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 four (4) 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 $26,200,000.00 (the “Note”).  Unless
otherwise defined herein, capitalized terms shall have the meaning assigned to
them in the Note.




B.           Borrower
has requested that Lender modify certain terms of the Note, and in consideration
of a modification and renewal fee in the amount of $65,500, 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 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.




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




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





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5.           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.





IN
WITNESS WHEREOF, Borrower and Lender have each caused this First Amendment to be
duly executed and delivered on its behalf by its duly authorized
representatives, on the day and year first above written.





BORROWER:





EMERICHIP
EVERETT LLC,


a
Delaware limited liability company





By:             EMERITUS
CORPORATION,


a Washington corporation


its Sole Member





By:  /s/ Eric Mendelsohn
__


Eric
Mendelsohn,


Senior
      Vice President Corporate
Development


2


BORROWER:




EMERICHIP
PHOENIX LLC,


a
Delaware limited liability company





By:             EMERITUS
CORPORATION,


a Washington corporation


its Sole Member





By:  /s/ Eric Mendelsohn
______


Eric
Mendelsohn,


Senior
      Vice President Corporate
Development


3


BORROWER:




EMERICHIP
SAN ANTONIO AO LP


a
Delaware limited partnership





By:             Emerichip
Texas, LLC, a Delaware


Limited
liability company


Its
General Partner





By:             ESC
G.P. II, Inc.,


a Washington corporation


its Sole Member





By: _/s/ Eric Mendelsohn
____


Eric
Mendelsohn,


Senior
Vice President Corporate Development


4


BORROWER:




EMERICHIP
WALLA WALLA LLC,


a
Delaware limited liability company





By:             EMERITUS
CORPORATION,


a Washington corporation


its Sole Member





By: /s/ Eric Mendelsohn


Eric
Mendelsohn,


Senior
      Vice President Corporate
Development





Acknowledged
by Guarantor


this 26th
day of December, 2008





EMERITUS
CORPORATION, a


Washington
corporation








By:_/s/
Eric Mendelsohn


Eric
Mendelsohn,


Senior
Vice President Corporate Development


5











CAPMARK BANK, a Utah
      industrial bank





By:           /s/ Malana C.
Bryant


Name:                      Malana C.
Bryant


Title:                      Authorized
Signer























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