Closing that each of said representations and warranties
is true and correct as of the date of the Loan Closing.

       

      ARTICLE
4.            

      LOAN
AND LOAN DOCUMENTS

       

       

      4.1 Agreement
to Borrow and Lend.

       

      Subject
to the terms, provisions and conditions of this Agreement and the other Loan
Documents, Borrowers jointly and severally agree to borrow from Lender and
Lender agrees to lend to Borrowers the Loan in the principal amount of SEVENTEEN
MILLION FIVE HUNDRED NINETY-FIVE and NO/100 DOLLARS ($17,595,000.00), for the
purposes and subject to all of the terms, provisions and conditions contained in
this Agreement.

       

      4.2 Loan
Documents.

       

      Borrowers
will, on or before the Loan Closing Date, execute and deliver or cause to be
executed and delivered to Lender the following documents (“Loan
Documents”) in form and substance acceptable to Lender:

       

      (a) The
Note.

       

      (b) The
Mortgages.

       

      (c) The
Assignments of Rents.

       

      (d) The
Security Agreements.

       

      (e) The
Guaranty.

       

      (f) The
Environmental Indemnity.

       

      (g) With
respect to each Facility, an Assignment and Subordination of Master Lease from
the Master Tenant in favor of Lender whereby the Master Lease for such Facility
is assigned to Lender as security for the Obligations and the Master Lease is
subordinated to the Mortgages and the Obligations.

       

      (h) Such
other documents, instruments or certificates as Lender may reasonably require,
including such documents as Lender in its sole discretion deems necessary or
appropriate to effectuate the terms and conditions of this Agreement and the
Loan Documents, and to comply with the laws of the State.

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      Borrowers
authorize Lender to file such UCC financing statements (each, a “UCC-1 Financing
Statement”) as Lender determines are advisable or necessary to perfect or
notify third parties of the security interests intended to be created by the
Loan Documents.  The foregoing authorization includes Borrowers’
irrevocable authorization for Lender at any time and from time to time to file
any initial financing statements and amendments thereto that describe the
collateral as “all assets” of Borrowers or words of similar effect.

       

      4.3 Allocation
of Loan.

       

      (a) The
principal amount of the Loan shall be allocated among the Facilities as
follows:

      

      
        	
                Facility

              	
                Allocated
      Amount

              
	
                Dowlen
      Oaks

              	
                $6,960,000.00

              
	
                Saddleridge
      Lodge

              	
                $7,785,000.00

              
	
                Seville
      Estates

              	
                $2,850,000.00

              

      

       

      4.4 Term of
the Loan.

       

      All
principal, interest and other sums due under the Loan Documents shall be due and
payable in full on the Maturity Date.

       

      4.5 Payments.

       

      (a) Borrower
shall pay interest in arrears on the first (1st) day of
every calendar month in the amount of all interest accrued and unpaid through
the last day of the immediately preceding calendar month.

       

      (b) All
payments (whether of principal or of interest) shall be deemed credited to
Borrower’s account only if received by 12:00 noon Seattle time on a Business
Day; otherwise, such payment shall be deemed received on the next Business
Day.

       

      (c) All
principal shall be due and payable in full on the Maturity Date, as it may be
extended hereunder.

       

      4.6 Prepayments.

       

      Borrower
shall have the right to make prepayments of the Loan, in whole or in part,
without prepayment penalty, upon not less than seven (7) days prior written
notice to Lender.

       

      4.7 Late
Charge.

       

      Any and
all amounts due hereunder or under the other Loan Documents which remain unpaid
more than five (5) days after the date said amount was due and payable shall
incur a fee (the “Late
Charge”) equal to the greater of four percent (4%) of the amount of such
payment or

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      Twenty-Five
Dollars ($25.00), which payment shall be in addition to all of Lender’s other
rights and remedies under the Loan Documents, provided that no Late Charge shall
apply to the final payment of principal on the Maturity Date or as a result of
any earlier acceleration.

       

      ARTICLE
5.

       

       

      LOAN
STRUCTURE PROVISIONS.

       

       

      5.1 Cross-Default
and Cross-Collateralization.

       

      In
consideration of the benefits to Borrowers from the Loan, the receipt and
sufficiency of which are hereby acknowledged, Borrowers agree as
follows:

       

      (a) The
occurrence of any Security Instrument Default shall be an Event of Default under
this Agreement.

       

      (b) Each
Borrower acknowledges and agrees that because each of the Security Instruments
secures the entire Loan and a Security Instrument Default with respect to any
Facility will be an Event of Default under this Agreement, each Borrower has a
direct and material interest in preventing the occurrence of an Event of
Default. Accordingly each Borrower is willing to commit to make or receive loans
(each an "Intra-Party
Loan" and collectively, the "Intra-Party
Loans") in order to provide for the payment of all amounts due under the
Loan Documents and, in so doing, to avoid an Event of Default hereunder.
Borrowers each acknowledge and agree that Lender is an intended third party
beneficiary of Borrowers' obligations hereunder.  If and to the extent
that net revenues from any Facility (herein, a “Contributing
Facility”) are applied to make payments on the Loan in excess of the
payments due on the Allocated Loan Amount with respect to the Contributing
Facility, the Borrower who owns the Contributing Facility shall be deemed to
have made an Intra-Party Loan to the other Borrowers (proportionate to their
respective Allocated Loan Amounts) in the amount of such proceeds so
applied.

       

      (c) All
Intra-Party Loans deemed to be made under this Agreement shall be evidenced by
this Agreement, shall be an obligation of the party which owes such Intra-Party
Loan to the party making same solely by its execution of this Agreement, shall
not be evidenced by any separate instrument and, notwithstanding anything
contained herein or in the other Loan Documents to the contrary, shall not be
prohibited hereunder or under any of the other Loan Documents.  Each
Borrower waives presentment, notice of dishonor, protest and notice of
non-payment or non-performance with respect to each Intra-Party Loan for which
it is liable under this Agreement.  Intra-Party Loans shall be subject
and subordinate in all cases to the terms, conditions and liens of the Loan
Documents, and revenues from the other Facilities shall be the sole and
exclusive source of payment of any Intra-Party Loan.  Intra-Party
Loans may be repaid in whole or in part provided there is then no Default or
Event of Default and no Default or Event of Default would result from such
repayment.

       

      5.2 Loan
Structure.

       

      Each
Borrower acknowledges that (i) the Loan is evidenced by and made pursuant to the
Note and that the Note shall be secured by the Security Instruments; (ii) the
Note provides for joint and several liability of each Borrower; (iii) any
nonpayment of principal or interest, whether or

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      not
resulting from one Borrower’s failure to pay any portion of the Note or any
installment of principal or interest due thereunder as may be agreed among
Borrowers to be payable by another one or more of the Borrowers, may result in
an Event of Default under the Loan Documents and acceleration of the Loan; (iv)
in that event, all proceeds of the foreclosure sale of each Borrower’s Facility
may be applied to satisfy the Note; and (v) such foreclosure sale proceeds may
be applied to satisfy the Note even if the value of such Borrower’s Facility is
greater than the Loan Amount allocable to such Facility as agreed among the
Borrowers hereunder.

       

      5.3 Certain
Consequences of Loan Structure.

       

      Each
Borrower has been informed and understands that the consequence of becoming
obligated under the Security Instruments is that each Borrower’s Facility is
being encumbered as collateral for the entire Loan without any specific
agreed-upon reconveyance price, and that even upon prepayment in part of the
Loan allocated among the Borrowers to a particular Facility, that Facility owned
by a particular Borrower will not necessarily be reconveyed if the Loan remains
outstanding.  Each Borrower further understands and has been informed
that if an Event of Default occurs under the Loan Documents, all Borrowers must
act together for purposes of curing such Event of Default, and that the failure
to do so could result in the foreclosure and sale, and ultimate loss, of each
Borrower’s respective Facility.

       

      5.4 Allocation
and Distribution of Loan Proceeds.

       

      Borrowers
have agreed that the Loan proceeds shall be allocated among the Facilities in
accordance with Section 4.3
above.  Each Borrower agrees that it shall jointly and severally
reimburse and indemnify each other Borrower (each, an “Indemnitee”) for any losses suffered or
paid by the Indemnitee (including payments of the Loan and the loss of the
Indemnitee’s’ Facility or Facilities as a result of the exercise of the remedies
under the Loan Documents) because (i) such Borrower fails to make its
allocated share of payments under the Loan (based on the Allocated Loan Amounts
for which the respective Borrowers are liable, as agreed among themselves, as
set forth in Section
4.3 above), or
(ii) at the time of foreclosure or transfer by deed in lieu of foreclosure,
the actual value of such Borrower’s Facility or Facilities has declined
proportionately more (based on the percentages reflected by such pro rata share)
than the Indemnitee’s Facility or Facilities since the date of this
Agreement.  Notwithstanding anything contained herein or in the other
Loan Documents to the contrary, any such payment shall not be prohibited
hereunder or under any of the other Loan Documents.

       

      5.5 Representations
Regarding Loan Structure and Terms.

       

      Each
Borrower represents and warrants to Lender as follows:

       

      (a) The Loan
has been structured as one loan to Borrowers in the aggregate rather than as a
number of smaller loans to each Borrower at the request of
Borrowers.

       

      (b) The
interest rates and repayment terms of the Loan are more favorable than those
that each individual Borrower could have obtained on its own without such
“pooling” of the Facilities as security for the Loan, and without the
cross-collateralization, cross-default, and joint and several liability features
of the Loan Documents.

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

       

      (c) The
structure of the Loan has been devised in order to accommodate Borrower’s
existing operational structure in order to best serve Borrowers’ collective
interests, and to enable Lender to assign a collective value to the Facilities
in an amount greater than they otherwise would have if each Facility had been
separately financed.

       

      5.6 Representations
Regarding Borrowers’ Solvency.

       

      Borrowers
represent and warrant to Lender as follows:

       

      (a) The
application of the Loan proceeds constitutes reasonably equivalent value in
exchange for all of the transfers for security made and obligations incurred by
each Borrower under the Loan Documents.

       

      (b) No
Security Instrument is being executed by any Borrower for or on account of any
antecedent debt owed by any Borrower to Lender.

       

      (c) No
Borrower is insolvent as of the date hereof.

       

      (d) The
execution, delivery and, where applicable, the recordation or filing of the
Security Instruments is intended by Borrowers and Lender to be a contemporaneous
exchange for new value given to Borrowers and shall in fact be a substantially
contemporaneous exchange.

       

      (e) The
transfers for security made and obligations incurred by Borrowers under the Loan
Documents are not made with actual intent to hinder, delay, or defraud any
entity to which any Borrower was, is, or subsequently becomes
indebted.

       

      (f) No
Borrower is or shall be insolvent (as defined above) on the date that any
transfer is to be made or obligation to be incurred under the terms of the Loan
Documents, nor shall any Borrower become insolvent as a result of such transfer
or obligation.

       

      (g) No
Borrower is engaged in business or a transaction, or is about to engage in
business or a transaction, for which any property remaining with such Borrower
is an unreasonably small amount of capital in relation to such business or
transaction.

       

      (h) No
Borrower intends to incur, or believes that it will incur, debts that would be
beyond such Borrowers ability to pay as such debts mature.

       

      5.7 Indemnity.

       

      Borrowers,
severally and jointly, shall hold harmless, protect, indemnify and defend Lender
against any losses suffered or incurred by Lender in the event any warranty or
representation by any Borrower in this Article 5 is false or
misleading, or contains a statement of fact, which if not accurate, would make
such warranty or representation false or misleading.

      
        
           

        

        
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      ARTICLE
6.

       

       

      INTEREST

       

       

      6.1 Interest
Rate.

       

      (a) The Loan
will bear interest at the Adjusted LIBOR Rate which will be the Applicable Rate
hereunder, unless the Default Rate is applicable.  Adjustments in the
Adjusted LIBOR Rate shall occur on the first day of each calendar month
throughout the term.

       

      (b) If Lender
determines (which determination shall be conclusive and binding upon Borrowers,
absent manifest error) (i) that no adequate basis exists for determining the
LIBOR Rate, or (ii) that, due to circumstances affecting the London interbank
market generally, the LIBOR Rate will not adequately and fairly reflect the cost
to Lender of funding the Loan, or (iii) that any applicable Law or regulation or
compliance therewith by Lender prohibits or restricts or makes impossible the
charging of interest based on the LIBOR Rate, or (iv) that the Adjusted LIBOR
Rate would be in excess of the maximum interest rate which Borrower may by law
pay and Lender so notifies Borrowers in writing, then until Lender notifies
Borrowers in writing that the circumstances giving rise to such suspension no
longer exist, interest shall accrue and be payable at the Adjusted Prime
Rate.

       

      (c) Interest
at the Applicable Rate (whether the Adjusted LIBOR Rate or Default Rate, as
applicable) shall be calculated for the actual number of days elapsed on the
basis of a 360-day year, including the first date of the applicable period to,
but not including, the date of repayment.

       

      6.2 Interest
Rate Agreements.

       

      (a) If
Borrowers institute an interest rate hedging program through the purchase of an
interest rate swap, cap or such other interest rate protection product (“Interest Rate
Protection Product”) from Lender or any Affiliate of Lender, Borrowers
shall enter into such party’s customary form of agreement (“Interest Rate
Agreement”) relating to such Interest Rate Protection
Product.  Any indebtedness incurred pursuant to an Interest Rate
Agreement entered into by Borrowers and Lender shall constitute indebtedness
evidenced by the Note and secured by the Mortgages and the other Loan Documents
to the same extent and effect as if the terms and provisions of such Interest
Rate Agreement were set forth herein, whether or not the aggregate of such
indebtedness, together with the disbursements made by Lender of the proceeds of
the Loan, shall exceed the face amount of the Note.

       

      (b) Borrowers
hereby collaterally assign to Lender any and all Interest Rate Protection
Products purchased or to be purchased by Borrowers in connection with the Loan,
as additional security for the Loan, and agree to provide Lender with any
additional documentation requested by Lender in order to confirm or perfect such
security interest during the term of the Loan.  If Borrowers obtain an
Interest Rate Protection Product from a party other than Lender, Borrowers shall
deliver to Lender such third party’s consent to such collateral
assignment.  No Interest Rate Protection Product purchased from a
third party may be secured by an interest in any Borrower or the
Facilities.

      
        
           

        

        
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      ARTICLE
7.

       

      COSTS
OF MAINTAINING LOAN

       

       

      7.1 Increased
Costs and Capital Adequacy.

       

      (a) Borrowers
recognize that the cost to Lender of maintaining the Loan or any portion thereof
may fluctuate and, Borrowers agree to pay Lender additional amounts to
compensate Lender for any increase in its actual costs incurred in maintaining
the Loan or any portion thereof outstanding or for the reduction of any amounts
received or receivable from Borrowers as a result of:

       

      (i) any
change after the date hereof in any applicable Law, regulation or treaty, or in
the interpretation or administration thereof, or by any domestic or foreign
court, (A) changing the basis of taxation of payments under this Agreement to
Lender (other than taxes imposed on all or any portion of the overall net income
or receipts of Lender), or (B) imposing, modifying or applying any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of, credit extended by, or any other acquisition of funds for loans
by Lender (which includes the Loan or any applicable portion thereof), or
(C) imposing on Lender, or the London interbank market generally, any other
condition affecting the Loan, provided that the result of the foregoing is to
increase the cost to Lender of maintaining the Loan or any portion thereof or to
reduce the amount of any sum received or receivable from Borrowers by Lender
under the Loan Documents; or

       

      (ii) the
maintenance by Lender of reserves in accordance with reserve requirements
promulgated by the Board of Governors of the Federal Reserve System of the
United States with respect to “Eurocurrency Liabilities” of a similar term to
that of the applicable portion of the Loan (without duplication for reserves
already accounted for in the calculation of a LIBOR Rate pursuant to the terms
hereof).

       

      (b) If the
application of any Law, rule, regulation or guideline adopted or arising out of
the July, 1988 report of the Basel Committee on Banking Regulations and
Supervisory Practices entitled “International Convergence of Capital Measurement
and Capital Standards”, or the adoption after the date hereof of any other Law,
rule, regulation or guideline regarding capital adequacy, or any change after
the date hereof in any of the foregoing, or in the interpretation or
administration thereof by any domestic or foreign Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender, with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has the effect of reducing the
rate of return on such Lender’s capital to a level below that which such Lender
would have achieved but for such application, adoption, change or compliance
(taking into consideration the policies of such Lender with respect to capital
adequacy), then, from time to time Borrower shall pay to such Lender such
additional amounts as will compensate such Lender for such reduction with
respect to any portion of the Loan outstanding.

       

      (c) Any
amount payable by Borrowers under Section 7.1 (a) or (b) shall be
paid within five (5) days of receipt by Borrowers of a certificate signed by an
authorized officer of Lender setting forth the amount due and the basis for the
determination of such amount, which statement shall be conclusive and binding
upon Borrowers, absent manifest error.  Failure on

      
        
           

        

        
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      the part
of Lender to demand payment from Borrowers for any such amount attributable to
any particular period shall not constitute a waiver of Lender’s right to demand
payment of such amount for any subsequent or prior period.  Lender
shall use reasonable efforts to deliver to Borrowers prompt notice of any event
described in Section 7.1 (a) or (b) of the
amount of the reserve and capital adequacy payments resulting therefrom and the
reasons therefor and of the basis of calculation of such amount; provided,
however, that any failure by Lender to so notify Borrowers shall not affect
Borrowers’ obligation to pay the reserve and capital adequacy payment resulting
therefrom.

       

      7.2 Borrower
Withholding.

       

      If by
reason of a change in any applicable Laws occurring after the date hereof, any
Borrower is required by Law to make any deduction or withholding in respect of
any taxes (other than taxes imposed on or measured by the net income of Lender
or any franchise tax imposed on Lender), duties or other charges from any
payment due under the Note to the maximum extent permitted by law, the sum due
from Borrowers in respect of such payment shall be increased to the extent
necessary to ensure that, after the making of such deduction or withholding,
Lender receives and retains a net sum equal to the sum which it would have
received had no such deduction or withholding been required to be
made.

       

      ARTICLE
8.

       

       

      LOAN
EXPENSE AND ADVANCES

       

       

      8.1 Loan and
Administration Expenses.

       

      Except as
otherwise provided in this Agreement and the other Loan Documents, Borrowers
unconditionally agree to pay all reasonable out-of-pocket expenses of the Loan,
including all amounts payable pursuant to Sections 8.2 and 8.3 and any and
all other fees owing to Lender pursuant to the Loan Documents, and also
including, without limiting the generality of the foregoing, all recording,
filing and registration fees and charges, mortgage or documentary taxes, all
insurance premiums, title insurance premiums and other charges of the Title
Insurer, printing and photocopying expenses, survey fees and charges, cost of
certified copies of instruments, cost of premiums on surety company bonds and
the Title Policies, all appraisal fees, insurance consultant’s fees, travel
related expenses and all costs and expenses incurred by Lender in connection
with the determination of whether or not Borrowers have performed the
obligations undertaken by Borrowers hereunder or have satisfied any conditions
precedent to the obligations of Lender hereunder and, if any Default or Event of
Default occurs hereunder or under any of the Loan Documents or if the Loan or
Note or any portion thereof is not paid in full when and as due, all costs and
expenses of Lender (including, without limitation, court costs and reasonable
counsel’s fees and disbursements and fees and costs of paralegals) incurred in
attempting to enforce payment of the Loan and expenses of Lender incurred
(including court costs and reasonable counsel’s fees and disbursements and fees
and costs of paralegals) in attempting to realize, while a Default or Event of
Default exists, on any security or incurred in connection with the sale or
disposition (or preparation for sale or disposition) of any security for the
Loan.  Borrowers agree to pay all brokerage, finder or similar fees or
commissions payable in connection with the transactions contemplated hereby and
shall indemnify and hold Lender harmless against all claims, liabilities, costs
and expenses (including

      
        
           

        

        
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      attorneys’
fees and expenses) incurred in relation to any claim by broker, finder or
similar person.

       

      8.2 Loan
Origination Fee.

       

      On or
before the Loan Closing Date, Borrowers shall pay Lender a loan origination fee
in the amount of $114,367.50.  Such fee is fully earned and
non-refundable.

       

      8.3 Lender’s
Attorney Fees and Disbursements.

       

      Borrowers
agree to pay Lender’s reasonable attorneys fees and disbursements incurred in
connection with this Loan, including (i) the preparation of this Agreement,
any intercreditor agreements and the other Loan Documents and the preparation of
the closing binders, (ii) the disbursement and administration (but not
syndication or sale) of the Loan and (iii) the enforcement of the terms of
this Agreement and the other Loan Documents.

       

      8.4 Time of
Payment of Fees and Expenses.

       

      Borrowers
shall pay all expenses and fees incurred by Lender as of the Loan Closing as
described in Section
8.1 above on the
Loan Closing Date (unless sooner required herein) and at the Loan Closing,
Lender may pay all Loan expenses from the proceeds of the Loan.  All
other costs, fees and expenses for which Borrowers are liable hereunder shall be
due and payable within ten (10) days after demand by Lender or as otherwise
provided in the Loan Documents, and if not paid when due, shall thereafter bear
interest until paid at the Default Rate.

       

      8.5 Expenses
and Advances Secured by Loan Documents.

       

      Any and
all advances or payments made by Lender under this Article 8 from
time to time, and any amounts expended by Lender pursuant to Section 13.2, shall, as
and when advanced or incurred, constitute additional indebtedness evidenced by
the Note and secured by the Mortgages and the other Loan Documents.

       

      8.6 Right of
Lender to Make Advances to Cure Borrower’s Defaults.

       

      In the
event Borrowers fail to perform any of their covenants, agreements or
obligations contained in this Agreement or any of the other Loan Documents
(including the obligation to pay accrued interest upon the Loan when due) (after
the expiration of applicable grace periods, except in the event of an emergency
or other exigent circumstances), Lender may (but shall not be required to)
perform any of such covenants, agreements and obligations, and any amounts
expended by Lender in so doing and shall constitute additional indebtedness
evidenced by the Note and secured by the Mortgages and the other Loan Documents
and shall bear interest at a rate per annum equal to the Applicable Rate (or
Default Rate following an Event of Default).

      
        
           

        

        
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      ARTICLE
9.                                

       

      CONDITIONS
TO CLOSING AND DISBURSEMENT OF THE LOAN

       

       

      9.1 Conditions to
Closing.

       

      Borrowers
agree that Lender’s obligation to close the Loan and to advance the proceeds of
the Loan is conditioned upon Borrowers’ delivery, performance and satisfaction
of the following conditions precedent in form and substance satisfactory to
Lender in its sole discretion:

       

      (a) Loan
Documents.  The Loan Documents shall have been duly executed
and delivered to Lender and the Mortgages and the Assignments of Rents shall
have been duly delivered for recordation and Lender shall have been authorized
to file the UCC-1 Financing Statements.

       

      (b) Title
Policies.  The Title Insurer shall have unconditionally
committed to Lender to issue the Title Policies.

       

      (c) Survey.  Lender
shall have received and approved surveys of each of the
Facilities.  

       

      (d) Insurance
Requirements.  Lender shall have received and approved
certificates of insurance evidencing that insurance coverage is in effect with
respect to the Facilities and Borrower, in accordance with the Insurance
Requirements attached hereto as Exhibit A, for which
the premiums have been fully prepaid with endorsements reasonably satisfactory
to Lender.

       

      (e) Minimum
Facility Occupancy.  Each Facility shall have had Occupancy of
not less than seventy percent (70%) as of August 31, 2008.

       

      (f) Minimum
Occupancy.  As of August 31, 2008, the average Occupancy of all
of the Facilities shall have been at least eighty percent (80%).

       

      (g) Minimum
Debt Service Coverage.  Lender shall have reasonably determined
that the Debt Service Coverage for the Facilities for the three month period
ending August 31, 2008, was at least 1.0 to 1.0.

       

      (h) Master
Leases.  The Master Leases shall have been approved by
Lender.

       

      (i) No
Litigation.  No uninsured litigation or proceedings shall be
pending or threatened in writing which could reasonably be expected to cause a
Material Adverse Change with respect to the Master Tenant or any Borrower,
Guarantor, or Facility.

       

      (j) Healthcare
Licenses.  Lender shall have received and approved copies of
all Healthcare Licenses for operation and occupancy of the
Facilities.

       

      (k) Residency
Agreements and Rent Roll.  Lender shall have received and
approved all Leases (if any) and Residency Agreements in effect, the form of the
standard Residency Agreement for the Facilities, and a current rent roll of each
of the Facilities certified by the Master Tenant to be complete and correct in
all material respects.

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

      (l) Attorney
Opinion Letters.  Borrowers shall have furnished to Lender
customary legal opinions from counsel for Borrowers, the Master Tenant and
Guarantors covering due authorization, execution and delivery and enforceability
of the Loan Documents.

       

      (m) Appraisals.  Lender
shall have received and approved an Appraisal of each Facility.

       

      (n) Lien
Searches.  Lender shall have received current bankruptcy,
federal tax lien and judgment searches and searches of all Uniform Commercial
Code financing statements with respect to each Borrower and the Master Tenant,
demonstrating the absence of adverse claims.

       

      (o) Financial
Statements.  Lender shall have received current annual
financial statements of Guarantors and the Master Tenant and such other persons
or entities connected with the Loan as Lender may reasonably request, each in
form and substance and certified as acceptable to Lender together with such
other financial information regarding Guarantors, the Master Tenant and the
Facilities as Lender may reasonably require.

       

      (p) Pro Forma
Projection.  Lender shall have received a Pro Forma Projection
for each Facility covering the succeeding five year period.

       

      (q) Flood
Hazard.  Lender shall have received and approved evidence that
non of the Facilities are located in an area designated by the Secretary of
Housing and Urban Development as a special flood hazard area, or flood hazard
insurance acceptable to Lender in its sole discretion.

       

      (r) Zoning.  Lender
shall have received evidence satisfactory to Lender regarding the zoning of the
Facilities and compliance of the Facilities with zoning and similar
laws.

       

      (s) Organizational
Documents.  Lender shall have received and approved the
Organizational Documents for Borrowers, the members of Borrowers, the Master
Tenant, Emeritus and such other entities as Lender may require, together, if
required by such Organizational Documents, with certified resolutions in form
and content satisfactory to Lender, authorizing execution, delivery and
performance of the Loan Documents, and such other documentation as Lender may
reasonably require to evidence the authority of the persons executing the Loan
Documents.

       

      (t) Property
Condition Reports.  Lender shall have received and approved a
property condition report with respect to each Facility prepared by an architect
or engineer approved by Lender, which shall, at a minimum, (A) demonstrate the
absence of any structural or otherwise potentially hazardous defect in any
Facility, and (B) describe the condition of each Facility and identify defects
and all reasonably necessary or prudent repairs and/or
replacements.

       

      (u) Environmental
Reports.  Lender shall have received and approved the
Environmental Reports which shall, at a minimum, (A) demonstrate the absence of
any existing or potential Hazardous Material contamination or violations of
environmental Laws at the Facilities, except as acceptable to Lender in its sole
and absolute discretion, (B) include the results of all sampling or monitoring
to confirm the extent of existing or potential Hazardous

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

      Material
contamination at any of the Facilities, including the results of leak detection
tests for each underground storage tank located at any of the Facilities, if
any, (C) describe response actions appropriate to remedy any existing or
potential Hazardous Material contamination, and report the estimated cost of any
such appropriate response, (D) confirm that any prior removal of Hazardous
Material or underground storage tanks from any of the Facilities was completed
in accordance with applicable Laws, and (E) confirm whether or not any of the
Facilities are located in a wetlands district.

       

      (v) Additional
Documents.  Borrowers shall have furnished to Lender such other
materials, documents, papers or requirements regarding the Facilities,
Borrowers, the Master Tenant and Guarantors as Lender shall reasonably
request.

       

      (w) No
Default.  There shall be no Default or Event of Default
hereunder.

       

      (x) No
Material Adverse Change.  There shall have been no Material
Adverse Change with respect to any Borrower, Facility or Guarantor or the Master
Tenant.

       

      (y) Closing
of Concurrent Loan.  The Concurrent Loan shall have closed
concurrently with the closing of the Loan hereunder.

       

      ARTICLE
10.

       

       

      OTHER
COVENANTS

       

       

      Borrowers
further covenant and agree as follows:

       

      10.1 Mechanics’
Liens.

       

      Borrowers
will promptly cause any mechanics’ lien filed against any of the Facilities to
be discharged or bonded over to Lender’s reasonable satisfaction.

       

      10.2 Renewal
of Insurance.

       

      Borrowers
shall cause insurance policies to be maintained in compliance with this
Agreement at all times.  Borrowers shall timely pay or cause to be
paid all premiums on all insurance policies required hereunder, and as and when
any policies of insurance may expire, furnish or cause to be furnished to Lender
additional and renewal insurance policies with companies, coverage and in
amounts satisfactory to Lender in accordance with Section 9.1(d).

       

      10.3 Payment
of Taxes.

       

      Borrowers
shall pay or cause to be paid all real estate taxes and assessments and charges
of every kind upon the Facilities before the same become delinquent; provided,
however, that Borrower shall have the right to pay such tax under protest or to
otherwise contest in good faith any such tax or assessment, but only if (i) such
contest has the effect of preventing the collection of such taxes so contested
and also of preventing the sale or forfeiture of a Facility or any part thereof
or any interest therein, (ii) Borrower has notified Lender of Borrower’s intent
to contest such taxes, and (iii) Borrower has deposited security in form and
amount reasonably satisfactory to Lender, and has increased the amount of such
security so deposited promptly after Lender’s reasonably request
therefor.  If Borrower fails to commence such contest
or,

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

      having
commenced to contest the same, and having deposited such security required by
Lender for its full amount, shall thereafter fail to prosecute such contest in
good faith or with due diligence, or, upon adverse conclusion of any such
contest, shall fail to pay such tax, assessment or charge is not paid when due,
Lender may, at its election (but shall not be required to), pay and discharge
any such tax, assessment or charge, and any interest or penalty thereon, and any
amounts so expended by Lender shall be included in the Obligations, shall be due
on demand and shall bear interest from the date of demand until paid at the
Default Rate.  Borrowers shall furnish to Lender evidence that taxes
are paid at least five (5) days prior to the last date for payment of such taxes
and before imposition of any penalty or accrual of interest.

       

      10.4 Tax and
Insurance Escrow Accounts.

       

      Borrowers
shall, following the written request of Lender after the occurrence of any
delinquency in payment of taxes or insurance premiums or after the occurrence of
any Event of Default, make or cause to be made insurance and tax escrow
deposits, in amounts reasonably determined by Lender from time to time as being
needed to pay taxes and insurance premiums when due, in an interest bearing
escrow account held by Lender in Lender’s name and under its sole dominion and
control.  All payments deposited in the escrow account, and all
interest accruing thereon, are pledged as additional collateral for the Loan.
Notwithstanding Lender’s holding of the escrow account, nothing herein shall
obligate Lender to pay any insurance premiums or real property taxes with
respect to any portion of the Facilities unless any Default has been cured to
the satisfaction of Lender.  If the Default has been satisfactorily
cured, Lender shall make available to Borrowers such funds as may be deposited
in the escrow account from time to time for Borrowers’ payment of insurance
premiums or real property taxes due with respect to the Facilities.

       

      10.5 Personal
Property.

       

      All of
Borrowers’ and the Master Tenant’s personal property, fixtures, attachments and
equipment delivered upon, attached to or used in connection with the operation
of the Facilities shall always be located at the Facilities and shall be kept
free and clear of all liens, encumbrances and security interests.

       

      10.6 Leasing
Restrictions.

       

      Without
the prior written consent of Lender (such consent not to be unreasonably
withheld, conditioned or delayed), Borrowers shall not and shall not permit the
Master Tenant to (i) enter into any non-residential Lease other than
arms-length Leases of non-residential space in the Facilities entered into in
the ordinary course of business, (ii) accept any rental payment under any
Lease more than one month in advance of its due date (except in circumstances
where a Resident of the Facilities intends to be away from the Facilities for a
period in excess of one month), or (iii) enter into any Lease or occupancy
agreement other than arms-length transactions in the ordinary course of
operation of the Facilities.  Borrowers will not and will not permit
the Master Tenant to enter into any residential Lease for a term of more than
one year without Lender’s prior written consent, which consent shall not be
unreasonably withheld, conditioned, or delayed, and all residential Leases shall
be on a form approved by Lender without material modification.

      
        
           

        

        
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      10.7 Condition
of Facilities.

       

      Borrowers
will cause all buildings, improvements and equipment located on or used or
useful in connection with the Facilities to be kept and maintained in good
repair, working order and condition, reasonable wear and tear excepted, and,
from time to time, cause all needed and proper repairs, renewals, replacements,
additions, and improvements thereto to be done in order to keep the same in good
operating condition.

       

      10.8 Inventory
and Equipment.

       

      Borrowers
will cause sufficient inventory and equipment of types and quantities to be
maintained at the Facilities to adequately operate the Facilities.

       

      10.9 Lender’s
Attorneys’ Fees for Enforcement of Agreement.

       

      In case
of any Default or Event of Default hereunder, Borrowers (in addition to Lender’s
attorneys’ fees, if any, to be paid pursuant to Section 8.3) will pay
Lender’s reasonable attorneys’ and paralegal fees (including, without
limitation, any reasonable attorney and paralegal fees and costs incurred in
connection with any litigation or bankruptcy or administrative hearing and any
appeals therefrom and any post-judgment enforcement action including, without
limitation, supplementary proceedings) in connection with the enforcement of
this Agreement; without limiting the generality of the foregoing, if at any time
or times hereafter Lender employs counsel with respect to a Default (whether or
not any suit has been or shall be filed and whether or not other legal
proceedings have been or shall be instituted) for advice or other representation
with respect to the Facilities, this Agreement, or any of the other Loan
Documents, or to protect, collect, lease, sell, take possession of, or liquidate
any of the Facilities, or to attempt to enforce any security interest or lien in
any portion of the Facilities, or to enforce any rights of Lender or Borrowers’
obligations hereunder, then in any of such events all of the reasonable
attorneys’ fees arising from such services, and any reasonable out-of-pocket
expenses, costs and charges relating thereto (including fees and costs of
paralegals), shall constitute an additional liability owing by Borrowers to
Lender, payable on demand.

       

      10.10 Appraisals.

       

      Lender
shall have the right to obtain new or updated Appraisals of the Facilities from
time to time.  Borrowers shall cooperate with Lender in this
regard.  If the Appraisal is obtained to comply with this Agreement or
any applicable law or regulatory requirement, or bank policy promulgated to
comply therewith, or if an Event of Default exists, Borrower shall pay for any
such Appraisal upon Lender’s request.

       

      10.11 Financial
Information.

       

      Borrowers
shall deliver or cause to be delivered to Lender the following, all of which
shall be in form satisfactory to Lender:

       

      (a) Internally
prepared quarterly and year-to-date financial statements for each Facility,
including occupancy statistics and payor mix, within 45 days after the end of
each fiscal quarter;

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

      (b) Quarterly
internally prepared financial statements for Emeritus within 60 days after the
end of each fiscal quarter, certified as correct and complete by the chief
financial officer of Emeritus.

       

      (c) Annual
consolidated and consolidating financial statements for Emeritus within 120 days
after the end of each fiscal year, which financial statements shall be audited
by a CPA acceptable to Lender.

       

      (d) Annual
personal financial statement for Baty within 120 days after the end of each
calendar year.

       

      (e) Within 45
days after the end of each calendar quarter, Quarterly Compliance Certificates
in the form of Exhibit
B attached with respect to the Emeritus Covenants and Borrowers’
financial covenants described in Section 10.12
below.

       

      (f) Copies of
all state or federal regulatory, survey or reimbursement reports or
documentation regarding the Facilities, promptly after the issuance
thereof.

       

      All such
financial statements shall be in a format approved by
Lender.  Borrowers shall provide such additional financial information
Lender reasonably requires.  Borrowers shall during regular business
hours permit Lender or any of its agents or representatives to have access to
and examine all of its books and records regarding the Facilities.

       

      10.12 Financial
Covenants.

       

      Borrowers
agree to comply with each of the following covenants throughout the term of the
Loan:

       

      (a) Minimum
Facility Occupancy.  As of the end of each calendar quarter
commencing with the calendar quarter ending December 31, 2008, the Occupancy of
each Facility shall no time be less than 90% of the Occupancy for such Facility
as of September 30, 2008.

       

      (b) Minimum
Debt Service Coverage.  For each calendar quarter commencing
with the calendar quarter ending December 31, 2008, the Debt Service Coverage
shall be no less than the required Debt Service Coverage set out
below:

      

      
        	
                Quarter End

              	
                Required Debt Service
    Coverage

              
	
                12/31/2008

              	
                1.00

              
	
                3/31/2009

              	
                1.00

              
	
                6/30/2009

              	
                1.00

              
	
                9/30/2009

              	
                1.00

              
	
                12/31/2009

              	
                1.10

              
	
                3/31/2010

              	
                1.10

              
	
                6/30/2010

              	
                1.10

              
	
                9/30/2010

              	
                1.10

              
	
                12/31/2010

              	
                1.10

              
	
                3/31/2011

              	
                1.15

              

      

      
        
           

        

        
          30

          
            

          

        

        
           

        

      

      

      
        	
                6/30/2011

              	
                1.20

              
	
                9/30/2011

              	
                1.25

              

      

       

      In the
event the minimum Debt Service Coverage is not met for any calendar quarter,
such shall not be an Event of Default hereunder if by the date the Quarterly
Compliance Certificate for such calendar quarter is due under Section 10.11(e) above,
Borrowers make a principal payment on the Loan in an amount sufficient to cause
such Debt Service Coverage to be met.

       

      10.13 Lost
Note.

       

      Upon
Lender’s furnishing to Borrowers an affidavit to such effect and an indemnity
reasonably acceptable to Borrowers, Borrowers shall, if the Note is mutilated,
destroyed, lost or stolen, deliver to Lender, in substitution therefor, a new
note containing the same terms and conditions as the Note.

       

      10.14 Indemnification.

       

      Borrowers
shall indemnify Lender, including each party owning an interest in the Loan and
their respective officers, directors, employees and consultants (each, an “Indemnified
Party”) and defend and hold each Indemnified Party harmless from and
against all claims, injury, damage, loss and liability, cost and expense
(including reasonable attorneys’ fees, costs and expenses) of any and every kind
to any persons or property by reason of (i) the operation or maintenance of
the Facilities; (ii) any breach of representation or warranty, Default or
Event of Default; or (iii) any other matter arising in connection with the Loan,
Borrower or the Facilities.  No Indemnified Party shall be entitled to
be indemnified against its own gross negligence or willful
misconduct.  The foregoing indemnification shall survive repayment of
the Loan and shall continue to benefit Lender following any assignment of the
Loan with respect to matters arising or accruing prior to such
assignment.

       

      10.15 No
Additional Debt.

       

      Except
for the Loan, Borrowers shall not incur any indebtedness (whether personal or
nonrecourse, secured or unsecured) other than customary trade payables paid
within sixty (60) days after they are incurred.

       

      10.16 Compliance
With Laws.

       

      Borrowers
shall comply with all applicable and material requirements (including applicable
Laws) of any Governmental Authority having jurisdiction over Borrowers or any of
the Facilities.

       

      10.17 Organizational
Documents.

       

      Without
the prior written consent of Lender, not to be unreasonably withheld, no
Borrower shall permit or suffer (i) a material amendment or modification of
its Organizational Documents, (ii) the admission of any new member, or (iii) any
dissolution or termination of its existence.

      
        
           

        

        
          31

          
            

          

        

        
           

        

      

      10.18 Management
Contracts.

       

      No
Borrower shall enter into, modify, amend, terminate or cancel any management
contracts for the Facilities or agreements with agents or brokers, without the
prior written approval of Lender, such approval not to be unreasonably withheld,
conditioned or delayed.

       

      10.19 Furnishing
Notices.

       

      Borrowers
shall provide Lender with copies of all material notices pertaining to the
Facilities received by any Borrower or the Master Tenant from any Governmental
Authority or insurance company within seven (7) days after such notice is
received.

       

      10.20 Authorized
Representative.

       

      Borrowers
appoint Eric Mendelsohn as their authorized representative (“Authorized
Representative”) for purposes of dealing with Lender on behalf of
Borrowers in respect of any and all matters in connection with this Agreement,
the other Loan Documents, and the Loan.  The Authorized Representative
shall have the power, in his discretion, to give and receive all notices,
monies, approvals, and other documents and instruments, and to take any other
action on behalf of Borrowers.  All actions by the Authorized
Representative shall be final and binding on Borrowers.  Lender may
rely on the authority given to the Authorized Representative until actual
receipt by Lender of a duly authorized resolution substituting a different
person as the Authorized Representative.  No more than one person
shall serve as Authorized Representative at any given time.

       

      10.21 Single
Purpose Entity Provisions.

       

      (a) The sole
purpose for which each Borrower is organized is to acquire, own, hold, maintain
and operate its Facility, together with such other activities as may be
necessary or advisable in connection with such limited purpose.  No
Borrower shall engage in any business unrelated to the foregoing purpose and
shall not acquire any real property or own assets other than those in
furtherance of the limited purposes of such Borrower.

       

      (b) No
Borrower shall have the authority to perform any act in violation of any
(i) applicable laws or regulations or (ii) the Loan Documents.

       

      (c) No
Borrower shall during the term of the Loan and/or prior to the full and
indefeasible repayment of the Loan:

       

      (i) except
for Intra-Party Loans or otherwise as permitted by Lender in writing, make any
loans to any member of Borrower or any Affiliate of any member;

       

      (ii) dissolve,
wind up or liquidate Borrower;

       

      (iii) merge,
consolidate or acquire all or substantially all of the assets of any other
entity; or

       

      (iv) change
the nature of the business of Borrower.

      
        
           

        

        
          32

          
            

          

        

        
           

        

      

      (d) No
Borrower shall, and no person or entity on behalf of Borrower shall: (a)
institute proceedings to be adjudicated bankrupt or insolvent; (b) consent to
the institution of bankruptcy or insolvency proceedings against Borrower; (c)
file a petition seeking, or consenting to, reorganization or relief under any
applicable federal or state law relating to bankruptcy; (d) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of Borrower or a substantial part of its property; (e) make
any assignment for the benefit of creditors; (f) admit in writing Borrower’s
inability to pay its debts generally as they become due or declare or effect a
moratorium on its debts; or (g) take any action in furtherance of any such
action.

       

      (e) Borrowers
shall at times observe the applicable legal requirements for the recognition of
each Borrower as a legal entity separate from any of its Affiliates, including,
without limitation, as follows:

       

      (i) Each
Borrower shall hold itself out to the public (including any of its Affiliates’
creditors) under such Borrower’s own name and as a separate and distinct entity
and not as a department, division or otherwise of any Affiliate.

       

      (ii) Each
Borrower shall observe all customary formalities regarding the existence of
Borrower.

       

      (iii) Each
Borrower shall hold title to its assets in its own name and act solely in its
own name and through its own duly authorized members and agents.  No
Affiliate shall be appointed or act as agent of Borrower, other than, as
applicable, the Master Tenant with respect to the Facilities.

       

      (iv) Investments
shall be made in the name of each Borrower directly by such Borrower or on its
behalf by brokers engaged and paid by such Borrower or its agents.

       

      (v) Each
Borrower is solvent.

       

      (vi) Each
Borrower shall maintain its assets in such a manner that it is not costly or
difficult to segregate, ascertain or identify its individual assets from those
of any Affiliate or other person or entity.

       

      (vii) Each
Borrower shall pay or cause to be paid its own liabilities and expenses of any
kind, including but not limited to salaries of its employees, if any, only out
of its own separate funds and assets or through Intra-Party Loans.

       

      (viii) Each
Borrower shall at all times be adequately capitalized to engage in the
transactions contemplated at its formation; provided, however, that this
provision shall not require any direct or indirect member of Borrowers to make
additional capital contributions to any Borrower.

       

      (ix) No
Borrower shall do any act which would make it impossible to carry on the
ordinary business of Borrower.

       

      (x) None of
any Borrower’s funds shall be invested in securities issued by, nor shall any
Borrower acquire the indebtedness or obligation of, any
Affiliate.

      
        
           

        

        
          33

          
            

          

        

        
           

        

      

      (xi) Each
Borrower shall correct any misunderstanding that is known by Borrower regarding
its name or separate identity.

       

      (f) Any
indemnification obligation of Borrower in favor of its members or any other
Affiliate shall (i) be fully subordinated to the Loan and (ii) not constitute a
claim against Borrower or its assets until such time as the Loan has been
indefeasibly paid in accordance with its terms and otherwise has been fully
discharged.

       

      10.22 Right of
First Refusal.

       

      Borrowers
grant Lender a right of first refusal (“Lender’s
ROFR”) with respect to any refinancing of the Loan or any of the
Facilities which secure the Loan.  Lender (which, as used in this
paragraph includes any Affiliate of Lender) shall have the right, but not the
obligation, to match the terms of any such financing offered to any Borrower(s)
by any reputable institutional real estate lender.  If within 30 days
after Lender receives a copy of any such firm financing offer to any Borrower(s)
from a reputable institutional real estate lender, Lender offers such Borrower
financing on terms which, in the reasonable judgment of Borrowers and Lender,
are comparable in all material respects to the terms of any such offered
financing, such Borrower(s) may decline to accept the financing offered by
Lender only if Borrowers pay Lender a termination fee (the “Termination
Fee”) in an amount equal to $175,950.00, multiplied by the allocable
percentage of the Loan (based on the allocation in Section 4.3) applicable
to such Facility or Facilities.  The Termination Fee shall be due and
payable when the Loan is due in full or is paid in full, or when Lender releases
such Facility(ies) from the lien of the Security Instruments, whichever is
earlier, and such fee shall be included in the indebtedness secured by the
Mortgages.  If Lender does not, in writing, irrevocably offer such
Borrower(s) financing on terms which, in the reasonable judgment of Borrowers
and Lender, are comparable in all material respects to the terms of any such
offered financing, Borrowers shall not be obligated to pay any Termination Fee
or any other fees to Lender in connection with the refinancing of the
Loan.  Lender’s ROFR is personal to Lender and shall not be subject to
any assignment by Lender without Borrowers’ prior written consent.

       

      ARTICLE
11.                                

       

       

      CASUALTIES
AND CONDEMNATION

       

       

      11.1 Lender’s
Election to Apply Proceeds on Indebtedness.

       

      (a) Subject
to the provisions of Section 11.1(b) below,
Lender may elect to collect, retain and apply upon the indebtedness of Borrowers
under this Agreement or any of the other Loan Documents all proceeds of
insurance or condemnation (individually and collectively referred to as “Proceeds”)
after deduction of all expenses of collection and settlement, including
attorneys’ and adjusters’ fees and charges.  Any proceeds remaining
after repayment of the indebtedness under the Loan Documents shall be paid by
Lender to Borrower.

       

      (b) Notwithstanding
anything in Section
11.1(a) to the
contrary, in the event of any casualty to a Facility or any condemnation of part
of a Facility, Lender agrees to make the Proceeds available to pay costs of
restoration of the Facility if (i) there is then no Default or Event of
Default, (ii) all Proceeds are deposited with Lender, (iii) in Lender’s
reasonable judgment, the amount of Proceeds available for restoration of the
Facilities (together with any

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

      sums or
other security acceptable to Lender deposited with Lender by Borrower for such
purpose) is sufficient to pay the full and complete costs of such restoration,
(iv) if the cost of restoration exceeds ten percent (10%) of the Loan
Amount allocable to such Facility determined based on Section 4.3 above, in
Lender’s sole determination after completion of restoration the Loan Amount
allocable to such Facility will not exceed 75% of the “stabilized” fair market
value of the Facility, (vi) in Lender’s reasonable determination, the
Facility can be restored to an architecturally and economically viable project
in compliance with applicable Laws, (vii) each Guarantor reaffirms its Guaranty
in writing, and (viii) in Lender’s reasonable determination, such
restoration is likely to be completed not later than three (3) months prior to
the Maturity Date.

       

      11.2 Borrowers’
Obligation to Rebuild and Use of Proceeds Therefor.

       

      In case
Lender does not elect to apply or does not have the right to apply the Proceeds
to the indebtedness of Borrowers under this Agreement or any of the other Loan
Documents, as provided in Section 11.1 above,
Borrowers shall:

       

      (a) Proceed
with diligence to make settlement with insurers or the appropriate governmental
authorities and cause the Proceeds to be deposited with Lender;

       

      (b) In the
event of any delay in making settlement with insurers or the appropriate
governmental authorities or effecting collection of the Proceeds, deposit with
Lender the full amount required to complete construction as aforesaid;
and

       

      (c) Promptly
proceed with construction of the Facility, including the repair of all damage
resulting from such fire, condemnation or other cause and restoration to its
former condition.

       

      Lender
may condition the disbursement of Proceeds and other funds deposited with Lender
for the cost of restoration on Lender’s reasonable approval of the plans and
specifications for the restoration, contractor’s cost estimates, architect’s
certificates, waivers of liens, sworn statements of mechanics and materialmen,
and such other evidence of costs, percentage completion of construction,
application of payments and satisfaction of liens as Lender may reasonably
require.

       

      ARTICLE
12.                                

       

       

      ASSIGNMENTS
BY LENDER AND BORROWER

       

       

      12.1 Assignments
and Participations.

       

      Lender
may from time to time sell the Loan and the Loan Documents (or any interest
therein) and may grant participations in the Loan to any entity or person
(herein, a “Lender
Transferee”).  Borrowers agree to cooperate with Lender’s
efforts to do any of the foregoing and to execute all documents reasonably
required by Lender in connection therewith which do not materially adversely
affect Borrowers’ rights under the Loan Documents.  If such Lender
Transferee (or its owner if the Lender Transferee is a disregarded entity for
United States federal income tax purposes) is a “foreign person” within the
meaning of Section 1445 or 7701 of the Internal Revenue Code, and if Borrower is
obligated to withhold United States withholding taxes from interest payments on
the Loan to such Lender Transferee, Borrower shall be entitled to
deduct

      
        
           

        

        
          35

          
            

          

        

        
           

        

      

      such
withholding taxes from each such interest payment provided that Borrower remits
such withholding taxes to the Internal Revenue Service in accordance with
applicable Law.

       

      12.2 Prohibition
of Assignments and Transfers by Borrowers.

       

      Borrowers
shall not assign or attempt to assign its rights under this Agreement and any
purported assignment shall be void.  Without the prior written consent
of Lender, in Lender’s sole discretion, Borrowers shall not suffer or permit any
Transfer other than a Permitted Transfer.

       

      12.3 Prohibition
of Transfers in Violation of ERISA.

       

      In
addition to the prohibitions set forth in Section 12.2 above, no
Borrower shall assign, sell, pledge, encumber, transfer, hypothecate or
otherwise dispose of its interest or rights in this Agreement or in any of the
Facilities, or attempt to do any of the foregoing or suffer any of the
foregoing, nor shall any party owning a direct or indirect interest in any
Borrower assign, sell, pledge, encumber, transfer, hypothecate or otherwise
dispose of any of its rights or interest (direct or indirect) in any Borrower,
attempt to do any of the foregoing or suffer any of the foregoing, if such
action would cause the Loan, or the exercise of any of Lender’s rights in
connection therewith, to constitute a prohibited transaction under ERISA or the
Internal Revenue Code or otherwise result in Lender being deemed in violation of
any applicable provision of ERISA.  Borrowers agree to indemnify and
hold Lender free and harmless from and against all losses, reasonable
out-of-pocket costs (including reasonable attorneys’ fees and expenses), taxes,
damages and reasonable expenses Lender may suffer by reason of the
investigation, defense and settlement of claims and in obtaining any prohibited
transaction exemption under ERISA necessary or desirable in Lender’s sole
judgment or by reason of a breach of the foregoing prohibitions.  The
foregoing indemnification shall be a recourse obligation of Borrowers and shall
survive repayment of the Note, notwithstanding any limitations on recourse
contained herein or in any of the Loan Documents.

       

      12.4 Successors
and Assigns.

       

      Subject
to the foregoing restrictions on transfer and assignment contained in this Article 12, this
Agreement shall inure to the benefit of and shall be binding on the parties
hereto and their respective successors and permitted assigns.

       

      ARTICLE
13.                                

       

       

      DEFAULT

       

       

      13.1 Events of
Default.

       

      The
occurrence of any one or more of the following shall constitute an “Event of
Default” as said term is used herein:

       

      (a) Failure
of Borrowers to make any payment of principal or interest on the Note within
five (5) days after the date when due.

       

      (b) Failure
by Borrowers to pay the Loan in full by the Maturity Date.

      
        
           

        

        
          36

          
            

          

        

        
           

        

      

      (c) Failure
of Borrowers to observe or perform any of the other covenants or conditions by
Borrowers to be performed under the terms of this Agreement or any other Loan
Document concerning the payment of money, for a period of ten (10) days after
written notice from Lender that the same is due and payable.

       

      (d) Failure
of Borrowers for a period of thirty (30) days after written notice from Lender,
to observe or perform any non-monetary covenant or condition contained in this
Agreement or any other Loan Documents; provided that if any such failure
concerning a non-monetary covenant or condition is susceptible to cure and
cannot reasonably be cured within said thirty (30) day period, then
Borrowers shall have an additional sixty (60) day period to cure such failure
and no Event of Default shall be deemed to exist hereunder so long as Borrowers
commence such cure within the initial thirty (30) day period and diligently
and in good faith pursue such cure to completion within such resulting ninety
(90) day period from the date of Lender’s written notice; provided however that
if a different notice or grace period is specified under any other subsection of
this Section 13.1 with respect
to a particular breach, the specific provision shall control.

       

      (e) Any
Transfer or other disposition in violation of Article
12.

       

      (f) If any
material warranty, representation, statement, report or certificate made now or
hereafter by any Borrower or Guarantor is untrue or incorrect at the time made
or delivered, provided that if such breach is reasonably susceptible of cure,
then no Event of Default shall exist so long as Borrowers cure (or cause the
cure of) said breach (i) within the notice and cure period provided in
Section 13.1(c) above for
a breach that can be cured by the payment of money or (ii) within the
notice and cure period provided in Section 13.1(d) above for
any other breach.

       

      (g) Any
Borrower or Guarantor or Master Tenant shall commence a voluntary case
concerning any Borrower or Guarantor or Master Tenant under the Bankruptcy Code;
or an involuntary proceeding is commenced against any Borrower or Guarantor or
Master Tenant under Bankruptcy Code and relief is ordered against any Borrower
or Guarantor or Master Tenant, or the petition is controverted but not dismissed
or stayed within sixty (60) days after the commencement of the case, or a
custodian (as defined in Bankruptcy Code) is appointed for or takes charge of
all or substantially all of the property of any Borrower or Guarantor or Master
Tenant; or any Borrower or Guarantor or Master Tenant commences any other
proceedings under any reorganization, arrangement, readjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar Law of any
jurisdiction whether now or hereafter in effect relating to any Borrower or
Guarantor or Master Tenant; or there is commenced against any Borrower or
Guarantor or Master Tenant any such proceeding which remains undismissed or
unstayed for a period of sixty (60) days; or any Borrower or Guarantor or Master
Tenant fails to controvert in a timely manner any such case under Bankruptcy
Code or any such proceeding, or any order of relief or other order approving any
such case or proceeding is entered; or any Borrower or Guarantor or Master
Tenant by any act or failure to act indicates its consent to, approval of, or
acquiescence in any such case or proceeding or the appointment of any custodian
or the like of or for it for any substantial part of its property or suffers any
such appointment to continue undischarged or unstayed for a period of sixty (60)
days.

      
        
           

        

        
          37

          
            

          

        

        
           

        

      

      (h) Any
Borrower or Guarantor or Master Tenant shall make an assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts generally
as they become due, or shall consent to the appointment of a receiver or trustee
or liquidator of all of its property or the major part thereof or if all or a
substantial part of the assets of any Borrower or Guarantor or Master Tenant are
attached, seized, subjected to a writ or distress warrant, or are levied upon,
or come into the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors.

       

      (i) If any
Borrower or Master Tenant is enjoined, restrained or in any way prevented by any
court order from operating any of the Facilities.

       

      (j) One or
more final judgments are entered (i) against any Borrower or Master Tenant in
amounts aggregating in excess of $100,000 or (ii) against Guarantor in amounts
aggregating in excess of $250,000, and said judgments are not satisfied, stayed
or bonded over within thirty (30) days after entry.

       

      (k) If any
Borrower or Guarantor or Master Tenant shall fail to pay any debt (which term
shall not include judgments under clause (j) above) owed by it or is in default
under any agreement with Lender or any other party (other than a failure or
default for which such Borrower’s or Master Tenant’s maximum liability does not
exceed $100,000 and Guarantor’s maximum liability does not exceed $250,000) and
such failure or default continues after any applicable grace period specified in
the instrument or agreement relating thereto.

       

      (l) Failure
by Emeritus to comply with any of the Emeritus Covenants.

       

      (m) If a
Material Adverse Change occurs with respect to any Borrower, any of
the  Facilities or Guarantor.

       

      (n) The
occurrence of any other event or circumstance denominated as an Event of Default
herein or under any of the other Loan Documents and the expiration of any
applicable grace or cure periods, if any, specified for such Event of Default
herein or therein, as the case may be.

       

      (o) Any
default by any Borrower or by the Master Tenant under any Master Lease which is
not cured within any applicable cure period thereunder.

       

      13.2 Remedies
Conferred Upon Lender.

       

      Upon the
occurrence of any Event of Default, Lender may pursue any one or more of the
following remedies concurrently or successively, it being the intent hereof that
none of such remedies shall be to the exclusion of any other:

       

      (a) Take
possession of the Facilities and do anything which is necessary or appropriate
in its sole judgment to fulfill the obligations of Borrower under this Agreement
and the other Loan Documents;

       

      (b) Declare
the Note to be immediately due and payable;

      
        
           

        

        
          38

          
            

          

        

        
           

        

      

      (c) Use and
apply any monies or letters of credit deposited by Borrower with Lender,
regardless of the purposes for which the same was deposited, to cure any such
Event of Default or to apply on account of any indebtedness under this Agreement
which is due and owing to Lender;

       

      (d) Exercise
or pursue any other remedy or cause of action permitted under this Agreement or
any other Loan Documents, or conferred upon Lender by operation of
Law.

       

      Notwithstanding
the foregoing, upon the occurrence of any Event of Default under Section 13.1(g), all
amounts evidenced by the Note shall automatically become due and payable,
without any presentment, demand, protest or notice of any kind to
Borrowers.

       

      ARTICLE
14.                                

       

       

      GENERAL
PROVISIONS

       

       

      14.1 Time is
of the Essence.

       

      Borrowers
agree that time is of the essence under this Agreement; provided, however, that
if any payment or performance is due on day that is not a Business Day, such
payment or performance shall be due on the Business Day immediately following
such date.

       

      14.2 Captions.

       

      The
captions and headings of various Articles, Sections and subsections of this
Agreement and Exhibits pertaining hereto are for convenience only and are not to
be considered as defining or limiting in any way the scope or intent of the
provisions hereof.

       

      14.3 Modification;
Waiver.

       

      No
modification, waiver, amendment or discharge of this Agreement or any other Loan
Document shall be valid unless the same is in writing and signed by the party
against which the enforcement of such modification, waiver, amendment or
discharge is sought.

       

      14.4 Governing
Law.

       

      Borrowers
and Lender agree that this Agreement and the other Loan Documents shall be
construed, enforced and otherwise governed by the laws of the State of
Washington without regard to its conflict of laws rules, except that the
validity and enforcement of each Security Instrument shall be governed by the
laws of the State in which the applicable Facility is located.

       

      14.5 Disclaimer.

       

      This
Agreement is made for the sole benefit of Borrowers and Lender and no other
person or persons shall have any benefits, rights or remedies under or by reason
of this Agreement, or by reason of any actions taken by Lender pursuant to this
Agreement.  Lender shall not be liable for any debts or claims
accruing in favor of any such parties against Borrowers or others or against the
Facilities.  By making the Loan or taking any action pursuant to any
of the Loan Documents, Lender shall not be deemed a partner or a joint venturer
with any Borrower or a fiduciary of any Borrower.

      
        
           

        

        
          39

          
            

          

        

        
           

        

      

      14.6 Partial
Invalidity; Severability.

       

      If any of
the provisions of this Agreement, or the application thereof to any person,
party or circumstances, shall, to any extent, be invalid or unenforceable, the
remainder of this Agreement, or the application of such provision or provisions
to persons, parties or circumstances other than those as to whom or which it is
held invalid or unenforceable, shall not be affected thereby, and every
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.

       

      14.7 Definitions
Include Amendments.

       

      Definitions
contained in this Agreement which identify documents, including, but not limited
to, the Loan Documents, shall be deemed to include all amendments and
supplements to such documents from the date hereof, and all future amendments
and supplements thereto entered into from time to time to satisfy the
requirements of this Agreement or otherwise with the consent of
Lender.  Reference to this Agreement contained in any of the foregoing
documents shall be deemed to include all amendments and supplements to this
Agreement.

       

      14.8 Execution
in Counterparts.

       

      This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.

       

      14.9 Entire
Agreement.

       

      This
Agreement, taken together with all of the other Loan Documents and all
certificates and other documents delivered by Borrower to Lender, embody the
entire agreement and supersede all prior agreements, written or oral, relating
to the subject matter hereof.

       

      14.10 Waiver of
Damages.

       

      In no
event shall Lender be liable to any Borrower for punitive, exemplary or
consequential damages, including, without limitation, lost profits, whatever the
nature of a breach by Lender of its obligations under this Agreement or any of
the Loan Documents, and Borrowers waive all claims for punitive, exemplary or
consequential damages.

       

      14.11 Claims
Against Lender.

       

      Lender
shall not be in default under this Agreement, or under any other Loan Documents,
unless a written notice specifically setting forth the claim of Borrower shall
have been given to Lender within three (3) months after Borrowers first had
knowledge of the occurrence of the event which Borrowers allege gave rise to
such claim and Lender does not remedy or cure the default, if any there be,
promptly thereafter.  Borrowers waive any claim, set-off or defense
against Lender arising by reason of any alleged default by Lender as to which
Borrowers do not give such notice timely as aforesaid.  Borrowers
acknowledge that such waiver is or may be essential to Lender’s ability to
enforce its remedies without delay and that such waiver therefore constitutes a
substantial part of the bargain between Lender and Borrowers with regard to the
Loan.

      
        
           

        

        
          40

          
            

          

        

        
           

        

      

      14.12 Jurisdiction.

       

      TO THE
GREATEST EXTENT PERMITTED BY LAW, BORROWERS HEREBY WAIVE ANY AND ALL RIGHTS TO
REQUIRE MARSHALING OF ASSETS BY LENDER.  WITH RESPECT TO ANY SUIT,
ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”),
EACH BORROWER IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF SEATTLE, STATE OF
WASHINGTON, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE
LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM
THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES
THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT
HAVE JURISDICTION OVER SUCH PARTY.  NOTHING IN THIS AGREEMENT SHALL
PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL
THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE
BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION.  BORROWER FURTHER
AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS
PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN
ANY WASHINGTON STATE OR UNITED STATES COURT SITTING IN THE STATE OF WASHINGTON
MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED
TO BORROWER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE
COMPLETE UPON RECEIPT; EXCEPT THAT IF BORROWER SHALL REFUSE TO ACCEPT DELIVERY,
SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO
MAILED.

       

      14.13 Set-Offs.

       

      After the
occurrence and during the continuance of an Event of Default, each Borrower
hereby irrevocably authorizes and directs Lender from time to time to charge
Borrower’s accounts and deposits with Lender (or its Affiliates), and to pay
over to Lender an amount equal to any amounts from time to time due and payable
to Lender hereunder, under the Note or under any other Loan
Document.  Each Borrower hereby grants to Lender a security interest
in and to all such accounts and deposits maintained by Borrower with Lender (or
its Affiliates).

       

      14.14 Notices.

       

      All
notices required or permitted hereunder shall be in writing and shall be given
to the parties as follows:

       

      
        	
                 
      

              	
                If
      to Lender:

              	
                KeyBank
      National Association

              

      

       

      
        	
                 
      

              	
                Healthcare
      Services

              

      

       

      
        	
                 
      

              	
                800
      Superior Avenue, 6th
      Floor

              

      

       

      
        	
                 
      

              	
                Cleveland,
      OH  44114

              

      

       

      
        	
                 
      

              	
                Attn:  CRE
      Client Services

              

      

       

      
        	
                 
      

              	
                Mail
      Code:  OH-01-02-0628

              

      

       

      
        	
                 
      

              	
                Fax
      No.:  216-828-7521

              

      

      
        
           

        

        
          41

          
            

          

        

        
           

        

      

      

       

      
        	
                If
      to Borrowers:

              	
                c/o
      Emeritus Corporation

              

      

       

      
        	
                 
      

              	
                3131
      Elliott Avenue #500

              

      

       

      
        	
                 
      

              	
                Seattle,
      WA  98121

              

      

       

      
        	
                 
      

              	
                Attn:
      Eric Mendelsohn

              

      

       

      
        	
                 
      

              	
                Fax
      No.:  206-204-1490

              

      

       

      
        	
                 
      

              	
                With
      a copy to:

              	
                Pircher,
      Nichols & Meeks

              

      

       

      
        	
                 
      

              	
                900
      North Michigan Avenue, Suite 1050

              

      

       

      
        	
                 
      

              	
                Chicago,
      Illinois  60611

              

      

       

      
        	
                 
      

              	
                Attn:
      Real Estate Notices (JDL/MJK)

              

      

       

      
        	
                 
      

              	
                Fax
      No.:  312-915-3348

              

      

       

      Any such
notices shall be sent by (a) a nationally recognized overnight courier, in which
case notice shall be deemed delivered one Business Day after deposit with such
courier; or (b) served personally, in which case notice shall be deemed
given on the date of such service, or (c) delivered by facsimile
transmission followed by delivery by personal service or nationally recognized
courier service on the next business day after facsimile transmission, in which
case notice shall be deemed to have been given on the date of facsimile
transmission.  The above addresses may be changed by written notice to
the other party; provided that no notice of a change of address shall be
effective until actual receipt of such notice.

       

      14.15 Waiver of
Jury Trial.

       

      BORROWERS
AND LENDER EACH WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS
THE SUBJECT OF THIS AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

       

      14.16 Statutory
Notice.

       

      ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.

      
        
           

        

        
          42

          
            

          

        

        
           

        

      

       

      IN
WITNESS WHEREOF, the parties have signed this Agreement as of the date written
above.

       

      “Borrowers”

       

      EMERITOL
DOWLEN OAKS LLC,

       

      a  Delaware
limited liability company

       

      
        	
                 
      

              	
                By:

              	
                Batus
      LLC, a Delaware limited liability
company,

              

      

       

      
        	
                 
      

              	
                its
      Sole Member

              

      

      

      
        	
                 
      

              	
                By:

              	
                Summerville
      Senior Living, Inc., a Delaware corporation, its Administrative
      Member

              

      

      

      

      
        	
                 
      

              	
                By:

              	
                /s/
      Eric Mendelsohn

              

      

      
        	
                 
      

              	
                Eric
      Mendelsohn, Senior VP Corporate
Development

              

      

       

      EMERITOL
SEVILLE ESTATES LLC,

       

      a
Delaware limited liability company

       

      
        	
                 
      

              	
                By:

              	
                Batus
      LLC, a Delaware limited liability
company,

              

      

       

      
        	
                 
      

              	
                its
      Sole Member

              

      

      

      
        	
                 
      

              	
                By:

              	
                Summerville
      Senior Living, Inc., a Delaware corporation, its Administrative
      Member

              

      

      

      

      
        	
                 
      

              	
                By:

              	
                /s/
      Eric Mendelsohn ________

              

      

      
        	
                 
      

              	
                Eric
      Mendelsohn, Senior VP Corporate
Development

              

      

       

      EMERITOL
SADDLERIDGE LODGE LLC,

       

      a
Delaware limited liability company

       

      
        	
                 
      

              	
                By:

              	
                Batus
      LLC, a Delaware limited liability
company,

              

      

       

      
        	
                 
      

              	
                its
      Sole Member

              

      

      

      
        	
                 
      

              	
                By:

              	
                Summerville
      Senior Living, Inc., a Delaware corporation, its Administrative
      Member

              

      

      

      

      
        	
                 
      

              	
                By:

              	
                /s/
      Eric Mendelsohn ________

              

      

      
        	
                 
      

              	
                Eric
      Mendelsohn, Senior VP Corporate
Development

              

      

       

       [signatures
continued on following page]

      
        
           

        

        
          43

          
            

          

        

        
           

        

      

      

       

       “Lender”

       

      KEYBANK
NATIONAL ASSOCIATION,

       

      a
national banking association

       

      

      By:           /s/
Joe Schoder__________

      Name:                      Joe
Schoder __________________

      Title:                      Vice
President________________

      
        
           

        

        
          44

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