FIRST AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS


         THIS FIRST AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS,  dated as of July
, 1998 (this  "Amendment"),  is entered  into by and  between  BROOKDALE  LIVING
COMMUNITIES, INC., a Delaware corporation (the "Borrower"), and LaSALLE NATIONAL
BANK, a national banking association (the "Bank").

                                   WITNESSETH

         WHEREAS,  Borrower has previously  executed and delivered to the Bank a
certain  Note dated April 27,  1998 in the  original  principal  amount of up to
Fifteen Million Dollars ($15,000,000.00)  evidencing a certain loan (the "Loan")
set forth more fully in and  governed by a certain  Loan  Agreement of that same
date to which the Bank is also a party ("Loan Agreement");

         WHEREAS,  subject  to the  terms  and  conditions  of  this  Amendment,
Borrower has requested the Bank (a) to increase the principal amount of the Loan
by $10,000,000,  on an interim basis only, from $15,000,000 to $25,000,000,  and
(b) to permit a portion of the Loan to be reserved  for the  issuance of standby
letters of credit by the Bank to and for the  benefit  municipalities  and other
governmental  units in connection with projects  developed by Borrower from time
to time.

         WHEREAS,  Borrower and the Bank desire to modify the Loan Agreement and
the  Documents  to reflect the  modified  terms of the Loan as set forth in this
Amendment.

         NOW,  THEREFORE,  in consideration  of the premises,  the covenants and
agreements  herein  contained,  and other good and valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereby
agree as follows:

         Incorporation  of  Recitals.  The  above  and  foregoing  recitals  are
incorporated into and made a part of this Amendment.  All capitalized terms used
herein,  if not  otherwise  specifically  defined,  shall have the  meanings and
definitions  prescribed  in the Loan  Agreement  and the  Documents  referred to
therein.

         Interim   Maturity  Date.  For  purposes  of  this  Amendment  and  the
Documents, the term "Interim Maturity Date" shall mean the earlier of (a) a date
certain  which is ninety  (90) days after the date of this  Amendment,  or (b) a
date  certain  which is the date on which  Borrower  closes  on an  offering  of
Borrower's  convertible  preferred  stock or convertible  debt securities with a
minimum aggregate sales price (before underwriting commissions and discounts and
other expenses relating to such sale) of $50,000,000.00 which in all cases shall
be subordinate to the Loan (the "Offering").

         Increased Loan Commitment.  As of the date of this Amendment,  the Loan
Agreement and the Documents are hereby amended to increase the principal  amount
of the Loan and Maximum  Revolving Loan  Commitment  from  $15,000,000.00  to an
amount not to exceed  $25,000,000.00  until the Interim  Maturity  Date on which
date,  without further notice or demand (a) Borrower shall pay amounts necessary
to reduce the outstanding  principal balance of the Loan,  including any portion
of  the  Loan  comprised  of  an  LC  Reserve  (as  hereafter  defined)  to  (i)
$10,000,000.00 or less if the Offering has occurred,  or (ii)  $15,000,000.00 if
the Offering has not occurred,  and (b) the Maximum  Revolving  Loan  Commitment
shall be permanently  reduced to an amount not to exceed (i)  $10,000,000.00  if
the  Offering  has  occurred,  or (ii)  $15,000,000.00  if the  Offering has not
occurred.

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         Letters of Credit.  Provided  Borrower is otherwise in compliance  with
all  terms  and  conditions  of the  Loan  Agreement,  the  Documents  and  this
Amendment,  the Bank  agrees  to issue  from  time to time from the date of this
Amendment to and including  April 1, 1999,  standby letters of credit (a "Letter
of Credit"  and,  collectively,  the  "Letters  of  Credit")  for the account of
Borrower to and for the benefit of municipalities  and other units of government
in order to guarantee Borrower's  completion of public improvements  required by
those entities in connection with Borrower's  development projects,  all subject
to the conditions of this Section 4 and which,  when added to: (a) the aggregate
amount of all other  Letters of Credit  outstanding,  issued or  approved by the
Bank as of the proposed  issuance  date,  and (b) the  aggregate  amount of Loan
Advances  outstanding  as of the  proposed  issuance  date,  will not exceed the
Maximum  Revolving Loan  Commitment in effect as of the proposed  issuance date.
The Letters of Credit shall also be subject to the following conditions:

                  Application  and  Agreement.  As a  condition  of  the  Bank's
         obligation to issue a particular  Letter of Credit,  Borrower,  through
         the Authorized  Borrower  Representative,  shall notify the Bank of the
         particulars  of the Letter of Credit  not less than three (3)  business
         days in advance, and Borrower shall provide such borrowing  resolutions
         and  information,   and  execute  such   applications,   documents  and
         agreements as are required by the Bank,  including without  limitation,
         the Bank's  standard form of  application  and credit  agreement.  ("LC
         Documents").

                  Reserve.  The stated amount of each Letter of Credit issued by
         the  Bank  shall  reduce  the  amount  of the  Maximum  Revolving  Loan
         Commitment  then  in  effect  in  accordance  with  the  terms  of this
         Agreement on a dollar for dollar basis ("LC Reserve").

                  Expiry.  The Bank shall not issue any Letter of Credit with an
         expiry date later than April 1, 1999.

                  Fee.  Borrower  shall pay the Bank a fee in the  amount of one
         percent  (1%) per annum of the stated  amount of each  Letter of Credit
         issued by the Bank at the request of Borrower, fully earned and payable
         quarterly  in  advance.  If the  Letter of Credit  expires  during  the
         quarter,  the fee shall be  pro-rated  based upon the number of days in
         the quarter that the Letter of Credit is outstanding. As a condition to
         the issuance of each Letter of Credit,  Borrower shall pay the Bank the
         quarterly  portion of the Letter of Credit fee stated in the  preceding
         sentence.

                  Payment.  Each  drawing  under the  Letter  of Credit  (an "LC
         Drawing") shall  constitute a Loan advance under the Loan Agreement and
         shall be payable in  accordance  with the terms and  provisions  of the
         Loan  Agreement  with  respect  to  other  Loan  Advances.   Borrower's
         obligation  to pay all LC  Drawings  shall  be  absolute,  irrevocable,
         unconditional  and  without  setoff  under  any and  all  circumstances
         whatsoever,  including,  without  limitation,  any  of  the  following,
         whether or not with notice to, or the consent of, Borrower:

                           Any lack of validity or enforceability of a Letter of
                  Credit, the Loan Agreement,  the LC Documents or any of the LC
                  Documents;

                           The existence of any claim, set-off, defense or other
                  right  which  Borrower  may  have  at  any  time  against  the
                  beneficiary  of a Letter  of  Credit,  the  Bank or any  other
                  person or entity,  whether in connection with the transactions
                  contemplated herein or therein or any unrelated transaction;


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<PAGE>


                           Any statement or any other document presented under a
                  Letter of Credit proving to be forged, fraudulent,  invalid or
                  insufficient  in any respect or any  statement  therein  being
                  untrue or inaccurate in any respect whatsoever;

                           Payment by the Bank under a Letter of Credit  against
                  presentation  of a draft or certificate  which does not comply
                  with the terms of the Letter of Credit;

                           Any failure,  omission,  delay or lack on the part of
                  the Bank or any party to any of the LC  Documents  to enforce,
                  assert or exercise any right,  power or remedy  conferred upon
                  the Bank or any such  party  under  the LC  Documents,  or any
                  other  acts or  omissions  on the part of the Bank or any such
                  party;

                           The    voluntary    or    involuntary    liquidation,
                  dissolution, sale or other disposition of all or substantially
                  all the  assets of  Borrower,  the  receivership,  insolvency,
                  bankruptcy,   assignment   for  the   benefit  of   creditors,
                  reorganization,  arrangement,  composition  with  creditors or
                  readjustment or other similar  proceedings  affecting Borrower
                  or any of the assets of Borrower, or any allegation or contest
                  of the validity of this  Amendment,  the Loan  Agreement,  the
                  Letter  of  Credit  or any of the LC  Documents,  in any  such
                  proceeding; or

                           Any other event or action that would,  in the absence
                  of  this  clause,  result  in  the  release  or  discharge  by
                  operation  of  law  of  Borrower  from  the   performance   or
                  observance of any obligation,  covenant or agreement contained
                  in this Amendment, the Loan Agreement, the Letter of Credit or
                  any of the LC Documents.

                  LC Documents Control.  Each Letter of Credit shall be governed
         by and subject to the LC Documents  required to be executed by Borrower
         for each such Letter of Credit.  In the event of any  conflict  between
         any of the  terms  of the LC  Documents  and any of the  terms  of this
         Amendment, the terms of this Amendment shall control.

         Maturity Date. The definition of Maturity Date in the Loan Agreement is
amended and  restated to mean (a) the  Interim  Maturity  Date as to any and all
amounts of the Loan in excess of (i)  $10,000,000.00 or less if the Offering has
occurred,  or (ii)  $15,000,000.00 or less if the Offering has not occurred,  on
which date Borrower  shall pay all amounts  necessary to reduce the  outstanding
principal  balance of the Loan,  including the amount of the LC Reserve,  to (A)
$10,000,000.00  or less if the Offering has  occurred or (B)  $15,000,000.00  or
less if the Offering has not occurred,  and on which date the Maximum  Revolving
Loan  Commitment  shall be  permanently  reduced  to an amount not to exceed (C)
$10,000,000.00  or less if the Offering has  occurred or (D)  $15,000,000.00  or
less if the Offering has not occurred,  and (b) April 26, 1999 as to the balance
of the Loan and all  outstanding  Loan  Advances  together  with any accrued but
unpaid  interest  thereon and any other costs or amounts  owed to the Bank under
the Loan Agreement as amended hereby.


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<PAGE>


         Interim Maturity Default Rate. If the outstanding  principal balance of
the  Loan,  including  the  amount  of the LC  Reserve,  is not  reduced  to (a)
$10,000,000.00  or less if the Offering has  occurred or (b)  $15,000,000.00  or
less if the Offering has not occurred by the Interim  Maturity  Date as required
under this  Amendment,  Borrower  shall be  considered in default under the Loan
Agreement  and, in addition to all other  rights and  remedies  available to the
Bank under the Loan  Agreement,  the  Documents,  at law or equity,  any and all
amounts  outstanding  under  the Loan  Agreement  shall,  without  notice,  bear
interest  payable on demand at the  interest  rate then in effect  with  respect
thereto plus four percent (4%)  ("Preliminary  Default Rate"),  further provided
that if, within 30 days after the Interim  Maturity Date as required above,  the
outstanding  principal  balance  of the  Loan,  including  the  amount of the LC
Reserve,  is not  reduced  to (i)  $10,000,000.00  or less if the  Offering  has
occurred,  or (ii) $15,000,000.00 or less if the Offering has not occurred,  any
and all amounts outstanding under the Loan Agreement shall, without notice, bear
interest payable on demand at the Preliminary Default Rate plus two percent (2%)
(Modified Default Rate"). The Preliminary  Default Rate and the Modified Default
Rate are,  during  their  pendency,  in lieu of the default rate of interest set
forth in Section 2.03 of the Loan Agreement.

         Execution Note.  Contemporaneous  with the execution of this Amendment,
Borrower  has  executed  and  delivered  an  Amended  and  Restated  Note in the
principal  sum of up to  $25,000,000.00  evidencing  the Loan as  amended by and
subject to this  Amendment,  which  Amended and Restated  Note shall replace and
supersede the Note.

         Payment  of  Fees.  Contemporaneous  with  and  as a  condition  of the
execution of this Agreement,  Borrower shall pay the Bank a fee in the amount of
$50,000.00,  which fee is deemed fully earned at the time  Borrower and the Bank
execute this Amendment, as additional consideration for increasing the amount of
the Loan.  Borrower  shall also pay the legal fees of Bank counsel in connection
with the preparation of this Amendment and matters related thereto.  In addition
to the  $50,000.00  closing fee,  Borrower shall continue to be obligated to pay
the Bank the Unused  Commitment  Fee in the amount of one-quarter of one percent
(1/4%)  per annum of the  average  unused  Maximum  Revolving  Loan  Commitment,
excluding the LC Reserve,  and as otherwise set forth in the Loan Agreement,  as
amended by this Amendment.

         Year 2000  Problem.  Borrower and its  Subsidiaries  have  reviewed the
areas within their business and operations which could be adversely affected by,
and have developed or are developing a program to address on a timely basis, the
"Year  2000  Problem"  (that is,  the risk that  computer  applications  used by
Borrower and its  Subsidiaries  may be unable to recognize and perform  properly
date-sensitive  functions  involving  certain  dates prior to and any date after
December  31,  1999),  and have made  related  appropriate  inquiry of  material
suppliers and vendors. Based on such review and program,  Borrower believes that
the "Year 2000  Problem"  will not have a material  adverse  effect on Borrower.
From time to time,  at the request of the Bank,  Borrower  and its  Subsidiaries
shall  provide  to the Bank such  updated  information  or  documentation  as is
requested  regarding  the  status  of their  efforts  to  address  the Year 2000
Problem.

         Reaffirmation.  To the extent any term(s) or condition(s) in any of the
Documents shall  contradict or be in conflict with the amended terms of the Loan
as set forth herein,  such terms and conditions  are hereby deemed  modified and
amended accordingly, upon the effective date hereof, to reflect the terms of the
Loan as so amended herein. All terms of the Documents,  as amended hereby, shall
be and remain in full force and effect and shall  constitute  the legal,  valid,
binding and  enforceable  obligations of Borrower to the Bank. As of the date of
this Amendment,  Borrower herein restates, ratifies and reaffirms each and every
term and condition set forth in the  Documents as amended  herein.  There are no
other changes to the  Documents  except for the changes  specifically  set forth
herein.

                                      -4-

<PAGE>


         Certification. To further induce the Bank to enter into this Amendment,
Borrower  represents  and  warrants  to the Bank as  follows:  (a)  Borrower  is
empowered to perform all acts and things  undertaken  and done  pursuant to this
Amendment and the Amended and Restated Note and has taken all corporate or other
action necessary to authorize the execution,  delivery and performance of the of
this  Amendment and the Amended and Restated  Note; (b) the officers of Borrower
executing  this  Amendment  and the  Amended  and  Restated  Note have been duly
elected or appointed  and have been fully  authorized to execute the same at the
time  executed;  (c) this  Amendment  and the Amended and  Restated  Note,  when
executed  and  delivered,  will be the legal,  valid and binding  obligation  of
Borrower,  enforceable  against it in accordance with its respective  terms; and
(d) Borrower is delivering to the Bank contemporaneously herewith, a certificate
of  Borrower's  Secretary  certifying  as to the  resolutions  of the  Executive
Committee of  Borrower's  Board of Directors  approving  this  Amendment and the
Amended and Restated Note and the  incumbency  and signatures of the officers of
Borrower signing this Amendment and the Amended and Restated Note.

         Consent to  Offering.  The Bank  hereby  consents to the  Offering  and
acknowledges  that the Offering  shall not  constitute an Event of Default under
the Loan Agreement conditioned upon the Offering being subordinate to the Loan.

         Absence  Of  Claim.  To  further  induce  the Bank to enter  into  this
Amendment,  Borrower hereby acknowledges and agrees that, as of the date hereof,
there exists no right of offset, defense,  counterclaim or objection in favor of
Borrower as against the Bank with respect to the Obligations to the Bank.

         Illinois  Law  To  Govern.   This   Amendment   and  each   transaction
contemplated  hereunder  shall be deemed to be made under and shall be construed
and interpreted in accordance with the laws of the State of Illinois.

         Binding Effect. The terms,  provisions and conditions of this Amendment
shall be  binding  upon and inure to the  benefit of each  respective  party and
their respective legal representatives, successors and assigns.

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized,  as of the date
first above written.

                                    BORROWER:

                                    BROOKDALE LIVING COMMUNITIES, INC.

                                    By:
                                    Print Name:
                                    Title:
ATTEST:

By:
Print Name:
Title:

                                    BANK:

                                    LaSALLE NATIONAL BANK

                                    By:
                                    Print Name:
                                    Title:



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