SECOND AMENDMENT TO PROMISSORY NOTE (AMENDED AND RESTATED)

(FRETUS)

SECOND AMENDMENT TO PROMISSORY NOTE (AMENDED AND RESTATED)

THIS SECOND AMENDMENT TO PROMISSORY NOTE (AMENDED AND RESTATED) (this “Second Amendment”) is executed as of the 1st day of July, 2011 (the “Effective Date”), by and between FRETUS INVESTORS LP, a Delaware  limited partnership, having an address at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the “Borrower”), and CAPMARK BANK, a Utah industrial bank, having an address at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, together with its successors and assigns (the “Lender”).

RECITALS

A.           Borrower executed to the order of Lender that certain Promissory Note (Amended and Restated) dated May 1, 2008, in the principal amount of $16,800,000.00, as amended by that certain First Amendment to Promissory Note dated December 31, 2008, which reduced the principal amount to $4,350,000 (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 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 “2011 Note Rate” shall mean an interest rate charged beginning on the Effective Date and continuing through December 31, 2011, 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 (2.50%), plus four percent (4.00%) (“2011 Margin”).  Beginning January 1, 2012, the “2012 Note Rate” charged shall be LIBOR for a term of one month determined solely by Lender on each Note Rate Adjustment Date, but not less than two and one-half percent (2.50%), plus five percent (5.00%) (“2012 Margin”; the 2011 Margin and the 2012 Margin, as then in effect, may be referred to herein as the “Margin”), which combined figure shall be rounded upwards to the nearest one-eighth percent (.125%). The term “Note Rate” shall mean either the 2011 Note Rate or the 2012 Note Rate as applicable at the time the Note Rate is charged.

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

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

5.           This Second 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 Second Amendment to be duly executed and delivered on its behalf by its duly authorized representatives, on the day and year first above written.

                                                                            BORROWER:

FRETUS Investors El Paso LP, a

Delaware limited partnership

By:           Village Oaks Cielo Vista Investors

LLC, a Delaware limited liability company

Its:           General Partner

By:           FRETUS Investors LLC, a

Washington limited liability company

Its:           Managing Member

By: Emeritus Corporation,

a Washington corporation

Its:           Administrative Member

By:    /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇                                         

▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇

Its:           Senior Vice President Corporate  Development

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Acknowledged by Guarantor

this ____ day of July, 2011

EMERITUS CORPORATION, a

Washington corporation

By:  /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇                                        

       ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,

       Senior Vice President Corporate Development

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CAPMARK BANK, a Utah industrial bank

 By:           /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇                

 Name:        ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇   

 Title:           Senior Vice President/Managing Director

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