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);







“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).




2


“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%


3


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




4


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;




5


(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:




6


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




7


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




8


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.




9


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




10


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




11





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











12







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


1




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”).




2


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.




3







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












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).




1


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




2


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.




3


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.




4


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.




5


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.




6


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”).




RE  C I  T  AL 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




1


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.




2


(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




3


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


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


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




6


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.




7


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


(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.




9


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


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:





11


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


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


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.







EXHIBIT
L




REQUEST
FOR ADVANCE




Pursuantto 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:







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 ______________________.







ATTACHMENT 1 TO COMPLIANCE
CERTIFICATE




PROJECT
DESCRIPTION












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