FIRST
AMENDMENT TO PROMISSORY NOTE




THIS FIRST AMENDMENT TO PROMISSORY
NOTE (this “First Amendment”) is executed as of the 31st day of
December, 2008 (the “Effective Date”), by and between the seven (7) undersigned
limited liability companies and limited partnerships, having an address at 3131
Elliott Avenue, Suite 500, Seattle, Washington 98121 (collectively, the
“Borrower”), and CAPMARK
BANK, a Utah industrial bank, having an address at 6955 Union Park
Center, Suite 330, Midvale, Utah 84047, together with its successors and assigns
(the “Lender”).




RECITALS




A.           Borrower
executed to the order of Lender that certain Promissory Note dated August 15,
2007, in the principal amount of $49,800,000.00 (the “Note”).  Unless
otherwise defined herein, capitalized terms shall have the meaning assigned to
them in the Note.




B.           Concurrently
herewith the outstanding principal balance of the Note has been reduced to
$42,151,382.00.




C.           In
consideration for the partial prepayment of the Note and for payment by Borrower
to Lender concurrently with the execution of this First Amendment of a
modification and renewal fee in the amount of $95,378, Borrower has requested
that Lender modify certain terms of the Note, and Lender has so agreed, on the
terms and conditions contained herein.




AGREEMENT




NOW, THEREFORE, in
consideration of the above Recitals and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Borrower and
Lender hereby amend the Note as follows:




1.  Section
1.4 of the Note, Note
Rate and Note Rate Adjustment Dates, is hereby amended by deleting the
first sentence thereof and replacing it, as of the Effective Date, with the
following:




“The
“Note Rate” shall mean
an interest rate which is the average of London Interbank Offered Rates (“LIBOR”), in U.S. dollar
deposits, for a term of one month determined solely by Lender on each Note Rate
Adjustment Date (defined below), but not less than two and one-half percent
(2.5%), plus
four percent (4.00%) (“Margin”), which combined
figure shall be rounded upwards to the nearest one-eighth percent (.125%);
provided that in no event shall the Note Rate be less than six and one-half
percent (6.5%).”




2.  Section
2.1 of the Note, Note
Payments and Payment Dates, is hereby amended by adding the following at
the end of Section 2.1:




“Commencing
on the first (1st) day of
February, 2009, and continuing on each Payment Date thereafter through January
1, 2010, in addition to the foregoing interest payments, Borrower shall also pay
consecutive monthly payments of principal in an amount of Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00).  Commencing on the first
(1st) day of
February, 2010, and continuing on each Payment




1


Date
thereafter through January 1, 2011, in addition to the foregoing interest
payments, Borrower shall also pay consecutive monthly payments of principal in
an amount of Five Hundred Thousand and No/100 Dollars
($500,000.00).  Commencing on the first (1st) day of
February, 2011, and continuing on each Payment Date thereafter through the term
of the Loan, in addition to the foregoing interest payments, Borrower shall also
pay consecutive monthly payments of principal in an amount of Six Hundred
Sixty-Six Thousand Six Hundred Sixty-Seven and No/100 Dollars
($666,667.00).  Notwithstanding the foregoing, once the aggregate
outstanding principal balance of (a) the Loan, plus (b) that certain loan made
by Lender to those four (4) limited liability companies and limited partnerships
shown on Schedule 2 attached hereto (the “Loan A Borrowers”) as evidenced by
that certain Promissory Note dated August 15, 2007, made by Loan A Borrowers in
favor of Lender in the amount of $26,200,000, as amended by that certain First
Amendment to Promissory Note by and between Loan A Borrowers and Lender dated as
of December 31, 2008, equals an amount equal to or less than $38,000,000 (the
"Debt Reduction Threshold"), then commencing on the later to occur of February
1, 2010 or the next Payment Date occurring after the Debt Reduction Threshold
has been met and continuing on each Payment Date thereafter through the term of
the Loan, in addition to the foregoing interest payments, Borrower shall pay
consecutive monthly payments of principal in an amount of Three Hundred
Thirty-Three Thousand Three Hundred Thirty-Three and No/100 Dollars
($333,333.00).




3.  Section 4
of the Note, Maturity
Date, is hereby amended as of the Effective Date to extend the Maturity
Date from September 1, 2009, until January 2, 2012.   All
references in the Note to the “Maturity Date” are hereby amended to mean January
2, 2012.




4.  Section
4.1 of the Note, Extension of Maturity
Date, is hereby deleted in its entirety.




5.           Except
as expressly amended herein, the Note shall remain in full force and effect in
accordance with its terms and conditions.





6.           This
First 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.





[REMAINDER
OF THIS PAGE IS INTENTIONALLY LEFT BLANK]




2


In
Witness Whereof, each Borrower has duly executed and delivered this note, or
caused it to be duly executed and delivered on its behalf by its duly authorized
representatives, on the day and year first above written.




BORROWER:




EMERICHIP
STOCKTON  LLC,


a
Delaware limited liability company





By:             EMERITUS
CORPORATION,


a Washington corporation


its Sole Member





By: _/s/ Eric Mendelsohn
__


Eric
Mendelsohn,


Director
      of Real Estate and Legal
Affairs


3


In
Witness Whereof, each Borrower has duly executed and delivered this note, or
caused it to be duly executed and delivered on its behalf by its duly authorized
representatives, on the day and year first above written.




BORROWER:




EMERICHIP
NEW PORT RICHEY  LLC,


a
Delaware limited liability company





By:             EMERITUS
CORPORATION,


a Washington corporation


its Sole Member





By: _/s/ Eric Mendelsohn
____________


Eric
Mendelsohn,


Director
      of Real Estate and Legal
Affairs


4


BORROWER:







EMERICHIP
DALLAS  LP,


a
Delaware limited partnership





By:             Emerichip
Texas LLC,,


a Delaware limited liability
company


its General Partner





By:             ESC
GP II Inc.,


a Washington corporation


its Sole Member








By: _/s/ Eric Mendelsohn
______________


Eric
Mendelsohn,


Director
      of Real Estate and Legal Affairs





5





BORROWER:




EMERICHIP
EL PASO  LP,


a
Delaware limited partnership





By:             Emerichip
Texas LLC,,


a Delaware limited liability
company


its General Partner





By:             ESC
GP II Inc.,


a Washington corporation


its Sole Member








By: _/s/ Eric Mendelsohn
______________


Eric
Mendelsohn,


Director
      of Real Estate and Legal Affairs







6







BORROWER:




EMERICHIP
CAMBRIA  LP,


a
Delaware limited partnership





By:             Emerichip
Texas LLC,,


a Delaware limited liability
company


its General Partner





By:             ESC
GP II Inc.,


a Washington corporation


its Sole Member








By: _/s/ Eric Mendelsohn
___________


Eric
Mendelsohn,


Director
      of Real Estate and Legal Affairs





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BORROWER:




EMERICHIP
VENICE  LLC,


a
Delaware limited liability company





By:             EMERITUS
CORPORATION,


a Washington corporation


its Sole Member





By: /s/ Eric Mendelsohn
____________


Eric
Mendelsohn,


Director
      of Real Estate and Legal
Affairs


8


BORROWER:




EMERICHIP
ALTAMONTE  LLC,


a
Delaware limited liability company





By:             EMERITUS
CORPORATION,


a Washington corporation


its Sole Member





By: _/s/ Eric Mendelsohn
_______


Eric
Mendelsohn,


Director
      of Real Estate and Legal Affairs





Acknowledged
by Guarantor


This
26th
day of December, 2008





EMERITUS CORPORATION,a


Washington
Corporation





By:           /s/ Eric
Mendelsohn


Name:
Eric
Mendelsohn


Title:  SVP
Corporate Development














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IN WITNESS WHEREOF, Borrowers
and Lender have caused this Agreement to be properly executed by their
respective duly authorized representatives as of the date first above
written.












CAPMARK FINANCE, INC., a
California Corporation








By:           _/s/
William E. Shine_____(Seal)


Name:    _
William E. Shine ________________


Its:           _EVP______________


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