AGREEMENT OF SALE AND PURCHASE

Exhibit 10.3

AGREEMENT OF SALE AND PURCHASE

      THIS AGREEMENT OF SALE AND PURCHASE (the “Agreement”) is dated as of March 7, 2007, to be effective as of the Effective Date, and is made and entered into by and between the entities that have executed this Agreement on the signature pages hereto as sellers (individually, a “Seller” and collectively, the “Sellers”), and EMERITUS CORPORATION , a Washington corporation, as purchaser (the “Purchaser”). Each Seller and Purchaser are sometimes individually referred to as a “Party” and collectively referred to as the “Parties”.

      WHEREAS , Sellers are the owners of the Facilities, the Emeritus Mortgage Loan and the Term Mortgage Loan as provided herein; and

      WHEREAS , Sellers desire to sell and Purchaser desires to purchase the Facilities and to terminate the Tenant Leases; and

      WHEREAS , in connection with the sale and purchase of the Facilities and the termination of the Tenant Leases, Purchaser has agreed either to pay the unpaid amounts owed under the Emeritus Mortgage Loan required to pay the Emeritus Mortgage Loan in full or to cause the purchase of the Emeritus Mortgage Loan at the Closing as provided herein; and

      WHEREAS , in connection with the sale and purchase of the Facilities and the termination of the Tenant Leases, Purchaser has agreed to pay the unpaid amounts owed under the Term Mortgage Loan required to pay the Term Mortgage Loan in full at the Closing;

      NOW, THEREFORE , in consideration of the sum of Ten Dollars ($10.00), the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I
DEFINITIONS AND INTERPRETATION

     1.1 Definitions. As used herein, the following defined terms shall have the meanings set forth below:

      “Affiliate” shall mean any Person that directly or indirectly controls, is under common control with, or is controlled by any other Person. For purposes of this definition, “controls”, “under common control with” and “controlled by” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or otherwise.

      “Appurtenant Rights” shall mean all rights, privileges and easements appurtenant to the Land that permissibly pass by operation of law with the conveyance by the applicable Seller of the fee simple estate in the Land.

      “Assumed Business Agreements” shall mean all Business Agreements that (i) Purchaser agrees to assume as provided in Section 4.3 hereof, and (ii) are assigned to Purchaser pursuant to the General Assignment for a Facility.

      “Assumed Liabilities” shall mean the following:

     (a) all obligations of Sellers that arise or accrue under the Assumed Business Agreements relating to a particular Facility on and after the effective date of the General Assignment for such Facility;

     (b) all obligations under any Permit and Warranty assigned to Purchaser that arise or accrue on or after the effective date of the General Assignment for the Facility to which such Permit and Warranty relates;

     (c) all Property Taxes and all other obligations with respect to a Facility that accrued prior to the Closing Date for such Facility but which are not due for payment until after the Closing Date;

     (d) all Property Taxes and all other obligations with respect to a Facility that accrue on and after the Closing Date; and

     (e) all obligations, liabilities, damages, losses, claims, expenses and costs relating to the Facilities arising or accruing on or prior to the Closing Date that the Tenant under each of the Tenant Leases was obligated, liable or responsible to pay or perform under the terms of such Tenant Lease.

      “Bankruptcy/Dissolution Event” shall mean the occurrence of any of the following: (a) the commencement of a case under Title 11 of the U.S. Code, as now constituted or hereafter amended, or under any other applicable federal or state bankruptcy law or other similar law; (b) the appointment of a trustee or receiver of any property interest; (c) an assignment for the benefit of creditors; (d) an attachment, execution or other judicial seizure of a substantial property interest; (e) the taking of, failure to take, or submission to any action indicating an inability to meet financial obligations as they accrue; or (f) a dissolution or liquidation.

      “Bill of Sale” shall mean a bill of sale substantially in the form of Exhibit A hereto by which the applicable Seller for a Facility conveys to Purchaser such Seller’s right, title and interest, if any, in and to the Personal Property located at such Facility.

      “Business Agreement” shall mean any management agreement, service contract, contractor agreement, construction contract or other agreement or instrument affecting all or a portion of the Facilities or the operation thereof to which a Seller is party and that is assignable by such Seller without the consent or approval of any other Person.

      “Business Day” shall mean any calendar day other than a Saturday, a Sunday or a day on which national banks are not required or authorized by law to remain closed.

      “Closing” shall mean the closing of the purchase and sale of the Facilities contemplated by this Agreement.

      “Closing Date” shall mean March 16, 2007.

      “Code” shall mean the United States Internal Revenue Code of 1986, as amended, and all regulations promulgated thereunder.

      “Deeds” shall mean special warranty deeds substantially in the form of Exhibit B hereto, modified to reflect a special warranty deed (or the equivalent) for the applicable states where each of the Facilities is located, by which the applicable Seller conveys the Land, the Improvements and Appurtenant Rights comprising or relating to a Facility to Purchaser.

      “Earnest Money” shall have the meaning set forth in Section 2.1 hereof.

      “Effective Date” shall mean the latest of the dates of the execution of this Agreement by a Seller and Purchaser as evidenced by the dates appearing under their respective signatures hereto.

      “Emeritus Mortgage Loan” shall mean the mortgage loan identified on Exhibit G-1 hereto that encumbers one or more of the Tenant Leases.

      “Escrow Agreement” shall mean an escrow agreement substantially in the form of Exhibit C hereto by and among Sellers, Purchaser and Title Company with respect to the terms of the escrow of the Earnest Money.

      “Facilities” shall mean the Land, the Improvements and the Appurtenant Interests associated therewith comprising the senior living facilities identified on Exhibit D hereto.

      “Forum” shall mean any federal, state, local or municipal court, governmental agency, administrative body or agency, tribunal, private alternative dispute resolution system or arbitration panel.

      “General Assignment” shall mean one of the assignments between Purchaser and the applicable Seller, substantially in the form of Exhibit E hereto, pursuant to which the right, title and interest of such Seller in and to the Assumed Business Agreements and the Permits and Warranties relating to a Facility are assigned to, and obligations thereunder are assumed by, Purchaser.

      “Government” shall mean any federal, state, local or municipal government or any department, commission, board, bureau, agency, instrumentality, unit or taxing authority thereof.

      “Governmental Requirements” shall mean any notices, filings or pre-approvals required by a Government in connection with the transfer of ownership of any of the Facilities.

      “HR” shall mean Healthcare Realty Trust Incorporated, a Maryland corporation and an Affiliate of Sellers.

      “Improvements” shall mean all buildings, improvements, structures and fixtures to the extent now, and on the Closing Date, owned by Sellers and comprising the Facilities, including landscaping, parking lot improvements and structures, drainage facilities and all above ground and underground utility structures and other so-called infrastructure improvements comprising a part thereof to the extent any of the same may be owned by Sellers.

      “Land” means the real property owned in fee simple by Sellers upon which the Facilities are located.

      “Laws” means all federal, state and local laws, moratoria, initiatives, referenda, ordinances, rules, regulations, standards, orders and other governmental requirements, including those relating to the environment, health and safety, disabled or handicapped persons, and as applicable, to the licensing of a Facility.

      “Lease Termination” shall mean a lease termination agreement, substantially in the form of Exhibit F hereto, pursuant to which the applicable Seller and the Tenant under a Tenant Lease agree to terminate such Tenant Lease effective as of the Closing Date.

      “Mortgage Loan Assignee” shall mean an Affiliate of Purchaser designated by Purchaser in accordance with Section 2.3(a) hereto to purchase the Emeritus Mortgage Loan as provided herein.

      “Mortgage Assignment” shall mean an assignment and assumption agreement, substantially in the form of Exhibit J hereto, pursuant to which HR’s right, title and interest in and to the Emeritus Mortgage Loan and the Mortgage Loan Documents relating thereto are assigned to, and HR’s obligations thereunder are assumed by, the Mortgage Loan Assignee.

      “Mortgage Loan Documents” shall mean all promissory notes, mortgages, deeds of trust, loan agreements, participation agreements and other documents evidencing or securing the Emeritus Mortgage Loan.

      “Orders” shall mean all applicable orders, writs, judgments, decrees, rulings, consent agreements and awards of or by any Forum or entered by consent of the party to be bound.

      “Permits and Warranties” shall mean the following, to the extent that they relate exclusively to the Facilities and are assignable by the applicable Seller without the consent or approval of any other Person: (i) certificates of occupancy and permits or approvals of any nature from any Government; and (ii) guarantees, warranties and indemnities, if any, pertaining to the ownership of the Land or the Improvements.

      “Permitted Exceptions” shall mean (a) all liens for Property Taxes that are not yet due and payable; (b) easements, restrictions, covenants and other encumbrances of record as of the Effective Date; (c) any state of facts that would be disclosed by an accurate survey or independent inspection of the Facilities; (d) all applicable building and zoning ordinances, Laws, regulations and restrictions of any Government; (e) such easements, restrictions, covenants and other encumbrances that become matters of public record after the Effective Date and before the Closing to the extent that such matters are waived or accepted, or deemed to be waived or accepted, by Purchaser; and (f) the rights of residents of the Facilities.

      “Person” shall mean an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization, a Government and any other legal entity.

      “Personal Property” shall mean all tangible personal property of any kind located on or in the Facilities and owned by Sellers, including, without limitation, equipment, appliances, machinery, furniture, furnishings, signage and fixtures.

      “Property Taxes” shall mean all ad valorem, real property and personal property taxes, all general and special private and public assessments, all other property taxes, and all similar obligations relating to the Land and the Improvements.

      “Purchase Price” shall mean the amount of Ninety-Eight Million Nine Hundred Ninety-Eight Thousand Eight Hundred Fourteen and No/100 Dollars ($98,998,814.00).

      “Rent” shall mean all rental payments due under the Tenant Leases prior to the Closing Date.

      “Tenant” shall mean each party named as the tenant or lessee under any Tenant Lease.

      “Tenant Lease” shall mean each of the leases, license agreements and other occupancy agreements for the rental of a Facility identified on Exhibit H hereto, as amended, modified or extended through the Effective Date, together with all renewals, modifications, addenda, guarantees and other security documents relating to any and all such leases, license agreements or other occupancy agreements.

      “Term Mortgage Loan” shall mean the mortgage loan identified on Exhibit G-2 hereto that encumbers one or more of the Tenant Leases.

      “Title Company” shall mean Fidelity National Title Insurance Company.

     1.2 Interpretation . In this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other gender; references to statutes, regulations or ordinances are to be construed as including all provisions consolidating, amending or replacing the referenced statute, regulation or ordinance; references to agreements and other contractual instruments shall be deemed to include all subsequent amendments to or changes in such agreements or instruments entered into in accordance with their respective terms; references to Persons include their permitted successors and assigns; use of the term “include” or “including” shall mean to include or including without limitation; and references to a “Section” or “Article” shall mean a section or article of this Agreement unless otherwise expressly stated.

ARTICLE II
PURCHASE AND SALE

     2.1 Purchase and Sale . Upon the terms and subject to the conditions set forth in this Agreement, Sellers at the Closing shall sell, transfer and assign to Purchaser all right, title and interest of Sellers in and to the Facilities free and clear of any mortgage, security interest, lien, charge, claim or other encumbrance except the Permitted Exceptions, and Purchaser shall purchase such Facilities for the Purchase Price. Prior to the Effective Date, Purchaser has deposited with Title Company the amount of One Million Three Hundred Fourteen Thousand Two Hundred Seventy-Two and No/100 Dollars ($1,314,272.00) as an earnest money deposit

(the “Earnest Money”), which Title Company shall continue to hold pursuant to the Escrow Agreement. Purchaser shall be entitled to apply the Earnest Money to the payment of the portion of the Purchase Price due from Purchaser at the Closing. The Earnest Money is refundable only in the event that this Agreement is terminated pursuant to Sections 9.1(a)(i), 9.1(a)(ii), 9.1(a)(iii) or 9.1(a)(iv) hereof. Except as set forth in the immediately preceding sentence, the Earnest Money is not refundable to Purchaser under any circumstances and shall be deemed to be consideration earned by Sellers for the execution and delivery of this Agreement, and the forfeiture of any Earnest Money pursuant to this Agreement shall not be deemed to be liquidated damages or otherwise to limit Seller’s remedies for a breach or default by Purchaser under this Agreement.

     2.2 Assumption of Liabilities . Upon the terms and subject to the conditions set forth in this Agreement, Purchaser, as of the Closing Date, shall assume all of the Assumed Liabilities.

     2.3 Purchase Price .

     (a) The Purchase Price shall be subject to adjustment only as set forth in this Section 2.3 . Property Taxes, water/sewer charges, gas, electric, telephone and other utilities, and other operating expenses relating to the Facilities are the responsibility of the Tenants under the Tenant Leases and shall not be prorated. All unpaid Rent and any other amounts due and payable under the Tenant Leases as of the Closing Date shall be charged to Purchaser and paid at the Closing, and Rent for the month in which Closing occurs shall be prorated through the Closing Date. Sellers shall retain all security deposits and other similar deposits relating to the Tenant Leases, and Purchaser shall receive a credit for such deposits at the Closing. In addition to the payment of the Purchase Price, Purchaser shall, at and as a condition to the Closing, be obligated (i) to pay all unpaid amounts that are owed under the Term Mortgage Loan which are required to pay the Term Mortgage Loan in full, and (ii) either (A) to pay all unpaid amounts that are owed under the Emeritus Mortgage Loan which are required to pay the Emeritus Mortgage Loan in full or (B) to cause the Mortgage Loan Assignee to purchase the Emeritus Mortgage Loan from HR for a purchase price equal to all unpaid amounts that are owed under the Emeritus Mortgage Loan in consideration of HR’s execution and delivery of the Mortgage Assignment to the Mortgage Loan Assignee at the Closing. If Purchaser elects to pay the Emeritus Mortgage Loan in full at the Closing, Purchaser must provide, not less than two (2) Business Days prior to the Closing Date, written notice to Sellers of any such election, and, in the absence of such written notice of Purchaser’s election, Purchaser shall cause the Mortgage Loan Assignee to purchase the Emeritus Mortgage Loan from HR at the Closing for a purchase price equal to all unpaid amounts that are owed under the Emeritus Mortgage Loan. Purchaser shall identify the Mortgage Loan Assignee in a written notice to Sellers not less than three (3) Business Days prior to the Closing Date. Sellers shall cause HR to accept, or cause the acceptance of, prepayment of the Term Mortgage Loan and, as applicable, accept the prepayment, or complete the sale as contemplated herein, of the Emeritus Mortgage Loan irrespective of the failure of Purchaser to satisfy any applicable prepayment notice requirements, and to deliver a payoff letter to Purchaser at least three (3) Business Days prior to the Closing Date.

     (b) In addition to any adjustments to the Purchase Price pursuant to Section 2.3(a) hereof, the Purchase Price shall be subject to further adjustment as set forth below:

          (i) the Purchase Price shall be adjusted to reflect any expense paid by one Party that the other Party has agreed to pay or share pursuant to Section 11.1 hereof or otherwise pursuant to this Agreement; and

          (ii) for any Facility that is not purchased by Purchaser pursuant to Section 10.2 hereof, the Purchase Price shall be decreased by an amount determined in accordance with Section 10.2 hereof.

     (c) After taking into account any adjustments to the Purchase Price as set forth above, the Purchase Price (plus the unpaid amounts owed under the Term Mortgage Loan required to pay the Term Mortgage Loan in full and either the unpaid amounts owed under the Emeritus Mortgage Loan required to pay the Emeritus Mortgage Loan in full or the purchase price of the Emeritus Mortgage Loan if it is to be purchased as provided herein) shall be paid by Purchaser (and the Mortgage Loan Assignee as provided herein) by wire transfer of immediately available funds to an escrow account maintained by Title Company for delivery to Sellers (and HR, as applicable) upon the consummation of the Closing. As soon as possible after the Closing (but not later than thirty (30) days after the Closing Date), the Parties shall reconcile the actual amount of any prorations that were estimated as of the Closing. To the extent that a Party subsequently verifies that the actual amounts differ from the amounts estimated and so prorated, the Parties agree to remit the correct amount of such items to the appropriate Party as and when they are determined. The terms of this Section 2.3 shall survive the Closing.

     2.4 Deliveries at Closing .

     (a) At the Closing, Sellers shall deliver to Purchaser, or cause the delivery to Purchaser of, the following:

          (i) A certificate of an authorized representative of each Seller, dated the Closing Date, certifying that attached thereto is a true and complete copy of resolutions or limited partnership documentation, as applicable, adopted by such Seller authorizing the execution, delivery and performance of this Agreement and the documents and instruments to be executed and delivered by such Seller pursuant hereto, and that all such resolutions or limited partnership documentation, as applicable, are still in full force and effect and have not been amended or modified;

          (ii) A General Assignment, duly executed by the applicable Seller, assigning to Purchaser the Permits and Warranties and Assumed Business Agreements relating to the Facilities that are sold and transferred on the Closing Date;

          (iii) A separate Lease Termination, duly executed by the applicable Seller, for each Tenant Lease by which such Seller agrees to the termination of such Tenant Lease as of the Closing Date;

          (iv) A separate Bill of Sale, duly executed by the applicable Seller, for each Facility conveyed by such Seller to Purchaser;

          (v) The Deeds, duly executed by the applicable Sellers, relating to the Facilities that are sold and transferred on the Closing Date;

          (vi) Releases of the leasehold mortgages or deeds of trust and other instruments that secure the repayment of the Term Mortgage Loan and the Emeritus Mortgage Loan;

          (vii) A statement executed by each Seller in form and substance acceptable under Section 1445 of the Internal Revenue Code, as amended, setting forth such Seller’s United States taxpayer identification number and certifying that Seller is not a “foreign person” as that term is used under Section 1445(b)(2) of the Internal Revenue Code, as amended;

          (viii) Copies of any engineering plans, drawings, specifications and blueprints in the possession of Sellers and relating to the Improvements;

          (ix) A closing statement executed by the applicable Sellers itemizing the Purchase Price and all adjustments thereto as provided herein;

          (x) An owner’s title affidavit substantially in the form of Exhibit I hereto duly executed by each applicable Seller relating to the Land and Improvements that are sold and transferred on the Closing Date and owned by such Seller; and

          (xi) In the event that the Emeritus Mortgage Loan is to be purchased by the Mortgage Loan Assignee as permitted by this Agreement, the Mortgage Assignment duly executed by HR.

     (b) At the Closing, Purchaser shall deliver to Sellers or HR, as applicable, or cause the delivery to Sellers or HR, as applicable of, the following:

          (i) A certificate of the Secretary or an Assistant Secretary of Purchaser, dated the Closing Date, certifying that attached thereto is a true and complete copy of resolutions adopted by the board of directors of Purchaser authorizing the execution, delivery and performance of this Agreement and the documents and instruments to be executed and delivered by Purchaser pursuant hereto, and that all such resolutions are still in full force and effect and have not been amended or modified;

          (ii) The funds constituting the portion of the Purchase Price allocable to the Facilities that are sold and transferred on the Closing Date, as required under Section 2.3 hereof;

          (iii) All unpaid amounts that are owed under the Term Mortgage Loan which are required to pay the Term Mortgage Loan in full as of the Closing Date;

          (iv) All unpaid amounts that are owed under the Emeritus Mortgage Loan which are required to pay the Emeritus Mortgage Loan in full as of the Closing Date, or, if the Emeritus Mortgage Loan is to be purchased and sold as provided herein, the purchase price of the Emeritus Mortgage Loan equal to all unpaid amounts under the Emeritus Mortgage Loan that would be required to pay the Emeritus Mortgage Loan in full;

          (v) A General Assignment, duly executed by Purchaser, by which Purchaser assumes the payment and performance of the obligations of the applicable Seller under the Permits and Warranties and Assumed Business Agreements assigned to Purchaser thereby and relating to a Facility that is sold and transferred by such Seller on the Closing Date;

          (vi) A separate Lease Termination, duly executed by Purchaser, for each Tenant Lease by which the Tenant thereunder agrees to the termination of such Tenant Lease;

          (vii) Executed waivers of the rights of first refusal under the Tenant Leases held by any Tenants (other than Purchaser) in a form acceptable to Sellers;

          (viii) A closing statement executed by Purchaser itemizing the Purchase Price and all adjustments thereto as provided herein;

          (ix) In the event that the Emeritus Mortgage Loan is to be purchased by the Mortgage Loan Assignee as permitted by this Agreement, the Mortgage Assignment duly executed by the Mortgage Loan Assignee.

     2.5 Further Assurances . From time to time after the Closing, Sellers shall, upon Purchaser’s reasonable request and at Purchaser’s sole expense, execute, acknowledge and deliver to Purchaser such other instruments of transfer and conveyance and shall take such other actions and execute and deliver such other documents, certifications and further assurances as Purchaser may reasonably require to vest more effectively in Purchaser, or to put Purchaser more fully in possession of, any of the Facilities, or to better enable Purchaser to complete, perform and discharge the Assumed Liabilities. Each Party shall cooperate with the other and shall execute and deliver to another Party such other instruments and documents and take such other actions as may be reasonably requested from time to time by another Party hereto as necessary to carry out, evidence and confirm the intended purposes of this Agreement.

     2.6 Delivery of Possession . Possession of the Facilities sold, transferred and assigned at the Closing shall be delivered to Purchaser effective as of the Closing Date.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS

     Sellers hereby represent and warrant to Purchaser as of the Effective Date as follows:

     3.1 Organization, Qualifications and Corporate Power . Each Seller is duly formed or incorporated, as the case may be, and validly existing and in good standing under the laws of its state of formation or incorporation, as the case may be, and is qualified or authorized to conduct business in each state where the failure to be so qualified or authorized could reasonably be expected to have a material adverse effect upon the business of Sellers taken as a whole. Sellers have the power and authority to execute, deliver and perform the Escrow Agreement, this Agreement and the other agreements, documents and certificates contemplated to be delivered by them pursuant to this Agreement.

     3.2 Authorization . The execution, delivery and performance by Sellers of this Agreement and the instruments contemplated to be delivered by Sellers pursuant to this Agreement at the Closing have been duly authorized by necessary corporate or partnership action, as applicable.

     3.3 Validity. This Agreement has been duly executed and delivered by Sellers and constitutes the legal, valid and binding obligation of Sellers, enforceable in accordance with its terms, subject to general equity principles and to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect affecting the enforcement of creditors’ rights. The Escrow Agreement and each Deed, General Assignment, Bill of Sale, Lease Termination and other agreement, document and certificate to be executed and delivered by Sellers hereunder shall, when so executed and delivered in accordance with this Agreement by the applicable Sellers, constitute the legal, valid and binding obligation of the applicable Sellers enforceable in accordance with its terms, subject to general equity principles and to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect affecting the enforcement of creditors’ rights.

     3.4 Non-Contravention. The execution and delivery of this Agreement and the other agreements, documents and certificates contemplated to be executed and delivered by Sellers pursuant to this Agreement do not, and the consummation by Sellers of the transactions contemplated hereby and thereby shall not, violate any provision of their respective articles of incorporation or bylaws or partnership agreement, as the case may be.

     3.5 Litigation. No Seller is a party to or subject to any judgment, decree or order entered in any lawsuit or proceeding brought by any Government or other party seeking to prevent the execution of this Agreement or the consummation of the transactions contemplated hereby.

     3.6 Assets. The applicable Seller has good and marketable title to each Facility to be conveyed by such Seller. At the Closing, each Facility shall be free and clear of any and all mortgages, pledges, security interests, liens, charges and conditional sales agreements granted by Sellers, except for the Permitted Exceptions and subject to execution and delivery by the Tenants of the Lease Terminations. To Sellers’ Knowledge, the zoning classification for each of the Facilities located in the Commonwealth of Pennsylvania is set forth in Schedule 3.6 hereto.

     3.7 No Bankruptcy or Dissolution . No Bankruptcy/Dissolution Event has occurred with respect to any Seller.

ARTICLE IV
COVENANTS OF SELLERS

     4.1 Transfer of Permits. Sellers shall use commercially reasonable efforts to assist Purchaser with the assumption, transfer or reissuance of any licenses, permits or approvals required for the operation of the Facilities that do not constitute Permits and Warranties; provided, however, that Sellers shall not incur any material cost, expense or liability in connection with such efforts or in connection with the assumption, transfer or reissuance of any such licenses, permits or approvals that do not constitute Permits and Warranties.

     4.2 Cooperation. Insofar as such conditions are within their reasonable control or influence, Sellers shall use commercially reasonable efforts to cause the conditions set forth in Section 7.2 hereof to be satisfied and to facilitate and cause the consummation of the transactions contemplated hereby; provided, however, that no Seller shall be required to make any payment to any party (other than reimbursement of expenses), guarantee any Business Agreement or remain liable for the payment thereof following the Closing Date with respect to any matters arising on or after the Closing Date, or agree to any concessions or amendments to other contracts, leases or arrangements with such party in order to obtain any such consent or approval.

     4.3 Delivery of Documents. No later than five (5) Business Days after the Effective Date, Sellers shall provide, or otherwise make available, to Purchaser the following, to the extent such information and materials are in Sellers’ possession and available without immediate disclosure of the confidential nature of this Agreement:

     (a) True copies of all Business Agreements;

     (b) True copies of any existing surveys of any of the Facilities to the extent in the possession of Sellers; and

     (c) True copies of title commitments with respect to the Facilities, each of which has an effective date that is not earlier than seventy-five (75) days prior to the date of this Agreement.

Purchaser shall have the right to assume any such Business Agreements relating to a Facility pursuant to the General Assignment therefor so long as Purchaser provides written notice to Sellers no later than three (3) Business Days prior to the Closing Date that identifies those Business Agreements which Purchaser has elected to assume as of the Closing Date, and any Business Agreements not so assumed by Purchaser shall be terminated by Seller at its sole cost and expense.

     4.4 No New Business Agreements. During the period commencing on the Effective Date and continuing through the earlier of the Closing Date or the prior termination of this Agreement, no Seller shall, without the prior written consent of Purchaser, which may be given or withheld in Purchaser’s sole and absolute discretion, enter into or modify any Business Agreements, or any agreements for the use and occupancy of any of the Facilities, that will survive the Closing.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser represents and warrants to Sellers as follows:

     5.1 Organization, Corporate Power and Authorization. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington and in each other jurisdiction in which it is lawfully required to qualify to conduct business. Purchaser has the corporate power and authority to execute, deliver and perform this Agreement and the other agreements, documents and certificates contemplated to be executed and delivered

by Purchaser pursuant to this Agreement. If the Emeritus Mortgage Loan is to be purchased as provided in Section 2.3(a) hereof, the Mortgage Loan Assignee shall have the legal power and authority to execute, deliver and perform the Mortgage Loan Assignment.

     5.2 Authorization. The execution, delivery and performance by Purchaser of this Agreement and the other agreements, documents and certificates contemplated to be executed and delivered by Purchaser pursuant to this Agreement have been duly authorized by all corporate action required by law. If the Emeritus Mortgage Loan is to be purchased as provided in Section 2.3(a) hereof, the execution, delivery and performance by the Mortgage Loan Assignee of the Mortgage Assignment shall have been duly authorized by all action required by law.

     5.3 Non-Contravention. The execution and delivery of this Agreement and the other agreements, documents and certificates contemplated to be executed and delivered by Purchaser pursuant to this Agreement do not, and the consummation by Purchaser of the transactions contemplated hereby and thereby shall not, violate any provision of its articles of incorporation or bylaws. If the Emeritus Mortgage Loan is to be purchased as provided in Section 2.3(a) hereof, the execution and delivery of the Mortgage Assignment by the Mortgage Loan Assignee shall not, and the consummation by the Mortgage Loan Assignee of the transaction contemplated thereby shall not, violate any provision of the Mortgage Loan Assignee’s articles of incorporation, bylaws, partnership agreement, operating agreement or other instrument governing the organization or operation thereof.

     5.4 Validity. This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser, enforceable in accordance with its terms, subject to general equity principles and to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect affecting the enforcement of creditors’ rights. The Escrow Agreement and each General Assignment, Lease Termination and other agreement, document and certificate to be executed and delivered by Purchaser hereunder, shall, when so executed and delivered, constitute the legal, valid and binding obligation of Purchaser, enforceable in accordance with its terms, subject to general equity principles and to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect affecting the enforcement of creditors’ rights. If the Emeritus Mortgage Loan is to be purchased as provided in Section 2.3(a) hereof, the Mortgage Assignment to be executed and delivered by the Mortgage Loan Assignee shall, when so executed and delivered, constitute the legal, valid and binding obligation of the Mortgage Loan Assignee, enforceable in accordance with its terms, subject to general equity principles and to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect affecting the enforcement of creditors’ rights.

     5.5 Litigation. Purchaser is not a party to or subject to any judgment, decree or order entered in any lawsuit or proceeding brought by any Government or other party seeking to prevent the execution of this Agreement or the consummation of the transactions contemplated hereby.

     5.6 Tenant Leases. Purchaser and ESC IV, L.P. (d/b/a Texas-ESC IV, L.P.), a Washington limited partnership, are the sole Tenants under the Tenant Leases. ESC IV, L.P. (d/b/a Texas-ESC IV, L.P.), a Washington limited partnership, is a wholly-owned subsidiary of Purchaser.

     5.7 AS IS, WHERE IS. Purchaser acknowledges, represents and warrants that any information supplied or made available by Sellers, whether written or oral or in the form of maps, surveys, plats, environmental reports, engineering studies, inspection reports, plans, specifications or any other information whatsoever, without exception, pertaining to the Facilities, any and all records, rent rolls and other documents pertaining to the use or occupancy of the Facilities or any portion thereof, the income thereof, the costs and expenses of the maintenance thereof, and any and all other matters concerning the condition, suitability, integrity, marketability, compliance with Laws or other attributes of the Facilities or any part thereof, has been furnished to Purchaser solely to assist in Purchaser’s review and investigation of the Facilities. Further, Purchaser acknowledges that, as of the Effective Date, Purchaser is in possession of the Facilities and is familiar with the Facilities and has made all such independent investigations as Purchaser deems necessary or appropriate concerning the Facilities. AS SUCH, THE FACILITIES ARE SOLD BY SELLERS, AND ARE HEREBY ACCEPTED BY PURCHASER, AS IS, WHERE IS AND WITH ALL FAULTS, AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESSED OR IMPLIED, WRITTEN OR ORAL. PURCHASER HEREBY UNCONDITIONALLY WAIVES AND EXCLUDES, AND SELLERS DISCLAIM, ALL REPRESENTATIONS AND WARRANTIES, INCLUDING ANY AND ALL EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES AS TO: (i) THE CONDITION OF THE FACILITIES OR ANY ASPECT THEREOF, INCLUDING ANY AND ALL EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES RELATED TO SUITABILITY FOR HABITATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE; (ii) THE NATURE OR QUALITY OF CONSTRUCTION, STRUCTURAL DESIGN OR ENGINEERING OF THE IMPROVEMENTS; (iii) THE QUALITY OF THE LABOR OR MATERIALS INCLUDED IN THE IMPROVEMENTS; (iv) THE SOIL CONDITIONS, DRAINAGE, TOPOGRAPHICAL FEATURES OR OTHER CONDITIONS OF THE FACILITIES OR WHICH AFFECT ANY THEREOF; (v) ANY FEATURES OR CONDITIONS AT OR WHICH AFFECT THE FACILITIES WITH RESPECT TO ANY PARTICULAR PURPOSE, USE, DEVELOPMENTAL POTENTIAL, CASH FLOW OR OTHERWISE; (vi) ALL EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES CREATED BY ANY AFFIRMATION OF FACT OR PROMISE OR BY ANY DESCRIPTION OF ANY OF THE FACILITIES; (vii) ANY ENVIRONMENTAL, GEOLOGICAL, METEOROLOGICAL, STRUCTURAL OR OTHER CONDITION OR HAZARD OR THE ABSENCE THEREOF HERETOFORE, NOW OR HEREAFTER AFFECTING IN ANY MANNER ANY OF THE FACILITIES; (viii) CLAIMS REGARDING DEFECTS WHICH WERE NOT OR ARE NOT DISCOVERABLE; (ix) PRODUCT LIABILITY CLAIMS IN ANY MANNER RELATED TO ANY OF THE FACILITIES; AND (x) ALL OTHER EXPRESS OR IMPLIED WARRANTIES AND REPRESENTATIONS BY SELLERS WHATSOEVER.

ARTICLE VI
COVENANTS OF PURCHASER

     6.1 Purchaser Performance. After the Closing, Purchaser shall promptly pay as they become due and otherwise perform all obligations of Sellers under the Assumed Liabilities relating to the Facilities and otherwise perform and fulfill all other obligations with respect to the Facilities to the extent relating to the period on and after the Closing.

     6.2 Confidentiality. Purchaser hereby agrees that any information, documents, financial records, architectural and construction plans or other materials provided to Purchaser pursuant to this Agreement shall be deemed to be confidential information and shall not be disclosed to others except (i) to Purchaser’s attorneys, accountants, investors, lenders and agents who have agreed to treat such information, documents, financial records, architectural and construction plans and other materials as confidential information and not to disclose any thereof to others and (ii) insofar as any such information, documents, financial records, architectural and construction plans or other materials are published or are a matter of public knowledge (other than as a result of the disclosure thereof by Purchaser or any of its attorneys, accounta