Exhibit 10.1

ASSET PURCHASE AGREEMENT

BETWEEN

LIMA RETIREMENT, L.L.C.,

ZANESVILLE RETIREMENT, L.L.C.,

DECATUR RETIREMENT, L.L.C.,

COUNCIL BLUFFS RETIREMENT, L.L.C., AND

PRIMROSE COTTAGES, L.L.C.

COLLECTIVELY AS SELLERS,

AND

CHT PARTNERS, LP

AS PURCHASER

Dated as of October 30, 2012

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TABLE OF CONTENTS

 

LISTS OF EXHIBITS AND SCHEDULES

     v   

1.

 

DEFINITIONS

     2     

1.1

  

Definitions

     2   

2.

 

PURCHASE AND SALE, ASSETS AND LIABILITIES

     10     

2.1

  

Purchase and Sale

     10     

2.2

  

Description of the Assets

     10     

2.3

  

Excluded Assets

     12     

2.4

  

Retained Liabilities

     13     

2.5

  

Assumed Liabilities

     13     

2.6

  

Tenant-Held Assets. »

     14   

3.

 

PURCHASE PRICE

     14     

3.1

  

Purchase Price

     14     

3.2

  

Deposit

     14     

3.3

  

Payment of Purchase Price

     16     

3.4

  

Allocation of Purchase Price

     16   

4.

 

DUE DILIGENCE AND INSPECTION

     16     

4.1

  

Right to Inspect

     16     

4.2

  

Matters Relating to Title

     18     

4.3

  

Assignment and Assumption of Facility Contracts, Tenant Leases, and Transferred
Licenses and Permits

     19     

4.4

  

Inventory

     20     

4.5

  

Licensing

     20     

4.6

  

Financing

     20     

4.7

  

Purchaser’s Election Whether or Not to Proceed

     20     

4.8

  

Release and Indemnification

     20   

 

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5.

 

REPRESENTATIONS AND WARRANTIES

     21     

5.1

  

Sellers’ Representations and Warranties

     21     

5.2

  

Purchaser’s Representations and Warranties

     28   

6.

 

COVENANTS

     29     

6.1

  

Confidentiality

     29     

6.2

  

Assessments

     30     

6.3

  

Conduct of the Businesses

     30     

6.4

  

Licenses and Permits

     31     

6.5

  

Tax Contests

     31     

6.6

  

Notices and Filings

     32     

6.7

  

Further Assurances

     32     

6.8

  

Estoppel Certificate

     33     

6.9

  

Exclusivity

     33     

6.10

  

Bulk Sales

     33     

6.11

  

Employees

     33   

7.

 

CLOSING CONDITIONS

     34     

7.1

  

Purchaser’s Closing Conditions

     34     

7.2

  

Failure of Any Purchaser’s Closing Condition

     35     

7.3

  

Sellers’ Closing Conditions

     35     

7.4

  

Failure of Sellers’ Closing Conditions

     36   

8.

 

CLOSING

     36     

8.1

  

Closing Date

     36     

8.2

  

Closing Escrow

     36     

8.3

  

Sellers’ Closing Deliveries

     37     

8.4

  

Purchaser’s Closing Deliveries

     39   

 

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9.

 

EXPENSES

     39     

9.1

  

Closing Statement

     39     

9.2

  

Expenses

     39     

9.3

  

Cash

     39     

9.4

  

Employees

     40     

9.5

  

Purchaser’s Transaction Costs

     40     

9.6

  

Sellers’ Transaction Costs

     40   

10.

 

DEFAULT AND REMEDIES

     40     

10.1

  

Sellers’ Default

     40     

10.2

  

Purchaser’s Default

     41     

10.3

  

Liquidated Damages

     41   

11.

 

RISK OF LOSS

     41     

11.1

  

Casualty

     41     

11.2

  

Condemnation

     41   

12.

 

SURVIVAL, INDEMNIFICATION AND RELEASE

     42     

12.1

  

Survival

     42     

12.2

  

Indemnification by Sellers

     42     

12.3

  

Indemnification by Purchaser

     42     

12.4

  

Indemnification Procedure. Notice of Indemnification Claim

     42     

12.5

  

Guarantor Guaranty

     43     

12.6

  

Exclusive Remedy for Indemnification Loss

     43   

13.

 

MISCELLANEOUS PROVISIONS

     44     

13.1

  

Notices

     44     

13.2

  

Time is of the Essence

     45     

13.3

  

Assignment

     45   

 

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13.4

  

Successors and Assigns

     45     

13.5

  

Third Party Beneficiaries

     46     

13.6

  

Rules of Construction

     46     

13.7

  

Severability

     46     

13.8

  

Jurisdiction and Venue

     46     

13.9

  

Waiver of Trial by Jury

     47     

13.10

  

Attorneys’ Fees

     47     

13.11

  

Incorporation of Recitals, Exhibits and Schedules

     47     

13.12

  

Entire Agreement

     47     

13.13

  

Further Assurances

     47     

13.14

  

Effect of Delay and Waivers

     48     

13.15

  

Amendments, Waivers and Termination of Agreement

     48     

13.16

  

Execution of Agreement

     48     

13.17

  

Tax Disclosures

     48     

13.18

  

Liability of Interest-Holders in Sellers and Purchaser and their Affiliates

     48     

13.19

  

Good Faith Efforts

     48   

 

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LISTS OF EXHIBITS AND SCHEDULES

List of Exhibits

Exhibit A-1 – Lima Fee Premises

Exhibit A-2 – Zanesville Fee Premises

Exhibit A-3 – Decatur Fee Premises

Exhibit A-4 – Council Bluffs Fee Premises

Exhibit A-5 – Aberdeen Cottages Fee Premises

Exhibit 8.3.1 – Closing Certificate

Exhibit 8.3.2 – Deeds

Exhibit 8.3.3 – Bill of Sale

Exhibit 8.3.4 – Assignment and Assumption of Developer’s Rights Under Agreement
for Private Development

Exhibit 8.3.5 – Assignment and Assumption of Intellectual Property

Exhibit 8.3.6 – Assignment and Assumption of Leases

Exhibit 8.3.7 – Assignment and Assumption of Resident Agreements

Exhibit 8.3.17 – Sellers’ Certificate

Exhibit 8.4.3 – Closing Certificate

List of Schedules

Schedule 1.1 – Facility Lease Terms

Schedule 2.2.5 – Tenant Leases

Schedule 2.2.6 – Intellectual Property

Schedule 2.2.7 – Facility Contracts

Schedule 2.2.8 – Licenses and Permits

 

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Schedule 2.2.13 – Resident Agreements

Schedule 2.3.2 – Excluded Assets: Third-Party Assets

Schedule 2.4(f) – Retained Liabilities

Schedule 5.1.16 – Labor and Employment Matters

Schedule 5.1.17 – Construction Contracts

Schedule 5.1.20 – Environmental Condition of Real Property

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made as of October 30, 2012
(the “Effective Date”), by and between LIMA RETIREMENT, L.L.C., a South Dakota
limited liability company, ZANESVILLE RETIREMENT, L.L.C., a South Dakota limited
liability company, DECATUR RETIREMENT, LLC, a South Dakota limited liability
company, COUNCIL BLUFFS RETIREMENT, LLC, a South Dakota limited liability
company and PRIMROSE COTTAGES, LLC, a South Dakota limited liability company
(each a “Seller” and collectively “Sellers”), and CHT PARTNERS, LP, a Delaware
limited partnership (“Purchaser”) (Sellers and Purchaser are at times
hereinafter referred to individually as a “Party” and collectively as the
“Parties”).

R E C I T A L S

A. LIMA RETIREMENT, L.L.C., a South Dakota limited liability company is the
owner of all of the assets and interests which constitute the senior living
facility commonly known as the Primrose Retirement Community of Lima located in
Lima, Ohio (the “Lima Facility”).

B. ZANESVILLE RETIREMENT, L.L.C., a South Dakota limited liability company is
the owner of all of the assets and interests which constitute the senior living
facility commonly known as Primrose Retirement Community of Zanesville located
in Zanesville, Ohio (the “Zanesville Facility”).

C. DECATUR RETIREMENT, L.L.C., a South Dakota limited liability company is the
owner of all of the assets and interests which constitute the senior living
facility commonly known as Primrose Retirement Community of Decatur located in
Decatur, IL (the “Decatur Facility”).

D. COUNCIL BLUFFS, L.L.C., a South Dakota limited liability company is the owner
of all the assets and interests which constitute the senior living facility
commonly known as Primrose Retirement Community of Council Bluffs located in
Council Bluffs, IA (the “Council Bluffs Facility”).

E. PRIMROSE COTTAGES, L.L.C., a South Dakota limited liability company is the
owner of all the assets and interests which constitute the senior living
facility commonly known as Primrose Cottages located in Aberdeen, SD (the
“Aberdeen Cottages”).

F. Purchaser desires to purchase, and Sellers desire to sell the Assets on the
terms and conditions set forth in this Agreement.

G. Purchaser also wishes to lease the Assets back to an Affiliate of the Sellers
on the terms and conditions set forth in this Agreement.

 

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NOW, THEREFORE, in consideration of the provisions contained in this Agreement,
and intending to be legally bound hereby, the Parties agree as follows:

 

1. DEFINITIONS

1.1 Definitions. In addition to the terms defined in the body of this Agreement,
the following terms will have the following meanings in this Agreement:

“Aberdeen Cottages” has the meaning set forth in Recital E of this Agreement.

“Aberdeen Cottages Premises” means that certain real property more particularly
described as such on Composite Exhibit “A-5” attached hereto.

“Aberdeen Cottages Improvements” means all buildings, structures, and
improvements located on or affixed to the Mansfield Fee Premises, including all
fixtures which constitute real property under Applicable Law.

“Affiliate” has the following meaning: two entities are “Affiliates” if

(a) one of the entities is a Subsidiary of the other entity;

(b) both of the entities are Subsidiaries of the same entity; or

(c) both of the entities are Controlled by the same Person.

“Agreement” has the meaning set forth in the first paragraph of this Agreement.

“Allocated Purchase Price” has the meaning set forth in Section 3.1 of this
Agreement.

“Applicable Law” means (i) all federal, state, and local statutes, laws, common
law, rules, regulations, ordinances, codes, guidances, policies, or other legal
requirements of any Governmental Authority, stock exchange, board of fire
underwriters and similar quasi-governmental authority, and (ii) any judgment,
injunction, order or other similar requirement of any court or other
adjudicatory authority of competent jurisdiction, in effect at the time in
question and in each case to the extent the Person or property in question is
subject to the same.

“Assets” has the meaning set forth in Section 2.2 of this Agreement.

“Assumed Liabilities” has the meaning set forth in Section 2.5 of this
Agreement.

“Bankruptcy Code” has the meaning set forth in Section 5.1.15 of this Agreement.

“Books and Records” has the meaning set forth in Section 2.2.12 of this
Agreement.

“Businesses” means all of the businesses currently being operated on the Real
Property and all activities related thereto.

“Business Day” means any day other than a Saturday, Sunday or any United States
federal legal holiday.

“Casualty” has the meaning set forth in Section 11.1 of this Agreement.

 

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“Closing” has the meaning set forth in Section 8.1 of this Agreement.

“Closing Date” means the date on which the Closing takes place.

“Closing Escrow” has the meaning set forth in Section 8.2 of this Agreement.

“Closing Escrow Agreement” has the meaning set forth in Section 8.2 of this
Agreement.

“Closing Statement” has the meaning set forth in Section 9.1 of this Agreement.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act.

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any regulations, rulings and guidance issued by the Internal Revenue
Service.

“Condemnation” has the meaning set forth in Section 11.2 of this Agreement.

“Compete” has the meaning set forth in Section 6.12 of this Agreement.

“Contracts” means any maintenance, service and supply contracts, and all other
similar agreements for goods or services provided to Sellers in connection with
the Businesses

“Control” means:

(a) the right to exercise, directly or indirectly, a majority of the votes which
may be voted at a meeting of (i) the shareholders of the corporation, in the
case of a corporation, (ii) the shareholders of the general partner, in the case
of a limited partnership, or (iii) the equity holders or other voting
participants of a Person that is not a corporation or limited partnership; or

(b) the right to elect or appoint, directly or indirectly, a majority of (i) the
directors of the corporation, in the case of a corporation, (ii) the directors
of the general partner, in the case of a limited partnership, or (iii) a
majority of the Persons who have the right to manage or supervise the management
of the affairs and business of a Person that is not a corporation or limited
partnership,

(c) and “Controlled” has a corresponding meaning.

“Council Bluffs Facility” has the meaning set forth in Recital D of this
Agreement.

“Council Bluffs Premises” means that certain real property more particularly
described as such on Composite Exhibit “A-4” attached hereto.

“Council Bluffs Improvements” means all buildings, structures, and improvements
located on or affixed to the Council Bluffs Fee Premises, including all fixtures
which constitute real property under Applicable Law.

“Decatur Facility” has the meaning set forth in Recital C of this Agreement.

 

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“Decatur Fee Premises” means that certain real property more particularly
described as such on Composite Exhibit “A-3” attached hereto.

“Decatur Improvements” means all buildings, structures, and improvements located
on or affixed to the Decatur Fee Premises, including all fixtures which
constitute real property under Applicable Law.

“Deeds” means the deeds to be delivered by Sellers to Purchaser pursuant to
Section 8.3.2.

“Deposit” has the meaning set forth in Section 3.2.1 of this Agreement.

“Effective Date” has the meaning set forth in the opening paragraph of this
Agreement.

“Employees” means at the time in question all Persons employed by or for the
benefit of Sellers or any facility manager full-time and part-time in connection
with the Businesses.

“Environmental Claims” means all claims for reimbursement, remediation,
abatement, removal, clean up, contribution, personal injury, property damage or
damage to natural resources made by any Governmental Authority or other Person
arising from or in connection with (i) the presence or actual or potential
spill, leak, emission, discharge or release of any Hazardous Materials over, on,
in, under or from the Real Property, or (ii) any violation of any Environmental
Laws with respect to the Assets.

“Environmental Laws” means all Applicable Law relating to industrial hygiene or
to environmental or unsafe conditions or to human health including, but not
limited to, those relating to the generation, manufacture, storage, handling,
transportation, disposal, release, emission or discharge of Hazardous Materials,
including those in connection with the construction, fuel supply, power
generation and transmission, waste disposal or any other operations or processes
relating to the Assets, including, without limitation, the Real Property, and
those relating to the atmosphere, soil, surface and ground water, wetlands,
stream sediments and vegetation on, under, in or about the Assets, including,
without limitation, the Real Property.

“Environmental Liabilities” means all Liabilities under any Environmental Laws
arising from or in connection with the Assets, including, without limitation,
any obligations to manage, control, contain, remove, remedy, respond to, clean
up or abate any actual or potential presence, spill, leak, emission, discharge
or release of any Hazardous Materials, pollution, contamination or radiation
into any water, soil, sediment, air, Improvements or other environmental media.

“Environmental Reports” means those certain environmental reports obtained in
connection with the transactions contemplated herein with respect to the Real
Property, as applicable, or any portion thereof.

“ERISA” means the Employee Retirement Income Security Act, as amended from time
to time and any regulations, ratings and guidance issued pursuant thereto.

“Escrow Agent” means Title Company, acting in its capacity as escrow agent
pursuant to the terms hereof, or such other escrow agent as is mutually
acceptable to Sellers and Purchaser.

 

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“Exception Cure Period” has the meaning set forth in Section 4.2.1 of this
Agreement.

“Excluded Assets” has the meaning set forth in Section 2.3 of this Agreement.

“Facilities” means, collectively, the Lima Facility, the Zanesville Facility,
the Decatur Facility, the Council Bluffs Facility and the Aberdeen Cottages.

“Facility Contracts” has the meaning set forth in Section 2.2.7 of this
Agreement.

“Facility Lease” means, for any Property, a lease between Landlord and Tenant
under the terms and conditions set forth on Schedule 1.1 of this Agreement and
the form of which is to be agreed upon by the Parties during the Inspection
Period.

“Fee Premises” means, collectively, the Lima Fee Premises, the Zanesville Fee
Premises, the Council Bluffs Fee Premises, the Council Bluffs Fee Premises and
the Aberdeen Cottages Fee Premises.

“Governmental Authority” means any federal, state or local government or other
political subdivision thereof, including, without limitation, any Person
exercising executive, legislative, judicial, regulatory or administrative
governmental powers or functions, in each case to the extent the same has
jurisdiction over the Person or property in question.

“Guarantor” means each of James L. Thares, Brian J. Morgan, Wiliam J.
Schaefbauer II and Mark W. McNeary.

“Hazardous Materials” means petroleum and petroleum products, flammable
explosives, radioactive materials (excluding radioactive materials in smoke
detectors), polychlorinated biphenyls, radon, lead/asbestos in any form,
hazardous waste, toxic or hazardous substances, molds, microbiological agents,
and other related materials whether in the form of a chemical, biologic,
element, natural agent, compound, solution, mixture or otherwise, all to the
extent identified, managed, regulated or governed by Environmental Law,
including, but not limited to, those materials defined under Environmental Laws
as “hazardous substances,” “extremely hazardous substances,” “hazardous
chemicals,” “hazardous materials,” “toxic substances,” “solid waste,” “toxic
chemicals,” “air pollutants,” “toxic pollutants,” “hazardous wastes,” “extremely
hazardous waste,” or “restricted hazardous waste”.

“Improvements” means the Lima Improvements, the Zanesville Improvements, the
Decatur Improvements, the Council Bluffs Improvements and the Aberdeen Cottages
Improvements.

“Indemnification Loss” means, with respect to any Indemnitee, any Liability,
including, without limitation, reasonable attorneys’ fees and expenses and court
costs, incurred by such Indemnitee as a result of the act, omission or
occurrence in question.

“Indemnification Claim” has the meaning set forth in Section 12.4 of this
Agreement.

“Indemnitee” has the meaning set forth in Section 12.4 of this Agreement.

 

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“Indemnitor” has the meaning set forth in Section 12.4 of this Agreement.

“Initial Lease Basis” has the meaning set forth on Schedule 1.1 of this
Agreement.

“Inspection Period” means the period beginning on the Effective Date of this
Agreement and ending at 5:00 p.m., Eastern Standard Time, on the forty-fifth
(45th) day following such Effective Date provided, however, that the Inspection
Period may be extended by up to two (2) additional thirty (30) days periods upon
placement by Purchaser of an additional $50,000 Deposit with Escrow Agent prior
to the expiration of the then-current Inspection Period. Although held with the
Deposit, each such additional $50,000 deposit shall be non-refundable to
Purchaser, except in the event of a Sellers’ default hereunder.

“Inspections” means any inspections, examinations, tests, investigations, or
studies of the Assets, including, without limitation, the Real Property, the
Improvements or the Businesses conducted by or on behalf of Purchaser (or any
Affiliate thereof).

“Intangible Assets” has the meaning set forth in Section 2.2.11 of this
Agreement.

“Intellectual Property” means all works of authorship, including without
limitation, all literary works, pictorial, graphic and sculptural works,
architectural works, software, works of visual art, and any other work that may
be the subject matter of copyright protection and all worldwide registrations
thereof; any trademarks, service marks, brand names, trade dress, trade names,
designs and any other word, symbol, device, product configuration, slogan or any
combination thereof used to distinguish or identify goods or services that may
be the subject matter of trademark protection, including all worldwide
applications and registrations therefore and associated goodwill; any patents,
invention disclosures or inventions, including all processes, machines,
manufactures and compositions of matter, designs and any other invention that
may be the subject matter of patent protection, and all worldwide statutory or
other legal protection obtained or obtainable therein, including without
limitation all published and granted patents and pending applications and
provisionals, reissues, divisionals, renewals, extensions, continuations, and
continuations-in-part, design patents and industrial design registrations; all
domain names, URLs, websites, and all data, content, “look and feel”, operating
and underlying code or software of all websites; all trade secrets, proprietary
information, data, and knowledge and experience of a technical, commercial or
administrative nature, including all proprietary information, know-how,
information processes, operating, maintenance and other manuals, data and
databases, computer programs, including all documentation, design
specifications, and flowcharts, operational and other plans, schematics and
drawings, customer data and lists, advertising, marketing and product concepts
and campaigns and other valuable or proprietary information or data; and all
worldwide statutory protection obtained or obtainable thereon on all of the
preceding; all rights to enforce, enjoin or sue, any claims, judgments, causes
of action or other legal and equitable rights and remedies arising out of or
related to any infringement, misappropriation or violation of any of the
foregoing; and all right, title and interest to claim royalties, residuals,
damages and other remuneration for use of any of the foregoing rights.

“Landlord” means Purchaser, or Purchaser’s designee, as “landlord” under any
Facility Lease.

 

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“Liability” means any liability, obligation, damage, loss, cost or expense of
any kind or nature whatsoever, whether accrued or unaccrued, and “Liabilities”
has a corresponding meaning.

“Licenses and Permits” has the meaning set forth in Section 2.2.8 of this
Agreement.

“Lima Facility” has the meaning set forth in Recital A of this Agreement.

“Lima Fee Premises” means that certain real property more particularly described
as such on Composite Exhibit “A-1” attached hereto.

“Lima Improvements” means all buildings, structures, and improvements located on
or affixed to the Lima Fee Premises, including all fixtures which constitute
real property under Applicable Law.

“New Survey Defect” has the meaning set forth in Section 4.2.3 of this
Agreement.

“New Title Exception” has the meaning set forth in Section 4.2.3 of this
Agreement.

“Ordinary Course of Business” means the ordinary course of business consistent
with Sellers’ past custom and practice for the applicable Business (including
with respect to maintaining a sufficient supply of inventory), taking into
account the seasonality of the Business and such other facts and circumstances
in existence from time to time.

“Party” or “Parties” has the meaning set forth in the first paragraph of this
Agreement.

“Person” means any natural person, firm, corporation, general or limited
partnership, limited liability company, association, joint venture, trust,
estate, Governmental Authority or other legal entity, in each case whether in
its own or a representative capacity.

“Permitted Exception” has the meaning set forth in Section 4.2.1 of this
Agreement.

“Personal Property” has the meaning set forth in Section 2.2.3 of this
Agreement.

“Property Condition Evaluations” means the property condition evaluations
obtained by Purchaser in connection with the transaction contemplated herein
with respect to the Assets or any portion thereof.

“Purchase Price” has the meaning set forth in Section 3.1 of this Agreement.

“Purchaser” has the meaning set forth in the opening paragraph of this
Agreement.

“Purchaser’s Closing Condition Failure” has the meaning set forth in Section 7.2
of this Agreement.

“Purchaser’s Closing Conditions” has the meaning set forth in Section 7.2 of
this Agreement.

 

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“Purchaser’s Closing Deliveries” has the meaning set forth in Section 8.4 of
this Agreement.

“Purchaser’s Default” has the meaning set forth in Section 10.2 of this
Agreement.

“Purchaser’s Documents” has the meaning set forth in Section 5.2.2 of this
Agreement.

“Purchaser’s Due Diligence Reports” means all studies, reports and assessments
prepared by any Person for or on behalf of Purchaser and at Purchaser’s
direction (other than any internal studies, reports and assessments prepared by
any of Purchaser’s employees, attorneys or accountants) in connection with the
Inspections.

“Purchaser’s Indemnitees” means Purchaser and its Affiliates, and each of their
respective shareholders, members, partners, trustees, beneficiaries, directors,
officers and employees, and the successors, assigns, legal representatives,
heirs and devisees of each of the foregoing.

“Purchaser’s Inspectors” means any Person that conducted any Inspections for or
on behalf of Purchaser or any Affiliate thereof.

“Purchaser’s Transaction Costs” means the Purchase Price plus up to $350,000 of
Purchaser’s due diligence costs and costs incurred pursuant to Section 9.5 of
this Agreement.

“Real Property” means, collectively, the Fee Premises and the Improvements.

“Resident” means any person occupying a portion of a Facility pursuant to a
Resident Agreement.

“Resident Agreements” has the meaning set forth in Section 2.2.513 of this
Agreement.

“Retained Liabilities” has the meaning set forth in Section 2.4 of this
Agreement.

“Retained Licenses and Permits” means those Licenses and Permits which are
labeled as “Retained Licenses and Permits” on Schedule 2.2.8.

“Seller” and “Sellers” have the meanings set forth in the opening paragraph of
this Agreement.

“Sellers’ Certificate” means that certain document, the form of which is
attached hereto as Exhibit “8.3.17”, to be delivered by each Seller at Closing.

“Sellers’ Closing Condition Failure” has the meaning set forth in Section 7.4 of
this Agreement.

“Sellers’ Closing Conditions” has the meaning set forth in Section 7.3 of this
Agreement.

“Sellers’ Closing Deliveries” has the meaning set forth in Section 8.3 of this
Agreement.

“Sellers’ Default” has the meaning set forth in Section 10.1 of this Agreement.

 

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“Sellers’ Documents” has the meaning set forth in Section 5.1.2 of this
Agreement.

“Sellers’ Due Diligence Materials” means all documents and materials provided by
Sellers to Purchaser, pursuant to this Agreement or otherwise, together with any
copies or reproductions of such documents or materials.

“Sellers’ Indemnitees” means Sellers and their Affiliates, and each of their
respective shareholders, members, partners, trustees, beneficiaries, directors,
officers and employees, and the successors, assigns, legal representatives,
heirs and devisees of each of the foregoing.

“Special Closing Contingencies” shall have the meaning set forth in Section 8.1
of this Agreement.

“Subsidiary” means, in respect of any Person:

(a) any corporation of which more than 50% of the outstanding capital stock
having ordinary voting power to elect the majority of the board of directors of
such corporation is at the time directly or indirectly owned by (i) such Person,
(ii) such Person and one or more subsidiaries of such Person, or (iii) one or
more subsidiaries of such Person; or

(b) any limited or general partnership, joint venture, limited liability company
or other entity as to which (i) such Person, (ii) such Person and one or more of
its subsidiaries, or (iii) one or more subsidiaries of such Person owns, more
than a 50% ownership, equity or similar interest or has power to direct or cause
the direction of management and policies, or the power to elect the general
partner or managing partner (or equivalent thereof), of such limited or general
partnership, joint venture, limited liability company or other entity, as the
case may be.

“Survey Defects” has the meaning set forth in Section 4.2.1 of this Agreement.

“Surveys” means the surveys of the Real Property, or any portion thereof, to be
obtained by Purchaser, at Purchaser’s option, during the Inspection Period.

“Taxes” means any federal, state, local or foreign, real property, personal
property, sales, use, room, occupancy, ad valorem or similar taxes, assessments,
levies, charges or fees imposed by any Governmental Authority on any Seller with
respect to the Assets, including without limitation, the Businesses, including,
without limitation, any interest, penalty or fine with respect thereto, but
expressly excluding any (i) federal, state, local or foreign income, capital
gain, gross receipts, capital stock, franchise, profits, estate, gift or
generation skipping tax, or (ii) transfer, documentary stamp, recording or
similar tax, levy, charge or fee incurred with respect to the transactions
described in this Agreement.

“Tenant” means TSMM, LLC, a South Dakota limited liability company, or its
Affiliate, as “tenant” under any Facility Lease.

“Tenant Leases” has the meaning set forth in Section 2.2.5 of this Agreement.

 

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“Third-Party Claim” means, with respect to the Person in question, any claim,
demand, lawsuit, arbitration or other legal or administrative action or
proceeding against the Person in question by any other Person which is not an
Affiliate of the Person in question.

“Third-Party Estoppels” has the meaning set forth in Section 6.8 of this
Agreement.

“Title Commitment” has the meaning set forth in Section 4.2.1 of this Agreement.

“Title Company” means Fidelity National Title Insurance Company, whose address
is 1 East Washington Street, Suite 450, Phoenix, Arizona 85004, Attention: Mary
Garcia, Director of Major Accounts

“Title Exceptions” has the meaning set forth in Section 4.2.1 of this Agreement.

“Title Notice” has the meaning set forth in Section 4.2.1 of this Agreement.

“Title Policies” has the meaning set forth in Section 4.2.4 of this Agreement.

“Transferred Licenses and Permits” means those Licenses and Permits which are
labeled as “Transferred Licenses and Permits” on Schedule 2.2.8.

“Unpermitted Exceptions” has the meaning set forth in Section 4.2.1 of this
Agreement.

“Warranties” has the meaning set forth in Section 2.2.10 of this Agreement.

“WARN Act” means the Worker’s Adjustment and Retraining Notification Act, 29
U.S.C. §2101 et seq., and any similar state and local laws, as amended from time
to time, and any regulations, rules and guidance issued pursuant thereto.

“Zanesville Facility” has the meaning set forth in Recital B of this Agreement.

“Zanesville Fee Premises” means that certain real property more particularly
described as such on Composite Exhibit “A-2” attached hereto.

“Zanesville Improvements” means all buildings, structures, and improvements
located on or affixed to the Grand Island Fee Premises, including all fixtures
which constitute real property under Applicable Law.

 

2. PURCHASE AND SALE, ASSETS AND LIABILITIES

2.1 Purchase and Sale. Sellers agree to sell the Assets to Purchaser and
Purchaser agrees to buy the Assets from Sellers, all in accordance with the
terms and conditions set forth in this Agreement.

2.2 Description of the Assets. In this Agreement, the term “Assets” means all of
the following, but expressly excluding the Excluded Assets:

2.2.1 Real Property. The Fee Premises.

 

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2.2.2 Fixtures. All fixtures located on, attached to and/or forming a part of
the Real Property, other than those which constitute the Improvements (the
“Fixtures”).

2.2.3 Personal Property. All tangible personal property, including, without
limitation, any and all furniture, equipment, machinery, tools, and appliances,
located at the Real Property or used in connection with the Businesses (the
“Personal Property”).

2.2.4 Consumables. All food, consumable supplies and inventories of every kind
owned by Sellers as of the Closing Date and located at and used in connection
with the operation of the Businesses (the “Consumables”).

2.2.5 Tenant Leases. All of Sellers’ right, title and interest in and to all
leases, subleases, licenses, concessions and similar agreements granting to any
other Person the right to use or occupy any portion of the Real Property (other
than the Resident Agreements), a complete listing of which is attached hereto as
Schedule 2.2.5 (the “Tenant Leases”) together with all security deposits held by
Sellers thereunder.

2.2.6 Intellectual Property. Any and all Intellectual Property relating to the
Businesses, excluding the Intellectual Property identified on Schedule 2.2.6,
each of which shall remain the property of Sellers.

2.2.7 Facility Contracts. To the extent assignable or transferable, all of
Sellers’ right, title and interest in and to any contracts which are applicable
to the operation of the Businesses (the “Facility Contracts”), which Facility
Contracts are set forth in Schedule 2.2.7, together with all deposits made or
held by Sellers thereunder.

2.2.8 Transferred Licenses and Permits. All of Sellers’ right, title and
interest in and to the Transferred Licenses and Permits together with any
deposits made by Sellers thereunder. A complete listing of all licenses,
permits, consents, authorizations, approvals, registrations and certificates
issued by any Governmental Authority which are currently held by Sellers with
respect to the Assets, including, without limitation, all such licenses,
permits, consents, authorizations, approvals, registrations and certificates
issued by any Governmental Authority necessary for the use, operation, or
occupancy of the Real Property or the Businesses is attached hereto as Schedule
2.2.8 (the “Licenses and Permits”).

2.2.9 Plans and Specifications. To the extent assignable or transferable, all of
Sellers’ right, title and interest in and to any plans and specifications, blue
prints, architectural plans, engineering diagrams and similar items which
specifically relate to the Real Property (the “Plans and Specifications”).

2.2.10 Warranties. To the extent assignable or transferable, all warranties and
guaranties held by Sellers with respect to any of the Assets (the “Warranties”).

2.2.11 Intangible Assets. To the extent assignable or transferable, all of
Sellers’ right, title and interest in and to any and all drawings, surveys,
environmental and

 

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soil reports, telephone and facsimile numbers listing in directories, customer
and supplier lists and files, guest lists, credit records, labels, security
codes, all records and sales and other customer data, and any unexpired
guaranties or warranties (collectively with the Tenant Leases, Transferred
Licenses and Permits, Plans and Specifications and Warranties referred to as the
“Intangible Assets”).

2.2.12 Books and Records. Copies of all of Sellers’ books and records which
relate to the Real Property or the Businesses, but expressly excluding all
documents and other materials which are legally privileged or constitute
attorney work product (the “Books and Records”).

2.2.13 Resident Agreements. All of Sellers’ right, title and interest in and to
all resident agreements or similar contracts granting to any other Person the
right to use or occupy any portion of the Real Property (other than Tenant
Leases), a complete listing of which is attached hereto as Schedule 2.2.13,
together with all security deposits and community entrance fees held by Sellers
thereunder (the “Resident Agreements”).

2.2.14 Other Assets. All other assets, rights, and interest of Sellers in and to
the Fee Premises, Improvements or Businesses, not constituting Excluded Assets.

2.3 Excluded Assets. Notwithstanding anything to the contrary in Section 2.2,
the following property, assets, rights and interests (the “Excluded Assets”) are
excluded from the Assets:

2.3.1 Cash. Except for deposits expressly included in Section 2.2, all cash on
hand or on deposit in any operating account or other account or reserve
maintained in connection with the Real Property or the Businesses.

2.3.2 Third-Party Assets. Any removable fixtures, personal property or
intellectual property owned by third-parties and more particularly set forth on
the attached Schedule 2.3.2.

2.3.3 Motor Vehicles. Any buses or minivans.

2.3.4 Retained Licenses and Permits. The Retained Licenses and Permits as more
particularly set forth in Schedule 2.2.8, unless and to the extent that
Applicable Law or Purchaser’s lender requires the same to be held by Purchaser,
in which event such Retained Licenses and Permits shall be deemed Transferred
Licenses and Permits.

2.3.5 Accounts Receivable. Sellers’ accounts receivable and rents receivable.

2.3.6 Unwanted Assets. Any other assets of Sellers that, notwithstanding their
inclusion within the definition of Assets, Purchaser specifically declines to
accept by written notice to Sellers prior to the expiration of the Inspection
Period.

 

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2.4 Retained Liabilities. At Closing, Sellers shall retain all Liabilities for,
and Purchaser shall not have any obligation or Liability concerning:

(a) any Liabilities under the Tenant Leases, Contracts, and Licenses and Permits
which have arisen, accrued or pertain to a period prior to the Closing Date,
including, without limitation, the Liability for the payment of any amounts due
and payable or accrued but not yet due or payable prior to the Closing Date
under the Tenant Leases, Contracts, and Licenses and Permits; and

(b) the payment of all Taxes and assessments due and payable or accrued but not
yet paid prior to the Closing Date, except to the extent Purchaser has received
a credit for such Taxes and assessments under Article 9; and

(c) the employment and employment benefits of any Employees, including the
payment of any compensation, accrued paid time off, sick time, personal days and
any amounts accrued under any employee benefit or welfare plan of Sellers; and

(d) any claim for personal injury or property damage to a Person which is based
on any event which occurred at the Real Property or in connection with the
Businesses prior to the Closing Date; and

(e) any damages (including costs of cleanup, containment or other remediation)
arising from or in connection with any environmental health or safety
liabilities arising out of or relating to (i) the ownership or operation by any
Person at any time on or prior to the Closing Date of the Assets, or (ii) any
bodily injury (including illness, disability and death, regardless of when any
bodily injury occurred, was incurred or manifested itself), personal injury,
property damage (including trespass, nuisance, wrongful eviction and deprivation
of the use of real property) or other damage of or to any Person or any assets
in any way arising from or allegedly arising from any hazardous activity
conducted by any Person with respect to the Assets, that was present or
suspected to be present on or before the Closing Date on or at the Real Property
(or present or suspected to be present on any other property, if such Hazardous
Material emanated or allegedly emanated from any property and was present or
suspected to be present on the Real Property, on or prior to the Closing Date),
or was released or allegedly released by any Person on, at, or about the Assets
at any time on or prior to the Closing Date; and

(f) any actual, pending or threatened litigation as set forth on Schedule 2.4(f)
(collectively, all items contained in this Section 2.4 being the “Retained
Liabilities”).

The rights and obligations of the Parties under this Section 2.4 shall survive
the Closing.

2.5 Assumed Liabilities. At Closing, Purchaser shall assume (i) all Liabilities
under the Tenant Leases, Facility Contracts, Transferred Licenses and Permits
and Resident Agreements that are not Retained Liabilities and which arise or
accrue on or after the Closing Date, and (ii) the payment of Taxes and
Association Assessments which arise or accrue on or after the Closing Date
(“Assumed Liabilities”). The Parties agree and acknowledge that Sellers shall be
responsible for certain of the Assumed Liabilities after the Closing Date
pursuant to the Lease Agreements. The rights and obligations of the Parties
under this Section 2.5 shall survive Closing.

 

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2.6 Tenant-Held Assets. »

Notwithstanding their inclusion in the Purchase Price for the Assets being
conveyed as of Closing, unless otherwise required by its Lender, Purchaser
agrees that the following Assets shall remain the property of and in the
possession of the Sellers or the Tenant as Sellers’ nominee, provided that as of
expiration or earlier termination of the Facility Leases, Seller shall or shall
cause Tenant to convey, pursuant to the terms of the Facility Leases, each of
the following to Purchaser or Purchaser’s Affiliate or nominee for no additional
consideration:

(a) Tenant Leases;

(b) Facility Contracts;

(c) Licenses and Permits;

(d) Resident Agreements; and

(e) Motor Vehicles.

The terms of this provision shall expressly survive Closing.

 

3. PURCHASE PRICE

3.1 Purchase Price. The purchase price for the Assets is Seventy-Three Million
Fifty Thousand Dollars ($73,050,000) (the “Purchase Price”), which shall be
adjusted at Closing as expressly set forth in this Agreement. The parties hereby
agree that the Purchase Price shall be allocated (i) among each Property (the
“Allocated Purchase Price”) as agreed upon by Sellers and Purchaser during the
Inspection Period, (ii) the various components of the Land and Improvements
comprising each Property as determined by Purchaser in its sole and absolute
discretion, and (iii) prepaid sales tax on the rental of personal property.

3.2 Deposit.

3.2.1 Deposit. Within three (3) Business Days after the Effective Date,
Purchaser shall deliver to Escrow Agent the sum of Four Hundred Thousand Dollars
($400,000), which shall be held by the Escrow Agent as a deposit under this
Agreement (the “Deposit”) in good funds either by certified bank or cashier’s
check or by federal wire transfer or by an irrevocable letter-of-credit. If and
each time Purchaser extends the Inspection Period by placing an additional
$50,000 with the Escrow Agent, then such additional funds shall become a part of
the Deposit except that it shall not be refundable to Purchaser except as a
result of Sellers’ default or failure of a Purchaser’s Closing Contingency under
this Agreement.

3.2.2 Maintenance of Deposit. The Deposit shall be held by the Escrow Agent in
an interest-bearing account, under Purchaser’s taxpayer identification number of

 

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27-2963394, pursuant to the terms and conditions of this Agreement with such
changes thereto as may be agreed to by Sellers and Purchaser pursuant thereto.
The Deposit shall be fully refunded to Purchaser upon termination of this
Agreement by Purchaser prior to the expiration of the Inspection Period and
otherwise if this Agreement is terminated by Purchaser in accordance with any
right of Purchaser to do so under this Agreement. Otherwise, it shall be
non-refundable to Purchaser except as expressly provided in this Agreement. If
the Deposit is to be paid to Sellers under the provisions of this Agreement,
Escrow Agent shall pay the Deposit to Sellers in the manner and on the terms and
conditions set forth herein.

3.2.3 Disbursement of Deposit to Sellers. At Closing, Purchaser shall cause the
Escrow Agent to disburse the Deposit to Sellers, and Purchaser shall receive a
credit against the Purchase Price in the amount of the Deposit (including the
$100,000 additional deposit, if any) disbursed to Sellers.

3.2.4 Refund of Deposits to Purchaser. If this Agreement is terminated and
Purchaser is entitled to a refund of the Deposit under any express provision of
this Agreement, then the Escrow Agent shall disburse the Deposit to Purchaser no
later than two (2) Business Days after termination. Notwithstanding the
foregoing, if the Deposit includes an additional $50,000 or $100,000 paid by
Purchaser to extend the Inspection Period, such portion of the Deposit shall be
paid to Sellers, unless the termination is as a result of a Seller default or
failure of a Purchaser’s Closing Contingency.

3.2.5 Forfeiture of Deposit. If Purchaser’s Default occurs and remains uncured
beyond any applicable cure period, upon the expiration of such cure period,
Purchaser shall forfeit the Deposit and Escrow Agent shall disburse the Deposit
to Sellers no later than two (2) Business Days after the expiration of such cure
period.

3.2.6 Disagreements Regarding Deposit. If Escrow Agent shall be unable to
determine at any time to whom the Deposit should be paid or if a dispute should
develop between Sellers and Purchaser concerning the disposition of the Deposit,
then in any such event, Escrow Agent shall pay the Deposit in accordance with
the joint (or consistent) written instructions of Sellers and Purchaser. In the
event that such joint (or consistent) written instructions shall not be received
by Escrow Agent within ten (10) days after Escrow Agent shall have served
written requests for such joint (or consistent) written instructions upon
Sellers and Purchaser, Escrow Agent shall have the right to pay all of the
Deposit into a court of competent jurisdiction in Orlando, Florida and to
interplead Sellers and Purchaser in respect thereof; and, thereafter, Escrow
Agent shall be discharged of any further or continuing obligations in connection
with the Deposit.

3.2.7 Escrow Agent’s Costs and Expenses. If costs and expenses (including
attorneys’ fees) are incurred by Escrow Agent because of litigation or any
dispute between Sellers and Purchaser arising out of the holding of the Deposit,
the non-prevailing party in such dispute shall reimburse Escrow Agent for
reasonable costs and expenses incurred. Sellers and Purchaser hereby agree and
acknowledge that Escrow Agent assumes no Liability in connection with the
holding or investment of the Deposit pursuant hereto, except for the negligence
or willful misconduct of Escrow Agent and its

 

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employees and agents. Escrow Agent shall not be responsible for the validity,
correctness or genuineness of any document or notice referred to herein; and, in
the event of any dispute under this Agreement relating to the disposition of the
Deposit, Escrow Agent may seek advice from its own counsel and, provided that
Escrow Agent tenders the deposit into a court of competent jurisdiction in
Orlando, Florida, Escrow Agent shall be fully protected in any action taken in
good faith in accordance with the opinion of Escrow Agent’s counsel.

3.3 Payment of Purchase Price.

3.3.1 Payment at Closing. At Closing, Purchaser shall pay to the applicable
Seller (as directed by the Sellers) by wire transfer an amount equal to cash
portion of the Purchase Price (as adjusted pursuant hereto), less the Deposit.
Purchaser shall cause the wire transfer of funds to be received by Sellers no
later than 5:00 p.m. (Eastern Time) on the Closing Date.

3.3.2 Method of Payment. All amounts to be paid by Purchaser to Sellers pursuant
to this Agreement shall be paid by wire transfer of immediately available U.S.
federal funds.

3.4 Allocation of Purchase Price. The Parties agree that the Purchase Price
shall be allocated (i) between the Fee Premises as agreed by the Parties during
the Inspection Period, and (ii) between the Real Property and the Personal
Property for each facility for federal, state and local tax purposes as
determined by Purchaser in its sole and absolute discretion. The Parties shall
file all transfer tax forms and all federal, state and local tax returns and
related tax documents consistent with the allocation determined by Purchaser, as
the same may be adjusted pursuant to Article 9 or any other provision of this
Agreement.

 

4. DUE DILIGENCE AND INSPECTION

4.1 Right to Inspect. At all times prior to Closing, Purchaser and Purchaser’s
Inspectors shall, subject to reasonable advance notice to the applicable Seller,
have the right to enter upon the Real Property and to perform, at Purchaser’s
expense, such inspections of and concerning the Assets, and other tests,
studies, reviews and investigations, as Purchaser may deem appropriate. Upon two
(2) Business Days’ notice, Purchaser shall have the right to meet and interview
(with the applicable Seller present if such Seller so elects) management
including but limited to: Executive Director, Director of Marketing, Director of
Nursing, Dietary Manager, as well as maintenance of the Facilities to discuss
the Businesses, including the revenues, expenses, operation and physical
condition of the Assets. In addition, Purchaser shall have the right, but not
the obligation, to contact such Governmental Authorities as it may elect in
connection with the transactions contemplated by this Agreement. The Inspections
shall not unreasonably interfere with the operation of the Businesses. To the
extent in Sellers’ possession or control, Sellers shall furnish to Purchaser
copies of the following within three (3) Business Days of the Effective Date,
each of which will be a true, correct and complete copy of the document it
purports to be:

(i) All Warranties which are still in effect to which Sellers may be entitled to
make a claim;

 

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(ii) All Licenses and Permits;

(iii) The most recent real estate tax statements with respect to the Real
Property, if any;

(iv) The Surveys, engineering and architectural plans, drawings and
specifications relating to the Real Property, as applicable, including, without
limitation, the Plans and Specifications;

(v) All contracts affecting the Assets in any material respect;

(vi) Copies of the Books and Records, including but not limited to GAAP
internally prepared financial statements for the prior three (3) years for each
Property;

(vii) All Tenant Leases and all agreements for real estate commissions,
brokerage fees, finder’s fees or other compensation payable in connection
therewith which will be binding on Purchaser;

(viii) All Resident Agreements; and

(ix) All other information and documentation that Purchaser may reasonably
request in writing regarding the Assets.

Purchaser shall also have the option, at Purchaser’s cost and expense, to obtain
(and disclose, if required by Applicable Law) audited financial statements for
each Property and for the Guarantor for the prior three (3) years, and in such
case, Sellers agree to cooperate with Purchaser and Purchaser’s auditors in the
preparation of the same. Purchaser and Purchaser’s Inspectors shall take all
reasonable precautions to minimize the impact on the Assets of any Inspections
and shall coordinate with Sellers regarding communications with Sellers’
employees and Governmental Authorities relating to the Inspections. With respect
to physical Inspections of the Assets to be conducted by Purchaser (e.g.,
environmental Inspections), Purchaser shall retain professional third-party
consultants to complete such Inspections and shall require such third-party
consultants to maintain liability insurance coverage for their activities that
is consistent with liability insurance coverage customarily maintained by
similar professional third-party consultants. Such third-party consultants will
be notified of and advised to comply with the confidentiality provisions set
forth in this Agreement. If Purchaser or Purchaser’s Inspectors intend to take
any sample from the Real Property in connection with any physical investigations
permitted herein, then Purchaser shall give reasonable advance notice to the
applicable Seller to enable such Seller to have the opportunity to
simultaneously obtain a similar sample in order to allow such Seller, if it so
chooses, to perform its own analysis. Purchaser shall, immediately after any
entry, inspection or test, restore the Assets, in all material respects and at
its sole cost, to the condition which existed immediately prior thereto (to the
extent practicable), including replacing paving and landscaping. If a lien is
placed against any Property as a result of Purchaser’s inspections, Purchaser
shall immediately take whatever action is necessary to

 

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remove such lien. The foregoing restoration obligations of Purchaser shall
survive the Closing or earlier termination of this Agreement. In the event the
transaction contemplated by this Agreement is not consummated, Purchaser shall
return to Sellers any and all due diligence materials provided by Sellers to
Purchaser hereunder.

4.2 Matters Relating to Title.

4.2.1 State of Title. Purchaser shall order current title commitments (the
“Title Commitments”) with respect to the Real Property, together with legible
copies of all title exception documents within five (5) Business Days of the
Effective Date. Purchaser may also obtain, at its own cost, the Surveys during
the Inspection Period. Within ten (10) Business Days after the date of receipt
by Purchaser of the Title Commitments and Surveys, but in any event prior to the
expiration of the Inspection Period, Purchaser may submit to Sellers a written
Notice from Purchaser (“Title Notice”) specifying any alleged defects in or
objections to the title shown in the Title Commitments or any of the Surveys.
Any matters to which Purchaser objects in the Title Notice shall constitute
“Title Exceptions”, and any survey defects to which Purchaser objects in the
Title Notice which adversely affect title to the Real Property shall constitute
“Survey Defects” (the Title Exceptions and Survey Defects shall collectively be
referred to as the “Unpermitted Exceptions”). Sellers shall notify Purchaser in
writing within five (5) Business Days of receiving the Title Notice (the
“Exception Cure Period”) whether Sellers will cure any Unpermitted Exceptions
set forth in the Title Notice and, if Sellers elect to cure such Unpermitted
Exceptions, Sellers shall do so at their own expense (the failure to so notify
Purchaser within such five (5) Business Days being deemed an election to cure
such Unpermitted Exceptions). Upon Purchaser’s failure to timely object, all
matters shown on the Title Commitment or on the Surveys shall thereafter be
deemed a “Permitted Exception”. Any matter which Sellers elect not to cure shall
also be deemed a Permitted Exception unless Purchaser elects to terminate this
Agreement by written notice to Sellers within ten (10) days after Purchaser
receives written notice of Sellers’ election not to cure such objection. If
Sellers elect to cure any or all of the Unpermitted Exceptions, but are unable
to complete the cure of such Unpermitted Exceptions before Closing, Purchaser
shall have the right, in its absolute discretion, to elect, upon written notice
to Sellers, to either (A) defer the Closing Date for a reasonable period not
exceeding sixty (60) days to give Sellers an opportunity, to either (i) cure
such Unpermitted Exceptions, or (ii) if Purchaser, in its sole and absolute
discretion agrees to accept affirmative title insurance coverage with respect to
such Unpermitted Exceptions, provide the Title Company such assurances as the
Title Company requires to insure Purchaser against any loss arising from such
Unpermitted Exceptions, or (B) to proceed pursuant to Section 4.2.2 below.
Failure by Purchaser to deliver the notice referred to in the immediately
preceding sentence shall be deemed an election under (B) above, and failure of
Sellers to cure any default it has elected to cure hereunder shall be an Event
of Default under this Agreement.

4.2.2 Failure of Title. If on the Closing Date title to the Fee Premises and
Improvements is not insurable or is subject to any Unpermitted Exceptions,
Purchaser may elect, as its sole right and remedy, either (i) to take such title
to the interests as can be conveyed, with no abatement of the Purchase Price
(except for

 

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abatement to the extent of monetary liens of a definite, fixed and ascertainable
amount not in excess of the Purchase Price), or (ii) to terminate this Agreement
and proceed pursuant to Section 10.1 below.

4.2.3 Updated Title Commitment or Surveys. If prior to Closing any update of the
Title Commitments discloses any Title Exception which is not disclosed in the
original Title Commitments previously obtained by Purchaser (a “New Title
Exception”), or any update of the Surveys obtained by Purchaser discloses any
Survey Defect which is not disclosed in the Surveys previously obtained by
Purchaser (a “New Survey Defect”), upon written objection from Purchaser,
Sellers shall remove or cure such New Title Exception or New Survey Defect at or
prior to Closing. In the event that Sellers fail to remove or cure such New
Title Exception or New Survey Defect at or prior to Closing, Purchaser shall be
entitled to proceed under Section 4.2.2 above. Other than those easements
contemplated hereby, Sellers will not create or permit to exist any New Title
Exception or New Survey Defect.

4.2.4 Title Policies. At Closing, Sellers shall take such steps as may be
necessary to cause the Title Company to issue owner’s title insurance policies
to Purchaser, subject only to the applicable Permitted Exceptions (the “Title
Policies”).

4.2.5 Conveyance of the Fee Premises and Improvements. At Closing Sellers shall
convey the applicable portion of the Fee Premises and Improvements to Purchaser
subject only to the Permitted Exceptions.

4.3 Assignment and Assumption of Facility Contracts, Tenant Leases, and
Transferred Licenses and Permits. On the Closing Date, if not retained by the
Tenant pursuant to the provisions of Section 2.6 above, the applicable Facility
Contracts, Tenant Leases, and Transferred Licenses and Permits approved by
Purchaser during the Inspection Period, together with the Resident Agreements,
shall be assigned by Sellers and assumed by Purchaser as of the Closing Date
pursuant to an “Assignment and Assumption” with Purchaser being responsible for
the payment of any fee or other charge imposed by any party in connection with
such transfer. Notwithstanding the foregoing, on or before the termination of
the Inspection Period, Purchaser shall identify in writing to Sellers (i) which
Facility Contracts, Tenant Leases, and Licenses and Permits it agrees to assume,
and (ii) any such Facility Contracts, Tenant Leases, and Licenses and Permits it
does not agree to assume, and Sellers shall retain such Facility Contracts,
Tenant Leases, and Licenses and Permits as Retained Liabilities or terminate
such disapproved Facility Contracts, Tenant Leases, and Licenses and Permits at
its sole cost and expense as of the Closing Date. If the costs of such
termination are not paid by Sellers prior to the Closing Date, Sellers shall use
the proceeds of the Purchase Price to pay the same, and shall instruct the
Escrow Agent to deliver such costs to the appropriate party at Closing. With
respect to any equipment lease that Purchaser agrees to assume, it shall be a
condition to such assumption that at least five (5) Business Days prior to the
Closing Date, the applicable Seller will obtain and deliver to Purchaser written
statements from the equipment lessors which demonstrate to Purchaser’s
satisfaction that (i) all payments under such equipment lease are current and
that there are no charges owed, and (ii) Purchaser shall not be responsible for
the payment of any charges, penalties or other costs relating to damage,
destruction or loss of such equipment, or a breach or violation of the terms of
such equipment leases that occurred or became due prior to said Closing

 

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Date, and the applicable Seller agrees to pay the same upon five (5) days
written demand by Purchaser or equipment lessor. Notwithstanding anything to the
contrary, Purchaser shall not be responsible for the obligations under any
Contracts, Tenant Leases, and Licenses and Permits that it does not expressly
approve in writing during the Inspection Period and assume in the Assignment and
Assumption.

4.4 Inventory. During the Inspection Period, Purchaser and its representatives
shall be permitted to enter the Real Property for the purpose of taking an
inventory of all tangible personal property related to the Businesses.

4.5 Licensing. The parties acknowledge that due to the nature of the Businesses,
certain regulatory approvals, licenses and authorizations must be obtained from
certain governmental agencies prior to Closing (collectively, the “Licensing
Approvals”). Sellers and Purchaser agree to each use good faith efforts in the
pursuit of the Licensing Approvals and to cooperate with and provide reasonable
assistance to each other in having any existing regulatory approvals, licenses
and/or authorizations assigned from Sellers to Purchaser, to the extent required
under Applicable Law.

4.6 Financing. Purchaser’s obligation to consummate the transactions
contemplated hereby are contingent upon Purchaser obtaining senior mortgage
financing equal to 65% of the Purchase Price for the acquisition of the
Properties. Sellers agrees to provide Purchaser with all reasonable assistance
needed with respect to financing, including (but not limited to) entering into a
commercially reasonable form of Subordination, Non-Disturbance and Attornment
Agreement with any senior lender, providing the same provides that in the event
of a foreclosure (or deed in lieu of foreclosure), or other exercise of lender’s
remedies upon a default in connection with which title or possession of the
Property is transferred to the lender or another party, the lease(s) with Tenant
shall not be terminated and Tenant will not be disturbed in its rights under the
lease(s) so long as not in default.

4.7 Purchaser’s Election Whether or Not to Proceed. If Purchaser determines in
its sole discretion for any reason, or no reason at all, that it does not desire
to acquire the Assets and Purchaser notifies Sellers and the Escrow Agent of
such determination in writing prior to the expiration of the Inspection Period,
then the Deposit shall be returned to Purchaser, this Agreement shall be of no
further force or effect, and the Parties hereto shall have no further
obligations to the other (except for any obligations or liabilities that
expressly survive termination of this Agreement). Upon the expiration of the
Inspection Period, the Deposit shall be nonrefundable to Purchaser except in the
case of a Sellers’ Default, the failure to occur of a Purchaser’s Closing
Condition, or as otherwise expressly set forth herein. In any instance where
Purchaser has the discretion to elect to terminate this Agreement (in whole or
in part), and in fact does elect to terminate this Agreement pursuant to this
Section 4, Escrow Agent shall return the Deposit to Purchaser without further
instructions, consent or written authorization by Sellers. This provision shall
constitute the mutual escrow instructions to Escrow Agent and Escrow Agent shall
be entitled and required to rely upon such instructions to return the Deposit to
Purchaser without consent or further action by Sellers.

4.8 Release and Indemnification. Purchaser (for itself and all Purchaser’s
Indemnitees) hereby releases Sellers’ Indemnitees for any Indemnification Loss
incurred by any

 

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Purchaser Indemnitee arising from or in connection with the Inspections, except
to the extent resulting from the gross negligence or willful misconduct of
Sellers’ Indemnitee. Purchaser shall indemnify, save, insure pay, defend and
hold harmless Sellers’ Indemnitees in accordance with Article 12 from and
against any Indemnification Loss incurred by Sellers’ Indemnitee arising from or
in connection with the Inspections, except to the extent resulting from the
gross negligence or willful misconduct of Sellers’ Indemnitee.

 

5. REPRESENTATIONS AND WARRANTIES

5.1 Sellers’ Representations and Warranties. To induce Purchaser to enter into
this Agreement and to consummate the transactions described in this Agreement,
each Seller hereby make the representations and warranties in this Section 5.1,
upon which Sellers acknowledge and agree that Purchaser is entitled to rely, and
as of Closing shall provide a certificate reconfirming that all such
representations and warranties remain true and correct as of the Closing Date.

5.1.1 Organization and Power. Seller is duly incorporated or formed (as the case
may be), validly existing, in good standing in the jurisdiction of its
incorporation or formation, and is qualified to do business in the jurisdictions
in which the Assets which it owns are located and has all requisite power and
authority to own the Assets and conduct the Businesses as currently owned and
conducted.

5.1.2 Authority and Binding Obligation. (i) each Seller shall obtain the
approval of its members of this Agreement and the transactions described herein.
Sellers covenant to use commercially reasonable efforts to obtain all required
member approvals so that Sellers have full power and authority to execute and
deliver this Agreement and all other documents to be executed and delivered by
each of them pursuant to this Agreement (the “Sellers’ Documents”), and to
perform all obligations required of them under this Agreement and each of
Sellers’ Documents. In the event Sellers fail to obtain all required member
approvals within 20 days of the Effective Date, Sellers shall pay to Purchaser
the sum of One Hundred Thousand Dollars ($100,000) as reimbursement to Purchaser
for due diligence and other costs and expenses incurred by Purchaser; (ii) the
execution and delivery by Seller of this Agreement and, when executed and
delivered, Sellers’ Document, and the performance by Seller of its obligations
under this Agreement and, when executed and delivered, each of Sellers’
Documents, have been duly and validly authorized by all necessary action by
Seller; and (iii) this Agreement and, when executed and delivered, Sellers’
Documents constitutes, or will constitute, legal, valid and binding obligations
of Seller enforceable against Seller in accordance with its and their terms,
except to the extent Purchaser itself is in default hereunder or thereunder.

5.1.3 Title to the Assets. Lima Retirement, L.L.C. is the fee owner of the Lima
Fee Premises, the Lima Improvements and all of the other Assets with respect to
the Lima Facility, subject to the Permitted Exceptions, free and clear of all
liens, mortgages, security interests, adverse claims, and all encumbrances
(other than those that will be released or assumed upon Closing); Zanesville
Retirement, L.L.C. is the fee owner of the Zanesville Fee Premises, Zanesville
Improvements and all of the other Assets with respect to the Zanesville
Facility, subject to the Permitted Exceptions, free

 

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and clear of all liens, mortgages, security interests, adverse claims, and all
encumbrances (other than those that will be released or assumed upon Closing);
Decatur Retirement, L.L.C. is the fee owner of the Decatur Fee Premises, the
Decatur Improvements and all of the other Assets with respect to the Decatur
Facility, subject to the Permitted Exceptions, free and clear of all liens,
mortgages, security interests, adverse claims, and all encumbrances (other than
those that will be released or assumed upon the Closing); Council Bluffs
Retirement, L.L.C. is the fee owner of the Council Bluffs Fee Premises, the
Council Bluffs Improvements and all of the other Assets with respect to the
Council Bluffs Facility, subject to the Permitted Exceptions, free and clear of
all liens, mortgages, security interests, adverse claims, and all encumbrances
(other than those that will be released or assumed upon the Closing); and
Primrose Cottages Retirement, L.L.C. is the fee owner of the Aberdeen Cottages
Fee Premises, the Aberdeen Cottages Improvements and all of the other Assets
with respect to the Aberdeen Cottages, subject to the Permitted Exceptions, free
and clear of all liens, mortgages, security interests, adverse claims, and all
encumbrances (other than those that will be released or assumed upon the
Closing).

5.1.4 Ownership of Assets. Except as set forth on the attached Schedule 5.1.4,
the Assets, together with the Excluded Assets, constitute all interests in all
assets owned or controlled by Sellers, and any of their respective Affiliates
located at or used in connection with the operation of the Businesses.

5.1.5 Consents and Approvals; No Conflicts. Subject to the recording of Sellers’
Documents, as appropriate, (i) no filing with, and no permit, authorization,
consent or approval of, any Governmental Authority or other Person is necessary
for execution or delivery by Sellers of any of Sellers’ Documents, or the
performance by Sellers of any of their obligations under this Agreement or any
of Sellers’ Documents or the consummation by Sellers of the transactions
described in this Agreement, except to the extent such permit, authorization,
consent or approval (a) has been or will be obtained by the applicable Seller
prior to or at Closing or (b) obtaining such permit, authorization, consent or
approval is Purchaser’s responsibility hereunder, and (ii) neither the execution
and delivery by Sellers of this Agreement or any of Sellers’ Documents, nor the
performance by Sellers of any of their obligations under this Agreement or any
of Sellers’ Documents, nor the consummation by Sellers of the transactions
described in this Agreement, will (A) violate any provision of Sellers’
organizational or governing documents, (B) violate any Applicable Law to which
Sellers are subject, (C) result in a violation or breach of, or constitute a
default under any of the Contracts that affect Sellers or any of the Assets in
any respect, or (D) result in the creation or imposition of any lien or
encumbrance on any of the Assets or any portion thereof.

5.1.6 Condemnation. Seller has not received any written notice of any pending
condemnation proceeding or other proceeding in eminent domain, and no such
condemnation proceeding or eminent domain proceeding is threatened affecting any
of the Real Property, or any portion thereof.

5.1.7 Compliance with Applicable Law. There is no, and Seller has not received
any written notice of, any violation of any provision of Applicable Law
(including, but not limited to, the Americans with Disabilities Act, the WARN
Act,

 

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COBRA, and those of environmental agencies), with respect to the ownership,
operation, use, maintenance or condition of any of the Assets which has not been
cured or dismissed with prejudice.

5.1.8 Litigation. Except as set forth on Schedule 2.4(f), Seller has not
(i) been served or threatened with any court filing in any litigation with
respect to any Assets in which Seller is named a party which has not been
resolved, settled or dismissed and which could result in an adverse impact on
the Assets or Seller’s title to any of the Assets or (ii) received written
notice of any claim, charge or complaint from any Governmental Authority or
other Person pursuant to any administrative, arbitration or similar adjudicatory
proceeding with respect to any Assets which has not been resolved, settled or
dismissed.

5.1.9 Taxes. All Taxes which would be delinquent if unpaid at Closing will be
paid in full or prorated at Closing as part of the prorations pursuant to
Article 9; provided, however, that if any Taxes are payable in installments,
such representation and warranty shall apply only to such installments which
would be delinquent if unpaid at Closing. Seller has not received any written
notice for an audit or delinquency of any Taxes with respect to any Assets which
has not been resolved or completed. There are no outstanding unpaid municipal
assessment notices against the Assets in a material amount. No Seller is
currently contesting any Taxes with respect to any Assets. All state and local
tax returns and tax reports required to be filed by Seller with respect to the
Assets on or before the date hereof have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed, and all of such returns were true, correct and complete in
all material respects as filed. All state, and local income, franchise, sales,
use, property, excise, payroll and other taxes in material amounts (including
interest and penalties and including estimated tax installments where required
to be filed and paid) due from or with respect to the Assets prior to the date
hereof have been fully paid, and appropriate accruals have been made on the
books of Seller for taxes not yet due and payable. All taxes and other
assessments and levies for material amounts which Seller is required by law to
withhold or to collect with respect to the Assets have been duly withheld and
collected, and have been paid over to the proper governmental authorities and
agencies to the extent due and payable. There are no outstanding or pending
claims, deficiencies or assessments for taxes due and payable, interest or
penalties with respect to the Assets by Seller for any taxable period.

5.1.10 Licenses and Permits. Sellers have made available to Purchaser a true and
complete copy of the Licenses and Permits that are necessary for the ownership
and operation of the Assets. A complete listing of the Licenses and Permits is
attached hereto as Schedule 2.2.8. Seller has not received any written notice
from any Governmental Authority or other Person of (i) any violation,
suspension, revocation or non-renewal of any Licenses and Permits that has not
been cured or dismissed, or (ii) any failure by Seller to obtain any Licenses
and Permits that are necessary for or relate to the ownership and/or operation
of the Assets that has not been cured or dismissed.

5.1.11 Tenant Leases. Schedule 2.2.5 sets forth a true, correct and complete
list and rent roll with respect to the Tenant Leases, and Seller has made

 

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available to Purchaser for review a copy of each of the Tenant Leases in
Seller’s possession, which are true, correct and complete copies of the Tenant
Leases in all material respects. Seller has not given nor received any written
notice of any breach or default under any of the Tenant Leases which has not
been cured. Except as set forth in Schedule 2.2.5, no tenants are entitled to
any rebates, rent concessions or free rent. No rents due under any of the Tenant
Leases are presently assigned, hypothecated or encumbered by Seller, other than
in connection with any mortgage encumbering the Real Property which shall be
satisfied prior to or in connection with the Closing. There are no unpaid
brokerage commissions or unpaid landlord obligations for tenant improvements in
connection with the current term of occupancy of tenants under the Tenant
Leases. No rent under any of the Tenant Leases has been prepaid (except for
rental for the current month and payments that are required to be made in
advance pursuant to the terms and provisions of the Tenant Leases and except for
prepayments set forth in the Tenant Leases). No tenant has notified Seller in
writing of its intent to terminate its Tenant Lease prior to expiration of the
term of such Tenant Lease. No party to the Tenant Leases in breach or default
under any material obligation thereunder. The attached Schedule 2.2.5 accurately
summarizes all the existing Tenant Leases and their material terms. Prior to
Closing, the applicable Seller will deliver to Purchaser updated information
current as of no earlier than five (5) Business Days prior to Closing on an
updated rent roll signed by a representative of Seller which shall replace
Schedule 2.2.5 for all purposes under this Agreement.

5.1.12 Possession. Except pursuant to the Permitted Exceptions, Tenant Leases
and Resident Agreements, no Person other than Sellers have any license, lease or
other right relating to the use or possession of the Real Property or any part
thereof.

5.1.13 Purchase Rights. There are no options or other agreements of any kind,
whereby any Person other than Purchaser will have acquired or will have any
right to acquire title or interest to all or any portion of the Assets, and
there are no purchase contracts, options or other agreements of any kind,
whereby any Person will have acquired or will have any right to acquire title or
interest to all or any portion of the Assets.

5.1.14 Facility Contracts. Schedule 2.2.7 sets forth a true, correct and
complete list of the Facility Contracts. The copies heretofore delivered to
Purchaser are true, correct and complete in all material respects. No party to
the Facility Contracts is in breach or default under any obligation thereunder
or any provisions thereof. The consent of all Persons whose consent for such
assignment is required has been or will be secured on or prior to the Closing
Date. Except as set forth on Schedule 2.2.7, no consent of any Person is
required as a condition to Sellers’ assignment of the Facility Contracts to
Purchaser at Closing. With respect to any Persons whose consent is required as a
condition to Sellers’ assignment of the Facility Contracts to Purchaser at
Closing, Seller covenants to employ diligent, good faith efforts to obtain such
consent(s) in writing (in a form reasonably acceptable to Purchaser) and to
deliver same to Purchaser prior to the expiration of the Inspection Period and,
if Seller fails to obtain such written consent(s) prior to the expiration of the
Inspection Period, the applicable Seller shall continue such efforts thereafter
until the Closing Date.

 

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5.1.15 Bankruptcy. Seller is not insolvent within the meaning of Title 11 of the
United States Code, as amended (the “Bankruptcy Code”), and is able to repay its
debts as they become due. Seller has not filed or taken any action to file a
voluntary petition, case or proceeding under any section or chapter of the
Bankruptcy Code, or under any similar law or statute of the United States or any
state thereof, relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of its debts and no such petition, case or proceeding
has been filed against it which has not been dismissed, vacated or stayed on
appeal and Seller has not been adjudicated as a bankrupt or insolvent or
consented to, nor filed an answer admitting or failing reasonably to contest an
allegation of bankruptcy or insolvency. Seller has not sought, or consented to
or acquiesced in, the appointment of any receiver, trustee, liquidator or other
custodian of it or a material part of its assets, and Seller has not made or
taken any action to make a general assignment for the benefit of creditors or an
arrangement, attachment or execution has been levied and no tax lien or other
governmental or similar lien has been filed, against it or a material part of
its properties, which has not been duly and fully discharged prior to the date
hereof.

5.1.16 Labor and Employment Matters. Except as set forth in Schedule 5.1.16, no
Seller is a party to any collective bargaining agreement or relationship with
any labor union that affects the Assets. During the three (3) years preceding
the date hereof, the Businesses have not experienced any labor disputes or labor
trouble. There are no union organizing activities, strikes, work stoppages or
slow downs in respect of the Businesses, nor has Seller been asked within the
past twelve (12) months by any Person to negotiate in connection with entering
into any collective bargaining agreement or other contract or written
understanding with a labor union or organization or any other Person
representing or seeking to represent any Employees. There are no outstanding
claims or actions or, to Seller’s knowledge, threatened claims or actions, by
any current or former employee of the Businesses against Seller or the
Businesses except as set forth in Section 5.1.8.

5.1.17 Construction Contracts. Except as set forth in Schedule 5.1.17, there are
no outstanding Contracts made by Seller for the construction or repair of any
Improvements, and Seller shall discharge and have released of record or bonded
all mechanic’s, builder’s or materialman’s liens, if any, arising from any labor
or materials furnished to the Real Property prior to the Closing to the extent
any such lien is not bonded over pursuant to Applicable Law.

5.1.18 General Condition of Assets. All material aspects of the Assets as of the
Closing Date will be in good working order and repair, except for normal wear
and tear and will be mechanically and structurally sound and free from material
defects in materials and workmanship as such are maintained in the ordinary
course of business.

5.1.19 Insurance Policies. Seller has not received written notice from any
insurance carrier of defects or inadequacies in the Assets which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.

 

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5.1.20 Environmental Condition of Real Property. To the best of Seller’s
knowledge, except as set forth in Schedule 5.1.20, there are no underground
storage tanks on the Real Property and the Real Property does not contain any
Hazardous Materials (other than any Hazardous Materials situated at the Real
Property in the Ordinary Course of Business or the ordinary course of business
of any tenant or other occupant of the Real Property which are stored, held,
used and disposed of in compliance with Environmental Laws) and there are no
Environmental Claims, Environmental Liabilities or violations of Environmental
Laws in respect of the Real Property.

5.1.21 Management Agreements. As of the Closing Date, there will be no
management agreements with respect to the Assets, other than those approved in
writing by Purchaser prior to Closing.

5.1.22 Compliance with Of-Record Matters. Seller has not received, nor given,
any written notice of any material violation of any exception item listed on
Schedule B of those certain title reports more which has not been cured or
dismissed, nor does there exist any breach or default with respect to any of
those exception items.

5.1.23 Finders and Investment Brokers. Seller has not dealt with any Person who
has acted, directly or indirectly, as a broker, finder, financial adviser or in
such other capacity for or on behalf of Seller in connection with the
transactions contemplated by this Agreement in a manner which would entitle such
Person to any fee or commission in connection with this Agreement or the
transactions contemplated by this Agreement.

5.1.24 Foreign Person. Seller is a “United States person” (as defined in
Section 7701(a)(30)(B) or (C) of the Code) for the purposes of the provisions of
Section 1445(a) of the Code.

5.1.25 Financial Statements. The profit and loss statements for the Businesses
which were provided to Purchaser: (i) are true and complete copies of the
operating statements for such periods prepared by Seller in the ordinary course
of its business operations with respect to the Businesses; and (ii) have been
prepared in accordance with GAAP and present fairly, in all material respects,
the operation results of the Businesses for the periods covered by such income
statements, subject to standard year-end adjustments for any year to date income
statements and financial notes and qualifications to such statements.

5.1.26 ERISA. Neither (i) any assets of Seller, nor (ii) any funds to be used by
Seller with respect to the transactions contemplated pursuant to this Agreement,
are, or at the Closing will be, pursuant to ERISA or the Code, considered for
any purpose of ERISA or Section 4975 of the Code to be assets of a Plan. Seller
is not executing this Agreement and will not be performing its obligations or
exercising its rights or remedies under the Agreement on behalf of or for the
benefit of any Plan. Neither the execution or delivery of this Agreement by
Seller, nor the performance by Seller of its obligations or the exercise of its
rights or remedies under this Agreement, nor any transaction contemplated under
this Agreement, is or will be a “prohibited transaction” within the

 

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meaning of Section 406 of ERISA or Section 4975 of the Code. For the purposes
hereof the following terms shall have the following meanings: “Code” shall mean
the Internal Revenue Code of 1986, as amended; “ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended (and any successor statute
and any applicable regulations or guidance promulgated thereunder); and “Plan”
shall mean a “plan” as that term is defined in Section 3(3) of ERISA or
Section 4975 of the Code.

5.1.27 Resident Agreements. Schedule 2.2.13 sets forth a true, correct and
complete list and rent roll with respect to the Resident Agreements and Seller
has made available for review by Purchaser a copy of each of the Resident
Agreements in Seller’s possession, which are true, correct and complete copies
of the Resident Agreements in all material respects. Seller has not given nor
received any written notice of any breach or default under any of the Resident
Agreements which has not been cured. Except for the community entrance fees set
forth on Schedule 2.2.5, no amounts due under any of the Resident Agreements are
presently assigned, hypothecated or encumbered by Seller, other than in
connection with any mortgage encumbering the Real Property which shall be
satisfied or assumed prior to or in connection with the Closing. No amounts
owing under any of the Resident Agreements has been prepaid (except for rental
for the current month and payments that are required to be made in advance
pursuant to the terms and provisions of the Resident Agreements). No resident
has notified Seller in writing of its intent to terminate its Resident Agreement
prior to expiration of the term of such Resident Agreement. The attached
Schedule 2.2.13 accurately summarizes all the existing Resident Agreements,
their material terms and their current payment status. Prior to Closing, the
applicable Seller will deliver to Purchaser updated information current as of no
earlier than five (5) Business Days prior to Closing on an updated Schedule
2.2.13 signed by a representative of Seller which shall replace Schedule 2.2.13
for all purposes under this Agreement.

5.1.28 Intellectual Property. Seller owns all rights in, and has all rights
necessary to transfer the, Intellectual Property to be transferred hereunder.

5.1.29 Name. Seller has the rights to use the names “Primrose Retirement
Community” and “Sweetwater Retirement Community” in connection with the
Businesses and Seller has not received notification of any claims or actions by
any party disputing or challenging Seller’s right to use such names.

5.1.30 Patriot Act. Sellers and their officers and shareholders, and their
respective principals, shall not transfer the proceeds obtained as a result of
this Agreement to any Person listed on the Office of Foreign Assets Control list
as “Terrorists” and “Specially Designated Nationals and Blocked Persons”, or
otherwise be in violation of the International Money Laundering Abatement and
Financial Anti-Terrorism Act of 2001.

5.1.31 Existing Use. The Real Property and the use thereof for the existing
Businesses, and the condition thereof do not violate in any material respect any
applicable deed restrictions, zoning or subdivision regulations, urban
redevelopment plans, local, state or federal environmental law or regulation or
any building code or fire

 

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code applicable to the Assets and are not designated by any governmental agency
to be in a flood plain area. Seller has no knowledge of any condition or state
of facts which would preclude, materially limit or materially restrict the use
of the Assets for the Businesses.

5.1.32 Restriction of Access. Seller has no knowledge of any current federal,
state, county or municipal plans to materially restrict or materially change
access to any part of the Real Property from any highway or road leading
directly to or abutting any part of the Real Property.

5.1.33 Location of Improvements. All of the Improvements are located on the Real
Property.

5.2 Purchaser’s Representations and Warranties. To induce Seller to enter into
this Agreement and to consummate the transactions described in this Agreement,
Purchaser hereby makes the representations and warranties in this Section 5.2,
upon which Purchaser acknowledges and agrees that Sellers are entitled to rely.

5.2.1 Organization and Power. Purchaser is duly incorporated or formed (as the
case may be), validly existing and in good standing in the laws of the
jurisdiction of its incorporation or formation, and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as currently being conducted.

5.2.2 Authority and Binding Obligation. Purchaser has full power and authority
to execute and deliver this Agreement and to perform all obligations of
Purchaser arising under this Agreement. Subject to Purchaser obtaining approval
from its Board of Directors during the Inspection Period, Purchaser has full
power and authority to execute and deliver all other documents to be executed
and delivered by Purchaser pursuant to this Agreement (the “Purchaser’s
Documents”), and to perform all obligations of Purchaser arising under each of
Purchaser’s Documents. The execution and delivery by the signer on behalf of
Purchaser of this Agreement and, when executed and delivered, each of
Purchaser’s Documents, and the performance by Purchaser of its obligations under
this Agreement, and when executed and delivered, each of Purchaser’s Documents,
has been, or will be, duly and validly authorized by all necessary actions by
Purchaser. This Agreement and, when executed and delivered, each of Purchaser’s
Documents, constitutes, or will constitute, legal, valid and binding obligations
of Purchaser, enforceable against Purchaser in accordance with its and their
terms, except to the extent Sellers are in default thereunder. Unless Purchaser
terminates this Agreement prior to the end of the Inspection Period as provided
for herein, following the expiration of the Inspection Period, Purchaser shall
be deemed to have represented that it has obtained all necessary Board
approvals.

5.2.3 Consents and Approvals; No Conflicts. No filing with, and no permit,
authorization, consent or approval of, any Governmental Authority or other
Person is necessary for the execution or delivery by Purchaser of this Agreement
or the performance by Purchaser of any of its obligations under this Agreement.
Subject to Purchaser obtaining the approval of its Board of Directors during the
Inspection Period,

 

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no filing with, and no permit, authorization, consent or approval of, any
Governmental Authority or other Person is necessary for the execution or
delivery by Purchaser of any of Purchaser’s Documents, the performance by
Purchaser of any of its obligations under any of Purchaser’s Documents, or the
consummation by Purchaser of the transactions contemplated by this Agreement or
any of Purchaser’s Documents. With approval of Purchaser’s Board of Directors,
neither the execution and delivery by Purchaser of any of Purchaser’s Documents,
nor the performance by Purchaser of any of its obligations under any of
Purchaser’s Documents, nor the consummation by Purchaser of the transactions
described in this Agreement, will: (A) violate any provision of the
organizational or governing documents of Purchaser; (B) violate any Applicable
Law to which Purchaser is subject; or (C) result in a violation or breach of or
constitute a default under any contract, agreement or other instrument or
obligation to which Purchaser is a party or by which any of Purchaser’s
properties are subject. Unless Purchaser terminates this Agreement prior to the
end of the Inspection Period as provided for herein, following the expiration of
the Inspection Period, Purchaser shall be deemed to have represented that it has
obtained all necessary Board approvals.

5.2.4 Finders and Investment Brokers. Purchaser has not dealt with any Person
who has acted, directly or indirectly, as a broker, finder, financial adviser or
in such other capacity for or on behalf of Purchaser in connection with the
transactions described by this Agreement in any manner which would entitle such
Person to any fee or commission in connection with this Agreement or the
transactions described in this Agreement.

 

6. COVENANTS

6.1 Confidentiality.

6.1.1 Disclosure of Confidential Information. The Parties acknowledge and agree
that the existence of this Agreement, the terms of this Agreement and any other
information disclosed in Sellers’ Due Diligence Materials, Purchaser’s Due
Diligence Reports or any other documents, materials, data or other information
with respect to the Assets which is not generally known to the public shall be
confidential. Nothing herein shall restrict or limit Sellers from communicating
with tenants, lenders, contract parties, owner’s associations, or government
officials or bodies in connection with obtaining estoppels or other required
consents or approvals, as may be reasonably necessary to consummate the
transactions contemplated under this Agreement, or Purchaser from contacting
Sellers’ company officials, property engineers and architects, and other
third-party consultants assisting Purchaser in its investigation of the Assets,
subject to Section 6.1.3. Nothing herein shall restrict or limit Sellers from
communicating the existence and progress of the transactions contemplated by
this Agreement to their lenders or from making disclosures required under
Applicable Law.

6.1.2 Public Announcements. No Party shall have the right to make a public
announcement regarding the transactions described in this Agreement without the
prior approval of the other Party. Sellers and Purchaser shall approve the
timing, form and substance of any such public announcement, which approval shall
not be

 

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unreasonably withheld, conditioned or delayed, except if a Party is required to
make a public announcement under Applicable Law, in which case no such approval
by any other Party shall be required.

6.1.3 Communication with Governmental Authorities. Purchaser and its
representatives and consultants shall have the right to review building
department, health department and other local Governmental Authority records
with respect to the Assets and the operation of the Businesses and request
written or verbal confirmation of zoning and any other compliance by the Assets
with any Applicable Law. Purchaser and its representatives and consultants shall
have the right to contact Governmental Authorities to pursue the issuance of any
Licenses and Permits desired by Purchaser. Purchaser shall use reasonable
efforts to coordinate such communication with Sellers.

6.2 Assessments. Any assessments for improvements or other work at the Real
Property incurred prior to Closing shall be the responsibility of and paid by
Sellers and Sellers shall indemnify, save, insure, pay, defend and hold
Purchaser harmless from and against any claims therefor any Liability arising
therefrom. Sellers acknowledges that one or more Affiliates of Sellers shall
also be responsible for all of such assessments levied after Closing in their
capacity as tenants under the Lease Agreements. The obligations under the first
sentence of this Section 6.2 shall survive Closing.

6.3 Conduct of the Businesses.

6.3.1 Operation, Maintenance and Repair in Ordinary Course of Business. From the
Effective Date until Closing or earlier termination of this Agreement, Sellers
shall conduct the Businesses in the Ordinary Course of Business including,
without limitation, (i) performing maintenance and repairs and making capital
improvements to the Real Property in the Ordinary Course of Business; and
(ii) maintaining insurance coverage consistent with Sellers’ risk management
policies in place as of the date hereof; and (iii) replacing and/or repairing
Personal Property in the Ordinary Course of Business. Sellers shall maintain the
Assets and maintain adequate supplies and inventory in accordance with the
Ordinary Course of Business (such obligation to include the maintenance of
Sellers’ casualty and liability insurance policies in the Ordinary Course of
Business), subject to reasonable wear and tear and further subject to
destruction by casualty or eminent domain. Purchaser shall have the right to
inspect the Assets prior to Closing to determine if any Seller has breached the
covenants of such Seller in this Section 6.3.1. Sellers in all material respects
shall comply with the terms conditions and requirements under the Contracts,
Tenant Leases, and Licenses and Permits, and shall continue to make all payments
due thereunder prior to delinquency (whether or not Purchaser shall assume the
same). No Seller shall sell, remove or otherwise dispose of any items of
Personal Property other than in the Ordinary Course of Business.

6.3.2 Contracts, Tenant Leases, Resident Agreements and Licenses and Permits.
From the Effective Date until Closing or earlier termination of this Agreement,
no Seller shall, (i) without Purchaser’s prior written consent,

 

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which shall not be unreasonably withheld, conditioned or delayed, amend, extend,
renew or terminate any of the existing Facility Contracts, Tenant Leases,
Licenses and Permits or Resident Agreements except in the Ordinary Course of
Business, or (ii) without Purchaser’s prior written consent in its sole
discretion procure any new contract, tenant leases, licenses and permits or
resident agreements, except, in each instance, in the Ordinary Course of
Business, or in the event that any Seller is required to act on an emergency
basis to enter into any such contract to prevent material damages to the Assets
or the operation of the Businesses. Notwithstanding the foregoing, from the
Effective Date until the Closing or earlier termination of this Agreement,
should any Seller enter into any such new contracts, tenant leases, licenses and
permits or resident agreements, whether or not in the Ordinary Course of
Business, or should any Seller become aware of any contracts or licenses and
permits or resident agreements that were not previously disclosed to Purchaser,
such Seller shall immediately disclose the same to Purchaser in writing, and
Purchaser shall have the right take an assignment of such contracts, tenant
leases, licenses and permits and resident agreements at Closing pursuant to the
terms of this Agreement. If Purchaser elects not to take an assignment of any
such new contracts, tenant leases, and licenses and permits, such contracts,
tenant leases, and licenses and permits shall be deemed Retained Liabilities of
Sellers.

6.4 Licenses and Permits. To the extent permissible under applicable Law and not
otherwise required by Purchaser’s lender to be in Purchaser’s name, each Seller
or Tenant shall keep in its name all of the applicable Retained Licenses and
Permits. Purchaser shall be responsible for obtaining, and Sellers or Tenant
shall be responsible for reasonably cooperating with respect to, the transfer of
all Transferred Licenses and Permits and Purchaser shall be responsible for
obtaining all other new licenses and permits (to the extent the existing
Licenses and Permits are not transferable). Purchaser, at its cost and expense,
shall promptly submit all necessary applications and other materials to the
appropriate Governmental Authority and take such other actions to effect the
transfer of the Transferred Licenses and Permits or issuance of new licenses and
permits as of the Closing, and Sellers or Tenant shall reasonably cooperate with
Purchaser to cause the Transferred Licenses and Permits to be transferred or new
licenses and permits to be issued to Purchaser. This Section 6.4 shall survive
the Closing.

6.5 Tax Contests.

6.5.1 Taxable Period Terminating Prior to Closing Date. Each Seller shall retain
the right, at its sole cost and expense, to commence, continue and settle any
proceeding to contest any Taxes for any taxable period which terminates prior to
the Closing Date, and shall be entitled to any refunds or abatements of Taxes
awarded in such proceedings; provided, however, Sellers shall indemnify and hold
Purchaser harmless from and against any Indemnification Loss incurred by
Purchaser as a result of any Seller exercising its rights to so contest any
Taxes under this Section 6.5.1. This Section 6.5.1 shall survive the Closing.

6.5.2 Taxable Period Including the Closing Date. Sellers shall have the right to
commence, continue and settle any proceeding to contest any Taxes for any
taxable period which includes the Closing Date. Notwithstanding the foregoing,
if

 

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Purchaser desires to contest any Taxes for such taxable period and the
applicable Seller has not commenced any proceeding to contest any such Taxes for
such taxable period, Purchaser, may request such Seller to do so. If any Seller
desires to contest such Taxes, such Seller shall provide written notice to
Purchaser within thirty (30) days after receipt of Purchaser’s request
confirming that such Seller will contest such Taxes, in which case such Seller
shall proceed to contest such Taxes, and Purchaser shall not have the right to
contest such Taxes. If Seller fails to provide such written notice confirming
that such Seller will contest such Taxes within such thirty (30) day period,
Purchaser shall have the right to contest such Taxes. Any refunds or abatements
awarded in such proceedings shall be used first to reimburse the Party
contesting such Taxes for the reasonable costs and expenses incurred by such
Party in contesting such Taxes, and the remainder of such refunds or abatements
shall be prorated between the applicable Seller and Purchaser (subject to the
terms of the Lease Agreements) as of the cut-off time, and the Party receiving
such refunds or abatements promptly shall pay such prorated amount due to the
other Party. This Section 6.5.2 shall survive the Closing.

6.5.3 Taxable Period Commencing After Closing Date. Purchaser acknowledges that
Tenant under the Facility Leases, shall have the right under the Facility Leases
to commence, continue and settle any proceedings to contest Taxes for any
taxable period which commences after the Closing Date, and shall, subject to the
terms of the applicable Facility Leases, be entitled to any refunds or
abatements of Taxes awarded in such proceedings.

6.5.4 Cooperation. Sellers and Purchaser shall use commercially reasonable
efforts to cooperate with the Party contesting the Taxes (at no cost or expense
to the Party not contesting the Taxes other than any de minimis cost or expense
or any cost or expense which the requesting Party agrees in writing to
reimburse) and to execute and deliver any documents and instruments reasonably
requested by the Party contesting the Taxes in furtherance of the contest of
such Taxes. This Section 6.5.4 shall survive the Closing.

6.6 Notices and Filings. Sellers and Purchaser shall use commercially reasonable
efforts to cooperate with each other (at no cost or expense to the Party whose
cooperation is requested, other than any de minimis cost or expense or any cost
or expense which the requesting Party agrees in writing to reimburse) to provide
written notice to any Person under any Facility Contracts, Tenant Leases, or
Licenses and Permits and to effect any required registrations or filings with
any Governmental Authority or other Person, regarding the change in ownership of
the Assets.

6.7 Further Assurances. From the Effective Date until the Closing or termination
of this Agreement, Sellers and Purchaser shall use commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate the transactions
described in this Agreement, including, without limitation, (i) obtaining all
necessary consents, approvals and authorizations required to be obtained from
any Governmental Authority or other Person under this Agreement or Applicable
Law, and (ii) effecting all registrations and filings required under this
Agreement or Applicable Law. After Closing, Sellers and Purchaser shall use
commercially reasonable efforts (at no cost

 

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or expense to such Party, other than any de minimis cost or expense or any cost
or expense which the requesting Party agrees in writing to reimburse) to further
effect the transactions contemplated in this Agreement.

6.8 Estoppel Certificate. Sellers shall obtain estoppel certificates and deliver
the same to Purchaser as of or prior to the Closing Date, from any third party
required by Purchaser as a result of its due diligence regarding the Assets (the
“Third-Party Estoppels”), in forms reasonably satisfactory to Purchaser,
including, without limitation, estoppel certificates regarding personal property
used in the operation of the Businesses and any service or maintenance
contracts.

6.9 Exclusivity. Sellers covenant and agree to refrain during the term of this
Agreement from making, accepting, encouraging or soliciting or otherwise
pursuing any other offer or proposal or agreement regarding the sale of the
Assets or any portion thereof or any interest therein, and will deal exclusively
with Purchaser in good faith toward the completion of the transactions
contemplated herein unless this Agreement shall be terminated as provided
herein.

6.10 Bulk Sales. Sellers, at no expense to Purchaser, shall comply with all
applicable “bulk sales laws” in a timely manner, taking into account the timing
of the Closing.

6.11 Employees

6.11.1 Liability of Sellers and Purchaser. At Closing, Sellers shall terminate
all of its employees located at the Facilities. With respect to wages and
benefits of Employees, each Seller shall be solely responsible for all wages,
salaries, bonuses, employment taxes, withholding taxes, and all accrued vacation
days, sick days and personal days accruing prior to the Closing Date in its
capacity as Seller. Purchaser shall never be or be deemed the employer of any
Employee and shall not be liable to any Employee for any wages, salaries,
bonuses, vacation days, sick days or personal days in which said Employee may
have acquired an accrued or vested right by virtue of their employment. Sellers
shall and hereby agree to indemnify, save, defend, pay, insure and hold
Purchaser harmless from and against any Liability for wages, salaries, bonuses,
accrued vacation days, sick days and personal days to be paid to Employees.
Sellers shall remain liable for and hereby agree to indemnify, save, defend,
pay, insure and hold Purchaser harmless from and against any Liability arising
out of or relating to medical, pension, welfare benefits, other employee
benefits or other fringe benefits (hereinafter collectively referred to as
“benefits”) due to Employees under plans in which employees of the Businesses
participate whether prior to or after Closing, and all payments due on the plans
providing such benefits. Sellers shall also remain responsible for and hereby
agree to indemnify, save, defend, pay, insure and hold Purchaser harmless from
and against any loss, cost, damage, claims, expense or Liability arising out of
or relating to any Sellers’ failure to pay (a) any Employee of the Businesses’
wages, salary, bonuses, employment taxes, accrued vacation pay, sick days and
personal days, and withholding taxes, (b) benefits, whenever due, provided under
plans in which Employees of the Businesses participate, (c) liability under
Section 4980B, Part 6 of Title I of ERISA or Title IV of ERISA and (d) liability
under the WARN Act.

 

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7. CLOSING CONDITIONS

7.1 Purchaser’s Closing Conditions. Purchaser’s obligations to close the
transactions described in this Agreement are subject to the satisfaction at or
prior to Closing of the following conditions precedent (the “Purchaser’s Closing
Conditions”):

7.1.1 Sellers’ Deliveries. All of the applicable Sellers’ Closing Deliveries
shall have been delivered to Purchaser or deposited with Escrow Agent in the
Closing Escrow, to be delivered to Purchaser at the Closing.

7.1.2 Representations and Warranties. The representations or warranties of the
Sellers in this Agreement shall be true and correct in all material respects as
of the Closing (or as such other date to which such representation and
warranties expressly were made).

7.1.3 Covenants and Obligations. The covenants and obligations of the Sellers in
this Agreement shall have been performed in all material respects.

7.1.4 Title Policies. The Title Company shall have irrevocably committed to
issue the applicable Title Policies pursuant to Section 4.2.4 with all standard
exceptions deleted and all requirements for issuance of each such Title Policy
satisfied and deleted.

7.1.5 Change in Environmental Condition of Property. No event shall have
occurred following the Effective Date and prior to the Closing Date which would
result in a violation of any Environmental Law.

7.1.6 Adverse Proceedings. No litigation or other court action shall have been
commenced seeking to obtain an injunction or other relief from such court to
enjoin the consummation of the transactions described in this Agreement, and no
preliminary or permanent injunction or other order, decree or ruling shall have
been issued by a court of competent jurisdiction or by any Governmental
Authority, would make illegal or invalid or otherwise prevent the consummation
of the transactions described in this Agreement.

7.1.7 Adverse Law. No Applicable Law shall have been enacted that would make
illegal or invalid or otherwise prevent the consummation of the transactions
described in this Agreement.

7.1.8 Contracts. There shall be no material default by any Seller under any of
the Facility Contracts.

7.1.9 Licensing Approvals. Purchaser shall have obtained the Licensing
Approvals.

7.1.10 Financing Approvals. Purchaser shall have obtained financing for the
transaction as contemplated hereunder.

 

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7.1.11 Closing Deliveries. Sellers shall have satisfied all of Sellers’ Closing
Deliveries under Section 8.3 below.

7.2 Failure of Any Purchaser’s Closing Condition. If any of Purchaser’s Closing
Conditions is not satisfied at Closing (a “Purchaser’s Closing Condition
Failure”), and Sellers fail to cure such condition failure within fifteen
(15) days after written notice is delivered by Purchaser to Sellers (excepting a
failure to deliver Sellers’ Closing Deliveries at Closing for which there shall
be no cure period) then Purchaser shall have the right (unless such Purchaser’s
Closing Condition Failure was within the discretion or control of Purchaser), in
Purchaser’s absolute discretion, to either (i) terminate this Agreement by
providing written notice to Sellers, in which case the Deposit shall be refunded
to Purchaser in accordance with Section 3.2.4, and the Parties shall have no
further rights or obligations under this Agreement, except as set forth herein
below and except with respect to those which expressly survive such termination,
or (ii) complete the transactions set out herein, without prejudice to any right
or remedy of Purchaser in respect thereof. If Purchaser terminates this
Agreement pursuant to clause (i) above and if such termination is by reason of a
Purchaser’s Closing Condition Failure (other than Sections 7.1.6, 7.1.7 or 7.1.9
(provided Sellers shall have used commercially reasonable efforts to cause the
satisfaction of such Purchaser’s Closing Condition)) which was within the
control or discretion of Sellers, then Sellers shall reimburse Purchaser for all
reasonable out-of-pocket expenses incurred by Purchaser in connection with the
transactions contemplated by this Agreement.

7.3 Sellers’ Closing Conditions. Sellers’ obligations to close the transactions
contemplated in this Agreement are subject to the satisfaction at or prior to
Closing of the following conditions precedent, as applicable (the “Sellers’
Closing Conditions”):

7.3.1 Receipt of the Purchase Price. Purchaser shall have (i) paid to Sellers or
deposited with Escrow Agent with irrevocable written direction to disburse the
same to Sellers, the Purchase Price (as allocated, and as adjusted for
prorations pursuant to Article 9) and (ii) delivered irrevocable written
direction to Escrow Agent to disburse the Deposit to the Sellers.

7.3.2 Purchaser’s Deliveries. All of the Purchaser’s Closing Deliveries shall
have been delivered to Sellers or deposited with Escrow Agent in the Closing
Escrow, to be delivered to the applicable Sellers at the Closing.

7.3.3 Representations and Warranties. The representations and warranties of
Purchaser in this Agreement shall be true and correct in all material respects
as of the Closing (or as of such other date to which such representation or
warranty expressly is made).

7.3.4 Covenants and Obligations. The applicable covenants and obligations of
Purchaser in this Agreement shall have been performed in all material respects.

7.3.5 Adverse Proceedings. No litigation or other court action shall have been
commenced by a third-party seeking to obtain an injunction or other relief from
such court to enjoin the consummation of the transactions described in this
Agreement,

 

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and no preliminary or permanent injunction or other order, decree or ruling
shall have been issued by a court of competent jurisdiction or by any
Governmental Authority, would make illegal or invalid or otherwise prevent the
consummation of the transactions described in this Agreement.

7.3.6 Adverse Law. No Applicable Law shall have been enacted that would make
illegal or invalid or otherwise prevent the consummation of the transactions
described in this Agreement.

7.3.7 Closing Deliveries. Purchaser shall have satisfied all of Purchaser’s
Closing Deliveries under Section 8.4 below.

7.4 Failure of Sellers’ Closing Conditions. If any of applicable Sellers’
Closing Conditions is not satisfied at Closing (a “Sellers’ Closing Condition
Failure”), and Purchaser fails to cure such condition failure within fifteen
(15) days after written notice from Sellers to Purchaser of such failure
(excepting a failure to deliver the Purchase Price at Closing for which there
shall be no cure period) then Sellers shall have the right, in Sellers’ absolute
discretion (unless such Sellers’ Closing Condition Failure was within the
discretion or control of Sellers), to either (i) terminate this Agreement by
providing written notice to Purchaser, in which case the Deposit shall be
disbursed to Sellers in accordance with Section 3.2.3 (unless such termination
is as a result of Sellers’ Closing Condition under Sections 7.3.5 or 7.3.6
(provided Purchaser shall have used commercially reasonable efforts to cause the
satisfaction of such Sellers’ Closing Condition), in which case the Deposit
shall be returned to Purchaser) and the Parties shall have no further rights or
obligations under this Agreement, except those which expressly survive the
termination, or (ii) complete the transactions set out herein, without prejudice
to any right or remedy of Sellers.

 

8. CLOSING

8.1 Closing Date. If both Purchaser’s Closing Conditions and Sellers’ Closing
Conditions have been satisfied pursuant to Article 7, the closing of the
transactions described in this Agreement (the “Closing”) shall occur on the date
which is fifteen (15) days following the later of (a) expiration of the
Inspection Period and (b) the satisfaction or waiver of Purchaser’s Closing
Conditions, other than the Sellers’ Closing Deliveries. The Closing shall occur
at the offices of Purchaser’s attorney in Orlando, Florida, or such other place
as agreed to in writing between Sellers and Purchaser. At the request of a
Party, the Parties shall reasonably cooperate to accomplish the Closing “by
mail.”

8.2 Closing Escrow. If the Parties agree to effect the Closing through an escrow
(the “Closing Escrow”), then, prior to the Closing, the Parties shall enter into
a closing escrow agreement with the Escrow Agent with respect to the Closing
Escrow in form and substance reasonably acceptable to Sellers, Purchaser and the
Escrow Agent (the “Closing Escrow Agreement”) pursuant to which (i) the Purchase
Price to be paid by Purchaser pursuant to Section 3.3 shall be deposited with
Escrow Agent, (ii) all of the documents required to be delivered by Sellers and
Purchaser at Closing pursuant to this Agreement shall be deposited with Escrow
Agent, and (iii) at Closing, the Purchase Price (as adjusted for prorations
pursuant to Article 9) and the Deposit shall be disbursed to the Sellers and the
documents deposited into the Closing Escrow shall be delivered to the Sellers
and Purchaser (as the case may be) pursuant to the Closing Escrow Agreement.

 

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8.3 Sellers’ Closing Deliveries. At Closing, the Sellers shall deliver or cause
to be delivered to Purchaser, or deposited with Escrow Agent in the Closing
Escrow to be delivered to Purchaser at Closing, or (with the approval of
Purchaser, acting reasonably) otherwise to be delivered or made available to
Purchaser upon Closing, all of the following documents, each of which shall have
been duly executed by the applicable Seller and acknowledged (if required), and
other items, set forth in this Section 8.3 (the “Sellers’ Closing Deliveries”),
as follows:

8.3.1 Closing Certificate. A closing certificate substantially in the form
attached hereto as Exhibit “8.3.1”.

8.3.2 Deeds. Deeds substantially in substantially the form attached hereto as
Composite Exhibit “8.3.2”, conveying the Fee Premises and the Improvements to
Purchaser, free and clear of all liens restrictions and encumbrances, subject
only to Permitted Exceptions.

8.3.3 Bill of Sale. A Bill of Sale substantially in the form attached hereto as
Exhibit “8.3.3”, transferring the Personal Property and Fixtures to Purchaser.

8.3.4 TIF Assignment. An assignment of the Developer’s Rights under that certain
Agreement for Private Redevelopment dated March 12, 2007 by and between the City
Council of Council Bluffs, Iowa and Council Bluffs Retirement L.L.C.
substantially in the form attached hereto as Exhibit 8.3.4.

8.3.5 Assignment and Assumption of Intellectual Property. An Assignment and
Assumption of Intellectual Property substantially in the form attached hereto as
Exhibit “8.3.5” assigning the Intellectual Property to Purchaser.

8.3.6 Intentionally Omitted.

8.3.7 Intentionally Omitted.

8.3.8 Title Requirements. Such agreements, affidavits or other documents as may
be reasonably required by the Title Company from Sellers to issue the Title
Policies.

8.3.9 Other Declarations. Any transfer tax declarations or other documents
required under Applicable Law in connection with the conveyance of the Assets.

8.3.10 FIRPTA Certificates and Title Affidavits. An affidavit from Sellers with
respect to compliance with the Foreign Investment in Real Property Tax Act
(Internal Revenue Code Sec. 1445, as amended) and the regulations issued
thereunder and any similar state tax requirements and an affidavit from Sellers
in favor of the Title Company which shall be sufficient to delete the standard
exceptions from the Title Policy.

 

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8.3.11 Closing Statement. The Closing Statement prepared pursuant to
Section 9.1.

8.3.12 Authority Documents. Such resolutions, and incumbency certificates as
required to evidence the capacity and authority of any Person signing on behalf
of Sellers.

8.3.13 Tenant and Resident Notices. Executed written notices, to be delivered
post-Closing, from Sellers to each tenant under the Tenant Leases and each
resident under the Resident Agreements advising such tenants and residents of
the transaction.

8.3.14 Estoppel Certificates. All Third-Party Estoppels.

8.3.15 Possession and Keys. Possession of the Real Property free and clear of
all parties in possession, except tenants in possession pursuant to the Tenant
Leases, and duplicates of or access information for all keys, codes and other
security devices relating to the Improvements and the Real Property.

8.3.16 Property Related Deliveries. On the Closing Date, (1) originals, or
copies if originals are not available, of all Tenant Leases and Resident
Agreements; and (2) in addition, to the extent the foregoing have not heretofore
been delivered to Purchaser, Sellers shall cause to be delivered to Purchaser:
(i) any plans and specifications for the Improvements in Sellers’ possession or
control; (ii) all unexpired warranties and guarantees which Sellers have
received in connection with any work or services performed with respect to, or
equipment installed in, the Improvements; (iii) originals, or copies if
originals are not available, of all Facility Contracts that will be assigned to
Purchaser and remain in effect after Closing; (v) copies of all Licenses and
Permits that will be assigned to Purchaser; (vi) copies of all Books and
Records, whether kept in paper or electronic form; (vii) duplicates of all keys
and lock combinations relating to the Assets and (ix) copies of all other
materials necessary for the continuity of Businesses, together with all files,
advertising and promotional information and materials.

8.3.17 Sellers’ Certificate. Delivery of the Sellers’ Certificate, the form of
which is attached hereto as Exhibit “8.3.17”.

8.3.18 Facility Leases. Counterpart original Facility Leases for each of the
Properties, executed by the Tenant.

8.3.19 Facility Lease Guarantees. A Guaranty of the Tenant’s obligations under
each of the Facility Leases from the Guarantor to and in favor of the Landlord.

8.3.20 Other Documents. Such other documents and instruments as may be
reasonably requested by Purchaser or the Title Company in order to consummate
the transactions described in this Agreement.

 

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8.4 Purchaser’s Closing Deliveries. At Closing, Purchaser shall deliver or cause
to be delivered to Sellers or deposited with Escrow Agent in the Closing Escrow
to be delivered to Sellers all of the following, each of which, to the extent
applicable, shall have been duly executed by Purchaser and acknowledged (if
required), and other items, set forth in this Section 8.4 (the “Purchaser’s
Closing Deliveries”):

8.4.1 Purchase Price. The Purchase Price (as adjusted for prorations pursuant to
Article 9) in the form of immediately available funds delivered by wire
transfer, to be paid by Purchaser.

8.4.2 Disbursement Letter. A letter of direction to Escrow Agent directing
Escrow Agent to disburse the Deposit to the Sellers.

8.4.3 Closing Certificate. A closing certificate substantially in the form
attached hereto as Exhibit “8.4.3”.

8.4.4 Counterpart Execution Documents. A counterpart of each of the documents
and instruments to be delivered by Sellers under Section 8.3 which require
execution by Purchaser;

8.4.5 Authority Documents. Such resolutions, and incumbency certificates as
required to evidence the capacity and authority of any Person signing on behalf
of Purchaser.

8.4.6 Facility Leases. Counterpart original Facility Leases for each of the
Properties, executed by the Landlord.

8.4.7 Other Documents. Such other documents and instruments as may be reasonably
requested by Sellers or the Title Company in order to consummate the
transactions described in this Agreement.

 

9. EXPENSES

9.1 Closing Statement. The Parties shall jointly prepare prior to Closing a
closing statement (the “Closing Statement”). The Closing Statement shall be
approved and executed by the Parties at Closing, and such adjustments and
prorations shall be final with respect to the items set forth in the Closing
Statement.

9.2 Expenses. Purchaser and Sellers shall pay their respective Transaction Costs
as defined in Sections 9.5 and 9.6 below. Since Tenant will be responsible for
the Property’s income and expense under the Lease Agreement, they shall not be
prorated.

9.3 Cash. All cash on hand, escrow and reserve accounts of Sellers, accounts
receivable and accounts payable, indebtedness or liabilities for the period
prior to the Closing Date shall remain the property or responsibility, as
applicable, of Sellers. Sellers shall be responsible for the payment of all
expenses on account of services and supplies furnished to and for the benefit of
the Assets or Businesses through and including the day preceding the Closing
Date and Purchaser shall be responsible for the payment of all expenses on
account of services and supplies furnished to and for the benefit of the Assets
or Businesses from and including the Closing Date.

 

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9.4 Employees. If applicable, Sellers will comply with the notice requirements
under the WARN Act, the COBRA or any similar federal, state or local legislation
with respect to any Employees terminated by Sellers in connection with this
transaction. It is expressly understood and agreed that Purchaser is not and
shall not be responsible or liable, directly or indirectly, for payment of any
benefits, severance liability, compensation, pay or other obligations, of
whatever nature, due or alleged to be due to any Employee of Sellers
attributable to any time period up to, upon and after Closing.

9.5 Purchaser’s Transaction Costs. In addition to the other costs and expenses
to be paid by Purchaser as set forth elsewhere in this Agreement, Purchaser
shall pay for the following items in connection with this transaction: (i) the
fees and expenses incurred by Purchaser for Purchaser’s Inspectors or otherwise
in connection with the Inspections; (ii) the fees and expenses of Purchaser’s
attorneys, accountants and consultants; (iii) all transfer, sales or similar tax
and recording charges payable in connection with the conveyance of the Assets
which are normally paid by the Purchaser in the applicable jurisdictions where
the Facilities are located; (iv) the fees and expenses for the Survey; (vi) any
of Purchaser’s financing-related expenses, including but not limited to,
mortgage tax, title insurance fees and expenses for any loan title insurance
policies, recording charges or other amounts payable in connection with the
assignment and assumption of the Existing Debt and/or any new financing obtained
by Purchaser; and (vii) one half (1/2) of the fees and expenses for the Escrow
Agent.

9.6 Sellers’ Transaction Costs. Sellers shall pay for the following items in
connection with this transaction: (i) the fees and expenses of Sellers’
attorneys, accountants, and consultants; and (ii) all transfer, sales or similar
tax and recording charges payable in connection with the conveyance of the
Assets which are normally paid by the Sellers in the applicable jurisdictions
where the Facilities are located; (iii) the fees and expenses incurred in
connection with the preparation and issuance of the Title Policies; (iv) any
governmental fees or expenses payable for the assignment, transfer or conveyance
of any Facility Contracts, Tenant Leases, Resident Agreements or Licenses and
Permits; and (v) one half (1/2) of the fees and expenses for the Escrow Agent.

 

10. DEFAULT AND REMEDIES

10.1 Sellers’ Default. If, at or any time prior to Closing, any Seller fails to
perform in any material respect any of its covenants or obligations under this
Agreement which breach or default is not caused in whole or in part by a
Purchaser’s Default (and, if such failure is other than a failure to deliver
Sellers’ Closing Deliveries, Sellers fail to cure such condition failure within
fifteen (15) days after written notice of such failure is delivered by Purchaser
to Sellers) (a “Sellers’ Default”), and no material Purchaser’s Default has
occurred which remains uncured, Purchaser may elect, as its sole and exclusive
remedy, to (a) terminate this Agreement by providing written notice to
applicable Sellers, in which case the Deposit shall be refunded to Purchaser in
accordance with Section 3.2.4, applicable Sellers shall reimburse Purchaser for
all reasonable, actual, third party out-of-pocket expenses not to exceed
$400,000 incurred by Purchaser in connection with the transactions contemplated
by this Agreement, and the Parties

 

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shall have no further rights or obligations under this Agreement, except those
which expressly survive such termination, or (b) waive such default and proceed
to Closing without any reduction in or setoff against the Purchase Price, or
(c) obtain a court order for specific performance.

10.2 Purchaser’s Default. If at any time prior to Closing, Purchaser fails to
perform in any material respect any of its covenants or obligations under this
Agreement which breach or default is not caused in whole or in part by a
Sellers’ Default (and, if such failure is other than a failure to deliver
Purchaser’s Closing Deliveries, Purchaser fails to cure such condition failure
within fifteen (15) days after written notice of such failure is delivered by
Sellers to Purchaser) (a “Purchaser’s Default”), and no material Sellers’
Default has occurred which remains uncured, then Seller may elect, as their sole
and exclusive remedy, to (a) terminate this Agreement by providing written
notice to Purchaser, in which case the Deposit shall be disbursed to Sellers in
accordance with Section 3.2.3, and the Parties shall have no further rights or
obligations under this Agreement, except those which expressly survive such
termination or (b) waive such default and proceed to Closing without any
reduction in or setoff against the Purchase Price.

10.3 Liquidated Damages. The Parties acknowledge and agree that if this
Agreement is terminated pursuant to Section 10.2, the damages that Sellers would
sustain as a result of such termination would be difficult if not impossible to
ascertain. Accordingly, the Parties agree that Sellers shall retain the Deposit
as full and complete liquidated damages (and not as a penalty) as Sellers’ sole
and exclusive remedy for such termination; provided, however, that in addition
to the Deposit, Sellers shall retain all rights and remedies under this
Agreement with respect to those obligations of Purchaser which expressly survive
such termination.

 

11. RISK OF LOSS

11.1 Casualty. As to Sellers, if, at any time after the Effective Date and prior
to Closing or earlier termination of this Agreement, the Assets of any Seller or
any portion thereof are materially damaged or destroyed by fire or any other
casualty (a “Casualty”), Sellers shall give written notice of each such Casualty
to Purchaser promptly after the occurrence of such Casualty, and Purchaser shall
have the right to elect, by providing written notice to Sellers within thirty
(30) days after Purchaser’s receipt of Sellers’ written notice of such Casualty,
to (i) terminate this Agreement in its entirety, (ii) terminate this Agreement
with respect to the Assets comprising the Facilities which are the subject of
such Casualty and receive a reduction in the Purchase Price equal to the value
allocated to such Facility pursuant to Section 3.4 hereof, as applicable, or
(iii) extend the Closing Date to allow Sellers to restore the affected Assets at
Sellers’ costs with no adjustment to the Purchase Price. If Purchaser fails to
provide written notice of its election to Sellers within such thirty (30) day
time period, then Purchaser shall be deemed to have elected to proceed to
Closing pursuant to clause (ii) of the preceding sentence. If the Closing is
scheduled to occur within Purchaser’s thirty (30) day election period, the
Closing Date shall, upon Purchaser’s election, be postponed until the date which
is five (5) Business Days after the expiration of such thirty (30) day election
period. In the event that Purchaser terminates this Agreement pursuant to this
Section 11.1, the Deposit shall be returned to Purchaser.

11.2 Condemnation. As to Sellers, if, at any time after the Effective Date and
prior to Closing or the earlier termination of this Agreement, any Governmental
Authority commences

 

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any condemnation proceeding or other proceeding in eminent domain with respect
to all or any portion of the Real Property of such Seller (a “Condemnation”),
Sellers shall give written notice of such Condemnation to Purchaser promptly
after the applicable Seller receives notice of such Condemnation, and if such
Condemnation would give any tenant under any of the Lease Agreements the right
to terminate any such Lease Agreement, then Purchaser shall have the right to
elect, by providing written notice to Sellers within thirty (30) days after
Purchaser’s receipt of Sellers’ written notice of such Condemnation, to
(i) terminate this Agreement in its entirety, (ii) terminate this Agreement with
respect to the Assets comprising the Facilities which are the subject of such
Condemnation and receive a reduction in the Purchase Price equal to the value
allocated to such Facility pursuant to Section 3.4 hereof, as applicable, or
(iii) proceed to Closing, without terminating this Agreement, in which case
Sellers shall assign to Purchaser all of any such Sellers’ right, title and
interest in all proceeds and awards from such Condemnation. If Purchaser fails
to provide written notice of its election to Sellers within such time period,
then Purchaser shall be deemed to have elected to proceed to Closing pursuant to
clause (ii) of the preceding sentence. If the Closing is scheduled to occur
within Purchaser’s thirty (30) day election period, the Closing shall, upon
Purchaser’s election, be postponed until the date which is five (5) Business
Days after the expiration of such thirty (30) day election period. In the event
that Purchaser terminates this Agreement (or a portion thereof) pursuant to this
Section 11.2, the Deposit shall be returned to Purchaser.

 

12. SURVIVAL, INDEMNIFICATION AND RELEASE

12.1 Survival. The representations and warranties, covenants and obligations
(including without limitations obligations of defense and indemnification) of
Sellers and Purchaser shall survive termination or Closing of this Agreement
until the date which is eighteen (18) months after the Effective Date.

12.2 Indemnification by Sellers. Subject to the limitations set forth in this
Article 12 and any other express provision of this Agreement, Sellers shall
indemnify, save, insure, pay, defend and hold harmless Purchaser’s Indemnitees
from and against any Indemnification Loss incurred by any Purchaser’s Indemnitee
to the extent resulting from (i) any breach of any representation or warranty of
any Seller in this Agreement, (ii) any breach by any Seller of any of its
covenants or obligation under this Agreement, and (iii) any Retained
Liabilities.

12.3 Indemnification by Purchaser. Subject to the limitations set forth in this
Article 12, Purchaser shall indemnify, defend and hold harmless Sellers’
Indemnitees from and against any Indemnification Loss incurred by Sellers’
Indemnitee the extent resulting from (i) any breach of any representation or
warranty of Purchaser in this Agreement, (ii) any breach by Purchaser of any of
its covenants or obligations under this Agreement, and (iii) any Assumed
Liabilities.

12.4 Indemnification Procedure. Notice of Indemnification Claim. If any of
Sellers’ Indemnitees or Purchaser’s Indemnitees (as the case may be) (each, an
“Indemnitee”) is entitled to defense or indemnification under any other
provision in this Agreement (each, an “Indemnification Claim”), the Party
required to provide defense indemnification to such Indemnitee (the
“Indemnitor”) shall not be obligated to defend, indemnify and hold harmless such
Indemnitee unless and until such Indemnitee provides written notice to such
Indemnitor

 

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promptly after such Indemnitee has actual knowledge of any facts or
circumstances on which such Indemnification Claim is based or a Third-Party
Claim is made on which such Indemnification Claim is based, describing in
reasonable detail such facts and circumstances or Third-Party Claim with respect
to such Indemnification Claim.

12.4.1 Resolution of Indemnification Claim Not Involving Third-Party Claim. If
the Indemnification Claim does not involve a Third-Party Claim and is disputed
by the Indemnitor, the dispute shall be resolved by litigation or other means of
alternative dispute resolution as the Parties may agree in writing.

12.4.2 Resolution of Indemnification Claim Involving Third-Party Claim. If the
Indemnification Claim involves a Third-Party Claim, the Indemnitor shall have
the right (but not the obligation) to assume the defense of such Third-Party
Claim, at its cost and expense, and shall use good faith efforts consistent with
prudent business judgment to defend such Third-Party Claim, provided that
(i) the counsel for the Indemnitor who shall conduct the defense of the
Third-Party Claim shall be reasonably satisfactory to the Indemnitee (unless
selected by Indemnitor’s insurance company, in which case Indemnitee shall have
no such approval rights), (ii) the Indemnitee, at its cost and expense, may
participate in, but shall not control, the defense of such Third-Party Claim,
and (iii) the Indemnitor shall not enter into any settlement or other agreement
which requires any performance by the Indemnitee, other than the payment of
money which shall be paid by the Indemnitor. The Indemnitee shall not enter into
any settlement agreement with respect to the Indemnification Claim, without the
Indemnitor’s prior written consent. If the Indemnitor elects not to assume the
defense of such Third-Party Claim, the Indemnitee shall have the right to retain
the defense of such Third-Party Claim and shall use good faith efforts
consistent with prudent business judgment to defend such Third-Party Claim in an
effective and cost-efficient manner.

12.4.3 Accrual of Indemnification Obligation. Notwithstanding anything to the
contrary in this Agreement, the Indemnitee shall have no right to
indemnification against the Indemnitor for any Indemnification Claim which
(i) does not involve a Third-Party Claim but is disputed by Indemnitor until
such time as such dispute is resolved by written agreement or by a final,
non-appealable order of court of competent jurisdiction or (ii) which involves a
Third-Party Claim until such time as such Third-Party Claim is concluded,
including any appeals with respect thereto in the case of a claim in litigation.

12.5 Guarantor Guaranty. Each Guarantor holds an ownership interest in the
Sellers and, as a result thereof, each Guarantor receives a direct financial
benefit from the transaction contemplated in this Agreement. In consideration of
the foregoing benefit, the Purchase Price and other good and valuable
consideration paid to Sellers at Closing pursuant to this Agreement and as a
further inducement for Purchaser to enter into this Agreement, each Guarantor,
hereby absolutely, unconditionally and irrevocably guarantees the full and
timely performance of the indemnification obligations, covenants and conditions
of each Seller pursuant to this Article 12.

12.6 Exclusive Remedy for Indemnification Loss. Except for claims based on
fraud, the indemnification provisions in this Article 12 shall be the sole and
exclusive remedy of any Indemnitee with respect to any claim for Indemnification
Loss arising from or in connection with this Agreement.

 

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13. MISCELLANEOUS PROVISIONS

13.1 Notices.

13.1.1 Method of Delivery. Any notice pursuant to this Agreement shall be given
in writing by (a) personal delivery, (b) reputable overnight delivery service
with proof of delivery, (c) United States Mail, postage prepaid, registered or
certified mail, return receipt requested, or (d) legible facsimile transmission
with a confirmation sheet or e-mail, sent to the intended addressee at the
address set forth below, or to such other address or to the attention of such
other person as the addressee shall have designated by written notice sent in
accordance herewith. Any notice so given shall be deemed to have been given upon
receipt or refusal to accept delivery, or, in the case of facsimile transmission
or e-mail, as of the date of the facsimile transmission or e-mail provided that
an original of such facsimile is also sent to the intended addressee by means
described in clauses (a), (b) or (c) above. Unless changed in accordance with
the preceding sentence, the addresses for notices given pursuant to this
Agreement shall be as follows:

 

If to Sellers:  

c/o Primrose Retirement Communities, LLC

815 N. 2nd Street

Aberdeen, South Dakota 57401-2350

Attention: Brian Morgan

Telephone No.:  (605) 226-3300

Facsimile No.:   (605) 725-8732

E-Mail: bmorgan@primroseretirement.com

with a copy to:  

Primrose Retirement Communities, LLC

815 N. 2nd Street

Aberdeen, South Dakota 57401-2350

Attention:           Mark W. McNeary, General Counsel

Telephone No.:  (605) 226-3300 ext 34

Facsimile No.:   (605) 725-8732

E-Mail: mmcneary@primroseretirement.com

If to Purchaser:  

CHT Partners, LP

c/o CNL Healthcare Trust, Inc.

450 South Orange Avenue, Suite 1200

Orlando, Florida 32801

Attention: Tracey Bracco, Esquire

Telephone No.: (407) 540-7595

Facsimile No.: (407) 540-2544

E-Mail: Tracey.Bracco@cnl.com

 

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with a copy to:  

Lowndes, Drosdick, Doster, Kantor & Reed, P.A.

450 South Orange Avenue, Suite 800

Orlando, Florida 32801

Attention: John D. Ruffier, Esquire

Telephone No.: (407) 418-6414

Facsimile No.: (407) 843-4444

E-Mail: John.Ruffier@lowndes-law.com

13.1.2 Receipt of Notices. All Notices sent by a Party (or its counsel as
contemplated below) under this Agreement shall be deemed to have been received
by the Party to whom such Notice is sent upon (i) delivery to the address,
facsimile number or e-mail address of the recipient Party, provided that such
delivery is made prior to 5:00 p.m. (local time for the recipient Party) on a
Business Day, otherwise the following Business Day, or (ii) the attempted
delivery of such Notice if (A) such recipient Party refuses delivery of such
Notice, or (B) such recipient Party is no longer at such address, facsimile
number or e-mail address, and such recipient Party failed to provide the sending
Party with its current address or facsimile number pursuant to Section 13.1.3.

13.1.3 Change of Address. The Parties and their respective counsel shall have
the right to change their respective address and/or facsimile number for the
purposes of this Section 13.1 by providing a Notice of such change in address
and/or facsimile number as required under this Section 13.1.

13.1.4 Delivery by Party’s Counsel. The Parties agree that the attorney for a
Party shall have the authority to deliver Notices on such Party’s behalf to the
other Parties hereto.

13.2 Time is of the Essence. Time is of the essence of this Agreement; provided,
however, that notwithstanding anything to the contrary in this Agreement, if the
time period for the performance of any covenant or obligation, satisfaction of
any condition or delivery of any Notice or item required under this Agreement
shall expire on a day other than a Business Day, such time period shall be
extended automatically to the next Business Day.

13.3 Assignment. Neither Purchaser nor Sellers shall assign this Agreement or
any interest therein to any Person, without the prior written consent of the
other Party which consent may be withheld in the other Party’s sole discretion,
except however, Purchaser shall have the right to assign this Agreement, in
whole or in part, to a CNL-sponsored fund or funds, or one or more Affiliates of
such CNL-sponsored fund or funds, by providing written notice to Sellers no
later than ten (10) Business Days prior to Closing; provided, however, that
(a) such designation or assignment shall not be effective until Purchaser has
provided Sellers with a fully executed copy of such designation or assignment
and assumption instrument, and (b) no such assignment will relieve Purchaser
from any of its duties or obligations under this Agreement.

13.4 Successors and Assigns. This Agreement shall be binding upon the Parties
hereto and their respective heirs and permitted successors, and assigns, each of
whom shall be entitled to enforce performance and observance of this Agreement,
to the same extent as if such heirs, successors, and assigns, were parties,
hereto.

 

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13.5 Third Party Beneficiaries. This Agreement shall not confer any rights or
remedies on any Person other than (i) the Parties and their respective
successors and permitted assigns, and (ii) any Indemnitee to the extent such
Indemnitee is expressly provided any right of defense or indemnification in this
Agreement.

13.6 Rules of Construction. The following rules shall apply to the construction
and interpretation of this Agreement:

(i) Singular words shall connote the plural as well as the singular, and plural
words shall connote the singular as well as the plural, and the masculine shall
include the feminine and the neuter, as the context may require.

(ii) All references in this Agreement to particular articles, sections,
subsections or clauses (whether in upper or lower case) are references to
articles, sections, subsections or clauses of this Agreement. All references in
this Agreement to particular exhibits or schedules (whether in upper or lower
case) are references to the exhibits and schedules attached to this Agreement,
unless otherwise expressly stated or clearly apparent from the context of such
reference.

(iii) The headings in this Agreement are solely for convenience of reference and
shall not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.

(iv) Each Party and its counsel have reviewed and revised (or requested
revisions of) this Agreement and have participated in the preparation of this
Agreement, and therefore any rules of construction requiring that ambiguities
are to be resolved against the Party which drafted the Agreement or any exhibits
hereto shall not be applicable in the construction and interpretation of this
Agreement or any exhibits hereto.

(v) The terms “sole discretion” and “absolute discretion” with respect to any
determination to be made a Party under this Agreement shall mean the sole and
absolute discretion of such Party, without regard to any standard of
reasonableness or other standard by which the determination of such Party might
be challenged.

13.7 Severability. If any provision of this Agreement is ultimately determined
to be invalid or unenforceable, such provision shall be deemed limited by
construction in scope and effect to the minimum extent necessary to render the
same valid and enforceable, and, in the event no such limiting construction is
possible, such invalid or unenforceable provision shall be deemed severed from
the Agreement without affecting the validity of any other provision hereof if
the essential provisions of this Agreement for each party remain valid, binding
and enforceable.

13.8 Jurisdiction and Venue. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Florida. Purchaser
and Sellers agree to submit to the jurisdiction of Florida in connection with
any claims or controversy arising out of this Agreement and that venue for such
actions shall be in Orange County, Florida. Sellers

 

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(for itself and all Sellers’ Indemnitees) and Purchaser (for itself and all
Purchaser’s Indemnitees) hereby submit to jurisdiction and consent to venue in
such courts, and waive any defense based on forum non conveniens, provided that
any Party may seek injunctive relief or specific performance with respect to any
of the Assets in the courts of the State in which such Assets are situated and
may incorporate a claim against Sellers of such Asset with respect to any claim
for injunctive relief or specific performance.

13.9 Waiver of Trial by Jury. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THAT ANY PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENTS EXECUTED IN CONNECTION
HEREWITH, OR IN RESPECT OF ANY COURSE OF CONDUCT, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT.

13.10 Attorneys’ Fees. In connection with any disputes or actions arising out of
the transactions contemplated by this Agreement, or the breach, enforcement or
interpretation of this Agreement, the substantially prevailing party shall be
entitled to recover, from the party not substantially prevailing, all reasonable
costs and attorney, paralegal and expert fees incurred by the substantially
prevailing party before trial, at trial, at retrial, on appeal, at all hearings
and rehearings, and in all administrative, bankruptcy and reorganization
proceedings.

13.11 Incorporation of Recitals, Exhibits and Schedules. The recitals to this
Agreement, and all exhibits and schedules referred to in this Agreement are
incorporated herein by such reference and made a part of this Agreement. Any
matter disclosed in any schedule to this Agreement shall be deemed to be
incorporated in all other schedules to this Agreement. For the limited purpose
of updating the certificates to be executed and delivered at Closing
reconfirming that all representations and warranties remain true and correct as
of the Closing Date, the schedules shall be deemed supplemented by any relevant
matters disclosed to Purchaser in any of the written reports, studies or like
materials obtained by Purchaser from Purchaser’s consultants or agents after the
Effective Date and/or any matters subsequently disclosed in writing by Sellers
after the Effective Date; provided, however, that such disclosure shall in no
way limit Purchaser’s pre-Closing rights hereunder.

13.12 Entire Agreement. This Agreement and the agreements to be executed and
delivered in connection therewith set forth the entire understanding and
agreement of the Parties hereto and shall supersede any other agreements and
understandings (written or oral) between the Parties on or prior to the
Effective Date with respect to the transactions described in this Agreement.

13.13 Further Assurances. Each of the Parties covenants and agrees to do,
execute, acknowledge and deliver, or cause to be done, executed, acknowledged
and delivered, any and all such further acts, instruments, papers and documents
as may be reasonably necessary to carry out and effectuate the intent and
purposes of this Agreement.

 

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13.14 Effect of Delay and Waivers. No delay or omission to exercise any right or
power accruing prior to or upon any breach, omission, or failure of performance
hereunder shall impair any such right or power, or shall be construed to be a
waiver thereof, and any such right or power may be exercised from time to time
and as often as may be deemed expedient. In the event of any breach of any
provision contained in this Agreement, thereafter waived by another Party, such
waiver shall be limited to the particular waiving Party and to the particular
breach in question and no other. No waiver or release of any term or provision
of this Agreement shall be established by conduct, custom, or course of dealing,
but solely by a document in writing duly authorized and executed by the waiving
or releasing Party.

13.15 Amendments, Waivers and Termination of Agreement. No amendment or
modification to any terms or provisions of this Agreement, waiver of any
covenant, obligation, breach or default under this Agreement or termination of
this Agreement, shall be valid unless in writing and executed and delivered by
each of the Parties.

13.16 Execution of Agreement. A Party may deliver executed signature pages to
this Agreement by facsimile transmission to any other Party, which facsimile
copy shall be deemed to be an original executed signature page. This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original and all of which counterparts together shall constitute one agreement
with the same effect as if the Parties had signed the same signature page.

13.17 Tax Disclosures. Notwithstanding anything in this Agreement to the
contrary, in accordance with Section 1.6011-4(b)(3)(iii) of the Treasury
Regulations, Purchaser and Sellers (and each employee, representative, or other
agent of Purchaser and Sellers) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transactions
contemplated by this Agreement and all materials of any kind (including opinions
or other tax analyses) that are provided to Purchaser or Sellers relating to
such tax treatment and tax structure. However, any information relating to tax
treatment or tax structure shall remain subject to the confidentiality
provisions hereof (and the foregoing sentence shall not apply) to the extent,
but only to the extent, reasonably necessary to enable Purchaser and Sellers to
comply with applicable securities laws. For purposes hereof, “tax structure”
means any fact that may be relevant to understanding the federal income tax
treatment of the transaction.

13.18 Liability of Interest-Holders in Sellers and Purchaser and their
Affiliates. Except for the Guarantor obligations set forth in Section 12.5
above, nothing contained in this Agreement shall be construed to create or
impose any liabilities or obligations and no such liabilities or obligations
shall be imposed on any of the shareholders, beneficial owners, direct or
indirect, officers, directors, trustees, employees or agents of Sellers or
Purchaser or their respective Affiliates for the payment or performance of the
obligations or liabilities of Sellers or Purchaser.

13.19 Good Faith Efforts. The Parties agree to use commercially reasonable,
good-faith efforts to effectuate the transactions contemplated by this
Agreement.

[Remainder of page intentionally left blank;

Signatures on following pages]

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be executed and
delivered in its name by a duly authorized officer as of the date first set
forth above.

 

SELLERS: LIMA RETIREMENT, L.L.C., a South Dakota limited liability company By:  

/s/ James L. Thares

Name:   James L. Thares Title:   President ZANESVILLE RETIREMENT, L.L.C., a
South Dakota limited liability company By:  

/s/ James L. Thares

Name:   James L. Thares Title:   President DECATUR RETIREMENT, L.L.C., a South
Dakota limited liability company By:  

/s/ James L. Thares

Name:   James L. Thares Title:   President COUNCIL BLUFFS RETIREMENT, L.L.C., a
South Dakota limited liability company By:  

/s/ James L. Thares

Name:   James L. Thares Title:   President PRIMROSE COTTAGES, L.L.C., a South
Dakota limited liability company By:  

/s/ James L. Thares

Name:   James L. Thares Title:   President

 

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PURCHASER: CHT PARTNERS, LP, a Delaware limited partnership By:   CHT GP, LLC, a
Delaware limited liability company, its General Partner   By:   CNL Healthcare
Trust, Inc., a Maryland corporation, its sole member     By:  

/s/ Holly Greer

    Name:   Holly Greer     Title:   Senior Vice President

 

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Each of the undersigned hereby join in the execution of this Agreement for the
purposes of acknowledging and accepting his obligations as a Guarantor
hereunder:

 

GUARANTOR:  

/s/ James L. Thares

  (SEAL) James L. Thares  

/s/ Brian J. Morgan

  (SEAL) Brian J. Morgan  

/s/ William J. Schaefbauer

  (SEAL) William J. Schaefbauer  

/s/ Mark W. McNeary

  (SEAL) Mark W. McNeary  

 

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The undersigned hereby joins in the execution of this Agreement for the purposes
of acknowledging and accepting its obligations as Escrow Agent hereunder:

 

ESCROW AGENT: FIDELITY NATIONAL TITLE INSURANCE COMPANY By:  

/s/ Mary L. Garcia

Name:   Mary L. Garcia Title:   VP, Senior Commercial Escrow Officer

 

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