Loan No. 07-0004017 Collateral Assignment Of Management Agreement - EMERITUS CORP\WA\ - 11-8-2002

LOAN NO. 07-0004017 COLLATERAL ASSIGNMENT OF MANAGEMENT AGREEMENT AND WAIVER OF PROPERTY MANAGEMENT AND BROKER'S LIENS THIS COLLATERAL ASSIGNMENT OF MANAGEMENT AGREEMENT AND WAIVER OF PROPERTY MANAGEMENT AND BROKER'S LIENS ("AGREEMENT") is made as of the 26th day of August, 2002, by EMERITUS CORPORATION, a Washington corporation ("MANAGER"), and EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company ("BORROWER"), to and for the benefit of HELLER HEALTHCARE FINANCE, INC., a Delaware corporation ("LENDER"). RECITALS A. Borrower is the owner of the real estate legally described in attached Exhibit A (the "PROPERTY"). B. Borrower and Manager have entered into a certain Management Agreement pursuant to which Manager has agreed to render certain property management services and leasing brokerage services (the "MANAGEMENT AGREEMENT"). C. Lender has agreed, subject to certain terms and conditions, to make a loan to Borrower in an amount not to exceed Eight Million Three Hundred Thousand and No/100 Dollars ($8,300,000.00) (the "LOAN"). The Loan is evidenced and governed by a certain Promissory Note A of even date herewith in the face amount of Five Million Three Hundred Ninety-Five Thousand and No/100 Dollars ($5,395,000.00), that certain Subordinated Promissory Note B of even date herewith in the face amount of Two Million Nine Hundred Five Thousand and No/100 Dollars ($2,905,000.00) and that certain Loan Agreement by and between Lender and Borrower of even date herewith, as the same may from time to time be renewed, amended, modified, increased, consolidated or extended (the "LOAN AGREEMENT"). All capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement. D. To induce Lender to make the Loan, Borrower has agreed to assign, as security for the Loan, its rights under the Management Agreement and Manager is willing to waive any and all liens to which it is or will be entitled, now or hereafter, arising in respect of the Management Agreement or the services performed, or expenses incurred, thereunder, including without limitation any mechanic's or materialman's lien claim or broker's lien claim under applicable law (the "MANAGER'S LIENS"). AGREEMENTS 1. To secure the Loan, Borrower hereby, sells, conveys and assigns to Lender all its right, title and interest in and to the Management Agreement. Manager hereby consents to such assignment. Borrower, Lender and Manager hereby agree that, upon the occurrence of a monetary default under and as defined in the Loan Agreement, Lender shall have the right, but not the obligation, to elect, by giving written notice to Borrower and Manager, either to: (i) enforce the obligations of Manager under the Management Agreement, in which event Manager will recognize Lender as owner of the Property for purposes of the Management Agreement; provided that all sums payable under the Management Agreement accruing from and after the date of delivery of such notice are paid when due, or (ii) terminate the Management Agreement as of the date of delivery of such notice without payment of any termination fees or charge notwithstanding anything to the contrary in the Management Agreement, in which event Borrower shall make no further payments to Manager and Manager shall not accept any such payments and Manager shall promptly deliver to Lender all books and records pertaining to the operation and management of the mortgaged property. 2. Manager acknowledges that pursuant to the terms of the Management Agreement Manager is required to maintain insurance for the Property. Manager agrees that it shall maintain such insurance in accordance with the requirements of the Mortgage, a copy of which Manager acknowledges it has reviewed. In case of loss or damage to the Property by fire or other casualty, Manager or Borrower shall give, or cause to be given, written notice thereof to the insurance carrier(s) and to Lender within three (3) business days after such loss or damage occurs. Lender is authorized and empowered, and Manager hereby irrevocably appoints Lender as its attorneyin-fact (such appointment is coupled with an interest), at its option, to make or file proofs of loss or damage and to settle and adjust any claim under insurance policies which insure against such risks, or to direct Manager, in writing, to agree with the insurance carrier(s) on the amount to be paid in regard to such loss. 3. The assignment made hereby is for collateral purposes only and Lender shall not be deemed to have assumed, or become liable for, the payment or performance of any of the obligations or liabilities of Borrower arising from or in connection with the Management Agreement whether arising before or after the occurrence of an Event of Default, unless and until Lender delivers to Borrower and Manager the above described notice of its election to enforce the obligations of Manager, as provided above, in which event Lender shall have no liability for any obligations or liabilities accruing prior to the date of the delivery of such notice. 4. The Manager's Liens are hereby waived. 5. Any notice or other communication required or permitted to be given shall be in writing addressed to the respective party as set forth below and may be personally served, telecopied or sent by overnight courier or U.S. Mail and shall be deemed given: (a) if served in person, when served; (b) if telecopied, on the date of transmission if before 3:00 p.m. (Chicago time) on a business day; provided that a hard copy of such notice is also sent pursuant to (c) or (d) below; (c) if by overnight courier, on the first business day after delivery to the courier; or (d) if by U.S. Mail, certified or registered mail, return receipt requested on the fourth (4th) day after deposit in the mail postage prepaid. Emeritus Corporation 3131 Elliott Avenue, Suite 500 Seattle, Washington 98121 Attn: Raymond R. Brandstrom, CFO Notices to Manager: Facsimile: (206) 301-4500 Emeritus Properties XIV, LLC 3131 Elliott Avenue, Suite 500 Seattle, Washington 98121 Attn: Raymond R. Brandstrom, CFO Notices to Borrower: Facsimile: (202) 301-4500 The Nathanson Group PLLC 1520 Fourth Avenue, Sixth Floor Seattle, Washington 98101 Attn: Randi S. Nathanson With a copy to: Facsimile: (206) 623-1738 Heller Healthcare Finance, Inc. Loan No. 07-0004017 2 Wisconsin Circle, Suite 400 Chevy Chase, Maryland 20815 Attn: Manager, Portfolio Management Group Notices to Lender: Telecopy: (301) 664-9843 Heller Healthcare Finance, Inc. Loan No. 07-0004017 100 Congress, Suite 700 Austin, Texas 78701 Attn: Diana Pennington, Vice President and Chief Counsel, Senior Living Group With a copy to: Telecopy: (512) 476-7832 Heller Healthcare Finance, Inc. Loan No. 07-0004017 500 West Monroe Street Chicago, Illinois 60661 Attn: Kevin McMeen, Senior Vice President And a copy to: Telecopy: (312) 441-7119 6. Neither Borrower nor Manager shall permit or agree to any modification, amendment or termination of the Management Agreement (other than the expiration of the Management Agreement on the expiry date, if any, set forth herein), without the prior written consent of Lender, which consent Lender shall not unreasonably withhold or delay. 7. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois. 8. MANAGER, BORROWER AND LENDER, BY ITS ACCEPTANCE OF THIS AGREEMENT, HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY MANAGER, BORROWER AND LENDER, AND MANAGER AND LENDER ACKNOWLEDGE THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. MANAGER, BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. MANAGER, BORROWER AND LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL. 9. MANAGER AND BORROWER HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREE THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. MANAGER AND BORROWER EXPRESSLY SUBMIT AND CONSENT TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS. MANAGER AND BORROWER HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREE THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON MANAGER OR BORROWER, AS THE CASE MAY BE, BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO MANAGER OR BORROWER, AS THE CASE MAY BE, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. IN WITNESS WHEREOF, the undersigned have executed this instrument on the day and year first above written. MANAGER: EMERITUS CORPORATION, a Washington corporation By Name Its /s/ Raymond R. Brandstrom Raymond R. Brandstrom CFO BORROWER: EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company By Emeritus Corporation, a Washington corporation, its sole member By Name Its /s/ Raymond R. Brandstrom Raymond R. Brandstrom CFO LENDER: HELLER HEALTHCARE FINANCE, INC., a Delaware corporation By Name Its /s/ Jeffrey M. Muchmore Jeffrey M. Muchmore Vice President EXHIBIT A LEGAL DESCRIPTION Record Owner: Emeritus Properties XIV, LLC Legal Description: IN WITNESS WHEREOF, the undersigned have executed this instrument on the day and year first above written. MANAGER: EMERITUS CORPORATION, a Washington corporation By Name Its /s/ Raymond R. Brandstrom Raymond R. Brandstrom CFO BORROWER: EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company By Emeritus Corporation, a Washington corporation, its sole member By Name Its /s/ Raymond R. Brandstrom Raymond R. Brandstrom CFO LENDER: HELLER HEALTHCARE FINANCE, INC., a Delaware corporation By Name Its /s/ Jeffrey M. Muchmore Jeffrey M. Muchmore Vice President EXHIBIT A LEGAL DESCRIPTION Record Owner: Emeritus Properties XIV, LLC Legal Description: LOAN NO. 07-0004017 GUARANTY THIS GUARANTY dated as of the 21st day of August, 2002 (the "GUARANTY") is made by the EMERITUS CORPORATION, a Washington corporation, with an address at 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121 (referred to herein as the "GUARANTOR"), for the benefit of HELLER HEALTHCARE FINANCE, INC., a Delaware corporation ("LENDER"). RECITALS A. FINANCIAL ACCOMMODATIONS. Lender and Emeritus Properties XIV, LLC, a Washington limited liability company ("BORROWER"), are concurrently herewith entering into that certain Loan Agreement (the "LOAN AGREEMENT") of even date herewith pursuant to which Lender shall extend financial accommodations to Borrower. EXHIBIT A LEGAL DESCRIPTION Record Owner: Emeritus Properties XIV, LLC Legal Description: LOAN NO. 07-0004017 GUARANTY THIS GUARANTY dated as of the 21st day of August, 2002 (the "GUARANTY") is made by the EMERITUS CORPORATION, a Washington corporation, with an address at 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121 (referred to herein as the "GUARANTOR"), for the benefit of HELLER HEALTHCARE FINANCE, INC., a Delaware corporation ("LENDER"). RECITALS A. FINANCIAL ACCOMMODATIONS. Lender and Emeritus Properties XIV, LLC, a Washington limited liability company ("BORROWER"), are concurrently herewith entering into that certain Loan Agreement (the "LOAN AGREEMENT") of even date herewith pursuant to which Lender shall extend financial accommodations to Borrower. B. INDUCEMENT. To induce Lender to extend to Borrower the financial accommodations set forth in the Loan Agreement, Guarantor is willing to execute and deliver this Guaranty. In consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows: 1. DEFINED TERMS All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Loan Agreement. 2. THE GUARANTY 2.1. GUARANTY OF OBLIGATIONS. Guarantor unconditionally and absolutely guarantees to Lender the full and prompt payment and performance when due, whether at maturity or earlier, by reason of acceleration or otherwise, and at all times thereafter, of the indebtedness, liabilities and obligations of every kind and nature of Borrower to Lender arising under or in any way relating to the Loan Agreement or any of the other Loan Documents, howsoever created, incurred or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, due or to become due, and howsoever owned, held or acquired by Lender (collectively, the "OBLIGATIONS"). Without limitation to the foregoing, the Obligations shall include (a) all reasonable attorneys' and paralegals' fees, including the cost of inside attorneys and paralegals, costs and expenses and all court costs and costs of appeal incurred by Lender in collecting any amount due Lender under this Guaranty or in prosecuting any action against Borrower, Guarantor or any other guarantor with respect to all or any part of the Obligations (collectively, the "ENFORCEMENT COSTS"), and (b) all interest, fees, costs and expenses due Lender after the filing of a bankruptcy petition by or against Borrower regardless of whether such amounts can be collected during the pendency of the bankruptcy proceedings. 2.2. CONTINUING GUARANTY; GUARANTY OF PAYMENT. This Guaranty is a continuing guaranty of the Obligations, and Guarantor agrees that the obligations of Guarantor to Lender hereunder shall be primary obligations, shall not be subject to any counterclaim, set-off, abatement, deferment or defense based upon any claim that Guarantor may have against Lender, Borrower or any other person or entity. 2.3. LIABILITY OF GUARANTOR NOT AFFECTED. This Guaranty shall remain in full force and effect without regard to, and shall not be released, discharged or affected in any way by, any circumstances or condition, including, without limitation: (a) the attempt or the absence of any attempt by Lender to obtain payment or performance by Borrower or any other guarantor (this being a guaranty of payment and performance and not of collection); (b) Lender's delay in enforcing Guarantor's obligations hereunder or of any other party under the Loan Documents, or any prior partial exercise by Lender of any right or remedy hereunder or under any of the other Loan Documents; (c) any renewal, extension, substitution, modification, replacement of or indulgence with respect to, the Obligations, all of which Lender is hereby authorized to make; (d) the fact that Borrower is not liable for the payment or performance of the Obligations, or any portion thereof, for any reason whatsoever, Guarantor being liable for the Obligations notwithstanding that Borrower may not be; LOAN NO. 07-0004017 GUARANTY THIS GUARANTY dated as of the 21st day of August, 2002 (the "GUARANTY") is made by the EMERITUS CORPORATION, a Washington corporation, with an address at 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121 (referred to herein as the "GUARANTOR"), for the benefit of HELLER HEALTHCARE FINANCE, INC., a Delaware corporation ("LENDER"). RECITALS A. FINANCIAL ACCOMMODATIONS. Lender and Emeritus Properties XIV, LLC, a Washington limited liability company ("BORROWER"), are concurrently herewith entering into that certain Loan Agreement (the "LOAN AGREEMENT") of even date herewith pursuant to which Lender shall extend financial accommodations to Borrower. B. INDUCEMENT. To induce Lender to extend to Borrower the financial accommodations set forth in the Loan Agreement, Guarantor is willing to execute and deliver this Guaranty. In consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows: 1. DEFINED TERMS All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Loan Agreement. 2. THE GUARANTY 2.1. GUARANTY OF OBLIGATIONS. Guarantor unconditionally and absolutely guarantees to Lender the full and prompt payment and performance when due, whether at maturity or earlier, by reason of acceleration or otherwise, and at all times thereafter, of the indebtedness, liabilities and obligations of every kind and nature of Borrower to Lender arising under or in any way relating to the Loan Agreement or any of the other Loan Documents, howsoever created, incurred or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, due or to become due, and howsoever owned, held or acquired by Lender (collectively, the "OBLIGATIONS"). Without limitation to the foregoing, the Obligations shall include (a) all reasonable attorneys' and paralegals' fees, including the cost of inside attorneys and paralegals, costs and expenses and all court costs and costs of appeal incurred by Lender in collecting any amount due Lender under this Guaranty or in prosecuting any action against Borrower, Guarantor or any other guarantor with respect to all or any part of the Obligations (collectively, the "ENFORCEMENT COSTS"), and (b) all interest, fees, costs and expenses due Lender after the filing of a bankruptcy petition by or against Borrower regardless of whether such amounts can be collected during the pendency of the bankruptcy proceedings. 2.2. CONTINUING GUARANTY; GUARANTY OF PAYMENT. This Guaranty is a continuing guaranty of the Obligations, and Guarantor agrees that the obligations of Guarantor to Lender hereunder shall be primary obligations, shall not be subject to any counterclaim, set-off, abatement, deferment or defense based upon any claim that Guarantor may have against Lender, Borrower or any other person or entity. 2.3. LIABILITY OF GUARANTOR NOT AFFECTED. This Guaranty shall remain in full force and effect without regard to, and shall not be released, discharged or affected in any way by, any circumstances or condition, including, without limitation: (a) the attempt or the absence of any attempt by Lender to obtain payment or performance by Borrower or any other guarantor (this being a guaranty of payment and performance and not of collection); (b) Lender's delay in enforcing Guarantor's obligations hereunder or of any other party under the Loan Documents, or any prior partial exercise by Lender of any right or remedy hereunder or under any of the other Loan Documents; (c) any renewal, extension, substitution, modification, replacement of or indulgence with respect to, the Obligations, all of which Lender is hereby authorized to make; (d) the fact that Borrower is not liable for the payment or performance of the Obligations, or any portion thereof, for any reason whatsoever, Guarantor being liable for the Obligations notwithstanding that Borrower may not be; (e) any sale, exchange, release, surrender or other disposition of, or realization upon, any collateral securing the Obligations, or any settlement or compromise of any guaranties of the Obligations, or any other obligation of any person or entity with respect to the Loan Documents; (f) the acceptance by Lender of any additional security for the Obligations; (g) the lack of validity or enforceability of, or Lender's waiver or consent with respect to, any provision of any instrument evidencing, securing or otherwise relating to the Obligations, or any part thereof, including without limitation the Loan Documents; (h) the failure by Lender to take any steps to perfect, maintain, or enforce its security interests or remedies under the Loan Documents, or to preserve its rights to or protect any security or collateral, for the Obligations; (i) any voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement, readjustment, assignment for the benefit of creditors, composition, receivership, liquidation, marshalling of assets and liabilities or similar event or proceedings with respect to Borrower or Guarantor, as applicable, or any of their respective properties (each, an "INSOLVENCY PROCEEDING"), or any action taken by Lender, any trustee or receiver or by any court in any such proceeding; (j) the failure by Lender to file or enforce a claim against the estate (either in an Insolvency Proceeding or other proceeding) of Borrower or Guarantor; (k) in any proceeding under Title 11 of the United States Code (11 U.S.C. Section 101 et seq.), as amended (the "BANKRUPTCY CODE"): (i) any election by Lender under Section 1111(b)(2) of the Bankruptcy Code, (ii) any borrowing or grant of a security interest by Borrower as debtor-inpossession under Section 364 of the Bankruptcy Code, (iii) the inability of Lender to enforce the Obligations against Borrower by application of the automatic stay provisions of Section 362 of the Bankruptcy Code, or (iv) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Lender's claim(s) against Borrower for repayment of the Obligations; (l) the failure of Guarantor to receive notice of any intended disposition of the collateral for the Obligations; (m) any merger or consolidation of Borrower into or with any other entity, or any sale, lease or transfer of any of the assets of Borrower or Guarantor to any other person or entity; (n) any change in the ownership of Borrower, or any change in the relationship between Borrower and Guarantor or any termination of any such relationship; (o) the death, incapacity, insanity, disability, dissolution or other change in status of Borrower or Guarantor; (p) the making of additional loans to Borrower, the increase or reduction of the maximum principal amount of the Obligations, the increase or reduction in the interest rate provided in the Notes, or any other modification, amendment, release or waiver of the terms of the Loan Documents; (q) the absence, impairment or loss of any right of reimbursement or subrogation or other right or remedy of Guarantor; and (r) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of Borrower, Guarantor or any other guarantor. Guarantor hereby expressly waives and surrenders any defense to its liability under this Guaranty based upon any of the foregoing acts, omissions, agreements, waivers or matters, whether or not Guarantor had notice or knowledge of same. It is the purpose and intent of this Guaranty that the obligations of Guarantor hereunder shall be absolute and unconditional under any and all circumstances. 2.4. RIGHTS OF LENDER. Lender is hereby authorized, without notice to or demand of Guarantor and without affecting the liability of Guarantor hereunder, to take any of the following actions from time to time: (a) increase or decrease the amount of, or renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, the Obligations, or otherwise modify, amend or change the terms of any promissory note or other agreement evidencing, securing or otherwise relating to any of the Obligations, including, without limitation, the making of additional advances thereunder; (b) accept and apply any payments on or recoveries against the Obligations from any source, and any proceeds of any security therefor, to the Obligations in such manner, order and priority as Lender may elect in its sole discretion; (c) take, hold, sell, release or otherwise dispose of all or any security for the Obligations or the payment of this Guaranty; (d) settle, release, compromise, collect or otherwise liquidate the Obligations or any portion thereof; (e) accept, hold, substitute, add or release any other guaranty or endorsements of the Obligations; and (f) upon the failure of Guarantor to perform any of the Obligations, appropriate and apply toward payment of the Obligations (i) any indebtedness due or to become due from Lender to Guarantor, and (ii) any moneys, credits, or other property belonging to Guarantor at any time held by or coming into the possession of Lender or any affiliates thereof, whether for deposit or otherwise. Without limiting the generality, scope or meaning of any of the foregoing or any other provision of this Guaranty, Guarantor: (a) waives all rights and defenses that Guarantor may have because the Borrower's debt is secured by real property. This means, among other things: (i) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; (ii) If Lender forecloses on any real property collateral pledged by Borrower: (1) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (2) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower; (b) waives all rights and defenses, if any, now or hereafter arising under the laws of the State of Illinois, which are the same as or similar to the rights and defenses waived as described above. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrower's debt is secured by real property. 2.5. SUBORDINATION. All indebtedness now or hereafter owing by Borrower to Guarantor for borrowed money or otherwise (the "INDEBTEDNESS TO GUARANTOR") is hereby subordinated to the payment of the Obligations, and, subsequent to and during the continuance of a default hereunder or under any of the other Loan Documents, Guarantor shall not accept payment of all or any portion of such Indebtedness to Guarantor until satisfaction in full of the Obligations. If such payment is received by Guarantor, it shall be received and held in trust for the benefit of Lender and shall be paid over promptly to Lender on account of the indebtedness owed by Borrower to Lender, but without impairing or affecting in any manner the liability of Guarantor for the Obligations. All security interests, liens and encumbrances which Guarantor, or any one of them, now or hereafter may have upon any of the assets of Borrower are hereby subordinated to all security interests, liens and encumbrances heretofore, now or hereafter granted to Lender pursuant to the Loan Documents. If Lender forecloses on the Project or otherwise exercises its remedies under the Loan Documents, any and all indebtedness of any Borrower to Guarantor shall be fully released and discharged without any further action of Guarantor; provided that upon request from Lender, Guarantor shall execute and deliver any documentation reasonably requested by Lender to evidence such release. 3. GUARANTOR'S WAIVERS 3.1. STATUTES OF LIMITATION. Guarantor irrevocably waives all statutes of limitation as a defense to any action or proceeding brought against Guarantor by Lender, to the fullest extent permitted by law. 3.2. ELECTION OF REMEDIES. Guarantor irrevocably waives any defense based upon an election of remedies made by Lender or any other election afforded to Lender pursuant to applicable law, including, without limitation, (a) any election to proceed by judicial or nonjudicial foreclosure or by Uniform Commercial Code sale or by deed or assignment in lieu thereof, or any election of remedies which destroys or otherwise impairs the subrogation rights of the Guarantor or the rights of the Guarantor to proceed against Borrower for reimbursement, or both, (b) the waiver by Lender, either by action or inaction of Lender or by operation of law, of a deficiency judgment against Borrower, and (c) any election pursuant to an Insolvency Proceeding. 3.3. RIGHTS OF SUBROGATION AND OTHER RIGHTS. Until payment in full of the Obligations, Guarantor irrevocably waives (a) all rights at law or in equity to seek subrogation, contribution, indemnification or any other form of reimbursement or repayment from Borrower or any other person or entity now or hereafter primarily or secondarily liable for any of the Obligations for any disbursements made by Guarantor under or in connection with this Guaranty, (b) all claims of any kind or type against Borrower as a result of any payment made by Guarantor to Lender, and (c) any right to participate in any security now or hereafter held by Lender. In furtherance, and not in limitation, of the foregoing, Guarantor agrees that any payment to Lender pursuant to this Guaranty shall be deemed a contribution to the capital of Borrower or other obligated party and shall not constitute Guarantor a creditor of Borrower or such other party. Guarantor further agrees that to the extent the waiver of its rights of subrogation as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation Guarantor may have against Borrower or against any collateral or security for any of the Obligations shall be junior and subordinate to any rights Lender may have against Borrower and to all right, title and interest Lender may have in such collateral or security. 3.4. DEMANDS AND NOTICES. Guarantor irrevocably waives all presentments, demands for performance, protests, notices of protest, notices of dishonor, notices of acceptance of this Guaranty and of the existence, creation or incurring of new or additional Obligations, notices of defaults by Borrower or any other person liable for the Obligations and demands and notices of every kind that may be required to be given by any statute or rule or law, other than notices specifically required by the terms of the Loan Documents. 3.5. BORROWER INFORMATION. Guarantor irrevocably waives (a) any duty of Lender to advise Guarantor of any information known to Lender regarding the financial condition of Borrower (it being the obligation of Guarantor to keep informed regarding such condition), and (b) any defense based on any claim that Guarantor's obligations exceed or are more burdensome than those of Borrower. 3.6. LIMITATION OF LIABILITY. Guarantor irrevocably waives any impairment, modification, change, release or limitation of the liability of, or stay of actions or lien enforcement proceedings against, Borrower or Guarantor, their property, or their estate in bankruptcy, resulting from the operation of any provision of the state or federal bankruptcy laws, or from the decision of any court. 3.7. LACK OF DILIGENCE. Guarantor irrevocably waives any and all claims or defenses based upon lack of diligence in: (a) collection of any Obligations; (b) protection of any collateral or other security for the Indebtedness or Obligations; or (c) realization upon the other Loan Documents. 3.8. OTHER DEFENSES. Guarantor irrevocably waives any other defenses, set-offs or counterclaims which may be available to Borrower, or any other Guarantor if there are more than one, and any and all other defenses now or at any time hereafter available to Guarantor (including without limitation those given to sureties) at law or in equity. 4. REPRESENTATIONS AND WARRANTS Guarantor represents and warrants to Lender as follows: 4.1. AUTHORITY; EXECUTION. This Guaranty has been duly and validly authorized, executed and delivered and constitutes the binding obligation of Guarantor, enforceable in accordance with its terms. 4.2. FINANCIAL STATEMENTS. All financial statements and other financial information concerning Guarantor furnished or to be furnished to Lender (a) are or will be true and correct in all material respects and do or will fairly represent in all material respects the financial condition of Guarantor (including all contingent liabilities), and (b) were or will be prepared in accordance with generally accepted accounting principles, or such other accounting principles as may be acceptable to Lender at the time of their preparation, consistently applied. There has been no material adverse change in Guarantor's financial condition since the dates of the statements most recently furnished Lender. 4.3. NO DEFAULTS. There is no existing event of default, and no event has occurred which with the passage of time and/or the giving of notice or both will constitute an event of default, under any agreement to which Guarantor is a party, the effect of which event of default will impair performance by Guarantor of the Obligations pursuant to and as contemplated by the terms of this Guaranty, and neither the execution and delivery of this Guaranty nor compliance with the terms and provisions hereof will violate any presently existing provision of law or any presently existing regulation, order, writ, injunction or decree of any court or governmental department, commission, board, bureau, agency or instrumentality, or constitute a default under, any agreement to which Guarantor is a party or by which Guarantor is bound. 4.4. NO LITIGATION. There are no actions, suits or proceedings pending or threatened against the Guarantor before any court or any governmental, administrative, regulatory, adjudicatory or arbitrational body or agency of any kind that will adversely affect performance by the Guarantor of Guarantor's obligations pursuant to and as contemplated by the terms and provisions of this Guaranty. 4.5. ACCURACY. Neither this Guaranty nor any document, financial statement, credit information, certificate or statement heretofore furnished or required herein to be furnished to Lender by Guarantor contains any untrue statement of fact or omits to state a fact material to this Guaranty. 5. EVENTS OF DEFAULT Upon the occurrence of any of the following events, Lender may, without notice to Borrower or Guarantor, declare any or all of the Obligations, whether or not then due, immediately due and payable by Guarantor under this Guaranty, and Lender shall be entitled to enforce the obligations of Guarantor hereunder. 5.1. DEFAULT BY BORROWER. Borrower shall default in the payment or performance of any of the Obligations guarantied hereby, after giving effect to any applicable notice and cure provisions set forth in the Loan Documents. 5.2. FAILURE TO PERFORM. Guarantor fails to perform any of its obligations under this Guaranty or any agreement under which security is given herefor, or this Guaranty is revoked or terminated by Guarantor, or any representation or warranty made or given by Guarantor to Lender proves to be false or misleading in any material respect. 5.3. INSOLVENCY PROCEEDING. The making by Guarantor of any assignment for the benefit of creditors, or a trustee or receiver being appointed for Guarantor or for any property of Guarantor, or Guarantor becoming insolvent or the subject of any Insolvency Proceeding and, in the case of such a proceeding being commenced against Guarantor, such proceeding is not dismissed within thirty (30) days following the commencement date thereof. 6. MISCELLANEOUS 6.1. REVIVAL AND REINSTATEMENT. If at any time all or any part of any payment theretofore applied by Lender to any of the Obligations is or must be rescinded or returned by Lender for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Borrower), such Obligations shall, for the purposes of this Guaranty, to the extent such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by Lender, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such Obligations, and Guarantor shall be fully liable therefore, all as though such application by Lender had not been made. 6.2. NO MARSHALING. Lender has no obligation to marshal any assets in favor of Guarantor, or against or in payment of (a) any of the Obligations, or (b) any other obligation owed to Lender by Guarantor, Borrower or any other person. 6.3. NO MODIFICATION, WAIVER OR RELEASE WITHOUT WRITING. Except as may otherwise be expressly set forth herein, this Guaranty may not be modified, amended, revised, revoked, terminated, changed or varied in any way whatsoever, nor shall any waiver of any of the provisions of this Guaranty be binding upon Lender, except as expressly set forth in a writing duly executed by Lender. No waiver by Lender of any default shall operate as a waiver of any other default or the same default on a future occasion, and no action by Lender permitted hereunder shall in any way affect or impair Lender's rights or the obligations of Guarantor under this Guaranty. 6.4. ASSIGNMENT; SUCCESSORS AND ASSIGNS. Guarantor may not assign Guarantor's obligations or liability under this Guaranty. Subject to the preceding sentence, this Guaranty shall be binding upon Guarantor and its successors, assigns, heirs, executors and representatives and shall inure to the benefit of Lender and its successors and assigns. Lender may, without notice to anyone, sell or assign the Obligations, the Notes or other Loan Documents or any part thereof, or grant participations therein, and in any such event each and every assignee or holder of, or participant in, all or any of the Obligations shall have the right to enforce this Guaranty, by suit or otherwise for the benefit of such assignee, holder, or participant, as fully as if herein by name specifically given such right, but Lender shall have an unimpaired right, prior and superior to that of any such assignee, holder or participant, to enforce this Guaranty for the benefit of Lender. 6.5. INTEGRATION. This Guaranty is the entire agreement of Guarantor with respect to the subject matter of this Guaranty, provided that this Guaranty shall not in any way limit or abrogate the obligations of Guarantor under the other Loan Documents, including, without limitation, the Hazardous Materials Indemnity Agreement of even date herewith. 6.6. RIGHTS CUMULATIVE. All of Lender's rights or remedies under this Guaranty and the other Loan Documents are cumulative. The exercise of any one right or remedy does not exclude the exercise of any other right given in this Guaranty or the other Loan Documents or any other right or remedy of Lender not set forth in this Guaranty or the other Loan Documents. 6.7. SEVERABILITY. Whenever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. 6.8. MATERIAL INDUCEMENT; CONSIDERATION. Guarantor acknowledges and agrees that Lender is specifically relying upon the representations, warranties, agreements and waivers contained herein and that such representations, warranties, agreements and waivers constitute a material inducement to Lender to accept this Guaranty and to enter into the Loan Agreement and the transaction contemplated therein. Guarantor further acknowledges that it expects to benefit from Lender's extension of financing accommodations to Borrower because of its relationship to Borrower, and that it is executing this Guaranty in consideration of that anticipated benefit. 6.9. INDEMNIFICATION. Guarantor agrees to indemnify, pay and hold Lender and its respective officers, directors, employees, Lender, and attorneys (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Guaranty or the exercise of any right or remedy hereunder or under the other documents pertaining to the Obligations (the "INDEMNIFIED LIABILITIES"); provided that Guarantor shall have no obligation to an Indemnitee under this subsection with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of that Indemnitee as determined by a court of competent jurisdiction. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Guarantor shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. 6.10. COUNTERPARTS. This Guaranty may be executed in counterparts, each of which shall be deemed an original, but all of which, when taken together, shall be deemed one and the same agreement. 6.11. GOVERNING LAW. This Guaranty shall be governed by and construed in accordance with the internal laws of the State of Illinois, without regard to conflicts of law provisions. 6.12. INTENTIONALLY OMITTED. 6.13. VENUE. GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY SHALL BE LITIGATED IN SUCH COURTS. GUARANTOR EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH GUARANTOR, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. 6.14. WAIVER OF JURY TRIAL. GUARANTOR, AND BY ITS ACCEPTANCE OF THIS GUARANTY, LENDER, HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS GUARANTY AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY GUARANTOR, AND BY LENDER'S ACCEPTANCE OF THIS GUARANTY, LENDER AND GUARANTOR ACKNOWLEDGE THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. 6.15. WAIVERS. THE WAIVERS SET FORTH IN THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, SECTIONS 6.13 AND 6.14 ABOVE) ARE KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER, HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THESE WAIVERS OR IN ANY WAY TO MODIFY OR NULLIFY THEIR EFFECT. GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THESE WAIVERS BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THESE WAIVERS WITH COUNSEL. 7. LIMITATION OF LIABILITY Except as provided in the next sentence, the maximum liability of Guarantor under this Guaranty is limited to the principal amount of Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00); plus accrued and unpaid interest and all Enforcement Costs. In addition to the amounts set forth in the preceding sentence, Guarantor shall, jointly and severally with Borrower, be personally liable for: (a) all losses, damages, costs and expenses (including, without limitation, attorney's fees), causes of action, suits, claims, demands and judgments of any nature or description whatsoever, which may be imposed upon, incurred by or awarded against Lender or any affiliate thereof as a result of: (i) any failure after the occurrence and during the continuance of any default (without benefit of any applicable grace or cure period) to apply any portion of the gross income from the Project to the Loan or to customary operating expenses of the Project, (ii) fraud by Borrower or Guarantor, (iii) any misappropriation of any funds derived from the Project, (iv) any material misrepresentation by Borrower or Guarantor, (v) any material waste or abandonment of the Project, (vi) failure to keep the Project insured in accordance with the terms of the Loan Documents, (vii) fees paid to Guarantor or any affiliate of Borrower or Guarantor after any default (other than a default occurring solely due to a default under the Other Loan Instruments (as defined in the Mortgage)) or any Event of Default under the Loan Documents, or (viii) any breach of any representation, warranty, covenant or obligation concerning Hazardous Materials (as defined in the Environmental Indemnity) set forth in the Loan Agreement or set forth in the Environmental Indemnity, each as amended from time to time; and (b) repayment of the Loan and all other obligations of Borrower under the Loan Documents in the event of (i) any breach of any of the covenants in Sections 11 or 12 of the Mortgage pertaining to change of control, transfers of interests and additional encumbrances, (ii) any breach of the warranty set forth in Section 4.16 of the Loan Agreement (single asset entity), or (iii) the filing by Borrower, or the filing against Borrower by Guarantor, of any proceeding for relief under any federal or state bankruptcy, insolvency or receivership laws or any assignment for the benefit of creditors made by Borrower. Neither this Guaranty nor any of the provisions contained herein (including, without limitation, this Section 7) shall in any manner affect or limit or reduce in any way the liability of Guarantor under the Environmental Indemnity. The undersigned have duly executed this Guaranty as of the date and year first above written. EMERITUS CORPORATION, a Washington corporation By /s/ Raymond R. Brandstrom -------------------------------Name Raymond R. Brandstrom Its CFO The undersigned have duly executed this Guaranty as of the date and year first above written. EMERITUS CORPORATION, a Washington corporation By /s/ Raymond R. Brandstrom -------------------------------Name Raymond R. Brandstrom Its CFO THIS DOCUMENT PREPARED UNDER THE SUPERVISION OF A MASSACHUSETTS LICENSED ATTORNEY AND AFTER RECORDING SHOULD BE RETURNED TO: Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd. 55 East Monroe Street, Suite 3700 Chicago, Illinois 60603 SPACE ABOVE THIS LINE FOR RECORDER'S USE LOAN NO. 07-0004017 ASSIGNMENT OF LEASES AND RENTS This ASSIGNMENT OF LEASES AND RENTS ("ASSIGNMENT") is made as of this 21st day of August, 2002 by EMERITUS PROPERTIES XIV, LLC, a Washington limited, whose address is 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121 ("ASSIGNOR"), to HELLER HEALTHCARE FINANCE, INC., a Delaware corporation ("ASSIGNEE") whose address is 2 Wisconsin Circle, Suite 400, Chevy Chase, Maryland 20815. 1. DEFINITIONS. "SCHEDULE": The Schedule of Leases separately delivered to Assignee listing all present leases, subleases, tenancies and occupants of the Property. "PROPERTY": The real estate described in Exhibit A attached hereto, together with all improvements thereon. "LEASES": All of the agreements affecting the use, enjoyment or occupancy of the Property, including patient and residential care agreements, leases and other occupancy agreements, and all guaranties, amendments, extensions and renewals thereof for all or any part of the Property. "LOAN AGREEMENT": The Loan Agreement of even date herewith between Assignor and Assignee. "LOAN DOCUMENTS": The "Loan Documents" as defined in the Loan Agreement. "RENTS": All of the rents, income, receipts, revenues, issues, and profits, prepayments of the same including, without limitation, lease termination, cancellation or similar fees now due or which may become due or to which Assignor may now or shall hereafter become entitled or which it may demand or claim and arising directly or indirectly from the Leases or the Property. "TENANT(S)": Any present or future tenant, subtenant or occupant of the Property. "MORTGAGE": The Real Property Mortgage with Power of Sale and Security Agreement of even date herewith which encumbers the Property. All other capitalized terms used herein, unless otherwise specified, shall have the same meaning ascribed to them in the Loan Agreement. 2. ASSIGNMENT. Assignor, for good and valuable consideration, the receipt of which is hereby acknowledged, does hereby assign, convey, and deliver unto Assignee: (a) All of Assignor's right, title and interest in all of the Leases; (b) The immediate and continuing right to collect and receive all of the Rents; (c) Any and all rights and claims of any kind that Assignor may have now or in the future against any Tenant. To have and to hold the same unto Assignee, its successors and assigns, until termination of this Assignment as hereinafter provided. 3. ABSOLUTE ASSIGNMENT. All of the Rents and all proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by damage to any part of the Property, together with any and all rights that Assignor may have against any Tenant under such Leases or any subtenants or occupants of any part of the Property and any award made hereafter to Assignor in any court proceeding involving any of the Tenants or in any bankruptcy, insolvency, or reorganization proceedings in any state or federal court, and all payments by Tenants in lieu of Rent, are hereby absolutely and unconditionally assigned to Assignee, to be applied by Assignee in payment of the Indebtedness. Assignor hereby further assigns to Assignee the Leases. It is understood and agreed by the parties that this assignment is intended to be and is an absolute assignment from Assignor to Assignee, and not merely the passing of a security interest; provided, however, that prior to the THIS DOCUMENT PREPARED UNDER THE SUPERVISION OF A MASSACHUSETTS LICENSED ATTORNEY AND AFTER RECORDING SHOULD BE RETURNED TO: Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd. 55 East Monroe Street, Suite 3700 Chicago, Illinois 60603 SPACE ABOVE THIS LINE FOR RECORDER'S USE LOAN NO. 07-0004017 ASSIGNMENT OF LEASES AND RENTS This ASSIGNMENT OF LEASES AND RENTS ("ASSIGNMENT") is made as of this 21st day of August, 2002 by EMERITUS PROPERTIES XIV, LLC, a Washington limited, whose address is 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121 ("ASSIGNOR"), to HELLER HEALTHCARE FINANCE, INC., a Delaware corporation ("ASSIGNEE") whose address is 2 Wisconsin Circle, Suite 400, Chevy Chase, Maryland 20815. 1. DEFINITIONS. "SCHEDULE": The Schedule of Leases separately delivered to Assignee listing all present leases, subleases, tenancies and occupants of the Property. "PROPERTY": The real estate described in Exhibit A attached hereto, together with all improvements thereon. "LEASES": All of the agreements affecting the use, enjoyment or occupancy of the Property, including patient and residential care agreements, leases and other occupancy agreements, and all guaranties, amendments, extensions and renewals thereof for all or any part of the Property. "LOAN AGREEMENT": The Loan Agreement of even date herewith between Assignor and Assignee. "LOAN DOCUMENTS": The "Loan Documents" as defined in the Loan Agreement. "RENTS": All of the rents, income, receipts, revenues, issues, and profits, prepayments of the same including, without limitation, lease termination, cancellation or similar fees now due or which may become due or to which Assignor may now or shall hereafter become entitled or which it may demand or claim and arising directly or indirectly from the Leases or the Property. "TENANT(S)": Any present or future tenant, subtenant or occupant of the Property. "MORTGAGE": The Real Property Mortgage with Power of Sale and Security Agreement of even date herewith which encumbers the Property. All other capitalized terms used herein, unless otherwise specified, shall have the same meaning ascribed to them in the Loan Agreement. 2. ASSIGNMENT. Assignor, for good and valuable consideration, the receipt of which is hereby acknowledged, does hereby assign, convey, and deliver unto Assignee: (a) All of Assignor's right, title and interest in all of the Leases; (b) The immediate and continuing right to collect and receive all of the Rents; (c) Any and all rights and claims of any kind that Assignor may have now or in the future against any Tenant. To have and to hold the same unto Assignee, its successors and assigns, until termination of this Assignment as hereinafter provided. 3. ABSOLUTE ASSIGNMENT. All of the Rents and all proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by damage to any part of the Property, together with any and all rights that Assignor may have against any Tenant under such Leases or any subtenants or occupants of any part of the Property and any award made hereafter to Assignor in any court proceeding involving any of the Tenants or in any bankruptcy, insolvency, or reorganization proceedings in any state or federal court, and all payments by Tenants in lieu of Rent, are hereby absolutely and unconditionally assigned to Assignee, to be applied by Assignee in payment of the Indebtedness. Assignor hereby further assigns to Assignee the Leases. It is understood and agreed by the parties that this assignment is intended to be and is an absolute assignment from Assignor to Assignee, and not merely the passing of a security interest; provided, however, that prior to the occurrence and continuance of an Event of Default, Assignor shall have a license, without joinder of Assignee, to enforce the Leases subject to the terms of the Mortgage, and to collect the Rents and insurance proceeds and payments in lieu of Rents described herein as they come due (but not more than one (1) month in advance) and to retain, use and enjoy the same. Assignor shall, upon request of Assignee, execute confirmatory assignments of any specific Leases affecting any part of the Property prior to or at any time there is not an Event of Default. Upon the occurrence and during the continuance of any Event of Default, Assignee may, at any time without notice, either in person, by agent or by a receiver appointed by a court, and without regard to the adequacy of any security for the Indebtedness and the Obligations (as defined in the Mortgage), enter upon and take possession of the Property, or any part thereof, in its own name sue for or otherwise collect the Rents, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorney's fees, upon the Indebtedness and in such order as Assignee may so determine. The collection of Rents, or the entering upon and taking possession of the Property, or the application thereof as aforesaid, shall not cure or waive any Event of Default or notice of an Event of Default hereunder or invalidate any act done in response to such Event of Default or pursuant to such notice of an Event of Default. In the event Assignor, as lessor under the Leases, shall fail to perform and fulfill any term, covenant, condition, or provision in the Leases, or any of them, on its part to be performed or fulfilled, at the time and in the manner in the Leases provided, or if the Assignor shall suffer or permit to occur any breach or default under the provisions of this Assignment of the Leases, or any of them, and such default shall continue for a period of thirty (30) days following the giving of written notice of such default to Assignor, then and in any such event, such breach or default shall constitute an Event of Default. Assignor further agrees that Assignee may enforce this Assignment without first resorting to or exhausting any security or collateral for the Loan; however, nothing herein contained shall prevent Assignee from exercising any other right under any of the Loan Documents. 4. POWER OF ATTORNEY. Assignor hereby irrevocably appoints Assignee its true and lawful attorney-in-fact (coupled with an interest), with full power of substitution and with full power for Assignee in its own name and capacity or in the name and capacity of Assignor to demand and collect any and all Rents and to file any claim or take any other action or proceeding and make any settlement regarding the Leases in the event Assignor fails to do so upon request or at any time after and during the continuance of Event of Default. From and after notice from Assignee to do so, all Tenants are hereby expressly authorized and directed to pay to Assignee, or to such nominee as Assignee may designate in a writing delivered to such Tenants, all amounts due Assignor pursuant to the Leases. All Tenants are expressly relieved of all duty, liability or obligation to Assignor in respect of all payments so made to Assignee or such nominee. 5. CONSIDERATION. This Assignment is made for and in consideration of the Loan made by Assignee to Assignor as set forth in the Loan Documents and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged. 6. INDEMNITY. Assignor hereby agrees to indemnify Assignee and to hold Assignee harmless from any liability, loss or damage including, without limitation, reasonable attorneys' fees, costs and expenses which may or might be incurred by Assignee under the Leases or by reason of this Assignment, and from any and all claims and demands which may be asserted against Assignee by reason of any term, covenant or agreement contained in any of the Leases, except for any such liability, loss or damage resulting solely from Assignee's gross negligence or willful misconduct. Any provision in this Assignment by which one party agrees to indemnify the other (the "INDEMNITEE"), or the agents and employees of the Indemnitee, against liability, claims, damages, losses or expenses, including attorney fees, arising out of bodily injury to persons or damage to property caused by, or resulting from, in whole or in part, the negligence, act or omission of the Indemnitee, or the agents or employees of the Indemnitee, or any legal entity for whose negligence, acts or omission any of them may be liable, shall not extend to liability, claims, damages, losses or expenses, including attorney fees, arising out of: (a) The preparation or approval of maps, drawings, opinions, reports, surveys, change orders, designs or specifications by the Indemnitee, or the agents or employees of the Indemnitee; or (b) The giving of or the failure to give directions or instructions by the Indemnitee, or the agents or employees of the Indemnitee, which such giving of or failure to give directions or instructions is the primary cause of bodily injury to persons or damage to property. 7. PERFORMANCE OF LEASE COVENANTS. In the event Assignor fails to perform any Lease covenant, Assignee may, at its option, upon prior notice to Assignor (except in the event of an emergency) perform any Lease covenant for and on behalf of Assignor, and all monies expended in so doing shall be chargeable to Assignor and added to the outstanding principal balance and shall be immediately due and payable. 8. REPRESENTATIONS AND WARRANTIES. Assignor represents and warrants and shall be deemed to reaffirm the same upon each disbursement of the proceeds of the Loan by Assignee to Assignor or any other Borrower (as defined in the Loan Agreement): (a) The Leases set forth on the Schedule are in full force and effect and have not been modified; (b) There are no defaults, defenses or setoffs of either landlord or, to the best of Assignor's knowledge, tenant under the Leases nor, to the best of Assignor's knowledge, is there any fact which, with the giving of notice or lapse of time or both, would constitute a default under the Leases; (c) The sole ownership of the entire landlord's interest in the Leases is vested in Assignor and the Leases are not, as of the date hereof, otherwise assigned or pledged; (d) Except as otherwise previously disclosed in writing to lender, (i) all Rents due to date have been collected, (ii) no Rent has been collected more than one (1) month in advance, and (iii) no Tenant has been granted any Rent concession or inducement whatsoever other than as set forth in Exhibit B; and (e) There are no leases of the Property not listed on the Schedule. 9. COVENANTS AND AGREEMENTS. Assignor hereby covenants and agrees as follows: (a) Assignor shall not permit any Rent under any Lease of the Property to be collected more than one (1) month in advance of the due date thereof. (b) Assignor shall act in a commercially reasonable manner to enforce all available remedies against any delinquent Tenant to protect the interest of the landlord under the Leases and to preserve the value of the Property. (c) Assignor shall comply with and perform in a complete and timely manner all of its obligations as landlord under all Leases. Assignor shall give notice to Assignee of any default by Assignor under any Lease or by any Tenant under any non-residential Lease in such time to afford Assignee an opportunity to cure any such default prior to the Tenant having any right to terminate the Lease. Assignor shall also provide Assignee with notice of the commencement of an action of ejectment or any summary proceedings for dispossession of the Tenant under any of the non-residential Leases. (d) Within five (5) business days of each request therefor, Assignor shall furnish promptly to Assignee a certified rent roll and copies of all non-residential Leases now existing or hereafter created. From and after and during the continuance of an Event of Default, Assignee shall have the right to notify any Tenant at any time and from time to time of any provision of the Loan Documents. (e) At Assignee's request, Assignor shall cause the Tenant under any non-residential Lease, other than a Qualified Non-Residential Lease, to execute a subordination and attornment agreement in form and substance reasonably satisfactory to Assignee. Assignor shall not enter into, amend or terminate any Leases except in compliance with the Loan Agreement and the Mortgage. (f) Assignor shall not without the prior written consent of Assignee: (i) perform any act or execute any other instrument which might interfere with the exercise of Assignee's rights hereunder; (ii) execute any assignment, pledge or hypothecation of Rents or any of the Leases; (iii) suffer or permit any of the Leases to become subordinate to any lien other than the lien of the Mortgage. (g) This Assignment transfers to Assignee all of Assignor's right, title, and interest in any security deposits, provided that Assignor shall have the right to retain the security deposit so long as there is no Event of Default outstanding under this Assignment or the Loan Documents. Assignee shall have no obligation to any Tenant with respect to its security deposit unless and until Assignee comes into possession and control of the deposit. (h) Assignor shall use reasonable efforts to deliver to Assignee, promptly upon request, a duly executed estoppel certificate from any non-residential Tenant in form and content satisfactory to Assignee. (i) Assignee may assign its right, title and interest in the Leases and any subsequent assignee shall have all of the rights and powers provided to Assignee by this Assignment. 10. NO OBLIGATION. This Assignment shall not be deemed to impose upon Assignee any of the obligations or duties of the landlord or Assignor provided in any Lease. Assignor hereby acknowledges and agrees: (i) Assignor is and will remain liable under the Leases to the same extent as though this Assignment had not been made; and (ii) Assignee has not by this Assignment assumed any of the obligations of Assignor under the Leases, except as to such obligations which arise after such time as Assignee shall have assumed full ownership or control of the Property. This Assignment shall not make Assignee responsible for the control, care, management, or repair of the Property or any personal property or for the carrying out of any of the terms of the Leases unless and until Assignee takes possession of the Property. Assignee shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm, or corporation in or about the Property absent gross negligence or willful misconduct by Assignee. 11. TENANT BANKRUPTCY. In the event any Tenant should be the subject of any proceeding under the Federal Bankruptcy Code or any other federal, state, or local statute which provides for the possible termination or rejection of any Lease, Assignor covenants and agrees no settlement for damages shall be made without the prior written consent of Assignee, which consent shall not be unreasonably withheld or delayed, and any check in payment of damages for rejection of any Lease will be made payable both to Assignor and Assignee. Assignor hereby assigns any such payment to Assignee and further covenants and agrees that it will duly endorse to the order of Assignee any such check. 12. EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an "EVENT OF DEFAULT" under this Assignment: (a) failure of Assignor to pay, within ten (10) days of the due date, any of the Indebtedness, including any payment due under the Notes; or (b) failure of Assignor to strictly comply with Sections 9(a) and (f) of this Assignment; or (c) breach of any covenant (other than those covenants set forth in subsection (b) above), representation or warranty set forth in this Assignment which is not cured within thirty (30) days after notice; provided, however, if such breach cannot by its nature be cured within thirty (30) days, and Assignor diligently pursues the curing thereof (and then in all events cures such failure within sixty (60) days after the original notice thereof), Assignor shall not be in default hereunder; or (d) the occurrence of an Event of Default under any other Loan Documents. 13. REMEDIES. Upon the occurrence of an Event of Default, then, without notice to, or the consent of, Assignor, Assignee shall be entitled to exercise all of the rights and remedies contained in this Assignment or in any other Loan Document or otherwise available at law or in equity including, without limitation, the right to do any one or more of the following: (a) To enter upon, take possession of and manage the Property for the purpose of collecting the Rents; (b) Dispossess by the usual summary proceedings any Tenant defaulting in the payment thereof to Assignor; (c) Lease the Property or any part thereof; (d) Repair, restore, and improve the Property; (e) Apply the Rent after payment of Property expenses as determined by Assignee to the indebtedness and the obligations secured by any of the Loan Documents in such order as Assignee may determine; and (f) Apply to any court of competent jurisdiction for specific performance of this Assignment, an injunction against the violation hereof and/or the appointment of a receiver. 14. NO WAIVER. Neither the exercise of any rights under this Assignment by Assignee nor the application of any Rents to payment of Assignor's indebtedness under the Loan Documents shall cure or waive any Event of Default thereunder. Failure of Assignee to avail itself of any of the terms of this Assignment for any period of time or for any reason shall not constitute a waiver of the Assignment. 15. OTHER DOCUMENTS. This Assignment is intended to be supplementary to, not in substitution for, or in derogation of, any assignment of rents contained in the Mortgage or in any of the Loan Documents. 16. NOTICES. Any notice or other communication required or permitted to be given shall be in writing addressed to the respective party as set forth in the Loan Agreement. 17. GOVERNING LAW; SEVERABILITY. This Assignment shall be governed by and construed in accordance with the internal laws of the State of Illinois except that the provisions of the laws of the jurisdiction in which the Property is located shall be applicable to the creation, perfection and enforcement of the lien created by this Assignment. The invalidity, illegality or unenforceability of any provision of this Assignment shall not affect or impair the validity, legality or enforceability of the remainder of this Assignment, and to this end the provisions of this Assignment are declared to be severable. IN WITNESS WHEREOF, Assignor has executed this Assignment or has caused the same to be executed by its duly authorized representatives as of the date first set forth above. EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company By: EMERITUS CORPORATION, its sole member By Name Its /s/ Raymond R. Brandstrom ---------------------------Raymond R. Brandstrom CFO ACKNOWLEDGMENT STATE COUNTY OF OF WASHINGTON ) KING SS ) ) On this _____ day of August, 2002, before me appeared ____________________________, to me personally known, who, being by me duly sworn, did say that _he is the ____________________ of EMERITUS CORPORATION, a Washington corporation, the sole member of EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company, and that said instrument was signed and sealed on behalf of said limited liability company by authority of its members, and _he acknowledged said instrument to be the free act and deed of said limited liability company. Print Name: Commission No. (if any) IN WITNESS WHEREOF, Assignor has executed this Assignment or has caused the same to be executed by its duly authorized representatives as of the date first set forth above. EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company By: EMERITUS CORPORATION, its sole member By Name Its /s/ Raymond R. Brandstrom ---------------------------Raymond R. Brandstrom CFO ACKNOWLEDGMENT STATE COUNTY OF OF WASHINGTON ) KING SS ) ) On this _____ day of August, 2002, before me appeared ____________________________, to me personally known, who, being by me duly sworn, did say that _he is the ____________________ of EMERITUS CORPORATION, a Washington corporation, the sole member of EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company, and that said instrument was signed and sealed on behalf of said limited liability company by authority of its members, and _he acknowledged said instrument to be the free act and deed of said limited liability company. Print Name: Commission No. (if any) My Commission Expires:______________ A-2 A-1 EXHIBIT A PROPERTY DESCRIPTION Record Owner: Emeritus Properties XIV, LLC, a Washington limited liability company Legal Description: EXHIBIT B LEASE CONCESSIONS/DEVIATIONS None Loan No. 07-0004017 ACKNOWLEDGMENT STATE COUNTY OF OF WASHINGTON ) KING SS ) ) On this _____ day of August, 2002, before me appeared ____________________________, to me personally known, who, being by me duly sworn, did say that _he is the ____________________ of EMERITUS CORPORATION, a Washington corporation, the sole member of EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company, and that said instrument was signed and sealed on behalf of said limited liability company by authority of its members, and _he acknowledged said instrument to be the free act and deed of said limited liability company. Print Name: Commission No. (if any) My Commission Expires:______________ A-2 A-1 EXHIBIT A PROPERTY DESCRIPTION Record Owner: Emeritus Properties XIV, LLC, a Washington limited liability company Legal Description: EXHIBIT B LEASE CONCESSIONS/DEVIATIONS None Loan No. 07-0004017 August 26, 2002 Emeritus Properties XIV, LLC 3131 Elliott Avenue, Suite 500 Seattle, Washington 98121 Re: $8,300,000 ("LOAN") from Heller Healthcare Finance, Inc. ("LENDER") to Emeritus Properties XIV, LLC limited liability company ("BORROWER") Dear Madam or Sir: We write in connection with that certain Loan Agreement, dated as of even date herewith, by and between Lender and Borrower (the "LOAN AGREEMENT"), pursuant to which Lender has agreed to make the Loan to Borrower. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Loan Agreement. Lender and Guarantor have entered into or currently intend to enter into negotiations for Lender to make a loan A-2 A-1 EXHIBIT A PROPERTY DESCRIPTION Record Owner: Emeritus Properties XIV, LLC, a Washington limited liability company Legal Description: EXHIBIT B LEASE CONCESSIONS/DEVIATIONS None Loan No. 07-0004017 August 26, 2002 Emeritus Properties XIV, LLC 3131 Elliott Avenue, Suite 500 Seattle, Washington 98121 Re: $8,300,000 ("LOAN") from Heller Healthcare Finance, Inc. ("LENDER") to Emeritus Properties XIV, LLC limited liability company ("BORROWER") Dear Madam or Sir: We write in connection with that certain Loan Agreement, dated as of even date herewith, by and between Lender and Borrower (the "LOAN AGREEMENT"), pursuant to which Lender has agreed to make the Loan to Borrower. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Loan Agreement. Lender and Guarantor have entered into or currently intend to enter into negotiations for Lender to make a loan (the "DEUTSCHE BANK REFINANCE LOAN") to Guarantor or its affiliate (the "REFINANCE BORROWER"), which loan will be used, among other things, to refinance existing debt of Guarantor (or its affiliates) owed to Deutsche Bank. In the event that (a) Lender does not issue a loan application in an amount acceptable to Refinance Borrower for the Deutsche Bank Refinance Loan or (b) Refinance Borrower has signed and Lender has accepted a loan application for the Deutsche Bank Refinance Loan in an amount acceptable to the Refinance Borrower, and Lender fails to obtain credit committee approval for the Deutsche Bank Refinance Loan for any reason, then Lender hereby agrees that it shall allow Borrower to repay, in full but not in part, the Loan prior to the first anniversary of the Closing Date, notwithstanding the prohibition of such prepayment contained in Section 1.7 of the Loan Agreement (the "FIRST YEAR REPAYMENT"). If Borrower makes the First Year Repayment as provided herein, Lender hereby agrees to waive the Exit Fee due pursuant to Section 1.8 of the Loan Agreement in connection with such prepayment and to refund to Borrower, at the time of the First Year Repayment, a portion of the Loan commitment paid to Lender in the amount of Forty-One Thousand Five Hundred Dollars ($41,500). Nothing contained herein shall be construed as a commitment to make the Deutsche Bank Refinance Loan, or to enter into or continue negotiations to make the Deutsche Bank Refinance Loan. Very truly yours, GENERAL ELECTRIC CAPITAL CORPORATION, a EXHIBIT B LEASE CONCESSIONS/DEVIATIONS None Loan No. 07-0004017 August 26, 2002 Emeritus Properties XIV, LLC 3131 Elliott Avenue, Suite 500 Seattle, Washington 98121 Re: $8,300,000 ("LOAN") from Heller Healthcare Finance, Inc. ("LENDER") to Emeritus Properties XIV, LLC limited liability company ("BORROWER") Dear Madam or Sir: We write in connection with that certain Loan Agreement, dated as of even date herewith, by and between Lender and Borrower (the "LOAN AGREEMENT"), pursuant to which Lender has agreed to make the Loan to Borrower. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Loan Agreement. Lender and Guarantor have entered into or currently intend to enter into negotiations for Lender to make a loan (the "DEUTSCHE BANK REFINANCE LOAN") to Guarantor or its affiliate (the "REFINANCE BORROWER"), which loan will be used, among other things, to refinance existing debt of Guarantor (or its affiliates) owed to Deutsche Bank. In the event that (a) Lender does not issue a loan application in an amount acceptable to Refinance Borrower for the Deutsche Bank Refinance Loan or (b) Refinance Borrower has signed and Lender has accepted a loan application for the Deutsche Bank Refinance Loan in an amount acceptable to the Refinance Borrower, and Lender fails to obtain credit committee approval for the Deutsche Bank Refinance Loan for any reason, then Lender hereby agrees that it shall allow Borrower to repay, in full but not in part, the Loan prior to the first anniversary of the Closing Date, notwithstanding the prohibition of such prepayment contained in Section 1.7 of the Loan Agreement (the "FIRST YEAR REPAYMENT"). If Borrower makes the First Year Repayment as provided herein, Lender hereby agrees to waive the Exit Fee due pursuant to Section 1.8 of the Loan Agreement in connection with such prepayment and to refund to Borrower, at the time of the First Year Repayment, a portion of the Loan commitment paid to Lender in the amount of Forty-One Thousand Five Hundred Dollars ($41,500). Nothing contained herein shall be construed as a commitment to make the Deutsche Bank Refinance Loan, or to enter into or continue negotiations to make the Deutsche Bank Refinance Loan. Very truly yours, GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation By: /s/ Jefferey M. Muchmore ---------------------------Name: Jefferey M. Muchmore Its: VP Loan No. 07-0004017 Loan No. 07-0004017 August 26, 2002 Emeritus Properties XIV, LLC 3131 Elliott Avenue, Suite 500 Seattle, Washington 98121 Re: $8,300,000 ("LOAN") from Heller Healthcare Finance, Inc. ("LENDER") to Emeritus Properties XIV, LLC limited liability company ("BORROWER") Dear Madam or Sir: We write in connection with that certain Loan Agreement, dated as of even date herewith, by and between Lender and Borrower (the "LOAN AGREEMENT"), pursuant to which Lender has agreed to make the Loan to Borrower. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Loan Agreement. Lender and Guarantor have entered into or currently intend to enter into negotiations for Lender to make a loan (the "DEUTSCHE BANK REFINANCE LOAN") to Guarantor or its affiliate (the "REFINANCE BORROWER"), which loan will be used, among other things, to refinance existing debt of Guarantor (or its affiliates) owed to Deutsche Bank. In the event that (a) Lender does not issue a loan application in an amount acceptable to Refinance Borrower for the Deutsche Bank Refinance Loan or (b) Refinance Borrower has signed and Lender has accepted a loan application for the Deutsche Bank Refinance Loan in an amount acceptable to the Refinance Borrower, and Lender fails to obtain credit committee approval for the Deutsche Bank Refinance Loan for any reason, then Lender hereby agrees that it shall allow Borrower to repay, in full but not in part, the Loan prior to the first anniversary of the Closing Date, notwithstanding the prohibition of such prepayment contained in Section 1.7 of the Loan Agreement (the "FIRST YEAR REPAYMENT"). If Borrower makes the First Year Repayment as provided herein, Lender hereby agrees to waive the Exit Fee due pursuant to Section 1.8 of the Loan Agreement in connection with such prepayment and to refund to Borrower, at the time of the First Year Repayment, a portion of the Loan commitment paid to Lender in the amount of Forty-One Thousand Five Hundred Dollars ($41,500). Nothing contained herein shall be construed as a commitment to make the Deutsche Bank Refinance Loan, or to enter into or continue negotiations to make the Deutsche Bank Refinance Loan. Very truly yours, GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation By: /s/ Jefferey M. Muchmore ---------------------------Name: Jefferey M. Muchmore Its: VP Loan No. 07-0004017 SENIOR HOUSING RIDER THIS SENIOR HOUSING RIDER is attached to and made a part of that certain Loan Agreement dated as of the 26th day of August, 2002, among EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company, ("BORROWER"), EMERITUS CORPORATION, a Washington corporation ("MANAGER") and HELLER HEALTHCARE FINANCE, INC., a Delaware corporation (Heller Healthcare Finance, Inc. and its successors and assigns are hereinafter referred to as "LENDER"). To the extent of any conflict between the terms Nothing contained herein shall be construed as a commitment to make the Deutsche Bank Refinance Loan, or to enter into or continue negotiations to make the Deutsche Bank Refinance Loan. Very truly yours, GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation By: /s/ Jefferey M. Muchmore ---------------------------Name: Jefferey M. Muchmore Its: VP Loan No. 07-0004017 SENIOR HOUSING RIDER THIS SENIOR HOUSING RIDER is attached to and made a part of that certain Loan Agreement dated as of the 26th day of August, 2002, among EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company, ("BORROWER"), EMERITUS CORPORATION, a Washington corporation ("MANAGER") and HELLER HEALTHCARE FINANCE, INC., a Delaware corporation (Heller Healthcare Finance, Inc. and its successors and assigns are hereinafter referred to as "LENDER"). To the extent of any conflict between the terms and provisions of this Rider and the terms and provisions of the Loan Agreement, the terms and provisions of this Rider shall govern and control the rights and obligations of the parties; provided, however, in any event, the obligations and covenants of Borrower and Manager set forth herein shall be subject to the notice and cure periods set forth in Section 7.1(c) of the Loan Agreement. R-1. All capitalized terms not defined in this Rider shall have the meanings ascribed to such terms as set forth in the Loan Agreement. R-2. The following representations, warranties and covenants are hereby added to the representations, warranties and covenants contained in the Loan Agreement. Each Borrower represents, covenants, and warrants, as of the date hereof and through the term of Loan, as follows: (a) Borrower, together with Manager, is using and operating the Property and Improvements (collectively, the "FACILITY") as an assisted and/or independent senior housing facility, the Facility having the number of units set forth on Exhibit A to the Loan Agreement (as modified from time to time with Lender's consent, which consent shall not be unreasonably withheld, the "LICENSED USE"). As of the date hereof, in connection with the operation of the Facility, Manager and Borrower comply, and throughout the term of the Loan will comply, with all federal, state and local laws, regulations, quality and safety standards, accreditation standards and requirements of the applicable state department of health or other applicable state regulatory agency (each a "DOH") and all other federal, state or local governmental authorities including, to the extent applicable to the Facility, those relating to the quality and adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies, additions to facilities and services and fee splitting. The Facility shall be operated at all times in compliance with such laws and requirements. Notwithstanding anything to the contrary set forth herein, neither Borrower nor Manager shall be deemed to be in default under this clause (a) in the event it is cited for minor deficiencies during the course of licensure or certification surveys and the same are corrected within thirty (30) days, or so long as Borrower or Manager, as applicable, is diligently pursuing a cure, such longer period as is required to correct such deficiency, and provided further that Borrower or Manager delivers to Lender evidence that the DOH has approved such cure in its ordinary course of review of the Facility. (b) All governmental licenses, permits, regulatory agreements or other approvals or agreements necessary or desirable for the Licensed Use of the Facility are held by Borrower or Manager in the name of the Borrower or Manager as required under applicable law and are in full force and effect, including, if required, a valid certificate of need ("CON") or similar certificate, license, or approval issued by the DOH for the requisite number of units in the Facility, and a provider agreement or other required documentation of approved provider status for each provider payment or reimbursement program listed in Exhibit R-1 hereto, if applicable. All required permits, certificates, licenses and governmental approvals necessary for operation of the Facility for the Licensed Use are listed on Exhibit R-1 hereto (collectively, the "LICENSES"). So long as the Loan remains outstanding, Borrower Loan No. 07-0004017 SENIOR HOUSING RIDER THIS SENIOR HOUSING RIDER is attached to and made a part of that certain Loan Agreement dated as of the 26th day of August, 2002, among EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company, ("BORROWER"), EMERITUS CORPORATION, a Washington corporation ("MANAGER") and HELLER HEALTHCARE FINANCE, INC., a Delaware corporation (Heller Healthcare Finance, Inc. and its successors and assigns are hereinafter referred to as "LENDER"). To the extent of any conflict between the terms and provisions of this Rider and the terms and provisions of the Loan Agreement, the terms and provisions of this Rider shall govern and control the rights and obligations of the parties; provided, however, in any event, the obligations and covenants of Borrower and Manager set forth herein shall be subject to the notice and cure periods set forth in Section 7.1(c) of the Loan Agreement. R-1. All capitalized terms not defined in this Rider shall have the meanings ascribed to such terms as set forth in the Loan Agreement. R-2. The following representations, warranties and covenants are hereby added to the representations, warranties and covenants contained in the Loan Agreement. Each Borrower represents, covenants, and warrants, as of the date hereof and through the term of Loan, as follows: (a) Borrower, together with Manager, is using and operating the Property and Improvements (collectively, the "FACILITY") as an assisted and/or independent senior housing facility, the Facility having the number of units set forth on Exhibit A to the Loan Agreement (as modified from time to time with Lender's consent, which consent shall not be unreasonably withheld, the "LICENSED USE"). As of the date hereof, in connection with the operation of the Facility, Manager and Borrower comply, and throughout the term of the Loan will comply, with all federal, state and local laws, regulations, quality and safety standards, accreditation standards and requirements of the applicable state department of health or other applicable state regulatory agency (each a "DOH") and all other federal, state or local governmental authorities including, to the extent applicable to the Facility, those relating to the quality and adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies, additions to facilities and services and fee splitting. The Facility shall be operated at all times in compliance with such laws and requirements. Notwithstanding anything to the contrary set forth herein, neither Borrower nor Manager shall be deemed to be in default under this clause (a) in the event it is cited for minor deficiencies during the course of licensure or certification surveys and the same are corrected within thirty (30) days, or so long as Borrower or Manager, as applicable, is diligently pursuing a cure, such longer period as is required to correct such deficiency, and provided further that Borrower or Manager delivers to Lender evidence that the DOH has approved such cure in its ordinary course of review of the Facility. (b) All governmental licenses, permits, regulatory agreements or other approvals or agreements necessary or desirable for the Licensed Use of the Facility are held by Borrower or Manager in the name of the Borrower or Manager as required under applicable law and are in full force and effect, including, if required, a valid certificate of need ("CON") or similar certificate, license, or approval issued by the DOH for the requisite number of units in the Facility, and a provider agreement or other required documentation of approved provider status for each provider payment or reimbursement program listed in Exhibit R-1 hereto, if applicable. All required permits, certificates, licenses and governmental approvals necessary for operation of the Facility for the Licensed Use are listed on Exhibit R-1 hereto (collectively, the "LICENSES"). So long as the Loan remains outstanding, Borrower (and Manager) shall operate the Facility or cause the Facility to be operated in a manner such that the Licenses shall remain in full force and effect. True and complete copies of the Licenses have been delivered to Lender. (c) The Licenses for the Facility, including without limitation, if applicable, the CON: (i) May not be, and have not been, and will not be transferred to any location other than the Facility; (ii) Are not now and will not be pledged as collateral security for any other loan or indebtedness; and (iii) Are held free and will remain free from restrictions or known conflicts which would materially impair the use or operation of the Facility for the Licensed Use, and shall not be provisional, probationary or restricted in any way which would have an adverse affect on the operation of the Facility for the Licensed Use. (d) Neither Borrower nor Manager shall: (i) Rescind, withdraw, revoke, amend, modify, supplement, or otherwise alter the nature, tenor or scope of the Licenses for the Facility; provided, however, nothing herein shall be construed as prohibiting Borrower or Manager from modifying the Licenses in any manner which will permit Borrower or Manager to provide additional services at the Facility which are not currently offered but which are within the use of the Project at the time this Rider was executed or other uses reasonably incidental thereto; (ii) Amend or otherwise change the Facility's authorized units capacity and/or the number of units approved by the DOH; except that, subject to Lender's consent, which consent shall not be unreasonably withheld or delayed, a Borrower may change the allocation of units between assisted living and independent living and except that, without Lender's consent but with notice to Lender, Borrower may increase the number of approved beds/units at the Facility unless doing so involves an expenditure which is otherwise subject to Lender's approval under the provisions of the Loan Agreement or one or more of the other Loan Documents, in which case such approval shall be governed by the terms of the other provisions of the Loan Agreement or the applicable Loan Documents; (iii) Replace or transfer all or any part of the Facility's units or beds to another site or location; or (iv) Voluntarily transfer or encourage the transfer of any resident of the Facility to any other facility not subject to the Mortgage, unless such transfer is at the request of the resident or is for reasons relating to the health, required level of medical care or safety of the resident to be transferred or for non-payment of stay or as required by applicable law. (e) If and when Borrower or Manager participates in any Medicare or Medicaid or other third-party payor program with respect to the Facility, the Facility will remain in compliance with all requirements for participation in Medicare and Medicaid, including the Medicare and Medicaid Patient Protection Act of 1987, and such other third party payor programs, including any local third-party payor program ("LOCAL PROGRAM"); provided, however, that neither Borrower nor Manager shall be deemed to be in default of its obligations under this clause (e) in the event it is cited for minor deficiencies during the course of licensure or certification surveys and the same are corrected within thirty (30) days (or such longer period as required so long as Borrower or Manager is diligently pursuing correction) in accordance with a plan of correction acceptable to the entity or agency having jurisdiction over the applicable Medicare, Medicaid or Local Program; (f) The Facility will remain in conformance in all material respects with all insurance, reimbursement and cost reporting requirements, and, if applicable, has a current provider agreement which is in full force and effect under Medicare and Medicaid. (g) There is no, and during the term of the Loan there shall be no threatened, existing or pending revocation, suspension, termination, probation, restriction, limitation, or nonrenewal affecting Borrower, Manager (with respect to its operation of the Facility) or the Facility or any participation or provider agreement with any thirdparty payor, including Medicare, Medicaid, Local Program, Blue Cross and/or Blue Shield, and any other private commercial insurance managed care and employee assistance program (such programs, the "THIRD-PARTY PAYORS' PROGRAMS") to which Borrower or Manager may presently be subject with respect to the Facility, or at any time hereafter is subject. All Medicaid, Medicare, Local Program, and private insurance cost reports and financial reports submitted by Borrower or Manager, if any, in connection with the ownership or operation of the Facility are and will be materially accurate and complete and have not been and will not be misleading in any material respects. Except as otherwise disclosed in writing to Lender by Borrower prior to the execution of this Rider, no cost reports submitted prior to the date hereof for the Facility remain open or unsettled. (h) None of Borrower, Manager (with respect to its operations at the Facility) or the Facility is or will be the subject of any proceeding by any governmental agency, and no notice of any violation has been or will be issued by a governmental agency that would, directly or indirectly, or with the passage of time: (i) Have a material adverse impact on Borrower's or Manager's ability to accept and/or retain patients at the Facility or operate the Facility for its Licensed Use or result in the imposition of a fine, a sanction, a lower rate certification or a lower reimbursement rate for services rendered to eligible patients at the Facility; (ii) Modify, limit or annul or result in the transfer, suspension, revocation or imposition of probationary use of any of the Licenses; or (iii) If applicable, affect Borrower's or Manager's continued participation in the Medicaid or Medicare programs with respect to the operation of any Facility, or the Local Program, or any other of the Third-Party Payors' Programs in which the Facility now or at anytime hereafter participates, or any successor programs thereto, at current rate certifications. (i) The Facility and the use thereof complies and will continue to comply in all material respects with all applicable local, state and federal building codes, fire codes, health care, senior housing and other regulatory requirements (the "PHYSICAL PLANT STANDARDS") and no waivers of Physical Plant Standards exist at the Facility, except those that are described on Exhibit R-2 attached hereto. (j) Except as otherwise disclosed to Lender in writing prior to the execution of this Rider, the Facility has not received a "Level A" (or equivalent) violation, and no statement of charges or deficiencies has been made or penalty enforcement action has been undertaken against the Facility, Manager (in connection with its operation of the Facility) or Borrower, or against any officer, director, partner, member or stockholder of Manager (in connection with its operation of the Facility), or Borrower by any governmental agency during the last three calendar years, and there have been no violations over the past three years which have threatened the Facility's, Manager's (in connection with its operation of the Facility), or a Borrower's certification for participation in Medicare or Medicaid or the other Third-Party Payors' Programs, if and to the extent the Facility does now participate or has, at any time during such three year period, participated therein. (k) Except as otherwise disclosed to Lender in writing prior to the execution of this Rider, there are no current, pending or outstanding Medicaid, Medicare or Third-Party Payors' Programs reimbursement audits or appeals pending at the Facility, and there are no years that are subject to audit for which an audit has not yet been conducted. (l) Except as otherwise disclosed to Lender in writing prior to the execution of this Rider, there are no current or pending Medicaid or Medicare or Third-Party Payors' Programs recoupment efforts at the Facility. Borrower is not a participant in any federal program whereby any governmental agency may have the right to recover funds by reason of the advance of federal funds, including those authorized under the Hill-Burton Act (42 U.S.C. 291, et seq.). (m) Borrower will not pledge its receivables as collateral security for any other loan or indebtedness. (n) There are no and there will remain no patient or resident care agreements with patients or residents which deviate in any material adverse respect from the form agreements which have been delivered to and approved by Lender pursuant to Section 3.7 of the Loan Agreement. (o) All patient or resident records at the Facility, including patient or resident trust fund accounts, are true and correct in all material respects, and will remain true and correct in all material respects. (p) Any agreement relating to the management, and operation of the Facility (each a "MANAGEMENT AND OPERATING AGREEMENT") and the manager thereunder shall be subject to Lender's approval and no Management and Operating Agreement shall be modified, amended or terminated except in accordance with the requirements of the Loan Documents. Under the applicable laws and regulations in effect as of the date hereof, in the event any Management and Operating Agreement is terminated or in the event of foreclosure or other acquisition of the Facility by Lender or its designee or any purchaser at a foreclosure sale, Borrower, Lender, any subsequent manager or any subsequent purchaser need not obtain a CON prior to applying for and receiving Medicare or Medicaid payments. (q) Borrower shall not, nor shall the Facility or Manager, other than in the normal course of business, change the terms of any of the Third-Party Payors' Programs now or hereinafter in effect or their normal billing payment or reimbursement policies and procedures with respect thereto (including the amount and timing of finance charges, fees and write-offs), where such change would have an adverse affect on the operations at or financial condition of the Facility. (r) From time to time, upon the request of Lender, regardless of whether or not an Event of Default has occurred hereunder or under the other Loan Documents, Borrower shall, and shall cause Manager to complete, execute and deliver to Lender any applications, notices, documentation, and other information necessary or desirable, in Lender's judgment, to permit Lender or its designee (including a receiver) to obtain, maintain or renew any one or more of the Licenses for the Facility (or to become the owner of the existing Licenses for the Facility) and to the extent permitted by applicable law to obtain any other provider agreements, licenses or governmental authorizations then necessary or desirable for the operation of the Facility by Lender or its designee for its Licensed Use (including, without limitation, any applications for change of ownership of the existing Licenses or change of control of the owner of the existing Licenses). Upon an occurrence of an Event of Default, to the extent permitted by applicable law, (i) Lender is hereby authorized (without the consent of Borrower or Manager) to submit any such applications, notices, documentation or other information which Borrower caused to be delivered to Lender in accordance with the above provisions to the applicable governmental authorities, or to take such other steps as Lender may deem advisable to obtain, maintain or renew any License or other license or governmental authorization in connection with the operation of the Facility for its Licensed Use, and Borrower agrees to cooperate and to cause Manager to cooperate with Lender in connection with the same and (ii) Borrower, upon demand by Lender, shall take any action and cause Manager to take any action necessary or desirable, in Lender's sole judgment, to permit Lender or its designee (including a receiver) to use, operate and maintain the Facility for its Licensed Use. If Borrower fails to comply with the provisions of this subsection (q) for any reason whatsoever, Borrower hereby irrevocably appoints Lender and its designee as Borrower's attorneyin-fact, with full power of substitution, to take any action and execute any documents and instruments necessary or desirable in Lender's sole judgment to permit Lender or its designee to undertake Borrower's obligations under this subsection (q), including without limitation, obtaining any licenses or governmental authorizations then required for the operation of the Facility by Lender or its designee for its Licensed Use. The foregoing power of attorney is coupled with an interest and is irrevocable and Lender may exercise its rights thereunder in addition to any other remedies which Lender may have against any Borrower or Guarantor as a result of a Borrower's breach of the obligations contained in this subsection (q). (s) Borrower and Manager shall at all times comply with all obligations under the contracts and leases with residents of the Facility, and Borrower shall not commit or permit any default by Borrower or Manager thereunder. Borrower hereby indemnifies and holds harmless Lender and agrees to defend Lender (with counsel reasonably acceptable to Lender) from and against (collectively, the "INDEMNIFIED CLAIMS") any (i) claims, proceedings or causes of action brought by any resident of the Facility, and (ii) loss, damage, cost or expense, including reasonable attorneys' fees, incurred or suffered by Lender as a result of any (x) breach by Borrower or Manager of any contract or lease with a resident of the Facility or (y) violation of any license or any federal, state or local law governing the Facility or the use, operation or maintenance thereof for its Licensed Use. (t) Notwithstanding the foregoing or any other provision of this Senior Housing Rider to the contrary, if through the exercise of Lender's rights under the Loan Documents or otherwise, Lender or an affiliate of Lender shall take permanent possession and control of the Facility, Borrower shall not be liable to Lender for any Indemnified Claims which first arose after the date ("Transfer Date") Lender or an affiliate of Lender took permanent possession and control of the Facility if (but only if) the following conditions are fully satisfied: (i) None of Borrower, Guarantor, any Affiliate of Borrower or Guarantor or any agent, employee or contractor of any of the foregoing contributed, by act or omission, to the cause, existence, or occurrence of such Indemnified Claims; and (ii) The events or state of facts resulting (or with the passage of time eventually permanently resulting) in any such Indemnified Claims did not exist prior to the Transfer Date. IN WITNESS WHEREOF, Borrower and Manager have executed this Senior Housing Rider or have caused the same to be executed by its duly authorized representatives as of the date first written above. BORROWER: EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company By Emeritus Corporation, a Washington corporation, its sole member By Name Its /s/ Raymond Raymond CFO R. R. Brandstrom Brandstrom MANAGER: EMERITUS CORPORATION, a Washington corporation By Name Its /s/ Raymond Raymond CFO R. R. Brandstrom Brandstrom EXHIBIT R-1 LICENSES Attached -4EXHIBIT R-2 DISCLOSURES None. LOAN NO. 07-0004017 HAZARDOUS MATERIALS INDEMNITY AGREEMENT IN WITNESS WHEREOF, Borrower and Manager have executed this Senior Housing Rider or have caused the same to be executed by its duly authorized representatives as of the date first written above. BORROWER: EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company By Emeritus Corporation, a Washington corporation, its sole member By Name Its /s/ Raymond Raymond CFO R. R. Brandstrom Brandstrom MANAGER: EMERITUS CORPORATION, a Washington corporation By Name Its /s/ Raymond Raymond CFO R. R. Brandstrom Brandstrom EXHIBIT R-1 LICENSES Attached -4EXHIBIT R-2 DISCLOSURES None. LOAN NO. 07-0004017 HAZARDOUS MATERIALS INDEMNITY AGREEMENT This HAZARDOUS MATERIALS INDEMNITY AGREEMENT (this "AGREEMENT") is made as of August 26, 2002 by and among EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company ("BORROWER"), and EMERITUS CORPORATION, a Washington corporation ("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware corporation, whose address is 2 Wisconsin Circle, Suite 400, Chevy Chase, Maryland 20815. RECITALS A. Borrower is the owner in fee simple of that certain real property legally described in Exhibit A attached hereto (said property together with all rights and appurtenances thereto and all improvements presently located or hereafter constructed thereon are hereinafter collectively called the " PROJECT"). B. Concurrently herewith, Lender is making a loan to Borrower in the principal amount of Eight Million Three Hundred Thousand and No/100 Dollars ($8,300,000.00) (the "LOAN"). C. To evidence the Loan, Borrower has executed and delivered to Lender, a Promissory Note A of even date herewith in the face amount of Five Million Three Hundred Ninety-Five Thousand and No/100 Dollars EXHIBIT R-1 LICENSES Attached -4EXHIBIT R-2 DISCLOSURES None. LOAN NO. 07-0004017 HAZARDOUS MATERIALS INDEMNITY AGREEMENT This HAZARDOUS MATERIALS INDEMNITY AGREEMENT (this "AGREEMENT") is made as of August 26, 2002 by and among EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company ("BORROWER"), and EMERITUS CORPORATION, a Washington corporation ("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware corporation, whose address is 2 Wisconsin Circle, Suite 400, Chevy Chase, Maryland 20815. RECITALS A. Borrower is the owner in fee simple of that certain real property legally described in Exhibit A attached hereto (said property together with all rights and appurtenances thereto and all improvements presently located or hereafter constructed thereon are hereinafter collectively called the " PROJECT"). B. Concurrently herewith, Lender is making a loan to Borrower in the principal amount of Eight Million Three Hundred Thousand and No/100 Dollars ($8,300,000.00) (the "LOAN"). C. To evidence the Loan, Borrower has executed and delivered to Lender, a Promissory Note A of even date herewith in the face amount of Five Million Three Hundred Ninety-Five Thousand and No/100 Dollars ($5,395,000.00) and a Subordinated Promissory Note B of even date herewith in the face amount of Two Million Nine Hundred Five Thousand and No/100 Dollars ($2,905,000.00) (which notes and any and all renewals, amendments, modifications, increases and extensions thereof are hereinafter collectively called the "NOTES") and a Loan Agreement of even date herewith (as amended, modified, extended or restated from time to time, the "LOAN AGREEMENT"). Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement. D. Concurrently herewith, Borrower has granted to Lender a first priority Mortgage and Security Agreement (as amended, modified, extended or restated from time to time, the "MORTGAGE"), encumbering the Project. The Notes, the Loan Agreement, the Mortgage, and any other documents evidencing or securing the Loan or executed in connection therewith (other than the "Other Loan Instruments" as defined in the Mortgage), and any modification, renewal or extension of any of the foregoing are collectively called the "LOAN DOCUMENTS." E. Guarantor owns one hundred percent (100%) of the membership interests in Borrower. F. Lender, as a condition to making the Loan, has requested that Borrower and the Guarantor enter into this Agreement to indemnify Lender against liabilities arising from Hazardous Materials (as hereinafter defined) used or located on, or affecting the Project, and that Borrower and the Guarantor acknowledge and agree that their execution and delivery of this Agreement and their performance of the covenants contained herein are material inducements for Lender's agreement to make the Loan. AGREEMENTS NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and the Guarantor hereby represent, warrant, covenant and agree as follows: 1. NO HAZARDOUS MATERIALS ON PROJECT. Borrower and the Guarantor represent and warrant to the best of their knowledge, after all appropriate inquiry, and covenant that there are no, nor will there be, for as long as any indebtedness or obligations remain outstanding under the Loan, any Hazardous Materials generated, -4EXHIBIT R-2 DISCLOSURES None. LOAN NO. 07-0004017 HAZARDOUS MATERIALS INDEMNITY AGREEMENT This HAZARDOUS MATERIALS INDEMNITY AGREEMENT (this "AGREEMENT") is made as of August 26, 2002 by and among EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company ("BORROWER"), and EMERITUS CORPORATION, a Washington corporation ("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware corporation, whose address is 2 Wisconsin Circle, Suite 400, Chevy Chase, Maryland 20815. RECITALS A. Borrower is the owner in fee simple of that certain real property legally described in Exhibit A attached hereto (said property together with all rights and appurtenances thereto and all improvements presently located or hereafter constructed thereon are hereinafter collectively called the " PROJECT"). B. Concurrently herewith, Lender is making a loan to Borrower in the principal amount of Eight Million Three Hundred Thousand and No/100 Dollars ($8,300,000.00) (the "LOAN"). C. To evidence the Loan, Borrower has executed and delivered to Lender, a Promissory Note A of even date herewith in the face amount of Five Million Three Hundred Ninety-Five Thousand and No/100 Dollars ($5,395,000.00) and a Subordinated Promissory Note B of even date herewith in the face amount of Two Million Nine Hundred Five Thousand and No/100 Dollars ($2,905,000.00) (which notes and any and all renewals, amendments, modifications, increases and extensions thereof are hereinafter collectively called the "NOTES") and a Loan Agreement of even date herewith (as amended, modified, extended or restated from time to time, the "LOAN AGREEMENT"). Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement. D. Concurrently herewith, Borrower has granted to Lender a first priority Mortgage and Security Agreement (as amended, modified, extended or restated from time to time, the "MORTGAGE"), encumbering the Project. The Notes, the Loan Agreement, the Mortgage, and any other documents evidencing or securing the Loan or executed in connection therewith (other than the "Other Loan Instruments" as defined in the Mortgage), and any modification, renewal or extension of any of the foregoing are collectively called the "LOAN DOCUMENTS." E. Guarantor owns one hundred percent (100%) of the membership interests in Borrower. F. Lender, as a condition to making the Loan, has requested that Borrower and the Guarantor enter into this Agreement to indemnify Lender against liabilities arising from Hazardous Materials (as hereinafter defined) used or located on, or affecting the Project, and that Borrower and the Guarantor acknowledge and agree that their execution and delivery of this Agreement and their performance of the covenants contained herein are material inducements for Lender's agreement to make the Loan. AGREEMENTS NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and the Guarantor hereby represent, warrant, covenant and agree as follows: 1. NO HAZARDOUS MATERIALS ON PROJECT. Borrower and the Guarantor represent and warrant to the best of their knowledge, after all appropriate inquiry, and covenant that there are no, nor will there be, for as long as any indebtedness or obligations remain outstanding under the Loan, any Hazardous Materials generated, released, stored, buried or deposited over, beneath, in or upon the Project or on or beneath the surface of adjacent property, except as such Hazardous Materials may be generated, used, stored or transported in connection with the permitted uses of the Project and then only to the extent permitted by law after obtaining all necessary permits and licenses therefor. "HAZARDOUS MATERIALS" shall mean and include any pollutants, flammables, explosives, molds, petroleum (including crude oil) or any fraction thereof, radioactive materials, hazardous wastes, dangerous or toxic substances or related materials, including substances defined as or included in the definition of toxic or hazardous substances, wastes or materials under any federal, state or local laws, ordinances, regulations or guidances which relate to pollution, the environment or the protection of public health LOAN NO. 07-0004017 HAZARDOUS MATERIALS INDEMNITY AGREEMENT This HAZARDOUS MATERIALS INDEMNITY AGREEMENT (this "AGREEMENT") is made as of August 26, 2002 by and among EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company ("BORROWER"), and EMERITUS CORPORATION, a Washington corporation ("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware corporation, whose address is 2 Wisconsin Circle, Suite 400, Chevy Chase, Maryland 20815. RECITALS A. Borrower is the owner in fee simple of that certain real property legally described in Exhibit A attached hereto (said property together with all rights and appurtenances thereto and all improvements presently located or hereafter constructed thereon are hereinafter collectively called the " PROJECT"). B. Concurrently herewith, Lender is making a loan to Borrower in the principal amount of Eight Million Three Hundred Thousand and No/100 Dollars ($8,300,000.00) (the "LOAN"). C. To evidence the Loan, Borrower has executed and delivered to Lender, a Promissory Note A of even date herewith in the face amount of Five Million Three Hundred Ninety-Five Thousand and No/100 Dollars ($5,395,000.00) and a Subordinated Promissory Note B of even date herewith in the face amount of Two Million Nine Hundred Five Thousand and No/100 Dollars ($2,905,000.00) (which notes and any and all renewals, amendments, modifications, increases and extensions thereof are hereinafter collectively called the "NOTES") and a Loan Agreement of even date herewith (as amended, modified, extended or restated from time to time, the "LOAN AGREEMENT"). Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement. D. Concurrently herewith, Borrower has granted to Lender a first priority Mortgage and Security Agreement (as amended, modified, extended or restated from time to time, the "MORTGAGE"), encumbering the Project. The Notes, the Loan Agreement, the Mortgage, and any other documents evidencing or securing the Loan or executed in connection therewith (other than the "Other Loan Instruments" as defined in the Mortgage), and any modification, renewal or extension of any of the foregoing are collectively called the "LOAN DOCUMENTS." E. Guarantor owns one hundred percent (100%) of the membership interests in Borrower. F. Lender, as a condition to making the Loan, has requested that Borrower and the Guarantor enter into this Agreement to indemnify Lender against liabilities arising from Hazardous Materials (as hereinafter defined) used or located on, or affecting the Project, and that Borrower and the Guarantor acknowledge and agree that their execution and delivery of this Agreement and their performance of the covenants contained herein are material inducements for Lender's agreement to make the Loan. AGREEMENTS NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and the Guarantor hereby represent, warrant, covenant and agree as follows: 1. NO HAZARDOUS MATERIALS ON PROJECT. Borrower and the Guarantor represent and warrant to the best of their knowledge, after all appropriate inquiry, and covenant that there are no, nor will there be, for as long as any indebtedness or obligations remain outstanding under the Loan, any Hazardous Materials generated, released, stored, buried or deposited over, beneath, in or upon the Project or on or beneath the surface of adjacent property, except as such Hazardous Materials may be generated, used, stored or transported in connection with the permitted uses of the Project and then only to the extent permitted by law after obtaining all necessary permits and licenses therefor. "HAZARDOUS MATERIALS" shall mean and include any pollutants, flammables, explosives, molds, petroleum (including crude oil) or any fraction thereof, radioactive materials, hazardous wastes, dangerous or toxic substances or related materials, including substances defined as or included in the definition of toxic or hazardous substances, wastes or materials under any federal, state or local laws, ordinances, regulations or guidances which relate to pollution, the environment or the protection of public health and safety, or limiting, prohibiting or otherwise regulating the presence, sale, recycling, generation, manufacture, use, transportation, disposal, release, storage, treatment of, or response or exposure to, toxic or hazardous substances, wastes or materials. Such laws, ordinances and regulations, now or hereafter in effect, and as the same may be amended from time to time, are hereinafter collectively referred to as the "HAZARDOUS MATERIALS LAWS." 2. COMPLIANCE WITH LAWS. For as long as any Indebtedness or Obligations remain outstanding under the Loan Documents, Borrower and the Guarantor shall, and shall cause their respective employees, agents, tenants, contractors and subcontractors, and any other persons from time to time present on or occupying the Project to, keep and maintain the Project in compliance with, and not cause or knowingly permit the Project to be in violation of, any applicable Hazardous Materials Laws. None of Borrower, Guarantor or any of their respective employees, agents, tenants, contractors or subcontractors, or any other persons occupying or present on the Project shall generate, use, store, manufacture or dispose of on, under or about the Project or transport to or from the Project any Hazardous Materials, except such Hazardous Materials as may be generated, used, stored or transported in connection with the permitted uses of the Project and then only to the extent permitted by law after obtaining all necessary permits and licenses therefor. 3. HAZARDOUS MATERIALS CLAIMS. Borrower and the Guarantor shall immediately advise Lender in writing of: (a) any notices received by Borrower or the Guarantor (whether such notices are from the Environmental Protection Agency, or any other federal, state or local governmental agency or regional office thereof) of the violation or potential violation of any applicable Hazardous Materials Laws occurring on, under or about the Project; (b) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Borrower, Guarantor or the Project pursuant to any Hazardous Materials Laws; (c) all claims made or threatened by any third party against Borrower, Guarantor or the Project relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (a), (b) and (c) above are hereinafter referred to as "HAZARDOUS MATERIALS CLAIMS"); and (d) the discovery by Borrower or Guarantor of any occurrence or condition on the Project or any real property adjoining or in the vicinity of the Project that could cause the Project or any part thereof to be subject to any Hazardous Materials Claims. Lender shall have the right but not the obligation to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and Borrower and the Guarantor shall pay to Lender, upon demand, all attorneys' and consultants' fees incurred by Lender in connection therewith. 4. OTHER HAZARDOUS MATERIALS LAWS. Borrower and the Guarantor hereby represent, warrant and certify to the best of their knowledge, that except as disclosed in that certain Phase I Environmental Site Assessment, dated May 30, 2002, prepared by Commercial Inspectors, LLC, (a) there are no underground storage tanks located on, under or about the Project that are subject to the notification requirements under Section 9002 of the Solid Waste Disposal Act, as now or hereafter amended (42 U.S.C. 6991); and (b) there is no facility located on the Project that is subject to the reporting requirements of Section 312 of the Federal Emergency Planning and Community Right to Know Act of 1986 and the Federal regulations promulgated thereunder (42 U.S.C. 11022). 5. INSPECTION AND TESTING. Lender may require Borrower and the Guarantor, at their sole cost and expense, from time to time to perform or cause to be performed, such studies or assessments of the Project, as Lender may reasonably deem necessary, appropriate or desirable, to determine the status of environmental conditions on, under and about the Project, which studies and assessments shall be for the benefit of Lender and shall be prepared in accordance with the specifications established by Lender; provided, however, unless an Event of Default has occurred and is continuing or Lender has a good faith belief that Hazardous Material exist at such Property in violation of Hazardous Materials Laws, such studies shall not be performed more often than one time per year. 6. REMOVAL OF HAZARDOUS MATERIALS. Borrower and the Guarantor, at their sole cost and expense, shall, with due care, in a safe manner and in accordance with all Hazardous Materials Laws, detain the spread of, ameliorate and remove from the Project (and from any other property as required by any Hazardous Materials Laws) any Hazardous Materials contamination located on, under or about any such property and monitor or cause to be monitored the levels of Hazardous Materials on, under or about any such property or in the ground water in accordance with the terms and procedures required by any federal, state, county or local governmental agency having jurisdiction including, without limitation, any Regional Water Quality Control Board and the Environmental Protection Agency. 7. INDEMNIFICATION. Borrower and the Guarantor shall jointly and severally indemnify, defend and save harmless Lender and Lender's officers, directors, shareholders, agents, attorneys, representatives and employees, their successors and assigns (individually and collectively "INDEMNITEE"), from and against any and all claims, demands, causes of action, damages, costs, expenses, lawsuits and liabilities, at law or in equity, of every kind or nature whatsoever, directly or indirectly arising out of or attributable to the generation, use, storage, release, threatened release, discharge, disposal or presence of Hazardous Materials on, under or about the Project (whether occurring prior to or during or after the term of the Loan or otherwise and regardless of by whom caused, whether by Borrower, the Guarantor or any predecessor in title or any owner of land adjacent to the Project or any other third party, or any employee, agent, tenant, contractor or subcontractor of Borrower, the Guarantor or any predecessor in title or any such adjacent land owner or any third person) (collectively, the "LIABILITIES") including, without limitation: (a) Claims of third parties (including governmental agencies) for injury to or death of any person or for damage to or destruction of any property; (b) Claims for response costs, clean-up costs, costs and expenses of removal and restoration, including reasonable fees of attorneys and experts, and costs of determining the existence of Hazardous Materials and reporting same to any governmental agency; (c) Any and all other claims for expenses or obligations, including attorneys' fees, costs, and other expenses related to Hazardous Materials and the Project; (d) Any and all penalties threatened, sought or imposed on account of a violation of any Hazardous Materials Laws; (e) All reasonable fees of attorneys and all fees of any consultants and engineering firms retained in connection with monitoring the obligations of Borrower and the Guarantor under this Agreement and the Loan Documents; and (f) Any loss occasioned by diminution in the value of the Project which Lender is reasonably able to demonstrate resulted from any of the foregoing. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, if, through the exercise of Lender's rights under the Loan Documents or otherwise, Lender or an agent of Lender shall assume control of any Property, Borrower and Guarantor shall not be liable to Indemnitee for any Liabilities relating solely to such Property if and to the extent such Liabilities are a direct result of Lender's gross negligence or willful misconduct, or if and to the extent (x) such Liabilities first arose after title to the Property was vested in Lender or any other party after the completion of foreclosure proceedings or the granting of a deed-inlieu of foreclosure, (y) neither Borrower nor Guarantor, nor any of their respective affiliates, shall have contributed to the cause, existence or occurrence of such Liabilities, and (z) the events or state of facts resulting (or with the passage of time eventually resulting) in any such Liabilities did not exist or occur prior to the time of such assumption of control of the Property. 8. DEFENSE OR SETTLEMENT OF CLAIMS. (a) To assert an indemnity claim under this Agreement, Indemnitee shall notify Borrower and the Guarantor in writing as soon as reasonably practical under the circumstances stating the facts which entitle Indemnitee to make a claim for indemnification. (b) Borrower and the Guarantor shall, at their own cost, expense and risk: (i) defend all suits, actions, or other legal or administrative proceedings that may be threatened, brought or instituted against an Indemnitee on account of any matter or matters described in Section 7 above; (ii) pay or satisfy any judgment, decree or settlement that may be rendered against or agreed to by an Indemnitee in any such suit, action or other legal or administrative proceeding; (iii) reimburse Indemnitee for any and all reasonable expenses, including, without limitation, all legal expenses incurred in connection with any of the matters described in Section 7 above or in connection with enforcing this Agreement; and (iv) reimburse Indemnitee for any loss occasioned by the diminution in the value of the Project which Lender is reasonably able to demonstrate was caused by the presence of Hazardous Materials or the breach of any representation, warranty or obligation of Indemnitor hereunder. (c) Any law firm selected by Borrower or the Guarantor to defend an indemnified claim shall be subject to the approval of Indemnitee which approval shall not be unreasonably withheld or delayed; provided that upon thirty (30) days prior written notice, Indemnitee may elect to defend, using a law firm selected by such Indemnitee, any such claim, loss, action, legal or administrative proceeding at the cost and expense of Borrower and the Guarantor, if, in the reasonable judgment of Indemnitee: (i) the defense is not proceeding or being conducted in a satisfactory manner or (ii) there is a conflict of interest between any of the parties to such lawsuit, action, legal or administrative proceeding. (d) If Indemnitee exercises its right to designate counsel pursuant to the preceding clause, all reasonable costs and expenses thereof shall be paid by Borrower and the Guarantor within ten (10) days following written demand by such Indemnitee. (e) In the event Borrower or the Guarantor shall pay to Indemnitee any claim under this Agreement, then Borrower or the Guarantor (as applicable) shall be subrogated to any rights of such Indemnitee relating thereto, and such Indemnitee will cooperate with Borrower and the Guarantor, at the cost and expense of Borrower and the Guarantor, in enforcing such rights; provided, that such subrogation shall not be in derogation of any rights of the Indemnitee under this Agreement, and shall not be construed to limit the obligations of Borrower or the Guarantor hereunder. 9. BINDING EFFECT. All the covenants and agreements of Borrower or the Guarantor contained in this Agreement shall apply to and bind their respective heirs, executors, representatives, successors and assigns and shall inure to the benefit of each Indemnitee and its successors and assigns. 10. INDEMNIFICATION SEPARATE FROM THE LOAN. (a) Borrower and the Guarantor agree that this Agreement is separate, independent of and in addition to the undertakings of Borrower and the Guarantor pursuant to the Loan, the Notes, the Loan Agreement and the other Loan Documents. A separate action may be brought to enforce the provisions hereof, which shall in no way be deemed to be an action on the Notes, whether or not the Loan have been repaid and whether or not Lender would be entitled to a deficiency judgment following a judicial foreclosure, trustee's sale or UCC sale. The obligations of Borrower and the Guarantor hereunder shall not be affected by any exculpatory provisions contained in the Notes, the Loan Agreement or any of the other Loan Documents. This Agreement, and all rights and obligations hereunder, shall survive performance and repayment of the obligations evidenced by and arising under the Loan Documents, surrender of the Notes, reconveyance of the Mortgage, release of other security provided in connection with the Loan, trustee's sale or foreclosure under the Mortgage, and/or any of the other Loan Documents (whether by deed or other assignment in lieu of foreclosure, or otherwise) acquisition of the Project by Lender, any other transfer of the Project, and transfer of all of Lender's rights in the Loan, the Loan Documents, and the Project. (b) Borrower and the Guarantor waive all rights to require Lender to (i) proceed against or exhaust any security for the Loan or (ii) pursue any remedy in Lender's power whatsoever. Borrower waives all defenses by reason of any disability or other defense under the Loan or by reason of the cessation from any cause whatsoever of its liability under the Loan, or that it may acquire by reason of Lender's election of any remedy against it including, without limitation, Lender's exercise of its respective rights to foreclose under the Mortgage. 11. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of Illinois. 12. AMENDMENTS. This Agreement may not be modified, amended, waived or terminated, except by a written instrument executed by the parties hereto. 13. PARTIES IN INTEREST. Except as expressly set forth herein, nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement. 14. PERSONAL LIABILITY. Borrower and the Guarantor hereby acknowledge and agree that notwithstanding any other provisions of this Agreement, the Notes, the Loan Agreement or the other Loan Documents to the contrary, the obligations of Borrower and Guarantor under this Agreement shall be the unlimited personal obligations of Borrower and Guarantor. 15. JOINT AND SEVERAL OBLIGATIONS. The obligations of each of the undersigned hereunder shall be joint and several. 16. COUNTERPARTS. This Agreement may be executed in two or more counterparts. 17. CONSENT TO JURISDICTION. BORROWER AND GUARANTOR HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREE THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER AND GUARANTOR EXPRESSLY SUBMIT AND CONSENT TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS. BORROWER AND GUARANTOR HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREE THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER AND GUARANTOR BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER AND GUARANTOR, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. 18. JURY TRIAL WAIVER. BORROWER AND GUARANTOR, AND LENDER BY ITS ACCEPTANCE OF THIS AGREEMENT, HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER, GUARANTOR, AND LENDER, AND BORROWER AND GUARANTOR ACKNOWLEDGE THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER, GUARANTOR AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT BORROWER, GUARANTOR AND LENDER HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER, GUARANTOR AND LENDER FURTHER THEIR RELATED FUTURE DEALINGS. BORROWER, GUARANTOR AND LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL. [Remainder of page intentionally blank; signature page follows] Borrower and the Guarantor have executed this Agreement or have caused the same to be executed as of the date first set forth above. BORROWER: EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company By Emeritus Corporation, a Washington corporation, its sole member By: Name: Its: /s/ Raymond R. Brandstrom ---------------------------Raymond R. Brandstrom CFO GUARANTOR: EMERITUS CORPORATION, a Washington corporation By: Name: Its: /s/ Raymond R. Brandstrom ----------------------------Raymond R. Brandstrom CFO REAL ESTATE PURCHASE AND SALE AGREEMENT This Real Estate Purchase and Sale Agreement (the "Agreement") is by and between Auburn Land LLC, a Massachusetts limited liability company ("Seller"), and Emeritus Properties XIV, LLC, a Washington limited liability company ("Buyer"). This Agreement is attached to and a part of the Lease Agreement between Seller and Buyer dated January 1, 2000 (the "Lease") and shall become effective on the date of the exercise of the Purchase Option (as defined in the Lease) by Buyer as provided therein. Capitalized terms used herein shall have the same meanings as set forth in the Lease. Pursuant to the terms of the Lease, Buyer has already investigated the Premises, the condition of title and the books and records relating thereto. Buyer acknowledges that Buyer has occupied the Premises as Tenant pursuant to a sublease (the "Sublease") with Sage, L.L.C. (the tenant under the Lease), as Landlord, and, as such, Buyer is intimately familiar with the Premises and hereby agrees to take title to same "as is". Now, therefore, Buyer and Seller agree as follows-: 1. Purchase and Sale. On the terms and conditions set forth herein, Buyer agrees to acquire from Seller and Seller agrees to transfer to Buyer the following: (i) the Premises described on Exhibit A attached hereto, which shall include the Real Property, the Improvements, and the Facility, together with the all the furniture, fixtures, equipment, and any other improvements, (ii) the Personal Property, (iii) all rights, privileges, easements, including without limitation, all development rights, air rights, water rights, permits, and licenses, and (iv) Seller's interest in all existing service contracts, resident agreements, security and rental deposits, and all assignable warranties for the benefit of the Premises and the improvements thereon. Borrower and the Guarantor have executed this Agreement or have caused the same to be executed as of the date first set forth above. BORROWER: EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company By Emeritus Corporation, a Washington corporation, its sole member By: Name: Its: /s/ Raymond R. Brandstrom ---------------------------Raymond R. Brandstrom CFO GUARANTOR: EMERITUS CORPORATION, a Washington corporation By: Name: Its: /s/ Raymond R. Brandstrom ----------------------------Raymond R. Brandstrom CFO REAL ESTATE PURCHASE AND SALE AGREEMENT This Real Estate Purchase and Sale Agreement (the "Agreement") is by and between Auburn Land LLC, a Massachusetts limited liability company ("Seller"), and Emeritus Properties XIV, LLC, a Washington limited liability company ("Buyer"). This Agreement is attached to and a part of the Lease Agreement between Seller and Buyer dated January 1, 2000 (the "Lease") and shall become effective on the date of the exercise of the Purchase Option (as defined in the Lease) by Buyer as provided therein. Capitalized terms used herein shall have the same meanings as set forth in the Lease. Pursuant to the terms of the Lease, Buyer has already investigated the Premises, the condition of title and the books and records relating thereto. Buyer acknowledges that Buyer has occupied the Premises as Tenant pursuant to a sublease (the "Sublease") with Sage, L.L.C. (the tenant under the Lease), as Landlord, and, as such, Buyer is intimately familiar with the Premises and hereby agrees to take title to same "as is". Now, therefore, Buyer and Seller agree as follows-: 1. Purchase and Sale. On the terms and conditions set forth herein, Buyer agrees to acquire from Seller and Seller agrees to transfer to Buyer the following: (i) the Premises described on Exhibit A attached hereto, which shall include the Real Property, the Improvements, and the Facility, together with the all the furniture, fixtures, equipment, and any other improvements, (ii) the Personal Property, (iii) all rights, privileges, easements, including without limitation, all development rights, air rights, water rights, permits, and licenses, and (iv) Seller's interest in all existing service contracts, resident agreements, security and rental deposits, and all assignable warranties for the benefit of the Premises and the improvements thereon. 2. Purchase Price. The purchase price shall be $10,200,000. The purchase price shall be payable in full in cash certified funds or by wire transfer of immediately available funds at Closing. 3. Earnest Money. Within one business day after full execution of this Agreement, Buyer shall deposit $100,000 with an escrow company designated by Buyer (the "Escrow Agent") as an earnest money deposit (the "Earnest Money"). Upon closing of this transaction, the Earnest Money shall be credited against the Purchase Price. In the event this transaction fails to close as a result of Seller's default, the failure of any condition precedent to Buyer's obligations, or any reason other than Buyer's default, the Earnest Money shall be returned to Buyer. In the event REAL ESTATE PURCHASE AND SALE AGREEMENT This Real Estate Purchase and Sale Agreement (the "Agreement") is by and between Auburn Land LLC, a Massachusetts limited liability company ("Seller"), and Emeritus Properties XIV, LLC, a Washington limited liability company ("Buyer"). This Agreement is attached to and a part of the Lease Agreement between Seller and Buyer dated January 1, 2000 (the "Lease") and shall become effective on the date of the exercise of the Purchase Option (as defined in the Lease) by Buyer as provided therein. Capitalized terms used herein shall have the same meanings as set forth in the Lease. Pursuant to the terms of the Lease, Buyer has already investigated the Premises, the condition of title and the books and records relating thereto. Buyer acknowledges that Buyer has occupied the Premises as Tenant pursuant to a sublease (the "Sublease") with Sage, L.L.C. (the tenant under the Lease), as Landlord, and, as such, Buyer is intimately familiar with the Premises and hereby agrees to take title to same "as is". Now, therefore, Buyer and Seller agree as follows-: 1. Purchase and Sale. On the terms and conditions set forth herein, Buyer agrees to acquire from Seller and Seller agrees to transfer to Buyer the following: (i) the Premises described on Exhibit A attached hereto, which shall include the Real Property, the Improvements, and the Facility, together with the all the furniture, fixtures, equipment, and any other improvements, (ii) the Personal Property, (iii) all rights, privileges, easements, including without limitation, all development rights, air rights, water rights, permits, and licenses, and (iv) Seller's interest in all existing service contracts, resident agreements, security and rental deposits, and all assignable warranties for the benefit of the Premises and the improvements thereon. 2. Purchase Price. The purchase price shall be $10,200,000. The purchase price shall be payable in full in cash certified funds or by wire transfer of immediately available funds at Closing. 3. Earnest Money. Within one business day after full execution of this Agreement, Buyer shall deposit $100,000 with an escrow company designated by Buyer (the "Escrow Agent") as an earnest money deposit (the "Earnest Money"). Upon closing of this transaction, the Earnest Money shall be credited against the Purchase Price. In the event this transaction fails to close as a result of Seller's default, the failure of any condition precedent to Buyer's obligations, or any reason other than Buyer's default, the Earnest Money shall be returned to Buyer. In the event this transaction fails to close as a result of Buyer's default, the Escrow Agent shall deliver the Earnest Money to Seller and retention of the Earnest Money by Seller shall be Seller's sole and exclusive remedy. Escrow Agent shall deposit the Earnest Money in an interest bearing account at a financial institution approved by Buyer. 4. Closing. Closing shall occur on a date specified by Buyer, but no later than ninety (90) days after exercise by Buyer of the Purchase Option ("Closing" or "Closing Date"). Closing shall occur at the office of the Escrow Agent or at such other location mutually satisfactory to Buyer and Seller. Time is of the essence in this Agreement. 5. Conveyance Documents. a. Delivery by Seller. On or prior to the Closing Date, Seller shall deposit with the Escrow Agent, the following conveyance documents: i. The duly executed and acknowledged limited warranty deed, in the form attached hereto as Exhibit B, ready for recordation on the Closing Date. ii. An affidavit certifying that Seller is not a "foreign person" within the meaning of the Foreign Investment in Real Property Tax Act. iii. Any customary affidavits or certifications required by the Title Company (as defined below) to issue the title policy. v. iv. A bill of sale for the Personal Property. v. Any other conveyance documents in a form customary for transactions of this nature. b. Delivery by Buyer. i. A duly executed assumption of leases and resident agreements. ii. A duly executed assumption of service contracts. iii. Any other conveyance documents in a form customary for transactions of this nature. 6. Title Insurance. Buyer shall procure its own title insurance issued by a title company designated by Buyer (the "Title Company") in the face amount of the purchase price dated as of the Closing Date, and insuring Buyer's title to the Premises subject to the standard preprinted exceptions and the Permitted Exceptions (other than any Facility Mortgage, which will be satisfied in full and removed as an encumbrance to title by Seller in connection with Closing). Seller agrees to provide whatever affidavits Title Company may reasonably require to remove the standard preprinted exceptions for any mechanics liens and parties in possession (other than residents under existing resident agreements). Buyer shall be responsible for any surveys that may be required to remove the standard preprinted exceptions for survey matters. 7. Closing Costs. At Closing, Seller shall pay (i) real estate transfer taxes, deed taxes, fees necessary to remove any liens related to the Facility mortgage or similar conveyance taxes, (ii) costs of compliance with Internal Revenue Code Section 6045(e) (if any), and (iii) one-half of Escrow Agent's escrow fees and charges. Buyer shall pay (i) the costs of standard title insurance and extended coverage endorsements requested by Buyer, (ii) sales tax on the value of the-tangible personal property (if any), (iii) any other recording fees and (iv) one-half of Escrow Agent's escrow fees and charges. Each party shall be responsible for its own legal, accounting and consultant fees. 8. Prorations. Any Rent, Additional Rent, taxes, assessments, operating expenses, utilities and similar matters payable by Buyer to Seller under the Lease will be prorated at Closing to the extent necessary. Any prepaid rents and security deposits held by Seller (if any) will be transferred to Buyer at Closing. Any matters which cannot be prorated with certainty at Closing shall be adjusted between the parties as soon as reasonably possible after Closing as the correct figures becomes available. 9. Casualty or Condemnation. In the event of a Major Casualty (as defined in the Lease) to the Premises or the commencement of an action for condemnation of all or any portion of the Premises after Buyer exercises its Purchase Option but prior to Closing, Buyer may at its option terminate this Agreement or proceed with the purchase and sale transaction and take an assignment from Seller of available insurance proceeds and/or condemnation proceeds. 10. Negotiation and Construction. This Agreement and each of the terms and provisions hereof are deemed to have been explicitly negotiated between the parties, and the language in all parts of this Agreement shall, in all cases, be construed according to its fair meaning and not strictly for or against either party. 11. Brokers and Finders. In the event of a claim for broker's fee, finder's fee, commission or other similar compensation in connection herewith, Buyer, if such claim is based upon any agreement alleged to have been made by Buyer, hereby agrees to indemnify Seller against and hold Seller harmless from any and all damages, liabilities, costs, expenses, and losses (including, without limitation, reasonable attorneys' fees and costs) which Seller may sustain or incur by reason of such claim, and Seller, if such claim is based upon any agreement alleged to have been made by Seller, hereby agrees to indemnify Buyer against and hold Buyer harmless from any and all damages, liabilities, costs, expenses and losses (including, without limitation, reasonable attorneys' fees and costs) which Buyer may sustain or incur by reason of such claim The provisions of this section shall survive the termination of this Agreement or the Closing. 12. GoverningLaws,Attorneys' Fees. This Agreement shall be construed according to the laws of the Commonwealth of Massachusetts. If either Buyer or Seller should find it necessary to employ an attorney to enforce a provision of the Agreement or to recover damages, for the breach hereof (including proceedings in bankruptcy), the prevailing party shall be entitled to be reimbursed for its court costs and attorneys' fees, in addition to all damages, through all levels of appeal. 13. Default. If Seller shall fail to perform any covenant or agreement of Seller contained herein, Buyer may elect to pursue any and all remedies available in law or in equity, including, without limitation (a) specific performance of this Agreement; (b) damages from Seller; or (c) termination of this Agreement, return of the Earnest Money and the Sublease shall remain in full force and effect. If Buyer shall fail to perform any covenant or agreement of Buyer contained herein, Seller's retention of the Earnest Money shall be Seller's sole and exclusive remedy and this Agreement shall terminate and the Lease shall remain in full force and effect in accordance with its terms. 14. Notices. All notices required or permitted to be given hereunder shall be in writing and shall be personally delivered, transmitted by telephone facsimile or sent by U.S. certified mail, return receipt requested, addressed as set forth below: Buyer: c/o Emeritus Corporation 3131 Elliott Avenue, Suite 500 Seattle, Washington 98121 Attention: Raymond R. Brandstrom Telephone No.: (206) 298-2909 Fax No.: (206) 301-4500 With a copy to: Randi S. Nathanson, Esq. The Nathanson Group PLLC 1520 Fourth Avenue, Sixth Floor Seattle, Washington 98101 Telephone No.: (206) 623-6239 Fax No.: (206) 623-1738 Seller: Auburn Land LLC c/o Hanseatic Corporation 450 Park Avenue, Suite 202 New York, New York 10022 Attn.: Mr. Paul A. Biddelman Telephone No.: (212) 832-3038 Facsimile No.: (212) 223-2425 With a copy to: Krugman & Kailes LLP Park 80 West Plaza Two Saddle Brook, New Jersey 07663 Telephone No.: (201) 845-3434 Facsimile No.: (201) 845-9627 Attn.: Mr. Thomas Goodwin Either party hereto may by proper notice made by the other party designate such other address for giving of notices. All notices shall be deemed given on the day such notice is personally served or transmitted by telephone facsimile or on the third business day following the date such notice is mailed in accordance with this Section. 15. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, heirs, administrators and assigns. Notwithstanding the foregoing, Buyer may assign this Agreement or any of its rights hereunder. 16. Authority. Buyer and Seller each represent that they have all the requisite power and authority as a limited liability company to own, convey and/or purchase property as is contemplated by this Agreement. 17. No Conflicts. Buyer represents that the execution, delivery and performance of the Agreement does not conflict with or result in a violation of its certificate of formation or operating agreement and the execution, delivery and performance by the Buyer of the Agreement will not conflict with or result in a violation of any provision of any agreement, contract or instrument to which the Buyer is a party. Seller represents that the execution, delivery and performance of the Agreement does not conflict with or result in a violation of its certificate of formation or operating agreement, as amended, and the execution, delivery and performance by the Seller of the Agreement will not conflict with or result in a violation of any provision of any agreement, contract or instrument to which the Seller is a party. 18. Captions. The captions are included in this Agreement for convenience of reference only and shall not be construed so as to define, limit or modify in any manner any of the terms hereof. 19. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute but one and the same instrument. 20. Entire Agreement. This Agreement contains the entire understanding between the parties and supersedes any prior agreements between them respecting the subject matter hereof. 21. Further Assurances. As and to the extent otherwise contemplated by this Agreement, each party to this Agreement agrees that it will at any time and from time to time after the date hereof, at its sole cost and expense, immediately following the reasonable request of the other party, promptly execute, acknowledge (if necessary) and deliver or cause to be properly executed, acknowledged (if necessary) and delivered, such agreements, certificates, statements, instruments and documents and promptly take, or promptly cause to be taken, such other and further steps and actions, as may be required by law or as reasonably shall be deemed necessary by the other party in order to more fully effect, evidence or carry out the intent and purposes of this Agreement. [Signatures on following page] Effective as of the date of exercise of the Purchase Option under the Lease. SELLER: AUBURN LAND LLC LLC By: HF Realty Holding Its: Managing Member By: Name: Its: /s/ Paul Biddelman -------------------Paul Biddelman President BUYER: EMERITUS PROPERTIES XIV, LLC By: Emeritus Corporation Its: Sole Member By: Name: Its: /s/ Raymond R. Brandstrom ---------------------------Raymond R. Brandstrom CFO LIST OF EXHIBITS: Exhibit A - Legal Description of the Real Properly Exhibit B - Form of Limited Warranty Deed SUBLEASE TERMINATION AND RELEASE AGREEMENT Effective as of the date of exercise of the Purchase Option under the Lease. SELLER: AUBURN LAND LLC LLC By: HF Realty Holding Its: Managing Member By: Name: Its: /s/ Paul Biddelman -------------------Paul Biddelman President BUYER: EMERITUS PROPERTIES XIV, LLC By: Emeritus Corporation Its: Sole Member By: Name: Its: /s/ Raymond R. Brandstrom ---------------------------Raymond R. Brandstrom CFO LIST OF EXHIBITS: Exhibit A - Legal Description of the Real Properly Exhibit B - Form of Limited Warranty Deed SUBLEASE TERMINATION AND RELEASE AGREEMENT THIS AGREEMENT is made and entered into as of the 26th day of August, 2002 (the "Effective Date") by and between Sage, L.L.C., a Washington limited liability company doing business in Massachusetts as Sage Assisted Living, L.L.C. ("Landlord") and Emeritus Properties XIV, LLC, a Washington limited liability company ("Tenant"). RECITALS A. Pursuant to a Lease dated as of January 1, 2002 between Auburn Land, LLC ("Owner") and Landlord (the "Lease") Landlord is the lessee of that certain real property located at 669 Washington Street, Auburn, MA 01501 which is more fully described in Exhibit A hereto (the "Real Property") and the 108 unit assisted living facility located thereon and commonly known as The Lodge at Eddy Pond (the "Facility"), and Landlord subleases the Facility to Tenant pursuant to that certain Sublease Agreement dated January 1, 2002 (the "Sublease"). B. Under the terms of Section 2.2 of the Lease, Owner granted to Landlord the right to purchase the Real Property and the Facility (the "Purchase Option"). Owner further granted Landlord the right to assign the Purchase Option to Emeritus Corporation ("Emeritus") or to any subsidiary or affiliate entity whose ownership is at least 51% in common with Emeritus and of which Emeritus has control or in common control. C. Tenant is wholly owned by Emeritus. D. Landlord has assigned the Purchase Option to Tenant and Tenant has duly exercised the Purchase Option. E. In connection with the sale of the Real Property and the Facility by Landlord to Tenant (the "Sale Transaction"), Owner and Landlord have agreed to terminate the Lease and Landlord and Tenant have agreed to terminate the Sublease. LIST OF EXHIBITS: Exhibit A - Legal Description of the Real Properly Exhibit B - Form of Limited Warranty Deed SUBLEASE TERMINATION AND RELEASE AGREEMENT THIS AGREEMENT is made and entered into as of the 26th day of August, 2002 (the "Effective Date") by and between Sage, L.L.C., a Washington limited liability company doing business in Massachusetts as Sage Assisted Living, L.L.C. ("Landlord") and Emeritus Properties XIV, LLC, a Washington limited liability company ("Tenant"). RECITALS A. Pursuant to a Lease dated as of January 1, 2002 between Auburn Land, LLC ("Owner") and Landlord (the "Lease") Landlord is the lessee of that certain real property located at 669 Washington Street, Auburn, MA 01501 which is more fully described in Exhibit A hereto (the "Real Property") and the 108 unit assisted living facility located thereon and commonly known as The Lodge at Eddy Pond (the "Facility"), and Landlord subleases the Facility to Tenant pursuant to that certain Sublease Agreement dated January 1, 2002 (the "Sublease"). B. Under the terms of Section 2.2 of the Lease, Owner granted to Landlord the right to purchase the Real Property and the Facility (the "Purchase Option"). Owner further granted Landlord the right to assign the Purchase Option to Emeritus Corporation ("Emeritus") or to any subsidiary or affiliate entity whose ownership is at least 51% in common with Emeritus and of which Emeritus has control or in common control. C. Tenant is wholly owned by Emeritus. D. Landlord has assigned the Purchase Option to Tenant and Tenant has duly exercised the Purchase Option. E. In connection with the sale of the Real Property and the Facility by Landlord to Tenant (the "Sale Transaction"), Owner and Landlord have agreed to terminate the Lease and Landlord and Tenant have agreed to terminate the Sublease. F. Landlord and Tenant are interested in (i) confirming termination of the Sublease and (ii) releasing each other from further liability under the Sublease. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS: 1. Sublease Termination. Landlord and Tenant hereby confirm the termination of the Sublease as the Effective Date. 2. Release. a. As of the Effective Date, Landlord hereby releases Tenant and any past or present officer, director, employee, agent or shareholder thereof (collectively, the "Tenant Released Parties") and the Tenant does hereby release Landlord and any past or present officer, director, employee, agent or shareholder thereof (the "Landlord Released Parties") from any and all liability under the Sublease; provided, however, nothing herein shall be construed as releasing Landlord from its obligation to return to Tenant within five (5) business days after the Effective Date any security deposit which it may be holding under the terms of the Sublease or as releasing Tenant or Landlord from any obligations which it may have under the Sublease with respect to its acts or omissions prior to the Effective Date. c. The release provided for in this Paragraph 2 shall be fully and unconditionally effective on the Effective Date. 3 Tenant Representations. Notwithstanding anything contained herein to the contrary, Tenant represents that: (i) Tenant is wholly owned by Emeritus Corporation and (ii) Tenant is not aware of any default, or event given the SUBLEASE TERMINATION AND RELEASE AGREEMENT THIS AGREEMENT is made and entered into as of the 26th day of August, 2002 (the "Effective Date") by and between Sage, L.L.C., a Washington limited liability company doing business in Massachusetts as Sage Assisted Living, L.L.C. ("Landlord") and Emeritus Properties XIV, LLC, a Washington limited liability company ("Tenant"). RECITALS A. Pursuant to a Lease dated as of January 1, 2002 between Auburn Land, LLC ("Owner") and Landlord (the "Lease") Landlord is the lessee of that certain real property located at 669 Washington Street, Auburn, MA 01501 which is more fully described in Exhibit A hereto (the "Real Property") and the 108 unit assisted living facility located thereon and commonly known as The Lodge at Eddy Pond (the "Facility"), and Landlord subleases the Facility to Tenant pursuant to that certain Sublease Agreement dated January 1, 2002 (the "Sublease"). B. Under the terms of Section 2.2 of the Lease, Owner granted to Landlord the right to purchase the Real Property and the Facility (the "Purchase Option"). Owner further granted Landlord the right to assign the Purchase Option to Emeritus Corporation ("Emeritus") or to any subsidiary or affiliate entity whose ownership is at least 51% in common with Emeritus and of which Emeritus has control or in common control. C. Tenant is wholly owned by Emeritus. D. Landlord has assigned the Purchase Option to Tenant and Tenant has duly exercised the Purchase Option. E. In connection with the sale of the Real Property and the Facility by Landlord to Tenant (the "Sale Transaction"), Owner and Landlord have agreed to terminate the Lease and Landlord and Tenant have agreed to terminate the Sublease. F. Landlord and Tenant are interested in (i) confirming termination of the Sublease and (ii) releasing each other from further liability under the Sublease. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS: 1. Sublease Termination. Landlord and Tenant hereby confirm the termination of the Sublease as the Effective Date. 2. Release. a. As of the Effective Date, Landlord hereby releases Tenant and any past or present officer, director, employee, agent or shareholder thereof (collectively, the "Tenant Released Parties") and the Tenant does hereby release Landlord and any past or present officer, director, employee, agent or shareholder thereof (the "Landlord Released Parties") from any and all liability under the Sublease; provided, however, nothing herein shall be construed as releasing Landlord from its obligation to return to Tenant within five (5) business days after the Effective Date any security deposit which it may be holding under the terms of the Sublease or as releasing Tenant or Landlord from any obligations which it may have under the Sublease with respect to its acts or omissions prior to the Effective Date. c. The release provided for in this Paragraph 2 shall be fully and unconditionally effective on the Effective Date. 3 Tenant Representations. Notwithstanding anything contained herein to the contrary, Tenant represents that: (i) Tenant is wholly owned by Emeritus Corporation and (ii) Tenant is not aware of any default, or event given the passage of time that would become a default, by the Landlord under the Sublease, and has not received, or is aware of, any form of governmental notice of violation of any law, code or similar restriction affecting or relating to the Real Property and/or the Facility. 4. Further Assurances. Notwithstanding anything to the contrary contained herein, Landlord and Tenant agree to execute and/or file any and all other documents, agreements or other instruments as may be necessary or appropriate to confirm the agreements reached by, and the obligations imposed on, Landlord and Tenant hereunder. 5. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute but one and the same instrument. 6. Entirety. This Agreement represents the entire and final agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior discussions, negotiations and writings with respect thereto. This Agreement may only be amended by written instrument signed by the parties hereto. 7. Construction. Each of the parties has participated in the drafting and negotiation of this Agreement. Accordingly, in the event of a dispute among the parties with respect to the interpretation or enforcement of the terms hereof, no provision shall be construed so as to favor or disfavor any party hereto. 8. Attorneys Fees. In the event of a dispute among the parties hereto with respect to the interpretation or enforcement of the terms hereof, the prevailing party shall be entitled to collect from the other its reasonable attorneys fees and costs, including its costs and fees on appeal. 9. Captions. The captions are included in this Agreement for convenience of reference only and shall not be construed so as to define, limit or modify in any manner any of the terms hereof. 10. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Massachusetts . IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day and year first set forth above. SAGE, L.L.C. By: Name: Its: Daniel R. Baty Daniel R. Baty ______________________________ /s/ EMERITUS PROPERTIES XIV, LLC By: Emeritus Corporation Its: Sole Member By: Name: Its: /s/ Raymond Raymond CFO R. R. Brandstrom Brandstrom ACKNOWLEDGEMENTS STATE COUNTY OF OF WASHINGTON KING ) ) ss. ) On this ___ day of ________________, 2002 before me appeared ___________ to me personally known, who, being by me duly sworn, did say that he is the Manager of Sage, L.L.C., a Washington limited liability company, that the foregoing instrument was signed and sealed on behalf of said limited liability company and he acknowledged said instrument to be the free act and deed of said limited liability company. IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day and year first set forth above. SAGE, L.L.C. By: Name: Its: Daniel R. Baty Daniel R. Baty ______________________________ /s/ EMERITUS PROPERTIES XIV, LLC By: Emeritus Corporation Its: Sole Member By: Name: Its: /s/ Raymond Raymond CFO R. R. Brandstrom Brandstrom ACKNOWLEDGEMENTS STATE COUNTY OF OF WASHINGTON KING ) ) ss. ) On this ___ day of ________________, 2002 before me appeared ___________ to me personally known, who, being by me duly sworn, did say that he is the Manager of Sage, L.L.C., a Washington limited liability company, that the foregoing instrument was signed and sealed on behalf of said limited liability company and he acknowledged said instrument to be the free act and deed of said limited liability company. Notary Public in and for the State of Washington My Commission Expires: ________________ STATE COUNTY OF OF WASHINGTON KING ) ) ss. ) On this ___ day of ________________, 2002 before me appeared ___________ to me personally known, who, being by me duly sworn, did say that he is the __________ of Emeritus Corporation, the sole member of Emeritus Properties XIV, LLC., a Washington limited liability company, that the foregoing instrument was signed and sealed on behalf of said limited liability company and he acknowledged said instrument to be the free act and deed of said limited liability company. Notary Public in and for the State of Washington My Commission Expires: ________________ CERTIFICATION PURSUANT TO SECTION 906 (18 U.S.C. SECTION 1350) OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Emeritus Corporation, a Washington corporation (the "Company"), ACKNOWLEDGEMENTS STATE COUNTY OF OF WASHINGTON KING ) ) ss. ) On this ___ day of ________________, 2002 before me appeared ___________ to me personally known, who, being by me duly sworn, did say that he is the Manager of Sage, L.L.C., a Washington limited liability company, that the foregoing instrument was signed and sealed on behalf of said limited liability company and he acknowledged said instrument to be the free act and deed of said limited liability company. Notary Public in and for the State of Washington My Commission Expires: ________________ STATE COUNTY OF OF WASHINGTON KING ) ) ss. ) On this ___ day of ________________, 2002 before me appeared ___________ to me personally known, who, being by me duly sworn, did say that he is the __________ of Emeritus Corporation, the sole member of Emeritus Properties XIV, LLC., a Washington limited liability company, that the foregoing instrument was signed and sealed on behalf of said limited liability company and he acknowledged said instrument to be the free act and deed of said limited liability company. Notary Public in and for the State of Washington My Commission Expires: ________________ CERTIFICATION PURSUANT TO SECTION 906 (18 U.S.C. SECTION 1350) OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Emeritus Corporation, a Washington corporation (the "Company"), on Form 10-Q for the quarter ending September, 2002, as filed with the Securities and Exchange Commission (the "Quarterly Report"), I, Daniel R. Baty, Chief Executive Officer of the Company, certify, pursuant to Section CERTIFICATION PURSUANT TO SECTION 906 (18 U.S.C. SECTION 1350) OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Emeritus Corporation, a Washington corporation (the "Company"), on Form 10-Q for the quarter ending September, 2002, as filed with the Securities and Exchange Commission (the "Quarterly Report"), I, Daniel R. Baty, Chief Executive Officer of the Company, certify, pursuant to Section 906 (18 U.S.C. Section 1350) of the Sarbanes-Oxley Act of 2002 , that to my knowledge: 1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ Daniel R. Baty -----------------------------Daniel R. Baty Chief Executive Officer November 8, 2002 CERTIFICATION PURSUANT TO SECTION 906 (18 U.S.C. SECTION 1350) OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Emeritus Corporation, a Washington corporation (the "Company"), on Form 10-Q for the quarter ending September, 2002, as filed with the Securities and Exchange Commission (the "Quarterly Report"), I, Daniel R. Baty, Chief Financial of the Company, certify, pursuant to Section 906 (18 U.S.C. Section 1350) of the Sarbanes-Oxley Act of 2002 , that to my knowledge: 1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ Raymond R. Brandstrom --------------------------------Raymond R. Brandstrom Chief Financial Officer November 8, 2002 CERTIFICATION PURSUANT TO SECTION 906 (18 U.S.C. SECTION 1350) OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Emeritus Corporation, a Washington corporation (the "Company"), on Form 10-Q for the quarter ending September, 2002, as filed with the Securities and Exchange Commission (the "Quarterly Report"), I, Daniel R. Baty, Chief Financial of the Company, certify, pursuant to Section 906 (18 U.S.C. Section 1350) of the Sarbanes-Oxley Act of 2002 , that to my knowledge: 1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ Raymond R. Brandstrom --------------------------------Raymond R. Brandstrom Chief Financial Officer November 8, 2002