LOAN AGREEMENT

TABLE OF CONTENTS

Exhibit A                                Legal Description of Land

Exhibit B                                Budget

Exhibit C                                Request for Payment and Borrower’s Certificate

Exhibit D                                Survey Requirements

Exhibit E                                Insurance Requirements

Exhibit F                                Compliance Certificate

THIS LOAN AGREEMENT ( “Agreement” ) dated as of April 25, 2008, is made by and between EMERIKEYT LO OF BROADMOOR LLC LLC, a Delaware limited liability company ( “Borrower” ) and KEYBANK NATIONAL ASSOCIATION, a national banking association, its successors and assigns ( “Lender” ).

A.           Borrower is the owner of 59-unit assisted living and Alzheimer’s care facility, including all furniture, fixtures and equipment (the “Facility” ) on real property located at 615 Southpointe Court, Colorado Springs, Colorado, and legally described in Exhibit A attached (together with the Facility, the “Property” ).

B.           Borrower has applied to Lender for a loan in the amount of up to NINE MILLION, TWO HUNDRED FIFTY THOUSAND and NO/100 DOLLARS ($9,250,000.00) (the “Loan” ) the proceeds of which are to be used to refinance existing debt on the Property, to finance the construction of a 22-unit expansion and refurbishment of the Facility, and to finance interest and working capital expenses to be incurred by Borrower with respect to the Facility.  Lender is willing to make the Loan to Borrower on the terms and conditions set out in this Agreement.

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

1.1   Incorporation of Recitals .

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

1.2   Incorporation of Exhibits .

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

2.1   Defined Terms .

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

Adjusted LIBOR Rate :  The LIBOR Rate plus the applicable LIBOR Margin, adjusting on the first day of each calendar month throughout the initial term and any Extension Term of the Loan.

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

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

Agreement :  This Loan Agreement.

Applicable Rate :  The Adjusted LIBOR Rate unless the Default Rate is then applicable or the provisions of Section 5.1 below are then applicable.

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

Architect :  Jim Gwin Architects, Inc.

Architect’s Certificate :  The Architect’s Certificate in the form required by Lender as a condition to the closing of the Loan.

Assignment of Rents :  The Assignment of Rents and Leases made by Borrower in favor of Lender assigning all leases, subleases and other agreements relating to the use and occupancy of all or any portion of the Property, and all present and future leases, rents, issues and profits therefrom.

Augusta Borrower: As defined in Section 14.1(p).

Augusta Loan: As defined in Section 14.1(p).

Augusta Loan Documents:   As defined in Section 14.1(p).

Augusta Mortgage:   As defined in Section 14.1(p).

Augusta Property:   As defined in Section 14.1(p).

Authorized Representative :  As such term is defined in Section  11.28 .

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

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

Certificate of Occupancy :  A temporary or permanent certificate of occupancy from the municipality in which the Facility is located, or a letter from the appropriate Governmental Authority that no such certificate is issued.

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

Completion Date :  April 1, 2009.

Completion Guaranty :  A guaranty of performance and completion, executed by each Guarantor and pursuant to which the Guarantor guarantees the lien-free and timely completion of the Improvements in accordance with all provisions of this Agreement and Borrower’s obligation to keep the Loan In Balance and to pay for all cost overruns.

Construction or construction :  The construction and equipping of the Improvements in accordance with the Plans and Specifications, and the installation of all personal property, fixtures and equipment required for the operation of the Facility.

Construction Commencement Date : No later than thirty days from the Loan Closing Date.

Construction Schedule :  A schedule satisfactory to Lender’s Consultant, establishing a timetable for completion of the Construction, showing, on a monthly basis, the anticipated progress of the Construction and also showing that the Improvements can be completed on or before the Completion Date.

Contingency Fund :  A Budget Line Item which shall represent an amount necessary to provide reasonable assurances to Lender than additional funds are available to be used if additional costs and expenses are incurred or additional interest accrues on the Loan, or unanticipated events or problems occur.

Debt Service :  (a) For each fiscal quarter of Borrower, commencing at the Loan Closing and continuing through the initial Maturity Date, the amount of interest payable on the Loan during such fiscal quarter, calculated at the greater of (i) the Applicable Rate, or (ii) an assumed rate of six and one quarter percent (6.25%) per annum, and (b) for each fiscal quarter during the Extension Term, the total payments of principal and interest required on the Loan during such fiscal quarter, with interest calculated at the greater of (i) the Applicable Rate, or (ii) an assumed rate of six and one quarter percent (6.25%) per annum and an amortization period of 25 years.

Debt Service Coverage Ratio A :  The ratio as of each Covenant Test Date of (a) the Net Operating Income of the Property during the preceding fiscal quarter, to (b) the Debt Service during such preceding fiscal quarter.

Debt Service Coverage Ratio B :  For the applicable period, the ratio of (a) the Net Operating Income of the Property during such period, to (b) payments of principal and interest on the stated principal amount of the Loan ($9,250,000) during such period at an assumed interest rate of seven and one half percent (7.5%) and an amortization period of 25 years.

Debt Service Coverage Ratio C :  For the applicable period, the ratio of (a) the Net Operating Income of the Property during such period, to (b) payments of principal and interest on the stated principal amount of the Loan ($9,250,000) during such period at calculated at the greater of (i) the Applicable Rate, or (ii) an assumed rate of six and one quarter percent (6.25%) per annum and an amortization period of 25 years.

Deed of Trust :  The Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing executed by Borrower as grantor to Lender as beneficiary, granting a first priority lien on Borrower’s fee interest in the Property, subject only to the Permitted Exceptions.

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

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

Earnout Proceeds :  As defined in Section 8.4 .

Environmental Indemnity :  The Environmental and Hazardous Substances Indemnity Agreement from Borrower and Guarantor, indemnifying Lender with regard to all matters related to Hazardous Material and other matters.

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

Environmental Proceedings :  Any environmental proceedings, whether civil (including actions by private parties), criminal, or administrative proceedings, relating to the Property.

Environmental Report :  An environmental report prepared at Borrower’s expense by a qualified environmental consultant approved by Lender and addressed to Lender (or subject to separate letter agreement permitting Lender to rely on such environmental report).

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

Event of Default :  As such term is defined in Section  14.1 .

Extension Option :  As defined in Section 4.3 .

Extension Term :  As defined in Section 4.3 .

Facility :  As defined in Recital A .

Federal Funds Effective Rate :  Shall mean, for any day, the rate per annum, rounded upward to the nearest on one-hundredth of one percent (1/100 of 1%), announced by the Federal Reserve Bank of Cleveland on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate.”

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

General Contract :  The general contract(s) between Emeritus Corporation and General Contractor dated December 20, 2007, pertaining to the construction of the Improvements, and assigned to Borrower on April 23, 2008.

General Contractor :  Golden Triangle Construction of Southern Colorado, Inc., a Colorado corporation.

Governmental Approvals :  Collectively, all consents, licenses, and permits and all other authorizations or approvals required from any Governmental Authority for the Construction in accordance with the Plans and Specifications.

Governmental Authority :  Any federal, state, county or municipal government, or political subdivision thereof, any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, or public body, or any court, administrative tribunal, or public utility.

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

Guarantor :  Emeritus Corporation, a Washington corporation.

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

defined pursuant to 29 C.F.R. Part 1910; and  (vii) any other toxic substance or contaminant that is subject to any other Law or other past or present requirement of any Governmental Authority.  Any reference above to a Law, includes the same as it may be amended from time to time, including the judicial interpretation thereof.

Improvements :  The improvements referred to in Recital A hereto and more particularly described in the Plans and Specifications, and offsite improvements and together with any existing improvements not to be demolished.

In Balance or in balance :  As such term is defined in Section  9.5 .

Including or including :  Including but not limited to.

Indemnified Party :  As such term is defined in Section 11.17 .

Interest and Working Capital Reserve :  $230,000 of the proceeds of the Loan to be disbursed on the terms and conditions set out in Section 8.3 below.

Interest Rate Agreement :  As such term is defined in Section 5.2 .

Interest Rate Protection Product :  As such term is defined in Section 5.2 .

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

Late Charge :  As defined in Section 4.6 .

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

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

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

Lender’s Consultant :  An independent consulting architect and/or engineer designated by Lender in Lender’s sole discretion.

Lender’s Environmental Consultant :  An environmental consultant designated by Lender in Lender’s sole discretion.

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

LIBOR Margin :  Two and four tenths percent (2.40%) per annum, reducing to two and one-quarter percent (2.25%) per annum on the first day of the calendar month after the issuance of a Certificate of Occupancy for the Facility following completion of the Improvements, reducing to two percent (2%) per annum on the first day of the calendar month after the Debt Service

Coverage Ratio C (calculated for the preceding fiscal quarter) is at least 1.45 to 1.00; provided, however, that no rate reduction shall occur if there is then any Default or Event of Default.

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

Loan :  As defined in Recital B .

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

Loan Closing or Loan Closing Date :  The date the Deed of Trust is recorded and all conditions to the initial disbursement of the Loan have been satisfied.

Loan Documents :  The collective reference to this Agreement, the documents and instruments listed in Section 0 , and all the other documents and instruments entered into from time to time, evidencing or securing the Loan or any obligation of payment thereof or performance of Borrower’s or Guarantor’s obligations in connection with the transaction contemplated hereunder and any Interest Rate Agreement, each as amended.  Notwithstanding any provision of this Agreement or any other Loan Document, none of the obligations of Borrower or Guarantor under the Environmental Indemnity or of Guarantor under the Payment Guaranty are secured by the Deed of Trust or any other collateral for the Loan.

Loan Closing or Loan Closing Date :  The date the Deed of Trust is recorded and all conditions to the initial disbursement of the Loan have been satisfied.

Major Subcontractor :  Any subcontractor under a Major Subcontract.

Major Subcontracts :  All subcontracts between the General Contractor and any subcontractors and material suppliers which provide for an aggregate contract price equal to or greater than $250,000.

Master Lease:   The lease of the Property from Borrower to Master Tenant and approved by Lender.

Master Tenant:   Emeritus Properties XVI, Inc., a Nevada corporation.

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

Maturity Date :  May 1, 2011, or if extended for the Extension Term in accordance with Section 4.3 , May 1, 2012.

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

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

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

Operating Deficit :  For any calendar month, the amount by which the sum of (i) Operating Expenses and (ii) the monthly payment of principal and interest required on the Note exceeds the Gross Revenues.

Operating Expenses :  For any period, the actual costs and expenses of owning, operating, managing and maintaining the Property, determined on a cash basis (except for real and personal property taxes and insurance premiums, which shall be determined on an accrual basis) (including, an annual replacement reserve of $300 per apartment Unit, a five percent (5%) vacancy factor and a management fee equal to five percent (5%) of Gross Revenues), excepting, however, (i) interest or principal due on the Loan and (ii) capital expenditures.

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

Payment Guaranty :  The Limited Payment Guaranty of even date herewith from Guarantor to Lender.

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

Permitted Transfer :  (a) Residency Agreements entered into in the ordinary course of business provided the same are in the form reasonably approved by Lender without material modification and are in compliance with Laws, (b) arms-length non-residential Leases entered into by Borrower in the ordinary course of business for premises in the Facility intended for non-residential use, (c) Transfers of publicly traded stock in Guarantor on a nationally recognized securities exchange, (d) Transfer of all or substantially all of the stock or assets of Guarantor in a merger or consolidation of Guarantor with another entity, and (e) Any Transfer of shares of common stock, limited partnership interests limited liability company membership interests or other beneficial or ownership interests or other forms of securities in Borrower or in any direct or indirect owner of membership interests in Borrower so long as Guarantor retains Control of Borrower and directly or indirectly owns more than 50% of the membership interests in Borrower.

Plans and Specifications :  Detailed plans and specifications, as approved by Lender, referred to in Section 8.2(e) as modified from time to time in accordance with the terms hereof.

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

Prime Rate Margin :  One percent (1%) per annum.

Pro-Forma Projection :  A pro forma statement of projected income and expenses of the Property.

Property :  The collective reference to (i) the real property legally described on Exhibit A attached, together with the Facility and all buildings, structures and improvements located or to be located thereon, (ii) all rights, privileges, easements and hereditaments relating or appertaining thereto, and (iii) all personal property, fixtures and equipment required or beneficial for the operation thereof.

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

Required Permits :  A certificate of occupancy for the Facility issued by the City of Colorado Springs, Colorado, all licenses required under Law for use and occupancy of the Facility as an assisted living and Alzheimer care facility, and all other licenses, permits, certificates, approvals, authorizations and registrations required from any Governmental Authority in

connection with the ownership, operation, use or occupancy of the Facility, including, without limitation, business licenses and food service licenses.

Resident :  Any person residing in the Facility.

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

Security Agreement :  The Security Agreement of even date herewith from Borrower to Lender granting Lender a first lien on and security interest in all tangible and intangible personal property with respect to the Facility as security for the Obligations.

State :  The state in which the Property is located.

Title Insurer :  Chicago Title Insurance Company, or such other title insurance company licensed in the State as may be approved in writing by Lender.

Title Policy :  An ALTA Mortgagee’s Loan Title Insurance Policy with extended coverage issued by the Title Insurer and approved by Lender insuring the lien of the Deed of Trust as a valid first, prior and paramount lien upon the Property and all appurtenant easements, and subject to no other exceptions other than the Permitted Exceptions and containing such endorsements as Lender may require.

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

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

Unavoidable Delay :  Any delay in the construction of the Improvements, caused by natural disaster, fire, earthquake, floods, explosion, extraordinary adverse weather conditions, inability to procure or a general shortage of labor, equipment, facilities, energy, materials or supplies in the open market, failure of transportation, strikes or lockouts for which Borrower has notified Lender in writing.

Unit :  Each apartment unit in the Facility.

2.2   Other Definitional Provisions .

All terms defined in this Agreement shall have the same meanings when used in the Note, Deed of Trust, any other Loan Documents, or any certificate or other document made or delivered pursuant hereto.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement.

3.1   Representations and Warranties .

To induce Lender to execute this Agreement and perform its obligations hereunder, Borrower hereby represents and warrants to Lender as follows, which representations and warranties shall be true on the date of each disbursement of Loan proceeds as if made on and as of such date, except as otherwise disclosed by Borrower to Lender in writing prior to the date of such disbursement:

(a)   Borrower has good and marketable fee simple title to the Property subject only to the Permitted Exceptions.

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

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

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

(e)   Except to the extent the same have been obtained in writing and copies thereof provided to Lender prior to the Loan Closing Date, no consent, approval or authorization of or declaration, registration or filing with any Governmental Authority or nongovernmental person or entity, including any creditor or partner of Borrower or Guarantor, is required in connection with the execution, delivery and performance of this Agreement or any of the Loan Documents other than the recordation of the Deed of Trust and the Assignment of Rents and the filing of the UCC-1 Financing Statements, except for such consents, approvals or authorizations of or declarations or filings with any Governmental Authority or non-governmental person or entity where the failure to so obtain would not have an adverse effect on Borrower or Guarantor or which have been obtained as of any date on which this representation is made or remade.

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

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

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

(i)   The amounts set forth in the Budget present a full and complete itemization by category of all costs, expenses and fees which Borrower reasonably expects to pay or reasonably anticipates becoming obligated to pay to complete the Construction and operate the Facility (until the Facility achieves breakeven operations).  Borrower is unaware of any other such costs, expenses or fees which are material and are not covered by the Budget.

(j)   Neither the construction of the Improvements nor the use of the Property presently or when completed will violate (i) any Laws (including subdivision, zoning, building, environmental protection and wetland protection Laws), or (ii) any building permits, restrictions of record, or agreements affecting the Property or any part thereof.  Neither the zoning authorizations, approvals or variances nor any other right to use the Property is to any extent dependent upon or related to any real estate other than the Land.  Borrower has obtained or shall diligently pursue obtaining all Required Permits, and all Required Permits already issued are in full force and effect, true and correct copies of which have been provided to Lender. All Governmental Approvals required for the Construction in accordance with the Plans and Specifications have been obtained or will be obtained prior to the Loan Closing, except for those approved by Lender, and all Laws relating to the Construction and operation of the Improvements have been complied with and all permits and licenses required for the operation of the Facility which cannot be obtained until the Construction is completed can be obtained if the Improvements are completed in accordance with the Plans and Specifications.

(k)   The Facility is duly licensed as an “assisted living residence” by the Colorado Department of Health and is in compliance with all applicable Laws and regulations.

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

(m)   All financial statements and other information previously furnished by Borrower or Guarantor to Lender in connection with the Loan are true, complete and correct and fairly present the financial conditions of the subjects thereof as of the respective dates thereof and do not fail to state any material fact necessary to make such statements or information not misleading, and no Material Adverse Change with respect to Borrower or Guarantor has occurred since the respective dates of such statements and information.  Neither Borrower nor Guarantor has any material liability, contingent or otherwise, not disclosed in such financial statements.

(n)   Except as disclosed by Borrower to Lender in writing, (i) the Property is in a clean, safe and healthful condition, and, except for materials used in the ordinary course of construction, maintenance and operation of the Property, is free of all Hazardous Material and is in compliance with all applicable Environmental Laws; (ii) neither Borrower nor, to the best knowledge of Borrower, any other person or entity, has ever caused or permitted any

Hazardous Material to be placed, held, located or disposed of on, under, at or in a manner to affect the Property, or any part thereof, and the Property has never been used (whether by Borrower or, to the best knowledge of Borrower, by any other person or entity) for any activities involving, directly or indirectly, the use, generation, treatment, storage, transportation, or disposal of any Hazardous Material; (iii) neither the Property nor Borrower is subject to any existing, pending, or, to the best of Borrower’s knowledge, threatened investigation or inquiry by any Governmental Authority, and the Property is not subject to any remedial obligations under any applicable Environmental Laws; and (iv) there is no underground tank, vessel, or similar facility for the storage, containment or accumulation of Hazardous Materials of any sort on, under or affecting the Property.

(o)   The Property is comprised of one or more parcels, each of which is taxed separately without regard to any other property and for all purposes the Property may be mortgaged, conveyed and otherwise dealt with as an independent parcel.

(p)   Except for Residency Agreements which have been entered into in the ordinary course of operation of the Facility and disclosed to Lender in writing, Borrower has not entered into any Leases, subleases or other arrangements for occupancy of space within the Property.

(q)   When the Construction is completed in accordance with the Plans and Specifications, no building or other improvement will encroach upon any property line, building line, setback line, side yard line or any recorded or visible easement (or other easement of which Borrower is aware or has reason to believe may exist) with respect to the Property.

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

(s)   Borrower is not a party in interest to any plan defined or regulated under ERISA, and the assets of Borrower are not “plan assets” of any employee benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code.

(t)   Borrower is not a “foreign person” within the meaning of Section 1445 or 7701 of the Internal Revenue Code.

(u)   Borrower uses no trade name other than its actual name set forth herein.  The principal place of business of Borrower is as stated in Section  15.15 .

(v)   Borrower’s place of formation or organization is the State of Delaware and Borrower is duly qualified to conduct business in the State of Colorado.

(w)   Neither Borrower nor Guarantor is (or will be) a person with whom Lender is restricted from doing business under OFAC (including, those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not engage in any dealings or transactions or otherwise be associated with such persons.  In addition, Borrower hereby agrees to provide to Lender with any

additional information that Lender deems necessary from time to time in order to ensure compliance with all applicable Laws concerning money laundering and similar activities.

(x)   All statements set forth in the Recitals are true and correct.

3.2   Survival of Representations and Warranties .

Borrower agrees that all of the representations and warranties set forth in Section 3.1 and elsewhere in this Agreement are true as of the date hereof, will be true at the Loan Closing and, except for matters which have been disclosed by Borrower and approved by Lender in writing, at all times thereafter.  It shall be a condition precedent to the Loan Closing and each subsequent disbursement that each of said representations and warranties is true and correct as of the date of such requested disbursement.  Each disbursement of Loan proceeds shall be deemed to be a reaffirmation by Borrower that each of the representations and warranties is true and correct as of the date of such disbursement.  In addition, at Lender’s request, Borrower shall reaffirm such representations and warranties in writing prior to each disbursement hereunder.

4.1   Agreement to Borrow and Lend .

Subject to the terms, provisions and conditions of this Agreement and the other Loan Documents, Borrower agrees to borrow from Lender agrees to lend to Borrower the Loan, for the purposes and subject to all of the terms, provisions and conditions contained in this Agreement.  If Lender consists of more than one party, the obligations of each such party with respect to the amount it has agreed to loan to Borrower shall be several (and not joint and several) and shall be limited to its proportionate share of the Loan and of each advance.

(a)   The maximum aggregate amount of the Loan shall not exceed the lesser of (i) Nine Million, Two Hundred Fifty Thousand and No/100 Dollars ($9,250,000.00), or (ii) 75% of the fair market value of the Property, as set out in the Appraisal of the Property approved by Lender hereunder.

(b)   Subject to Borrower’s compliance with and satisfaction of all conditions precedent to the Loan Closing and all conditions to disbursement under Article 8 and Article 10 , provided that the Loan is In Balance, no Material Adverse Change has occurred with respect to Borrower, any Guarantor, or the Property and no Default or Event of Default has occurred and is continuing hereunder, at the Loan Closing, Lender will reimburse Borrower for a portion of the costs incurred by Borrower in connection with the development of the Property and the construction of the Improvements, to the extent provided for in the Budget.

(c)   After the Loan Closing, Borrower shall be entitled to receive further successive disbursements of the proceeds of the Loan in accordance with Article 10 within ten (10) Business Days after compliance with all conditions precedent thereto, provided that (i) the Loan remains In Balance; (ii) Borrower has complied with all conditions precedent to disbursement from time to time including the requirements of Articles 8, 9 and 10 ; (iii) no Material Adverse Change has occurred with respect to Borrower, any Guarantor, or the Property and (iv) no

Event of Default and no Default exists hereunder or under any other Loan Document and there is no material default by Borrower.

(d)   To the extent that Lender may have acquiesced in noncompliance with any conditions precedent to the Loan Closing or conditions precedent to any subsequent disbursement of Loan proceeds, such acquiescence shall not constitute a waiver by Lender, and Lender may at any time after such acquiescence require Borrower to comply with all such requirements.

(e)   Borrower shall, prior to the Closing of the Loan, open an Operating Account.  Borrower authorizes Lender to disburse Loan proceeds by crediting the Operating Account;  provided, however, that Lender shall not be obligated to use such method.  Lender is further authorized to pay and principal or interest due upon the Note when and as same shall become due by debiting funds on deposit in the Operating Account.

4.2   Loan Documents .

Borrower agrees that it will, on or before the Loan Closing Date, execute and deliver or cause to be executed and delivered to Lender the following documents in form and substance acceptable to Lender:

(a)   The Note.

(b)   The Deed of Trust.

(c)   The Assignment of Rents.

(d)   The Payment Guaranty.

(e)   The Environmental Indemnity.

(f)   The Security Agreement.

(g)   An Assignment and Subordination of Master Lease from Borrower and the Master Tenant in favor of Lender whereby the Master Lease is assigned to Lender as security for the Obligations and the Master Lease is subordinated to the Deed of Trust and the Obligations.

(h)   A collateral assignment of construction documents, including, without limitation, the General Contract, all architectural and engineering contracts, Plans and Specifications, permits, licenses, approvals and development rights, together with consents to the assignment and continuation agreements from the General Contractor, the architects and other parties reasonably specified by Lender.

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

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

4.3   Term of the Loan; Extension Terms .

(a)   All principal, interest and other sums due under the Loan Documents shall be due and payable in full on the Maturity Date.  Borrower shall have one (1) option to extend the Maturity Date (the “Extension Option” ), for an additional twelve (12) month term (the “Extension Term” ).

(b)   Borrower may only exercise the Extension Option upon satisfying the following conditions:

(i)   Borrower delivers written notice to Lender requesting the extension not more than sixty (60) days or less than thirty (30) days before the initial Maturity Date.

(ii)   Construction of the Improvements has been completed in accordance with all requirements of this Agreement.

(iii)   Borrower pays Lender an extension fee in the amount of $23,125.00.

(iv)   As of the date the Extension Term is to commence, no less than 63 beds in the Facility shall be occupied by Residents under Residency Agreements meeting the requirements of this Agreement.

(v)   The Debt Service Coverage Ratio A for Borrower’s fiscal quarter ending March 31, 2011, is no less than 1.40 to 1.00.

(vi)   The Debt Service Coverage Ratio C for the immediately preceding three months is no less than 1.35 to 1.00.

(vii)   There is then no Default or Event of Default hereunder, and no Default or Event of Default by the Augusta Borrower under the Augusta Loan Documents.

4.4   Payments .

(a)   Borrower shall pay interest in arrears on the tenth (10 ^th ) day of every calendar month in the amount of all interest accrued and unpaid through the last day of the immediately preceding calendar month.

(b)   On the tenth (10 ^th ) day of each month throughout the Extension Term, in addition to the monthly payments of interest on the Loan required hereunder, Borrower shall make payments of principal, each in the amount of $10,900.00.

(c)   If at the time the Interest and Working Capital Reserve has been fully disbursed, the Debt Service Coverage Ratio B is less than 1.00 to 1.00, then within ten (10) Business Days after notice from Lender, Borrower agrees to make a payment of principal of the Loan in the amount necessary to achieve a Debt Service Coverage Ratio B of at least 1.00 to 1.00.  In lieu of such principal payment, Borrower may deposit an unconditional, irrevocable letter of credit in such amount with Lender, or pledge such other collateral for the Obligations as may be satisfactory to Lender in its sole and absolute discretion.  Any letter of credit shall be from an issuer and in form reasonable satisfactory to Lender.

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

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

4.5   Prepayments .

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

4.6   Late Charge .

Any and all amounts due hereunder or under the other Loan Documents which remain unpaid more than five (5) days after the date said amount was due and payable shall incur a fee (the “Late Charge” ) equal to the greater of four percent (4%) of the amount of such payment or Twenty-Five Dollars ($25.00), which payment shall be in addition to all of Lender’s other rights and remedies under the Loan Documents, provided that no Late Charge shall apply to the final payment of principal on the Maturity Date.

5.1   Interest Rate .

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

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

the circumstances giving rise to such suspension no longer exist, interest shall accrue and be payable at the Adjusted Prime Rate.

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

5.2   Interest Rate Agreements .

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

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

6.1   Increased Costs and Capital Adequacy .

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

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

affecting the Loan, provided that the result of the foregoing is to increase the cost to Lender of maintaining the Loan or any portion thereof or to reduce the amount of any sum received or receivable from Borrower by Lender under the Loan Documents; or

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

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

(c)   Any amount payable by Borrower under Section 6.1 (a) or (b) shall be paid within five (5) days of receipt by Borrower of a certificate signed by an authorized officer of Lender setting forth the amount due and the basis for the determination of such amount, which statement shall be conclusive and binding upon Borrower, absent manifest error.  Failure on the part of Lender to demand payment from Borrower for any such amount attributable to any particular period shall not constitute a waiver of Lender’s right to demand payment of such amount for any subsequent or prior period.  Lender shall use reasonable efforts to deliver to Borrower prompt notice of any event described in Section 6.1(a) or 6.1(b) of the amount of the reserve and capital adequacy payments resulting therefrom and the reasons therefor and of the basis of calculation of such amount; provided, however, that any failure by Lender to so notify Borrower shall not affect Borrower’s obligation to pay the reserve and capital adequacy payment resulting therefrom.

6.2   Borrower Withholding .

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