ASSET
PURCHASE AGREEMENT
 
 
 THIS
ASSET PURCHASE AGREEMENT (the “Agreement”) is made as of June
9, 2008 (“Effective
Date”) by EMERITUS CORPORATION, a Washington corporation (“Buyer”), and HEALTH CARE REIT, INC., a
Delaware corporation (“HCN”), together with the
affiliates of HCN listed on Schedule 1 hereto (individually and collectively
with HCN, “Seller”).
  Seller
owns the land, improvements and certain personal property located at the
facilities listed on Schedule 2-A hereto (the “Tranche 1 Facilities”) and at
the facilities listed on Schedule 2-B hereto (the “Tranche 2
Facilities”).
  Buyer
leases 18 of the 19 Tranche 1 Facilities and certain other facilities from
Seller pursuant to an Amended and Restated Master Lease Agreement dated as of
September 30, 2003, as amended, and the Tranche 1 Facility located in Auburn,
Massachusetts pursuant to a Lease Agreement dated as of February 26, 1996, as
amended.  The two leases that relate to the 19 Tranche 1 Facilities
are collectively referred to herein as the “Master Lease
1.”  Buyer leases the Tranche 2 Facilities and certain other
facilities from Seller pursuant to a Master Lease Agreement dated as of
September 30, 2004, as amended (the “Master Lease 2”) except,
however, that the Tranche 2 Facilities located in Louisville, Kentucky and
Ontario, Oregon are leased under a Lease Agreement dated as of February 26,
1996, as amended (the “Louisville Lease”) and the
Master Lease 1, respectively.  All references hereinafter to the Master Lease 2 shall also mean
and include the Louisville Lease except where noted otherwise.  The
Tranche 1 Facilities and Tranche 2 Facilities are each individually referred to
herein as a “Facility” and collectively referred to herein as the
“Facilities.”  The Master Lease 1 and Master Lease 2 are each
individually referred to herein as a “Master Lease” and collectively referred to
herein as the “Master Leases.”  The Master Leases and all agreements,
instruments and documents executed by Buyer in connection with either Master
Lease are collectively referred to herein as the “Master Lease Documents.”
  Based
solely upon the representations and warranties of Buyer as set forth in each
Master Lease, Buyer is the licensed operator of each Facility, either directly
or through certain of its wholly-owned subsidiaries and
subtenants.  Buyer desires to purchase the Facilities from Seller on
the terms and conditions set forth in this Agreement (the “Acquisition”).
  NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual agreements,
representations and warranties contained herein, Seller and Buyer agree as
follows:
  ARTICLE
      1:
              SALE
      AND PURCHASE OF ASSETS
  1.1  Acquisition
Assets.  Subject to the terms and conditions of this Agreement,
Buyer shall purchase from Seller, and Seller shall sell, transfer and convey to
Buyer, the following assets that relate to the Facilities (the “Assets”):  [i] the
real property, as legally described in Exhibit A attached hereto, and the
improvements and fixtures located thereon, together with all rights, easements
and privileges appurtenant thereto (the “Real Property”); [ii] the
furniture, equipment and other personal property located at the Facilities to
the extent owned by Seller (the “Personal
   1
  Property”); and [iii] all of
Seller's right, title and interest (if any) in and to all intangible property
now or on the applicable Closing Date (as hereinafter defined) owned or held in
connection with the Real Property or the Personal Property, including, without
limitation, governmental approvals and development rights, directly related to
the Real Property (the “Intangible
Property”).
  1.2  Excluded
Assets.  Notwithstanding anything to the contrary in this
Agreement, the Assets do not include any rents, issues or accounts arising from
or payable due to Seller’s interest in the Facilities or Seller’s interest as
“Landlord” under either
Master Lease.
  1.3  No Assumption of
Liabilities.  Except as expressly provided herein, Buyer shall
not assume any liabilities, obligations or debts of Seller, including without
limitation, the obligations of Seller, as Landlord, under either Master Lease;
provided, however, that the indemnification obligations of Buyer under Section 5
of each Master Lease and Sections 4.6.1 and 8.1 of each of the leases that
relate to the Auburn and Louisville properties, shall survive each Closing (as
hereinafter defined) for the time periods defined in each such Master Lease and
leases.
  1.4  Close in
Tranches.  The sale of  the Assets shall be closed in
two separate tranches (each a “Tranche”) with the Tranche 1
Facilities closed in “Tranche
1” as designated on Schedule 2-A and with the Tranche 2 Facilities closed
in “Tranche 2” as
designated on Schedule 2-B (each a “Closing”).  Concurrently
with each Closing, Buyer and Seller shall amend the Master Lease 1 and, if and
when applicable, the Master Lease 2, to delete the sold Facilities and adjust
the Investment Amount (as defined therein) and corresponding
provisions.  Within 20 days of the Effective Date, Seller shall
provide Buyer with an initial draft of the form amendment to the Master Leases
to be executed in connection with each Closing.
  1.5  Section 1031
Transaction.  Seller or Buyer, or both of them, may close
either Tranche 1 or Tranche 2 or both as part of a like-kind exchange of
properties under Section 1031 of the Internal Revenue Code of 1986, as amended,
and applicable rules and regulations.  The exchanging party shall bear
all costs of the exchange.  The other party shall cooperate with the
exchanging party and do all things reasonably required and requested by the
exchanging party (provided that such actions do not increase the other party’s
obligations or liabilities under this Agreement) to effect and facilitate such
an exchange.  The exchanging party shall and does hereby indemnify,
defend and hold the other party harmless for and from all liabilities arising as
a result of the exchange that would not have arisen had the exchanging party not
closed Tranche 1, Tranche 2, or both as part of a like-kind
exchange.  Anything in this Section 1.5 to the contrary
notwithstanding:  [i] no party makes any representation or warranty to
the other as to the effectiveness or tax impact of any proposed exchange; [ii]
in no event shall any party be required to take title to any exchange or
replacement property; [iii] in no event shall completion of any such exchange be
a cause or excuse for any delay in either Closing; and [iv] no party shall be
required to incur any costs or expenses or incur any additional liabilities or
obligations in order to accommodate any exchange requested by the other party or
any exchange intermediary or facilitator.
   2
  1.6  Condition of
Assets.  EXCEPT AS EXPRESSLY PROVIDED IN ANY REPRESENTATION AND
WARRANTY CONTAINED HEREIN OR IN ANY CONVEYANCE DOCUMENT EXECUTED AND DELIVERED
AT A CLOSING, THE ASSETS ARE SOLD IN “AS IS, WHERE IS” CONDITION WITH NO
WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED, WHETHER OF THE SUITABILITY
THEREOF, THE DESIGN OR CONDITION THEREOF, THE MERCHANTABILITY THEREOF, THE
FITNESS THEREOF FOR A PARTICULAR PURPOSE, THE PHYSICAL CONDITION THEREOF, THE
QUALITY OF WORKMANSHIP THEREOF, THE CONFORMITY THEREOF TO FEDERAL, STATE OR
LOCAL GOVERNMENTAL REQUIREMENTS, THE OWNERSHIP, NON-INFRINGEMENT OR RIGHT TO USE
ANY NAMES, DESIGNS OR MARKS ASSOCIATED WITH ANY FACILITY (INCLUDING, WITHOUT
LIMITATION, THE NAMES SET FORTH IN SCHEDULE 2-A AND SCHEDULE 2-B HERETO), OR
WITH REGARD TO BUYER’S TENANCY, OPERATION OR LICENSURE OF THE FACILITIES OR ANY
RIGHTS WITH RESPECT THERETO.
  ARTICLE
      2:
              PURCHASE
      PRICE
  2.1  Purchase
Price.  The “Tranche 1 Purchase Price” and
the allocated purchase price for each Tranche 1 Facility is set forth on
Schedule 2-A and the “Tranche 2
Purchase Price” and the allocated purchase price for each Tranche 2
Facility is set forth on Schedule 2-B.   The total of the Tranche
1 Purchase Price and the Tranche 2 Purchase Price is $299,819,368.00 (the “Purchase
Price”).  All cash payments shall be payable in immediately
available funds by wire transfer to an account designated by
Seller.
  2.2  Earnest
Money.  Within one business day after the Effective Date, Buyer
shall deliver an earnest money deposit in an amount equal to one percent (1%) of
the Purchase Price (the “Earnest Money”) to the Title
Company (as hereinafter defined) for deposit into an escrow account and which
shall be held pursuant to an escrow agreement in the form attached hereto as
Exhibit B, to be executed by Buyer, Seller and the Title Company in connection
with the deposit of the Earnest Money.  The Earnest Money, together
with all interest earned thereon is referred to herein as the “Deposit.”  The Title
Company shall hold the Deposit in an interest-bearing account.
  2.3  Due Diligence
Period.  Due to Buyer’s existing tenancy and operation of the
Facilities, Buyer has determined that it will complete all of Buyer’s due
diligence with respect to the Facilities within 30 days after the Effective Date
(“Due Diligence
Period”).  At any time during the Due Diligence Period, Buyer
shall, in its sole discretion, be entitled to deliver a written notice to Seller
in accordance with the terms of this Agreement, stating that Buyer has elected
to terminate this Agreement.  If Buyer terminates this Agreement in
accordance with the terms hereof within the Due Diligence Period, the Title
Company will pay the Deposit as follows:  [i] to Seller, the
reasonable amount of outside counsel’s legal fees incurred by Seller in
connection with the Acquisition, as mutually instructed in writing by Buyer and
Seller, and [ii] to Buyer, the balance of the Deposit.
   3
  2.4  Deposit at Closing; Failure
to Close; Remedies.  [i] In the event that each Tranche shall
close as provided herein, the Deposit shall be applied to the Tranche 2 Purchase
Price at the Tranche 2 Closing.  [ii] In the event that Buyer has not
terminated this Agreement within the Due Diligence Period pursuant to Section
2.3, and either Tranche shall fail to close as provided herein due to Buyer's
default under this Agreement, then, as liquidated damages, the Deposit shall be
retained by Seller and Buyer shall pay Seller the reasonable amount of
out-of-pocket costs incurred by Seller in connection with the
Acquisition.  The retention of the Deposit and receipt of such
out-of-pocket costs as liquidated damages shall be Seller’s sole and exclusive
remedy for such failure to close, at law or in equity; provided, however, such
retention of the Deposit by Seller and its receipt of such out-of-pocket costs
shall not limit, release or otherwise affect Buyer’s indemnity obligations under
this Agreement and under the Master Lease Documents.  [iii] In the
event that Buyer has not terminated this Agreement within the Due Diligence
Period pursuant to Section 2.3, and either Tranche shall fail to close as
provided herein due to Seller’s default under this Agreement, then as liquidated
damages, the Deposit shall be returned to Buyer and Seller shall pay Buyer the
reasonable amount of out-of-pocket costs incurred by Buyer in connection with
the Acquisition.  The return of the Deposit and receipt of such
out-of-pocket costs as liquidated damages shall be Buyer’s sole and exclusive
remedy for such failure to close, at law or equity.  [iv] In the event
that Buyer has not terminated this Agreement within the due diligence period
pursuant to Section 2.3, if either Closing does not occur for any reason other
than Buyer's or Seller’s default under this Agreement, then the Deposit shall be
retained by Seller after payment to Buyer of its reasonable out-of-pocket costs
incurred in connection with the Acquisition.
  2.5  INTENTIONALLY
OMITTED
  2.6  Liquidated
Damages.  The parties hereto acknowledge that the actual
damages sustained by Seller and Buyer if the transactions contemplated hereby
shall fail to close are difficult to ascertain, and the parties hereby further
agree that the liquidated damages amounts
set forth in Section 2.4 are reasonable estimates
of the amount of damages, including consequential damages, which Seller and
Buyer would suffer by the other’s failure to close under this Agreement, gauged
by the circumstances existing at the time this Agreement is executed, and such
amounts are not intended as a penalty.
  2.7  Financing of
Acquisition.  Buyer intends to finance the Acquisition of each
Tranche through one or more loans from third party lenders (individually and
collectively, the “Acquisition
Loan”).  Buyer will borrow not less than 70% of the Purchase
Price pursuant to the Acquisition Loan.  The balance of the Purchase
Price for each Tranche (the “Balance”) will be paid as
follows:  [i] 40% of the Balance will be paid in cash by Buyer, and
[ii] 60% of the Balance will be obtained pursuant to a single loan (the “SellerLoan”) to be made by HCN or
an affiliate thereof (“Lender”) to Emeritus
Corporation, irrespective of any assignment of Buyer of its rights under this
Agreement.  Notwithstanding the foregoing, the maximum Seller Loan
amount will be $50,000,000.00 and Buyer will increase its cash investment as
necessary to cover any shortfalls.  Buyer may draw up to the entire
Seller Loan amount to fund the Tranche 1 Purchase Price; provided, however, that
Buyer shall have given reasonable assurance to Seller that Buyer has the cash
assets and other resources necessary to pay the Balance of the Tranche 2
Purchase Price in cash.  The proceeds of the Seller Loan shall be
applied solely to the payment of the Purchase Price.
   4
  2.8  Seller Loan
Terms.  The terms of the Seller Loan are set forth in the Term
Sheet for Sale of Facilities and Seller Loan issued by HCN and accepted by Buyer
dated as of March 25, 2008 (“Term Sheet”), which Term Sheet
is attached hereto as Exhibit C.  Notwithstanding the terms of the
Seller Loan set forth in the Term Sheet, the Seller Loan shall not be secured by
a pledge of equity interest of any subsidiary of Emeritus Corporation to whom
Emeritus Corporation assigns its rights under this Agreement, or to whom
Emeritus Corporation nominates to take title to the Facilities.  In
lieu of taking a pledge of an interest in any subsidiary of Emeritus
Corporation, Emeritus Corporation shall provide Lender with a leasehold mortgage
of its interest in Master Lease 2 and a contingent leasehold interest in Master
Lease 1 to secure Emeritus Corporation's obligations under the Seller
Loan.  Within 20 days of the Effective Date, Seller shall cause Lender
to deliver to Buyer the proposed documents (the “Loan Documents”), all of which
are to be executed and delivered at the Tranche 1 Closing to evidence and secure
the Seller Loan, including any leasehold or contingent leasehold mortgages,
which Loan Documents shall comply with the terms for the Seller Loan set forth
in the Term Sheet, as modified by this Section 2.8.
  2.9  No
Prorations.  Buyer and Seller acknowledge and agree that each
Master Lease is absolutely net to Seller, as Landlord, and that Buyer, as tenant
thereunder, is solely responsible for all Impositions (as defined therein), real
estate and personal property taxes, insurance premiums, utility charges,
licensure expenses and all other expenses incurred in connection with the
operation, maintenance and use of the Facilities.  Accordingly, Buyer
shall be solely responsible for all such amounts whether accruing prior to or
after the respective Closing Date and there shall be no prorations on account
thereof between Buyer and Seller hereunder, except that Buyer shall be entitled
to a credit against the Purchase Price for any rent or other charges paid to
Seller and which are applicable to any period after the applicable Closing
Date.
  ARTICLE
      3:
              THE
      CLOSINGS
  3.1  Closing Deadlines.
Subject
to Section 8.4, the Closing on Tranche 1 must occur no later than June 30, 2008
(“Tranche 1 Closing
Deadline”).  The Closing on Tranche 2 must occur no earlier
than October 1, 2008 and no later than October 31, 2008 (“Tranche 2 Closing Deadline,”
and with the Tranche 1 Closing Deadline, each a “Closing
Deadline”).  Notwithstanding the foregoing, Buyer shall have
[i] an initial option to extend the Tranche 2 Closing Deadline until December 1,
2008, and [ii] a second option to extend the Tranche 2 Closing Deadline until
December 31, 2008.  Buyer may exercise either such option by
delivering notice thereof to Seller on or before the then applicable Tranche 2
Confirmation Deadline (as hereinafter defined), in which event the Tranche 2
Confirmation Deadline shall be extended to October 31, 2008, with respect to the
initial such option above, and to November 30, 2008, with respect to the second
such option above.  For each such option exercised by Buyer, $100,000
of the Deposit, which might otherwise be payable, returnable or refundable to
Buyer under Section 2.3, 2.4[iv], 8.4 or 8.5 or any other section of this
Agreement, shall, except as provided in Section 2.4[iii], become non-refundable,
but shall be applied to the Tranche 2 Purchase Price at the Tranche 2
Closing.  Buyer’s right to purchase the Tranche 1 Facilities and
Tranche 2 Facilities shall terminate on the Tranche 1 Closing Deadline if the
Closing on Tranche 1 has not occurred by such date.  Buyer’s right to
purchase the Tranche 2 Facilities shall terminate on the Tranche 2 Closing
Deadline (as such deadline may be extended by Buyer as described above) if the
Closing on Tranche 2 has not occurred by such date.
   5
  3.2  Escrow
Closing.  Each Closing shall be held on such date as the
parties may agree upon in writing (each a “Closing Date”) but in each
case no later than the respective Closing Deadline.  All documents
necessary for each Closing, including, but not limited to, those documents
specifically described in this Agreement, shall be placed in escrow on or before
the applicable Closing Date with the Title Company or at such other time or
place or in such other manner as the parties may agree.  Seller shall
deliver possession of the respective Assets to Buyer on the respective Closing
Date.  Each Closing shall be deemed to be effective as of 12:01 a.m.
on the respective Closing Date.
  3.3  Legal
Fees.  Except as provided herein, each of Seller and Buyer
shall pay its own legal fees and expenses incurred by it in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated herein.
  3.4  Closing
Costs.
  (a)  Seller
shall pay the costs for real property transfer taxes, conveyance fees, deed
stamps (if applicable) and title insurance premiums for an owner’s policy
(except for the cost of any special endorsements) up to $1,125,000 for the
Closing on Tranche 1 and up to $375,000 for the Closing on Tranche 2; provided,
however, such costs shall not include any costs (and shall be solely Buyer’s
responsibility) of curing title defects that Title Company would not insure but
which Lawyer’s Title Corporation of America has noted in writing that it would
insure.
  (b)  Buyer
shall pay all other closing costs for each Closing of the Acquisition, the
Acquisition Loan and the Seller Loan (excluding Lender's or Seller's legal
fees), including, but not limited to, the following:
  (i)  real
property transfer taxes, conveyance fees, and deed stamps (if
applicable);
 (ii)  all due
diligence expenses, including survey, environmental reports, property condition
reports and appraisals;
 (iii)  title
insurance premiums, title search and commitment fees, and the cost of any
closing escrow or escrow agent; and
 (iv)  recording
fees.
  ARTICLE
      4:SELLER’S REPRESENTATIONS AND
WARRANTIES
  Seller
represents and warrants, both as of the Effective Date and as of each Closing
Date, as set forth below.
  4.1  Organization and
Standing.  HCN is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and is
qualified to do all things required of it under this
Agreement.  Seller has the requisite power and authority to own or
lease its property and to conduct its business as now being
conducted.
   6
  4.2  Authority.  The
execution and delivery of this Agreement and the consummation of the transaction
contemplated hereby have been duly and validly authorized by all necessary
action of the Seller and no other proceeding on the part of Seller is necessary
to authorize this Agreement or to consummate the transaction contemplated
hereby.  Seller has all requisite power to execute and deliver this
Agreement and the documents, instruments and agreements referred to or provided
for herein (“Seller’s
Transaction Documents”) and to consummate this Agreement and all
transactions contemplated hereby.  This Agreement has been duly
executed and delivered by Seller.
  4.3  Binding
Effect.  This Agreement has been duly authorized, executed and
delivered by Seller. This Agreement is, and when executed and delivered at each
Closing each of Seller’s Transaction Documents will be, the legal, the valid and
binding obligation of Seller, enforceable against Seller in accordance with
their respective terms.
  4.4  No Bankruptcy or
Dissolution.  No bankruptcy or dissolution event has occurred
with respect to Seller.
  4.5  Litigation.  To
Seller’s knowledge and without due inquiry, there are no actions, suits or
proceedings pending or threatened before or by any judicial, administrative or
union body, any arbiter or any governmental authority against or affecting
Seller that would have a material adverse effect on the Assets or Seller’s
ability to complete the transaction.
  ARTICLE
      5:
              BUYER’S
      REPRESENTATIONS AND WARRANTIES
  Buyer
represents and warrants, both as of the Effective Date and as of each Closing
Date, as set forth below.
  5.1  Organization and
Standing.  Buyer is a Washington corporation duly organized,
validly existing and in good standing under the laws of the State of Washington
and is qualified to do all things required of it under this
Agreement.  Buyer has the requisite power and authority to own or
lease its property and to conduct its business as now being
conducted.
  5.2  Authority.  The
execution and delivery of this Agreement and the consummation of the transaction
contemplated hereby have been duly and validly authorized by all necessary
action of the Buyer and no other proceeding on the part of Buyer is necessary to
authorize this Agreement or to consummate the transaction contemplated
hereby.  Buyer has all requisite power to execute and deliver this
Agreement and the documents, instruments and agreements referred to or provided
for herein (“Buyer’s
Transaction Documents”) and to consummate this Agreement and all
transactions contemplated hereby.  This Agreement has been duly
executed and delivered by Buyer.
  5.3  Binding
Effect.  This Agreement has been duly authorized, executed and
delivered by Buyer.  This Agreement is, and when executed and
delivered by Buyer at each Closing each of Buyer’s Transaction Documents will
be, the legal, valid and binding obligation of Buyer, enforceable against Buyer
in accordance with their respective terms.
  5.4  No Bankruptcy or
Dissolution.  No bankruptcy or dissolution event has occurred
with respect to Buyer.
   7
  5.5  Litigation.  To
Buyer’s knowledge and without due inquiry, there are no actions, suits or
proceedings pending or threatened before or by any judicial, administrative or
union body, any arbiter or any governmental authority against or affecting Buyer
that would have a material adverse effect on the Assets or Buyer’s ability to
complete the transaction.
  ARTICLE
      6:
              INFORMATION
      CONCERNING THE FACILITIES
  6.1  No Reliance. Buyer
acknowledges that [i] Buyer is the current tenant and, together with certain of
its wholly-owned subsidiaries, the licensed operator of the Facilities, [ii]
Buyer is familiar with the operations and condition of the Facilities, [iii]
Buyer has sufficient knowledge of the Facilities in order to assess the value of
the Facilities and evaluate the terms of the Acquisition, and [iv] except as may
be expressly set forth herein, Buyer is not relying upon Seller to provide any
information or evaluation of the Facilities and shall not rely upon any
information or materials that may have been obtained from Seller.
  6.2  Governmental
Approvals.  Buyer acknowledges and agrees that its ability to
obtain any licenses, consents and approvals of governmental authorities in
connection with the operation of the Facilities is not a condition to any
Closing.
  6.3  Facility
Operations.  Buyer acknowledges that the Personal Property to
be transferred by Seller at each Closing does not include all personal property,
receivables, contract rights, governmental approvals and other assets of
whatever type or nature that may be necessary or desirable for the operation of
the Facilities (the “Operator
Assets”).  Buyer is solely responsible for the acquisition of
any Operator Assets and for any agreements made or to be made by Buyerwith respect
to the Facility operations.
  ARTICLE
      7:
              OBLIGATIONS
      OF THE PARTIES UNTIL CLOSING
  7.1  Conduct of Business Pending
Closing.  Between the Effective Date and each Closing, Buyer
shall conduct the operation of the Facilities solely in the ordinary course of
business consistent with past practice.
  7.2  Negative Covenant of
Seller.  After the execution of this Agreement and until each
Closing or termination of this Agreement, Seller shall not, without the prior
written approval of Buyer, enter into any agreement with respect to any Facility
or the Assets except as specifically contemplated by this
Agreement.
  7.3  Affirmative
Covenants. Between the Effective Date and each Closing, Buyer shall
maintain and operate the applicable Facilities in accordance with the terms of
the applicable Master Lease.
  ARTICLE
      8:
              INITIAL
      CONDITIONS
  8.1  Initial Conditions
Precedent.  Buyer’s obligation to purchase the Assets is
subject to the fulfillment during the Due Diligence Period, ending on the date
that is 30 days after the Effective Date (“Inspection Completion Date”),
of the conditions set forth in Section 8.2 through Section 8.4 below (“Buyer’s Initial
Conditions”).
   8
  8.2  Title
Insurance.  Within 5 days after the Effective Date, Buyer shall
order a separate Commitment for Title Insurance (the “Commitments”) from Chicago
Title Insurance Company, 171 North Clark Street, Chicago, Illinois 60601,
Attention:  Cindy J. Malone (the “Title Company”) for an Owner’s
Policy of Title Insurance (the “Title Policies”), with respect to each parcel of
real estate which constitutes the Real Property, insuring that, upon Closing,
Buyer shall have good and marketable fee simple title to the Real Property, free
and clear of all liens, assessments, restrictions, encumbrances, leases,
tenancies, claims or rights of use or possession and other title objections,
except for [i] easements, agreements and restrictions of record as of the
Effective Date that do not, in Buyer’s reasonable discretion, materially and
adversely affect the existing use of the Facilities or the value of the
Facilities; [ii] taxes and installments of assessments, whether past due or not
yet due and payable; and [iii] any lien, encumbrance or claim granted by Buyer
(other than with respect to the Master Leases), arising from  any
action of Buyer or pursuant to any contract made by Buyer or relating to any
materials or labor supplied to Buyer (“Permitted
Exceptions”).  Buyer acknowledges that the Commitments may show
the rights of Buyer as tenant under each Master Lease, to which Buyer shall not
object, subject to release of each Facility from its respective Master Lease at
the applicable Closing.  The Master Leases shall not be Permitted
Exceptions.  Seller shall provide affidavits to the Title Company,
limited to Seller’s actual and current knowledge, and take such other actions as
are reasonably necessary to enable the Title Company to remove any exceptions
other than the Permitted Exceptions and issue the Title Policies in the form
required by this Agreement.
  8.3  Inspections.  Buyer
shall have obtained and completed such additional investigations, inspections
and reports and made such additional inquiries regarding the condition of the
Assets as Buyer may deem necessary or desirable.
  8.4  Failure of Conditions;
Objections.  If Buyer objects to any title, survey,
environmental,  structural, mechanical or other condition of the
Assets as a result of information disclosed by the due diligence inquiry
conducted by Buyer (“Objection”), Buyer shall
notify Seller of the Objection no later than the Inspection Completion Date.
Seller shall have a period of 15 days after the date of such notice in which to
cure the Objection to the reasonable satisfaction of the Buyer. If Seller is not
able to cure or is not willing to cure, in Seller’s sole discretion, the
Objection, then Buyer may, in Buyer’s sole discretion:  [i] terminate
this Agreement, in which case the Deposit shall be immediately returned to Buyer
and neither Buyer nor Seller shall have any further liability or obligations
hereunder; [ii] extend the time for the cure of the Objection, in which case the
Tranche 1 Closing Deadline shall be extended by the same number of days; or
[iii] waive the Objection.   Notwithstanding the foregoing,
Seller shall be required to pay off any liens or encumbrances against the Assets
created or assumed by Seller.
  8.5  Commitment for Acquisition
Loans.  It is an initial condition precedent for Seller’s
obligation to close on the sale of the Assets that Buyer deliver to Seller a
written confirmation, including such lending contingencies and conditions that
are standard in such written commitments, issued to Buyer for the Acquisition
Loan for Tranche 1 no later than May 31, 2008 and for Tranche 2, subject to
extension as provided in Section 3.1 above, no later than September 30, 2008
(each a “Confirmation
Deadline”).  If Buyer fails to meet either Confirmation
Deadline, then Seller may, in Seller’s sole discretion:  [i] terminate
this Agreement, in which case the Deposit shall be retained by Seller and
neither Buyer nor Seller
   9
  shall
have any further liability or obligations hereunder;or [ii] extend the time for the applicable
Confirmation Deadline.
  ARTICLE
      9:CLOSING CONDITIONS PRECEDENT TO BUYER’S
  OBLIGATIONS
  9.1  Closing
Conditions.  Buyer’s obligation to purchase the Assets (either
the Tranche 1 Facilities or the Tranche 2 Facilities, as applicable) is subject
to the fulfillment, prior to or at each Closing, of each of the conditions set
forth in this Article 9 (“Buyer’s Closing
Conditions”).
  9.2  Deed.  Seller
shall have delivered to Buyer a special warranty deed, or applicable State
equivalent (e.g., a Grant Deed in California), for the respective Real Property
conveying good and marketable fee simple title thereto, subject only to the
Permitted Exceptions, in the form reasonably agreed to by Buyer and
Seller.
  9.3  Bill of Saleand
Assignment.  Seller shall have delivered to Buyer a quitclaim bill of
sale and assignment of interest for the respective Personal Property and
Intangible Property, in the form of Exhibit D attached hereto.
  9.4  Amendment of Master
Lease.  A counterpart Amendment to Master Lease duly executed
and acknowledged by Seller, as Landlord, in the form reasonably agreed to by
Buyer and Seller, along with a release in recordable form with respect to the
Tranche 1 Facilities and the Tranche 2 Facilities, as applicable.
  9.5  Board
Approval.  Within ten business days after the Effective Date,
the Board of Directors of Buyer shall have approved the Acquisition by Buyer and
the Seller Loan to Emeritus Corporation.
  9.6  Other
Documents.  Seller shall have furnished Buyer with all other
documents, schedules and other instruments reasonably required to be furnished
to Buyer by Seller pursuant to the terms hereof or necessary for such Closing in
accordance with the terms of this Agreement.
  9.7  Title
Policies.  The Title Company, subject to payment of its fees,
costs and title insurance premiums, shall be willing to issue the Title
Policies, insuring that Buyer shall have good and marketable fee simple title to
the applicable portion of the Real Estate, subject only to the Permitted
Exceptions; except that Title Company’s failure to insure over a defect that
Lawyer’s Title Corporation of America has noted in writing that it would insure
will not constitute a closing condition precedent to Buyer’s
obligations.
  9.8  Seller Loan
Documents.  Lender shall have executed and delivered any Seller
Loan Documents to be executed by Lender, in the form agreed to by Buyer and
Lender.
  9.9  State Specific
Documents.  Seller shall have delivered, and executed as
applicable, any State specific documents customarily used in connection with the
transfer of real property and delivered by the seller thereof, including any
transfer tax affidavits or bulk sales releases, in forms reasonably agreed to by
Buyer and Seller.
   10
  9.10  Performance by
Seller.  The due performance by Seller of each and every
undertaking and agreement to be performed by it hereunder in all material
respects, and the truth of each representation and warranty made by Seller in
this Agreement in all material respects at the time as of which the same is made
and as of the Closing Date as if made on and as of the Closing
Date.
  ARTICLE
10:  CLOSING
CONDITIONS PRECEDENT TO SELLER’S OBLIGATIONS
  10.1  Closing
Conditions.  Seller’s obligation to sell the Assets (either the
Tranche 1 Facilities or the Tranche 2 Facilities, as applicable) is subject to
the fulfillment, prior to or at each Closing, of each of the conditions set
forth in this Article 10 (“Seller’s Closing
Conditions”).
  10.2  No Material
Change.  Since the Effective Date there shall not have been any
material adverse change in the financial condition of Buyer.
  10.3  Board
Approval.  Within five business days after the Effective Date,
Seller shall provide Buyer with evidence that the Acquisition by Buyer and the
Seller Loan from Lender to Buyer have been approved.
  10.4  Closing
Funds.  Buyer shall have delivered to Title Company’s escrow
account sufficient funds to pay the applicable Purchase Price to Seller, subject
to all adjustments, debits and credits with respect to each party’s payment of
closing costs and the funding of the Seller Loan applicable to such
Closing.
  10.5  Amendment of Master
Lease.  A counterpart Amendment to Master Lease duly executed
and acknowledged by Buyer, as tenant, in the form reasonably agreed to by Buyer
and Seller, along with a release in recordable form with respect to the Tranche
1 Facilities and the Tranche 2 Facilities, as applicable.
  10.6  Payment of
Rent.  Buyer shall have paid to HCN all rent and all other
charges due and payable under each Master Lease through the date of each
Closing.
  10.7  Seller Loan
Documents.  Buyer shall have executed and delivered any Seller
Loan Documents to be executed by Buyer, in the form agreed to by Buyer and
Lender.
  10.8  State Specific
Documents.  Buyer shall have delivered, and executed as
applicable, any State specific documents customarily used in connection with the
transfer of real property and delivered by the buyer thereof, including any
transfer tax affidavits or bulk sales releases, in forms reasonably agreed to by
Buyer and Seller.
  10.9  Performance by
Buyer.  The due performance by Buyer of each and every
undertaking and agreement to be performed by it hereunder in all material
respects, and the truth of each representation and warranty made by Seller in
this Agreement in all material respects at the time as of which the same is made
and as of the Closing Date as if made on and as of the Closing
Date.
   11
  ARTICLE
      11:
              CASUALTY,
      RISK OF LOSS
  11.1  Casualty, Risk of
Loss.  Buyer shall bear the risk of all loss or damage to the
Assets through each Closing.  If any of the Assets are damaged or
destroyed, in whole or in part, as a result of any cause at any time before a
Closing Date, Buyer shall nonetheless purchase the Assets and proceed to the
applicable Closing.  All insurance proceeds payable on account of any
such casualty shall belong to Buyer.  In the event of any condemnation
or taking related to any portion of the Real Property, Seller shall assign to
Buyer its rights to any condemnation proceeds resulting from such condemnation
or taking at the applicable Closing.
  ARTICLE
      12:
              MISCELLANEOUS
      PROVISIONS
  12.1  Survival of Representations
and Warranties.  The representations, warranties, covenants and
agreements by Buyer and Seller contained in this Agreement will survive for a
period of six months after each Closing.  After such time, the
conveyance of certain Assets to Buyer shall constitute full performance and
discharge of every representation, warranty, covenant and agreement of Seller
and Buyer to be performed hereunder, notwithstanding anything herein to the
contrary.
  12.2  Public
Announcements.  Each party shall hold in strict confidence all
information received from the other party concerning this transaction and shall
not release any such information to third parties (other than attorneys,
accountants or other professional consultants, and lenders of Buyer) without the
prior written consent of the other party unless otherwise required by
law.  Buyer and Seller will jointly prepare and issue any and all
releases of information to the public relating to the sale of the
Assets.  Each party will undertake to consult with the other prior to
responding to any inquiries made by any third party respecting the transactions
contemplated by this Agreement.
  12.3  Costs and
Expenses.  Except as expressly otherwise provided in this
Agreement, each party hereto shall bear its own costs and expenses in connection
with this Agreement and the transactions contemplated hereby.
  12.4  Performance.  In
the event of a breach or default by any party of its obligations hereunder, the
prevailing party shall be entitled to its reasonable attorney’s
fees.
  12.5  Benefit and
Assignment.  This Agreement binds and inures to the benefit of
each party hereto and its successors and assigns.  Buyer may assign
its interest under this Agreement to any other person or entity, or designate
one or more nominees to take title to all or any portion of the Assets, without
the prior written consent of Seller.  Seller shall not assign its
rights under this Agreement to any person or entity without the prior written
consent of Buyer.
   12
  12.6  Effect and Construction of
this Agreement.  This Agreement is the entire agreement of the
parties and supersedes any and all prior agreements, arrangements and
understandings relating to matters provided for herein.  The captions
used herein are for convenience only and shall not control or affect the meaning
or construction of the provisions of this Agreement.  This Agreement
may be executed in one or more counterparts, and all such counterparts shall
constitute one and the same instrument.
  12.7  Cooperation; Further
Assistance.  Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take such
action and execute and deliver such additional documents and instruments as may
be necessary to consummate and make effective the transactions contemplated by
this Agreement.
  12.8  Notices.  All
notices, consents and approvals required or permitted hereunder shall be in
writing and shall be deemed to be properly given when [i] personally delivered;
[ii] sent by first class U.S. mail, postage prepaid; [iii] sent by overnight
courier, or [iv] sent by facsimile or electronic transmittal (provided a copy is
promptly sent pursuant to clause [i], [ii], or [iii] above) in each case at the
address stated below:
  If
      to Seller:
              Health
      Care REIT, Inc.
  One
      SeaGate, Suite 1500
  Toledo,
      Ohio  43604
  Attn:
              Erin
      C. Ibele
  Telephone:
      (419) 247-2800
  Facsimile:
      (419) 247-2826
  with
      a Copy to:
              Shumaker,
      Loop & Kendrick, LLP
  1000
      Jackson Street
  Toledo,
      Ohio   43604
  Attn:
              Mary
      Ellen Pisanelli, Esq.
  Telephone:
      (419) 321-1313
  Facsimile:
      (419) 241-6894
  If
      to Buyer:
              Emeritus
      Corporation
  3131
      Elliott Avenue, #500
  Seattle,
      Washington 98121
  Attn:
              Eric
      Mendelsohn
  Telephone:
      (206) 301-4493
  Facsimile:
      (206) 357-7388
  with
      a Copy to:
              Pircher,
      Nichols & Meeks
  900
      North Michigan Avenue, Suite 1050
  Chicago,
      Illinois 60611
  Attn:  Real
      Estate Notices (JDL/MJK)
  Telephone:
      (312) 915-3112
  Facsimile:  (312)
      915-3348
   13
  All
notices, consents and approvals that are required or permitted to be given by
either party to the other under this Agreement may be given by such party or its
legal counsel, who are hereby authorized to do so on the party’s
behalf.
  12.9  Waiver and
Discharge.  This Agreement shall not be released or modified in
any manner except by an instrument in writing executed by or on behalf of each
of the parties.  The failure of any party to enforce at any time any
of the provisions of this Agreement shall in no way be construed to be a waiver
of any such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the right of any party thereafter to enforce each and
every such provision.  No waiver of any breach of this Agreement shall
be held to be a waiver of any other or subsequent breach.
  12.10  Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
  12.11  Severability.  Any
provision of this Agreement that is determined by a court of competent
jurisdiction to be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.  To the
extent permitted by applicable law, the parties waive any provision of law which
renders a provision hereof prohibited or unenforceable in any
respect.
  12.12  Time of
Essence.  Time is of the essence with respect to all provisions
of this Agreement.
  12.13  No Third Party
Beneficiaries.  Except as otherwise expressly provided herein,
the provisions of this Agreement are intended to be solely for the benefit of
the parties hereto, and the execution and delivery of this Agreement shall not
be deemed to confer any rights upon, nor obligate any of the parties hereunder,
to any person or entity other than the parties to this Agreement.
  12.14  No
Brokers.  Seller represents and warrants to Buyer, and Buyer
represents and warrants to Seller, that no broker or finder has been engaged by
it, respectively, in connection with any of the transactions contemplated by
this Agreement or to its knowledge is in any way connected with any of such
transactions.  In the event of a claim for broker’s or finder’s fee or
commissions in connection herewith, then Seller shall indemnify, protect, defend
and hold Buyer harmless from and against the same if it shall be based upon any
statement or agreement alleged to have been made by Seller, and Buyer shall
indemnify, protect, defend and hold Seller harmless from and against the same if
it shall be based upon any statement or agreement alleged to have been made by
Buyer.
  12.15  Further
Instruments.  Each party will, whenever and as often as it
shall be requested so to do by the other, cause to be executed, acknowledged or
delivered any and all such further instruments and documents as may be necessary
or proper, in the reasonable opinion of the requesting party, in order to carry
out the intent and purpose of this Agreement.
  12.16  Non Business
Days.  Whenever action must be taken (including the giving of
notice or the delivery of documents) under this Agreement during a certain
period of time (or by a
   14
  particular
date) that ends (or occurs) on a non business day, then such period (or date)
shall be extended until the immediately following business day.  As
used herein, “business day” means any day other than a Saturday, Sunday or
federal or Ohio State holiday.
  12.17  Amendments.  This
Agreement may be amended by written agreement of amendment executed by all
parties, but not otherwise.
  12.18  Waiver of Trial by
Jury.  The parties hereby irrevocably waive their respective
rights to a jury trial of any claim or cause of action based upon or arising out
of this Agreement.  This waiver shall apply to any subsequent
amendments, renewals, supplements or modifications to this
Agreement.  In the event of litigation, this Agreement may be filed as
a written consent to a trial by the court.
  12.19  Incorporation by
Reference.  All recitals and all schedules attached hereto are
incorporated by reference into this Agreement as if the same were fully set
forth herein, regardless of when the same are finally attached to this
Agreement.  The following is a complete list of the schedules and
exhibits attached or to be attached hereto:
  Schedule
1:                                         Seller
Entities
 Schedule
2-A:                                    Tranche
1 Facilities
 Schedule
2-B:                                     Tranche
2 Facilities
 
 Exhibit
A:                                           Legal
Descriptions
 Exhibit
B:                                           Form
of Earnest Money Escrow Agreement
 Exhibit
C:                                           Term
Sheet for Seller Loan
 Exhibit
D:                                           Form
of Quitclaim Bill of Sale
 
 
 
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REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
   15
  IN
WITNESS WHEREOF, each of the parties hereto have executed this Agreement as of
the Effective Date.
  Seller:
              HEALTH
      CARE REIT, INC.
                
                
                By:
      /s/ Erin C.
      Ibele
                Title: Senior Vice President
                Administration and Corporate
      SecretaryHCRI
      MISSISSIPPI PROPERTIES, INC.
                
                By:
      /s/ Erin C.
      Ibele
                Title: Senior Vice President
                Administration and Corporate
      SecretaryHCRI
      MASSACHUSETTS PROPERTIES TRUST II
                
                By:HCRI
      Massachusetts Properties, Inc., as Trustee, and not individually and
      subject to the provisions of the Declaration of Trust of HCRI
      Massachusetts Properties Trust II filed with the Secretary of the
      Commonwealth of Massachusetts and the City Clerk of Boston
                
                By: /s/ Erin C.
Ibele
                Title:Senior Vice
      President
                Administration and Corporate SecretaryHCRI
      TEXAS PROPERTIES, LTD.
                
                By:Health
      Care REIT, Inc., General Partner
                
                By: /s/ Erin C.
Ibele
                Title:Senior Vice
      President
                Administration and Corporate Secretary
  16
  
 HCRI
      EDDY POND PROPERTIES TRUST
                
                By:HCRI
      Massachusetts Properties, Inc., as Trustee, and not individually and
      subject to the provisions of the Declaration of Trust of HCRI Eddy Pond
      Properties Trust filed with the Secretary of the Commonwealth of
      Massachusetts and the City Clerk of Boston
                
                By: /s/ Erin C.
Ibele
                Title:Senior Vice President
                Administration and Corporate SecretaryHCRI
      NEVADA PROPERTIES, INC.
                
                By: /s/ Erin C.
      Ibele
                Title:Senior Vice
      President
                Administration and Corporate SecretaryHCRI
      KANSAS PROPERTIES, LLC
                
                By: Health
      Care REIT, Inc., Sole Member
                
                By: /s/ Erin C.
      Ibele
                Title:Senior Vice
      President
                Administration and Corporate SecretaryHCRI
      STONECREEK PROPERTIES, LLC
                
                By:  Health
      Care REIT, Inc., Sole Member
                
                By: /s/ Erin C.
      Ibele
                Title:Senior Vice
      President
                Administration and Corporate SecretaryBuyer:
              EMERITUS
      CORPORATION
                
                By:
      /s/ Eric Mendelsohn
                Title: SVP Corporate
      Development
 
   17