Document:

ex107702amend1masterleasenhi.htm

EX-10.77.02

    FIRST AMENDMENT TO MASTER
LEASE

     

    THIS
FIRST AMENDMENT TO MASTER LEASE (this “Amendment”) is made and executed and
effective as of this 1st day of December, 2009 (the “Amendment Execution Date”)
by and between EMERITUS CORPORATION, a Washington corporation, having its
principal office at 3131 Elliott Avenue, Suite 500, Seattle, Washington
98121-1031, as Tenant, and NATIONAL HEALTH INVESTORS, INC., a Maryland
corporation, having its principal office at 222 Robert Rose Drive, Murfreesboro,
Tennessee 37129, as Landlord.

     

    RECITALS

     

    A.           Landlord
and Tenant are parties to that Master Lease dated as of October 13, 2009 (the
“Lease”) with respect to eight senior housing facilities in South Carolina,
Tennessee and Arizona (the “Facilities”).

     

    B.           Landlord
and Tenant have agreed, in response to Tenant’s due diligence investigation, to
amend certain provisions of the Lease.

     

    C.           The
Lease provides that it can be amended by written instrument signed by Landlord
and Tenant.

     

    NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:

     

    1. DEFINITIONS.

     

    (a) Article 1
is amended by inserting the following new defined terms in the appropriate
places:

     

    “Annual
Rent Adjustment Date” shall mean (i) during the Initial Term, the anniversary of
each Facility Commencement Date and (ii) during any Extended Term, the
anniversary of the beginning date of that Extended Term.

     

    “Base
Purchase Price” shall mean Thirty Eight Million Five Hundred Twenty Thousand and
no/100 Dollars ($38,520,000); provided, however, in the event that the fair
market value of the Facilities subject to this Lease at the time the Purchase
Option is exercised as determined in the manner set forth in Section 25.16(c) of
this Lease is greater than Thirty Nine Million Six Hundred Forty Nine Thousand
Nine Hundred Ninety Nine and no/100 Dollars ($39,649,999.00), which amount shall
be reduced on a dollar for dollar basis by any amount previously paid to
Landlord pursuant to Articles 15 or Article 16 as a result of damage to or
destruction or Condemnation of any of the Facilities, then the Base Purchase
Price shall be Thirty Seven Million Five Hundred Twenty Thousand and no/100
Dollars ($37,520,000.00); and further provided that if the Lease and Purchase
Option are terminated with respect to the Gilbert Facility, Base Purchase Price
shall be adjusted as provided in Section 11(e) hereof.

     

    “Capital
Allowance” shall have the meaning set forth in Section 7.5(a);

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Capital
Allowance Rent Adjustment Date” shall have the meaning set forth in Section
7.5(a);

     

    “Consolidated
Net Worth” shall mean the consolidated net worth of the applicable entity as
determined in accordance with generally accepted accounting principles
consistently applied.

     

    “Disbursement
Date” shall have the meaning set forth in Section 7.5(d);

     

    “Existing
Easements and Encroachments” shall mean those matters described in Exhibit H;

     

    “FF &
E” shall have the meaning set forth in Section 7.5(a);

     

    “Gilbert
Facility” means the assisted living facility (including the free standing
cottages) located in Gilbert, Arizona.

     

    “Gilbert
Repair Project” means the construction at the Gilbert Facility related to the
sinking of the foundation and the flooding of the cottages;

     

    “Landlord’s
Approval” shall have the meaning set forth in Section 7.5(b);

     

    “Landlord’s
Share of the Capital Allowance” shall have the meaning set forth in Section
7.5(a);

     

    “Material
Defect” means any defect, whether latent or patent, (i) in the Gilbert Repair
Project and (ii) with respect to any matter other than the Gilbert Repair
Project, with a cost to repair individually or in the aggregate for any Facility
in excess of Seventy Five Thousand and no/100 Dollars ($75,000.00);

     

    “Missing
Estoppels” shall mean those Estoppel Certificates described in Exhibit
I;

     

    “Request
for Advance” shall have the meaning set forth in Section 7.5(d);

     

    “RRA”
shall have the meaning set forth in Section 7.5(a);

     

    “Subsequent
Settlement Condition” shall mean a condition (whether or not related to or
associated with the Gilbert Repair Project) occurring on or discovered at the
Gilbert Facility, or any portion thereof, where sinking or settlement of any
building foundations, walkways, paved areas, utility lines or any other
improvements thereon causes damage to the Gilbert Facility. For the avoidance of
doubt a Subsequent Settlement Event shall not include any damage to the Gilbert
Facility that is the result of either (i) Tenant’s willful misconduct or gross
negligence or (ii) a casualty event which is unrelated to the sinking or
settlement of the Gilbert Facility and which is covered by the insurance Tenant
is required to maintain under the Lease (even if Tenant has for any reason
failed to maintain such insurance).

     

    “Tenant’s
Share of the Capital Allowance” shall have the meaning set forth in Section
7.5(a).

     

    
      
         

      

      
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    “Vehicles”
shall have the same meaning set forth in Section 7.5(a).

     

    (b)           Article
1 is further amended by deleting the definition given for Lease Year and the
following inserted in lieu thereof.

     

    “Lease
Year” shall mean the period from the respective Facility Commencement Dates
through January 31, 2011 for the first Lease Year and each twelve (12)
consecutive month period thereafter throughout the Term, provided, however, that
the fifteenth Lease Year shall end concurrently with the expiration of the
Initial Term.

     

    2. EXISTING
TITLE ISSUES. Section 2.3 is hereby amended by inserting the following at
the end thereof:

     

    NOTWITHSTANDING
THE FOREGOING, LANDLORD ACKNOWLEDGES AND AGREES THAT TENANT SHALL HAVE NO
LIABILITY FOR ANY COSTS, DAMAGES, LOSSES OR EXPENSES ARISING FROM OR RELATED TO
THE EXISTING EASEMENTS AND ENCROACHMENTS OR THE MATTERS DESCRIBED IN THE MISSING
ESTOPPELS, BUT THAT THE SAME ARE, AND SHALL REMAIN, THE SOLE RESPONSIBILITY OF
LANDLORD.

     

    3. COMMENCEMENT
DATE.  Section 3.1 is amended by inserting the following at the
end thereof:

     

    Landlord
and Tenant acknowledge and agree that the Commencement Date, each Facility
Commencement Date and accordingly the Initial Term are tied to the issuance to
Tenant of its licenses to operate the Facilities (unless the Prior Tenant agrees
to enter into the Interim Operating Documents with Tenant pending issuance of
its licenses) and that they have agreed that Tenant will use its good faith
efforts to secure such licenses for all of the Facilities by January 1, 2010;
provided, however, Tenant shall not be in default of its obligations under this
Lease if it is unable to obtain some or all of the licenses by January 1,
2010.

     

    4. RENT.

     

    (a) Section
4.1 is hereby deleted in its entirety and the following inserted in lieu
thereof:

     

    4.1 Base Rent. The amounts shown
on Schedule II are referred to for each respective Facility as that Facility’s
“Initial Facility Base Rent.” Commencing on the Commencement Date for a given
Facility, Tenant shall pay the Initial Facility Base Rent for that Facility to
Landlord in twelve equal monthly installments on the 1st day of each month. Base
Rent for each Facility shall increase (i) on each Capital Allowance Rent
Adjustment Date by the amount set forth in Section 7.5(c), (ii) on each Annual
Rent Adjustment Date by the amount reflected below:

     

    First and
Second

    Annual
Rent Adjustment
Dates                                                      2.00%

    Third
Annual Rent Adjustment
Date                                                                           2.955%

    Fourth
and Fifth

    Annual
Rent Adjustment
Dates                                                      3.0%

    
      
         

      

      
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    Sixth
Annual Rent Adjustment
Date                                                                           3.026%

    Seventh
through Twelfth

    Annual
Rent Adjustment
Dates                                                      4.00%

    Thirteenth
Annual Rent Adjustment
Date                                                                           2.716%

    Fourteenth Annual Rent Adjustment
Date                                                                           4.050%

     

    Base Rent
shall be prorated for any period shorter than the number of days in a whole
month and for any Lease Year longer than twelve (12) months.

     

    The
aggregate annual amount for all Facilities of Base Rent, reflecting the increase
to Base Rent contemplated in Section 7.5(c), for the Second Lease Year and the
remainder of the Initial Term is set forth on Schedule III.  For the
avoidance of doubt, the parties acknowledge and agree that it is their intent
that from and after the Second Lease Year, the Base Rent will assume that the
Landlord’s Share of the Capital Allowance has been fully advanced.

     

    (b)           Section
4.2 is hereby deleted in its entirety and the following inserted in lieu
thereof:

     

    4.2 Base Rent for Extended Term.
Base Rent for the Extended Term shall increase by three percent (3%) per year on
the commencement of the Extended Term and each Annual Rent Adjustment Date
thereafter during the Extended Term. Base Rent as so increased shall be paid in
twelve equal monthly installments to Landlord.

     

    5. CAPITAL
IMPROVEMENTS. A
new Section 7.5 is added to the Master Lease which provides as
follows:

     

    7.5.           Capital
Allowance.

     

    (a) Notwithstanding
anything to the contrary set forth in this Article 7, Landlord and Tenant have
agreed to fund on a 50-50 basis the cost of certain repairs, renovations and
alterations to the Facilities (the “RRA”) and/or the acquisition of certain
furniture, fixtures and equipment for the Facilities (the “FF & E” and
together with the RRA, the “Improvements”), with the aggregate amount required
to be contributed by Landlord and Tenant for the Improvements not to exceed One
Million Five Hundred Thousand and no/100 Dollars ($1,500,000.00) (the “Capital
Allowance”), with up to Seven Hundred Fifty Thousand and No/100 Dollars
($750,000.00) of such amount being provided by Landlord (the “Landlord’s Share
of the Capital Allowance”) and with up to Seven Hundred Fifty Thousand and
no/100 Dollars ($750,000) of such amount being provided by Tenant (the “Tenant’s
Share of the Capital Allowance”). With respect to each of the Improvements,
Landlord and Tenant shall agree upon an appropriate allocation of the cost
thereof between Landlord and Tenant, it being understood and agreed that Tenant
may use the Tenant’s Share of the Capital Allowance to pay for the cost of any
vehicles to be used in connection with the operation of the Facilities (the
“Vehicles”) and that Landlord shall have no obligation to advance any portion of
the Landlord’s Share of the Capital Allowance to cover any portion of the costs
thereof. Accordingly, as between Landlord and Tenant, Landlord shall be required
to bear a disproportionate share of the cost of a portion of the Improvements
but in no event (A) shall the amount which Landlord is required to advance in
the aggregate with respect to the Improvements exceed the Landlord’s Share of
the Capital

     

    
      
         

      

      
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    Allowance
nor (B) shall the amount which Tenant is required to advance in the aggregate
with respect to the Improvements and the Vehicles exceed the Tenant’s Share of
the Capital Allowance.

     

    (b) The
Capital Allowance may be allocated by Tenant between the Facilities in such
manner as Tenant deems to be necessary and appropriate to equip, repair,
renovate and/or alter the Facilities; provided, however, any proposed use by
Tenant of the Landlord’s Share of the Capital Allowance shall be subject to the
review and prior written approval of Landlord, which approval shall not be
unreasonably withheld or delayed (“Landlord’s Approval”) and which Landlord’s
Approval shall be deemed to have been given unless such approval is denied in
writing within thirty (30) days after Tenant’s submission of a request for
approval to Landlord.

     

    (c) Any
portion of the Landlord’s Share of the Capital Allowance advanced by Landlord
will increase the Base Rent due and payable with respect to the affected
Facility commencing on the first day of the first month following the applicable
Disbursement Date (each a “Capital Allowance Rent Adjustment Date”) by an amount
equal to (i) the product of the amount advanced multiplied by nine percent per
annum (ii) divided by twelve (12). Any portion of the Tenant’s Share of the
Capital Allowance advanced by Tenant will be deemed to be a Capital Expenditure
within the meaning of Section 7.1 of this Lease.

     

    (d) In
response to a written disbursement request in substantially the form attached as
Exhibit L (each
a “Request for Advance”), Landlord shall make advances of the Landlord’s Share
of the Capital Allowance on the last day of each calendar month in which a
Request for Advance is received provided no Event of Default has occurred and/or
is continuing and provided that each of the following conditions has been
satisfied or waived by Landlord in the exercise of its reasonable discretion,
and, provided that, if the last day of the month is not a business day, then the
advance shall be disbursed on the last business day of that month (each a
“Disbursement Date”):

     

    (i) If the
Request for Advance relates to the purchase of FF& E, Landlord shall
disburse to Tenant such portions of the Landlord’s Share of the Capital
Allowance as are necessary to reimburse Tenant for fifty percent (50%) of the
amount of the paid invoice; and

     

    (ii) If the
Request for Advance relates to the cost of an RRA to a Facility, Landlord shall
disburse to Tenant such portions of the Landlord’s Share of the Capital
Allowance as are necessary to reimburse Tenant for fifty percent (50%) of the
cost thereof subject to Tenant’s compliance with the following
conditions:

     

    (A) Tenant
shall submit a completed Request for Advance, no later than the fifteenth
(15th)
calendar day of any calendar month;

     

    (B) Tenant
shall have delivered to Landlord all original mechanics’ lien waivers, in form
and substance satisfactory to Landlord, reasonably deemed necessary by Landlord
for services and materials provided in connection with the RRA;

     

    
      
         

      

      
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    (C) All costs
for the RRA are to be certified by Tenant in accordance with the Request for
Advance.  Verification of the monthly progress of the RRA and the
costs incurred may be made by Landlord in its reasonable judgment;

     

    (D) Tenant
shall be deemed to have remade, as of the date of each advance, each and every
representation and warranty made by Tenant in this Master Lease, and each such
representation and warranty shall be true and correct at the time of each
advance;

     

    (E) Tenant
shall have provided Landlord with evidence reasonably satisfactory to Landlord
that the RRA complies with all building, zoning and other laws and governmental
codes, rules and regulations, all necessary licenses, permits, approvals and
consents required for the use, occupancy and operation of the Facility and
evidence satisfactory to Landlord that, as of the date of the final Request for
Advance, to the extent required by applicable laws and regulations, the RRA has
been inspected and approved by each governmental authority with jurisdiction
over the RRA and by each person or entity that has the right to inspect and
approve the RRA, and each applicable governmental authority shall have issued
the appropriate permit, license or certificate to evidence such
approval;

     

    (F) Before
processing the final Request for Advance, Landlord shall have received a
completion certificate, in substantially the form attached hereto as Exhibit M, executed
by Tenant stating that the RRA has been completed, together with such other
evidence that no mechanics or materialmen’s liens or other encumbrances have
been filed and remain in effect against the Facility, or appropriate lien
waivers from any contractor or subcontractor;

     

    (G) To the
extent an architect has been engaged, a signed copy of the “AIA Document G702
Application and Certificate for Payment” shall have been submitted to Lessor
with each Request for Advance.

     

    6. SECURITY
INTEREST. Section 11.1 is hereby deleted in its entirety and the
following inserted in lieu thereof:

     

    Tenant
shall execute in favor of Landlord a security agreement in the form attached as
Exhibit G hereto, granting to Landlord a first priority security interest in all
Tenant’s Personal Property, Accounts, general intangibles, contract rights and
healthcare insurance receivables arising from the operations of each Facility
and other interests of Tenant which security interest shall secure the payment
of all Rent and the performance of all other obligations of the Tenant under
this Lease. Notwithstanding the foregoing, the security interest granted to
Landlord with respect to Tenant’s Personal Property in this Section 11.1 is
intended by Landlord and Tenant to be subordinate to any security interest
granted in connection with the financing or leasing of all or any portion of the
Tenant’s Personal Property. Tenant shall cooperate in filing all financing
statements needed to perfect such security interest.

     

    7. COVERAGE
RATIO.  Section 11.2 is amended by inserting the following at
the end thereof:

     

    
      
         

      

      
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    Notwithstanding
the foregoing, during the First Lease Year the Gilbert Facility shall be
excluded from the calculation of the Lease Coverage Ratio.

     

    8. PURCHASE
OPTION.  Section 25.16(b) is hereby deleted in its entirety and
the following inserted in lieu thereof:

     

    (b)           The
Purchase Price for the exercise of the Purchase Option shall be the sum of the
Base Purchase Price plus fifty percent (50%) of the amount, if any, by which the
fair market value of the Facilities subject to this Lease at the time the
Purchase Option is exercised exceeds the Base Purchase Price.

     

    9. CONDITIONS
PRECEDENT.

     

    (a) Sections
27(c) and (d) are hereby deleted in their entirety and the following inserted in
lieu thereof:

     

    (c)           It
shall be a condition to Tenant’s obligations hereunder that Tenant shall be
satisfied in its sole and absolute discretion with the results of its due
diligence investigation with respect to the physical, financial and operational
condition of each of the Facilities, which due diligence investigations shall
have been completed by November 30, 2009 (October 13, 2009 through November 30,
2009 being referred to herein as the “Due Diligence Period”).

     

    (d)           It
shall be a condition to Tenant’s obligations hereunder that it has secured the
approval of its Board of Directors to the transaction contemplated herein prior
to December 15, 2009.

     

    (b) The last
paragraph of Article 27 is hereby deleted in its entirety and the following
inserted in lieu thereof:

     

    In order
to terminate this Lease based upon Tenant’s dissatisfaction with the condition
set forth in Section 27(c), Tenant must provide written notice of termination to
Landlord not later than 5:00 p.m. Central Standard Time on December 1, 2009 and
in order to terminate this Lease based upon Tenant’s dissatisfaction with the
condition set forth in Section 27(d), Tenant must provide written notice of
termination to Landlord not later than 5:00 p.m. Pacific Standard Time on
December 15, 2009. If such notice of termination is not timely given, Tenant
shall be deemed to have satisfied conditions (c) and (d) of this Section
27.

     

    10. REPRESENTATIONS,
WARRANTIES AND COVENANTS.  As an inducement to Tenant to enter
into the Lease as amended by this Amendment, Landlord represents, warrants and
covenants to Tenant that each of the Facilities is, as of the Amendment
Execution Date, and will be, as of the Commencement Date, in good condition and
repair, ordinary wear and tear excepted, and free from any Material Defects.
Landlord agrees to indemnify, defend and hold harmless Tenant from and against
any and all damages, losses, costs or expenses, including, but not limited to,
reasonable attorneys fees, which Tenant may incur in the event of a breach of
the foregoing representations, warranties and covenants made in this Section 10
of this First Amendment. Landlord’s indemnity under this Section 10 shall
be

     

    
      
         

      

      
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    independent
of and not limited by Landlord’s indemnity obligations under Section 20.2 of the
Lease.

     

    11. ADDITIONAL REPRESENTATIONS,
WARRANTIES AND COVENANTS FOR THE GILBERT FACILITY

     

    As an inducement to enter into the
Lease as amended by this Amendment, Landlord represents, warrants and covenants
to Tenant with respect to the Gilbert Facility, as follows:

     

    (a) The
Gilbert Repair Project has, as of the Amendment Execution Date, or will have
been, as of the Commencement Date, completed in compliance with the plans and
specifications provided to Tenant, in a good and workmanlike manner and in
compliance with all applicable Legal Requirements and, as of the Commencement
Date, Landlord or the Prior Operator or Prior Manager, as applicable, will have
received all approvals required under any applicable Legal Requirements for the
lawful use and occupancy of the Gilbert Facility for the Permitted
Use.

     

    (b) Landlord
shall assign, or shall cause to be assigned, to Tenant effective as of the
Commencement Date any warranties issued to Landlord in connection with the
Gilbert Repair Project or, alternatively, shall, at the request of Tenant,
exercise, or cause to be exercised, any rights or remedies available
thereunder.

     

    (c) If a
Subsequent Settlement Condition is discovered, Tenant shall not be responsible
under Section 10.1 of the Lease for the repair of the Subsequent Settlement
Condition.

     

    (d) If Tenant
should at any time or times during the Term discover the existence of a
Subsequent Settlement Condition, Tenant shall give Landlord written notice
thereof (a “Gilbert Settlement Condition Notice”). Upon receipt of a Gilbert
Settlement Condition Notice, Landlord shall have a period of thirty (30) days,
or such longer period (not to exceed another thirty (30) days) as may be
reasonably needed to investigate the Subsequent Settlement Condition and
evaluate the cost of or feasibility of correcting the damage caused by the
Subsequent Settlement Event (the “Review Period”). At the end of the Review
Period, Landlord shall give written notice to the Tenant whether or not
Landlord, at Landlord’s sole cost and expense, shall repair the damage caused by
the Subsequent Settlement Condition (the “Repair Notice”).  If
Landlord so elects to repair a Subsequent Settlement Condition, Landlord shall
proceed with all due diligence to commence and promptly complete such repair and
shall do so in a good and workmanlike manner and in compliance with all
applicable Legal Requirements for such repairs and for the continuing lawful use
and occupancy of the Gilbert Facility and all portions thereof for the Permitted
Use.  If Landlord shall elect not to repair the damage caused by a
Subsequent Settlement Condition or shall fail to timely deliver a Repair Notice,
then in such event either Landlord or Tenant may to terminate the Lease with
respect to the Gilbert Facility by giving written notice to the other party of
such election (the “Termination Notice”) within sixty (60) days of the date of
(or deadline for) the Repair Notice. The Termination Notice shall specify the
date on which the Lease is to terminate as to the Gilbert Facility, which date
shall be the last day of the month occurring one hundred and eighty (180) days
after date of the Termination Notice. The termination of the Lease with respect
to the

     

    
      
         

      

      
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    Gilbert
Facility pursuant to this Section 11(d) will be effective on the date specified
in the Termination Notice.

     

    (e) If the
Lease with respect to the Gilbert Facility is terminated as provided in Section
11(d) above, the Purchase Option provided for in Section 25.16 of the Lease
shall be adjusted to remove the value of the Gilbert Facility (herein agreed to
be Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000.00) from the
Base Purchase Price (and all other amounts used in the definition of “Base
Purchase Price”).  In the event of such termination of the Lease with
respect to the Gilbert Facility, Landlord shall pay to Tenant the following: the
unamortized portion of all amounts Tenant has invested at the Gilbert Facility
for (i) capital expenditures to the Gilbert Facility’s land and
improvements prior to the date of the Termination Notice (including, but not
limited to, amounts expended therefor by Tenant under Sections 7.1 and 7.5 of
the Lease), and for (ii) FFF& E or FF&E having a net book value on
Tenant’s records in excess of Five Thousand Dollars ($5,000.00), individually,
or Fifteen Thousand Dollars ($15,000.00) in the aggregate with respect to such
FFF & E or FF & E at the Gilbert Facility, regardless of the net book
value of each individual item of such FFF & E or FF & E; any and all
WARN ACT costs; and any other termination fees incurred by Tenant in connection
with the termination of the Lease with respect to the Gilbert
Facility.

     

    (f) If
because of a Subsequent Settlement Condition or Landlord’s repair of the damage
to the Gilbert Facility caused by a Subsequent Settlement Condition, any
residential units at the Gilbert Facility are out of service or not able to be
occupied by residents, the Base Rent allocable to the Gilbert Facility shall
proportionately abate for the period such units are out of service.

     

    (g) Landlord
agrees to indemnify, defend and hold harmless Tenant from and against any and
all repair costs relating to a Subsequent Settlement Condition.  This
indemnity shall not apply to matters discovered or occurring after Tenant
acquires title to the Gilbert Facility in the event of the exercise of the
Purchase Option by Tenant.

     

    (h)            Landlord
and Tenant acknowledge and agree that there could be more than one Subsequent
Settlement Condition at the Gilbert Facility during the Term of the Lease and
that the provisions of this Section 11 shall apply equally to each such event
unless and until the Lease is terminated with respect to the Gilbert Facility as
a result thereof in accordance with the provisions of this Section
11.

     

    12. EXHIBITS.  Exhibits E
(Permitted Encumbrances) and G (Form of Security Agreement) are agreed upon and
attached hereto.

     

    13. NO
FURTHER MODIFICATIONS.  Except as specifically set forth
herein, the Lease shall remain in full force and effect as originally executed
by Landlord and Tenant.

     

    13.1 COUNTERPARTS.
This Amendment may be executed in counterparts, each of which shall be deemed to
be an original, but all of which taken together shall constitute but one and the
same instrument.

     

    
      
         

      

      
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    14. ENTIRETY.
This Amendment represents the entire and final agreement of Landlord and Tenant
with respect to the subject matter hereof and supersedes all prior negotiations,
discussions or writings with respect thereto.

     

    IN
WITNESS WHEREOF, Landlord and Tenant have executed this Amendment effective as
of the day and year first set forth above.

     

    TENANT:

     

    
      	
              Date:_12/10/09_

            	
              EMERITUS
      CORPORATION, a Washington
corporation

            

    

     

    By: /s/ Eric
Mendelsohn

    Eric
Mendelsohn

     

    Title:           SVP Corporate
Development

     

    
      
         

      

      
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    STATE OF
WASHINGTON                                                                :

     

    :
ss

    COUNTY
OF                                KING                                :

     

    On this,
the 10th day of December, 2009, before me, the undersigned officer, personally
appeared Eric
Mendelsohn, who acknowledged himself to be the SVP Corporate
Development of Emeritus Corporation, a Washington corporation
(“Company”), and being duly sworn according to law deposes and says that he, as
such officer, being authorized to do so, executed the foregoing Instrument for
the purposes therein contained, by signing the name of the Company by himself as
SVP Corporate
Development.

     

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

     

    Notary
Public:                                /s/ Melanie Jule
Pennington

     

    My
Commission
Expires:                                           07-09-2011

     

    
      
         

      

      
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    LANDLORD:

     

    
      	
              Date:_12-10-09_

            	
              NATIONAL
      HEALTH INVESTORS, INC., a Maryland
corporation

            

    

     

    By:/s/ Kristin S.
Gaines

    Kristin S.
Gaines

     

    Title: Vice President,
Operations

     

    STATE OF
_
TENNESSEE                                                      )

    )

    COUNTY OF
RUTHERFORD                                                      )

     

    Before
me, Jessica S. Murphy, a Notary Public of said County and State, personally
appeared Kristin S.
Gaines, with whom I am personally acquainted (or proved to me on the
basis of satisfactory evidence), and who, upon oath, acknowledged herself to be
Vice President,
Operations of National Health Investors, Inc., a Maryland corporation,
the within named bargainor, and that she as such Vice President,
Operations of the corporation, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation, and on its
behalf, by herself as _ Vice President,
Operations of the corporation.

     

    Witness
my hand and seal, at Office in Murfreesboro, this 10th day of _December,
2009.

     

    Notary
Public                               /s/
Jessica S. Murphy

     

    My
Commission Expires:_
07-21-2013

     

     

    

     

    
      
         

      

      
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    EXHIBIT
A

     

    The
following terms shall have the following meanings:

     

    “Facility” or “Facilities” means
individually or collectively as the context may require each of the assisted
living facilities listed on Schedule I, attached to this Agreement.

     

    “Medicaid” means the
medical assistance program established by Title XIX of the Social Security Act,
as amended.

     

    “Medicaid Receivable”
means with respect to each Facility any account that arises from the provision
of assisted living services (and any services or sales ancillary thereto) and
that is payable pursuant to an agreement entered into between Debtor or that
Facility and a federal or state agency or other Person administering Medicaid,
pursuant to which the Debtor or that Facility agrees to provide services or
merchandise for patients under Medicaid in accordance with the terms of such
agreement and the Medicaid Regulations.

     

    “Medicaid Regulations”
means collectively (a) all federal statutes, (whether set forth in Title XIX of
the Social Security Act, as amended, or elsewhere) affecting Medicaid, (b) all
applicable provisions of all rules, regulations, manuals, orders and
administrative, reimbursement and other guidelines of any governmental or
regulatory authority promulgated pursuant to or in connection with any of such
federal statutes, (c) all state statutes and plans for medical assistance
enacted in connection with any such federal statutes, rules, regulations,
manuals, orders and guidelines, and (d) and all applicable provisions of all
rules, regulations, manuals, orders and administrative, reimbursement and other
guidelines of any governmental or regulatory authority promulgated pursuant to
or in connection with any of such state statutes, in each case as such statutes,
rules, regulations, manuals, orders and guidelines may be supplemented, amended
or otherwise modified from time to time .

     

    “Medicare” means the
health insurance program for the aged and disabled established by Title XVIII of
the Social Security Act, as amended.

     

    “Medicare Receivable”
means with respect to each Facility any account that arises from the provision
of assisted living services (and any services or sales ancillary thereto) and
that is payable pursuant to an agreement entered into between Debtor or that
Facility and a federal or state agency or other Person administering Medicare,
pursuant to which Debtor or that Facility agrees to provide services or
merchandise for patients under Medicare in accordance with the terms of such
agreement and the Medicare Regulations.

     

    “Medicare Regulations”
means collectively (a) all federal statutes (whether set forth in Title XVIII of
the Social Security Act, as amended, or elsewhere) affecting Medicare and (b)
all applicable provisions of all rules, regulations, manuals, orders and
administrative, reimbursement and other guidelines of any governmental or
regulatory

    
      
         

      

      
        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.

     

    
      
         

      

      
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    SCHEDULE
I

     

    SCHEDULE
OF FACILITIES

    

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

    

    Emeritus
at Gilbert fka The Place at Gilbert, Arizona

    845 N. El
Dorado Drive, Gilbert, AZ

     

    Emeritus
at Glendale fka The Place at Glendale, Arizona

    6735 W.
Hillcrest Road, Glendale, AZ

     

    Emeritus
at Tanque Verde fka The Place at Tanque Verde, Arizona

    9050 E.
Tanque Verde
Road,                                                      Tanque
Verde, AZ

    

    Emeritus
at Tucson fka The Place at Tucson, Arizona

    2700 W.
Ina Road, Tucson, AZ

     

    Emeritus
at Conway fka The Place at Conway, South Carolina

    872
Singleton Ridge, Conway, SC

     

    Emeritus
at Gallatin fka The Place at Gallatin, Tennessee

    400
Hancock, Gallatin, TN

     

    Emeritus
at Kingsport fka The Place at Kingsport, Tennessee

    2424 N.
John B. Dennis Hwy, Kingsport, TN

     

    Emeritus
at Tullahoma fka The Place at Tullahoma, Tennessee

    801
Wilson Avenue, Tullahoma, TN

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    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”).

     

    R E  C I  T  A L S:

     

    WHEREAS,
Secured Party, as Landlord, and Debtor, as Tenant, have entered into that
certain Master Lease (as the same may be amended and/or restated from time to
time,  the “Master Lease”) dated October 13, 2009 whereunder Secured
Party has leased to Debtor the Land, the improvements thereon, equipment,
fixtures, furnishings and other property interests which comprise the eight
senior living facilities listed on Schedule I, attached
hereto and made a part hereof; and

     

    WHEREAS,
the Master Lease requires that Tenant pay Base Rent to Secured Party, Additional
Charges and other amounts which may become due pursuant to the Master Lease or
Capital Improvement Reserve Agreement; and

     

    WHEREAS,
the Master Lease requires the Debtor, as Tenant, to grant a security interest to
Secured Party in certain property of Debtor relating to or arising from the
Facilities to secure the payment of Base Rent and other amounts and obligations
of Debtor as Tenant; and

     

    WHEREAS,
Debtor is willing to grant the security interests created hereunder in favor of
Secured Party as security for the Obligations, as defined.

     

    NOW,
THEREFORE, in consideration of the premises and the mutual promises and
covenants hereinafter set forth, the parties hereby agree as
follows:

     

    10. Definitions.  Capitalized
terms not otherwise defined in this Agreement, including its preamble, recitals
and exhibits, shall have the meanings set forth in the Master
Lease.  All

     

    
      
         

      

      
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    capitalized
terms shall be equally applicable to the singular and plural forms thereof and
to any gender form thereof.

     

    11. Security
Interest.  As security for the repayment of the Obligations,
Debtor hereby assigns and grants to Secured Party a security interest in and to
all of Debtor’s rights in and to the property described on Exhibit A attached
hereto and incorporated herein by this reference now existing or hereafter
arising, and the proceeds thereof (collectively, the “Collateral”).  The
rights of Secured Party in the Collateral are limited to those of a secured
party.  The granting of security interests by Debtor hereunder in the
Collateral shall not be deemed to be an assignment of a payment within the
meaning of 42 U.S.C. §1395g or 42 U.S.C. §1396a (32).

     

    12. Obligations.  The
security interest granted herein by Debtor secures and shall secure the payment
of all (i) Base Rent and Additional Charges due or to become due under the
Master Lease, (ii) all amounts due or to become due for the Cap Ex Account
pursuant to the Capital Improvement Reserve Agreement and (iii) any and all
other amounts for which Debtor is or may become liable to Secured Party arising
in the course of performing or meeting any other obligation of Debtor under the
Master Lease.

     

    For
purposes of this Agreement, all such obligations secured by the Collateral shall
be referred to as “Obligations”.

     

    13. Debtor’s Representations and
Warranties to Secured Party.  Debtor hereby represents and
warrants to Secured Party that the following facts are true and correct as of
the Effective Date:

     

    (a) Debtor is
the true and lawful owner of the Collateral;

     

    (b) Debtor
has a good right to grant a security interest in the Collateral and to execute
this Agreement.

     

    (c) No
advances, liens, security interest or encumbrances exist against the Collateral
except as granted to Secured Party hereunder.

     

    14. Covenants to Secured
Party.  Debtor hereby covenants and agrees that until the
Obligations shall have been performed and paid in full or unless Debtor shall
have received the prior written consent of Secured Party:

     

    (a) Debtor
will keep the Collateral free from any adverse lien, security interest or
encumbrance (other than the security interest granted herein) and in good order
and repair and will not waste or impair or materially diminish the value of the
Collateral or any part thereof; Debtor will not use the Collateral in violation
of any of the Legal Requirements.

     

    (b) Debtor
will not sell or offer to sell or otherwise transfer, dispose of or encumber the
Collateral, or any interest therein (i) for less than its reasonable fair market
value other than sales in the normal course of operation for senior living
communities, or (ii) in such manner as to materially diminish the value of the
Collateral.

     

    
      
         

      

      
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    (c) Debtor
will maintain insurance with respect to the Collateral as set forth in the
Master Lease.

     

    (d) Subject
to Secured Party filing any necessary financing and continuation statements,
Secured Party’s security interest in the Collateral is now and at all times
hereafter shall be perfected and Secured Party shall have a lien having priority
over any other liens on the Collateral granted by Debtor other than those liens,
if any, permitted by the terms of the Master Lease.

     

    (e) Secured
Party (by any of its officers, employees and/or agents) shall have the right at
any time or times during Debtor’s usual business hours, but subject to
applicable laws governing the confidentiality of resident and employee records,
to inspect the Collateral and all related records (and the premises upon which
it is located) and all financial records and to verify the amount and condition
of the Collateral or any other matter whether or not relating to the
Collateral.  After the occurrence and during the continuation of an
Event of Default, all costs, fees and expenses incurred by Secured Party, or for
which Secured Party has become obligated, in connection with such inspection
and/or verification shall be payable immediately by Debtor to Secured
Party.

     

    (f) Subject
to Debtor’s due contest right set forth in the Master Lease, Debtor agrees to
pay all taxes, charges, transfer fees and assessments against the Collateral and
to do all things necessary to preserve and maintain the value thereof and
Debtor’s ability to collect its accounts.

     

    (g) In its
sole and absolute discretion without waiving or releasing any obligation,
liability or duty of Debtor under this Agreement or the Master Lease, Secured
Party may at any time or times hereafter, but shall be under no obligation to do
so, pay, acquire and/or accept an assignment of any security interest, lien,
encumbrance or claim asserted by a person against the Collateral if and to the
extent such security interest, line, encumbrance or claim is not otherwise
permitted by the terms of the Master Lease.  All reasonable sums paid
by Secured Party in respect thereof and all costs, fees and expenses, including
attorneys’ fees, court costs, expenses and other charges relating thereto
incurred by Secured Party on account thereof shall be payable immediately by
Debtor to Secured Party.

     

    (h) Secured
Party shall be required to file any financing or continuation statements
required to perfect its security interest in the Collateral and upon expiration
or earlier termination of the Lease and payment in full of the Obligations shall
be required to file any termination statements with respect to all such
financing/continuation statements; provided, however, in the event Secured Party
fails to file a termination statement upon request of Debtor, Debtor shall be
authorized to file the same on behalf of Secured Party. Upon request of Secured
Party, Debtor will sign and execute alone or with Secured Party any financing
statement or other document or procure any document and pay all necessary costs
to protect the security interest under this Agreement against the interest of
third Persons not otherwise permitted by the terms of the Master Lease. Debtor
will pay the cost of filing the same in all public offices wherever filing is
deemed by Secured Party to be necessary or desirable.  Debtor further
agrees to pay all costs and fees for filing any termination
statements.  In connection with the foregoing, it is agreed and
understood between the parties hereto (and Secured Party is hereby authorized
to

     

    
      
         

      

      
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    carry out
and implement the following agreements and understandings and Debtor hereby
agrees to pay the costs thereof) that Secured Party may, at any time or times,
file as a financing statement any counterpart of this Agreement signed by Debtor
if Secured Party shall elect so to file.

     

    (i) Debtor
will defend the Collateral against any claims and demands of all Persons at any
time claiming the same or any interest therein.

     

    (j) Debtor
will permit Secured Party and its agents, representatives and employees to enter
upon or into any premises where the Collateral and/or the records concerning the
Collateral may be located without being guilty of a trespass.  Secured
Party shall be permitted to examine the Collateral and such records relating
thereto.  Debtor will furnish upon request all pertinent information
regarding collateral.  Debtor will transmit to Secured Party promptly
all information that it may have or receive with respect to the Collateral that
might in any way materially diminish the value of the Collateral or Secured
Party’s rights or remedies with respect thereto. Debtor and Secured Party shall
comply with all Privacy Standards relating to protected health information as
provided in Section 22.4 of the Master Lease.

     

    (k) If any
documented security, certificate of title or similar document is, at any time
and pursuant to the laws of any jurisdiction, issued or outstanding with respect
to the Collateral or any part thereof , Debtor shall promptly advise Secured
Party thereof, and Debtor shall promptly cause the interest of Secured Party to
be properly noted thereon and Debtor will further promptly deliver to Secured
Party any such certificate of title or similar document issued or outstanding at
any time with respect to such Collateral.  If any instruments, chattel
paper, money or monies or documents are, at any time or times, included in the
Collateral, whether as proceeds or otherwise, Debtor will promptly deliver the
same to Secured Party upon demand therefore by Secured Party.

     

    15. Special Representations,
Warranties and Agreements with respect to Receivables.  With
respect to Receivables (as defined on Exhibit A hereto).
Debtor represents warrants and agrees with Secured Party as
follows:

     

    (a) As of the
time any Receivable becomes subject to Secured Party’s Security Interest,
including, without limitation, as of each time any specific assignment or
transfer or identification is made to Secured Party of any Receivable, Debtor
shall be deemed to have warranted as to each and all of such Receivables that
each Receivable and all papers and documents relating thereto are genuine and in
all respects what they purport to be; that each Receivable is valid and
subsisting and arises out of a bona fide sale of goods sold and delivered, or in
the process of being delivered, or out of and for services theretofore actually
rendered, to the debtor named in the Receivable (each a “Receivable Debtor”); that the
amount of the Receivable represented as owing is the correct amount actually and
unconditionally owing except for normal cash discounts, Medicaid overpayment
recoupments occurring in the ordinary course of business and allowances for bad
or doubtful accounts (referred to as contractual allowances with respect to
Medicaid residents) established by Debtor in the ordinary course of business and
in accordance with generally accepted accounting principals or applicable
Medicaid reimbursement requirements, is not disputed, and except for such normal
cash discounts is not subject to any setoffs, credits, deductions or
counter-charges; that Debtor is the owner thereof,

     

    
      
         

      

      
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    free and
clear of all liens, encumbrances and security interest of any nature whatsoever
(except for the security interest of Secured Party hereunder); and that Debtor
has no notice of or reason to believe that the Receivable Debtor is subject to
any pending bankruptcy proceeding, insolvency proceeding or operations of any
creditors committee.

     

    (b) Debtor
will hold in Debtor’s executive office, or such other location approved by
Secured Party, and make available to Secured Party as requested, subject to
applicable laws governing the confidentiality of resident records, so long as
any Obligations remain unpaid, all of Debtor’s records containing any entries as
to Receivables, including details of sale, delivery, payment and other material
information and, subject to applicable laws governing the confidentiality of
resident records, Secured Party shall at all reasonable times have full access
to and the right to examine and audit Debtor’s books and records, and to make
copies of pertinent portions thereof at Secured Party’s expenses, prior to the
occurrence or continuation of an Event of Default and at Debtor’s expense from
and after the occurrence and during the continuation of an Event of
Default.

     

    (c) Upon the
occurrence and during the continuation of any Event of Default and upon Secured
Party’s request, Debtor will notify its Receivable Debtors to make payment of
any or all Receivable or Receivables directly to Secured Party or to a bank
designated by Secured Party, the deposits of which are insured by the Federal
Deposit Insurance Corporation, pursuant to an arrangement whereby said bank
receives payments on Receivables for deposit into a collection account in
Debtor’s name and thereafter transfers all collected amounts to a collateral
account in Secured Party’s name.  Any proceeds of Receivables so
transmitted to Secured Party or to said bank may be deposited in a collateral
account in the name of Secured Party and under its dominion and control pending
their application to the Obligations, but Debtor acknowledges that the
maintenance of such account is solely for convenience in administering the
procedures established by this Section 6(c) and that
Debtor has not and shall not have any right, title or interest in said account
or in the amounts at any time to the credit thereof.  All proceeds so
received by Secured Party and or said bank shall be applied to the Obligations
which by their terms are then due, such application to be made to such portions
of the Obligations as Secured Party may determine in its sole discretion, with
any excess amounts remitted by Secured Party or said bank to Debtor. Subject to
the foregoing provisions of this Section 6(c) and to
the rights reserved to Secured Party elsewhere in this Agreement and prior to
the occurrence and continuation of an Event of Default, Debtor shall have the
right, at Debtor’s expense, to enforce, collect and receive all amounts owing on
Receivables. Upon the occurrence and during the continuation of an Event of
Default and upon receipt of a written demand from Secured Party, Debtor shall
take such action to ensure that all checks and other forms of remittances
received by Debtor on Receivables shall not be commingled with Debtor’s other
property but shall be segregated, held by Debtor in trust for Secured Party as
Secured Party’s exclusive property and immediately delivered by Debtor to
Secured Party in the identical form as that in which received with proper
endorsements. Debtor will accompany each such transmission of proceeds to
Secured Party with a report in such form as Secured Party may require
identifying the Receivables to which such proceeds apply.  In the
event any Receivable Debtor shall also be indebted to Debtor in any other
respect and such Receivable Debtor shall make payment without designating the
particular indebtedness against which it is to apply, such payment shall be
conclusively presumed to be payment on the Receivable of such Receivable
Debtor.  In administering the collection of proceeds as herein
provided, Secured Party or the bank

     

    
      
         

      

      
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    designated
by it may accept checks or drafts in any amount and bearing any notation without
incurring liability to Debtor for so doing.

     

    16. Debtor’s Use
of  the Collateral.  Prior to the occurrence and
continuation of an Event of Default and to the election by Secured Party to
exercise its rights under the Master Lease to terminate Debtor’s right to
possession of the Premises or to terminate the Master Lease as a result of such
Event of Default, Debtor may use the Collateral in the ordinary course of
Debtor’s business; provided, upon the occurrence and during the continuation of
an Event of Default and the election by Secured Party to exercise its rights
under the Master Lease to terminate Debtor’s right to possession of the Premises
or to terminate the Master Lease as a result of such Event of Default, Debtor’s
right to so use the Collateral shall terminate until further notice from Secured
Party.

     

    17. Events
of  Default.  The term “Event of Default”,
whenever used in this Agreement, shall mean that occurrence of an Event of
Default as defined in the Master Lease.

     

    18. Remedies.  In
conjunction with the election by Secured Party to exercise its rights and
remedies under the Master Lease to terminate Debtor’s right to possession of the
Premises or to terminate the Master Lease upon the occurrence and during the
continuation of an Event of Default thereunder, Secured Party shall have the
following remedies hereunder:

     

    (a) Upon the
occurrence and during the continuation of any Event of Default, at the option of
Secured Party, Secured Party shall have and may exercise any or all of the
rights and remedies of a secured party under the Code, and as otherwise
contractually granted herein under any applicable law or under any other
agreement executed by Debtor in favor of Secured Party, including, without
limitation, the right and power to sell, at public or private sale or sales, or
otherwise dispose of  or utilize such portion of the Collateral and
any part or parts thereof in any manner authorized or permitted under the Code
after the occurrence of an Event of Default, and to apply the proceeds thereof
toward payment of any costs and expenses and attorneys’ fees and legal expenses
thereby incurred by Secured Party and toward payment of the Obligations, from
time to time, in such order or manner as Secured Party may elect in its sole
discretion.

     

    (b) As an
essential part of the bargained-for consideration running to Secured Party,
Debtor hereby expressly grants to Secured Party the contractual right to
purchase any or all of the Collateral which is not already owned by Secured
Party at any sale any time after ten (10) days’ notice of such sale shall have
been sent to Debtor by Secured Party.  Debtor agrees that if such
notice of the sale is delivered in accordance with the terms of this Agreement
at least ten (10) days before the time of the proposed sale or disposition, such
notice shall be deemed reasonable and shall fully satisfy any requirement of
giving notice, and the proposed sale may take place any time after such ten (10)
day period without the necessity of sending another notice to
Debtor.  Secured Party may postpone and reschedule any proposed sale
at its option without the necessity of giving Debtor further notice of such fact
as long as the rescheduled sale occurs within sixty (6) days of the originally
scheduled sale.

     

    (c) The right
of Secured Party to take possession or control of the Collateral upon the
occurrence and during the continuation of an Event of Default may be
exercised

     

    
      
         

      

      
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    without
resort to any court proceeding or judicial process whatever and without any
hearing whatever thereon.

     

    (d) All
recitals in any instrument of assignment or any other document or paper executed
by Secured Party incident to sale, transfer, assignment or other disposition or
utilization of the Collateral or any part thereof hereunder shall be sufficient
to establish full legal propriety of the sale or other action taken by Secured
Party or of any fact condition or thing incident thereto, and all prerequisites
of such sale or other action shall be presumed conclusively to have been
performed or to have occurred.

     

    (e) Upon
disposition by Secured Party of any property in which Secured Party has a
security interest granted hereunder, Debtor shall be and remain liable for any
deficiency; and Secured Party shall account to Debtor for any surplus, but
Secured Party shall have the right to apply all or any part of such surplus to
(or to hold the same as a reserve against) all or any of the Obligations,
whether or not they or any of them be then due,  and in such order of
application as Secured Party may from time to time elect.

     

    (f) All right
to marshalling of assets of Debtor, including any such right with respect to the
Collateral, are hereby waived by Debtor.

     

    (g) In
addition to the foregoing provisions, upon the occurrence and during the
continuation of an Event of Default, and upon Secured Party’s demand, Debtor
agrees to assemble the Collateral at its usual place of business and make same
available to Secured Party immediately.

     

    19. Secured Party’s Powers and
Duties with Respect to Collateral.

     

    (a) Secured
Party shall be under no duty to pursue collection of any amount that may be or
become due in connection with any of the Collateral now or hereafter pledged
hereunder, to realize on the Collateral, to keep the same insured, or to do
anything for the enforcement and collection of the Collateral or the protection
thereof.

     

    (b) NOT
LIMITING THE GENERALITY OF ANY OF THE FOREGOING BUT IN AMPLIFICATION OF THE
SAME, SECURED PARTY SHALL NOT BE IN ANY WAY LIABLE TO OR RESPONSIBLE FOR ANY
DIMINUTION IN THE VALUE OF, OR REDUCTION IN THE PROCEEDS REALIZED FROM, THE
COLLATERAL FROM ANY CAUSE WHATSOEVER EXCEPT TO THE EXTENT THE SAME ARISES SOLELY
AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SECURED
PARTY.

     

    20. Expenses and
Indemnity.  Debtor will, upon demand, pay to Secured Party
forthwith the amount of all reasonable expenses, including reasonable attorney’s
fees and legal expenses, incurred by Secured Party upon the occurrence of an
Event of Default in seeking to collect or enforce any rights in the
Collateral.  Debtor agrees to indemnify Secured Party from and against
any and all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the gross
negligence or willful misconduct of Secured Party.

     

    
      
         

      

      
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    21. General
Authority.  Effective immediately but exercisable by Secured
Party (or by any Person designated by Secured Party), only upon the occurrence
and during the continuation of an Event of Default and only in the event that
Debtor fails, upon request, to take such actions and/or execute such documents
as Secured Party may reasonably request in order to allow Secured Party to
exercise its rights and remedies hereunder, Debtor hereby irrevocably appoints
Secured Party (or any Person designated by Secured Party) as Debtor’s duly
authorized attorney in fact, which appointment is hereby coupled with an
interest, with full power of substitution, in the name of Secured Party or the
name of Debtor, for Secured Party’s sole use and benefit, but at Debtor’s cost
and expense, to exercise at any time from and after the occurrence and during
the continuation of an Event of Default and to the extent Secured Party has
elected to exercise its remedies under the Master Lease to terminate Debtor’s
right to possession of the Premises or to terminate the Master Lease all or any
of the following powers solely with respect to all or any of the Collateral and
not with respect to any other assets of Debtor:

     

    (a) To sell,
transfer, assign or otherwise deal in or with the Collateral as fully and
effectively as if Secured Party were the absolute owner thereof;

     

    (b) To
retain, collect, demand, sue for collection, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof;

     

    (c) To
receive, take endorse, assign and/or deliver in Secured Party’s name or Debtor’s
name any and all checks, notes, drafts, documents, instruments and other
property relating to the Collateral;

     

    (d) To
transmit to Receivable Debtors notice of Secured Party’s interest in Receivables
and to request from Receivable Debtors at any time, in Debtor’s name or in
Secured Party’s name or the name of Secured Party’s designee, information
concerning the Receivables and the amounts owing thereon;

     

    (e) To
receive and open all mail addressed to Debtor and to retain all mail pertaining
to the Collateral;

     

    (f) To take
or bring, in Debtor’s name or Secured Party’s name, all steps, actions, suits or
proceedings deemed by Secured Party necessary or desirable in connection with
the Collateral;

     

    (g) To sign
Debtor’s name or Secured Party’s name to any documents evidencing the
Receivables, to compromise with any Receivable Debtor and give acquittances for
any and all Receivables;

     

    (h) To notify
Receivable Debtors to make payment directly to Secured Party or to any bank
designated by Secured Party;

     

    (i) To take
or bring, in Debtor’s name or Secured Party’s name, all steps, actions, suits or
proceedings deemed by Secured Party necessary or desirable to effect collection
of the Receivables;

     

    
      
         

      

      
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    (j) In
general, to do all things necessary to perform the terms of this Agreement,
including, without limitation, to take any action or initiate any proceedings
that Secured Party deems necessary or appropriate to protect and preserve the
security interest of Secured Party in the Collateral;

     

    PROVIDED,
HOWEVER, THE EXERCISE BY SECURED PARTY OF OR FAILURE TO SO EXERCISE ANY SUCH
AUTHORITY SHALL IN NO MANNER AFFECT DEBTOR’S LIABILITY TO SECURED PARTY
HEREUNDER OR IN CONNECTION WITH THE OBLIGATIONS; AND PROVIDED FURTHER, THAT
SECURED PARTY SHALL NOT BE UNDER ANY OBLIGATION OR DUTY TO EXERCISE ANY OF THE
POWERS HEREBY CONFERRED UPON SECURED PARTY AND SECURED PARTY SHALL HAVE NO
LIABILITY FOR ANY ACT OR FAILURE TO ACT IN CONNECTION WITH ANY OF THE COLLATERAL
EXCEPT FOR LIABILITY ARISING SOLELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SECURED PARTY. SECURED PARTY SHALL NOT BE BOUND TO TAKE
ANY STEPS NECESSARY TO PRESERVE RIGHTS IN ANY COLLATERAL.

     

    22. Other
Collateral.  The execution and delivery of this Agreement in no
manner shall impair or affect any other security (by endorsement or otherwise)
for the payment of the Obligations and no security taken hereafter as security
for payment of any part or all of the Obligations shall impair in any manner or
affect this Agreement, all such present and future additional security to be
considered as cumulative security.  Any of the Collateral may be
released from this Agreement without altering, varying or diminishing in any way
the force, effect, lien, security interest or charge of this Agreement as to the
Collateral not expressly released, and this Agreement shall continue as a first
lien security interest and charge on all of the Collateral not expressly
released until all sums and Obligations have been paid and performed in
full.  Any future assignment or attempted assignment or transfer of
the interest of Assignor in and to any of the Collateral shall not deprive
Secured Party of the right to sell or otherwise dispose of or utilize all of the
Collateral as above provided or necessitate the sale or disposition thereof in
parcels or in severalty.

     

    14.           Miscellaneous. This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original, but all of which taken together shall constitute but one and the
same instrument.  This Agreement represents the entire and final
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior negotiations, discussions or writings with respect thereto.
Any notice required to be given by either party under this Agreement shall be
given in the manner and to the parties at the addresses set forth in the Master
Lease. This Agreement shall be governed by the laws of the State of Tennessee
except that the exercise by Secured Party of its rights hereunder shall, with
respect to each of the Facilities, be governed by the laws of the State in which
each such Facility is located. This Agreement shall be binding upon and inure to
the benefit of the parties which are from time to time the Landlord and Tenant
under the Master Lease.

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, this Agreement has been executed and delivered as of the
Effective Date.

     

     

    Secured
Party:                                                                                     Debtor:

     

    NATIONAL
HEALTH
INVESTORS,                                                                           EMERITUS
CORPORATION,

     

    INC., a
Maryland
corporation                                                                           a
Washington corporation

     

    

     

    By:                                                      By:                                                      

     

    Name:                                                      Name:                                                      

     

    Title:                                                      Title:                                                      

     

    

     

    

    STATE OF
WASHINGTON                                                                :

    : ss

    COUNTY
OF                                KING                                :

    

    

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

    

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

    

    

    

    Notary Public

    

    My Commission
Expires:                                                                

    

    

    

    
      
         

      

      
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    STATE OF
__________________                                                                )

    )

    COUNTY OF
________________                                                                )

     

    Before
me, ___________________________________________, a Notary Public of said County
and State, personally appeared _________________________________, with whom I am
personally acquainted (or proved to me on the basis of satisfactory evidence),
and who, upon oath, acknowledged himself to be ________________________ of
National Health Investors, Inc., a Maryland corporation, the within named
bargainor, and that he as such _____________________________ of the corporation,
executed the foregoing instrument for the purposes therein contained, by signing
the name of the corporation, and on its behalf, by himself as
_____________________________ of the corporation.

     

    Witness
my hand and seal, at Office in _______________, this _____ day of _________,
2009.

     

     

    

    Notary
Public

    My
Commission
Expires:                                                                

    

    
      
         

      

      
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    EXHIBIT
H

     

    EXISTING
EASEMENT AND ENCROACHMENTS

     

    15. The
Gilbert Survey does not reveal the locations of the easements referenced in
exceptions 5, 8 and 10 of the Gilbert Title Commitment.

     

    16. The
Glendale Survey states that the easements described in exceptions 6, 8, 9 and 11
are blanket in nature.

     

    17. The
Tanque Verde Survey does not show the matters as shown on a recorded survey
referenced in exceptions 4 and 5.

     

    18. The
Conway Survey does not disclose the location of the easements referenced in
exceptions 7, 11, 12 and 13.

     

    19. The
Tullahoma Title Commitment references in exception 8 all matters noted on a
recorded plat. The Survey does not disclose any easements.

     

    20. The
Survey Reading in the Gilbert Title Commitment excepts coverage from title for
variations between the location of a block wall and the location of record
lines. The Gilbert Survey reveals a block wall on all sides of the Gilbert
Property that encroaches up to four feet onto adjacent property.

     

    21. Exception
7 in the Glendale Title Commitment references a wall column encroachment of .38
feet from adjacent property onto the Glendale Property. Additionally, the Survey
reading on the Glendale Title Commitment reveals the following encroachments:
(i) block wall up to 1.1 feet south of the southerly line, (ii) curb an
undetermined distance south of southerly line, (iii) block wall up to 1.5 feet
west of westerly line, (iv) variations between locations of block walls and
column and locations of westerly line, (v) encroachments on Hillcrest Boulevard
of walks (up to 4.1 feet), curbs (undetermined) and planter walls
(undetermined), (vi) curb an undetermined distance west and east of easterly
lines, (vii) block wall up to 1.1 feet west of easterly line, (viii) access
drive in southerly portion of premises crosses easterly line and (ix) building
violates Non-Build Easement Agreement recorded as No. 97-27899 up to .5
feet.

     

    22. Exception
7 in the Tanque Verde Title Commitment notes the encroachment of a traffic
control box near the northeast and northwest corners of the Tanque Verde
Property. Additionally, the Survey Reading reveals (i) a right of way for
utilities parallel to the east property line which the title company infers
creates an encroachment and which were are attempting to further research and as
to which we must reserve the right to comment further and (ii) encroachment of a
driveway and related improvements onto the right of way for Tanque Verde and
Woodland Roads.

     

    23. The
Survey Reading in the Tucson Title Commitment discloses the following
encroachments: (i) overhead electrical easement along the south property line,
(ii) street lights in the southwest corner, (iii) existing square power pole
north of the southwest corner, (iv) flagpole, signage and landscaping in the
southwest corner, (v) fire hydrant north of the south property
line,

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    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

     

    Pursuant to that Master Lease
dated as of October 13, 2009, as amended, by and between National Health
Investors, Inc., as Landlord, and Emeritus Corporation, as Tenant (the “Lease”),
Tenant hereby requests a Capital Allowance Funding advance in the amount and on
the date set below:

     

    Amount
Requested:                                _____________________

     

    Date
Requested:                                _____________________

     

    Capitalized
terms used herein and not otherwise defined shall have the meaning set forth in
the Lease.

     

    As an
inducement to Landlord to make the advance Tenant hereby represents and warrants
to Landlord as follows:

     

    30. All costs
shown have been paid in full.  Invoices for all items included in this
Request For Advance and evidence of payment thereof are attached
hereto.  Tenant has received valid lien releases or waivers from all
contractors, subcontractors and materialmen with respect to all goods and
services being paid for from the requested advance. Tenant has no knowledge of
any actual or threatened mechanics lien against the Property.

     

    31. The work
which is the subject of the requested advance has been completed in compliance
with all applicable governmental requirements.

     

    32. The
attached AIA Document G702 Application and Certificate for Payment is an
accurate and complete statement of all amounts paid for the work which is the
subject of the requested advance.

     

    EMERITUS
CORPORATION

     

    By:           

     

    Its:           

     

    Date:           

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    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                                                                $5,410,737ex107901psatracepointe.htm

EX-10.79.01

    Trace
Pointe

     

    Clinton,
Mississippi

     

    

    

     

    

     

    PURCHASE
AND SALE AGREEMENT

    

    

    between

    

    

    EMERITUS
CORPORATION

    as
“Buyer”

    

    

    and

    

    

    CLINTON
ASSISTED LIVING LLC

    as
“Seller”

    

    

    

    Dated
as of September 29, 2009

    

     

    

     

    

     

    

    

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE
OF CONTENTS

    

      
        	 
      	 
      	
                Page

              
	
                ARTICLE
      1

              	
                DEFINITIONS

              	
                1

              
	
                ARTICLE
      2

              	
                TERMS
      OF THE SALE

              	
                4

              
	
                2.1

              	
                Sale

              	
                4

              
	
                2.2

              	
                Closing

              	
                5

              
	
                2.3

              	
                Conveyance

              	
                5

              
	
                2.4

              	
                Prorations

              	
                6

              
	
                2.5

              	
                Costs

              	
                7

              
	
                ARTICLE
      3

              	
                CONDITIONS
      TO THE OBLIGATION OF BUYER TO CLOSE

              	
                8

              
	
                3.1

              	
                Performance

              	
                8

              
	
                3.2

              	
                Representations
      and Warranties

              	
                8

              
	
                3.3

              	
                Recordation
      and Costs

              	
                8

              
	
                3.4

              	
                Title
      Insurance

              	
                8

              
	
                3.5

              	
                Entitlements

              	
                8

              
	
                3.6

              	
                Condemnation;
      Casualty

              	
                9

              
	
                3.7

              	
                Transaction
      Documents

              	
                9

              
	
                3.8

              	
                Due
      Diligence

              	
                9

              
	
                ARTICLE
      4

              	
                CONDITIONS
      TO THE OBLIGATION OF SELLER TO CLOSE

              	
                9

              
	
                4.1

              	
                Performance

              	
                10

              
	
                4.2

              	
                Representations
      and Warranties

              	
                10

              
	
                4.3

              	
                Board
      Approval

              	
                10

              
	
                4.4

              	
                Existing
      Financing

              	
                10

              
	
                ARTICLE
      5

              	
                REPRESENTATIONS,
      WARRANTIES AND COVENANTS

              	
                10

              
	
                5.1

              	
                By
      Seller

              	
                10

              
	
                5.2

              	
                By
      Buyer

              	
                11

              
	
                ARTICLE
      6

              	
                COVENANTS
      OF THE PARTIES AND OTHER MATTERS

              	
                12

              
	
                6.1

              	
                Covenants
      of Seller

              	
                12

              
	
                6.2

              	
                Notification
      of Changes

              	
                13

              
	
                6.3

              	
                Effect
      Transaction

              	
                13

              
	
                6.4

              	
                Indemnification

              	
                13

              
	
                ARTICLE
      7

              	
                MISCELLANEOUS

              	
                13

              
	
                7.1

              	
                Survival

              	
                13

              

      

      
        
           

        

        
          i

          
            

          

        

        
           

        

      

      
        	 
      	 
      	
                Page

              
	
                7.2

              	
                Brokers

              	
                13

              
	
                7.3

              	
                Notices

              	
                14

              
	
                7.4

              	
                Attorneys'
      Fees

              	
                14

              
	
                7.5

              	
                Successors

              	
                15

              
	
                7.6

              	
                Waiver

              	
                15

              
	
                7.7

              	
                Invalidity

              	
                15

              
	
                7.8

              	
                Governing
      Law

              	
                15

              
	
                7.9

              	
                Waiver
      of Trial by Jury

              	
                15

              
	
                7.1

              	
                Bulk
      Sales

              	
                16

              
	
                7.11

              	
                1031
      Exchange

              	
                16

              
	
                7.12

              	
                Counterparts

              	
                16

              
	
                7.13

              	
                ARBITRATION
      OF DISPUTES

              	
                16

              
	
                7.14

              	
                Buyer's
      Remedies

              	
                17

              
	
                7.15

              	
                Seller's
      Remedies

              	
                17

              
	
                7.16

              	
                Entire
      Agreement

              	
                17

              

      

    EXHIBITS

    

    Exhibit A
– Legal Description of the Land

    Exhibit B
– Form of Bill of Sale

    Exhibit C
– Form of Promissory Note

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    PURCHASE
AND SALE AGREEMENT

     

    This
Purchase and Sale Agreement (this “Agreement”) is dated as of
September 29, 2009 (the “Effective Date”), between
EMERITUS CORPORATION, a Washington corporation, and/or its assigns (“Buyer”), and CLINTON ASSISTED
LIVING LLC, a Washington limited liability company (“Seller”).

     

    RECITALS

     

    A.  Seller
owns certain real property located at 501 East Northside Drive, Clinton,
Mississippi, commonly known as Trace Pointe Retirement (“Trace
Pointe”);

     

    B.  Seller
desires to sell to Buyer, and Buyer desires to purchase from Seller, the
Property, the Personal Property and the Additional Property as defined
below

     

    NOW,
THEREFORE, the parties hereto agree as follows:

     

    ARTICLE
1                      

     

    DEFINITIONS

     

    For all
purposes of this Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires, the terms defined in this Article have
the meanings assigned to them in this Article and include the plural as well as
the singular.

     

    “Additional
Property”:  Collectively, (i) all Resident Agreements, (ii) all
Consumables, (iii) all trade names relating to the Property, (iv) any
certificate of need or similar certificate for the Property, (v) any third-party
provider agreements (including Medicare and Medicaid) relating to the Property,
(vi) any health care license or other operating license for the Property (to the
extent the same are transferable without the consent of any third-party), (vii)
any security deposits related to the Property, and (viii) any vehicles owned,
which will be transferred subject to any loans secured by such
vehicles.

     

    “Bill of Sale and
Assignment”:  A bill of sale and general assignment
substantially in the form attached hereto as Exhibit B conveying
the Personal Property to Buyer.

     

    “Closing”:  The
transactions taking place on the Closing Date.

     

    “Closing Date”:  The
date on which Buyer receives conveyance of good and marketable fee title to the
Property, free and clear of all liens, claims and encumbrances (except Permitted
Encumbrances), which date will be on or before September 30, 2009, unless Seller
and Buyer agree to a later date in writing; and delivery of the Purchase Price
to Seller as adjusted by applicable pro-rations, in any case, subject to the
satisfaction of the conditions set forth herein; provided, however, all pro-rations
shall be effective and calculated as of 12:01 a.m. on October 1,
2009.

     

    “Code”:  The
Internal Revenue Code of 1986, as amended.

     

    “Commercial Occupancy
Arrangement”:  Any commercial (as opposed to resident)
Occupancy Arrangement.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “Condemnation”:  The
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor or a voluntary sale or transfer by Seller to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.

     

    “Condemnor”:  Any
public or quasi-public authority, or private corporation or individual, having
the power of Condemnation.

     

    “Consumables”:  All
consumable goods and supplies, including inventories of food, beverages,
pharmaceuticals, medical supplies, linens, clothing or similar items utilized in
connection with the operation and/or maintenance of the Facility.

     

    “Deed”:  A Warranty
Deed in form reasonably acceptable to Buyer, conveying the Property to
Buyer.

     

    “Deposit”.  As
defined in Section 2.1.

     

    “Excluded
Assets”.  (a) All cash, cash equivalents and short-term
investments of Seller, as well as any utility deposits or similar security
deposits unrelated to the Property; and (b) all notes, drafts and accounts
receivable not otherwise subject to proration pursuant to the terms of this
Agreement.

     

    “Facility”:  The
land and all related improvements, fixtures and appurtenances of that certain 97
unit independent living, assisted living and Alzheimer’s and commercial clinic
facility commonly known as Trace Pointe and located at  501 East
Northside Drive, Clinton, Mississippi, which land is more particularly described
on Exhibit A
attached hereto

     

    “Flood Hazard
Area”:  An area designated by the Federal Emergency Management
Agency and/or the Secretary of Housing and Urban Development as having special
flood hazards.

     

    “Governmental
Authority”:  The United States, the State or commonwealth,
county, parish, city and political subdivisions in which the Property is located
or which exercise jurisdiction over the Property or the use thereof, and any
court administrator, agency, department, commission, board, bureau or
instrumentality or any of them which exercises jurisdiction over the Property or
the construction or use of the Property.

     

    “Governmental
Requirement”:  Any law, ordinance, order, rule, regulation,
decree or similar edict of a Governmental Authority.

     

    “Hazardous
Substances”:  Collectively, any petroleum, petroleum product or
byproduct or any substance, material or waste regulated or listed pursuant to
any Environmental Law.

     

    “Health Care
License”:  As defined in Section 3.5.

     

    “Intangible
Property”:  All Permits and the following intangible property
or interest therein now or on the Closing Date owned or held by Seller in
connection with the Property: Plans and Specifications, leases, contract rights,
agreements, water rights and reservations, zoning rights, and third-party
warranties.

     

    “Issuing
Agency”:  As defined in Section 3.5.

     

    “Licenses”:  As
defined in Section 3.5.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Management
Agreement”:  That certain Management Agreement dated April 9,
1999, as it may have been amended, between Buyer and Seller regarding the
management of the Facility.

     

    “Net Wire”:  Any
wire transfer by Buyer to Title Insurer, Seller, or other appropriate party
designated by Seller and Buyer for purposes of funding all or a portion of the
acquisition of the Property hereunder.

     

    “Net Wire
Date”:  The date of any Net Wire.

     

    “Organizational
Documents”:  Collectively, as applicable, the articles or
certificate of incorporation, certificate of limited partnership or certificate
of limited liability company, by-laws, partnership agreement, operating company
agreement, trust agreement, statement of partnership, fictitious business name
filings and all other organizational documents relating to the creation,
formation and/or existence of a business entity, together with resolutions of
the board of directors, partner or member consents, trustee certificates,
incumbency certificates and all other documents or instruments approving or
authorizing the transactions contemplated hereby and the Exhibits
hereto.

     

    “Permits”:  All
permits, licenses, approvals, entitlements and other authorizations issued by
Governmental Authorities including certificates of occupancy, those required in
connection with the ownership, planning, development, construction, use,
operation and/or maintenance of each Facility for its Primary Intended Use, and
all amendments, modifications, supplements, general conditions and addenda
thereto, other than any licenses or permits included within the definition of
Additional Property.

     

    “Permitted
Encumbrances”:  Collectively, (i) liens for taxes, assessments
and governmental charges not yet due and payable or delinquent and (ii) such
other title exceptions as Buyer may approve, in its sole and absolute discretion
in accordance with Section 3.9 below.  In addition, any loans secured
by vehicles transferred to Buyer under this Agreement will be Permitted
Encumbrances against such vehicles.

     

    “Person”:  Any
individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other form of entity.

     

    “Personal
Property”:  All of Seller’s right, title and interest in all
Intangible Property and all tangible personal property of every kind and nature
located at, upon or about, or affixed or attached to, or installed in each
Facility or used or to be used primarily in connection with and incorporated
into or otherwise relating to the Facility or its ownership, planning,
development, construction, operation and/or maintenance, including the
following:

     

    All
equipment, machinery, fixtures, furniture and furnishings and other tangible
personal property, including all components thereof, now or on the Closing Date
located in, on or used in connection with the Facility, including all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air cooling and air conditioning systems, apparatus, sprinkler
systems, fire and theft protection equipment, built-in oxygen and vacuum
systems, tools, repair parts, appliances and communications equipment, to the
extent any of the foregoing items are not conveyed to Buyer as part of the
Facility pursuant to the Deed; and

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Notwithstanding
the foregoing, “Personal
Property” shall not include any of the Additional Property.

     

    “Property”:  The
Facility together with the Personal Property and Additional Property relating to
the Facility, except for Excluded Assets.

     

    “Plans and
Specifications”:  All drawings (including final and complete
“as-builts”), plans, specifications, blueprints, maps, studies, structural
reviews, surveys (including “as-built”) and engineering, soil, seismic,
geologic, architectural and other reports relating to the Property.

     

    “Primary Intended
Use”:  An independent living, assisted living, Alzheimer’s and
commercial clinic facility.

     

    “Purchase
Price”:  As defined in Section 2.1.

     

    “Resident
Agreements”:  Any and all leases, rental and occupancy
agreements, lease commitments, admission and payment documents, reservation
agreements and concessions, all deposits made thereunder, and any and all
resident trust accounts, in each case with respect to the Property.

     

    “State”:  The State
of Mississippi.

     

    “Title
Insurer”:  Chicago Title Insurance Company, Seattle,
Washington, Attn: Michael Beckman.

     

    “Title Policy”:  As
defined in Section 3.4.

     

    “Transaction
Documents”:  Collectively, this Agreement, the Deed, the Bill
of Sale and Assignment, and any other documents and/or instructions executed in
connection with the transaction contemplated by this Agreement and the
Exhibits hereto.

     

    ARTICLE
2                      

     

    TERMS OF THE
SALE

     

    Sale.  Buyer
shall deposit into an interest bearing escrow account with Title Insurer (i) the
sum of Three Hundred Thousand Dollars ($300,000.00) within five (5) business
days after mutual execution of this Agreement (the “Deposit”).  Any and
all interest accruing on the Deposit shall be for the benefit of
Buyer.  On the Closing Date, subject to the conditions of this
Agreement, Seller agrees to sell to Buyer, and Buyer agrees to purchase from
Seller, the Property for a purchase price in the amount of Fifteen Million Seven
Hundred Eighty Three Thousand Three Hundred Fifty Eight Dollars ($15,783,358.00)
(the “Purchase Price”),
which shall be payable as follows: (a) Thirteen Million Eight Hundred Thirty
Three Thousand Three Hundred Fifty Eight Dollars ($13,833,358.00) in immediately
available funds (subject to adjustment for prorations and closing costs), and
(b) One Million Nine Hundred Fifty Thousand Dollars ($1,950,000.00) (the “Note”) in the form of a
promissory note payable to Seller’s indirect parent entity, B.F. Limited
Partnership LP, which shall be in the form attached hereto as Exhibit
C.  Buyer intends to assign its interest in the Agreement to a
wholly owned subsidiary of Buyer (“Assignee”).  Notwithstanding any
such assignment of Buyer’s interest in the Agreement to Assignee, the aforesaid
promissory note shall be executed by Emeritus Corporation (“Emeritus”) and
Assignee shall not have any liability thereunder.  The Deposit shall
be applied against the Purchase Price

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    at
Closing.  Buyer and Seller hereby agree that the Purchase Price shall
be allocated as may be reasonably determined by Buyer upon consultation with
Seller.

     

     2.1 Closing.  The
Closing shall be held through an escrow or sub-escrow with Title
Insurer.  The parties shall mutually execute and deliver to Title
Insurer, as escrow holder, escrow and/or recording instructions consistent with
this Agreement on or prior to the Closing Date.  In the event of any
conflict between the provisions of this Agreement or any such escrow and/or
recording instructions or any general instructions required by Title Insurer to
be executed by Buyer and Seller in connection therewith, the provisions of this
Agreement shall control.

     

     2.2 Conveyance.  On
the Closing Date, subject to the terms and conditions of this Agreement, Seller
shall deliver, or cause to be delivered, the Deed, the Bill of Sale and
Assignment and such other instruments as shall be necessary to convey, assign or
grant to Buyer good and marketable fee title to the Property, free and clear of
all liens, claims and encumbrances (except for Permitted
Encumbrances).  Buyer will assume liability for any loans securing any
vehicles included within the Property transferred at Closing.  Seller
acknowledges and agrees that as a condition to Buyer’s obligation to close,
Title Insurer shall be irrevocably committed to issue to Buyer a policy of title
insurance showing good and indefeasible title to the real property comprising
the Facility in fee simple vested in Buyer as of the Closing, subject only to
the Permitted Encumbrances applicable to the Property (the “Title
Policy”).  Each party shall execute and deliver such
instruments and take such actions as either party may reasonably request in
order to effectuate the purposes of this Agreement.

     

    (a) The Deed
shall be sufficient to convey good and indefeasible fee simple title to Buyer
the portion of the Property constituting real property and shall be duly
executed, acknowledged and in recordable form.  The Deed shall be
deemed to include all appurtenances to the subject real property conveyed
thereby, including all right, title and interest, if any, of the grantor in and
to any land lying in the bed of any street adjoining the Property to the center
line thereof, and any existing improvements located on the
Property.

     

    (b) The Bill
of Sale and Assignment shall be sufficient to convey good and marketable fee
title to the Personal Property to Buyer and shall be duly
executed.  In addition, Seller will execute or obtain and deliver to
Buyer on the Closing Date all other proper instruments for the conveyance of
such title to the Personal Property.

     

    (c) Seller
shall deliver (i) a “FIRPTA” certificate in form
and substance satisfactory to Buyer and in conformance with Section 1445(b)(2)
of the Code, to the effect that  Seller is not a foreign person and
(ii) such other affidavits or certificates as may be required under applicable
law in order to confirm that Buyer is not required to withhold taxes from the
payment of sale proceeds to Seller.

     

    (d) Each
party shall execute and deliver any state and/or county real estate transfer tax
declaration of real estate value or other affidavit required in connection with
the recordation of the Deed.

     

     2.3 Prorations.

     

    (a) The
following shall be prorated between Sellers and Buyers as of the Closing
Date:

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (i) Taxes.  All
ad valorem, real estate and personal property taxes and assessments on the
Property payable for the current assessment period in which the Closing Date
occurs, based on the fiscal year of the applicable taxing authority (the “Current Tax
Year”).  Such real estate taxes and assessments shall be
prorated on a per diem basis based upon the number of days in the Current Tax
Year prior to and on the Closing Date (which shall be allocated to Seller) and
the number of days in the Current Tax Year after the Closing Date (which shall
be allocated to Buyer).  Seller shall be responsible for real estate
taxes and assessments on the Property payable in respect to periods prior to the
Current Tax Year.  Upon the Closing Date and subject to the adjustment
provided for above, Buyer shall be responsible for real estate taxes and
assessments on the Property payable in respect to the Current Tax Year and all
periods after the Current Tax Year.  If the Closing shall occur before
the tax rate or the assessed valuation of the Property is fixed for the Current
Tax Year, the apportionment of taxes shall be based upon the applicable tax rate
for the preceding year applied to the latest assessed
valuation.  Subsequent to the Closing, when the tax rate and the
assessed valuation of the Property is fixed for the year in which the Closing
occurs, the parties agree to adjust the proration of taxes and, if necessary, to
refund or repay such sums as shall be necessary to effect such
adjustment.

     

    (ii) Rents.  All
rentals and other residency or tenant payments, charges and reimbursements
(“Rents”) received in
respect to the month in which the Closing Date occurs (the “Current
Month”).  Such Rents for the Current Month which have been
received as of the Closing Date shall be prorated on a per diem basis based upon
the number of days in the Current Month prior to and on the Closing Date (which
shall be allocated to Seller) and the number of days in the Current Month after
the Closing Date (which shall be allocated to Buyer).  All Rents
received by Buyer from a resident or a tenant after the Closing Date shall first
be applied to any unpaid Rent accrued prior to the Closing Date and Buyer shall
promptly remit to the Seller that portion of Rents received after the Closing
Date attributable to periods prior to the Current Month, and if attributable to
the Current Month, Seller’s share thereof in accordance with the proration set
forth above.  If Seller shall receive any Rents after Closing, such
Seller shall promptly deliver such Rents to Buyer to the extent the same are
payable to Buyer as provided above.  Buyer shall exercise commercially
reasonable efforts to collect Rents on behalf of Seller.   Seller
shall be solely responsible for any third-party costs or expenses incurred by
Buyer in connection with the collection of rents from private party residents,
so long as Seller has approved such costs in writing in advance.

     

    (iii) Operating
Expenses.  All operating expenses of the
Facility.  As to each service provider, operating expenses payable or
paid to such service provider with respect to the billing period of such service
provider in which the Closing Date occurs (the “Current Billing Period”),
shall be prorated on a per diem basis based upon the number of days in the
Current Billing Period prior to and on the Closing Date (which shall be
allocated to Seller) and the number of days in the Current Billing Period after
the Closing Date (which shall be allocated to Buyer), and assuming that all
charges are incurred uniformly during the Current Billing Period.  An
amount equal to the amount of operating expenses actually prepaid by Seller to a
service provider for services to be performed after the Closing Date shall be
reimbursed to Seller by Buyer at Closing.  If actual bills for the
Current Billing Period are unavailable as of the Closing Date, then such
proration shall be made on an estimated basis based upon the most recently
issued bills, subject to readjustment upon receipt of actual
bills.  Seller shall be entitled to a credit at Closing for deposits
Seller may have with any such service providers.  Buyer, as the
current manager of the Facility, shall continue to purchase Consumables in
quantities consistent with its regular business practice.  To the
extent the

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    inventory
of Consumables at the Facility exceeds a seven (7) day supply for the Facility
as of Closing, Seller shall be entitled to a credit for such excess
Consumables.

     

    (iv) Prepaid
Rents.  Prepaid rentals and other resident or tenant charges
received by Seller for periods after the Current Month, shall be credited in
favor of Buyer against the Purchase Price.

     

    (b) None of
the insurance policies relating to the Property that are carried by Seller will
be assigned to Buyer (and Seller shall pay any cancellation fees resulting from
the termination of such policies) and Buyer shall be responsible for arranging
for its own insurance as of the Closing Date.  Seller and Buyer
acknowledge that Buyer, as a manager of the Facility, carries certain insurance
coverages and such policies shall not be terminated pursuant to the
foregoing,

     

    (c) As
manager of the Facility, Buyer employs all employees performing services at the
Facility.  Seller shall (i) be solely responsible for payment of all
wages, salaries and benefits of all employees through the Closing Date, and (ii)
credit to Buyer an amount equal to holiday, vacation, sick or other paid time
off accrued through the Closing Date for all employees performing services at
the Facility.

     

    (d) The
prorations and payments shall be made on the basis of a written statement
submitted by Escrow Holder to Buyer and Seller prior to the Closing Date and
approved by Buyer and Seller.  In the event any prorations or
apportionments made hereunder shall prove to be incorrect for any reason or the
information related to the same is not available as of the Closing Date, then
any party shall be entitled to an adjustment to correct the same.  The
parties shall cooperate with each other in order to complete all pro-rations in
a manner consistent with past practices between the Seller and Buyer within
forty five (45) days after Closing.

     

     2.4 Costs.  Seller
and Buyer, as applicable, shall pay the following:

     

    (a) Buyer
shall pay the State documentary stamps and recording costs in connection with
the delivery and recordation of the Deed

     

    (b) Seller
shall pay all State transfer taxes, if any, in connection with the sale of the
Property hereunder;

     

    (c) Seller
shall pay all costs and premiums related to the issuance of the standard form
owner’s title insurance commitment and policy and one-half (1/2) of all escrow
fees and charges;

     

    (d) Buyer
shall pay all expenses related to the issuances of any lender’s title insurance
policy and owner’s extended title insurance commitment and policy and the cost
of any endorsements to the Title Policy requested by Buyer and one-half (1/2) of
all escrow fees and charges;

     

    (e) Buyer
shall pay the charges for recording any documents related to Buyer’s financing
of the purchase of the Property;

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (f) Seller
shall pay Seller’s legal, accounting and other professional fees and expenses
and the cost of all instruments and documents required to be delivered, or to be
caused to be delivered, by Seller hereunder;

     

    (g) Buyer
shall pay Buyer’s legal, accounting and other professional fees and expenses and
the cost of all instruments and documents required to be delivered, or to be
caused to be delivered, by Seller hereunder;

     

    (h) Seller
shall pay any other costs customarily allocated to a seller of real property in
the State of Mississippi; and

     

    (i) Buyer
shall pay any other costs customarily allocated to a buyer of real property in
the State of Mississippi.

     

    ARTICLE
3                      

     

    CONDITIONS TO THE OBLIGATION
OF BUYER TO CLOSE

     

    The
obligations of Buyer hereunder are subject to the satisfaction or waiver by
Buyer of the following conditions.  Should any condition set forth in
this Article 3 not be fulfilled or waived on the Closing Date to the
satisfaction of Buyer, Buyer shall, at its option, without waiving any rights
provided in this Agreement, be relieved of all obligations
hereunder.

     

     3.1 Performance.  Seller
shall have performed in all material respects each and all of the covenants and
obligations required to be performed by it on or prior to the
Closing.

     

     3.2 Representations and
Warranties.  Each and all of the representations and warranties
of Seller hereunder shall be in all material respects true and correct on and as
of the Closing Date, as though given as of the Closing Date, and Seller shall
have delivered to Buyer officers’ certificates to that effect.

     

     3.3 Recordation and
Costs.  Seller shall (a) have made arrangements for the
Deed to be recorded or filed in the manner required by the laws of the State,
and (b) pay, or arrange to be paid, all costs and fees to be paid by Seller
pursuant to Section 2.5.

     

     3.4 Entitlements.  Buyer
shall have received evidence satisfactory to it that (i) the Facility holds all
licenses, permits, accreditations, authorizations and certifications from all
applicable Governmental Authorities required for the operation thereof for its
Primary Intended Use (collectively, the “Licenses”), including a
license to operate an assisted living facility on the Property in conformance
with Governmental Requirements (the “Health Care License”) from the
applicable Government Authority(ies) (the “Issuing Agency”); Buyer must
make all reasonable efforts to diligently pursue the acquisition of the Health
Care License from the Issuing Agency.

     

     3.5 Condemnation;
Casualty.  No Condemnation shall be pending or threatened with
respect to the Property and no casualty shall have occurred with respect to the
Property or any portion thereof that has resulted in damage to such Property
that would materially affect the operation of the subject Facility.

     

     3.6 Transaction
Documents.  Seller shall have executed and delivered to Title
Insurer to hold in escrow the Bill of Sale and Assignment.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     3.7 Due
Diligence.  Until the Closing Date or the earlier termination
of this Agreement, Seller shall provide Buyer and its agents and representatives
with access to the Property.  Seller will provide access to all other
relevant information regarding the Property to the extent such information is in
the possession or control of Seller.  Commencing on the Effective Date
and continuing until 5:00 p.m. (Pacific Time) on September 29, 2009 (the “Due Diligence Period”), Buyer
shall have the opportunity to perform and complete, at its sole expense, its due
diligence review, examination and inspection of all matters pertaining to the
Property, including the Resident Agreements, the commercial leases, service
contracts, and all financial, licensing, employment, physical, environmental and
compliance matters, entitlements and other conditions relating to the
Property.  Buyer shall at all times conduct such due diligence at
reasonable times and upon reasonable notice, in compliance with applicable law,
and in a manner so as to not unreasonably interfere with or disturb the
operation of the Facility, and Buyers shall promptly restore the Property to
their condition immediately preceding such inspections and examinations and
shall keep the Property free and clear of any mechanic’s liens or materialmen’s
liens in connection with such inspections and investigations.  Any
intrusive physical testing (environmental, structural or otherwise) at the
Property such as soil borings or the like) shall be conducted by Buyer only
after obtaining Seller’s prior written consent to such testing, which consent
shall not be unreasonably withheld.  Buyers shall be liable for all
property damage or personal injury solely resulting from, relating to or arising
out of any inspection or examinations of the Property by the acts of Buyer or
any of its employees, agents, representatives or contractors, and Buyer shall
indemnify, protect, defend and hold harmless Seller and their respective agents,
employees, officers, directors, affiliates, and tenants from and against any
damages, claims, liabilities, costs and expenses, including reasonable
attorneys’ fees, arising therefrom.  This indemnification by Buyer
shall survive the Closing or the termination of this Agreement, as
applicable.  If, on or before the expiration of the Due Diligence
Period, Buyer determines that it shall proceed with the acquisition of the
Property, then Buyer shall promptly notify Seller and Title Insurer of such
determination in writing (the “Approval
Notice”).  If, however, on or before the expiration of the Due
Diligence Period, (i) Buyer shall notify Seller in writing that it has
determined, in its sole and absolute discretion that Buyer will not acquire the
Property, or (ii) Buyer shall fail to deliver the Approval Notice to Seller
on or before the expiration of the Due Diligence Period, this Agreement, and the
obligations of the parties (excluding any obligations which expressly survive
termination), shall terminate and the Deposit shall be returned to
Buyer.  Upon expiration of the Due Diligence Period, the Deposit shall
be non-refundable to Buyer; provided, however, if the failure to close arises
from a breach of Seller’s obligations hereunder, the Deposit shall be delivered
to Buyer in accordance with Section 7.14 below.

     

     3.8 Seller
shall provide Buyer,: (i) a preliminary commitment for ALTA standard coverage
title insurance (the “Commitment”) showing marketable title to the Facility in
Seller issued by Chicago Title Insurance Company (the “Title Company”), together
with correct, complete and legible copies of all recorded instruments referenced
in the Commitment as conditions or exceptions to title to the Real Property,
including liens; and (ii) any and all existing surveys of the Property in
Seller's possession.  By written notice to Seller no later than
September 29, 2009, if Buyer is not satisfied with the condition of title in its
sole discretion, Buyer shall be entitled (i) to terminate this Agreement, or
(ii) to object to any of the exceptions to title or any other condition
appearing in the Commitment, and to condition its acquisition of the Property
upon the release, discharge or removal of said objected matters from the Title
Policy.  If Buyer fails to give written notice waiving objections
regarding the Commitment prior to September 29, 2009, Buyer shall be deemed to
have elected to have waived its right to object to any title
matter.  If Buyer makes any such objections regarding the Commitment,
Seller shall notify Buyer in writing, prior to the Closing Date, whether or not
Seller shall cure such objected

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    matters
prior to closing.  If Seller does not deliver a response to Buyer’s
objection notice by the Closing Date, Seller shall be deemed to have elected not
to cure the objected matters.  In the event Seller elects not to cure
all of the objected matters at or prior to Closing, Buyer may elect to waive
such objected matters which Seller declines to cure or to terminate this
Agreement by written notice to Seller.  Buyer’s failure to make such
an election shall be deemed to be Buyer’s election to terminate this
Agreement.  In the event Buyer elects to terminate this Agreement, the
Deposit shall be returned to Buyer and any and all rights or obligations of
Seller and Buyer under this Agreement (except those which expressly survive the
termination hereof) shall terminate and be of no further force or
effect.

     

    ARTICLE
4                      

     

    CONDITIONS TO THE OBLIGATION
OF SELLER TO CLOSE

     

    The
obligations of Seller hereunder are subject to the satisfaction by Buyer or
waiver by Seller of the following conditions:

     

     4.1 Performance.  Buyer
shall have performed in all material respects each and all of the covenants and
obligations required to be performed by it on or prior to the
Closing.

     

     4.2 Representations and
Warranties.  Each and all of the representations and warranties
of Buyer hereunder shall be in all material respects true and correct on and as
of the Closing Date, as though given as of the Closing Date.

     

    ARTICLE
5                      

     

    REPRESENTATIONS, WARRANTIES
AND COVENANTS

     

     5.1 By
Seller.  Seller represents and warrants to Buyer as
follows:

     

    5.1.1 Seller is
duly organized, validly existing and in good standing under the laws of its
state of organization/formation, and has full power, authority and legal right
to execute and deliver this Agreement and to perform its obligations under this
Agreement.  In addition, Seller is qualified to do business and is in
good standing in the State.

     

    5.1.2 This
Agreement has been, and on the Closing Date, the applicable Transaction
Documents and all other documents to be executed by Seller hereunder will have
been, duly authorized, executed and delivered by Seller, as applicable, and
constitute and will constitute the valid and binding obligations of Seller
enforceable against it in accordance with their respective terms.

     

    5.1.3 Seller is
solvent, has timely and accurately filed all tax returns required to be filed by
it, and to Seller’s knowledge, Seller is not in default in the payment of any
taxes levied or assessed against it or any of its assets, or subject to any
judgment, order, decree, rule or regulation of any Governmental Authority which
would, in each case or in the aggregate, materially and adversely affect its
condition, financial or otherwise, or its prospects, the Property or the
transactions contemplated hereunder.

     

    5.1.4 To
Seller’s knowledge, no consent, approval or other authorization of, or
registration, declaration or filing with, any Governmental Authority is required
for the due execution and delivery of this Agreement, or for the performance of
Seller’s obligations under this Agreement.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    5.1.5 To
Seller’s knowledge, there are no actions or proceedings, including Condemnation
proceedings or tax audits, pending or threatened, against or affecting Seller,
or the Property, seeking to enjoin, challenge or collect damages in connection
with the transactions contemplated hereunder or which could reasonably be
expected to materially and adversely affect the financial condition or
operations of Seller, or any Facility or the ability of Seller to carry out the
transactions contemplated hereunder.

     

    5.1.6 To
Seller’s knowledge, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder, will not result in (a)
a breach or violation of (i) any Governmental Requirement applicable to Seller,;
(ii) the Organizational Documents of Seller; (iii) any judgment, order or decree
of any Governmental Authority binding upon Seller; or (iv) any agreement or
instrument to which Seller is a party or by which it is bound; or (b) the
acceleration of any obligation of Seller.

     

    5.1.7 To
Seller’s knowledge and except as otherwise disclosed to Buyer in connection with
Buyer’s review of the Property, (a) there are no underground tanks or Hazardous
Substances currently located on any of the Property; (b) no enforcement,
cleanup, removal or other governmental or regulatory actions are currently
pending or threatened with respect to any of the Property; (c) there is no
outstanding violation of any environmental law relating to Hazardous Substances
with respect to any of the Property; and (d) no claims have been made or
threatened by any third party with respect to any of the Property relating to
damage, contribution, cost recovery, compensation, loss or injury resulting from
or related to any release of any Hazardous Substance.

     

    5.1.8 INTENTIONALLY
OMITTED.

     

    5.1.9 Seller is
not a foreign person for purposes of Section 1445 of the Code.

     

     5.2 By
Buyer.  Buyer represents and warrants as follows:

     

    5.2.1 Buyer is
duly organized, validly existing and, to the extent applicable, in good standing
under the laws of the state of its organization/formation; is, or will be on the
Closing Date, duly qualified and authorized to do business in the State, to the
extent such qualification is required to perform its obligations hereunder or
under any Transaction Document; and has or will have on the Closing Date, full
power, authority and legal right to execute and deliver and to perform and
observe the provisions of this Agreement, and all other instruments provided for
herein to which it is a party, and otherwise carry out the transactions
contemplated hereunder and the Exhibits hereto.

     

    5.2.2 This
Agreement has been, and on the Closing Date all other documents to be delivered
by Buyer pursuant to this Agreement will have been, duly authorized, executed
and delivered by Buyer and constitute, and will constitute, the valid and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    ARTICLE
6                      

     

    COVENANTS OF THE PARTIES AND
OTHER MATTERS

     

     6.1 Covenants of
Seller.  To the extent the following matters are or can be
controlled or directed by Seller, prior to the Closing Date, Seller
shall:

     

    (a) not amend
or permit to be amended any material agreement related to the Property without
Buyer’s consent, which shall not be unreasonably withheld;

     

    (b) timely
pay all property, sales and withholding taxes and all ad valorem and other
taxes, liens and charges upon the Property and business operated thereon as they
become due through the Closing Date;

     

    (c) not
dispose of or encumber or permit the disposition or encumbrance of the Property
or any portion thereof, except for Property which is consumed or replaced in the
ordinary course of business;

     

    (d) not enter
into or assume or permit to be entered into or assumed any material contract
related to the Property except as contemplated hereunder;

     

    (e) not do
any act or omit any act which would cause a breach of any contract, commitment
or obligation which would have a material and adverse effect on the Property or
the business conducted thereon;

     

    (f) permit
the officers, attorneys, accountants, and other authorized representatives of
Buyer access during normal business hours to the Property and to the books and
records related to the Property and the business conducted thereon in order to
afford Buyer such opportunity of review, examination and investigation as Buyer
shall desire with respect to the same and permit Buyer to make extracts from,
and take copies of, such books and records as may be reasonably necessary for
such purposes;

     

    (g) shall
cooperate with Buyer in notifying all Governmental Authorities required by law
regarding the transfer of the Property;

     

    (h) take all
action as may be necessary to comply promptly with any and all Governmental
Requirements affecting the Property and all orders of any board of fire
underwriters or other similar bodies in connection with the making of repairs
and alterations, and promptly, and in no event later than forty eight (48) hours
from the time of its receipt, notify Buyer of any failure of Seller to comply
with the same; and

     

    (i) INTENTIONALLY
OMITTED.

     

    (j)           Buyer
acknowledges that as manager of the facility, Buyer will also comply with terms
set forth in section 6.1, to the extent such matters are or can be controlled
by  Buyer.

     

     6.2 Notification of
Changes.  At any time at or prior to the Closing Date, Seller
shall promptly notify Buyer of any event or circumstance of which Seller becomes
aware which makes any representation or warranty of Seller contained herein
untrue or misleading in any material respect; provided, however, Seller shall
not have any obligation to provide notice to

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    Buyer
with respect to matters within Buyer’s actual knowledge in connection with
Buyer’s management of the Facility.

     

     6.3 Effect
Transaction.  Seller shall take all actions necessary or
desirable to effect the transactions contemplated herein.

     

     6.4 Indemnification.

     

    (a) Seller
hereby agrees to indemnify, protect, defend and hold harmless Buyer from and
against any and all loss, cost or expense, including reasonable attorneys’ fees,
arising from (i) the breach of any representation or warranty of Seller
contained herein; and (ii) the failure of Seller to perform any covenant
contained herein.

     

    (b) Subject
to the limitations set forth in Section 7.15 below, Buyer hereby agrees to
indemnify, protect, defend and hold harmless Seller from and against any and all
loss, cost or expense, including reasonable attorneys’ fees, arising from (i)
the breach of any representation or warranty of Buyer contained herein; and (ii)
the failure of Buyer to perform any covenant contained
herein.  Payment shall not be a condition precedent to recovery under
the foregoing indemnification provision.

     

    ARTICLE
7                      

     

    MISCELLANEOUS

     

     7.1 Survival.  All
covenants, representations and warranties made by Seller and Buyer hereunder or
in any certificates or other instruments delivered pursuant to this Agreement
shall survive the execution and delivery of this Agreement and recordation of
the Deed; provided, however, that Seller's representations and warranties under
this Agreement will expire on the first anniversary of the Closing Date, and
will have no effect thereafter.

     

     7.2 Brokers.  Seller
and Buyer each represents to the other that to the best of its knowledge, no
brokerage commission, finder’s fee or other compensation of any kind is due or
owing to any person or entity in connection with the transactions contemplated
hereunder.  Each party hereby agrees that if any person or entity
makes a claim for brokerage commissions or finder’s fees related to the sale of
the Property by Seller to Buyer, and such claim is made by, through or on
account of any acts or alleged acts of said party or its representatives, then
said party will protect, indemnify, defend and hold the other party free and
harmless from and against any and all loss, liability, cost, damage and expense
(including reasonable attorneys’ fees) in connection therewith.  The
provisions of this paragraph shall survive Closing or any termination of this
Agreement.

     

     7.3 Notices.  Any
notice, consent, approval, demand or other communication required or permitted
to be given hereunder (a “notice”) must be in writing
and may be served personally or by U.S. Mail.  If served by U.S. Mail,
it shall be addressed as follows:

     

    
      	
               
      

            	
              If
      to Buyer:

            	
              c/o
      Emeritus Corporation

            

    

    
      	
               
      

            	
              Attn:  Eric
      Mendelsohn, Senior Vice President, Corporate
  Development

            

    

    
      	
               
      

            	
              3131
      Elliott Avenue, Suite 500

            

    

    
      	
               
      

            	
              Seattle,
      Washington 98121-1031

            

    

    
      	
               
      

            	
              Fax:  (206)
      301-4493

            

    

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              with
      a copy to:

            	
              Riddell
      Williams, P.S.

            

    

    Attn:
David D. Buck

    1001
Fourth Avenue Plaza

    Suite
4500

    Seattle,
Washington 98154

    Fax:  (206)
389-1708

    

    

    
      	
               
      

            	
              If
      to Seller:

            	
              CLINTON
      ASSISTED LIVING LLC

            

    

    
      	
               
      

            	
              Attn:
      Kathy Mackey

            

    

    
      	
               
      

            	
              1910
      Fairview Avenue E., Suite 500

            

    

    
      	
               
      

            	
              Seattle,
      WA 98102

            

    

    

    
      	
               
      

            	
              with
      a copy to:

            	
              Columbia
      Pacific

            

    

    
      	
               
      

            	
              Attn:
      Meredith Baty

            

    

    
      	
               
      

            	
              1910
      Fairview Avenue E., Suite 500

            

    

    
      	
               
      

            	
              Seattle,
      WA 98102

            

    

    

    

    Any
notice which is personally served shall be effective upon the date of service;
any notice given by U.S. Mail shall be deemed effectively given, if deposited in
the United States Mail, registered or certified with return receipt requested,
postage prepaid and addressed as provided above, on the date of receipt, refusal
or non-delivery indicated on the return receipt.  In addition, either
party may send notices by facsimile or by a nationally recognized overnight
courier service which provides written proof of delivery (such as U.P.S. or
Federal Express).  Any notice sent by facsimile shall be effective
upon confirmation of receipt in legible form, and any notice sent by a
nationally recognized overnight courier shall be effective on the date of
delivery to the party at its address specified above as set forth in the
courier’s delivery receipt.  Either party may, by notice to the other
from time to time in the manner herein provided, specify a different address for
notice purposes.

     

     7.4 Attorneys’
Fees.  If Buyer or Seller brings an action at law or other
proceeding against the others to enforce any of the terms, covenants or
conditions hereof or any instrument executed pursuant to this Agreement, or by
reason of any breach or default hereunder or thereunder, the party prevailing in
any such action or proceeding and any appeal thereupon shall be paid all of its
costs and attorneys’ fees.

     

     7.5 Successors.  This
Agreement shall be binding upon Buyer, Seller and their respective successors
and assigns.  Buyer shall have the right to assign its interest in
this Agreement to Emeritrace LLC, a Delaware limited liability company, a
subsidiary of Buyer, without the prior consent of Seller provided that the Note
shall be made by Emeritus Corporation.

     

     7.6 Waiver.  No
delay in exercising any right or remedy shall constitute a waiver thereof, and
no waiver by Buyer or Seller of a breach of any covenant of this Agreement shall
be construed as a waiver of any preceding or succeeding breach of the same or
any other covenant or condition of this Agreement.

     

     7.7 Invalidity.  In
the event any one or more of the provisions contained in this Agreement shall,
for any reason, be held to be invalid, illegal or unenforceable in any
respect,

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement.

     

     7.8 Governing
Law.  If any provision of this Agreement shall require judicial
interpretation, it is agreed that the court interpreting or construing the same
shall not construe this Agreement against one party more strictly by reason of
any rule of interpretation which relates to the source of preparation of a
document, it being agreed that the agents of all parties have participated in
the preparation of this Agreement and that legal counsel was consulted by each
party prior to its execution hereof.  This Agreement shall be governed
by and construed in accordance with the laws of the State of Mississippi,
without regard to its laws regarding conflicts of laws.

     

     7.9 Waiver of Trial by
Jury.  TO THE EXTENT PERMITTED BY LAW, EACH OF BUYER AND SELLER
ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO
ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTION OF THE UNITED STATES, THE
STATE OF MISSISSIPPI.  EACH OF BUYER AND SELLER HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (i) ARISING UNDER THIS AGREEMENT (OR ANY AGREEMENT FORMED PURSUANT TO THE
TERMS HEREOF) OR (ii) IN ANY MANNER CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF BUYER AND SELLER WITH RESPECT TO THIS AGREEMENT (OR ANY
AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREINAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; EACH OF BUYER
AND SELLER HEREBY AGREES AND CONSENTS THAT, SUBJECT TO SECTION 7.13, ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL
WITHOUT A JURY, AND THAT EITHER PARTY MAY FILE A COPY OF THIS SECTION WITH ANY
COURT AS CONCLUSIVE EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF
ITS RIGHT TO TRIAL BY JURY.

     

    BUYER’S
INITIALS: /s/
EM_                             SELLER’S
INITIALS:_______

     

     7.10 Bulk
Sales.  Buyer and Seller hereby waive compliance with the
notice provisions of any bulk sales statute in effect in the
State.  Seller shall indemnify, defend and hold harmless Buyer from
and against any and all claims, losses, damages, liabilities, costs and expenses
(including reasonable legal fees and expenses) paid or incurred by Buyer and
arising directly or indirectly out of noncompliance with bulk sales
statutes.

     

     7.11 INTENTIONALLY
OMITTED.

     

     7.12 Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
a valid and binding original, but all of which together shall constitute one and
the same instrument.

     

     7.13 ARBITRATION OF
DISPUTES

     

    (a) EXCEPT AS
PROVIDED IN SECTION 7.13(B) BELOW, ANY CONTROVERSY, DISPUTE OR CLAIM OF
WHATSOEVER NATURE ARISING OUT OF, IN CONNECTION WITH, OR IN RELATION TO THE
INTERPRETATION, PERFORMANCE OR

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    BREACH OF
THIS AGREEMENT, INCLUDING ANY CLAIM BASED ON CONTRACT, TORT OR STATUTE, SHALL BE
DETERMINED BY FINAL AND BINDING, CONFIDENTIAL ARBITRATION ADMINISTERED BY THE
AMERICAN ARBITRATION ASSOCIATION (“AAA”) IN SEATTLE, WASHINGTON,
IN ACCORDANCE WITH ITS THEN-EXISTING COMMERCIAL ARBITRATION RULES, AND THE SOLE
ARBITRATOR SHALL BE SELECTED IN ACCORDANCE WITH SUCH AAA RULES.  ANY
ARBITRATION HEREUNDER SHALL BE GOVERNED BY THE UNITED STATES ARBITRATION ACT, 9
U.S.C. 1-16 (OR ANY SUCCESSOR LEGISLATION THERETO), AND JUDGMENT UPON THE AWARD
RENDERED BY THE ARBITRATOR MAY BE ENTERED BY ANY STATE OR FEDERAL COURT HAVING
JURISDICTION THEREOF.  NEITHER BUYER, SELLER NOR THE ARBITRATOR SHALL
DISCLOSE THE EXISTENCE, CONTENT OR RESULTS OF ANY ARBITRATION HEREUNDER WITHOUT
THE PRIOR WRITTEN CONSENT OF ALL PARTIES; PROVIDED, HOWEVER, THAT EITHER
PARTY MAY DISCLOSE THE EXISTENCE, CONTENT OR RESULTS OF ANY SUCH ARBITRATION TO
ITS PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND ACCOUNTANTS
AND TO ANY OTHER PERSON TO WHOM DISCLOSURE IS REQUIRED BY APPLICABLE
GOVERNMENTAL REQUIREMENTS, INCLUDING PURSUANT TO AN ORDER OF A COURT OF
COMPETENT JURISDICTION.  UNLESS OTHERWISE AGREED BY THE PARTIES, ANY
ARBITRATION HEREUNDER SHALL BE HELD AT A NEUTRAL LOCATION SELECTED BY THE
ARBITRATOR IN SEATTLE, WASHINGTON.  THE COST OF THE ARBITRATOR AND THE
EXPENSES RELATING TO THE ARBITRATION (EXCLUSIVE OF LEGAL FEES) SHALL BE BORNE
EQUALLY BY BUYER AND SELLER UNLESS OTHERWISE SPECIFIED IN THE AWARD OF THE
ARBITRATOR.  SUCH FEES AND COSTS PAID OR PAYABLE TO THE ARBITRATOR
SHALL BE INCLUDED IN “COSTS AND ATTORNEYS’ FEES” FOR PURPOSES OF SECTION 7.4 AND
THE ARBITRATOR SHALL SPECIFICALLY HAVE THE POWER TO AWARD TO THE PREVAILING
PARTY PURSUANT TO SUCH SECTION 7.4 SUCH PARTY’S COSTS AND EXPENSES INCURRED
IN SUCH ARBITRATION, INCLUDING FEES AND COSTS PAID TO THE
ARBITRATOR.

     

    (b) THE
PROVISIONS OF THIS SECTION 7.13 SHALL NOT APPLY TO ANY REQUEST OR APPLICATION
FOR AN ORDER OR DECREE GRANTING ANY PROVISIONAL OR ANCILLARY REMEDY (SUCH AS A
TEMPORARY RESTRAINING ORDER OR INJUNCTION) WITH RESPECT TO ANY RIGHT OR
OBLIGATION OF EITHER PARTY TO THIS AGREEMENT, AND ANY PRELIMINARY DETERMINATION
OF THE UNDERLYING CONTROVERSY, DISPUTE, QUESTION OR ISSUE AS IS REQUIRED TO
DETERMINE WHETHER OR NOT TO GRANT SUCH RELIEF.  A FINAL AND BINDING
DETERMINATION OF SUCH UNDERLYING CONTROVERSY, DISPUTE, QUESTION OR ISSUE SHALL
BE MADE BY AN ARBITRATION CONDUCTED PURSUANT TO THIS SECTION 7.13 AFTER AN
APPROPRIATE TRANSFER OR REFERENCE TO THE ARBITRATOR SELECTED PURSUANT TO THIS
SECTION 7.13 UPON MOTION OR APPLICATION OF EITHER PARTY HERETO.  ANY
ANCILLARY OR PROVISIONAL RELIEF WHICH IS GRANTED PURSUANT TO THIS SECTION
7.13(B) SHALL CONTINUE IN EFFECT PENDING AN ARBITRATION DETERMINATION AND ENTRY
OF JUDGMENT THEREON PURSUANT TO THIS SECTION 7.13.

     

     7.14 Buyer’s
Remedies.  In the event that Seller shall fail to comply with
any material provision of this Agreement or to consummate the Closing, for any
reason other than Buyer’s default or failure to satisfy a condition to Closing
for which Buyer is responsible, Buyer, as its sole and exclusive remedies, may
either (i) terminate this Agreement, whereupon this Agreement shall be
terminated and neither party shall have any further obligations hereunder other
than such obligations that expressly survive termination of this Agreement, in
which case

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    Buyer
shall be entitled to receive a refund of the Deposit plus an amount sufficient
to recover all of Buyer’s out-of-pocket costs incurred in connection with the
transaction contemplated herein up to an aggregate amount of Fifty Thousand
Dollars ($50,000.00); or (ii) initiate and prosecute an action for the specific
performance by Seller of its obligations under this Agreement, provided that any
such suit for specific performance must be brought within two years after
Seller’s default.

     

     7.15 Seller’s
Remedies.  If the Closing does not occur solely as a result of
Buyer’s default under this Agreement (all conditions to Buyer’s obligations
having been satisfied or waived), Seller, as its sole and exclusive remedy, may
elect to terminate this Agreement and receive the Deposit as liquidated damages
(and not as a penalty) whereupon Title Insurer shall promptly pay the Deposit to
Seller upon written notice given by Seller, this Agreement shall terminate and
neither Seller nor Buyer shall have any further obligations hereunder to the
other except for such obligations that expressly survive termination of this
Agreement.  Such liquidated damages are not intended as a forfeiture
or penalty within the meaning of applicable laws.  Seller and Buyer
have made this provision for liquidated damages because it would be difficult to
calculate, on the date hereof, the amount of actual damages for such default,
and Seller and Buyer agree that the Deposit represents reasonable compensation
to Seller for any such default.

     

     7.16 Entire
Agreement.  This Agreement constitutes the entire agreement of
the parties in respect of the subject matter hereof, and may not be changed or
modified except by an agreement in writing signed by the parties.

     

    [Signature
Page Follows]

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
effective as of the day and year first above written.

     

    
      	
              “Seller”

              CLINTON ASSISTED LIVING,
      LLC, a

              Washington
      limited liability company

                By           C.P.
      '99 POOL GENERAL PARTNERSHIP, its sole member

                  By           COLUMBIA
      PACIFIC GROWTH FUND '99 L.P., its general partner

               

                    By                      B.F.,
      LIMITED PARTNERSHIP, its

              general
      partner

               

                      By
      COLUMBIA PACIFIC GROUP, INC., its general partner

               

               

                        By
      /s/ Brandon D.
      Baty                                                                

                            Brandon
      D. Baty, President

                    Brandon
      D. Baty, President

            	
              “Buyer”

              EMERITUS
      CORPORATION,

              a
      Washington corporation

              By:/s/ Eric Mendelsohn

                   Eric
      Mendelsohn

              Its: SVP Corporate Development

               

            
	 	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      

    

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    LEGAL
DESCRIPTION

     

    Begin at
the Northeast Corner of Lot 9, Kentwood Sub., Part 1, Clinton, Hinds County,
Mississippi; thence North 0 degrees 47 minutes 18 seconds West 184.80 feet to
point on the South R/W Line of Northside Drive; thence North 89 degrees 11
minutes 40 seconds East 809.28 feet along said South R/W Line; thence leaving
said R/W South 1 degree 38 minutes 08 seconds East 1,041.38 feet; thence North
82 degrees 43 minutes 20 seconds West 237.50 feet; thence North 52 degrees 43
minutes 42 seconds West 300.93 feet; thence North 63 degrees 01 minutes 02
seconds West 242.67 feet; thence South 11 degrees 52 minutes 20 seconds West
186.72 feet; thence South 89 degrees 58 minutes 07 seconds West 96.95 feet;
thence North 00 degrees 47 minutes 18 seconds West 705.21 feet to the Point of
Beginning and being part of the NW 1/4 of the SE 114 of Section 20, T-6-N,
R-1-W, Clinton, Hinds County, Mississippi.

     

    

     

    

     

    
      
         

      

      
        A
- 1

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    

     

    FORM
OF BILL OF SALE

     

    

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
A

     

    LEGAL DESCRIPTION OF THE
LAND

    

    Begin at
the Northeast Corner of Lot 9, Kentwood Sub., Part 1, Clinton, Hinds County,
Mississippi; thence North 0 degrees 47 minutes 18 seconds West 184.80 feet to
point on the South R/W Line of Northside Drive; thence North 89 degrees 11
minutes 40 seconds East 809.28 feet along said South R/W Line; thence leaving
said R/W South 1 degree 38 minutes 08 seconds East 1,041.38 feet; thence North
82 degrees 43 minutes 20 seconds West 237.50 feet; thence North 52 degrees 43
minutes 42 seconds West 300.93 feet; thence North 63 degrees 01 minutes 02
seconds West 242.67 feet; thence South 11 degrees 52 minutes 20 seconds West
186.72 feet; thence South 89 degrees 58 minutes 07 seconds West 96.95 feet;
thence North 00 degrees 47 minutes 18 seconds West 705.21 feet to the Point of
Beginning and being part of the NW 1/4 of the SE 114 of Section 20, T-6-N,
R-1-W, Clinton, Hinds County, Mississippi.

    
      
         

      

      
        C
- 1

        
          

        

      

      
         

      

    

    Exhibit
B

    

    LIST OF EQUIPMENT
LEASES

    

    

    

    NONE

    

     

    

     

    
      
         

      

      
        
          D

        

        
          

        

      

      
         

      

    

    EXHIBIT
C

     

    FORM
OF PROMISSORY NOTE

     

    

     

    

     

    PROMISSORY
NOTE

     

    

    
      
         

      

      
        E

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