EX-10.77.02

FIRST AMENDMENT TO MASTER LEASE
 
THIS FIRST AMENDMENT TO MASTER LEASE (this “Amendment”) is made and executed and
effective as of this 1st day of December, 2009 (the “Amendment Execution Date”)
by and between EMERITUS CORPORATION, a Washington corporation, having its
principal office at 3131 Elliott Avenue, Suite 500, Seattle, Washington
98121-1031, as Tenant, and NATIONAL HEALTH INVESTORS, INC., a Maryland
corporation, having its principal office at 222 Robert Rose Drive, Murfreesboro,
Tennessee 37129, as Landlord.
 
RECITALS
 
A.           Landlord and Tenant are parties to that Master Lease dated as of
October 13, 2009 (the “Lease”) with respect to eight senior housing facilities
in South Carolina, Tennessee and Arizona (the “Facilities”).
 
B.           Landlord and Tenant have agreed, in response to Tenant’s due
diligence investigation, to amend certain provisions of the Lease.
 
C.           The Lease provides that it can be amended by written instrument
signed by Landlord and Tenant.
 
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:
 
1. DEFINITIONS.
 
(a) Article 1 is amended by inserting the following new defined terms in the
appropriate places:
 
“Annual Rent Adjustment Date” shall mean (i) during the Initial Term, the
anniversary of each Facility Commencement Date and (ii) during any Extended
Term, the anniversary of the beginning date of that Extended Term.
 
“Base Purchase Price” shall mean Thirty Eight Million Five Hundred Twenty
Thousand and no/100 Dollars ($38,520,000); provided, however, in the event that
the fair market value of the Facilities subject to this Lease at the time the
Purchase Option is exercised as determined in the manner set forth in Section
25.16(c) of this Lease is greater than Thirty Nine Million Six Hundred Forty
Nine Thousand Nine Hundred Ninety Nine and no/100 Dollars ($39,649,999.00),
which amount shall be reduced on a dollar for dollar basis by any amount
previously paid to Landlord pursuant to Articles 15 or Article 16 as a result of
damage to or destruction or Condemnation of any of the Facilities, then the Base
Purchase Price shall be Thirty Seven Million Five Hundred Twenty Thousand and
no/100 Dollars ($37,520,000.00); and further provided that if the Lease and
Purchase Option are terminated with respect to the Gilbert Facility, Base
Purchase Price shall be adjusted as provided in Section 11(e) hereof.
 
“Capital Allowance” shall have the meaning set forth in Section 7.5(a);
 

 
 

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“Capital Allowance Rent Adjustment Date” shall have the meaning set forth in
Section 7.5(a);
 
“Consolidated Net Worth” shall mean the consolidated net worth of the applicable
entity as determined in accordance with generally accepted accounting principles
consistently applied.
 
“Disbursement Date” shall have the meaning set forth in Section 7.5(d);
 
“Existing Easements and Encroachments” shall mean those matters described in
Exhibit H;
 
“FF & E” shall have the meaning set forth in Section 7.5(a);
 
“Gilbert Facility” means the assisted living facility (including the free
standing cottages) located in Gilbert, Arizona.
 
“Gilbert Repair Project” means the construction at the Gilbert Facility related
to the sinking of the foundation and the flooding of the cottages;
 
“Landlord’s Approval” shall have the meaning set forth in Section 7.5(b);
 
“Landlord’s Share of the Capital Allowance” shall have the meaning set forth in
Section 7.5(a);
 
“Material Defect” means any defect, whether latent or patent, (i) in the Gilbert
Repair Project and (ii) with respect to any matter other than the Gilbert Repair
Project, with a cost to repair individually or in the aggregate for any Facility
in excess of Seventy Five Thousand and no/100 Dollars ($75,000.00);
 
“Missing Estoppels” shall mean those Estoppel Certificates described in Exhibit
I;
 
“Request for Advance” shall have the meaning set forth in Section 7.5(d);
 
“RRA” shall have the meaning set forth in Section 7.5(a);
 
“Subsequent Settlement Condition” shall mean a condition (whether or not related
to or associated with the Gilbert Repair Project) occurring on or discovered at
the Gilbert Facility, or any portion thereof, where sinking or settlement of any
building foundations, walkways, paved areas, utility lines or any other
improvements thereon causes damage to the Gilbert Facility. For the avoidance of
doubt a Subsequent Settlement Event shall not include any damage to the Gilbert
Facility that is the result of either (i) Tenant’s willful misconduct or gross
negligence or (ii) a casualty event which is unrelated to the sinking or
settlement of the Gilbert Facility and which is covered by the insurance Tenant
is required to maintain under the Lease (even if Tenant has for any reason
failed to maintain such insurance).
 
“Tenant’s Share of the Capital Allowance” shall have the meaning set forth in
Section 7.5(a).
 

 
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“Vehicles” shall have the same meaning set forth in Section 7.5(a).
 
(b)           Article 1 is further amended by deleting the definition given for
Lease Year and the following inserted in lieu thereof.
 
“Lease Year” shall mean the period from the respective Facility Commencement
Dates through January 31, 2011 for the first Lease Year and each twelve (12)
consecutive month period thereafter throughout the Term, provided, however, that
the fifteenth Lease Year shall end concurrently with the expiration of the
Initial Term.
 
2. EXISTING TITLE ISSUES. Section 2.3 is hereby amended by inserting the
following at the end thereof:
 
NOTWITHSTANDING THE FOREGOING, LANDLORD ACKNOWLEDGES AND AGREES THAT TENANT
SHALL HAVE NO LIABILITY FOR ANY COSTS, DAMAGES, LOSSES OR EXPENSES ARISING FROM
OR RELATED TO THE EXISTING EASEMENTS AND ENCROACHMENTS OR THE MATTERS DESCRIBED
IN THE MISSING ESTOPPELS, BUT THAT THE SAME ARE, AND SHALL REMAIN, THE SOLE
RESPONSIBILITY OF LANDLORD.
 
3. COMMENCEMENT DATE.  Section 3.1 is amended by inserting the following at the
end thereof:
 
Landlord and Tenant acknowledge and agree that the Commencement Date, each
Facility Commencement Date and accordingly the Initial Term are tied to the
issuance to Tenant of its licenses to operate the Facilities (unless the Prior
Tenant agrees to enter into the Interim Operating Documents with Tenant pending
issuance of its licenses) and that they have agreed that Tenant will use its
good faith efforts to secure such licenses for all of the Facilities by January
1, 2010; provided, however, Tenant shall not be in default of its obligations
under this Lease if it is unable to obtain some or all of the licenses by
January 1, 2010.
 
4. RENT.
 
(a) Section 4.1 is hereby deleted in its entirety and the following inserted in
lieu thereof:
 
4.1 Base Rent. The amounts shown on Schedule II are referred to for each
respective Facility as that Facility’s “Initial Facility Base Rent.” Commencing
on the Commencement Date for a given Facility, Tenant shall pay the Initial
Facility Base Rent for that Facility to Landlord in twelve equal monthly
installments on the 1st day of each month. Base Rent for each Facility shall
increase (i) on each Capital Allowance Rent Adjustment Date by the amount set
forth in Section 7.5(c), (ii) on each Annual Rent Adjustment Date by the amount
reflected below:
 
First and Second
Annual Rent Adjustment
Dates                                                      2.00%
Third Annual Rent Adjustment
Date                                                                           2.955%
Fourth and Fifth
Annual Rent Adjustment
Dates                                                      3.0%

 
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Sixth Annual Rent Adjustment
Date                                                                           3.026%
Seventh through Twelfth
Annual Rent Adjustment
Dates                                                      4.00%
Thirteenth Annual Rent Adjustment
Date                                                                           2.716%
Fourteenth Annual Rent Adjustment
Date                                                                           4.050%
 
Base Rent shall be prorated for any period shorter than the number of days in a
whole month and for any Lease Year longer than twelve (12) months.
 
The aggregate annual amount for all Facilities of Base Rent, reflecting the
increase to Base Rent contemplated in Section 7.5(c), for the Second Lease Year
and the remainder of the Initial Term is set forth on Schedule III.  For the
avoidance of doubt, the parties acknowledge and agree that it is their intent
that from and after the Second Lease Year, the Base Rent will assume that the
Landlord’s Share of the Capital Allowance has been fully advanced.
 
(b)           Section 4.2 is hereby deleted in its entirety and the following
inserted in lieu thereof:
 
4.2 Base Rent for Extended Term. Base Rent for the Extended Term shall increase
by three percent (3%) per year on the commencement of the Extended Term and each
Annual Rent Adjustment Date thereafter during the Extended Term. Base Rent as so
increased shall be paid in twelve equal monthly installments to Landlord.
 
5. CAPITAL IMPROVEMENTS. A new Section 7.5 is added to the Master Lease which
provides as follows:
 
7.5.           Capital Allowance.
 
(a) Notwithstanding anything to the contrary set forth in this Article 7,
Landlord and Tenant have agreed to fund on a 50-50 basis the cost of certain
repairs, renovations and alterations to the Facilities (the “RRA”) and/or the
acquisition of certain furniture, fixtures and equipment for the Facilities (the
“FF & E” and together with the RRA, the “Improvements”), with the aggregate
amount required to be contributed by Landlord and Tenant for the Improvements
not to exceed One Million Five Hundred Thousand and no/100 Dollars
($1,500,000.00) (the “Capital Allowance”), with up to Seven Hundred Fifty
Thousand and No/100 Dollars ($750,000.00) of such amount being provided by
Landlord (the “Landlord’s Share of the Capital Allowance”) and with up to Seven
Hundred Fifty Thousand and no/100 Dollars ($750,000) of such amount being
provided by Tenant (the “Tenant’s Share of the Capital Allowance”). With respect
to each of the Improvements, Landlord and Tenant shall agree upon an appropriate
allocation of the cost thereof between Landlord and Tenant, it being understood
and agreed that Tenant may use the Tenant’s Share of the Capital Allowance to
pay for the cost of any vehicles to be used in connection with the operation of
the Facilities (the “Vehicles”) and that Landlord shall have no obligation to
advance any portion of the Landlord’s Share of the Capital Allowance to cover
any portion of the costs thereof. Accordingly, as between Landlord and Tenant,
Landlord shall be required to bear a disproportionate share of the cost of a
portion of the Improvements but in no event (A) shall the amount which Landlord
is required to advance in the aggregate with respect to the Improvements exceed
the Landlord’s Share of the Capital
 

 
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Allowance nor (B) shall the amount which Tenant is required to advance in the
aggregate with respect to the Improvements and the Vehicles exceed the Tenant’s
Share of the Capital Allowance.
 
(b) The Capital Allowance may be allocated by Tenant between the Facilities in
such manner as Tenant deems to be necessary and appropriate to equip, repair,
renovate and/or alter the Facilities; provided, however, any proposed use by
Tenant of the Landlord’s Share of the Capital Allowance shall be subject to the
review and prior written approval of Landlord, which approval shall not be
unreasonably withheld or delayed (“Landlord’s Approval”) and which Landlord’s
Approval shall be deemed to have been given unless such approval is denied in
writing within thirty (30) days after Tenant’s submission of a request for
approval to Landlord.
 
(c) Any portion of the Landlord’s Share of the Capital Allowance advanced by
Landlord will increase the Base Rent due and payable with respect to the
affected Facility commencing on the first day of the first month following the
applicable Disbursement Date (each a “Capital Allowance Rent Adjustment Date”)
by an amount equal to (i) the product of the amount advanced multiplied by nine
percent per annum (ii) divided by twelve (12). Any portion of the Tenant’s Share
of the Capital Allowance advanced by Tenant will be deemed to be a Capital
Expenditure within the meaning of Section 7.1 of this Lease.
 
(d) In response to a written disbursement request in substantially the form
attached as Exhibit L (each a “Request for Advance”), Landlord shall make
advances of the Landlord’s Share of the Capital Allowance on the last day of
each calendar month in which a Request for Advance is received provided no Event
of Default has occurred and/or is continuing and provided that each of the
following conditions has been satisfied or waived by Landlord in the exercise of
its reasonable discretion, and, provided that, if the last day of the month is
not a business day, then the advance shall be disbursed on the last business day
of that month (each a “Disbursement Date”):
 
(i) If the Request for Advance relates to the purchase of FF& E, Landlord shall
disburse to Tenant such portions of the Landlord’s Share of the Capital
Allowance as are necessary to reimburse Tenant for fifty percent (50%) of the
amount of the paid invoice; and
 
(ii) If the Request for Advance relates to the cost of an RRA to a Facility,
Landlord shall disburse to Tenant such portions of the Landlord’s Share of the
Capital Allowance as are necessary to reimburse Tenant for fifty percent (50%)
of the cost thereof subject to Tenant’s compliance with the following
conditions:
 
(A) Tenant shall submit a completed Request for Advance, no later than the
fifteenth (15th) calendar day of any calendar month;
 
(B) Tenant shall have delivered to Landlord all original mechanics’ lien
waivers, in form and substance satisfactory to Landlord, reasonably deemed
necessary by Landlord for services and materials provided in connection with the
RRA;
 

 
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(C) All costs for the RRA are to be certified by Tenant in accordance with the
Request for Advance.  Verification of the monthly progress of the RRA and the
costs incurred may be made by Landlord in its reasonable judgment;
 
(D) Tenant shall be deemed to have remade, as of the date of each advance, each
and every representation and warranty made by Tenant in this Master Lease, and
each such representation and warranty shall be true and correct at the time of
each advance;
 
(E) Tenant shall have provided Landlord with evidence reasonably satisfactory to
Landlord that the RRA complies with all building, zoning and other laws and
governmental codes, rules and regulations, all necessary licenses, permits,
approvals and consents required for the use, occupancy and operation of the
Facility and evidence satisfactory to Landlord that, as of the date of the final
Request for Advance, to the extent required by applicable laws and regulations,
the RRA has been inspected and approved by each governmental authority with
jurisdiction over the RRA and by each person or entity that has the right to
inspect and approve the RRA, and each applicable governmental authority shall
have issued the appropriate permit, license or certificate to evidence such
approval;
 
(F) Before processing the final Request for Advance, Landlord shall have
received a completion certificate, in substantially the form attached hereto as
Exhibit M, executed by Tenant stating that the RRA has been completed, together
with such other evidence that no mechanics or materialmen’s liens or other
encumbrances have been filed and remain in effect against the Facility, or
appropriate lien waivers from any contractor or subcontractor;
 
(G) To the extent an architect has been engaged, a signed copy of the “AIA
Document G702 Application and Certificate for Payment” shall have been submitted
to Lessor with each Request for Advance.
 
6. SECURITY INTEREST. Section 11.1 is hereby deleted in its entirety and the
following inserted in lieu thereof:
 
Tenant shall execute in favor of Landlord a security agreement in the form
attached as Exhibit G hereto, granting to Landlord a first priority security
interest in all Tenant’s Personal Property, Accounts, general intangibles,
contract rights and healthcare insurance receivables arising from the operations
of each Facility and other interests of Tenant which security interest shall
secure the payment of all Rent and the performance of all other obligations of
the Tenant under this Lease. Notwithstanding the foregoing, the security
interest granted to Landlord with respect to Tenant’s Personal Property in this
Section 11.1 is intended by Landlord and Tenant to be subordinate to any
security interest granted in connection with the financing or leasing of all or
any portion of the Tenant’s Personal Property. Tenant shall cooperate in filing
all financing statements needed to perfect such security interest.
 
7. COVERAGE RATIO.  Section 11.2 is amended by inserting the following at the
end thereof:
 

 
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Notwithstanding the foregoing, during the First Lease Year the Gilbert Facility
shall be excluded from the calculation of the Lease Coverage Ratio.
 
8. PURCHASE OPTION.  Section 25.16(b) is hereby deleted in its entirety and the
following inserted in lieu thereof:
 
(b)           The Purchase Price for the exercise of the Purchase Option shall
be the sum of the Base Purchase Price plus fifty percent (50%) of the amount, if
any, by which the fair market value of the Facilities subject to this Lease at
the time the Purchase Option is exercised exceeds the Base Purchase Price.
 
9. CONDITIONS PRECEDENT.
 
(a) Sections 27(c) and (d) are hereby deleted in their entirety and the
following inserted in lieu thereof:
 
(c)           It shall be a condition to Tenant’s obligations hereunder that
Tenant shall be satisfied in its sole and absolute discretion with the results
of its due diligence investigation with respect to the physical, financial and
operational condition of each of the Facilities, which due diligence
investigations shall have been completed by November 30, 2009 (October 13, 2009
through November 30, 2009 being referred to herein as the “Due Diligence
Period”).
 
(d)           It shall be a condition to Tenant’s obligations hereunder that it
has secured the approval of its Board of Directors to the transaction
contemplated herein prior to December 15, 2009.
 
(b) The last paragraph of Article 27 is hereby deleted in its entirety and the
following inserted in lieu thereof:
 
In order to terminate this Lease based upon Tenant’s dissatisfaction with the
condition set forth in Section 27(c), Tenant must provide written notice of
termination to Landlord not later than 5:00 p.m. Central Standard Time on
December 1, 2009 and in order to terminate this Lease based upon Tenant’s
dissatisfaction with the condition set forth in Section 27(d), Tenant must
provide written notice of termination to Landlord not later than 5:00 p.m.
Pacific Standard Time on December 15, 2009. If such notice of termination is not
timely given, Tenant shall be deemed to have satisfied conditions (c) and (d) of
this Section 27.
 
10. REPRESENTATIONS, WARRANTIES AND COVENANTS.  As an inducement to Tenant to
enter into the Lease as amended by this Amendment, Landlord represents, warrants
and covenants to Tenant that each of the Facilities is, as of the Amendment
Execution Date, and will be, as of the Commencement Date, in good condition and
repair, ordinary wear and tear excepted, and free from any Material Defects.
Landlord agrees to indemnify, defend and hold harmless Tenant from and against
any and all damages, losses, costs or expenses, including, but not limited to,
reasonable attorneys fees, which Tenant may incur in the event of a breach of
the foregoing representations, warranties and covenants made in this Section 10
of this First Amendment. Landlord’s indemnity under this Section 10 shall be
 

 
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independent of and not limited by Landlord’s indemnity obligations under Section
20.2 of the Lease.
 
11. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS FOR THE GILBERT
FACILITY
 
As an inducement to enter into the Lease as amended by this Amendment, Landlord
represents, warrants and covenants to Tenant with respect to the Gilbert
Facility, as follows:
 
(a) The Gilbert Repair Project has, as of the Amendment Execution Date, or will
have been, as of the Commencement Date, completed in compliance with the plans
and specifications provided to Tenant, in a good and workmanlike manner and in
compliance with all applicable Legal Requirements and, as of the Commencement
Date, Landlord or the Prior Operator or Prior Manager, as applicable, will have
received all approvals required under any applicable Legal Requirements for the
lawful use and occupancy of the Gilbert Facility for the Permitted Use.
 
(b) Landlord shall assign, or shall cause to be assigned, to Tenant effective as
of the Commencement Date any warranties issued to Landlord in connection with
the Gilbert Repair Project or, alternatively, shall, at the request of Tenant,
exercise, or cause to be exercised, any rights or remedies available thereunder.
 
(c) If a Subsequent Settlement Condition is discovered, Tenant shall not be
responsible under Section 10.1 of the Lease for the repair of the Subsequent
Settlement Condition.
 
(d) If Tenant should at any time or times during the Term discover the existence
of a Subsequent Settlement Condition, Tenant shall give Landlord written notice
thereof (a “Gilbert Settlement Condition Notice”). Upon receipt of a Gilbert
Settlement Condition Notice, Landlord shall have a period of thirty (30) days,
or such longer period (not to exceed another thirty (30) days) as may be
reasonably needed to investigate the Subsequent Settlement Condition and
evaluate the cost of or feasibility of correcting the damage caused by the
Subsequent Settlement Event (the “Review Period”). At the end of the Review
Period, Landlord shall give written notice to the Tenant whether or not
Landlord, at Landlord’s sole cost and expense, shall repair the damage caused by
the Subsequent Settlement Condition (the “Repair Notice”).  If Landlord so
elects to repair a Subsequent Settlement Condition, Landlord shall proceed with
all due diligence to commence and promptly complete such repair and shall do so
in a good and workmanlike manner and in compliance with all applicable Legal
Requirements for such repairs and for the continuing lawful use and occupancy of
the Gilbert Facility and all portions thereof for the Permitted Use.  If
Landlord shall elect not to repair the damage caused by a Subsequent Settlement
Condition or shall fail to timely deliver a Repair Notice, then in such event
either Landlord or Tenant may to terminate the Lease with respect to the Gilbert
Facility by giving written notice to the other party of such election (the
“Termination Notice”) within sixty (60) days of the date of (or deadline for)
the Repair Notice. The Termination Notice shall specify the date on which the
Lease is to terminate as to the Gilbert Facility, which date shall be the last
day of the month occurring one hundred and eighty (180) days after date of the
Termination Notice. The termination of the Lease with respect to the
 

 
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Gilbert Facility pursuant to this Section 11(d) will be effective on the date
specified in the Termination Notice.
 
(e) If the Lease with respect to the Gilbert Facility is terminated as provided
in Section 11(d) above, the Purchase Option provided for in Section 25.16 of the
Lease shall be adjusted to remove the value of the Gilbert Facility (herein
agreed to be Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000.00)
from the Base Purchase Price (and all other amounts used in the definition of
“Base Purchase Price”).  In the event of such termination of the Lease with
respect to the Gilbert Facility, Landlord shall pay to Tenant the following: the
unamortized portion of all amounts Tenant has invested at the Gilbert Facility
for (i) capital expenditures to the Gilbert Facility’s land and improvements
prior to the date of the Termination Notice (including, but not limited to,
amounts expended therefor by Tenant under Sections 7.1 and 7.5 of the Lease),
and for (ii) FFF& E or FF&E having a net book value on Tenant’s records in
excess of Five Thousand Dollars ($5,000.00), individually, or Fifteen Thousand
Dollars ($15,000.00) in the aggregate with respect to such FFF & E or FF & E at
the Gilbert Facility, regardless of the net book value of each individual item
of such FFF & E or FF & E; any and all WARN ACT costs; and any other termination
fees incurred by Tenant in connection with the termination of the Lease with
respect to the Gilbert Facility.
 
(f) If because of a Subsequent Settlement Condition or Landlord’s repair of the
damage to the Gilbert Facility caused by a Subsequent Settlement Condition, any
residential units at the Gilbert Facility are out of service or not able to be
occupied by residents, the Base Rent allocable to the Gilbert Facility shall
proportionately abate for the period such units are out of service.
 
(g) Landlord agrees to indemnify, defend and hold harmless Tenant from and
against any and all repair costs relating to a Subsequent Settlement
Condition.  This indemnity shall not apply to matters discovered or occurring
after Tenant acquires title to the Gilbert Facility in the event of the exercise
of the Purchase Option by Tenant.
 
(h)            Landlord and Tenant acknowledge and agree that there could be
more than one Subsequent Settlement Condition at the Gilbert Facility during the
Term of the Lease and that the provisions of this Section 11 shall apply equally
to each such event unless and until the Lease is terminated with respect to the
Gilbert Facility as a result thereof in accordance with the provisions of this
Section 11.
 
12. EXHIBITS.  Exhibits E (Permitted Encumbrances) and G (Form of Security
Agreement) are agreed upon and attached hereto.
 
13. NO FURTHER MODIFICATIONS.  Except as specifically set forth herein, the
Lease shall remain in full force and effect as originally executed by Landlord
and Tenant.
 
13.1 COUNTERPARTS. 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.
 

 
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14. ENTIRETY. This Amendment represents the entire and final agreement of
Landlord and Tenant with respect to the subject matter hereof and supersedes all
prior negotiations, discussions or writings with respect thereto.
 
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment effective
as of the day and year first set forth above.
 
TENANT:
 
Date:_12/10/09_
EMERITUS CORPORATION, a Washington corporation

 
By: /s/ Eric Mendelsohn
Eric Mendelsohn
 
Title:           SVP Corporate Development
 

 
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STATE OF
WASHINGTON                                                                :
 
: ss
COUNTY OF                                KING                                :
 
On this, the 10th day of December, 2009, before me, the undersigned officer,
personally appeared Eric Mendelsohn, who acknowledged himself to be the SVP
Corporate Development of Emeritus Corporation, a Washington corporation
(“Company”), and being duly sworn according to law deposes and says that he, as
such officer, being authorized to do so, executed the foregoing Instrument for
the purposes therein contained, by signing the name of the Company by himself as
SVP Corporate Development.
 
IN WITNESS WHEREOF, I hereunto set my hand and official seal the day and year
first above written.
 
Notary Public:                                /s/ Melanie Jule Pennington
 
My Commission Expires:                                           07-09-2011
 

 
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LANDLORD:
 
Date:_12-10-09_
NATIONAL HEALTH INVESTORS, INC., a Maryland corporation

 
By:/s/ Kristin S. Gaines
Kristin S. Gaines
 
Title: Vice President, Operations
 
STATE OF _ TENNESSEE                                                      )
)
COUNTY OF RUTHERFORD                                                      )
 
Before me, Jessica S. Murphy, a Notary Public of said County and State,
personally appeared Kristin S. Gaines, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon oath,
acknowledged herself to be Vice President, Operations of National Health
Investors, Inc., a Maryland corporation, the within named bargainor, and that
she as such Vice President, Operations of the corporation, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation, and on its behalf, by herself as _ Vice President, Operations
of the corporation.
 
Witness my hand and seal, at Office in Murfreesboro, this 10th day of _December,
2009.
 
Notary Public                               /s/ Jessica S. Murphy
 
My Commission Expires:_ 07-21-2013
 
 

 

 
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EXHIBIT A
 
The following terms shall have the following meanings:
 
“Facility” or “Facilities” means individually or collectively as the context may
require each of the assisted living facilities listed on Schedule I, attached to
this Agreement.
 
“Medicaid” means the medical assistance program established by Title XIX of the
Social Security Act, as amended.
 
“Medicaid Receivable” means with respect to each Facility any account that
arises from the provision of assisted living services (and any services or sales
ancillary thereto) and that is payable pursuant to an agreement entered into
between Debtor or that Facility and a federal or state agency or other Person
administering Medicaid, pursuant to which the Debtor or that Facility agrees to
provide services or merchandise for patients under Medicaid in accordance with
the terms of such agreement and the Medicaid Regulations.
 
“Medicaid Regulations” means collectively (a) all federal statutes, (whether set
forth in Title XIX of the Social Security Act, as amended, or elsewhere)
affecting Medicaid, (b) all applicable provisions of all rules, regulations,
manuals, orders and administrative, reimbursement and other guidelines of any
governmental or regulatory authority promulgated pursuant to or in connection
with any of such federal statutes, (c) all state statutes and plans for medical
assistance enacted in connection with any such federal statutes, rules,
regulations, manuals, orders and guidelines, and (d) and all applicable
provisions of all rules, regulations, manuals, orders and administrative,
reimbursement and other guidelines of any governmental or regulatory authority
promulgated pursuant to or in connection with any of such state statutes, in
each case as such statutes, rules, regulations, manuals, orders and guidelines
may be supplemented, amended or otherwise modified from time to time .
 
“Medicare” means the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act, as amended.
 
“Medicare Receivable” means with respect to each Facility any account that
arises from the provision of assisted living services (and any services or sales
ancillary thereto) and that is payable pursuant to an agreement entered into
between Debtor or that Facility and a federal or state agency or other Person
administering Medicare, pursuant to which Debtor or that Facility agrees to
provide services or merchandise for patients under Medicare in accordance with
the terms of such agreement and the Medicare Regulations.
 
“Medicare Regulations” means collectively (a) all federal statutes (whether set
forth in Title XVIII of the Social Security Act, as amended, or elsewhere)
affecting Medicare and (b) all applicable provisions of all rules, regulations,
manuals, orders and administrative, reimbursement and other guidelines of any
governmental or regulatory

 
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authority promulgated pursuant to or in connection with any of such federal
statutes, in each case as such statutes, rules, regulations, manuals, orders and
guidelines may be supplemented, amended or otherwise modified from time to time.
 
The collateral consists of, and Debtor hereby grants to Secured Party a security
interest in and to, all of Debtor’s right, title and interest in the following
described property and property rights (and types of property) that arise from
or are located on, attached to or under or used in connection with the leasing
and/or operation of any of the Facilities (collectively, the “Collateral”):

1. All inventory in all of its forms, including, but not limited to, all central
supplies, linen, housekeeping and other supplies (collectively the “Inventory”).
 
2. All accounts, accounts receivable (regardless of source payment and
including, but not limited to, any healthcare receivable, if applicable,
Medicaid Receivable and if applicable, Medicare Receivable), notes, drafts,
acceptances, instruments, chattel paper, choses in action, documents, deposit
accounts, general intangibles, intangible personal property, things in action,
contract rights and other rights to receive the payment of money and other
consideration of any kind, however evidenced or designated, whether now or
hereafter existing and whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, loan agreements and other
contracts securing or otherwise relating to any of the foregoing (collectively
the “Receivables”).
 
3. All beds, linens, towels. televisions, carpeting, draperies and blinds,
telephones, computers, lamps, medical and rehabilitation equipment, wheelchairs,
laboratory equipment, diagnostic equipment, furniture, furnishings, food service
equipment, restaurant and kitchen equipment, medical equipment, heating and air
conditioning equipment, fixtures, other equipment, machinery and tangible
personal property of every description and kind, and all replacements or
substitutions thereto owned by Debtor, and all parts thereof and all accessions
thereto; provided, however, that with respect to any items that are leased and
not owned by Debtor, the Equipment shall, to the extent permitted by the terms
of the applicable lease, include the leasehold interest only of Debtor together
with any options to purchase any of said items and any additional or greater
rights with respect to such items that Debtor may hereafter acquire
(collectively the “Equipment”).
 
4. To the full extent transferable (and only to the extent any
necessary  governmental approval has been obtained), all Certificates of Need,
licenses, permits, registrations, certificates, consents, accreditations,
approvals and franchises owned by Debtor and necessary to operate any or each
Facility and any portion thereof.
 
5. All plans and surveys, including, without limitation, all “as built” plans,
plans relating to utilities, easements and roads, plats, specifications,
engineers' drawings, architectural renderings and similar items owned by Debtor.
 
6. Investment Property as defined in the Uniform Commercial Code as adopted in
the State of Washington (the “Code”).
 

 
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7. All interest of Debtor in any Capital Improvements Reserve Account which may
be created pursuant to the Capital Improvement Reserve Agreement.
 
8. Subject to applicable laws governing the confidentiality of resident and
employee records, all ledger sheets, records (including but not limited to
resident records), files, data, printouts, data bases, programs and books of
account relating to the Collateral, whether in the form of writings,
photographs, microfilm, microfiche or electronic media, together with all
computer software necessary to access, use, create, maintain or process the
foregoing on electronic media (collectively the “Documentation”).
 
9. All proceeds of any and all of the foregoing Collateral, including proceeds
that constitute property of the types described as Collateral, and, to the
extent not otherwise included, all (a) payments under insurance (whether or not
Secured Party is the loss payee thereof), or any indemnity, warranty or guaranty
payable by reason of loss to or otherwise with respect to any of the foregoing
Collateral and (b) cash;
 
For the avoidance of doubt the parties acknowledge and agree that the Debtor is
the owner, tenant, manager and operator of other assisted living and long term
care facilities and that the Collateral shall not include (i) the name
“Emeritus” or any variation thereof or (ii) any property of the Debtor which is
used commonly in conjunction with the operation of the Facilities and any other
assisted living or long term care facility or facilities owned, leased, managed
or otherwise operated by Debtor.
 

 
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SCHEDULE I
 
SCHEDULE OF FACILITIES

The name and address of the Facilities as of the Effective Date are set forth
below (it being understood and agreed that the names of the Facilities may be
changed by Debtor while this Agreement is in affect but such changes shall not
affect the validity or priority of the security interest granted to Secured
Party hereunder):

Emeritus at Gilbert fka The Place at Gilbert, Arizona
845 N. El Dorado Drive, Gilbert, AZ
 
Emeritus at Glendale fka The Place at Glendale, Arizona
6735 W. Hillcrest Road, Glendale, AZ
 
Emeritus at Tanque Verde fka The Place at Tanque Verde, Arizona
9050 E. Tanque Verde
Road,                                                      Tanque Verde, AZ

Emeritus at Tucson fka The Place at Tucson, Arizona
2700 W. Ina Road, Tucson, AZ
 
Emeritus at Conway fka The Place at Conway, South Carolina
872 Singleton Ridge, Conway, SC
 
Emeritus at Gallatin fka The Place at Gallatin, Tennessee
400 Hancock, Gallatin, TN
 
Emeritus at Kingsport fka The Place at Kingsport, Tennessee
2424 N. John B. Dennis Hwy, Kingsport, TN
 
Emeritus at Tullahoma fka The Place at Tullahoma, Tennessee
801 Wilson Avenue, Tullahoma, TN
 

 

 
 

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EXHIBIT E
 
PERMITTED ENCUMBRANCES
 
The Place at Gilbert, Gilbert, Arizona
 
1.  
The liabilities and obligations imposed upon said land by reason of: (a)
inclusion thereof within the boundaries of the Salt River Project Agricultural
Improvement and Power District; (b) membership of the owner thereof in the Salt
River Valley Water Users’ Association, an Arizona corporation; and (c) the terms
of any Water Right Application made under the reclamation laws of the United
States for the purpose of obtaining water rights for said land.

 
2.  
Taxes and assessments, general and special, for the year 2009, a lien but not
yet due and payable.

 
3.  
The following contained in the Patent from the United States of America:
“Subject to any vested and accrued water rights for mining, agricultural,
manufacturing or other purposes, and right to ditches and reservoirs used in
connection with such water rights as may be recognized and acknowledged by the
local customs, laws and decisions of courts; and there is reserved from the
lands hereby granted, a right-of-way thereon for ditches or canals constructed
by the authority of the United States of America.”

 
4.  
A Right-of Way Easement for telecommunications as recorded in the Maricopa
County Records at Recorder’s No. 93-794661.

 
5.  
Easements and rights incident thereto for public utilities as shown on Final
Plat of El Dorado Lakes Golf Community recorded in Book 366 of Maps, Page 15 in
the Maricopa County Records (the locations of these easements are not shown on
the Survey (defined below)).

 
6.  
Declaration of Covenants, Conditions and Restrictions of El Dorado Lakes Golf
Club Community recorded in the Maricopa County Records at Recorder’s No.
94-71825.

 
7.  
Declaration of Easements, Covenants, Conditions and Restrictions recorded in the
Maricopa County Records at Recorder No. 95-716888.

 
8.  
Access Easement Agreement recorded in the Maricopa County Records at Recorder
No. 98-129773 (the location of this easement is not shown on the Survey).

 
9.  
Easements and recitals affecting the land and for purposes stated and incidental
purposes as shown on the Final Plat of Sterling House Assisted Living, Gilbert,
Arizona recorded in Book 472 of Maps, Page 18 in the Maricopa County Records.

 
10.  
Underground Power Easement recorded in the Maricopa County Records at Recorder
No. 98-649315 (the location of this easement is not shown on the Survey).

 

 
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11.  
Variations between location of block wall and location of record lines as
disclosed by Survey prepared by Joseph C. McGill, Registered Land Surveyor of
Neil/McGill Consultants, Inc., dated October 1998 (the “Gilbert Survey”).

 
The Place at Glendale, Glendale, Arizona
 
1.  
The following contained in the Patent from the United States of America:
“Subject to any vested and accrued water rights for mining, agricultural,
manufacturing or other purposes, and right to ditches and reservoirs used in
connection with such water rights as may be recognized and acknowledged by the
local customs, laws and decisions of courts; and there is reserved from the
lands hereby granted, a right-of-way thereon for ditches or canals constructed
by the authority of the United States of America.”

 
2.  
Taxes and assessments, general and special, for the year 2009, a lien but not
yet due and payable.

 
3.  
Easements and recitals affecting the land and for purposes stated and incidental
purposes as shown on the Amended Map of Dedication for Hillcrest Ranch (Phase
I)  recorded in Book 349 of Maps, Page 34 in the Maricopa County Records.

 
4.  
Non-Build Easement Agreement recorded in the Maricopa County Records at Recorder
No. 97-27889.

 
5.  
Encroachment of wall column from property to the west onto subject property .38
feet as disclosed in Deed recorded in the Maricopa County Records at Recorder
No. 97-849228.

 
6.  
Easement Agreement recorded in the Maricopa County Records at Recorder No.
97-755649 (which easement is blanket in nature).

 
7.  
Declaration of Easements, Covenants, Conditions and Restrictions recorded in the
Maricopa County Records at Recorder No. 97-849229 (which easements are blanket
in nature).

 
8.  
Site Development Agreement recorded in the Maricopa County Records at Recorder
No. 97-849230 (which easements are blanket in nature).

 
9.  
Utility Easement recorded in the Maricopa County Records at Recorder No.
98-389484.

 
10.  
Declaration of Covenants, Conditions and Restrictions for Hillcrest Ranch
recorded in the Maricopa County Records at Recorder No. 89-5398, as amended by
(i) First Amendment to Declaration of Covenants, Conditions and Restrictions for
Hillcrest Ranch recorded in the Maricopa County Records at Recorder No.
94-722966 and (ii) Tract Declaration Hillcrest Ranch recorded in the Maricopa
County Records at Recorder No. 97-755647 (which easements are blanket in
nature).

 
11.  
The following encroachments as disclosed by the survey prepared by Scott E.
Ohana, Registered Land Surveyor, dated November 5, 2009 (the “Glendale Survey”):
(i) block wall up to 1.1 feet south of the southerly line, (ii) curb an
undetermined distance south of

 

 
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southerly line, (iii) block wall up to 1.5 feet west of westerly line, (iv)
variations between locations of block walls and column and locations of westerly
line, (v) encroachments on Hillcrest Boulevard of walks (up to 4.1 feet), curbs
(undetermined) and planter walls (undetermined), (vi) curb an undetermined
distance west and east of easterly lines, (vii) block wall up to 1.1 feet west
of easterly line, (viii) access drive in southerly portion of premises crosses
easterly line and (ix) building violates Non-Build Easement Agreement recorded
as No. 97-27899 up to .5 feet
 
The Place at Tanque Verde, Tucson, Arizona
 
12.  
The following contained in the Patent from the United States of America recorded
March 8, 1916 in Deed Book 61, Page 162: “Subject to any vested and accrued
water rights for mining, agricultural, manufacturing or other purposes, and
right to ditches and reservoirs used in connection with such water rights as may
be recognized and acknowledged by the local customs, laws and decisions of
courts; and there is reserved from the lands hereby granted, a right-of-way
thereon for ditches or canals constructed by the authority of the United States
of America.”

 
13.  
Taxes and assessments for the second half of 2009, a lien but not yet due and
payable.

 
14.  
Easements, restrictions, reservations and conditions as set forth on the Plat of
Subdivision recorded in Book 15, Page 40 in the Pima County Records.

 
15.  
Matters shown on survey recorded in the Pima County Records in Book 36 of
Surveys at Page 55: “the west line on said survey, being the east line of
caption property, has a different bearing.”

 
16.  
Matters shown on survey recorded in the Pima County Records in Book 47 of Maps
and Plats at Page 1: “the west line on said survey, being the east line of
caption property, has a different bearing.”

 
17.  
Right of Way Easement for electrical purposes recorded in the Pima County
Records at Docket 10809, Page 1126.

 
18.  
Memorandum of Agreement between Alternative Living Services and Cox
Communications Tucson recorded in the Pima County Records in Docket 11008 at
Page 268.

 
19.  
Memorandum of Agreement between RGL Development and Cox Communications Tucson
recorded in the Pima County Records in Docket 12060 at Page 3820.

 
20.  
The following encroachments as disclosed by the survey prepared by Cella Barr
Associates, Inc., dated February, 1999 (the “Tanque Verde Survey”): (i)
encroachment driveway and related improvements onto the right of way of Tanque
Verde and Woodland Roads and (ii) encroachment of traffic signal control boxes
onto subject property near the northeast and northwest corners.

 

 
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The Place at Tucson, Tucson, Arizona
 
21.  
The following contained in the Patent from the United States of America recorded
November 5, 1923 in Deed Book 95, Page 21: “Subject to any vested and accrued
water rights for mining, agricultural, manufacturing or other purposes, and
right to ditches and reservoirs used in connection with such water rights as may
be recognized and acknowledged by the local customs, laws and decisions of
courts; and there is reserved from the lands hereby granted, a right-of-way
thereon for ditches or canals constructed by the authority of the United States
of America.”

 
22.  
Taxes and assessments for the second half of 2009, a lien but not yet due and
payable.

 
23.  
Declaration of Restrictions and Covenants Running with the Land Development Plan
recorded in the Pima County Records at Docket 8038, Page 2739.

 
24.  
Easement for access, sewers, utilities and drainage recorded in the Pima County
Records at Docket 8044, Page 3710.

 
25.  
No Access Easement recorded in the Pima County Records at Docket 8044, Page
3721.

 
26.  
Access Control Easement recorded in the Pima County Records at Docket 10762,
Page 1154.

 
27.  
Water Easement recorded in the Pima County Records at Docket 10786, Page 226.

 
28.  
Right-of-Way Easement for electrical purposes recorded in the Pima County
Records at Docket 10852, Page 1409.

 
29.  
The following encroachments as disclosed by the survey prepared by Rick
Engineering company, dated December 19, 1998 (the “Tucson Survey”): (i) overhead
electrical easement along the south property line, (ii) street lights in the
southwest corner, (iii) existing square power pole north of the southwest
corner, (iv) flagpole, signage and landscaping in the southwest corner, (v) fire
hydrant north of the south property line, east of the southwest entrance, (vi)
headwall at the southeast corner and (vii) encroachment of a driveway and
related improvements onto the right of way for Ina Road and Shama Wing Lane.

 
The Place at Conway, Conway, South Carolina
 
30.  
Declaration of Covenants, Conditions and Restrictions for Delta Development,
LLC, a South Carolina limited liability company recorded in Deed Book 1971, Page
874 in the Horry County Records, as amended by the Partial Release of
Restrictive Covenants recorded in Deed Book 1999, Page 857 in the Horry County
Records (the location of these easement are not shown on the Survey prepared by
J. Donald Rowels, Jr. R.L.S. of Cox and Dinkins, Inc. Engineers and Surveyors,
dated October 23, 1998 (the “Conway Survey”).

 
31.  
Horry County Real Estate Taxes for the year 2009, a lien not yet due and
payable.

 

 
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32.  
Easement for access and storm drainage purposes recorded in Deed Book 1999, Page
867 in the Horry County Records.

 
33.  
Conveyance of water and sewer systems to Grand Strand Water and Sewer Authority
recorded in Deed Book 2052, Page 202 in the Horry County Records.

 
34.  
Drainage Easement recorded in Deed Book 2070, Page 938 in the Horry County
Records (the location of this easement is not shown on the Survey).

 
35.  
Right-of-Way Easement recorded in Deed Book 2070, Page 937 in the Horry County
Records (the location of this easement is not shown on the Survey).

 
36.  
Distribution Right-of-Way for electrical purposes recorded in Deed Book 1969,
Page 1428 in the Horry County Records (the location of this easement is not
shown on the Survey).

 
37.  
Development and use restrictions and conditions imposed by federal, state and
local laws with respect to portions of the property shown as wetlands on the
Survey of Rivertown Medical Park, prepared for Delta Development, LLC by
Associated Land Surveyors, recorded in Plat Book 152, Page 147 in the Horry
County Records.

 
38.  
Setback lines and easements as shown on the Survey of Rivertown Medical Park,
prepared for Delta Development, LLC by Associated Land Surveyors, recorded in
Plat Book 152, Page 147 and Plat Book 152, Page 136 in the Horry County Records.

 
The Place at Gallatin, Gallatin, Tennessee
 
39.  
2010 general or special taxes and assessments for the County of Sumner and City
of Gallatin not yet due and payable for Map-Par.126P-J-15.01 and 126P-J-15.01 P.

 
40.  
Matters shown on the plan of recorded in the Register’s Office of Sumner County
in Book 16 at Page 348.

 
41.  
The following encroachment as disclosed by the survey prepared by Timothy R.
Buchanan, Registered Land Surveyor of Buchanan Land Surveying, dated November
19, 1998 (the “Gallatin Survey”): fence encroaches on Tennessee Highway.

 
The Place at Kingsport, Kingsport, Tennessee
 
42.  
Deed of Easement for underground utility purposes recorded in Book 1349C, Page
492 of Register’s Office in Sullivan County.

 
43.  
Deed of Easement for ingress and egress purposes recorded in Book 1349C, Page
498 and re-recorded in Book 1349C, Page 504 of Register’s Office in Sullivan
County.

 
44.  
Plan of Record recorded in Book 39, Page 48 of Register’s Office in Sullivan
County.

 

 
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45.  
2010 general or special taxes and assessments for the County of Sullivan and
City of Kingsport not yet due and payable for Map-Par.047-011.17 and 047-011.17
P.

 
46.  
The following encroachments as disclosed by the survey prepared by Daryl W.
Perdue, Registered Land Surveyor of J.E. Horton & Associates, dated November 4,
1998 (the “Kingsport Survey”): (i) sign and landscape encroach onto John B.
Dennis Highway and (ii) block building encroaches 4.3 feet on proposed right of
way.

 
The Place at Tullahoma, Tullahoma, Tennessee
 
47.  
Plat of Harton Heights Subdivision recorded in Trust Deed Book 57, Page 230 of
Register’s Office in Coffee County (the location of these easements are not
shown on the Survey (defined below)).

 
48.  
Bulk Rate Agreement for Cable Television Service recorded in Trust Deed Book
T446, Page 389 of Register’s Office in Coffee County.

 
49.  
Agreement for Release and Termination of Utility Easement recorded in Book 263,
Page 212 and in Deed Book 268, Page 127 of Register’s Office in Coffee County.

 
50.  
2010 general or special taxes and assessments for the County of Coffee and City
of Tullahoma not yet due and payable for Map-Par.124P-D-7.

 
The following encroachment as disclosed by the survey prepared by Jeffrey K.
Clark, Registered Land Surveyor, dated February 25, 1999 (the “Tullahoma
Survey”): guy anchor encroachment on easterly line.
 

 
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EXHIBIT G
 
FORM OF SECURITY AGREEMENT
 
SECURITY AGREEMENT
 
Debtor:                                                                           Secured
Party:
Emeritus Corporation                                                  National
Health Investors, Inc.
3131 Elliott Avenue                                                     222
Robert Rose Drive
Suite
500                                                                       Murfreesboro,
Tennessee 37129
Seattle,
WA  98121-1031                                                                           
Attention:  Eric Mendelsohn                                   
Attention:  Kristin S. Gaines
 
THIS SECURITY AGREEMENT (as the same may be amended and/or restated from time to
time, this “Agreement”) is entered into by and between EMERITUS CORPORATION, a
Washington corporation (herein “Debtor”), and NATIONAL HEALTH INVESTORS, INC., a
Maryland corporation (herein the “Secured Party”) as of the _____ day of
____________________, 2010 (the “Effective Date”).
 
R E  C I  T  A L S:
 
WHEREAS, Secured Party, as Landlord, and Debtor, as Tenant, have entered into
that certain Master Lease (as the same may be amended and/or restated from time
to time,  the “Master Lease”) dated October 13, 2009 whereunder Secured Party
has leased to Debtor the Land, the improvements thereon, equipment, fixtures,
furnishings and other property interests which comprise the eight senior living
facilities listed on Schedule I, attached hereto and made a part hereof; and
 
WHEREAS, the Master Lease requires that Tenant pay Base Rent to Secured Party,
Additional Charges and other amounts which may become due pursuant to the Master
Lease or Capital Improvement Reserve Agreement; and
 
WHEREAS, the Master Lease requires the Debtor, as Tenant, to grant a security
interest to Secured Party in certain property of Debtor relating to or arising
from the Facilities to secure the payment of Base Rent and other amounts and
obligations of Debtor as Tenant; and
 
WHEREAS, Debtor is willing to grant the security interests created hereunder in
favor of Secured Party as security for the Obligations, as defined.
 
NOW, THEREFORE, in consideration of the premises and the mutual promises and
covenants hereinafter set forth, the parties hereby agree as follows:
 
10. Definitions.  Capitalized terms not otherwise defined in this Agreement,
including its preamble, recitals and exhibits, shall have the meanings set forth
in the Master Lease.  All
 

 
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capitalized terms shall be equally applicable to the singular and plural forms
thereof and to any gender form thereof.
 
11. Security Interest.  As security for the repayment of the Obligations, Debtor
hereby assigns and grants to Secured Party a security interest in and to all of
Debtor’s rights in and to the property described on Exhibit A attached hereto
and incorporated herein by this reference now existing or hereafter arising, and
the proceeds thereof (collectively, the “Collateral”).  The rights of Secured
Party in the Collateral are limited to those of a secured party.  The granting
of security interests by Debtor hereunder in the Collateral shall not be deemed
to be an assignment of a payment within the meaning of 42 U.S.C. §1395g or 42
U.S.C. §1396a (32).
 
12. Obligations.  The security interest granted herein by Debtor secures and
shall secure the payment of all (i) Base Rent and Additional Charges due or to
become due under the Master Lease, (ii) all amounts due or to become due for the
Cap Ex Account pursuant to the Capital Improvement Reserve Agreement and (iii)
any and all other amounts for which Debtor is or may become liable to Secured
Party arising in the course of performing or meeting any other obligation of
Debtor under the Master Lease.
 
For purposes of this Agreement, all such obligations secured by the Collateral
shall be referred to as “Obligations”.
 
13. Debtor’s Representations and Warranties to Secured Party.  Debtor hereby
represents and warrants to Secured Party that the following facts are true and
correct as of the Effective Date:
 
(a) Debtor is the true and lawful owner of the Collateral;
 
(b) Debtor has a good right to grant a security interest in the Collateral and
to execute this Agreement.
 
(c) No advances, liens, security interest or encumbrances exist against the
Collateral except as granted to Secured Party hereunder.
 
14. Covenants to Secured Party.  Debtor hereby covenants and agrees that until
the Obligations shall have been performed and paid in full or unless Debtor
shall have received the prior written consent of Secured Party:
 
(a) Debtor will keep the Collateral free from any adverse lien, security
interest or encumbrance (other than the security interest granted herein) and in
good order and repair and will not waste or impair or materially diminish the
value of the Collateral or any part thereof; Debtor will not use the Collateral
in violation of any of the Legal Requirements.
 
(b) Debtor will not sell or offer to sell or otherwise transfer, dispose of or
encumber the Collateral, or any interest therein (i) for less than its
reasonable fair market value other than sales in the normal course of operation
for senior living communities, or (ii) in such manner as to materially diminish
the value of the Collateral.
 

 
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(c) Debtor will maintain insurance with respect to the Collateral as set forth
in the Master Lease.
 
(d) Subject to Secured Party filing any necessary financing and continuation
statements, Secured Party’s security interest in the Collateral is now and at
all times hereafter shall be perfected and Secured Party shall have a lien
having priority over any other liens on the Collateral granted by Debtor other
than those liens, if any, permitted by the terms of the Master Lease.
 
(e) Secured Party (by any of its officers, employees and/or agents) shall have
the right at any time or times during Debtor’s usual business hours, but subject
to applicable laws governing the confidentiality of resident and employee
records, to inspect the Collateral and all related records (and the premises
upon which it is located) and all financial records and to verify the amount and
condition of the Collateral or any other matter whether or not relating to the
Collateral.  After the occurrence and during the continuation of an Event of
Default, all costs, fees and expenses incurred by Secured Party, or for which
Secured Party has become obligated, in connection with such inspection and/or
verification shall be payable immediately by Debtor to Secured Party.
 
(f) Subject to Debtor’s due contest right set forth in the Master Lease, Debtor
agrees to pay all taxes, charges, transfer fees and assessments against the
Collateral and to do all things necessary to preserve and maintain the value
thereof and Debtor’s ability to collect its accounts.
 
(g) In its sole and absolute discretion without waiving or releasing any
obligation, liability or duty of Debtor under this Agreement or the Master
Lease, Secured Party may at any time or times hereafter, but shall be under no
obligation to do so, pay, acquire and/or accept an assignment of any security
interest, lien, encumbrance or claim asserted by a person against the Collateral
if and to the extent such security interest, line, encumbrance or claim is not
otherwise permitted by the terms of the Master Lease.  All reasonable sums paid
by Secured Party in respect thereof and all costs, fees and expenses, including
attorneys’ fees, court costs, expenses and other charges relating thereto
incurred by Secured Party on account thereof shall be payable immediately by
Debtor to Secured Party.
 
(h) Secured Party shall be required to file any financing or continuation
statements required to perfect its security interest in the Collateral and upon
expiration or earlier termination of the Lease and payment in full of the
Obligations shall be required to file any termination statements with respect to
all such financing/continuation statements; provided, however, in the event
Secured Party fails to file a termination statement upon request of Debtor,
Debtor shall be authorized to file the same on behalf of Secured Party. Upon
request of Secured Party, Debtor will sign and execute alone or with Secured
Party any financing statement or other document or procure any document and pay
all necessary costs to protect the security interest under this Agreement
against the interest of third Persons not otherwise permitted by the terms of
the Master Lease. Debtor will pay the cost of filing the same in all public
offices wherever filing is deemed by Secured Party to be necessary or
desirable.  Debtor further agrees to pay all costs and fees for filing any
termination statements.  In connection with the foregoing, it is agreed and
understood between the parties hereto (and Secured Party is hereby authorized to
 

 
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carry out and implement the following agreements and understandings and Debtor
hereby agrees to pay the costs thereof) that Secured Party may, at any time or
times, file as a financing statement any counterpart of this Agreement signed by
Debtor if Secured Party shall elect so to file.
 
(i) Debtor will defend the Collateral against any claims and demands of all
Persons at any time claiming the same or any interest therein.
 
(j) Debtor will permit Secured Party and its agents, representatives and
employees to enter upon or into any premises where the Collateral and/or the
records concerning the Collateral may be located without being guilty of a
trespass.  Secured Party shall be permitted to examine the Collateral and such
records relating thereto.  Debtor will furnish upon request all pertinent
information regarding collateral.  Debtor will transmit to Secured Party
promptly all information that it may have or receive with respect to the
Collateral that might in any way materially diminish the value of the Collateral
or Secured Party’s rights or remedies with respect thereto. Debtor and Secured
Party shall comply with all Privacy Standards relating to protected health
information as provided in Section 22.4 of the Master Lease.
 
(k) If any documented security, certificate of title or similar document is, at
any time and pursuant to the laws of any jurisdiction, issued or outstanding
with respect to the Collateral or any part thereof , Debtor shall promptly
advise Secured Party thereof, and Debtor shall promptly cause the interest of
Secured Party to be properly noted thereon and Debtor will further promptly
deliver to Secured Party any such certificate of title or similar document
issued or outstanding at any time with respect to such Collateral.  If any
instruments, chattel paper, money or monies or documents are, at any time or
times, included in the Collateral, whether as proceeds or otherwise, Debtor will
promptly deliver the same to Secured Party upon demand therefore by Secured
Party.
 
15. Special Representations, Warranties and Agreements with respect to
Receivables.  With respect to Receivables (as defined on Exhibit A hereto).
Debtor represents warrants and agrees with Secured Party as follows:
 
(a) As of the time any Receivable becomes subject to Secured Party’s Security
Interest, including, without limitation, as of each time any specific assignment
or transfer or identification is made to Secured Party of any Receivable, Debtor
shall be deemed to have warranted as to each and all of such Receivables that
each Receivable and all papers and documents relating thereto are genuine and in
all respects what they purport to be; that each Receivable is valid and
subsisting and arises out of a bona fide sale of goods sold and delivered, or in
the process of being delivered, or out of and for services theretofore actually
rendered, to the debtor named in the Receivable (each a “Receivable Debtor”);
that the amount of the Receivable represented as owing is the correct amount
actually and unconditionally owing except for normal cash discounts, Medicaid
overpayment recoupments occurring in the ordinary course of business and
allowances for bad or doubtful accounts (referred to as contractual allowances
with respect to Medicaid residents) established by Debtor in the ordinary course
of business and in accordance with generally accepted accounting principals or
applicable Medicaid reimbursement requirements, is not disputed, and except for
such normal cash discounts is not subject to any setoffs, credits, deductions or
counter-charges; that Debtor is the owner thereof,
 

 
4

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free and clear of all liens, encumbrances and security interest of any nature
whatsoever (except for the security interest of Secured Party hereunder); and
that Debtor has no notice of or reason to believe that the Receivable Debtor is
subject to any pending bankruptcy proceeding, insolvency proceeding or
operations of any creditors committee.
 
(b) Debtor will hold in Debtor’s executive office, or such other location
approved by Secured Party, and make available to Secured Party as requested,
subject to applicable laws governing the confidentiality of resident records, so
long as any Obligations remain unpaid, all of Debtor’s records containing any
entries as to Receivables, including details of sale, delivery, payment and
other material information and, subject to applicable laws governing the
confidentiality of resident records, Secured Party shall at all reasonable times
have full access to and the right to examine and audit Debtor’s books and
records, and to make copies of pertinent portions thereof at Secured Party’s
expenses, prior to the occurrence or continuation of an Event of Default and at
Debtor’s expense from and after the occurrence and during the continuation of an
Event of Default.
 
(c) Upon the occurrence and during the continuation of any Event of Default and
upon Secured Party’s request, Debtor will notify its Receivable Debtors to make
payment of any or all Receivable or Receivables directly to Secured Party or to
a bank designated by Secured Party, the deposits of which are insured by the
Federal Deposit Insurance Corporation, pursuant to an arrangement whereby said
bank receives payments on Receivables for deposit into a collection account in
Debtor’s name and thereafter transfers all collected amounts to a collateral
account in Secured Party’s name.  Any proceeds of Receivables so transmitted to
Secured Party or to said bank may be deposited in a collateral account in the
name of Secured Party and under its dominion and control pending their
application to the Obligations, but Debtor acknowledges that the maintenance of
such account is solely for convenience in administering the procedures
established by this Section 6(c) and that Debtor has not and shall not have any
right, title or interest in said account or in the amounts at any time to the
credit thereof.  All proceeds so received by Secured Party and or said bank
shall be applied to the Obligations which by their terms are then due, such
application to be made to such portions of the Obligations as Secured Party may
determine in its sole discretion, with any excess amounts remitted by Secured
Party or said bank to Debtor. Subject to the foregoing provisions of this
Section 6(c) and to the rights reserved to Secured Party elsewhere in this
Agreement and prior to the occurrence and continuation of an Event of Default,
Debtor shall have the right, at Debtor’s expense, to enforce, collect and
receive all amounts owing on Receivables. Upon the occurrence and during the
continuation of an Event of Default and upon receipt of a written demand from
Secured Party, Debtor shall take such action to ensure that all checks and other
forms of remittances received by Debtor on Receivables shall not be commingled
with Debtor’s other property but shall be segregated, held by Debtor in trust
for Secured Party as Secured Party’s exclusive property and immediately
delivered by Debtor to Secured Party in the identical form as that in which
received with proper endorsements. Debtor will accompany each such transmission
of proceeds to Secured Party with a report in such form as Secured Party may
require identifying the Receivables to which such proceeds apply.  In the event
any Receivable Debtor shall also be indebted to Debtor in any other respect and
such Receivable Debtor shall make payment without designating the particular
indebtedness against which it is to apply, such payment shall be conclusively
presumed to be payment on the Receivable of such Receivable Debtor.  In
administering the collection of proceeds as herein provided, Secured Party or
the bank
 

 
5

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designated by it may accept checks or drafts in any amount and bearing any
notation without incurring liability to Debtor for so doing.
 
16. Debtor’s Use of  the Collateral.  Prior to the occurrence and continuation
of an Event of Default and to the election by Secured Party to exercise its
rights under the Master Lease to terminate Debtor’s right to possession of the
Premises or to terminate the Master Lease as a result of such Event of Default,
Debtor may use the Collateral in the ordinary course of Debtor’s business;
provided, upon the occurrence and during the continuation of an Event of Default
and the election by Secured Party to exercise its rights under the Master Lease
to terminate Debtor’s right to possession of the Premises or to terminate the
Master Lease as a result of such Event of Default, Debtor’s right to so use the
Collateral shall terminate until further notice from Secured Party.
 
17. Events of  Default.  The term “Event of Default”, whenever used in this
Agreement, shall mean that occurrence of an Event of Default as defined in the
Master Lease.
 
18. Remedies.  In conjunction with the election by Secured Party to exercise its
rights and remedies under the Master Lease to terminate Debtor’s right to
possession of the Premises or to terminate the Master Lease upon the occurrence
and during the continuation of an Event of Default thereunder, Secured Party
shall have the following remedies hereunder:
 
(a) Upon the occurrence and during the continuation of any Event of Default, at
the option of Secured Party, Secured Party shall have and may exercise any or
all of the rights and remedies of a secured party under the Code, and as
otherwise contractually granted herein under any applicable law or under any
other agreement executed by Debtor in favor of Secured Party, including, without
limitation, the right and power to sell, at public or private sale or sales, or
otherwise dispose of  or utilize such portion of the Collateral and any part or
parts thereof in any manner authorized or permitted under the Code after the
occurrence of an Event of Default, and to apply the proceeds thereof toward
payment of any costs and expenses and attorneys’ fees and legal expenses thereby
incurred by Secured Party and toward payment of the Obligations, from time to
time, in such order or manner as Secured Party may elect in its sole discretion.
 
(b) As an essential part of the bargained-for consideration running to Secured
Party, Debtor hereby expressly grants to Secured Party the contractual right to
purchase any or all of the Collateral which is not already owned by Secured
Party at any sale any time after ten (10) days’ notice of such sale shall have
been sent to Debtor by Secured Party.  Debtor agrees that if such notice of the
sale is delivered in accordance with the terms of this Agreement at least ten
(10) days before the time of the proposed sale or disposition, such notice shall
be deemed reasonable and shall fully satisfy any requirement of giving notice,
and the proposed sale may take place any time after such ten (10) day period
without the necessity of sending another notice to Debtor.  Secured Party may
postpone and reschedule any proposed sale at its option without the necessity of
giving Debtor further notice of such fact as long as the rescheduled sale occurs
within sixty (6) days of the originally scheduled sale.
 
(c) The right of Secured Party to take possession or control of the Collateral
upon the occurrence and during the continuation of an Event of Default may be
exercised
 

 
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without resort to any court proceeding or judicial process whatever and without
any hearing whatever thereon.
 
(d) All recitals in any instrument of assignment or any other document or paper
executed by Secured Party incident to sale, transfer, assignment or other
disposition or utilization of the Collateral or any part thereof hereunder shall
be sufficient to establish full legal propriety of the sale or other action
taken by Secured Party or of any fact condition or thing incident thereto, and
all prerequisites of such sale or other action shall be presumed conclusively to
have been performed or to have occurred.
 
(e) Upon disposition by Secured Party of any property in which Secured Party has
a security interest granted hereunder, Debtor shall be and remain liable for any
deficiency; and Secured Party shall account to Debtor for any surplus, but
Secured Party shall have the right to apply all or any part of such surplus to
(or to hold the same as a reserve against) all or any of the Obligations,
whether or not they or any of them be then due,  and in such order of
application as Secured Party may from time to time elect.
 
(f) All right to marshalling of assets of Debtor, including any such right with
respect to the Collateral, are hereby waived by Debtor.
 
(g) In addition to the foregoing provisions, upon the occurrence and during the
continuation of an Event of Default, and upon Secured Party’s demand, Debtor
agrees to assemble the Collateral at its usual place of business and make same
available to Secured Party immediately.
 
19. Secured Party’s Powers and Duties with Respect to Collateral.
 
(a) Secured Party shall be under no duty to pursue collection of any amount that
may be or become due in connection with any of the Collateral now or hereafter
pledged hereunder, to realize on the Collateral, to keep the same insured, or to
do anything for the enforcement and collection of the Collateral or the
protection thereof.
 
(b) NOT LIMITING THE GENERALITY OF ANY OF THE FOREGOING BUT IN AMPLIFICATION OF
THE SAME, SECURED PARTY SHALL NOT BE IN ANY WAY LIABLE TO OR RESPONSIBLE FOR ANY
DIMINUTION IN THE VALUE OF, OR REDUCTION IN THE PROCEEDS REALIZED FROM, THE
COLLATERAL FROM ANY CAUSE WHATSOEVER EXCEPT TO THE EXTENT THE SAME ARISES SOLELY
AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SECURED PARTY.
 
20. Expenses and Indemnity.  Debtor will, upon demand, pay to Secured Party
forthwith the amount of all reasonable expenses, including reasonable attorney’s
fees and legal expenses, incurred by Secured Party upon the occurrence of an
Event of Default in seeking to collect or enforce any rights in the
Collateral.  Debtor agrees to indemnify Secured Party from and against any and
all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the gross
negligence or willful misconduct of Secured Party.
 

 
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21. General Authority.  Effective immediately but exercisable by Secured Party
(or by any Person designated by Secured Party), only upon the occurrence and
during the continuation of an Event of Default and only in the event that Debtor
fails, upon request, to take such actions and/or execute such documents as
Secured Party may reasonably request in order to allow Secured Party to exercise
its rights and remedies hereunder, Debtor hereby irrevocably appoints Secured
Party (or any Person designated by Secured Party) as Debtor’s duly authorized
attorney in fact, which appointment is hereby coupled with an interest, with
full power of substitution, in the name of Secured Party or the name of Debtor,
for Secured Party’s sole use and benefit, but at Debtor’s cost and expense, to
exercise at any time from and after the occurrence and during the continuation
of an Event of Default and to the extent Secured Party has elected to exercise
its remedies under the Master Lease to terminate Debtor’s right to possession of
the Premises or to terminate the Master Lease all or any of the following powers
solely with respect to all or any of the Collateral and not with respect to any
other assets of Debtor:
 
(a) To sell, transfer, assign or otherwise deal in or with the Collateral as
fully and effectively as if Secured Party were the absolute owner thereof;
 
(b) To retain, collect, demand, sue for collection, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof;
 
(c) To receive, take endorse, assign and/or deliver in Secured Party’s name or
Debtor’s name any and all checks, notes, drafts, documents, instruments and
other property relating to the Collateral;
 
(d) To transmit to Receivable Debtors notice of Secured Party’s interest in
Receivables and to request from Receivable Debtors at any time, in Debtor’s name
or in Secured Party’s name or the name of Secured Party’s designee, information
concerning the Receivables and the amounts owing thereon;
 
(e) To receive and open all mail addressed to Debtor and to retain all mail
pertaining to the Collateral;
 
(f) To take or bring, in Debtor’s name or Secured Party’s name, all steps,
actions, suits or proceedings deemed by Secured Party necessary or desirable in
connection with the Collateral;
 
(g) To sign Debtor’s name or Secured Party’s name to any documents evidencing
the Receivables, to compromise with any Receivable Debtor and give acquittances
for any and all Receivables;
 
(h) To notify Receivable Debtors to make payment directly to Secured Party or to
any bank designated by Secured Party;
 
(i) To take or bring, in Debtor’s name or Secured Party’s name, all steps,
actions, suits or proceedings deemed by Secured Party necessary or desirable to
effect collection of the Receivables;
 

 
8

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(j) In general, to do all things necessary to perform the terms of this
Agreement, including, without limitation, to take any action or initiate any
proceedings that Secured Party deems necessary or appropriate to protect and
preserve the security interest of Secured Party in the Collateral;
 
PROVIDED, HOWEVER, THE EXERCISE BY SECURED PARTY OF OR FAILURE TO SO EXERCISE
ANY SUCH AUTHORITY SHALL IN NO MANNER AFFECT DEBTOR’S LIABILITY TO SECURED PARTY
HEREUNDER OR IN CONNECTION WITH THE OBLIGATIONS; AND PROVIDED FURTHER, THAT
SECURED PARTY SHALL NOT BE UNDER ANY OBLIGATION OR DUTY TO EXERCISE ANY OF THE
POWERS HEREBY CONFERRED UPON SECURED PARTY AND SECURED PARTY SHALL HAVE NO
LIABILITY FOR ANY ACT OR FAILURE TO ACT IN CONNECTION WITH ANY OF THE COLLATERAL
EXCEPT FOR LIABILITY ARISING SOLELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SECURED PARTY. SECURED PARTY SHALL NOT BE BOUND TO TAKE
ANY STEPS NECESSARY TO PRESERVE RIGHTS IN ANY COLLATERAL.
 
22. Other Collateral.  The execution and delivery of this Agreement in no manner
shall impair or affect any other security (by endorsement or otherwise) for the
payment of the Obligations and no security taken hereafter as security for
payment of any part or all of the Obligations shall impair in any manner or
affect this Agreement, all such present and future additional security to be
considered as cumulative security.  Any of the Collateral may be released from
this Agreement without altering, varying or diminishing in any way the force,
effect, lien, security interest or charge of this Agreement as to the Collateral
not expressly released, and this Agreement shall continue as a first lien
security interest and charge on all of the Collateral not expressly released
until all sums and Obligations have been paid and performed in full.  Any future
assignment or attempted assignment or transfer of the interest of Assignor in
and to any of the Collateral shall not deprive Secured Party of the right to
sell or otherwise dispose of or utilize all of the Collateral as above provided
or necessitate the sale or disposition thereof in parcels or in severalty.
 
14.           Miscellaneous. This Agreement 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.  This Agreement represents the
entire and final agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior negotiations, discussions or writings
with respect thereto. Any notice required to be given by either party under this
Agreement shall be given in the manner and to the parties at the addresses set
forth in the Master Lease. This Agreement shall be governed by the laws of the
State of Tennessee except that the exercise by Secured Party of its rights
hereunder shall, with respect to each of the Facilities, be governed by the laws
of the State in which each such Facility is located. This Agreement shall be
binding upon and inure to the benefit of the parties which are from time to time
the Landlord and Tenant under the Master Lease.
 

 
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the
Effective Date.
 
 
Secured
Party:                                                                                     Debtor:
 
NATIONAL HEALTH
INVESTORS,                                                                           EMERITUS
CORPORATION,
 
INC., a Maryland
corporation                                                                           a
Washington corporation
 

 
By:                                                      By:                                                      
 
Name:                                                      Name:                                                      
 
Title:                                                      Title:                                                      
 

 

STATE OF
WASHINGTON                                                                :
: ss
COUNTY OF                                KING                                :

On this, the ________ day of ________________, 2009, before me, the undersigned
officer, personally appeared ___________________________________, who
acknowledged himself to be the ________________________________ of Emeritus
Corporation, a Washington corporation (“Company”), and being duly sworn
according to law deposes and says that he, as such officer, being authorized to
do so, executed the foregoing Instrument for the purposes therein contained, by
signing the name of the Company by himself as ________________.

IN WITNESS WHEREOF, I hereunto set my hand and official seal the day and year
first above written.

Notary Public

My Commission
Expires:                                                                

 
10

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STATE OF
__________________                                                                )
)
COUNTY OF
________________                                                                )
 
Before me, ___________________________________________, a Notary Public of said
County and State, personally appeared _________________________________, with
whom I am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself to be
________________________ of National Health Investors, Inc., a Maryland
corporation, the within named bargainor, and that he as such
_____________________________ of the corporation, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation, and on its behalf, by himself as _____________________________ of
the corporation.
 
Witness my hand and seal, at Office in _______________, this _____ day of
_________, 2009.
 
 

Notary Public
My Commission
Expires:                                                                

 
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EXHIBIT H
 
EXISTING EASEMENT AND ENCROACHMENTS
 
15. The Gilbert Survey does not reveal the locations of the easements referenced
in exceptions 5, 8 and 10 of the Gilbert Title Commitment.
 
16. The Glendale Survey states that the easements described in exceptions 6, 8,
9 and 11 are blanket in nature.
 
17. The Tanque Verde Survey does not show the matters as shown on a recorded
survey referenced in exceptions 4 and 5.
 
18. The Conway Survey does not disclose the location of the easements referenced
in exceptions 7, 11, 12 and 13.
 
19. The Tullahoma Title Commitment references in exception 8 all matters noted
on a recorded plat. The Survey does not disclose any easements.
 
20. The Survey Reading in the Gilbert Title Commitment excepts coverage from
title for variations between the location of a block wall and the location of
record lines. The Gilbert Survey reveals a block wall on all sides of the
Gilbert Property that encroaches up to four feet onto adjacent property.
 
21. Exception 7 in the Glendale Title Commitment references a wall column
encroachment of .38 feet from adjacent property onto the Glendale Property.
Additionally, the Survey reading on the Glendale Title Commitment reveals the
following encroachments: (i) block wall up to 1.1 feet south of the southerly
line, (ii) curb an undetermined distance south of southerly line, (iii) block
wall up to 1.5 feet west of westerly line, (iv) variations between locations of
block walls and column and locations of westerly line, (v) encroachments on
Hillcrest Boulevard of walks (up to 4.1 feet), curbs (undetermined) and planter
walls (undetermined), (vi) curb an undetermined distance west and east of
easterly lines, (vii) block wall up to 1.1 feet west of easterly line, (viii)
access drive in southerly portion of premises crosses easterly line and (ix)
building violates Non-Build Easement Agreement recorded as No. 97-27899 up to .5
feet.
 
22. Exception 7 in the Tanque Verde Title Commitment notes the encroachment of a
traffic control box near the northeast and northwest corners of the Tanque Verde
Property. Additionally, the Survey Reading reveals (i) a right of way for
utilities parallel to the east property line which the title company infers
creates an encroachment and which were are attempting to further research and as
to which we must reserve the right to comment further and (ii) encroachment of a
driveway and related improvements onto the right of way for Tanque Verde and
Woodland Roads.
 
23. The Survey Reading in the Tucson Title Commitment discloses the following
encroachments: (i) overhead electrical easement along the south property line,
(ii) street lights in the southwest corner, (iii) existing square power pole
north of the southwest corner, (iv) flagpole, signage and landscaping in the
southwest corner, (v) fire hydrant north of the south property line,
 

 
1

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east of the southwest entrance, (vi) headwall at the southeast corner and (vii)
encroachment of a driveway and related improvements onto the right of way for
Ina Road and Shama Wing Lane.
 
24. The Survey Reading in the Gallatin Title Commitment shows a fence
encroaching onto Tennessee Highway 109.
 
25. The Survey Reading in the Kingsport Title Commitment reveals the following
encroachments: (i) a sign and landscape encroach onto John B. Dennis Highway and
(ii) a block building encroaches 4.3 feet onto a proposed right of way.
 
26. The Survey Reading in the Tullahoma Title Commitment shows a guy anchor
encroachment on the easterly property line.
 

 

 
2

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EXHIBIT I
 
MISSING ESTOPPELS
 
27. An estoppel pertaining to the Gilbert Property: signed by El Dorado Lakes
Golf Club Community Association indicating payment in full of all assessments
and no defaults relating to charges for landscaping maintenance pursuant to
exception 6 of Schedule B, Section 2.
 
28. Three estoppels pertaining to the Glendale Property: (i) an estoppel signed
by Hillcrest Ranch Community Association indicating payment in full of all liens
and charges for maintenance and no defaults relating to requirement 2 of
Schedule B, Section 1 and exceptions 3 and 11 of Schedule B, Section 2, (ii) an
estoppel signed by Bashwal LLC (or its successor in interest) indicating payment
in full of an annual fee as a contribution of the costs of maintenance relating
to a service drive pursuant to exceptions 6 and 8 of Schedule B, Section 2 and
(iii) an estoppel signed by ALS-Clare Bridge, Inc. (or its successor in
interest) regarding the payment to Evergreen-Hillcrest Limited Partnership (or
its successor in interest) for costs of construction of certain improvements in
the approximate amount of $33,402.00  relating to the Site Development Agreement
pursuant to exception 9 of Schedule B, Section 2.
 
29. Two estoppels pertaining to the Conway Property: (i) an estoppel from the
Association (the name of the Association is not provided in the Declaration of
Covenants, Conditions and Restrictions for Delta Development, LLC) indicating
payment in full of all assessments and no defaults relating to maintenance of
common area improvements and storm water retention areas pursuant to exception 7
of Schedule B, Section 2 and (ii) an estoppel from Delta Development, LLC (or
its successor in interest) for costs for the maintenance of an access easement
as described in exception 9 of Schedule B, Section 2.
 

 

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EXHIBIT L
 
REQUEST FOR ADVANCE
 
Pursuant to that Master Lease dated as of October 13, 2009, as amended, by and
between National Health Investors, Inc., as Landlord, and Emeritus Corporation,
as Tenant (the “Lease”), Tenant hereby requests a Capital Allowance Funding
advance in the amount and on the date set below:
 
Amount Requested:                                _____________________
 
Date Requested:                                _____________________
 
Capitalized terms used herein and not otherwise defined shall have the meaning
set forth in the Lease.
 
As an inducement to Landlord to make the advance Tenant hereby represents and
warrants to Landlord as follows:
 
30. All costs shown have been paid in full.  Invoices for all items included in
this Request For Advance and evidence of payment thereof are attached
hereto.  Tenant has received valid lien releases or waivers from all
contractors, subcontractors and materialmen with respect to all goods and
services being paid for from the requested advance. Tenant has no knowledge of
any actual or threatened mechanics lien against the Property.
 
31. The work which is the subject of the requested advance has been completed in
compliance with all applicable governmental requirements.
 
32. The attached AIA Document G702 Application and Certificate for Payment is an
accurate and complete statement of all amounts paid for the work which is the
subject of the requested advance.
 
EMERITUS CORPORATION
 
By:           
 
Its:           
 
Date:           
 

 
 

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EXHIBIT M
 
FORM OF COMPLETION CERTIFICATE
 
Re:           INSERT PROPERTY ADDRESS
 
This Completion Certificate (“Completion Certificate”) is delivered to Landlord
pursuant to and in accordance with that certain Master Lease dated as of October
13, 2009, as amended (the “Lease”), by and between EMERITUS CORPORATION, a
Washington corporation (“Tenant”), and NATIONAL HEALTH INVESTORS, INC., a
Maryland  corporation (“Landlord”).
 
Unless otherwise specifically defined in this Completion Certificate,
capitalized words shall have the meaning ascribed to them in the Lease.
 
The parties below hereby certify to the following with respect to the Renovation
Project described in Schedule 1 hereto:
 
33. The project described in Attachment 1 (the “Project”) has been completed.
 
34. No mechanic’s or materialmen’s liens or other encumbrances have been filed
and remain in effect against the Project and/or the Property.
 
35. The Lease requires that certain evidence be furnished to Landlord to confirm
that the Property, after completion of the Project, has been inspected by each
governmental authority having jurisdiction over the Project verifying all
licenses, permits, approvals and consents needed for use, occupancy and
operation have been issued.  Tenant represents and warrants that it has made the
necessary inquiries of the respective governmental authorities and any permits,
licenses, approvals or consents that are required for the use, occupancy and
operation of the Property after completion of the Project have been duly and
validly issued to Tenant.
 
36. This Completion Certificate is executed on ______________________.
 

 
 

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ATTACHMENT 1 TO COMPLIANCE CERTIFICATE
 
PROJECT DESCRIPTION
 

 

 
 

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SCHEDULE III
 
SCHEDULE OF ANNUAL AGGREGATE BASE RENT FOR LEASE YEARS 2-15
 

 
Lease Year
 
2                                                                $3,485,850
 
3                                                                $3,555,567
 
4                                                                $3,660,635
 
5                                                                $3,770,455
 
6                                                                $3,883,568
 
7                                                                $4,001,068
 
8                                                                $4,161,110
 
9                                                                $4,327,555
 
10                                                                $4,500,657
 
11                                                                $4,680,683
 
12                                                                $4,867,911
 
13                                                                $5,062,627
 
14                                                                $5,200,132
 
15                                                                $5,410,737

 
 

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