PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into as of
this 30 day of July, 2013 (the “Effective Date”), by and among HAMLET HEALTH
INVESTORS, LLC a North Carolina limited liability company (“HHI”) and NEWPORT
HEALTH INVESTORS, LLC (“NHI”), a North Carolina limited liability company
(collectively, “Seller”), and CORNERSTONE CORE PROPERTIES REIT, INC. a Maryland
corporation, or its assignee (“Buyer”).

 

1. Purchase and Sale. On the terms and conditions set forth herein, Seller shall
sell, assign, transfer, convey and deliver to Buyer and Buyer shall purchase
from Seller its interest in the following, which are hereinafter referred to
collectively as the “Property”:

 

(a) The improvements located on the Real Property, consisting of two (2)
assisted living and memory care facilities as described in Schedule 1(a)
attached hereto (singularly, a “Facility” and collectively, the “Facilities”),
owned by Seller, and all right, title and interest of Seller in and to the items
described in (a) through (f) herein;

 

(b) All of the real estate on which each Facility is situated, together with all
tenements, easements, appurtenances, privileges, rights of way, and other rights
incident thereto, all building and improvements and any parking lot to such
Facility located thereon situated in the State of North Carolina (the “State”),
which is described in Exhibit A attached hereto and made a part hereof by this
reference (collectively, the “Real Property”);

 

(c) All of the tangible personal property, inventory, equipment, machinery,
supplies including drugs and other supplies, spare parts, furniture,
furnishings, warranty claims, contracts, including but not limited to supply
contracts, contracts rights, intellectual property, including but not limited to
patents, trade secrets, and all rights and title to the names under which each
Facility operates, mailing lists, customer lists, vendor lists, resident files,
books and records owned by the Seller, who may retain copies of same, and shall
have reasonable access to such books and records after the Closing as required
for paying taxes and responding to legal inquiry, as such personal property is
described in Schedule 1(c) attached hereto (collectively, the “Personal
Property”);

 

(d) All transferable licenses, permits, certifications, assignable guaranties
and warranties in favor of Seller, approvals or authorizations and all
assignable intangible property not enumerated herein which is used by the Seller
in connection with each Facility, and all other assets whether tangible or
intangible; provided, that Seller shall retain all licenses required to be
retained by Seller in order to operate the current business within each
Facility;

 

(e) All trade names or other names commonly used to identify the Facility and
all goodwill associated therewith. The intent of the parties is to transfer to
Buyer only such names and goodwill associated with each Facility itself and not
with Seller or any affiliate of Seller, so as to avoid any interference with the
unrelated business activities of Seller; and

 

(f) All telephone numbers used in connection with the operation of each
Facility, and to the extent not described above, all goodwill of Seller
associated with each Facility (the items described in clauses (e) and (f) above
are collectively referred to as “Intangibles”).

 

 

 

 

2. Excluded Assets. Seller’s cash, investment securities, bank account(s) and
accounts receivable, and deposits attributable and relating to the operation of
each Facility, and Seller’s corporate minute books and corporate tax returns,
partnership records, and other corporate and partnership records shall be
excluded from each Facility sold by Seller to Buyer hereunder as well as
Seller’s real property not identified in Schedule 1(a) (the “Excluded Assets”).

 

3. Purchase Price; Deposits. The following shall apply with respect to the
Purchase Price of the Property:

 

(a) The purchase price (the “Purchase Price”) payable by Buyer to Seller for the
Property is Ten Million Eight Hundred Thousand and 00/100 Dollars
($10,800,000.00).

 

(b) The Purchase Price as allocated to each Facility by Seller is set forth on
Schedule 3 attached hereto and made a part hereof.

 

(c) Within three (3) business days after this Agreement is fully executed by the
parties, Buyer shall deposit the sum of Twenty-Five Thousand and 00/100 Dollars
($25,000.00) as an earnest money deposit (“Initial Deposit”) with Lawyers Title
Insurance Company, at its office at 4100 Newport Place Drive, Suite 120, Newport
Beach, California 92660, Attention: Debi Calmelat (“Title Company” or “Escrow
Agent”) and Escrow Agent will deposit it into an interest-bearing account with
the interest for the benefit of Buyer. In addition, if Buyer has not terminated
this Agreement on or before the expiration of the Due Diligence Period (defined
below), then Buyer shall deposit with Escrow Agent an additional Twenty-Five
Thousand and 00/100 Dollars ($25,000.00) (“Additional Deposit”) within three (3)
business days following the expiration of the Due Diligence Period (the Initial
Deposit and the Additional Deposit are collectively referred to as the
“Deposits”). Interest earned on the Deposit shall be paid to the party entitled
to such amount as provided in this Agreement.

 

(d) At Closing, the Deposit shall be credited against the Purchase Price and
Buyer shall deposit the balance of the Purchase Price in Cash to the Escrow
Agent.

 

(e) Buyer shall not assume or pay, and Seller shall continue to be responsible
for, any and all debts, obligations and liabilities of any kind or nature, fixed
or contingent, known or unknown, of Seller not expressly assumed by Buyer in
this Agreement. Specifically, without limiting the foregoing, Buyer shall not
assume any obligation, liability, cost, expense, claim, action, suit or
proceeding pending as of the Closing, nor shall Buyer assume or be responsible
for any subsequent claim, action, suit or proceeding arising out of or relating
to any such other event occurring, with respect to the manner in which Seller
conducted its business at the Facilities, on or prior to the date of the Closing
Date. In addition, Buyer shall not assume successor liability obligations to
Medicaid, HMO or any other third party payer programs or be responsible for
recoupment’s, fines, or penalties required to be paid to such parties as a
result of the operation of the Facilities prior to the Closing Date by Seller or
Sellers’ operating entities, Hamlet AL Holdings, LLC and Newport AL Holdings,
LLC (each an “Operator”, and collectively, “Operators”).

 

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4. Closing. The closing of the purchase and sale transactions pursuant to this
Agreement (“Closing”) shall occur on the date that is thirty (30) days after the
expiration of the Due Diligence Period (“Closing Date”). The Closing shall take
place through Seller’s delivery of a special warranty deed and Buyer’s delivery
of cash or immediately available funds through an escrow agreement (the
“Escrow”) to be established with the Escrow Agent pursuant to form escrow
instructions which shall be modified to be consistent with the terms and
provisions of this Agreement, and which shall be mutually agreed upon by the
parties hereto.

 

5. Conveyance. Title to each Facility shall be conveyed to Buyer by a special
warranty deed and bill of sale in form agreed to by the parties prior to the end
of the Due Diligence Period, as defined herein. Fee simple indefeasible title to
the Real Property and title to the Personal Property, shall be conveyed from
Seller to Buyer or Buyer’s nominee in “AS-IS, WHERE-IS” condition, free and
clear of all liens, charges, easements and encumbrances of any kind, other than:

 

(a) Liens for real estate taxes or assessments not yet due and payable;

 

(b) The standard printed exceptions included in the PTR, as defined in
Section 14(a) herein; unless objected to in writing by Buyer during the Due
Diligence Period;

 

(c) Such exceptions that appear in the PTR and that are either waived or
approved by Buyer in writing pursuant to Section 14(b) herein;

 

(d) Liens or encumbrances caused by the actions of Buyer but not those caused by
the actions of Seller; and

 

(e) Those matters identified as Permitted Exceptions on the attached Exhibit B.

 

The items described in this Section 5 are sometimes collectively referred to as
the “Permitted Exceptions.”

 

6. Buyer’s Due Diligence.

 

(a) Buyer shall have sixty (60) days from the Effective Date to complete Buyers
Due Diligence (the “Due Diligence Period”); provided, however, that if Seller
does not deliver the Due Diligence Items in the time frames set forth in Section
10(a)(v) below, the Due Diligence Period shall be extended on a day-by-day basis
for each day of delay in delivery of the Due Diligence Items beyond the time
periods set forth in Section 10(a)(v) below. During the Due Diligence Period,
Seller shall permit the officers, employees, directors, agents, consultants,
attorneys, accountants, lenders, appraisers, architects, investors and engineers
designated by Buyer and representatives of Buyer (collectively, the “Buyer’s
Consultants”) access to, and entry upon the Real Property and each Facility to
perform its normal and customary due diligence, including, without limitation,
the following (collectively, the “Due Diligence Items”):

 

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(i) Review of vendor contracts (“Contracts”) and leases (“Leases”) to which each
Facility (or the Seller, on behalf of such Facility) are a party, as set forth
on Schedule 8(f) attached hereto;

 

(ii) Conduct environmental investigations (including a Phase 1 Environmental
Audit);

 

(iii) Inspection of the physical structure of each Facility;

 

(iv) Review of current PTR, as defined in Section 14 herein, and underlying
documents referenced therein;

 

(v) Review of ALTA Surveys, as defined in Section 14 herein, for each Facility;

 

(vi) Inspection of the books and records of each Facility and that portion of
the Seller’s books and records which pertain to the Facilities;

 

(vii) Review of the Due Diligence Items, as described in Schedule 10(a)(v)
attached hereto, to be provided by Seller within five (5) business days
following the Effective Date;

 

(viii) Conduct such other inspections or investigations as Buyer may reasonably
require relating to the ownership, operation or maintenance of the Facilities;

 

(ix) Review of resident files, agreements, and any other documentation regarding
the residents of the Facilities, which review shall in all events be subject to
all applicable laws, rules and regulations concerning the review of medical
records and other types of patient records; and

 

(x) Review of files maintained by the State relating to the Facilities; and

 

(xi) Review of all drawings, plans and specifications and all engineering
reports for the Facilities in the possession of or readily available to Seller;
and

 

(xii) Seller will furnish copies of all environmental reports, property
condition reports, appraisals, title reports and ALTA Surveys (or surveys) that
it currently has in its possession.

 

(xiii) Review copies of currently effective written employment manuals or
written employment policies and/or procedures have been provided to or for
employees.

 

Notwithstanding the foregoing provisions of this Subsection, in the event Seller
fails to deliver all Due Diligence Items listed in Schedule 10(a)(v) on or
before the time set forth in Subsection (a)(vii) above, then the Due Diligence
Period shall be deemed extended on a day-to-day basis until Seller completes
such delivery of the Due Diligence Items to Buyer.

 

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(b) Buyer agrees and acknowledges that: (i) Buyer will not disclose the Due
Diligence Items or any other materials received from Seller pursuant to this
Agreement (the “Property Information”) or any of the provisions, terms or
conditions thereof, or any information disclosed therein or thereby, to any
party outside of Buyer’s organization, other than Buyer’s Consultants whom shall
also not disclose the Property Information to third parties; (ii) the Property
Information is delivered to Buyer solely as an accommodation to Buyer; (iii)
Seller has not undertaken any independent investigation as to the truth,
accuracy or completeness of any matters set out in or disclosed by the Property
Information; and(iv) except as expressly contained in this Agreement, Seller has
not made and does not make any warranties or representations of any kind or
nature regarding the truth, accuracy or completeness of the information set out
in or disclosed by the Property Information.

 

(c) All due diligence activities of Buyer at the Facilities shall be scheduled
with Seller upon two (2) business days prior notice. Reviews, inspections and
investigations at the Facilities shall be conducted by Buyer in such manner so
as not to disrupt the operation of the Facilities.

 

(d) Buyer may, at its sole cost, obtain third party engineering and physical
condition reports and Phase I Environmental Audits covering each Facility,
certified to Buyer, prepared by an engineering and/or environmental consultants
acceptable to Buyer; provided, no inspection by Buyer’s Consultants shall
involve the taking of samples or other physically invasive procedures (such as a
Phase II environmental audit) without the prior written consent of Seller, which
consent shall not be unreasonably withheld or delayed. Notwithstanding anything
to the contrary contained in this Agreement, Buyer shall indemnify, defend (with
counsel acceptable to Seller) and hold Seller and its employees and agents, and
each of them, harmless from and against any and all losses, claims, damages and
liabilities, without limitation, attorneys’ fees incurred in connection
therewith) arising out of or resulting from Buyer’ or Buyer’s Consultant’s
exercise of its right of inspection as provided for in this Section 6; provided,
however, such indemnification shall not extend to matters merely discovered by
Buyer and/ or the acts or omissions of Seller or any third party. The
indemnification obligation of Buyer under this Section 6 shall survive the
termination of this Agreement indefinitely. Following any audit or inspection as
provided for herein, Buyer shall return the Real Property and the Facilities to
the condition in which they existed immediately prior to such audit or
inspection.

 

(e) If the results of the foregoing inspections and audits are not acceptable to
Buyer in its sole and absolute discretion, Buyer may, upon notice to Seller
given on or before 5:00 p.m. (Pacific Time) on the last day of the Due Diligence
Period, terminate this Agreement, and in such event, neither party shall have
any further rights and obligations under this Agreement, except for obligations
which expressly survive the termination of this Agreement. Failure of Buyer to
deliver written notice of approval prior to 5:00 p.m. (Pacific Time) on the last
day of the Due Diligence Period shall be deemed to constitute Buyer’s
disapproval of the matters described in this Section 6(a). If this Agreement
shall be terminated prior to Closing, upon Seller’s request, Buyer shall
promptly return or destroy all copies of the Due Diligence Items.

 

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(f) During the Due Diligence Period, Buyer shall obtain, at Buyer’s election, a
third party inspection report with respect to each Facility (the Inspection
Report”). If the Inspection Report recommends any critical repairs (the
“Critical Repairs”) be made to any Facility, Buyer shall provide Seller with
written notice of the same prior to the expiration of the Due Diligence Period,
and the Critical Repairs shall be listed on a new Schedule 6(f) to be attached
to the Agreement. Seller shall make all Critical Repairs listed in the
Inspection Report to such Facility at least ten (10) business days prior to the
Closing, at Seller’s sole cost and expense (not to exceed One Hundred Thousand
Dollars ($100,000) per Facility (“Seller’s Critical Repair Cap”)). Buyer shall
be responsible for any Critical Repair costs for any Facility over the Seller’s
Critical Repair Cap. Seller shall deliver to Buyer a completion letter or
similar notice documenting the completion of the repairs (the “Repair Completion
Notice”) executed by Seller and Seller’s contractor and/or architect who
performed and/or supervised the construction of the repairs. The Critical
Repairs shall be constructed in a workmanlike manner and in accordance with all
applicable laws.

 

7. Prorations; Closing Costs; Possession; Post Closing Assistance.

 

(a) There will be no prorations at the Closing and Operator, its successors or
assigns shall remain responsible for all taxes, costs and expenses relating to
the Facilities following the Closing pursuant to the Post Closing Lease (as
defined in Section 12(a)(v)).

 

(b) Seller shall pay any state, county and local transfer taxes arising out of
the transfer of the Real Property.

 

(c) Buyer shall pay the cost of the standard owner’s title insurance policy, as
described in this Agreement. Buyer shall also pay the cost of any lender’s
policy for Buyer’s lender, any title endorsements requested by Buyer and its
lender and the cost of updating or obtaining new Surveys. Seller and Buyer shall
equally share the fees of Escrow Agent. All other costs associated with title
and survey matters shall be paid in accordance with Forsyth County (and local)
custom and practice.

 

(d) Buyer and Seller shall each pay their own attorney’s fees. Buyer shall pay
for all costs of review of the Due Diligence Items and its additional due
diligence inspection costs including, without limitation, the cost of any
environmental reports.

 

(e) On the Closing Date, each Operator shall retain possession of its respective
Facility pursuant to the Post Closing Lease.

 

8. Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer that:

 

(a) Legality.

 

(i) Organization, Corporate Powers, Etc. Each Seller entity is duly organized,
validly existing and in good standing under the laws of the State of North
Carolina. Each Seller has the full power, authority and legal right (A) to
execute and deliver, and perform and observe the provisions of this Agreement
and each Transaction Document, as defined herein, to which it is a party, (B) to
transfer good, indefeasible title to the Property to Buyer free and clear of all
liens, claims and encumbrances except for Permitted Exceptions (as defined in
Section 5 hereof), and (C) to carry out the transactions contemplated hereby and
by such other instruments to be carried out by such party.

 

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(ii) Due Authorization, Etc. This Agreement and the Closing Documents
(collectively the “Transaction Documents”) have been, and each instrument
provided for herein or therein to which Seller is a party will be, when executed
and delivered as contemplated hereby authorized, executed and delivered by
Seller and the Transaction Documents constitute, and each such instrument will
constitute, when executed and delivered as contemplated hereby, legal, valid and
binding obligations of Seller and enforceable in accordance with their terms.

 

(iii) Governmental Approvals. To the best of Seller’s knowledge, no consent,
approval or other authorization (other than corporate or other organizational
consents which have been obtained), or registration, declaration or filing with,
any court or governmental agency or commission is required for the due execution
and delivery of any of the Transaction Documents to which Seller is a party or
for the validity or enforceability thereof against such party other than the
recording or filing for recordation of the North Carolina form Special Warranty
Deed (the “Deed”) which recordings shall be accomplished at Closing.

 

(iv) Other Rights. No right of first refusal, option or preferential purchase or
other similar rights are held by any person with respect to any portion of the
Property.

 

(v) No Litigation. Except as set forth on Schedule 8(a)(v) attached hereto,
neither Seller nor its registered agent for service of process has been served
with summons with respect to any actions or proceedings pending or, to Seller’s
actual knowledge, no such actions or proceedings are threatened, against Seller
before or by any court, arbitrator, administrative agency or other governmental
authority, which (A) individually or in the aggregate, are expected, in the
reasonable judgment of Seller, to materially and adversely affect Seller’s
ability to carry out any of the transactions contemplated by any of the
Transaction Documents or (B) otherwise involve any portion of the Property
including, without limitation, the Facilities.

 

(vi) No Conflicts. Neither the execution and delivery of the Transaction
Documents to which Seller is a party, compliance with the provisions thereof,
nor the carrying out of the transactions contemplated thereby to be carried out
by such party will result in (A) a breach or violation of (1) any material law
or governmental rule or regulation applicable to Seller now in effect, (2) any
provision of any of Seller’s organizational documents, (3) any material
judgment, settlement agreement, order or decree of any court, arbitrator,
administrative agency or other governmental authority binding upon Seller, or
(4) any material agreement or instrument to which Seller is a party or by which
Seller or its respective properties are bound; (B) the acceleration of any
obligations of Seller; or (C) the creation of any lien, claim or encumbrance
upon any properties or assets of Seller.

 

(b) Property.

 

As of the Effective Date and the Closing Date, except as set forth on
Schedule 8(b):

 

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(i) Seller has no actual knowledge of and has not received any notice of
outstanding deficiencies or work orders of any authority having jurisdiction
over any portion of the Property;

 

(ii) Seller has no actual knowledge of and has not received any notice of any
claim, requirement or demand of any licensing or certifying agency supervising
or having authority over the Facility to rework or redesign it in any material
respect or to provide additional furniture, fixtures, equipment or inventory so
as to conform to or comply with any law which has not been fully satisfied;

 

(iii) Seller has not received any notice from any governmental authority of any
material violation of any law applicable to any portion of the Real Property or
to the Facilities;

 

(c) Condemnation. There is no pending or, to the actual knowledge of Seller,
threatened condemnation or similar proceeding or assessment affecting the Real
Property, nor, to the actual knowledge of Seller, is any such proceeding or
assessment contemplated by any governmental authority.

 

(d) Hazardous Substances. Except as disclosed on Schedule 8(d), which includes a
list of all environmental reports provided by Seller to Buyer in connection with
this Agreement (the “Seller Environmental Reports”), to Seller’s actual
knowledge, there has been no production, storage, manufacture, voluntary or
involuntary transmission, use, generation, treatment, handling, transport,
release, dumping, discharge, spillage, leakage or disposal at, on, in, under or
about the Real Property of any Hazardous Substances by Seller, or any affiliate
or agent thereof, except in strict compliance with all applicable Laws. To
Seller’s actual knowledge and except as disclosed on Schedule 8(d), there are no
Hazardous Substances at, on, in, under or about the Real Property in violation
of any Law, and to Seller’s actual knowledge, there is no proceeding or inquiry
by any federal, state or local governmental agency with respect thereto. For
purposes of this Agreement, “Hazardous Substances” shall mean any hazardous or
toxic substances, materials or wastes, including, without limitation, those
substances, materials and wastes listed in the United States Department of
Transportation Table (49 CFR 172.1 01) or by the Environmental Protection Agency
as hazardous substances (40 CFR Part 302 and amendments thereto) or such
substances, materials and wastes which are or become regulated under any
applicable local, state or federal law (collectively, “Laws”), including,
without limitation, any material, waste or substance which is (i) a hazardous
waste as defined in the Resource Conservation and Recovery Act of 1976, as
amended (42 U.S.C. § 6901 et seq.); (ii) a pollutant or contaminant or hazardous
substance as defined in the Comprehensive Environmental Response. Compensation
and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.); (iii) a
hazardous substance pursuant to § 311 of the Clean Water Act (33 U.S.C. § 1251,
et seq., 33 U.S.C. § 1321) or otherwise listed pursuant to § 307 of the Clean
Water Act (33 U.S.C. § 1317); (iv) a hazardous waste pursuant to § 1004 of the
Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.); (v)
polychlorinated biphenyls (PCBs) as defined in the Federal Toxic Substance
Control Act, as amended (15 U.S.C. § 2501 et seq.); (vi) hydrocarbons, petroleum
and petroleum products; (vii) asbestos; (viii) formaldehyde or medical or
biohazardous waste; (ix) radioactive substances; (x) flammables and explosives;
(xi) any state statutory counterparts to those federal statutes listed herein;
or (vii) any other substance, waste or material which could presently or at any
time in the future require remediation at the behest of any governmental agency.
Any reference in this definition to Laws shall include all rules and regulations
which have been promulgated with respect to such Laws.

 

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(e) Brokers. Neither Seller nor Buyer has dealt with any broker or finder in
connection with the transactions contemplated hereby. Each party represents and
warrants to the other party that it has not dealt with any broker, salesman,
finder or consultant with respect to this Agreement or the transactions
contemplated hereby. Each party agrees to indemnify, protect, defend, protect
and hold the other party harmless from and against all claims, losses, damages,
liabilities, costs, expenses (including reasonable attorneys’ fees and
disbursements) and charges resulting from such indemnifying party’s breach of
the foregoing representation. The provisions of this Section 8(e) shall survive
the Closing or earlier termination of this Agreement.

 

(f) Leases and Contracts. Schedule 8(f) is a list of all Leases and Contracts
relating to the Facilities to which Seller is a party or by which Seller may be
bound. Seller has made or will promptly make available to Buyer true, complete
and accurate copies of all Leases and Contracts including, without limitation,
any modifications thereto. All of the Leases and Contracts are in full force and
effect without claim of material default there under, and, except as may be set
forth on Schedule 8(f).

 

(g) Financial Statements. Schedule 8(g) contains (i) the balance sheets of the
Operator for the last three (3) fiscal years ending prior to the date of this
Agreement (audited if available and unaudited to the extent audited statements
are not available) and the unaudited balance sheets for each of the past three
(3) fiscal quarters completed prior to the date of this Agreement and (ii) the
related consolidated statements of income, results of operations, changes in
members’ equity and changes in financial position with respect to each such
period as compared with the immediately prior period (collectively, the
“Financial Statements”). The Financial Statements taken as a whole (A) fairly
present the financial condition and results of operation of the Operators for
the periods indicated, (B) are true, accurate, correct and complete in all
material respects, and (C) except as stated in Schedule 8(g) (or in the notes to
the Financial Statements) have been prepared in accordance with the Operator’s
tax basis reporting, as consistently applied. Except as disclosed in
Schedule 8(g), or otherwise disclosed in writing to Buyer, to Seller’s actual
knowledge neither Seller, as to any Facility, nor any Facility is obligated for
or subject to any material liabilities, contingent or absolute, and whether or
not such liabilities would be disclosed in accordance with tax basis reporting,
and Schedule 8(g) sets forth all notes payable, other long term indebtedness
and, to Seller’s actual knowledge, all other liabilities to which the Facilities
and the Real Property are or at Closing (and following Closing) will be subject,
other than new indebtedness obtained by Buyer in connection with its purchase of
the Property. Seller has received no notice of default under any such
instrument.

 

(h) Interests in Competitors, Suppliers and Customers. Other than the Operator
entities and except as set forth on Schedule 8(h), or in Schedule 1(a) as
constituting a part of the Facilities, Seller does not have any interest in any
property used in the operation of, or holds an interest in, any competitor,
supplier or customer of Seller or the Facilities.

 

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(i) No Foreign Persons. Neither Seller nor its members is a foreign person
within the meaning of Sections 897 or 1445 of the Code, nor is Seller a U.S.
Real Property Holding Company within the meaning of Section 897 of the Code.

 

(j) Licensure. As of the date hereof, except as set forth on Schedule 8(j)
attached hereto, there is no action pending or, to the actual knowledge of
Seller, recommended by the appropriate state agency to revoke, withdraw or
suspend any license to operate the Facilities, or certification of the
Facilities, or any material action of any other type with regard to licensure or
certification. Each Facility is operating and functioning as an assisted living
and memory care facility without any waivers from a governmental agency
affecting such Facility except as set forth in Schedule 8(j), and is fully
licensed for an assisted living and memory care facility, as applicable, by the
State for the number of beds and licensure category set forth in Schedule 1(a)
hereto. Schedule 8(j) attached hereto contains a complete and accurate list of
all life safety code waivers or other waivers affecting each Facility.

 

(k) Regulatory Compliance.

 

(i) Seller or the Operator has duly and timely filed all reports and other items
required to be filed (collectively, the “Reports”) with respect to any cost
based or other form of reimbursement program or any other third party payor
(including without limitation, Medicaid, medically indigent assistance, Blue
Cross, Blue Shield, any health maintenance, preferred provider, independent
practice or other healthcare related organizations, peer review organizations,
or other healthcare providers or payors) (collectively, “Payors”) and have
timely paid all amounts shown to be due thereon. At the time of filing, to
Seller’s actual knowledge, each Report was true, accurate and complete. To
Seller’s actual knowledge, all rights and obligations of the Facilities or
Seller under such Reports are accurately reflected or provided for in the
Financial Statements.

 

(ii) Except as set forth in Schedule 8(k) attached hereto, (A) neither Seller
nor, to Seller’s actual knowledge, the Operator is delinquent in the payment of
any amount due under any of the Reports for the Facilities, (B) there are no
written or threatened proposals by any Payors for collection of amounts for
which Seller or any Facility could be liable, (D) there are no current or
pending claims, assessments, notice, proposal to assess or audits of Seller or
Operator or any Facility with respect to any of the Reports, and, to Seller’s
actual knowledge, no such claims, assessments, notices, or proposals to assess
or audit are threatened, and (D) neither Seller nor Operator has executed any
presently effective waiver or extension of the statute of limitations for the
collection or assessment of any amount due under or in connection with any of
the Reports with respect to any Facility.

 

(iii) Except as set forth in Schedule 8(k) attached hereto, neither Seller nor
the Operator has received notice of failure to comply with all applicable Laws,
settlement agreements, and other agreements with any state or federal
governmental body relating to or regarding any Facility (including all
applicable environmental, health and safety requirements), and Seller or the
Operator has and maintains all permits, licenses, authorizations, registrations,
approvals and consents of governmental authorities and all health facility
licenses, accreditations, Medicaid, and other Payor certifications necessary for
its activities and business including the operation of each Facility as
currently conducted. Each health facility license, Medicaid and other Payor
certifications, Medicaid provider agreement and other agreements with any Payors
is in full force and effect without any waivers of any kind (except as disclosed
in Schedule 8(k)) and has not been amended or otherwise modified, rescinded or
revoked or assigned nor, to Seller’s actual knowledge, (A) is there any
threatened termination, modification, recession, revocation or assignment
thereof, (B) no condition exists nor has any event occurred which, in itself or
with the giving of notice, lapse of time or both would result in the suspension,
revocation, termination, impairment, forfeiture, or non-renewal of any
governmental consent applicable to Seller or to any Facility or of any
participation or eligibility to participate in any Medicaid, or other Payor
program and (C) there is no claim that any such governmental consent,
participation or contract is not in full force and effect.

 

10

 

 

(l) Regulatory Surveys. Seller shall deliver to Buyer, in the manner required
pursuant to the terms of this Agreement, complete and accurate copies of the
survey or inspection reports made by any governmental authority with respect to
each Facility during the calendar years 2009, 2010, 2011 and year-to-date 2012.
To the best of Seller’s knowledge, after diligent investigation, and except as
shown on Schedule 8(l), all exceptions, deficiencies, violations, plans of
correction or other indications of lack of compliance in such reports have been
fully corrected and there are no bans or limitations in effect, pending or
threatened with respect to admissions to any Facility nor any licensure
curtailments in effect, pending or threatened with respect to any Facility.
Seller shall continue to deliver all such surveys, inspection reports as and
when same are received and/or filed as the case may be prior to the Closing.

 

(m) Licensed Bed/Current Rate Schedule. As of the Effective Date, Schedule 8(m)
sets forth (i) the number of licensed beds and the number of operating beds in
the Facility, (ii) the current standard private rates charged by each Facility
to all of its residents, and (iii) the number of beds or units presently
occupied in, and the occupancy percentage at, the Facility, including the
current rates charged by each Facility for each such occupied bed or unit.
Neither Seller nor any Operator has any life care arrangement in effect with any
current or future resident.

 

(n) Operations. Each Facility is adequately equipped and each Facility includes
sufficient and adequate numbers of furniture, furnishings, equipment, consumable
inventory, and supplies to operate such Facility as each is presently operated
by Seller. Personal Property used to operate each Facility and to be conveyed to
Buyer is free and clear of liens, security interests, encumbrances, leases and
restrictions of every kind and description, except for Permitted Encumbrances
and any liens, security interests and encumbrances to be released at Closing.

 

(o) No Misstatements, Etc. To the best of Seller’s knowledge, neither the
representations and warranties of Seller stated in this Agreement, including the
Exhibits and the Schedules attached hereto, nor the Due Diligence Items or any
certificate or instrument furnished or to be furnished to Buyer by Seller in
connection with the transactions contemplated hereby, contains or will contain
any untrue or misleading statement of a material fact.

 

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(p) Supplementation of Schedules; Change in Representations and Warranties.
Seller shall have the continuing right and obligation to supplement and amend
the Schedules herein on a regular basis including, without limitation,
Schedule 8(g), and Seller’s warranties and representations required hereunder,
as necessary or appropriate (i) in order to make any representation or warranty
not misleading due to events, circumstances or the passage of time or (ii) with
respect to any matter hereafter arising or discovered up to and including the
Closing Date, but Buyer shall not be deemed to have approved such supplemental
Schedules unless Buyer expressly acknowledges approval of same in writing. In
the event Seller amends any such Schedules, or Buyer or Seller gains actual
knowledge prior to the Closing that any representation or warranty made by the
other party contained in this Section 8 is otherwise untrue or inaccurate, such
party shall, within five (5) days after gaining such actual knowledge but in any
event prior to the Closing, provide the other party with written notice of such
inaccuracy, whereupon the noticed party shall promptly commence, and use its
best efforts to prosecute to completion, the cure of such matter, to the extent
any such matter is curable. If any such matter is not curable within reason and
is material, in Buyer’s reasonable business judgment, Buyer shall have the right
to terminate this Agreement upon written notice to Seller within five (5)
business days of receipt or delivery of such notice, as applicable, on the same
basis as set forth in Section 13(a) if during the Due Diligence Period and in
Section 13(b)(i)(i) herein if after expiration of the Due Diligence Period.

 

(q) Survival of Representations and Warranties; Updates. The representations and
warranties of Seller in this Agreement shall not be merged with the Deeds at the
Closing and shall survive the Closing for the period of one (1) year provided
such warranties shall be deemed made as of the date provided; provided, Seller
understands and agrees that the Post Closing Lease, shall provide for a
lengthier period of survival with respect to certain matters referenced therein.

 

For purposes of this Agreement, the phrase “to Seller’s actual knowledge” or
words of similar import shall mean the actual knowledge of Charles E. Trefzger,
Jr.

 

9. Representations and Warranties of Buyer. Buyer hereby warrants and represents
to Seller that:

 

(a) Organization, Corporate Powers, Etc. Buyer is a limited liability company,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified and in good standing in each other state or jurisdiction
in which the nature of its business requires the same except where a failure to
be so qualified does not have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations of that person.
Buyer has full power, authority and legal right (i) to execute and deliver, and
perform and observe the provisions of this Agreement and each Transaction
Document to which it is a party, and (ii) to carry out the transactions
contemplated hereby and by such other instruments to be carried out by Buyer
pursuant to the Transaction Documents.

 

(b) Due Authorization, Etc. The Transaction Documents have been, and each
instrument provided for herein or therein to which Buyer is a party will be,
when executed and delivered as contemplated hereby, duly authorized, executed
and delivered by Buyer and the Transaction Documents constitute, and each such
instrument will constitute, when executed and delivered as contemplated hereby,
legal, valid and binding obligations of the Buyer enforceable in accordance with
their terms.

 

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(c) Governmental Approvals. To Buyer’s actual knowledge, no consent, approval or
other authorization (other than corporate or other organizational consents which
have been obtained), or registration, declaration or filing with, any court or
governmental agency or commission is required for the due execution and delivery
of any of the Transaction Documents to which Buyer is a party or for the
validity or enforceability thereof against such party.

 

(d) No Litigation. Except as set forth on Schedule 9(d) attached hereto, neither
Buyer nor its registered agent for service of process has been served with
summons with respect to any actions or proceedings pending or, to Buyer’s actual
knowledge, no such actions or proceedings are threatened, against Buyer before
or by any court, arbitrator, administrative agency or other governmental
authority, which individually or in the aggregate, are expected, in the
reasonable judgment of Buyer, to materially and adversely affect Buyer’s ability
to carry out any of the transactions contemplated by any of the Transaction
Documents.

 

(e) No Conflicts. Neither the execution and delivery of the Transaction
Documents to which Buyer is a party, compliance with the provisions thereof, nor
the carrying out of the transactions contemplated thereby to be carried out by
such party will result in (i) a breach or violation of (A) any material law or
governmental rule or regulation applicable to Buyer now in effect, (B) any
provision of any Buyer’s organizational documents, (C) any material judgment,
settlement agreement, order or decree of any court, arbitrator, administrative
agency or other governmental authority binding upon Buyer, or (D) any material
agreement or instrument to which Buyer is a party or by which Buyer or its
respective properties are bound; (ii) the acceleration of any obligations of
Buyer; or (iii) the creation of any lien, claim or encumbrance upon any
properties or assets of Buyer.

 

(f) No Misstatements, Etc. To the best of Buyer’s knowledge, neither the
representations and warranties of Buyer stated in this Agreement, including the
Exhibits and the Schedules attached hereto, nor any certificate or instrument
furnished or to be furnished to Seller by Buyer in connection with the
transactions contemplated hereby, contains or will contain any untrue or
misleading statement of a material fact.

 

(g) Survival of Representations and Warranties; Updates. The representations and
warranties of Buyer in this Agreement shall not be merged with the Deeds at the
Closing and shall survive the Closing for the period of one (1) year.

 

10. Covenants of Seller. Seller covenants with respect to the Facilities as
follows:

 

(a) Pre-Closing. Between the date of this Agreement and the Closing Date, except
as contemplated by this Agreement or with the prior written consent of Buyer,
which shall not be unreasonably withheld, conditioned or delayed:

 

(i) Seller shall use its best efforts to cause the Operator to operate the
Facilities diligently, in accordance with the Operator’s obligations under its
lease or other arrangement with Seller, and only in the ordinary course of
business and consistent with past practice.

 

(ii) Seller shall use its best efforts to prevent the Operator from making any
material change in the operation of any Facility, and shall prevent the Operator
from selling or agreeing to sell any items of machinery, equipment or other
assets of the Facility, or otherwise entering into any agreement affecting any
Facility, except in the ordinary course of business;

 

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(iii) Seller shall use its best efforts to prevent the Operator from entering
into any Lease or Contract or commitment affecting any Facility, except for
Leases or Contracts entered into in the ordinary course of business;

 

(iv) During normal business hours and consistent with Section 6(c) herein,
Seller shall provide Buyer or its designated representative with access to the
Facility upon prior notification and coordination with Seller and the Operator;
provided, Buyer shall not materially interfere with the operation of any
Facility. At such times Seller and the Operator shall permit Buyer to inspect
the books and records of each Facility;

 

(v) Within five (5) business days following the execution of this Agreement by
the parties, Seller shall deliver to Buyer the due diligence items described on
the Due Diligence List attached hereto as Schedule 10(a)(v) (the “Due Diligence
Items”); provided, in the event certain Due Diligence Items (“Unavailable
Items”) are not readily accessible to Seller, Seller may identify the
Unavailable Items by written notice to Buyer within such five (5) business day
period and shall use its best efforts to deliver all Unavailable Items to Buyer
as promptly as possible, but in no event more than ten (10) business days
following the execution of this Agreement. If Buyer requests additional items
not included on Schedule 10(a)(v), it will do so by written request delivered by
Seller and Seller will use its best efforts to provide such information within
five (5) business days within receipt of the request; and, provided further,
Seller shall continue to cause Operator to deliver to Buyer, following the
expiration of the Due Diligence Period, financial reports showing, among other
things, the EBITDAR (defined below) for the Facilities for the trailing six (6)
month annualized operations for any given period. The term “EBITDAR” means
“earnings before interest, taxes, depreciation, amortization and rent and
reserves (reserves meaning additions to capital reserves).”

 

(vi) Seller shall use its best efforts to prevent the Operator from moving
residents from any Facility, except (a) to any other Facility which is owned by
Seller and constitutes part of the Property as defined herein, (b) for health
treatment purposes or otherwise at the request of the resident, family member or
other guardian or (c) upon court order or the request of any governmental
authority having jurisdiction over such Facility;

 

(vii) Seller shall use commercially reasonable efforts to cause the Operators to
retain the services and goodwill of the employees of such Operator until the
Closing;

 

(viii) Seller shall maintain in force, or shall cause each Operator to maintain
in force, the existing hazard and liability insurance policies, or comparable
coverage, for each Facility as are in effect as of the date of this Agreement;

 

(ix) Seller shall, and shall cause each Operator, to file all returns, reports
and filings of any kind or nature, including but not limited to, cost reports
referred to in this Agreement, required to be filed by Seller or the Operator on
a timely basis and shall timely pay all taxes or other obligations and
liabilities or recoupments which are due and payable with respect to each
Facility in the ordinary course of business with respect to the periods Seller
or Operator operated each Facility;

 

14

 

 

(x) Seller shall cause each Operator (a) to maintain all required operating
licenses in good standing, (b) to operate each Facility in accordance with its
current business practices and (c) to promptly notify Buyer in writing of any
notices of material violations or investigations received from any applicable
governmental authority;

 

(xi) Seller shall use commercially reasonable efforts to cause each Operator to
make all customary repairs, maintenance and replacements required to maintain
its Facility in substantially the same condition as on the date of Buyer’s
inspection thereof, ordinary wear and tear excepted;

 

(xii) Seller shall promptly notify Buyer in writing of any Material Adverse
Change, as defined herein, of which Seller becomes aware in the condition or
prospects of the Facilities including, without limitation, sending Buyer copies
of all surveys and inspection reports of all governmental agencies received
after the date hereof and prior to Closing, promptly following receipt thereof
by the Operator. For purposes of this Agreement, a “Material Adverse Change”
shall mean: (i) a decrease in the adjusted rolling six (6) month EBITDAR to less
than One Million One Hundred Fifty-Three Thousand Four Hundred Thirty and 00/100
Dollars ($1,153,430.00), cumulatively, or (ii) loss of licensure, or (iii) loss
of Medicaid participation, or (iv) any adverse action by a governmental agency
which, with the passage of time, would reasonably be expected to materially
affect in a negative manner licensure at any Facility, or any adverse action in
any Facility which would reasonably be expected to materially affect in a
negative manner such Facility’s participation or eligibility to participate in
any Medicaid, or other Payor program, unless appropriate corrective action has
been taken by the Operator, in the ordinary course of business, or (v) failure
to settle with the appropriate governmental authority, or to satisfy on or
before the Closing (either directly with such governmental authority or by funds
escrowed by Seller for such purposes) all claims for reimbursements,
recoupments, taxes, fines or penalties which may be due to any governmental
authority having jurisdiction over any Facility, or (vi) the occurrence of a
title or survey defect occurring after the date of this Agreement which would
reasonably be expected to adversely affect the ability of Buyer to operate the
assisted living and memory care facility at its respective Facility or to obtain
financing for such Facility, or (vii) the commencement of any third party
litigation which interferes with Seller’s ability to close the transactions
contemplated by this Agreement, or (viii) any damage, destruction or
condemnation affecting any Facility in which the estimate of damage exceeds
$100,000 per Facility and such damage or destruction has not been repaired, or
Buyer as not otherwise waived such condition prior to Closing. In the event of
any occurrence described in clause (iv) above, Operator shall deliver a copy of
the Plan of Correction or otherwise notify Buyer in writing of the planned
action, and such Plan of Correction or other corrective action which has been
approved by the applicable regulatory agency or agencies.

 

15

 

 

(xiii) Seller agrees to cause each Operator to remedy any compliance deficiency
cited in any written notice from, or in any settlement agreement or other Plan
of Correction or other agreement with, any state governmental body, or in the
event of state proceedings against any Operator or any Facility, or receipt by
any Operator of such notice prior to the Closing Date, of any condition which
would affect the truth or accuracy of any representations or warranties set
forth in this Agreement by Seller; provided, however, in the event a physical
plant deficiency is cited which Seller has insufficient time to remedy before
the Closing Date, in accordance with the approval of the appropriate state
agency, then the same shall be deemed remedied when the costs of correcting said
deficiency (based upon reasonable estimates from established vendors selected by
Seller and Buyer and approved by Seller and by Buyer, in its sole and absolute
discretion) shall be held back in the Escrow at the Closing and not released to
Seller until such deficiency is corrected by Seller; and, provided further, a
non-physical plant deficiency which cannot be remedied prior to the Closing, in
accordance with the approval of the appropriate state agency, will be deemed to
be remedied for purposes of this Section if such Operator develops a Plan of
Correction addressing the deficiency(ies) and such Plan of Correction is
approved by the applicable State agency. Seller shall use its best efforts to
remedy any such deficiency subsequent to the Closing which is to be remedied as
a result of a Plan of Correction filed by Seller or any Operator prior to the
Closing, and Buyer shall cooperate with such efforts by Seller; provided, Seller
shall bear all costs associated with such remedy. In the event any such Plan of
Correction agreed to by Seller and Operator prior to the Closing is not approved
by the applicable State agency subsequent to Closing, Seller shall promptly use
its best efforts, and shall cause such Operator to use its best efforts, to
amend the Plan of Correction in such a manner that is necessary to obtain
acceptance by the State of the amended Plan of Correction as soon as practicable
after submittal. Notwithstanding any other provision of this Agreement, the
obligation of Seller pursuant to this Subsection 10(a)(xiii) shall survive the
Closing for such period of time as is necessary to remedy such deficiency.

 

(xiv) Seller shall, at its cost and on or before Closing, obtain payoffs or
other lender documentation required to obtain timely releases of financing
statements and tax and judgment liens affecting or relating to each Facility
which have been filed or recorded in the State with the Office of the Secretary
of State and the appropriate County Recorder’s Office.

 

(xv) Seller shall promptly comply with any notices of violations received
relating to each Facility and shall deliver to Buyer a copy of any such notice
received and evidence of compliance with such notice.

 

(xvi) Seller shall complete the Critical Repairs in accordance with Section 6(f)
of this Agreement.

 

(b) Closing. On or before the Closing Date, Seller shall deliver the following
documents to Escrow Agent relating to the Facilities (“Closing Documents”):

 

(i) One (1) original executed Deed for each Facility, in recordable form;

 

(ii) Two (2) original executed counterparts of the Post Closing Lease;

 

(iii) Two (2) original executed counterparts of the bill of sale for the
Personal Property (“Bill of Sale”), an assignment of Seller’s interest in the
Contracts and Leases (“Assignment of Contracts and Leases”), and other
instruments of transfer and conveyance in form and substance to be agreed upon
prior to the expiration of the Due Diligence Period transferring and assigning
to Buyer the Real Property, Personal Property and the Intangibles to be
transferred as provided herein with respect to the Facilities (“Instruments of
Assignment”);

 

16

 

 

(iv) One (1) original of the executed Repair Completion Notice for each
Facility, as applicable, to the extent not previously delivered to Buyer.

 

(v) One (1) original executed certificate executed by Seller confirming that
Seller’s representations and warranties continue to be true and correct in all
material respects, or stating how such representations and warranties are no
longer true and correct (“Seller’s Confirmation”);

 

(vi) All contractor’s and manufacturer’s guaranties and warranties, if any, in
Seller’s possession relating to each Facility (collectively, the “Warranties”),
which delivery will be made by leaving such materials at the Facility; and

 

(vii) Two (2) original executed counterparts of each of the FIRPTA Certificate,
escrow agreements and other documents required by the Title Company in
connection with the transactions contemplated by this Agreement (collectively,
the “Title Company Documents”).

 

11. Covenants of Buyer. Buyer hereby covenants as follows:

 

(a) Pre-Closing. Between the date hereof and the Closing Date, except as
contemplated by this Agreement or with the consent of Seller, Buyer agrees that
Buyer shall not take any action inconsistent with its obligations under this
Agreement or which could hinder or delay the consummation of the transaction
contemplated by this Agreement. Between the date hereof and the Closing Date,
Buyer agrees that Buyer shall not (i) make any commitments to any governmental
authority, (ii) enter into any agreement or contract with any governmental
authority or third parties, or (iii) alter, amend, terminate or purport to
terminate in any way any governmental approval or permit affecting the Real
Property, Personal Property or Facility, which would be binding upon Seller, any
Real Property Owner, the Facility or Personal Property after any termination of
this Agreement.

 

(b) Closing. On or before the Closing Date, Buyer shall deposit the following
with Escrow Agent:

 

(i) The Purchase Price in accordance with the requirements of this Agreement;

 

(ii) Two (2) original executed counterparts of the Post Closing Lease;

 

(iii) Two (2) original executed counterparts of each of the Instruments of
Assignment requiring Buyer’s signature;

 

(iv) One (1) original executed certificate executed by Buyer confirming that
Buyer’s representations and warranties continue to be true and correct in all
material respects, or stating how such representations and warranties are no
longer true and correct (“Buyer’s Confirmation”); and

 

17

 

 

(v) Two (2) original executed counterparts of each of the Title Company
Documents requiring Buyer’s signature.

 

12. Conditions to Closing.

 

(a) Conditions to Buyer’s Obligations. All obligations of Buyer under this
Agreement are subject to the reasonable satisfaction and fulfillment, prior to
the Closing Date, of each of the following conditions. Any one or more of such
conditions may be waived in writing by Buyer.

 

(i) Seller’s Representations, Warranties and Covenants. Seller’s
representations, warranties and covenants contained in this Agreement or in any
certificate or document delivered in connection with this Agreement or the
transactions contemplated herein, shall be true at the date hereof and as of the
Closing Date as though such representations, warranties and covenants were then
again made, except to the extent that Buyer has discovered, or Seller has
provided Buyer with written notice (the “Supplemental Notice”) prior to Closing
that Seller has just become aware, that a representation is untrue or
inaccurate, and Buyer nevertheless elects not to terminate this Agreement at the
expiration of the Due Diligence Period, or, if the Supplemental Notice is
delivered after the Due Diligence Period, Buyer elects to proceed with closing
the transaction despite such inaccuracy, whereupon Buyer will be deemed to have
waived any right of recourse or damages against Seller resulting from such
inaccuracy disclosed in the Supplemental Notice. Upon receipt of a Supplemental
Notice from Seller after the expiration of the Due Diligence Period, Buyer shall
have the right to (a) terminate this Agreement upon written notice to Seller
within five (5) days after receipt of the Supplemental Notice, or (b) elect to
proceed with closing the transaction as set forth in this Agreement. If Seller
provides Buyer with a Supplemental Notice within ten (10) business days of
Closing, then Buyer shall have the right, at its option and upon written notice
to Seller, to extend the Closing Date for up to ten (10) business days in order
to analyze and review the issues disclosed in the Supplemental Notice.

 

(ii) Seller’s Performance. Seller shall have performed all of its obligations
and covenants under this Agreement that are to be performed prior to or at
Closing.

 

(iii) Damage and Condemnation. Prior to the Closing Date, no portion of any
Facility shall have been damaged or destroyed by fire or other casualty where
the estimate of damage to such Facility exceeds 10% of the Purchase Price
allocated to such Facility, or proceedings be commenced or threatened to take or
condemn any material part of the Real Property or improvements comprising a
Facility by any public or quasi-public authority under the power of eminent
domain. A proceeding shall be deemed to be “material” if such condemnation or
taking (i) relates to the material taking or closing of any right of access to
any Real Property or Facility, (ii) cause the Real Property or Facility to
become non-conforming with then current legal requirements governing such Real
Property or Facility, (iii) results in the loss of parking that is material to
the operation of such Facility, or (iv) result in the loss of value in excess of
10% of the Purchase Price allocated to such Facility, in Buyer’s reasonable
judgment. If such Facility shall have been so damaged or destroyed, Seller shall
deliver prompt written notice of such condemnation, damage or destruction to
Buyer. In the event Buyer waives this condition, by written notice to Seller
within fifteen (15) business days of receipt of notice of such proceeding, and
the Closing occurs, Seller shall assign to Buyer all its right to any insurance
proceeds in connection therewith. If proceedings shall be so commenced or
threatened to take or condemn the Real Property or the Facility or portion
thereof prior to Closing, and if Buyer waives this condition and the Closing
occurs, Seller shall pay or assign to Buyer all Seller’s right to the proceeds
of any condemnation award in connection thereof.

 

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(iv) Absence of Litigation. No action or proceeding shall have been instituted,
threatened or, in the reasonable opinion of Buyer, is likely to be instituted
before any court or governmental body or authority the result of which could
prevent or make illegal the acquisition by Buyer of any Facility, or the
consummation of the transaction contemplated hereby, or which could materially
and adversely affect any Facility or the business or prospects of any Facility.

 

(v) Form of Post Closing Lease. Prior to the expiration of the Due Diligence
Period, Operators and Buyer shall have agreed upon the form of the post closing
lease (the “Post Closing Lease”) between Buyer, as landlord, and Operator, as
tenant. The Post Closing Lease shall be in substantially the form attached
hereto and incorporated herein by reference as Exhibit C.

 

(vi) No Material Adverse Change. No Material Adverse Change shall have occurred
in any Facility.

 

(vii) Removal of Personal Property Liens. Seller shall have removed (or shall
have sufficient payoff or other documents to remove such liens) all personal
property liens which are related to the Facilities and the Facilities shall be
free and clear of all liens, claims and encumbrances other than Permitted
Exceptions once such payoffs are made at Closing.

 

(viii) Title Insurance Policies. Title Company shall be prepared to issue the
(i) Owners Title Insurance Policy for each Facility as of the Closing Date, with
coverage in the amount of the allocable portion of the Purchase Price for such
Facility, insuring Buyer as owner of such Facility subject only to the Permitted
Exceptions, and (ii) ALTA Title Insurance Policy for each Facility as of the
Closing Date, with coverage in the amount of the allocable portion of Buyer’s
loan from Buyer’s lender (“Lender”), insuring Lender’s lien against each
Facility subject only to such exceptions as may be approved by Lender, and with
such endorsements as may be required by Lender.

 

(ix) Close of Escrow Under Purchase Agreement for Shelby House. Concurrently
herewith, Buyer, as buyer, and WPC Salem, LLC, an affiliate of Seller, as
seller, are entering into a Purchase and Sale Agreement (the “Shelby Purchase
Agreement”) with respect to the purchase and sale of certain assisted living
facility located at 950 Hardin Drive, Shelby, NC 28150 (the “Shelby Facility”).
The close of escrow under the Shelby Purchase Agreement shall be an express
condition to Buyer’s obligation to close under this Agreement.

 

(b) Conditions to Seller’s Obligations. All obligations of Seller under this
Agreement are subject to the fulfillment, prior to the Closing Date, of each of
the following conditions. Anyone or more of such conditions may be waived by
Seller in writing.

 

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(i) Buyer’s Representations, Warranties and Covenants. Buyer’s representations,
warranties and covenants contained in this Agreement or in any certificate or
document delivered in connection with this Agreement or the transactions
contemplated herein shall be true at the date hereof and as of the Closing Date
as though such representations, warranties and covenants were then again made.

 

(ii) Buyer’s Performance. Buyer shall have performed its obligations and
covenants under this Agreement that are to be performed prior to or at Closing.

 

(iii) Absence of Litigation. No action or proceeding shall have been instituted,
threatened or, in the reasonable opinion of Seller, is likely to be instituted
before any court or governmental body or authority the result of which could
prevent or make illegal the acquisition by Buyer of any Facility, or the
consummation of the transaction contemplated hereby, or which could materially
and adversely affect any Facility or the business or prospects of any Facility.

 

(iv) No Actions. There shall be no action pending or recommended by the
appropriate state agency to revoke, withdraw or suspend any license to operate
any Facility or the certification of any Facility, or any action of any other
type with regard to licensure or certification or with respect to Medicaid
provider billing agreements necessary to operate any Facility.

 

(v) Execution of Post Closing Lease and Form of Post Closing Lease. Prior to the
expiration of the Due Diligence Period, Operator and Buyer shall have agreed
upon the form of the Post Closing Lease. Further, it shall be a condition to
Closing that Operators and Buyer execute the Post Closing Lease simultaneously
with Closing.

 

13. Termination; Defaults.

 

(a) Termination For Failure of Condition. Either party may terminate this
Agreement for non-satisfaction or failure of a condition to the obligation of
either party to consummate the transaction contemplated by this Agreement
(including, without limitation, Buyer’s election to disapprove the condition of
the title or Surveys pursuant to Section 14 herein), unless such matter has been
satisfied or waived by the date specified in this Agreement or by the Closing
Date (as same may be extended by the parties to allow the parties to satisfy or
waive conditions to close in the manner provided in this Agreement). In the
event of such a termination, Escrow Agent shall promptly return (i) to Buyer,
all funds of Buyer in its possession, including the Deposit and all interest
accrued thereon, and (ii) to Seller and Buyer, all documents deposited by them
respectively, which are then held by Escrow Agent. Thereafter, neither party
shall have any continuing obligation or liability to the other party except for
any such matters that expressly survive the Closing or termination of this
Agreement, as provided herein. The provisions of this Section 13(a) are intended
to apply only in the event of a failure of condition, as set forth herein, which
is not the result of a default by either party, but which shall not apply in the
event the non-terminating party is in default of its obligations under this
Agreement.

 

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(b) Termination For Cause.

 

(i) If the Agreement is terminated by Seller because Buyer fails to consummate
the Closing as a result of a default by Buyer under this Agreement, Seller’s
sole and exclusive remedy prior to the Closing Date shall be to terminate this
Agreement by giving written notice of termination to Buyer and Escrow Agent,
whereupon (A) Escrow Agent shall promptly release to Seller the Deposit, and all
interest accrued thereon, (B) Escrow Agent shall return to Buyer and Seller all
documents deposited by them respectively, which are then held by Escrow Agent,
(C) the parties shall be released and relieved of all obligations to each other
under this Agreement, except for provisions that expressly survive termination
as provided herein (including without limitation, indemnification provisions),
(D) Buyer shall return to Seller all documents received by it during the course
of its Due Diligence and (E) Buyer shall have no further right to purchase the
Property or legal or equitable claims against Seller (except for any breach by
Seller of provisions that survive termination) and/or the Property. Buyer shall
have no liability to Seller under any circumstances for any speculative,
consequential or punitive damages. Without limiting the other provisions of this
Agreement, Buyer acknowledges that the provisions of this Subsection are a
material part of the consideration being given to Seller for entering into this
Agreement and that Seller would be unwilling to enter into this Agreement in the
absence of the provisions of this Subsection. The provisions of this Subsection
shall survive any termination of this Agreement. With respect to any action by
Seller against Buyer or by Buyer against Seller commenced after the Closing
Date, Seller and Buyer expressly waive any right to any speculative,
consequential, or punitive damages. The parties acknowledge and agree that
Seller’s actual damages as a result of Buyer’s default would be difficult or
impossible to ascertain and that the deliveries and payments provided for in
this paragraph constitute reasonable compensation for its actual damages. Seller
and Buyer acknowledge that they have read and understand the provisions of this
Section 13(b)(i) and by their initials below agree to be bound by its terms.

 

         Sellers’ Initials   Buyer’s Initials      

(ii) Buyer shall have the right to terminate this Agreement in the event Seller
defaults in the performance of its obligations under this Agreement, or in the
event WPC Salem, LLC, defaults in the performance of their respective
obligations under the Shelby Purchase Agreement. If this Agreement is terminated
by Buyer because Seller has defaulted in the performance of its obligations
under this Agreement, and/or a default by WPC Salem, LLC, under the Shelby
Purchase Agreement, Buyer’s sole and exclusive remedies prior to the Closing
Date shall be either: (A) to terminate this Agreement by giving written notice
of termination to Seller and Escrow Agent and pursue any and all remedies for
Buyer’s out-of-pocket costs (including attorneys’ fees and court costs),
attributable to the termination of this Agreement supported by documentary
evidence, excluding any speculative or punitive damages, whereupon (i) Escrow
Agent shall promptly return to Buyer the Deposit, and all interest accrued
thereon, and (ii) Escrow Agent shall return to Seller and Buyer all documents
deposited by them respectively, which are then held by Escrow Agent, or (B) to
pursue the remedy of specific performance of Seller’s obligation to perform its
obligations under this Agreement. Seller shall have no liability to Buyer under
any circumstances for any speculative, consequential or punitive damages.
Without limiting the other provisions of this Agreement, Seller acknowledges
that the provisions of this Subsection are a material part of the consideration
being given to Buyer for entering into this Agreement and that Buyer would be
unwilling to enter into this Agreement in the absence of the provisions of this
Subsection. The provisions of this Subsection shall survive any termination of
this Agreement. With respect to any action by Buyer against Seller or by Seller
against Buyer commenced after the Closing Date, Buyer and Seller expressly waive
any right to any speculative, consequential, punitive or special damages
including, without limitation, lost profits. Seller and Buyer acknowledge that
they have read and understand the provisions of this Section 13.2(b) and by
their initials below agree to be bound by its terms.

 

 

 

      Sellers’ Initials   Buyer’s Initials      

 

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(c) General. In the event a party elects to terminate this Agreement such party
shall deliver a notice of termination to the other party.

 

14. Surveys and PTR.

 

(a) Buyer has previously obtained a preliminary title report (the “PTR”)
covering the Real Property and each Facility dated prior to the date of this
Agreement, together with legible copies of any and all instruments referred to
in the PTR as constituting exceptions to title of the Real Property (the “Title
Documents”).

 

(b) Seller shall have delivered to Buyer a copy of the existing surveys, if any,
in Seller’s possession for each Facility (“Surveys”) in accordance with
Section 10(a)(v) herein. Buyer shall be responsible for obtaining an update of
the Surveys or new Surveys, at Buyer’s sole cost (“New Surveys”). On or before
ten (10) business days prior to the expiration of the Due Diligence Period,
Buyer shall notify Seller and the Title Company (“Buyer’s Title Notice”) of any
objections which Buyer may have to the PTR and/or Surveys. If Buyer objects to
any matters (other than the Permitted Exceptions, as defined herein) which, in
Buyer’s determination, might adversely affect the ability of Buyer to operate
any of the Facilities, Seller shall use its reasonable business efforts to cure
same, but shall not be obligated to cure matters other than to obtain the
release (at Closing) of the existing mortgage and other monetary liens caused by
Seller which may be released by payment of the mortgage payoff or lien amount
from Seller’s Closing proceeds (collectively, “Monetary Liens”). If Seller
delivers written notice to Buyer (“Seller’s Title Notice”), on or before the
expiration of the Due Diligence Period that Seller is willing to remove any
exceptions objected to by Buyer, then Seller shall be obligated to remove such
exceptions on or prior to the Closing and such exceptions shall not be Permitted
Exceptions. If Seller does not provide Buyer with Seller’s Title Notice or
Seller’s Title Notice does not provide for Seller’s agreement to remove all
exceptions objected to by Buyer, then Buyer shall have the right to terminate
this Agreement prior to the expiration of the Due Diligence Period or waive
Buyer’s objection to any exceptions Seller has not agreed to remove with such
exceptions becoming Permitted Exceptions upon Buyer waiving its due diligence
contingency. Buyer shall, promptly following the execution of this Agreement,
commence to use its best efforts to obtain the New Surveys as soon as
practicable. Notwithstanding the foregoing provisions of this Subsection (b),
Buyer shall have the right to object, promptly upon learning of any such new
matters during the Due Diligence Period, to any matters raised in the New
Surveys which were not addressed in the Surveys, and the parties shall cooperate
with the Title Company, during the Due Diligence Period and as promptly as
possible following the delivery of Buyer’s objections to such new matters in the
New Surveys, to resolve any such matters to Buyer’s satisfaction. The Due
Diligence Period shall not be extended for resolution of any such matters in the
New Surveys.

 

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15. Cooperation. Following the execution of this Agreement, Buyer and Seller
agree that if any event should occur, either within or without the knowledge or
control of Buyer or Seller, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transaction contemplated
by this Agreement, each such party shall use reasonably commercial efforts to
cure or to cause the cure of the same as expeditiously as possible. In addition,
each party shall cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions with respect to, any applications,
requests, or actions which are or may be reasonable and necessary to obtain the
consent of any governmental instrumentality or any third party or to accomplish
the transaction contemplated by this Agreement.

 

16. Indemnification.

 

(a) Indemnification Provisions.

 

(i) Subject to the limitation on damages contained in Section 13(b)(ii) hereof,
Seller hereby agrees to indemnify, protect, defend and hold harmless Buyer and
its officers, directors members shareholders tenants, successors and assigns
harmless from and against any and all claims, demands, obligations, losses,
liabilities, damages, recoveries and deficiencies (including interest, penalties
and reasonable attorneys’ fees, costs and expenses) which any of them may suffer
as a result of: (A) any material breach of or material inaccuracy in the
representations and warranties, or breach, non-fulfillment or default in the
performance of any of the conditions, covenants and agreements, of Seller
contained in this Agreement or in any certificate or document delivered by
Seller pursuant to any of the provisions of this Agreement, unless Seller cures
such matter in the manner provided in Section 8(p) herein or (B) the failure to
discharge any federal, state or local tax liability, or to pay any other
assessments, recoupments, claims, fines, penalties or other amounts or
liabilities accrued or payable with respect to any activities of Seller prior to
the Closing Date (whether brought before or after the Closing Date), or (C) any
obligation which is expressly the responsibility of Seller under this Agreement,
or (D) any amounts required to cure citation violations issued by any state
health or human services authority on any Facility relating to any period prior
to the Closing Date (whether brought before or after the Closing Dates), or (E)
any claim by any employee of Seller relating to any period of employment prior
to the Closing Date (whether brought before or after the Closing Date), or (F)
the existence against the Real Property of any mechanic’s or materialmen’s
claims resulting from the action or inaction of Seller or anyone acting under
authority of Seller, or (G) any other cost, claim or liability arising out of or
relating to events (other than as a result of the actions of Buyer or Buyer’s
Consultants) or Seller’s ownership, operation or use of any Facility prior to
the Closing Date. Any amount due under the aforesaid indemnity shall be due and
payable by Seller within 30 days after demand thereof. Seller shall have the
right to contest any such claims, liabilities or obligations as provided herein.

 

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(ii) Subject to the limitation on damages contained in Section 13(b)(i) hereof,
Buyer hereby agrees to indemnify, protect, defend and hold harmless Seller and
its officers, directors, members, shareholders and tenants harmless from and
against any and all claims, demands, obligations, losses, liabilities, damages,
recoveries and deficiencies (including interest, penalties and reasonable
attorneys’ fees, costs and expenses) which any of them may suffer as a result
of: (A) any material breach of or material inaccuracy in the representations and
warranties, or breach, non-fulfillment or default in the performance of any of
the conditions, covenants and agreements, of Buyer contained in this Agreement
or in any certificate or document delivered by Buyer pursuant to any of the
provisions of this Agreement, unless Buyer cures such matter in the manner
provided in Section 8(p) herein, or (B) the existence against the Real Property
of any mechanic’s or materialmen’s claims arising from actions of Buyer or
Buyer’s Consultants prior to the Closing, or (C) any claim by any employee of
Buyer relating to any period after the Closing Date, or (D) any other cost,
claim or liability arising out of or relating to events (other than as a result
of Seller, Seller’s operator, Seller’s lessee, or Seller’s consultants) of
Buyer’s ownership, operation or use of any Facility after the Closing Date, or
(E) any obligation which is expressly the responsibility of Buyer under this
Agreement. Any amount due under the aforesaid indemnity shall be due and payable
by Buyer within thirty (30) days after demand therefor. Buyer shall have the
right to contest any such claims, liabilities or obligations as provided herein
or any other cost, claim or liability arising out of or relating to events or
Buyer’s ownership, operation or use of the Facilities after the Closing Date.

 

(iii) The parties intend that all indemnification claims be made as promptly as
practicable by the party seeking indemnification (the “Indemnified Party”).
Whenever any claim shall arise for indemnification hereunder, the Indemnifying
Party shall promptly notify the party from whom indemnification is sought (the
“Indemnitor”) of the claim, and the facts constituting the basis for such claim
(the “Indemnification Claim”). Failure to notify the Indemnitor will not relieve
the Indemnitor of any liability that it may have to the Indemnified Party,
except to the extent the defense of such action is materially and irrevocably
prejudiced by the Indemnified Party’s failure to give such notice.

 

(iv) An Indemnitor shall have the right to defend against an Indemnification
Claim, with counsel of its choice reasonably satisfactory to the Indemnified
Party, if (a) within fifteen (15) days following the receipt of notice of the
Indemnification Claim the Indemnitor notifies the Indemnified Party in writing
that the Indemnitor will indemnify the Indemnified Party from and against the
entirety of any damages the Indemnified Party may suffer resulting from,
relating to, arising out of, or attributable to the Indemnification Claim, (b)
the Indemnitor provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnitor will have the financial
resources to defend against the Indemnification Claim and pay, in cash, all
damages the Indemnified Party may suffer resulting from, relating to, arising
out of, or attributable to the Indemnification Claim, (c) the Indemnification
Claim involves only money damages and does not seek an injunction or other
equitable relief, (d) settlement of, or an adverse judgment with respect to, the
Indemnification Claim is not in the good faith judgment of the Indemnified Party
likely to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (e) the Indemnitor
continuously conducts the defense of the Indemnification Claim actively and
diligently.

 

24

 

 

(v) So long as the Indemnitor is conducting the defense of the Indemnification
Claim in accordance with Section 16(a)(iv), then (A) the Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in the
defense of the Indemnification Claim, (B) the Indemnified Party shall not
consent to the entry of any order or finalization of any tentative settlement,
the only condition of which is the consent of the Indemnified Party thereto,
with respect to the Indemnification Claim without the prior written consent of
the Indemnitor (not to be withheld unreasonably), and (C) the Indemnitor will
not consent to the entry of any order or finalization of any tentative
settlement, the only condition of which is the consent of the Indemnified Party
thereto, with respect to the Indemnification Claim without the prior written
consent of the Indemnified Party (not to be unreasonably withheld or delayed,
provided that it will not be deemed to be unreasonable for an Indemnified Party
to withhold its consent with respect to (i) any breach of any law, order or
permit, (ii) any violation of the rights of any person, or (iii) any matter
which Indemnified Party believes could have a material adverse effect on any
other actions to which the Indemnified Party or its Affiliates are party or to
which Indemnified Party has a good faith belief it may become party.
Notwithstanding the foregoing provisions of this Subsection (v), if Indemnified
Party refuses its consent to any of the matters set forth in clauses (i) through
(iii) above, the indemnity amount shall be determined as if such consent had
been given and Indemnitor shall pay over to the Indemnified Party such amount
and be absolved from any further obligation as to that particular claim;
Indemnified Party may then resolve the claim in the manner it sees fit without
further recourse against Indemnitor.

 

(vi) Each party hereby consents to the non-exclusive jurisdiction of any
governmental body, arbitrator, or mediator in which an action is brought against
any Indemnified Party for purposes of any Indemnification Claim that an
Indemnified Party may have under this Agreement with respect to such action or
the matters alleged therein, and agrees that process may be served on such party
with respect to such claim anywhere in the world, provided however, that any
venue relating to any claim or proceeding arising out of this Agreement or any
other agreement between Sellers and Buyer shall be the State and the laws of the
State shall apply.

 

(b) Insurance Proceeds. In determining the amount of damages for which either
party is entitled to assert an Indemnification Claim, the amount of any such
claims or damages shall be determined after deducting therefrom the amount of
any insurance coverage or proceeds or other third party recoveries received by
such other party in respect of such damages. If an indemnification payment is
received by the Indemnified Party in respect of any damages and the Indemnified
Party later receives insurance proceeds or other third party recoveries in
respect of such damages, the Indemnified Party shall immediately pay to the
Indemnifying Party a sum equal to the lesser of the actual amount of net
insurance proceeds or other third party recoveries (remaining after recovery
costs and expenses) or the actual amount of the indemnification payment
previously paid by or on behalf of the Indemnified Party.

 

(c) No Incidental, Consequential and Certain Other Damages. An Indemnitor shall
not be liable to an Indemnified Party for incidental, consequential, enhanced,
punitive or special damages unless such damages are included in a third-party
claim and such Indemnified Party is liable to the third party claimant for such
damages.

 

25

 

 

(d) Indemnification if Negligence of Indemnity; No Waiver of Rights or Remedies.

 

Each Indemnified Party’s rights and remedies set forth in this Agreement shall
survive the Closing or other termination of this Agreement, shall not be deemed
waived by such Indemnified Party’s consummation of the Closing of the sale
transactions (unless the Indemnified Party has knowledge of the existence of an
Indemnification Claim at Closing and decides to proceed with Closing)and will be
effective regardless of any inspection or investigation conducted by or on
behalf of such Indemnified Party or by its directors, officers, employees, or
representatives or at any time (unless such inspection or investigation reveals
the existence of an Indemnified Claim and such party proceeds with Closing),
whether before or after the Closing Date.

 

(e) Other Indemnification Provisions. A claim for any matter not involving a
third party may be asserted by notice to the Party from whom indemnification is
sought.

 

(f) Dispute Resolution. Any dispute arising out of or relating to claims for
indemnification pursuant to this Article 16 or any other dispute hereunder,
shall be resolved in accordance with the procedures specified herein, which
shall be the sole and exclusive procedure for the resolution of any such
disputes.

 

17. Notices. Any notice, request for consent or approval, election or other
communication provided for or required by this Agreement shall be in writing and
shall be delivered by hand, by air courier service, postage prepaid (certified
with return receipt requested), fax transmission or electronic transmission
followed by delivery of the hard copy of such communication by air courier
service or mail as aforesaid, addressed to the person to whom such notice is
intended to be given at such address as such person may have previously
furnished in writing to the such party’s last known address. Until receipt of
written notice to the contrary, the parties’ addresses for notices shall be:

 

To Buyer:    

Cornerstone Core Properties REIT, Inc.

c/o Cornerstone Healthcare Properties

1920 Main Street, Suite 400

Irvine, CA 92614

Attention: Kent Eikanas

Phone: (949) 812-4335

Email: KEikanas@crefunds.com

 

With a Copy to:    

Heffernan Seubert & French LLP

1075 Curtis Street

Menlo Park, CA 94025

Attention: Rachel Rosati Warner

Phone: (650) 322-2919

Email: rwarner@hsfllp.com

  

 

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To Seller:

Hamlet Health Investors, LLC

P.O. Box 2568

Hickory, NC 28603

Phone: (828) 322-5535

Email: CET@meridiansenior.com

 

Newport Health Investors, LLC

P.O. Box 2568

Hickory, NC 28603

Phone: (828) 322-5535

Email: CET@meridiansenior.com

 

 

    With a Copy to:

John A. Cocklereece, Jr.

Bell, Davis & Pitt, P.A.

100 North Cherry Street, Suite 600

Winston-Salem, NC 27101

Phone: (336) 722-3700

E-mail:jcockelreece@belldavispitt.com

 

 

 

18. Sole Agreement. This Agreement constitutes the entire understanding between
the parties with respect to the transactions contemplated herein, and all prior
or contemporaneous oral agreements, understandings representations and
statement, and all prior written agreements, understandings, letters of intent
and proposals are merged into this Agreement. Neither this Agreement nor any
provisions hereof may be waived, modified, amended, discharged or terminated
except by an instrument in writing signed by the party against which the
enforcement of such waiver, modification, amendment, discharge or termination is
sought, and then only to the extent set forth in such instrument.

 

19. Assignment; Successors. Neither party shall assign this Agreement without
the prior written consent of the other; provided, however, Buyer may assign all
of its rights, title, liability, interest and obligation pursuant to this
Agreement to one or more entities owned, controlled by or under common control
with Buyer. Subject to the limitations on assignment set forth above, all the
terms of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by and against the heirs, successors and assigns of the parties
hereto.

 

20. Severability. Should any one or more of the provisions of this Agreement be
determined to be invalid, unlawful or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby and each such provision shall be
valid and remain in full force and effect.

 

21. Risk of Loss. Until the Closing Date, Seller shall bear the risk of loss for
the Facilities and after the Closing Date, the risk of loss of the Facilities
shall be governed by the Post Closing Lease.

 

27

 

 

22. Holidays. If any date herein set forth for the performance of any
obligations by Seller or Buyer or for the delivery of any instrument or notice
as herein provided should be on a Saturday, Sunday or legal holiday, the
compliance with such obligations or delivery shall be deemed acceptable on the
next business day following such Saturday, Sunday or legal holiday. As used
herein, the term “legal holiday” means any state or federal holiday for which
financial institutions or post offices are generally closed in the State for
observance thereof.

 

23. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, and all of which together shall be deemed to
constitute one and the same instrument. Facsimile signature pages or
electronically transmitted signature pages shall constitute original
counterparts for all purposes.

 

24. Covenant Not to Compete; Non-Solicitation of Employees. For a period of
three (3) years following the Closing Date, each Seller agrees (i) not to own,
manage, lease or operate a long term assisted living facility which is located
within a ten (10) mile radius of each Facility and (ii) not to solicit the
transfer of patients or residents of any of the Facilities to any long term
assisted living facility which is managed, leased or operated by any entity
owned and/or controlled by any of the Seller entities or such individual within
a ten (10) mile radius of each Facility.

 

25. Exhibits and Schedules. To the extent that one or more Exhibits or Schedules
are not attached to this Agreement at the time this Agreement is executed,
Seller and Buyer agree that this Agreement is not rendered unenforceable by
reason of such fact. Seller shall provide such exhibits to Buyer during the Due
Diligence Period as promptly as possible in order to allow the parties to agree
upon such Exhibits and Schedules and to afford Buyer adequate time in which to
complete its due diligence review prior to the expiration of the Due Diligence
Period.

 

26. Prevailing Party. Subject to the limitations as otherwise set forth in this
Agreement, if an action shall be brought on account of any breach of or to
enforce or interpret any of the terms, covenants or conditions of this
Agreement, the prevailing party shall be entitled to recover from the other
party, as part of the prevailing party’s costs, reasonable attorney’s fees, the
amount of which shall be fixed by the court and shall be made a part of any
judgment rendered.

 

27. Time is of the Essence. Time is of the essence of this Agreement.

 

28. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State.

 

[Signatures on Following Pages]

 

28

 

 

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement by parties
legally entitled to do so as of the day and year first set forth above.

 

  “SELLER”:               HAMLET HEALTH INVESTORS, LLC, a North
Carolina limited liability company                     By: /s/ Charles E.
Trefzger, Jr.     Its: Manager                     NEWPORT HEALTH INVESTORS,
LLC, a North
Carolina limited liability company                   By: /s/ Charles E.
Trefzger, Jr.     Its: Manager                                            
“BUYER”:             CORNERSTONE CORE PROPERTIES REIT,
INC., a Maryland corporation                   By: /s/ Kent Eikanas        Kent
Eikanas, President  

  

29