FIRST
AMENDMENT TO MASTER LEASE AND SECURITY AGREEMENT
  THIS
FIRST AMENDMENT TO MASTER LEASE AND SECURITY AGREEMENT (“Amendment”) is dated as
of the 20thday of October, 2008
(the “Effective Date”), and is among HCP AUR1 CALIFORNIA A PACK, LLC, a Delaware
limited liability company (“HCP California A Pack”), HCP AUR1 CALIFORNIA B PACK,
LLC, a Delaware limited liability company (“HCP California B Pack”), HCP AUR1
CONNECTICUT, LLC, a Delaware limited liability company (“HCP Connecticut”), HCP
AUR1 MARYLAND, LLC, a Delaware limited liability company (“HCP Maryland”), HCP
AUR1 MASSACHUSETTS, LLC, a Delaware limited liability company (“HCP
Massachusetts”), HCP AUR1 NEW JERSEY, LLC, a Delaware limited liability company
(“HCP New Jersey”) and HCP AUR1 VIRGINIA, LLC, a Delaware limited liability
company (“HCP Virginia,” and together with HCP California A Pack, HCP California
B Pack, HCP Connecticut, HCP Maryland, HCP Massachusetts and HCP New Jersey, as
their interests may appear, “Lessor”) and EMERITUS CORPORATION, a Washington
corporation (“Emeritus” or “Lessee”).
  RECITALS
 
 A.          Lessor
is the “Lessor” and Lessee is the “Lessee” pursuant to that certain Master Lease
and Security Agreement dated as of August 22, 2008 (the “Lease”).  The
Lease covers the Leased Property of eleven (11) senior housing/care Facilities
located in the States of California, Connecticut, Maryland, Massachusetts, New
Jersey and Virginia, all as more particularly described therein.  All
capitalized terms used in this Amendment and not otherwise defined herein shall
have the meanings given to such terms in the Lease.
 
 B.           Lessor
and Lessee desire to amend the Lease in accordance with the terms and conditions
set forth herein.
 
 AMENDMENT
 
 NOW
THEREFORE, in consideration of the mutual covenants contained in this Amendment
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lessor and Lessee hereby agree as
follows:
 
 1.           Due
Diligence Period.  Notwithstanding anything to the contrary set forth
in Section 48.2.1(a) of the Lease, Lessee shall have until 5:00 p.m. (California
time) on October 29, 2008 to be satisfied with the results of its review of (a)
the physical condition of the Leased Property and the Facilities, (b) the
environmental condition of the Leased Property and the Facilities, (c) the
condition of title to and a review of ALTA surveys of the Leased Property and
the Facilities, (d) the insurance requirements of the Existing Facility Mortgage
Loan Documents and (e) the following operational issues with respect to each of
the Facilities: (i) September rent rolls and the latest available occupancy information from the“answers on demand”or Merlin systemreports, (ii) September
financial statements, (iii) workers compensation loss runs and claims histories,
and (iv) the dates of hire, salaries and benefits of the employees currently
employed at the Facilities (collectively, the “Reserved Due Diligence
Matters”).  Except with respect to the Reserved Due Diligence Matters,
(i) Lessee hereby advises Lessor that Lessee is
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  satisfied
with the results of its due diligence review of the Leased Property of each
Facility, the Facilities themselves and the operations thereof, including the
terms of the Existing Facility Mortgage Loan Documents and (ii) Lessee hereby
waives its right to terminate the Lease pursuant to Section 48.2.2 of the Lease
with respect to all other matters set forth in Section 48.2.1(a) of the
Lease.  With respect to the Reserved Due Diligence Matters, the
provisions of Section 48.2.2 shall continue in full force and effect, except
that if Lessee elects to terminate the Lease for any of the Reserved Due
Diligence Matters notice thereof shall be delivered to Lessor on or before 5:00
p.m. (California time) on October 29, 2008.
 
 2.           Existing
Facility Mortgagee Consent.  At any time after the date hereof and
prior to the date the conditions set forth in Sections 48.1.1(e) and 48.2.1(d)
of the Lease, as hereby amended, are to be satisfied or waived by Lessor and
Lessee, respectively, Lessor shall have the right, in its sole discretion, by
notice to Lessee to elect to pay in full the Existing Facility
Mortgages.  In the event that Lessor exercises such right, upon such
notice from Lessor to Lessee the conditions set forth in Sections 48.1.1(e) and
48.2.1(d) of the Lease, as hereby amended, shall be deemed satisfied and Lessor
shall cause the Existing Facility Mortgages to be paid in full on or prior to
the Commencement Date.  For purposes of clarity, nothing in the Lease,
as hereby amended, shall be deemed to limit Lessor’s right to pay in full the
Existing Facility Mortgages at any time and this Section 2 shall only be deemed
to grant Lessor the right, in its sole discretion, to elect to satisfy the
conditions set forth in Sections 48.1.1(e) and 48.2.1(d) of the Lease, as hereby
amended, by delivering notice to Lessee that Lessor elects to pay in full the
Existing Facility Mortgages on or prior to the Commencement Date.
 
 3.           Other
Conditions to the Continued Effectiveness of the Lease.
 
 Section
48.1.1(a) of the Lease is hereby amended and restated in its entirety to read as
follows:
 
 “(a)           On
or before 5:00 p.m. (California time) on October 17, 2008, Lessee shall have
submitted evidence reasonably satisfactory to Lessor that Lessee has applied for
all licenses, permits, accreditations, authorizations and certifications from
all governmental or quasi-governmental authorities, agencies, departments or
otherwise which are material to or required for the operation of each Facility
for its Primary Intended Use, including, without limitation, any state facility
license, certificate of need and any accreditations or certifications from
Medicare and/or Medicaid (collectively, the ‘Required Governmental Approvals’),
provided, however, that Lessee shall have until 5:00 p.m. (California time) on
October 31, 2008 to submit evidence reasonably satisfactory to Lessor that
Lessee, or the SNF Operator, has applied for all Required Governmental Approvals
relating to the SNF Beds;”.
 
 Section
48.1.1(b) of the Lease is hereby amended and restated in its entirety to read as
follows:
 
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  “(b)           On
or before 5:00 p.m. (California time) on December 1, 2008, Lessee shall have
submitted evidence reasonably satisfactory to Lessor that Lessee and, in the
case of the SNF Beds, the SNF Operator, the applicable Current Lessee and the
Current Manager have entered into one or more transfer agreements in form and
substance acceptable to Lessee and, in the case of the SNF Beds, the approved
SNF Operator, the applicable Current Lessee and the Current Manager (the
‘Operations Transfer Agreement(s)’) to arrange for a transition of full
operational responsibility for each of the Facilities to Lessee and, in the case
of the SNF Beds, to the approved SNF Operator, which Operations Transfer
Agreement(s) may include, or as to which the Current Lessee and the SNF Operator
may negotiate separate documents containing, customary interim management and/or
interim sublease provisions with respect to the SNF Beds to the extent that
Lessee reasonably anticipates that Lessee will not have obtained all Required
Governmental Approvals relating to the SNF Beds on or prior to the Commencement
Date; provided, however, that any such interim management and/or interim
sublease provisions/documents shall be subject to Lessor’s prior written
consent, which consent shall not be unreasonably withheld, but may be
conditioned upon Lessee, Current Lessee and Current Manager executing and
delivering to Lessor a consent agreement relating thereto in Lessor’s customary
form for such arrangements;”.
 
 The
references to “October 31, 2008” contained in Section 48.1.1(c) and Section
48.2.1 (c) of the Lease are hereby replaced with references to “November 14,
2008.”
 
 The
reference to “October 30, 2008” contained in Section 48.1.1(d) of the Lease is
hereby replaced with a reference to “November 21, 2008.”
 
 The
references to “November 14, 2008” contained in Sections 48.1.1(e) and 48.2.1(d)
of the Lease are hereby replaced with references to “November 28,
2008.”
 
 The
reference to “October 31, 2008” contained in Section 48.2.1(b) of the Lease is
hereby replaced with a reference to “December 1, 2008.”
 
 4.           Full
Force and Effect.  Except as specifically set forth herein, the Lease
shall remain in full force and effect as originally executed by Lessor and
Lessee.
 
 5.           Entire
Agreement.  The Lease, as hereby amended, constitutes the entire
agreement of the parties with respect to the subject matter hereof, and may not
be changed or modified except by an agreement in writing signed by the
parties.
 
 6.           Counterparts;
Facsimile Signatures.  This Amendment 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.  Telecopied
signatures may be used in place of
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  original
signatures on this Amendment, and Lessor and Lessee both intend to be bound by
the signatures of the telecopied document.
 
 
 [Signature pages
follow]
 
 
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  IN
WITNESS WHEREOF, the parties have caused this Lease to be executed and attested
by their respective officers thereunto duly authorized.
  
  LESSOR:
              HCP AUR1 CALIFORNIA A PACK,
      LLC,
  a
      Delaware limited liability company
  
  HCP AUR1 CALIFORNIA B PACK,
      LLC,
  a
      Delaware limited liability company
  
  HCP AUR1 CONNECTICUT,
      LLC,
  a
      Delaware limited liability company
  
  HCP AUR1 MARYLAND,
      LLC,
  a
      Delaware limited liability company
  
  HCP AUR1 MASSACHUSETTS,
      LLC,
  a
      Delaware limited liability company
  
  HCP AUR1 NEW JERSEY,
      LLC,
  a
      Delaware limited liability company
  
  HCP AUR1 VIRGINIA,
      LLC,
  a
      Delaware limited liability company
  
  By:
              HCP
      Partners, LP, a Delaware limited
partnership,
  their
      member
  
  By:
              HCP
      GP Corp., a Delaware corporation,
  its
      general partner
  By:
/s/ Thomas D. KirbyName: Thomas D. KirbyTitle:  SVP
  
  
  [Signatures continue on the following
page]
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  LESSEE:
              EMERITUS
      CORPORATION,
  a
      Washington corporation
  
  By:/s/
Eric Mendelsohn
  Name:
Eric Mendelsohn
  Title:
SVP Corporate Development
  
  
  
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