Exhibit 10.3

 

 

ABILENE, TEXAS

 

 

 

 

AGREEMENT OF PURCHASE AND SALE

 

OF REAL PROPERTY

 

BY AND BETWEEN

 

Covenant Place of Abilene, Inc.

(“Seller”)

 

AND

 

Capital Senior Living Acquisition, LLC or its assigns

(“Purchaser”)

 

Dated: March 10, 2006

 

 

 

 

AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY

 

THIS AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY is made and entered into as
of this 10th day of March, 2006 (“Effective Date”) by and between Covenant Place
of Abilene, Inc., a Delaware corporation (“Seller”), and Capital Senior Living
Acquisition, LLC, a Delaware limited liability company, or its assigns
(“Purchaser”).

 

W I T N E S S E T H:

 

In consideration of the mutual agreements contained herein, the sum of ten
dollars and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Seller hereby agrees to sell and convey to
Purchaser, and Purchaser hereby agrees to purchase from Seller, the Property
(hereinafter defined), for the purchase price and upon and subject to the terms,
provisions, and conditions hereinafter set forth.

 

ARTICLE 1.

 

Definitions; Purchase Price; Property

 

Section 1.01     Definitions. As used in this Agreement, the terms listed below,
when they appear with their initial letters capitalized, shall have the
following meanings unless the context in which they occur requires otherwise:

 

(a)        “Affiliate” means, as to a person or entity, any other person or
entity controlling, controlled by or under common control with such person or
entity.

 

(b)         “Agreement” means, and the words “herein,” “hereof,” “hereunder,”
and words of similar import, shall refer to, this Agreement of Purchase and Sale
of Real Property.

 

(c)

“City” means the City of Abilene, Texas.

 

(d)        “Closing” means the consummation of the purchase of the Property by
Purchaser from Seller in accordance with the terms and provisions of Article 3,
which Closing shall be held at the offices of the Title Company.

 

(e)        “Closing Date” means the date the Closing will occur which shall be
(i) the date which is on or before thirty (30) days after the expiration of the
Inspection Period (subject to extension as provided herein including Section
3.08 hereof); or (ii) such earlier date as determined by Purchaser in its
reasonable discretion as provided in written notice to Seller but in no event
earlier than March 31, 2006, or (iii) such other date as may be mutually agreed
to in writing by Seller and Purchaser. Unless otherwise mutually agreed by
Purchaser and Seller, the Closing Date shall occur effective as of the last day
of a month.

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

(f)         “Escrow Deposit” means the sum of one percent (1%) of the Purchase
Price in the form of cash which shall be delivered by Purchaser to the Title
Company within three (3) business days following the Effective Date of this
Agreement. The Escrow Deposit shall be invested in one or more federally insured
money market account(s) or similar interest-bearing account(s) as specified by
Purchaser. Interest on earnings on the Escrow Deposit shall accrue for the
benefit of Purchaser.

 

(g)        “Governmental Regulations” means any and all laws, ordinances, rules,
regulations, statutes, building codes and other matters of all governmental
authorities having jurisdiction over the Property.

 

(h)        “Improvements” means all improvements, buildings, structures and
fixtures placed, located, constructed or installed on the Land, including
without limitation, the 50-unit senior living facility, commonly known as
Covenant Place of Abilene, and any additional units being constructed on the
Land.

 

(i)         “Inspection Period” means the period commencing on the date provided
in Section 2.07 hereof, and expiring thirty (30) days thereafter or such later
date as may be mutually agreed to in writing by Seller and Purchaser.

 

(j)        “knowledge,” “know,” and analogues, with respect to a party, means
the actual knowledge, without investigation, of such party.

 

(k)        The “Land” means the tract(s) or parcel(s) of real property more
particularly described on Exhibit “A” attached hereto and made a part hereof for
all purposes, together with all and singular the rights, easements, rights of
way, privileges, and other appurtenances pertaining thereto, including any
right, title, and interest of Seller in and to any strips and gores, streets,
alleys, roads, or rights-of-way abutting or adjacent to or within the
specifically described real property, and all oil, gas, water and mineral
(including both hydrocarbons and other minerals) rights and shares of stock
pertaining to water or water rights, whether or not appurtenant thereto, owned
by Seller or any Affiliate of Seller’s, ownership of which affects the Land.

 

(l)         “Permitted Exceptions” means those (i) exceptions or conditions to
title to the Property set forth in the Survey or the Title Binder to which
Purchaser does not object, or to which Purchaser shall timely object in
accordance with the provisions hereof and which objections are waived by
Purchaser as specified in Section 2.06, or are cured at or prior to the Closing,
and (ii) liens, security interests, and other encumbrances on the Property
(other than the Real Property) of which Purchaser has knowledge to which
Purchaser does not object during the Inspection Period.

 

(m)

“Personal Property” means the personal property defined in Section 1.03 hereof.

 

(n)        “Plans” means all plans, drawings, and specifications, and any
amendments thereto, pertaining to the Land or the development thereof.

 

(o)

“Property” means the property defined in Section 1.03.

 

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

(p)        “Property Documents” means the documents and related items set forth
in Section 2.07 hereof.

 

(q)        “Purchase Price” means Two Million Eight Hundred Ten Thousand
Twenty-Three and No/100 Dollars ($2,810,023.00), payable by Purchaser at the
Closing (i) by Purchaser acquiring the Property subject to the then outstanding
first lien debt secured by the Property ("First Lien Debt") and the assumption
of the First Lien Debt by HCPI (as defined in Section 3.07(a) hereof) and (ii)
by Purchaser's delivery to Seller of an amount in cash equal to the Purchase
Price less the amount of the First Lien Debt.

 

(r)         “Title Binder” means the Commitment for Owner’s Title Insurance
Policy issued by the Title Company in accordance with the terms and provisions
of Section 2.01.

 

(s)         “Title Company” means Republic Title of Fort Worth, 420 Throckmorton
Street, Suite 640, Fort Worth TX 76102, Attention: Ms. Barbara Hutson.

 

(t)         “Title Policy” means the Owner’s Title Insurance Policy issued by
the Title Company in accordance with the terms and provisions of Section 2.02.

 

(u)        “Warranties” means all warranties and guaranties relating to the
Property, or the development thereof, or to the Personal Property.

 

Section 1.02     Purchase Price for the Property and Independent Contract
Consideration. The cash portion of the Purchase Price shall be payable through
the Title Company by wire transfer in accordance with wiring instructions
furnished by Seller. The Purchase Price shall be subject to the prorations and
adjustments provided for in this Agreement. Seller and Purchaser mutually agree
that the Purchase Price shall be allocated among the items constituting the
Property in accordance with Section 1060 of the Internal Revenue Code and the
regulations promulgated thereunder and all applicable provisions of state, local
and foreign law (such allocations, the “Section 1060 Allocations”) as follows:
Real Property ($2,388,520.00), Personal Property ($421,503.00). Each of the
parties hereto agrees to prepare and file reports, returns, declarations,
statements, forms, extensions or other documents filed or required to be filed
with any federal, state, local or other governmental department, court or other
authority in respect of any tax in a manner consistent with the Section 1060
Allocations, as finally determined pursuant to this Section 1.02.
Contemporaneously with the execution of this Agreement, Purchaser is delivering
to Seller a check in the amount of Fifty and No/100 Dollars ($50.00)
(“Independent Contract Consideration”), which amount the parties bargained for
and agreed to as consideration for Seller’s execution, delivery and performance
of this Agreement. This Independent Contract Consideration is in addition to and
independent of any other consideration or payment provided for in this
Agreement, is nonrefundable, and shall be retained by Seller notwithstanding any
other provision of this Agreement.

 

Section 1.03     Property. Upon and subject to the terms and conditions provided
herein, on the Closing Date, Seller will sell, transfer, assign and convey to
Purchaser, and Purchaser will purchase from Seller, all of Seller’s right, title
and interest in and to all tangible and intangible assets (other than the
Excluded Assets described below) used in the operation of the Improvements
(“Property”), including, without limitation, the following:

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

 

(a)

Real Property.

(i)         That certain real property consisting of the Land and the
Improvements located thereon (the “Real Property”). The Land and all related
real property shall be deemed to include all permits, easements, licenses,
rights-of-way, rights, and related appurtenances.

(ii)        Seller’s right, title and interest as landlord (whether named as
such therein, or by assignment or otherwise) in any leases and subleases, if
any, regarding the Real Property and all amendments, modifications, supplements,
renewals and extensions thereof, together with any security deposits made by the
lessees thereunder.

(b)

Personal Property.

(i)         Any and all furniture, fixtures, furnishings, motor vehicles,
machinery, computer hardware and software and any other equipment located on or
used in connection with the Improvements, and all other personal property used
in connection with the Real Property and now located upon the Real Property
(excluding any personal property owned by tenants). A list of such tangible
personal property is attached as Exhibit “B”.

(ii)        All existing warranties and guaranties (express or implied) issued
to the Seller, any of its Affiliates or any predecessor-in-interest to Seller in
connection with the Improvements or the Personal Property described in paragraph
(b)(i) above.

(iii)       The name “Covenant Place of Abilene” and all signs, marks, supplies,
trademarks and materials located on or used in the operation of the Improvements
bearing such name; provided, however, that Seller’s right to use the name
“Covenant” is qualified by the prior and superior rights of a third party to use
such name.

(iv)       All site plans, surveys, geological and environmental and soils
studies and reports, market studies and surveys and reports, architectural
renderings and models, plans and specifications, engineering plans and studies,
floor plans, landscaping plans and other similar plans and diagrams relating
thereto.

The tangible and intangible property described in paragraphs (b)(i), (b)(ii),
(b)(iii) and (b)(iv) shall be referred to herein as the “Personal Property”.

(c)        Agreements and Tenant Leases. All rights of Seller in, to and under
all contracts, leases, agreements, commitments and other arrangements, and any
amendments or modifications, existing as of the Effective Date and used in the
operation of the Real Property, and not designated by Purchaser in writing as a
contract, lease, agreement, commitment or arrangement which Purchaser will not
take subject to, and under all occupancy, residency, lease, tenancy and similar
written agreements existing as of the Effective Date with tenants of the Real
Property, and all amendments, modifications, supplements, renewals, and
extensions thereof, and all tenant deposits, but excluding any agreements or
tenant leases entered into by Seller or its property manager after the Effective
Date unless approved, in writing, by Purchaser as provided herein.

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

(d)        Records. True and complete copies of all of the books, records,
accounts, files, logs, ledgers and journals pertaining to or used in the
operation of the Property for the three calendar years preceding Closing and
year-to-date, including, but not limited to, any electronic data stored on
computer disks or tapes, and originals of any of the foregoing that relate to
residents of the Property.

(e)        Licenses. Any and all licenses now held in the name of Seller, its
property manager or any Affiliate of any of them and used or useful in the
operation of the Property, and any renewals, extensions, amendments or
modifications thereof, except to the extent not transferable or assignable under
applicable law.

(f)         Miscellaneous Assets. Except for the Excluded Assets, any other
tangible or intangible assets, properties or rights of any kind or nature not
otherwise described above in this Section 1.03 and now or hereafter owned by
Seller (or any Affiliate or predecessor-in-interest) and used in connection with
the operation of the Property.

Notwithstanding anything to the contrary set forth above, the following assets
(“Excluded Assets”), are not included in the Property, shall not be conveyed by
Seller to Purchaser at Closing and shall be retained by Seller: (i) Seller’s
corporate records, (ii) cash on hand (other than tenant deposits), (iii) cash
held by lender as capital reserves, and (iv) any and all assets located at the
home office of Seller.

 

ARTICLE 2.

 

Title and Survey; Approval of Documents;

Inspections; Conditions

 

Section 2.01     Title Binder. Within ten (10) days after the Effective Date,
Seller, at Seller’s sole cost and expense, shall cause to be furnished to
Purchaser a current Title Commitment, together with copies of all instruments
referred to as exceptions to title. The Title Commitment shall set forth the
state of title to the Land and Improvements, together with all exceptions or
conditions to such title, including, without limitation, all easements,
restrictions, rights-of-way, covenants, reservations, and all other liens or
encumbrances affecting the Land which would appear in an owner’s title policy,
if issued. The Title Commitment shall contain the express commitment of the
Title Company to issue the Title Policy to Purchaser in the amount of the
Purchase Price insuring such title to the Land and Improvements as is specified
in the Title Commitment, with the standard printed exceptions endorsed or
deleted in accordance with Section 2.02.

 

Section 2.02     Title Policy. At the Closing, and at Seller’s sole expense
(except to the extent otherwise specified below), Seller shall deliver to
Purchaser an Owner Policy of Title Insurance (“Owner Policy”) issued by Title
Company to Purchaser in the amount of the Purchase Price insuring that, after
the completion of the Closing, Purchaser is the owner of indefeasible fee simple
title to the Property, subject only to the Permitted Exceptions and to the
standard printed exceptions included in a Texas Standard Form Owner Policy of
Title Insurance; provided, however, that (I), at the election of Purchaser and
at Purchaser’s sole expense, the printed form survey exception shall be limited
to “shortages in area,” (II) the printed form exception for restrictive
covenants shall be deleted except for those restrictive covenants that are

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

Permitted Exceptions, (III) there shall be no exception for rights of parties in
possession other than the tenants of the Property as tenants, and (IV) the
standard exception for taxes shall read: “Standby Fees and Taxes for the year
2006 and subsequent years, and subsequent assessments for prior years due to
change in land usage or ownership.” The Owner Policy shall not contain any
general exceptions except to the extent that the Title Company will not agree to
remove them. Notwithstanding the foregoing, Purchaser may elect to receive a
credit against the Purchase Price at Closing in an amount equal to the premium
that otherwise would be payable by Seller hereunder, such credit being in lieu
of receiving the Title Policy from Seller.

 

Section 2.03     Survey. Within ten (10) days after the Effective Date, Seller,
at Seller’s sole cost and expense, shall cause to be furnished to Purchaser, a
current (or recertified) plat of survey (the “Survey”) of the Land, prepared by
the duly licensed land surveyor that provided the most recent previous survey of
the Land to Seller. The Survey shall at a minimum:

 

(i)

set forth an accurate metes and bounds description of the Land;

 

(ii)         locate all existing easements (setting forth recording information
with respect to recorded easements and locating recorded easements per the legal
description contained therein), alleys, streets, and roads which are within or
abut one or more of the exterior boundary lines of the Land;

 

(iii)        show any encroachments onto the Land from any adjacent property,
any encroachments from the Land onto adjacent property, and any encroachments
into any easement or restricted area within the Land;

 

(iv)        locate any improvements on the Land (such as the Improvements, power
lines, fences, and the like);

 

(v)        locate all dedicated public streets or other roadways providing
access to the Land; and

 

(vi)

locate all set-back lines and similar restrictions covering the Land.

 

The Survey shall contain the surveyor’ s certification to Purchaser and the
Title Company that the Survey was made on the ground and is correct, that there
are no visible discrepancies, conflicts, encroachments, or overlapping of
improvements except as shown on the Survey, that the Survey is a true, correct,
and accurate representation of the Land and the Improvements, and that no part
of the Land lies within a flood plain, flood prone, or flood risk area (whether
pursuant to the Flood Disaster Act of 1973, as amended, or otherwise), and such
other matters as may be reasonably required by the Title Company or Purchaser.

 

Section 2.04     Environmental Assessment. Purchaser, at Purchaser’s sole cost
and expense, and in its sole discretion, may obtain an Environmental Site
Assessment (the “ESA”) of the Property.

 

Section 2.05     Review of Survey and Title Binder by Purchaser. Purchaser shall
have a period until the expiration of ten (10) days following receipt of the
last to be delivered to Purchaser of the Title Binder, the title exception
documents and the Survey, to review the Title Binder, the copies of the
exception documents and the Survey, and, if Purchaser does not

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

terminate this Agreement in accordance with Section 2.09 hereof, deliver to
Seller such objections as Purchaser may have to anything contained or set forth
in the Title Binder, the copies of the exception documents, or the Survey. Any
objection made to Seller by Purchaser’s counsel within such time period shall be
deemed an objection by Purchaser. Any matters to which Purchaser does not so
object within such period shall be deemed to be Permitted Exceptions.

 

Section 2.06     Seller’s Right to Cure Purchaser’s Objections to Title. If
Purchaser delivers objections to Seller in accordance with Section 2.05, then
Seller shall have until the expiration of ten (10) days following delivery of
Purchaser’s objections to advise Purchaser in writing of its election to cure or
refuse to cure such objections (the “Election Notice”). In the event that Seller
shall fail to timely deliver the Election Notice, Seller shall be deemed to have
agreed to cure Purchaser’s objections on or before Closing. In the event Seller
timely delivers an Election Notice which indicates Seller’s refusal to cure
Purchaser’s objections, Purchaser may either waive such objections and close the
transaction contemplated hereby or terminate this Agreement by notice delivered
to Seller on or before the expiration of the later of fifteen (15) days
following receipt of Seller’s Election Notice or the end of the Inspection
Period.

 

Section 2.07     Additional Items Furnished to Purchaser. Within five (5) days
after the Effective Date, Seller shall furnish to Purchaser, true, correct,
complete, and legible copies of all of the items listed on Exhibit “C”
(collectively, the “Property Documents”).

 

Seller shall advise Purchaser in writing when it believes it has provided
Purchaser with all of the Property Documents (“Seller’s Delivery Notice”) and
Purchaser shall have until the expiration of three (3) days following receipt of
Seller’s Delivery Notice in which to advise Seller in writing of Property
Documents not yet delivered to Purchaser (“Purchaser’s Completeness Notice”). In
the event Purchaser fails to provide Seller with Purchaser’s Completeness Notice
within such three (3) day period, the last day of such period shall be deemed to
constitute the commencement of the Inspection Period. In the event Purchaser
does timely provide Seller with Purchaser’s Completeness Notice, Seller shall
have until the expiration of five (5) days following receipt of such notice to
either (i) provide Purchaser with the remaining Property Documents, or (ii)
advise Purchaser in writing that no further responsive Property Documents are
available (“Seller’s Response Notice”). Purchaser shall have until the
expiration of five (5) days following receipt of Seller’s Response Notice and
any and all Property Documents provided in conjunction therewith, in which to
advise Seller in writing that it is either (y) withdrawing its request for
further Property Documents (the “Delivery Completion Notice”), in which event
the Inspection Period shall commence on the date of Seller’s receipt of the
Delivery Completion Notice, or (z) terminating negotiations with respect to the
transaction (the “Termination Notice”), in which event Purchaser shall return to
Seller all of the Property Documents in its possession concurrently with
delivery of the Termination Notice. Seller will promptly advise Purchaser in
writing of any changes, additions, or deletions, or modifications in or to any
of the materials to be delivered to Purchaser pursuant to this Section 2.07, and
will provide Purchaser with true, correct and complete copies of such changes,
additions, deletions or modifications.

 

Section 2.08    Purchaser’s Right of Inspection. From the Effective Date through
the expiration of the Inspection Period (provided Purchaser does not terminate
negotiations pursuant to Section 2.07 hereof), Purchaser shall have reasonable
access to the Property, either personally or by authorized agent, to inspect the
Property, including, but not limited to, the physical

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

condition thereof, and to conduct environmental and other inspections and to
inspect the books, records and reports relating to the Property.

 

In the event Purchaser does not terminate negotiations pursuant to Section 2.07
hereof, Seller shall provide Purchaser, Purchaser’s agents and employees, upon
request during the Inspection Period, with access to the books and records of
Seller and the Property, provided that such access shall be coordinated solely
through Donny Edwards, in order to maintain the confidentiality of the
transaction, and provided further, that Purchaser shall indemnify Seller from
and against any damage suffered by Seller or the Property as a result of
Purchaser’s access, which indemnity shall specifically survive the termination
of this Agreement.

 

Section 2.09     Termination. If Purchaser determines, in Purchaser’s sole and
absolute discretion, that any of the Property Documents, the Title Binder, the
Survey or the results of any inspections or other investigations of the Property
made or caused to be made by Purchaser are unsatisfactory to Purchaser for any
reason, Purchaser shall be entitled to terminate this Agreement by written
notice to Seller of such election to terminate on or prior to the expiration of
the Inspection Period. If Purchaser terminates this Agreement in accordance with
this Article 2, Purchaser shall return to Seller any and all Property Documents
and any analysis thereof compiled by Purchaser. If Purchaser terminates this
Agreement in accordance with this Article 2, Purchaser shall receive a full
refund of the Escrow Deposit, together with all interest earned thereon, and
thereafter Seller and Purchaser shall have no further obligations or liabilities
hereunder, one to the other.

 

ARTICLE 3.

 

The Closing Date and the Closing; Obligations

of Purchaser and Seller with Respect Thereto

 

Section 3.01     The Closing and the Closing Date. The purchase of the Property
contemplated by the terms and conditions of this Agreement shall be consummated
at the Closing to be held in the offices of the Title Company on the Closing
Date. In the event the Closing Date specified is not a business day, the Closing
shall be held on the business day next following such date.

 

Section 3.02    Conditions Precedent. It shall be a condition precedent to
Purchaser’s obligations under this Agreement that on or before the Closing Date:

 

(a)        The zoning and land use for the Property shall permit the
development, operation and use of the Improvements as a senior living facility
and all necessary and appropriate licensure approvals for the Property and the
operator have been obtained in favor of Purchaser.

 

(b)

No material adverse change in the operation of the Property shall have occurred.

 

Purchaser shall use its reasonable best efforts to ensure that all conditions
described in subsection (a) above have been satisfied by the Closing Date. In
the event the matters described in subsections (a) and (b) above have not been
satisfied on or before the Closing Date, at Purchaser's option, the Closing may
be extended until such time as the above matters have been satisfied, provided
that in no event shall the Closing Date be extended for more than six (6)

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

months without the written consent of Seller; and provided further, that
Purchaser shall have used (and shall continue to use throughout such period) its
reasonable best efforts to cause all conditions described in subsection (a) to
be satisfied.

 

Section 3.03

Seller’s Obligations at the Closing.

 

(a)

At the Closing, Seller shall do the following:

 

(i)         Execute, acknowledge, and deliver to Purchaser a good and sufficient
General Warranty Deed (the “Deed”) in the form attached hereto as Exhibit “D”
and made a part hereof for all purposes conveying the fee simple title in the
Land and the Improvements (in accordance with the legal description shown on the
Survey) to Purchaser subject only to the Permitted Exceptions;

 

(ii)         Unless Purchaser elects to receive a credit in lieu of the Title
Policy as stated in Section 2.02, deliver the Title Policy to Purchaser or, if
the Title Policy is not delivered at Closing, Seller shall cause the Title
Company to unconditionally commit to deliver the Title Policy to Purchaser;

 

(iii)        Execute, and deliver to Purchaser a Bill of Sale and Assignment
(herein so called) in form reasonably satisfactory to Purchaser;

 

(iv)        Credit against the Purchase Price sums required to be so credited
pursuant to Section 2.02, if applicable, and Section 6.02 hereof;

 

(v)        Deliver to Purchaser and the Title Company satisfactory evidence that
all necessary corporate, partnership, or other action on the part of Seller, if
any, has been taken with respect to the consummation of the transaction
contemplated hereby;

 

(vi)

Deliver the affidavit required by Section 8.13 hereof;

 

(vii)       Deliver to Purchaser a gap affidavit in form reasonably acceptable
to the Title Company to permit the Title Company to insure against adverse
matters first appearing in the public records on a date subsequent to the
effective date of the Title Binder and prior to the recording of a general
warranty deed required by the terms of this Agreement;

 

(viii)      Deliver to Purchaser a certificate of an authorized person
certifying that all of the representations and warranties of Seller contained
herein are true and accurate as of the Closing Date;

 

(ix)        Deliver to Purchaser a certified rent roll updated within thirty
(30) days of Closing in the same form as provided in Section 2.07, duly
certified by Seller; and

 

(x)        Deliver to Purchaser the termite and pest inspection report updated
within thirty (30) days of Closing meeting the requirements of Section 2.07; and

 

(xi)

Deliver to Purchaser such other assignments and documents as

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

may be required pursuant to the provisions hereof or mutually agreed by counsel
for Seller and Purchaser to be necessary to fully consummate the transaction
contemplated hereby.

 

(b)        If Seller fails or is unable to deliver any of the items set forth in
this Section 3.03 at the Closing, Purchaser may (i) elect to waive such failure
and close the transaction, and/or (ii) exercise its rights under Section 5.01(b)
hereof.

 

Section 3.04

Purchaser’s Obligations at the Closing.

 

(a)        At the Closing, and upon receipt of all items to be delivered to
Purchaser under Section 3.03 above, Purchaser shall do the following:

 

(i)

Deliver the Purchase Price in accordance with Section 1.02 hereof;

 

(ii)         Deliver to Seller and the Title Company satisfactory evidence that
all necessary corporate, partnership, or other action on the part of Purchaser
has been taken with respect to the consummation of the transaction contemplated
hereby; and

 

(iii)        Deliver to Seller such other instruments or documents as may be
required pursuant to the terms hereof or mutually agreed by counsel for Seller
and Purchaser to be necessary to fully consummate the transaction contemplated
hereby.

 

(b)        If Purchaser fails or is unable to deliver any items set forth in
this Section 3.04 at the Closing, Seller may (i) elect to waive such failure and
close the transaction, or (ii) Seller may exercise its remedy under Section
5.02(b) hereof.

 

Section 3.05     Escrow Closing. Notwithstanding anything herein to the
contrary, Purchaser and Seller agree that the Closing shall be accomplished by
delivery into escrow with the Title Company of all documents and instruments
required to be delivered at Closing, together with the Purchase Price, whereupon
Title Company shall disburse such documents and the Purchase Price in accordance
with the terms hereof and such additional escrow instructions as Purchaser and
Seller may agree upon consistent with the terms hereof.

 

Section 3.06     Escrow Deposit. At Closing the Escrow Deposit, together with
interest thereon, shall, at Purchaser’s option, be returned to Purchaser or
applied to the Purchase Price.

 

Section 3.07    Obligations of Purchaser to Close. Notwithstanding anything
contained in this Agreement to the contrary, the obligation of Purchaser to
purchase the Property from Seller is subject to the satisfaction, as of the
Closing, of each of the conditions provided in Section 3.07 (a), (b), (c) and
(d) below (the conditions of Sections 3.07(b) and (c) (but not the conditions of
Section 3.07(a) and (d)) may be waived, in writing, in whole or in part by
Purchaser at or prior to the Closing, in which event this Agreement shall
continue in full force and effect and the obligations of Purchaser and Seller
hereunder shall be unaffected by such waiver) and in the event any such
condition is not satisfied or waived by the Closing Date, Purchaser shall be
entitled to terminate this Agreement by written notice to Seller of such
election to terminate on or prior to the Closing Date. If Purchaser terminates
this Agreement pursuant to this Section 3.07, Purchaser shall (i) receive a full
refund of the Escrow Deposit, together with all interest earned thereon, and
(ii) reimburse Seller for Seller's out of pocket expenses for attorneys' fees

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

and survey costs incurred in connection with this Agreement, thereafter Seller
and Purchaser shall have no further obligations or liabilities hereunder, one to
the other.

 

(a)        The holder of the first lien on the Property (and any other
applicable lender parties) have given their consent to (i) the sale of the
Property by Seller to Purchaser subject to the First Lien Debt, (ii) the sale
and leaseback of the Property by Purchaser to Health Care Property Investors,
Inc. (“HCPI”), and (iii) the assumption of the First Lien Debt by HCPI.

 

(b)        Purchaser and its Affiliates and HCPI and its Affiliates have
obtained any and all licenses, permits and approvals from any and all applicable
governmental agencies required for Purchaser and/or its Affiliates and HCPI
and/or its Affiliates to own, operate and/or manage the Property, as applicable.

 

(c)        Purchaser and HCPI have delivered into escrow all documents necessary
to close the sale and leaseback of the Property by Purchaser to HCPI immediately
following the Closing.

 

(d)

HCPI assumes the First Lien Debt.

 

Section 3.08     Extension of the Closing Date. Notwithstanding anything
contained in this Agreement to the contrary, if any of the conditions to
Purchaser’s obligation to close set forth in Section 3.07 hereof have not been
satisfied by the Closing Date, in addition to the right to terminate this
Agreement pursuant to Section 3.07, Purchaser, at its option, by written notice
to Seller, may extend the Closing Date until such conditions are satisfied or
waived by Purchaser, provided that in no event shall the Closing Date be
extended for more than six (6) months without the written consent of Seller;
provided further, that Purchaser shall have used (and shall continue to use
throughout such period) its best efforts to cause such conditions to be
satisfied.

 

Section 3.09     Option to Purchase. Notwithstanding anything contained in this
Agreement or the Option to Purchase (as hereinafter defined) or the Right of
First Refusal (as hereinafter defined) to the contrary, in the event of the
termination of this Agreement by Purchaser in accordance with the terms of this
Agreement, that certain Option to Purchase by and between Purchaser and Seller
dated August 18, 2004 with respect to the Property (the “Option to Purchase”),
and that certain Right of First Refusal Agreement by and between Purchaser and
Seller dated August 18, 2004 with respect to the Property (the "Right of First
Refusal") shall continue in full force and effect as written regarding Seller,
its successors and assigns, and Purchaser.

 

Section 3.10     Seller's Efforts. Seller shall use its reasonable best efforts
to ensure that the holder of the first lien on the Property (and any other
applicable lender parties) give their consent to the conditions in Section
3.07(a) above.

 

ARTICLE 4.

 

Representations, Warranties, and Covenants

 

Section 4.01     Representations and Warranties of Seller. Seller represents and
warrants to Purchaser, as of the Effective Date and as of the Closing Date, as
follows:

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

 

(a)        Seller has good and indefeasible fee simple title to the Real
Property and shall convey to Purchaser at Closing good and indefeasible fee
simple title to the Real Property free and clear of all encumbrances other than
the Permitted Exceptions;

 

(b)        There are no option agreements, rights of first refusal or similar
agreements or any other agreements pursuant to which any party other than
Purchaser has the right to purchase or otherwise acquire any portion of the
Property;

 

(c)        There are no adverse or other parties in possession of the Property,
or of any part thereof, except Seller and tenants under the written leases
delivered to Purchaser pursuant to Section 2.07 and leases executed after such
delivery that comply with the requirements of Section 4.04. No party has been
granted any license, lease or other right relating to the use or possession of
the Property, or any part thereof, except tenants under the written leases
referenced herein;

 

(d)        Except for the applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (“HSR Act”) and the rules and
regulations promulgated thereunder, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and the
compliance with the terms hereof will not (i) violate any Governmental
Regulations applicable to Seller, (ii) conflict with any contract or agreement
included as part of the Property, or (iii) require any approval, authorization,
consent, license, exemption, filing or registration with any court, arbitrator
or governmental entity, except for such approvals, authorizations, consents,
actions or filings which have been obtained or made. Prior to Closing, Seller
will take all action required of Seller under the HSR Act.

 

(e)        Seller has no knowledge of any pending or contemplated condemnation
action affecting any part of the Property. Seller has no notice of and has no
reason to believe that any changes are contemplated with respect to the present
zoning of the Property;

 

(f)         Seller has no knowledge of any pending or threatened litigation or
administrative proceeding affecting the Property or Seller, other than those
matters described on Exhibit “E” attached hereto. Seller knows of no condition
related to any part of the Property that fails to comply in all material
respects with any law, ordinance, or other governmental regulation;

 

(g)        The Property is contiguous to one or more streets that have been
physically completed and accepted for maintenance and other applicable purposes
by the city in which the Property is situated. All assessments or other charges
related to construction of those streets have been paid, and Seller has no
knowledge of any existing or contemplated special assessments;

 

(h)        All debts, liabilities and obligations of Seller arising from the
construction, ownership and operation of the Property and the business operated
thereon, including, but not limited to construction costs, salaries, taxes,
accounts payable, leasing commissions and the like, have been paid as they
became due. Except for debts, liabilities and obligations for which provision is
herein made for proration or other adjustment at Closing, there will be no
debts, liabilities or obligations of Seller with respect to the Property
(whether known, unknown, secured, unsecured, accrued, unaccrued, absolute,
contingent, or of any other character) outstanding as of the Closing Date except
those matters listed on Exhibit “F” attached hereto.

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

There will be no mechanic’s or materialmen’s liens affecting the Property and
relating to any work performed or materials furnished prior to the Closing Date;

 

(i)         To Seller’s knowledge, the Property as it presently exists is zoned
for use and operation as a senior living facility without relying for compliance
upon a variance or a preexisting, nonconforming use. No application for variance
or change in zoning is pending. No application for change in use or occupancy is
pending;

 

(j)         Seller (i) has obtained all certificates of occupancy, licenses and
permits which, to Seller’s knowledge, are required for operating the senior
living facility on the Property and all of such certificates of occupancy,
licenses and permits are in full force and effect, (ii) has not taken (or failed
to take) any action that would result in the revocation of such certificates of
occupancy, licenses or permits, and (iii) has not received any written notice of
violation from any federal, state, municipal, or other governmental
instrumentality, or written notice of an intention by any of the foregoing to
revoke any certificate of occupancy, license or permit issued by it in
connection with the use of the Property;

 

(k)        To Seller’s knowledge, the Property and the operation thereof conform
in all material respects to all Governmental Regulations (including, without
limitation, the Americans with Disabilities Act). Seller has not received
notice, written or otherwise, from any federal, state, municipal or other
governmental instrumentality requiring the correction of any condition with
respect to the Property, or any part thereof, by reason of a violation of any
Governmental Regulation or otherwise;

 

(l)         To Seller’s knowledge, the Property is, and as of the Closing will
be, in good repair, condition and working order, free from latent and apparent
defects, normal wear and tear excepted. Seller has disclosed to Purchaser in
writing any and all facts and circumstances that materially and adversely affect
the Property and its operation, or any portion thereof. Without limiting the
generality of the foregoing, the roofs, walls and foundations of the buildings
on the Property are free from leaks and seepage of moisture, and are in sound
structural condition;

 

(m)       The Property is fully equipped for operation as a senior living
facility, and contains the number of units, number of square feet and number of
parking spaces specified in documents provided to Purchaser. All appliances and
the water, sewer, heating, electrical, plumbing, air conditioning and other
mechanical and electrical systems in or on the Property are, and as of the
Closing will be, in good repair, condition and working order;

 

(n)        All water, sewer, gas (if any), electric, telephone and drainage
facilities, and other utilities required by law for the normal and proper
operation of the Property are installed to the property line and are connected
with valid permits, are in good repair, condition and working order, and are
adequate to serve the Property and, to Seller’s knowledge, to permit full
compliance with all requirements of law and the leases. All permits and
connection fees are fully paid and no action is necessary on the part of
Purchaser to transfer such permits to it. All utilities serving the Property
enter it through currently effective public or private easements. To Seller’s
knowledge, no fact or condition exists which would result in the termination of
such utilities services to the Property;

 

(o)        The financial statements relating to the Property for each of the
periods preceding the date of the Agreement heretofore or hereafter delivered by
Seller to Purchaser have, or at the

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

time of their delivery will have, been prepared on a consistent basis; and are,
or at the time of their delivery will be, true, correct and complete. At the
Closing, there will have been no material adverse change in the financial
condition of the Property since the date of the latest such financial statement;

 

(p)        The rent roll attached provided under Section 2.07 and each other
rent roll furnished by Seller to Purchaser pursuant to this Agreement is, or at
the time of its delivery will be, true, correct and complete;

 

(q)        Each lease furnished to Purchaser pursuant to this Agreement is in
full force and effect, and has not been amended, modified or supplemented in any
way that has not been disclosed to Purchaser in writing. The leases furnished to
Purchaser pursuant to this Agreement constitute all written and oral agreements
of any kind for the leasing, rental or occupancy of any portion of the Property.
Seller has performed and complied with all its obligations under the leases as
and when thereby required, and there exists no fact or circumstance that with or
without notice or the passage of time, or both, could constitute a default of
the landlord or lessor under any of the leases, or entitle any tenant thereunder
to offsets or defenses against the prompt, current payment of rent thereunder;

 

(r)         Seller will not object if Purchaser shall choose to hire any of its
employees at the Property. By any such hiring, Purchaser shall not be deemed to
assume any liability under any pre-existing pension, profit sharing or similar
plan of Seller;

 

(s)         Seller has not failed to disclose to Purchaser in writing prior to
the expiration of the Inspection Period any adverse conditions of which Seller
has knowledge with respect to the Property;

 

(t)         To Seller’s knowledge, the Property is not in violation of any
federal, state or local law, ordinance or regulation relating to industrial
hygiene or to the environmental conditions on, under or about the Property,
including, but not limited to, soil and groundwater condition. Neither Seller
nor, to Seller’s knowledge, any third party has used, generated, manufactured,
stored or disposed of on, under or about the Property or transported to or from
the Property, or incorporated into any improvements now or at any time thereon,
any explosives, radioactive material, hazardous waste, toxic substances or
related material (“Hazardous Materials”). For the purpose of this Agreement,
“Hazardous Materials” shall include but not be limited to substances defined as
“hazardous substances,” “hazardous materials,” or “toxic substances” in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq.; or the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., or in the regulations adopted and
publications promulgated pursuant to said laws. Additionally, Seller has not
released or agreed to any limitation of liability of any person, firm or entity
with respect to its or their obligations arising with respect to the Property
pursuant to any of the foregoing laws or regulations or any state law or
regulation regarding Hazardous Materials;

 

(u)        Seller has all requisite corporate power and authority to enter into
and perform its obligations under this Agreement, and this Agreement is the
legal and binding agreement of Seller enforceable in accordance with its terms;

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

(v)        Seller is not a foreign person or a foreign corporation for purposes
of the withholding rules of the Internal Revenue Code;

 

(w)       To Seller’s knowledge, there has been no material adverse change in
the condition of the Property or in any of the information furnished to, or
reviewed by, Purchaser hereunder;

 

(x)        No part of the Property has been assessed for real estate taxes based
upon agricultural or open space use or any other similar use for which the
Property may be subject to rollback taxes;

 

(y)        As of the Closing Date, there will be no management, service, supply,
or other contracts with respect to the Property except as may be disclosed to
Purchaser in writing prior to the expiration of the Inspection Period;

 

(z)         There are no attachments, executions, or assignments for the benefit
of creditors, or voluntary proceedings in bankruptcy or under any other debtor
relief law contemplated by or pending or threatened by, or, to Seller’s
knowledge, against Seller or otherwise affecting the Property;

 

(aa)       Seller does not receive with respect to the Property any Medicare or
Medicaid reimbursement except as may be disclosed to Purchaser in writing prior
to the expiration of the Inspection Period;

 

(bb)      To Seller’s knowledge, no action, proceeding or investigation in
connection with Medicare, Medicaid or other public or private third-party payor
or other program is pending or threatened against Seller or any of Seller’s
Affiliates in connection with the Property;

 

(cc)       There are no tax liens upon the Property except liens for current
taxes not yet due. The Real Property is a separate, independent tax parcel.
There are no tax contests or assessment disputes pending before any applicable
governmental authorities with respect to the Property; and

 

(dd)      There are no collective bargaining or similar agreements with any
labor unions or associations representing employees of the Property. Seller is
in compliance in connection with the Property with all applicable laws,
regulations and orders relating to the employment of labor, including all such
laws, regulations and orders relating to wages and hours, labor relations, civil
rights, safety and health and workers’ compensation.

 

Section 4.02     Disclaimer of Warranties. Except for Seller’s general warranty
of title to be contained in the Deed to Purchaser and except for the
representations and warranties of Seller expressly set for in Section 4.01
hereof, no representations or warranties, express or implied, shall exist with
respect to the Property or the sale of the Property.

 

Section 4.03     Seller’s Obligation to Notify Purchaser of Change. If, prior to
the Closing Date, Seller has knowledge that any representation or warranty set
forth in Section 4.01 hereof which was true and correct on the date hereof has
become incorrect, either prior to or at Closing, due to changes in conditions
beyond Seller’s control or the discovery of information by Seller of which
Seller was unaware on the date hereof, Seller shall immediately notify Purchaser
thereof. If Seller so notifies Purchaser of such change in conditions or receipt
by Seller of such new

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

information prior to Closing, Seller shall not be liable to Purchaser for breach
of warranty or representation by reason of such change in conditions or new
information nor shall Seller be in default hereunder; provided, however, if a
modification to this Agreement shall not be executed by Seller and Purchaser
within ten (10) days after such notification (or prior to the Closing Date, if
earlier), then Purchaser may, at Purchaser’s sole option, either (i) terminate
this Agreement by so notifying Seller on or prior to Closing, (whereupon the
Escrow Deposit, together with all accrued interest thereon, shall be returned to
Purchaser, and neither party shall have any liability to the other hereunder),
or (ii) waive such right, whereupon this Agreement shall remain in full force
and effect and the applicable representation and warranty shall be deemed
irrevocably amended to reflect such change of conditions or new information. The
provisions of this Section 4.03 shall not apply to any representation or
warranty given by Seller under Section 4.01 hereof which was incorrect or untrue
as of the date given and this Section shall be strictly limited so as to be
applicable solely to changes in conditions or, with respect to any
representation or warranty made to Seller’s knowledge, the receipt or discovery
by Seller of information of which it was previously unaware.

 

Section 4.04     Operation of Property Prior to Closing. From the Effective Date
through the Closing Date, Seller shall, at Seller’s sole cost and expense:

 

(a)

Operate the Property diligently and in the ordinary course of its business;

 

(b)        Promptly (and in any event, prior to the Closing) correct or repair
any condition on or about the Property revealed by any third party assessment of
the Property to be inconsistent with Seller’s warranties and representations;
provided, however, that (i) Purchaser and Seller shall agree on the third party
that will conduct the assessment, (ii) Purchaser and Seller each shall bear
one-half of the cost of such third party assessment, and (iii) in no event shall
Seller be liable to expend more than Twenty-Five Thousand Dollars ($25,000.00)
in the aggregate on corrections and repairs under this subsection (b);

 

(c)        Keep, maintain and repair the Property in a good and presentable
condition and comply with all Governmental Regulations affecting the Property;

 

(d)        Keep, observe and perform its obligations as landlord under the
tenant leases, and not terminate or cause the termination of any such lease
except as the result of the default of the tenant thereunder;

 

(e)        Not enter into any written or oral contract or other agreement, other
than a tenant lease, that will not be fully performed by Seller on or before the
Closing Date or that will not be cancelable by Purchaser without liability on or
after the Closing Date without the prior written consent of Purchaser;

 

(f)         Not enter into any lease for less rent or with a smaller deposit
than that currently being charged for similar units on the Property, that
permits pets, or that has a term of longer than twelve (12) months or shorter
than six (6) months without the prior written consent of Purchaser;

 

(g)        Not grant any bonus, free months’ rental, or other concession to any
present or future tenant of the Property without the prior written consent of
Purchaser;

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

(h)        Advise Purchaser promptly of any litigation, arbitration or
administrative hearing before any governmental instrumentality concerning or
affecting the Property which, to Seller’s knowledge, is instituted or threatened
after the Effective Date; and

 

(i)         Not sell, assign or convey any right, title or interest whatsoever
in or to the Property, or create any lien, encumbrance or charge thereon without
promptly discharging the same.

 

ARTICLE 5.

 

Defaults and Remedies

 

Section 5.01

Seller’s Defaults; Purchaser’s Remedies.

 

(a)        Seller’s Defaults. Seller shall be deemed to be in default hereunder
in the event that any of Seller’ s representations hereunder are determined to
be false or misleading in any material respect (other than due to circumstances
as to which Section 4.03 would be applicable) or in the event Seller shall fail
in any material respect to meet, comply with, or perform any covenant,
agreement, or obligation on its part required within the time limits and in the
manner required in this Agreement.

 

(b)        Purchaser’s Remedies. In the event Seller fails or refuses to
consummate the sale of the Property pursuant to this Agreement at the Closing or
fails to perform any of Seller’s other material obligations hereunder either
prior to or at the Closing for any reason other than Seller’s termination of
this Agreement pursuant to a right so to terminate expressly set forth in this
Agreement or Purchaser’s failure to perform Purchaser’s material obligations
under this Agreement, then Purchaser, as its sole and exclusive remedy, may take
any one of the following actions: (i) enforce specific performance of this
Agreement against Seller, whereupon such default shall be deemed irrevocably
waived; or (ii) terminate this Agreement; or (iii) in the event that such
failure is wrongful and intentional, seek damages pursuant to Section 8.20
below. In the event Seller shall be deemed to be in default hereunder by virtue
of the occurrence of any one or more of the events specified in Section 5.01(a)
above at a time after the Closing, Purchaser may (consistent with Section 8.20
regarding alternative dispute resolution) enforce any and all remedies which are
available at law or equity or otherwise.

 

(c)       Return of Escrow Deposit. Upon the termination of this Agreement prior
to the Closing in accordance with Section 5.01 (b) (ii) or other Sections hereof
providing for such termination by Purchaser, the Escrow Deposit, together with
all accrued interest thereon, if any, shall be returned to Purchaser by the
Title Company within five (5) business days of receipt of written notice from
Purchaser that Purchaser has rightfully terminated this Agreement, which written
notice need not be accompanied by any other document or consent of any other
party hereto. If the Escrow Deposit is to be returned to Purchaser in accordance
with this Section 5.01(c), Seller shall promptly execute and deliver such
documents as may be reasonably required to cause the Title Company to return the
Escrow Deposit to Purchaser.

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

 

Section 5.02

Purchaser’s Default; Seller’s Remedies.

 

(a)        Purchaser’s Defaults. Purchaser shall be deemed to be in default
hereunder in the event Purchaser shall fail in any material respect to meet,
comply with, or perform any covenant, agreement, or obligation on its part
required within the time limits and in the manner required in this Agreement.
Notwithstanding the foregoing, Seller’s remedy for Purchaser’s failure to timely
deposit the Escrow Deposit shall be governed by Section 8.11.

 

(b)       Seller’s Remedy. In the event Purchaser fails or refuses to consummate
the purchase of the Property pursuant to this Agreement at the Closing or fails
to perform any of Purchaser’s other material obligations hereunder either prior
to or at the Closing for any reason other than Purchaser’s termination of this
Agreement pursuant to a right so to terminate expressly set forth in this
Agreement or Seller’s failure to perform Seller’s material obligations under
this Agreement, then Seller, as its sole and exclusive remedy, may terminate
this Agreement, in which event Seller shall be entitled to the Escrow Deposit,
it being agreed between Purchaser and Seller that such sum shall be liquidated
damages for such default of Purchaser because of the difficulty, inconvenience
and uncertainty of ascertaining actual damages for such default. By signing this
Agreement, each party specifically confirms the accuracy of the statements made
above and the fact that each party was represented by counsel who explained the
consequences of this liquidated damages provision at the time this agreement was
made. If the escrow deposit is to be delivered to Seller in accordance with this
Section 5.02(b), Purchaser shall promptly execute and deliver such documents as
may be reasonably required to cause the Title Company to deliver the Escrow
Deposit to Seller. In the event Purchaser shall be deemed to be in default
hereunder by virtue of the occurrence of any one or more of the events specified
in Section 5.02(a) above at a time after the Closing, Seller may (consistent
with Section 8.20 regarding alternative dispute resolution) enforce any and all
remedies which are available at law or equity or otherwise.

 

ARTICLE 6.

 

Closing Costs; Prorations

 

Section 6.01     Costs. Costs of closing the transaction contemplated hereby
shall be allocated between Seller and Purchaser as follows:

 

(a)        Seller shall pay (i) the premium for the Title Policy (including all
charges for the coverages and/or deletions set forth in Section 2.02 hereof)
except to the extent specifically provided otherwise in this Agreement, (ii)
except to the extent specifically provided otherwise in this Agreement, the
costs of providing to Purchaser all information reviewed and approved by
Purchaser in accordance with Article 2 hereof, including, but not limited to,
copies of exceptions to title to the Property, (iii) one-half of any escrow fees
or similar charges of the Title Company, (iv) any transfer taxes, deed stamps,
excise taxes, document taxes, mortgage taxes, intangible taxes, and similar
taxes or charges with respect to the transfer of the Property from Seller to
Purchaser, and (v) the costs of obtaining any other items to be delivered by
Seller to Purchaser at Closing.

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

(b)        Purchaser shall pay (i) the cost (exclusive of any transfer or
similar taxes) of recording the Deed and any other conveyance documents that
Purchaser may choose to record, and (ii) one-half of any escrow fee or similar
charges of the Title Company.

 

(c)        All other expenses incurred by Seller or Purchaser with respect to
the Closing, including, but not limited to, attorneys’ fees of Purchaser and
Seller, shall be borne and paid exclusively by the party incurring same, without
reimbursement, except to the extent otherwise specifically provided herein.

 

Section 6.02

Prorations.

 

(a)        Taxes. Ad valorem and similar taxes (excluding assessments) for the
then current tax period relating to the Property shall be prorated as of the
Closing Date. If the Closing occurs before the tax rate is fixed for the then
current tax year, the apportionment of taxes shall be made on the basis of the
tax rate for the preceding tax year applied to the latest assessed valuation of
the Property, and when the tax rate is fixed for the tax year in which the
Closing occurs, Seller and Purchaser hereby agree, one to the other, to adjust
the proration of taxes and, if necessary, to refund or pay such sums to the
other party as shall be necessary to effect such adjustment. Seller shall
promptly reimburse Purchaser for the portion of any and all supplemental taxes
hereafter assessed against the Property which are attributable to the period
prior to the Closing Date. The installments payable for the period ending on the
Closing Date of all unpaid assessments, if any, existing as of the Closing Date,
whether due and payable before or after the Closing Date, shall be paid by
Seller in cash at the Closing to the assessing entity. Any income or other
expenses of the Property shall be prorated as of the Closing Date.

 

(b)        General. Any other items which may be prorated, such as governmental
inspection and license fees, rents and other revenues, utility and sewer charges
and other similar items, but not insurance, shall be prorated between Seller and
Purchaser as of the Closing Date.

 

(c)        Post-Closing Adjustments. Seller and Purchaser agree that, to the
extent items are prorated or adjusted at Closing on the basis of estimates, or
are not prorated or adjusted at Closing pending actual receipt of funds or
compilation of information upon which such prorations or adjustments are to be
based, each of them will, upon a proper accounting, pay to the other such
amounts as may be necessary such that Seller will receive the benefit of all
income and will pay all expenses of the Property prior to the Closing Date and
Purchaser will receive all income and will pay all expenses of the Property
after the Closing Date.

 

ARTICLE 7.

 

Indemnification

 

Section 7.01     Brokerage Commissions. Each party hereto represents and
warrants to the other that such party has incurred no liability to any real
estate broker or agent with respect to the payment of any commission regarding
the consummation of the transaction contemplated hereby. It is agreed that if
any claims for commissions or fees, including, without limitation, brokerage
fees, finder’s fees, or commissions, are ever made against Seller or Purchaser
in connection with this transaction, all such claims shall be handled and paid
by the party whose actions or alleged commitments form the basis of such claim
and such party shall indemnify and

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

hold harmless the other from and against any and all such claims or demands with
respect to any brokerage fees, finder’s fees, or agents’ commissions or other
compensation asserted by any person, firm, or corporation in connection with
this Agreement or the transactions contemplated hereby. Purchaser shall
indemnify and hold Seller and Seller's affiliates harmless in full from and
against any and all claims, demands, suits, actions and causes of action (in
each case whether sounding in contract, tort, strict liability or otherwise, and
whether at law or in equity), liabilities, obligations, damages, costs and
expenses (including, without limitation, attorneys' fees, court costs and costs
of investigation) that Seller or any of Seller's affiliates incurs with respect
to or in connection with any brokerage fees or other compensation payable or
allegedly payable to SSM, Inc. and/or its affiliates in connection with this
Agreement and/or the transactions contemplated hereby.

 

Section 7.02

Operation of Property.

 

(a)        Seller agrees to indemnify and hold the Purchaser harmless of and
from any and all liabilities, claims, demands, and expenses of any kind or
nature arising or accruing prior or subsequent to the Closing Date to the extent
resulting from or relating to the ownership or operation of the Property prior
to the Closing, and all expenses related thereto, including, without limitation,
court costs and reasonable attorney’s fees.

 

(b)        Purchaser agrees to indemnify and hold Seller harmless of and from
any and all liabilities, claims, demands, and expenses of any kind or nature
arising or accruing subsequent to the Closing Date to the extent resulting from
or relating to the ownership or operation of the Property after the Closing, and
all expenses related thereto, including, without limitation, court costs and
reasonable attorney’s fees.

 

Section 7.03     Procedure. In the event either party hereto receives notice of
a claim or demand against which it is entitled to indemnification pursuant to
this Article 7, such party shall immediately give notice thereof to the other
party. The party obligated to indemnify shall immediately take such measures as
may be reasonably required to properly and effectively defend such claim, and
may defend same with counsel of its own choosing. In the event the party
obligated to indemnify fails to properly and effectively defend such claim, then
the party entitled to indemnification may defend such claim with counsel of its
own choosing at the expense of the party obligated to indemnify upon at least
ten (10) days’ prior written notice. The parties hereto agree to cooperate in
the defense of any such claims.

 

ARTICLE 8.

 

Miscellaneous

 

Section 8.01     Survival of Representations and Warranties. All of the
representations and warranties shall survive the Closing and shall remain in
full force and effect thereafter for a period of three (3) years, after which
time all such representations and warranties shall terminate and be of no
further force or effect.

 

Section 8.02     Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors, and assigns.

 

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

 

Section 8.03     Entire Agreement; Modifications. This Agreement embodies and
constitutes the entire understanding between the parties with respect to the
transactions contemplated herein, and all prior or contemporaneous agreements,
including without limitation, the letter of intent between the parties dated
July 1, 2004, and all understandings, representations, and statements, oral or
written, are merged into this Agreement. Neither this Agreement nor any
provision hereof may be waived, modified, amended, discharged, or terminated
except by an instrument in writing signed by the party against which the
enforcement of such waiver, modification, amendment, discharge, or termination
is sought, and then only to the extent set forth in such instrument.

 

Section 8.04     Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation hereof.

 

Section 8.05    Interpretation and Construction. Whenever the context hereof
shall so require, the singular shall include the plural, the male gender shall
include the female gender and the neuter, and vice versa.

 

Section 8.06     Notice. Any notice required or permitted to be delivered
hereunder must be in writing and deposited in the United States mail, postage
prepaid, certified mail, return receipt requested, addressed to Seller or
Purchaser, as the case may be, at the address set forth opposite the signature
of such party hereto, or if sent by overnight courier or by telecopy or other
facsimile transmission or by any other reasonable means. All such notices shall
be deemed received when actually delivered to and received or refused by the
party to whom such notice is directed.

 

Section 8.07    Right to Possession. At the Closing and as a condition thereto,
Purchaser shall have full and unrestricted right to possession of the Property,
subject to the rights of tenants thereof in such capacity; and Seller will do
such acts, execute such instruments, and take such action as may be appropriate
or required to assure to Purchaser possession of the same.

 

Section 8.08     Further Actions. In addition to the acts and deeds recited
herein and contemplated to be performed, executed, and/or delivered by Seller or
Purchaser, Seller and Purchaser hereby agree to perform, execute, and/or deliver
or cause to be performed, executed, and/or delivered at the Closing or
thereafter, any and all such further acts, deeds, and assurances as Purchaser or
Seller, as the case may be, may reasonably require at the Closing or thereafter
to (i) evidence and vest in the Purchaser the ownership of, and title to, the
Property, and (ii) consummate the transactions contemplated hereunder.

 

Section 8.09     Governing Law; Construction. This Agreement shall be construed
and governed in accordance with laws of the State of Texas. All of the parties
to this Agreement have participated fully in the negotiation and preparation
hereof and, accordingly, this Agreement shall not be more strictly construed
against any one of the parties hereto.

 

Section 8.10     Attorneys’ Fees. Should either party employ an attorney or
attorneys to enforce any of the provisions hereof or to protect its interest in
any manner arising under this Agreement, the non-prevailing party in any action
pursued in courts of competent jurisdiction (the finality of which is not
legally contested) agrees to pay to the prevailing party all reasonable costs,
damages, and expenses, including attorneys’ fees, expended or incurred in
connection

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

therewith.

 

Section 8.11     Escrow Deposit. Within three (3) business days after the
Effective Date, the Escrow Deposit shall be deposited with the Title Company by
Purchaser, which Escrow Deposit shall be held and disbursed by the Title Company
in accordance with the terms, conditions, and provisions of this Agreement. In
the event Purchaser shall fail to timely deposit the Escrow Deposit, Seller may,
as Seller’s sole remedy, terminate this Agreement at any time prior to
Purchaser’s deposit of the Escrow Deposit.

 

Section 8.12     Assignment. Purchaser shall have the right without the consent
of Seller to assign its rights under this Agreement and all duties hereunder to
any Affiliate of Purchaser or to any entity in which Purchaser owns ten percent
(10%) or more of the equity interest. Seller's conversion of its entity status
to a limited partnership or to another non-corporate form of entity shall not
constitute an assignment for purposes of this Agreement, and this Agreement and
the respective rights and obligations of the parties under this Agreement shall
continue in full force and effect in the event that Seller effects such
conversion.

 

Section 8.13     Foreign Person Affidavit. At Closing, Seller shall deliver to
Purchaser its affidavit in form acceptable to Purchaser, stating, under penalty
of perjury, Seller’s U.S. taxpayer identification number and that Seller is not
a foreign person and not a disregarded entity within the meaning of Section 1445
of the Internal Revenue Code.

 

Section 8.14     Time of the Essence. Time is of the essence of this Agreement.
In the event that the date for performance of any obligation hereunder, or the
giving of any notice hereunder, falls on a day other than a business day, the
period for such performance, or the giving of any notice hereunder, shall be
extended to the end of the next business day.

 

Section 8.15     Severability. Whenever possible, each provision of this
Agreement and every related document shall be interpreted in such manner as to
be valid under applicable law; but, if any provision of any of the foregoing
shall be invalid or prohibited under said applicable law, such provision shall
be ineffective to the extent of such invalidity or prohibition without
invalidating the remainder of such provision, or the remaining provisions of
such document.

 

Section 8.16     Counterparts. This Agreement may be signed in counterparts, not
all of which are signed by all parties hereto but each party hereto having
signed and delivered to the other at least one of them, which delivery may be by
facsimile. Any one of such counterparts, signed by the party to be charged,
shall be sufficient to prove this Agreement.

 

Section 8.17    Confidentiality. Seller agrees that the terms set forth in this
Agreement shall remain totally and completely confidential and shall not be
revealed or disclosed to any person or party whatsoever, including without
limitation the State of Texas, in connection with the filing of licensure
application by Purchaser or the public through the issuance of a press release,
except: (i) with the prior written consent of the other party; (ii) as may be
disclosed to each party’s attorneys, accountants and other representatives that
are involved in connection with the consummation of this transaction; (iii) as
may be required by applicable law, including applicable securities law; and (iv)
in connection with any litigation between the parties.

 

Section 8.18     Casualty or Condemnation. The risk of loss or damage to the
Property by fire or other casualty or by condemnation shall continue to be borne
by Seller until Closing. If a

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

material portion of the Property is damaged by casualty and such damage has not
been fully repaired prior to the Closing Date, or if a material portion of the
Property has been condemned, Purchaser shall have the option to terminate this
Agreement and receive back the Escrow Deposit or to purchase the Property with
an appropriate adjustment in the Purchase Price as mutually agreed to by Seller
and Purchaser.

 

Section 8.19     Stock Purchase. Notwithstanding anything else to the contrary
stated herein, Purchaser may elect, at its sole discretion, to structure the
transactions contemplated by this Agreement as a purchase and sale of the
capital stock of Seller instead of the Property provided that doing so does not
result in any adverse tax effect to Seller or to any of Seller’s direct or
indirect equity owners. The stock purchase shall be on the same terms and
conditions as a Property purchase with reasonable modifications to the legal
documents to achieve the same intent and purposes of the parties.

 

Section 8.20

Alternative Dispute Resolution.

 

(i)         In the event of any dispute, controversy, or claim arising out of or
in connection with this Agreement or with the transactions contemplated hereby,
or with the breach or alleged breach hereof, in each case whether sounding in
contract, tort, or otherwise (each a “Dispute”), the parties shall settle such
Dispute in accordance with the provisions of this Section 8.20.

 

(ii)         Upon the occurrence and during the continuation of a Dispute, the
parties agree first to attempt to settle such Dispute amicably through
consultation and negotiation between their respective executive officers.

 

(iii)        Upon the occurrence and during the continuation of any Dispute that
remains unresolved notwithstanding compliance with Section 8.20(ii) above, the
parties agree to attempt to settle such Dispute through non-binding mediation
conducted by a mediator with at least five (5) years of mediation experience who
has been qualified under the Texas Alternative Dispute Resolution Act and who
has knowledge regarding real estate operations (a “Mediator”). In the event that
the parties cannot agree on a single Mediator, then each of the parties shall
select a Mediator, and the two (2) Mediators thus selected shall select a single
Mediator to hear the Dispute. Each of the parties shall pay one-half (1/2) of
the aggregate fees and expenses of the mediation.

 

(iv)        Any Dispute that remains unresolved notwithstanding compliance with
Sections 8.20(ii) and (iii) above, or any Dispute with respect to which one or
more parties shall fail to comply in all material respects with the requirements
of such Section 8.20(ii) and/or (iii) promptly following the written request of
the other party, shall be settled by arbitration administered by the American
Arbitration Association (“AAA”) under its “R-Series” Commercial Arbitration
Rules, as supplemented and modified by its “E-Series” Commercial Arbitration
Rules (or under such other AAA rules as may then apply with respect to expedited
arbitration), and judgment on the award (the “Award”) rendered by the
arbitrator(s) (the “Arbitrator”) may be entered in any court having jurisdiction
thereof. The parties agree to and mutually request an oral hearing of the
Dispute. The Arbitrator must have at least five (5) years of arbitration
experience and have knowledge regarding real estate operations.

 

(v)        The parties expressly agree that, prior to the appointment of the
Arbitrator, nothing in this Agreement shall prevent a party from applying to a
court that otherwise would be

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

of competent jurisdiction solely to obtain a preliminary injunction or other
similar provisional or interim relief to maintain the status quo. Upon
appointment of the Arbitrator, the Arbitrator shall have sole jurisdiction to
hear any such applications, except that any such provisional or interim measures
that the Arbitrator may order may be immediately and specifically enforced by a
court that otherwise would be of competent jurisdiction.

 

(vi)        Each of the parties shall pay one-half (1/2) of the aggregate fees
and expenses of the arbitration, and all other fees and expenses (such as, for
example, attorney and accounting fees, actuarial and other experts) shall be
paid by the party incurring them; provided, however, that a party prevailing on
substantially all of its claims shall be entitled to reasonable attorneys’ fees,
costs, and other disbursements in addition to any other relief to which such
party may be entitled.

 

(vii)      The place of any arbitration instituted under this Section 8.20 shall
be Dallas, Texas. Each party consents to jurisdiction in such forum.

 

[Signature pages follow]

 

Agreement of Purchase and Sale of Real Property – Abilene

 

 

 

 

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

 

 

Address for Notice:

SELLER:

 

Covenant Place of Abilene, Inc.

COVENANT PLACE OF ABILENE,

c/o Mr. Robert Bullock, EVP

INC., a Delaware corporation

 

1200 Summit Avenue, Suite 444

Fort Worth, Texas 76102

 

 

By:

/s/ Donny Edwards

 

Donny Edwards,

 

 

Vice President

 

 

With a copy to:

 

Brian D. Bowden, Esq.

Brian D. Bowden, P.C.

2900 Westridge Avenue

Fort Worth, Texas 76116-4647

 

 

Address for Notice:

PURCHASER:

 

Capital Senior Living Acquisition, LLC,

CAPITAL SENIOR LIVING

 

c/o James A. Stroud, Chairman of the Company

ACQUISITION, LLC, a Delaware

 

and David R. Brickman, Vice President

limited liability company

 

14160 Dallas Parkway, Suite 300

Dallas, Texas 75254

 

 

By:

/s/ James A. Stroud

 

 

James A. Stroud,

 

 

Chairman of the Company

 

 

With a copy to:

 

Jeffrey Fisher, Esq.

Geary, Porter & Donovan, a Professional

Corporation

16475 Dallas Parkway, Suite 500

Addison, Texas 75001-6837

 

 

Agreement of Purchase and Sale of Real Property – Abilene