Promissory Note of Emeritus Corporation dated March 31, 2008, in the principal

 

Commencing on the date hereof and continuing through the Maturity Date, the unpaid principal balance of the Loan shall accrue Basic Interest.

 

Commencing on the first day of the first month after the Closing Date and continuing on the 1st day of each calendar month thereafter until the Maturity Date, Maker shall make monthly payments of accrued Basic Interest only.

 

Except as otherwise provided in Section 3, the unpaid principal amount of this Note, together with all accrued and unpaid interest thereon, shall be all due and payable on the Maturity Date.

 

All payments of principal and interest due hereunder shall be made without deduction of any present and future taxes, levies, imposts, deductions, charges or withholdings from or on payments due from Maker (excluding taxation of the overall

 

net income of Holder), which amounts shall be paid by Maker.  Maker will pay the amounts necessary such that the gross amount of the principal and interest received by Holder is not less than that required by this Note.  All stamp and documentary taxes, if any, shall be paid by Maker.  If, notwithstanding the foregoing, Holder pays such taxes, Maker will reimburse Holder for the amount paid.  Maker will furnish Holder official tax  re­ceipts or other evidence of payment of all taxes.

 

Throughout the term of this Note, interest shall be calculated on the basis of a 360-day year with twelve (12) thirty day months.  If any payment of interest to be made by Maker hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment.

 

Any payments received by Holder pursuant to the terms hereof shall be applied first to sums, other than principal and interest, due Holder pursuant to this Note, next to the payment of all interest accrued to the date of such payment, and the balance, if any, to the payment of principal.

 

Maker acknowledges that the late payment of any amount due hereunder will cause Holder to lose the use of such money and incur costs and expenses not contemplated under this Note, including, without limitation, administrative and collection costs and processing and accounting expenses, the exact amount of which is extremely difficult to ascertain.  Therefore, (a) if any installment of interest and/or principal is not received by Holder within five (5) calendar days after the due date for such payment, then, in addition to the remedies conferred upon Holder pursuant to Paragraph 10 hereof, Maker shall thereafter pay to Holder on demand a late charge equal to five percent (5%) of the amount of all installments of interest and/or principal due under this Note and not paid on the due date; and (b) if any installment of interest and/or principal is not received by Holder within ten (10) calendar days after the due date thereof, then the amount due and unpaid shall bear interest at the lesser of the highest annual rate which may lawfully be charged and collected under applicable law on the obligation evidenced by this Note or an annual rate which shall be four percent (4%) higher than the Basic Interest (the “Agreed Rate”), computed from the date on which the amount was due and payable until paid.

 

default in the payment of principal or interest (i) when due on the Maturity Date, or (ii) with respect to any other payment due, within five (5) days after the due date pursuant to the terms hereof; or

 

the occurrence of an Event of Default under that certain Second Amended and Restated Loan Agreement dated as of March 3, 2005 by and between Maker, as borrower, and Holder, as lender (as successor to Healthcare Realty Trust Incorporated, a Maryland corporation), as subsequently amended, pursuant to the terms and conditions of which a loan in the principal amount of Twenty-One Million Four Hundred Twenty-Six Thousand Dollars ($21,426,000) is due from Maker to Holder; or

 

the occurrence of an Event of Default under that certain Master Lease dated as of October 2, 2006 by and among Holder and its affiliates, as landlord, and Summerville at Camelot Place LLC, a Delaware limited liability company, Summerville at Hillen Vale LLC, a Delaware limited liability company, Summerville at Lakeview LLC, a Delaware limited liability company, Summerville at Ridgewood Gardens LLC, a Delaware limited liability company, Summerville at North Hills LLC, a Delaware limited liability company, and The Inn at Medina LLC, a Delaware limited liability company, collectively, as tenant; as amended by (i) that certain First Amendment to Master Lease dated as of December 1, 2006, (ii) that certain Second Amendment to Master Lease dated as of January 2, 2007, and (iii) that certain Third Amendment to Master Lease dated as of March 3, 2008; or

 

the occurrence, prior to the Closing Date, of a material default by Maker of its obligations under the Purchase Agreement and the expiration of any applicable notice and/or cure period thereunder.

If to Maker:

Emeritus Corporation

 

3131 Elliott Avenue, Suite 500

 

Seattle, Washington  98121

With a copy to:

The Nathanson Group PLLC

 

One Union Square

 

600 University Street, Suite 2000

 

Seattle, Washington  98101-1195