Exhibit 10.2
 
PURCHASE AND SALE AGREEMENT

By And Between

MVI HEALTH CENTER, LP,
a Delaware limited partnership
as “Buyer”

and

SNF MESA VISTA, LLC,
a Texas limited liability company
as “Seller”

Dated as of

December 31, 2009

 

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TABLE OF CONTENTS
 

   
Page
     
ARTICLE I TERMINOLOGY
 
1
1.1
Defined Terms
 
1
1.2
Additional Defined Terms
 
3
     
ARTICLE II PURCHASE AND SALE
 
4
2.1
Property
 
4
2.2
Assumption of Liabilities.
 
5
2.3
Purchase Price
 
6
2.4
Adjustment of Purchase Price.
 
6
2.5
Earnest Money Deposit
 
7
2.6
Escrow Agent.
 
7
     
ARTICLE III DUE DILIGENCE PERIOD
 
8
3.1
Due Diligence Period
 
8
3.2
Buyer’s Responsibilities
 
9
3.3
Continuing Diligence and Inspection Rights
 
9
     
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER
 
9
4.1
Organization; Good Standing of Seller
 
9
4.2
Consent of Third Parties
 
10
4.3
Authority; Enforceability
 
10
4.4
Absence of Conflicts
 
10
4.5
No Judgments
 
10
4.6
No Governmental Approvals
 
10
4.7
Insurance
 
10
4.8
Litigation
 
10
4.9
Compliance with Laws
 
11
4.10
Environmental Matters
 
11
4.11
Assessments
 
11
4.12
Property Agreements
 
11
4.13
Licenses
 
12
4.14
Rent Roll
 
12
4.15
Medicare; Medicaid
 
12
4.16
Condemnation
 
13
4.17
Condition of Property
 
13
4.18
Independent Property
 
14
4.19
Utilities Access
 
14
4.20
Zoning
 
14
4.21
FIRPTA
 
14
4.22
Interests; Title
 
14
4.23
Title Encumbrances
 
15
4.24
Affordable Housing Units
 
15
4.25
No New Survey Matters
 
15

 
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TABLE OF CONTENTS (cont’d)

     
Page
       
4.26
Loans
 
15
4.27
Patriot Act Compliance
 
15
4.28
Broker’s or Finder’s Fees
 
15
4.29
Insolvency
 
15
     
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
 
16
5.1
Organization and Good Standing
 
16
5.2
Consent of Third Parties
 
16
5.3
Authorization and Binding Effect of Documents
 
16
5.4
Absence of Conflicts
 
16
5.5
Consents
 
16
5.6
Patriot Act Compliance
 
17
5.7
Broker’s or Finder’s Fees
 
17
     
ARTICLE VI OTHER COVENANTS
 
17
6.1
Conduct of Business Prior to the Closing
 
18
6.2
Notification of Certain Matters
 
18
6.3
Title; Additional Documents
 
18
6.4
Other Consents
 
18
6.5
Inspection and Access
 
18
6.6
Confidentiality.
 
19
6.7
Publicity
 
20
6.8
Reasonable Best Efforts
 
20
6.9
Reports
 
20
6.10
Post-Closing Obligations of Seller
 
20
6.11
No Other Representations or Warranties.
 
20
6.12
Noncompetition
 
20
6.13
Exclusivity
 
21
6.14
Loan Guaranties
 
21
     
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE
 
21
7.1
Accuracy of Representations and Warranties; Closing Certificate.
 
21
7.2
Performance of Agreement
 
21
7.3
No Adverse Change
 
21
7.4
Conveyance of Property
 
21
7.5
Title Insurance and Survey.
 
22
7.6
Delivery of Closing Documents
 
25
7.7
Licenses.
 
25
7.8
Financing Contingency.
 
25
7.9
Governmental Approvals.
 
26
7.10
Third-Party Consents
 
26
7.11
Amended and Restated Lease Agreement and Lease Guaranty.
 
26

 
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TABLE OF CONTENTS (cont’d)

   
Page
     
ARTICLE VIII CONDITIONS PRECEDENT TO THE  OBLIGATION OF SELLER TO CLOSE
 
26
8.1
Accuracy of Representations and Warranties.
 
26
8.2
Performance of Agreements
 
26
8.3
Delivery of Closing Documents.
 
26
       
ARTICLE IX CLOSING
 
27
9.1
Closing Date and Place.
 
27
9.2
Deliveries of Seller
 
27
9.3
Deliveries of Buyer
 
29
9.4
Closing Costs
 
29
       
ARTICLE X INDEMNIFICATION
 
30
10.1
General
 
30
10.2
Indemnification by Seller
 
30
10.3
Indemnification by Buyer
 
30
10.4
Administration of Indemnification
 
30
       
ARTICLE XI DEFAULT AND TERMINATION
 
32
11.1
Right of Termination
 
32
11.2
Remedies upon Default.
 
33
11.3
Specific Performance
 
33
11.4
Obligations Upon Termination
 
33
11.5
Termination Notice
 
34
11.6
Sole and Exclusive Remedy
 
34
     
ARTICLE XII MISCELLANEOUS
 
34
12.1
Further Actions
 
34
12.2
Notices
 
34
12.3
Entire Agreement
 
36
12.4
Binding Effect; Benefits
 
36
12.5
Assignment
 
36
12.6
Governing Law
 
36
12.7
Amendments and Waivers
 
36
12.8
Joint and Several
 
36
12.9
Severability
 
36
12.10
Headings
 
36
12.11
Counterparts
 
37
12.12
References
 
37
12.13
Seller Disclosure Letter
 
37
12.14
Attorneys’ Fees
 
37
12.15
Section 1031 Exchange/Tax Planning
 
37
12.16
Casualty
 
38
12.17
Condemnation
 
38
12.18
Limited Liability
 
38

 
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TABLE OF CONTENTS (cont’d)

     
Page
       
12.19
Survival of Defined Terms
 
39
12.20
Time of Essence
 
39
12.21
No Third-Party Beneficiary
 
39
12.22
WAIVER OF JURY TRIAL
 
39

EXHIBITS TO THIS AGREEMENT

EXHIBIT A-1
Legal Description of the Property

EXHIBIT B-1
Due Diligence Request List

EXHIBIT C-1
Form of Amended and Restated Lease Agreement

EXHIBIT D-1
Form of Lease Guaranty

EXHIBIT E-1
Form of Assignment and Assumption Agreement

 
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TABLE OF CONTENTS OF SELLER DISCLOSURE LETTER
 
SCHEDULES

Schedule 2.1(b)
Personal Property

Schedule 2.1(d)
Licenses

Schedule 4.7
Seller’s Insurance

Schedule 4.8
Litigation

Schedule 4.14
Rent Roll

Schedule 4.17
Condition of the Property

EXHIBITS
 
EXHIBIT A
Legal Description of the Property

EXHIBIT B
List of Property Agreements

EXHIBIT C
List of Licenses Required for the Property

EXHIBIT D
Form of Seller’s Counsel Opinion and Buyer’s Counsel Opinion

EXHIBIT E
Rent Roll

EXHIBIT F
Outstanding Citations

EXHIBIT G
Form of Audit Letter

 
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PURCHASE AND SALE AGREEMENT
 
THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is dated the 31st day of
December, 2009 (the “Effective Date”), by and between: MVI HEALTH CENTER, LP, a
Delaware limited partnership, or its successors or assigns (the “Buyer”); and
SNF MESA VISTA, LLC, a Texas limited liability company (the “Seller”).
 
RECITALS:
 
A.           Seller is the owner of certain real, personal and intangible
property constituting that certain senior housing community known as Mesa Vista
Inn Health Center, a 144 bed skilled nursing center located at 5756 N. Knoll
Drive, San Antonio, Texas  78130.
 
B.           Buyer desires to acquire, and Seller is willing to convey to Buyer
pursuant to the terms described herein the above referenced real property and
personal property.
 
Accordingly, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller and Buyer agree as follows:
 
ARTICLE I
TERMINOLOGY
 
1.1         Defined Terms.  As used herein, the following terms shall have the
meanings indicated:
 
Adjustment Amount:  The amount computed under Section 2.4 hereof.
 
Affiliate:  With respect to any specified person or entity, any other person or
entity which, directly or indirectly controls, is controlled by, or is under
common control with, the specified person or entity.
 
Applicable Law: Any federal, state, municipal, county, local, foreign or other
statute, law, ordinance, rule or regulation or any order, writ, injunction,
judgment, plan or decree of any court, arbitrator, department, commission,
board, bureau, agency, authority, instrumentality or other body, whether
federal, state, municipal, county, local, foreign or other.
 
Buyer Ownership Period:  Any period of time following Closing during which Buyer
or any of its Affiliates owns the Property or the Facility.
 
Closing: The consummation of the purchase and sale of the Property in accordance
with the terms of this Agreement on the Initial Closing Date, the Extended
Closing Date, or at such earlier or later date and time as may be agreed upon by
the parties.
 
Code:  The Internal Revenue Code of 1986, as amended.
 
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Documents:  This Agreement, all Exhibits hereto, and all Exhibits and Schedules
contained in the Seller Disclosure Letter, and each other agreement, certificate
or instrument to be delivered pursuant to this Agreement.
 
Due Diligence Period:  The period commencing on the Effective Date and ending on
December 31, 2009, during which time Buyer may, at reasonable times with prior
notice to Seller, (i) investigate the financial, legal, operational,
environmental and all other aspects of the Property as Buyer may desire, and
(ii) seek out sources of financing and/or investors, all in order to determine
whether to consummate the transactions contemplated by this Agreement or
terminate this Agreement.
 
Escrow Agent:  The Title Agent.
 
GAAP:  Generally accepted accounting principles as applied in the United States.
 
Knowledge:  As used in this Agreement, the term “knowledge” when used to refer
to the knowledge of Seller shall mean the actual knowledge of Robert S. Hicks,
Lew Little, Jr. and Steve Wood as of the Effective Date and the Closing or any
matter which any such person would have knowledge of upon inquiry of the
executive director of the Facility.
 
Licenses:  All certificates, licenses, and permits issued by governmental
authorities which are required to be held by an owner or tenant in connection
with the ownership, use, occupancy, operation, and maintenance of the Property
as a skilled nursing facility.
 
Lien:  Any mortgage, deed to secure debt, deed of trust, pledge, hypothecation,
right of first refusal, security interest, encumbrance, charge, claim, option or
lien of any kind, any conditional sale or other title retention agreement, or
any agreement to give or grant any of the foregoing, whether voluntarily
incurred or arising by operation of law or otherwise, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
Applicable Law.
 
Loss:  Any and all costs, obligations, liabilities, demands, claims, settlement
payments, awards, judgments, fines, penalties, damages and reasonable
out-of-pocket expenses, including court costs and reasonable attorneys’ fees,
whether or not arising out of a third-party claim.
 
Permitted Exceptions:  Any (i) statutory liens that secure a governmentally
required payment, including without limitation Taxes, not yet due, (ii) zoning
regulations and restrictive covenants and easements of record that do not
detract in any material respect from the present use of the Property and do not
materially and adversely affect, impair or interfere with the use of any
property affected thereby, (iii) public utility easements of record, and (iv)
any other condition of title as may be approved by Buyer in writing prior to
Closing or as may be deemed approved by Buyer pursuant to the express terms of
Section 7.5.
 
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Property Agreements: All contracts, leases, agreements, commitments and other
arrangements, and any amendments, modifications, supplements, renewals and
extensions thereof, used or useful in the operation of the Property made or
entered into by Seller or Tenant as of the Effective Date, or between the
Effective Date and the Closing in compliance with this Agreement.
 
Resident Agreements: All occupancy, residency, leases, tenancy and similar
written agreements entered into with residents of the Property, including any
amendments, modifications, supplements, renewals and extensions thereof.
 
Seller Disclosure Letter: The letter dated the same date as this Agreement given
by the Seller to the Buyer and containing the Exhibits and Schedules referenced
herein.
 
Seller Ownership Period:  Any period of time prior to Closing during which
Seller, Tenant or any of their respective Affiliates owned, operated or leased
the Property or the Facility.
 
Taxes:  All federal, state, local and foreign taxes including, without
limitation, income, gains, transfer, unemployment, withholding, payroll, social
security, real property, personal property, excise, sales, use and franchise
taxes, levies, assessments, imposts, duties, licenses and registration fees and
charges of any nature whatsoever, whether or not recorded, including interest,
penalties and additions with respect thereto and any interest in respect of such
additions or penalties, but excluding all transfer, conveyance, intangibles,
mortgage transfer, and documentary stamp taxes payable in connection with the
transactions contemplated by this Agreement.
 
Tenant:  PM Management – Babcock NC, LLC, a Texas limited liability company.
 
Title Agent:   The Title Agent is as follows:
 
Heritage Title Company of Austin, Inc.
410 Congress Avenue, Suite 1500
Austin, Texas   78701
Phone: (512) 505-5000
Fax:  (512) 505-5024
Attn.: Jennifer Ramburg
E-mail: jramberg@heritage-title.com

Title Insurer:   First American Title Insurance Company

1.2         Additional Defined Terms.  As used herein, the following terms shall
have the meanings defined in the recitals or Section indicated below:
 
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Agreement
Preamble
Amended and Restated Lease Agreement
Section 7.11
Assumed Obligations
Section 2.2(b)
Buyer
Preamble
CERCLA
Section 4.10
Closing
Section 9.1
Initial Closing Date
Section 9.1
Environmental Laws
Section 4.10
Extended Closing Date
Section 9.1
Governmental Payor Programs
Section 4.15
Guaranty
Section 7.11
Improvements
Section 2.1(a)
Indemnified Party
Section 10.4(a)
Indemnifying Party
Section 10.4(a)
Land
Section 2.1(a)
Lease Guaranty
Section 7.11
Lease Guarantor
Section 7.11
OFAC
Section 4.27
Patriot Act
Section 4.27
Permitted Buyer-Assignee
Section 12.5
Permitted Exception
Section 7.5(b)
Personal Property
Section 2.1(a)
Property
Section 2.1
Proration Date
Section 2.4(a)
Proration Schedule
Section 2.4(a)
Purchase Price
Section 2.3
Real Property
Section 2.1(a)
Records
Section 6.10
Required Cure Items
Section 7.5(b)
SEC
Section 6.6(c)
Seller
Preamble
Survey
Section 7.5(e)
Title Commitment
Section 7.5(a)
Title Defect
Section 7.5(b)
Title Notice
Section 7.5(b)
Transaction Costs
Section 9.4

 
ARTICLE II
PURCHASE AND SALE
 
2.1           Property.  Upon and subject to the terms and conditions provided
herein, at Closing, Seller will sell, transfer, assign and convey to Buyer, and
Buyer will purchase from Seller the following (collectively, the “Property”):
 
(a)           Real Property.  All of Seller’s right, title, and interest in and
to that certain parcel of real property consisting of land (“Land”) and all
buildings, structures, fixtures and other improvements (“Improvements”) located
thereon.  The Land is more particularly described on Exhibit A-1 attached hereto
and made a part hereof.  The Land and Improvements (collectively, the “Real
Property”) shall be deemed to include all rights-of-way, beneficial easements
and appurtenances related to the Real Property.  
 
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(b)           Personal Property.  All furnishings, machinery, equipment,
vehicles, supplies, inventory, linens, medicine, foodstuffs, consumable and
other personal property of any type or description, including, without
limitation, all beds, chairs, sofas, wheelchairs, tables, kitchen and laundry
equipment associated with and present at the Property (collectively, the
“Personal Property”) described in Schedule 2.1(b) of the Seller Disclosure
Letter. 
 
(c)           Records.  True and complete copies of all the books, records,
accounts, files, logs, ledgers, journals and architectural, mechanical and
electrical plans and specifications in the possession or control of Seller or
its Affiliates pertaining to or used in connection with the Property, however
such data is stored.
 
(d)           Licenses.  The Licenses and any renewals, extensions, amendments
or modifications thereof listed on Schedule 2.1(d) of the Seller Disclosure
Letter.
 
(e)           Claims and Causes of Action.  Any and all of the rights of Seller
and its Affiliates in and to any claims or causes of action to the extent they
are in the nature of enforcing a guaranty, warranty, or a contract obligation to
complete improvements, make repairs, or deliver services to the Property.
 
(f)           Intellectual Property.  Any and all rights of Seller or its
Affiliates with respect to the use of (a) all trade names, trademarks, service
marks, copyrights, patents, jingles, slogans, symbols, logos, inventions,
computer software, operating manuals, designs, drawings, plans and
specifications, marketing brochures, the “MESA VISTA INN” name, logo, symbol,
trademark and web site, or other proprietary material, process, trade secret or
trade right used by Seller or its Affiliates in the operation of the Property
and (b) all registrations, applications and licenses for any of the foregoing.  
 
2.2         Assumption of Liabilities.
 
(a)           Buyer is assuming no liabilities attributable to the operation or
ownership of the Property which accrued or occurred on or prior to the Closing,
all of which Seller shall pay, discharge and perform, or cause to be paid,
discharged and performed by Tenant in accordance with the Amended and Restated
Lease Agreement, when due. Specifically, without limiting the foregoing, Buyer
shall not assume (a) any claim, action, suit, or proceeding pending as of the
Closing or any subsequent claim, action, suit, or proceeding arising out of or
relating to any event occurring prior to Closing, with respect to the manner in
which Seller conducted its businesses on or prior to the Closing (b) any
liability for Taxes other than real property taxes for the year in which the
Closing occurs (such taxes being prorated as of Closing as hereinafter
provided), or (c) any liability under any Property Agreements.
 
(b)           Buyer acknowledges that, effective as of the Closing, Buyer shall
assume and undertake to pay, discharge, and perform only the liabilities and
obligations of Seller under the Lease as amended and modified by, and only to
the extent provided for in, the Amended and Restated Lease Agreement and,
subject to the obligations of the Tenant under the Amended and Restated Lease
Agreement, the License listed on Schedule 2.1(d) of the Seller Disclosure
Letter, to the extent such liabilities and obligations arise during and relate
to the period from and after the Closing (collectively, the “Assumed
Obligations”).
 
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2.3           Purchase Price.  The purchase price for the Property shall be an
amount equal to THIRTEEN  MILLION AND NO/100 U.S. DOLLARS ($13,000,000.00), (the
“Purchase Price”), plus or minus (whichever is applicable) the Adjustment Amount
which shall be paid to Seller for the Purchased Property, all of which shall be
paid by Buyer at Closing via wire transfer of immediately available funds.
 
2.4         Adjustment of Purchase Price.
 
(a)           All income and expenses (including prepaid expenses) of the
Property that are not the obligation of the Tenant under the Amended and
Restated Lease Agreement shall be prorated on a daily basis between Seller and
Buyer as of 11:59 p.m., on the date (the “Proration Date”) immediately preceding
the Closing.  Such items to be prorated shall include, without limitation:
 
 
(i)
Rent and other payments under the Amended and Restated Lease Agreement; and

 
 
(ii)
Real property taxes.

 
Buyer and Seller shall prepare a proposed schedule (the “Proration Schedule”)
prior to Closing, that shall include the items listed above and any other
applicable income and expenses with regard to the Property.  Seller and Buyer
will use all reasonable efforts to finalize and agree upon the Proration
Schedule at least two (2) business days prior to Closing.
 
(b)           To the extent not otherwise provided for under the Amended and
Restated Lease Agreement, any escrow accounts held by any utility companies, and
any cash deposits made by Seller or Seller’s Affiliates prior to Closing to
secure obligations under Assumed Obligations shall be either paid to Seller or,
if assigned to Buyer, Seller shall receive a credit at Closing for any such
deposits.
 
(c)           Seller shall receive all income from and shall be responsible for
all expenses of the Property attributable to the period prior to the Proration
Date, unless otherwise provided for in this Agreement.  In the event Buyer
receives any payment from Tenant for rent due for any period prior to the
Proration Date or payment of any other receivable of Seller, Buyer shall forward
such payment to Seller.
 
(d)           Buyer shall receive all income from and shall be responsible for
all expenses of the Property attributable to the period from and after the
Proration Date, unless otherwise provided for in this Agreement.  In the event
Seller or Seller’s Affiliates receive any payment from a tenant for rent due for
any period from and after the Proration Date, Seller shall forward such payment
to Buyer.  
 
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(e)           The parties agree that any amounts that may become due under this
Section 2.4 shall be paid at Closing as can best be determined.  A post-Closing
reconciliation of pro-rated items shall be made by the Buyer and Seller within
ninety (90) days after Closing and any amounts due at that time shall be
promptly forwarded to the respective party in a lump sum payment.  Any
additional amounts which may become due after such determination shall be
forwarded at the time they are received.  Any amounts due under this Section 2.4
which cannot be determined within ninety (90) days after Closing shall be
reconciled as soon thereafter as such amounts can be determined.  Buyer and
Seller agree that each shall have the right to audit the records of the other
for up to one (1) year following Closing in connection with any such
post-Closing reconciliation.
 
(f)           This Section 2.4 shall survive the Closing.
 
2.5       Earnest Money Deposit. Within two (2) business days after the
Effective Date, Buyer shall deposit TWENTY FIVE THOUSAND AND NO/100 U.S. DOLLARS
($25,000.00) (the “Earnest Money Deposit”) with Escrow Agent.
 
(a)           In the event of a termination of this Agreement pursuant to
Sections 11.1(b), 11.1(c), 11.1(e), or 11.2(a)(i) below, $1,000.00 of the
Earnest Money shall be immediately paid to Seller as consideration for the
execution of this Agreement (the “Independent Contract Consideration”), and the
balance of the Earnest Money Deposit shall be immediately paid to Buyer.  In the
event this Agreement is determined to be unenforceable or void as a mutually
binding contract by reason of the existence of any condition, the indefiniteness
of any provision, the lack of mutuality, or any approval, election or discretion
of Buyer with respect to any contingency or other matter, then such fee shall be
considered adequate consideration for, and this Agreement shall be construed as,
an option of Buyer to purchase the Property enforceable in accordance with the
terms set forth herein.
 
(b)           The Earnest Money Deposit shall be nonrefundable to the Buyer and
shall be paid to Seller immediately upon a termination of this Agreement
pursuant to Sections 11.1(d) or 11.2(b) below.
 
(c)           Upon Closing, the Earnest Money Deposit shall be applied to the
Purchase Price.
 
2.6         Escrow Agent.
 
(a)           By its execution and delivery of this Agreement, Escrow Agent
agrees to be bound by the terms and conditions in Section 2.5 of this Agreement
to the extent applicable to its duties, liabilities and obligations as “Escrow
Agent.”  Escrow Agent shall hold and dispose of the funds deposited with the
Escrow Agent pursuant to this Agreement (“Escrowed Funds”) in accordance with
the terms of this Agreement.  Escrow Agent shall incur no liability in
connection with the safekeeping or disposition of the Escrowed Funds for any
reason other than Escrow Agent’s breach of contract, willful misconduct or gross
negligence.  Escrow Agent shall be reimbursed by Buyer and Seller, jointly and
severally, for all out-of-pocket costs and expenses incurred in connection with
its obligations hereunder.  If Escrow Agent is in doubt as to its duties or
obligations with regard to the Escrowed Funds, or if the Escrow Agent receives
conflicting instructions from Buyer and Seller with respect to the Escrowed
Funds, the Escrow Agent shall not be required to disburse the Escrowed Funds and
may, at its option, continue to hold the Escrowed Funds until both Buyer and
Seller agree as to their disposition, or until a final judgment is entered by a
court of competent jurisdiction directing their disposition, or the Escrow Agent
may interplead the Escrowed Funds in accordance with the laws of the State of
Florida.  Escrow Agent shall not be responsible for the preservation of
principal or any interest on the Escrowed Funds except as is actually earned, or
for the loss of any interest or principal resulting from the withdrawal of the
Escrowed Funds prior to the date interest is posted thereon.  
 
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(b)           The Escrow Agent may resign upon written notice to the Seller and
Buyer.  If a successor escrow agent is not appointed by the Seller and Buyer
within this thirty (30) day period, the Escrow Agent may, but shall have no duty
to, petition a court of competent jurisdiction to name a successor.  If no
successor escrow agent is appointed within thirty (30) days after such written
notice, the Escrow Agent may withhold performance by it pursuant to Section
2.6(a) until such time as a successor escrow agent is appointed and, at such
time, the Escrow Agent shall deliver the Escrowed Funds or other documents,
instruments or items, if any, delivered to the Escrow Agent hereunder to any
such successor escrow agent; provided, however, the Escrow Agent shall act in
accordance with any joint written instructions from the Seller and Buyer.
 
(c)           The Escrow Agent may be removed, with or without cause, by the
Buyer and Seller acting jointly at any time by providing written notice to the
Escrow Agent.
 
(d)           This Section 2.6 shall survive the Closing or the expiration or
any termination of this Agreement.
 
ARTICLE III
DUE DILIGENCE PERIOD
 
3.1         Due Diligence Period.  During the Due Diligence Period, Buyer shall
have the right to a complete physical inspection of the Property as the Buyer
deems appropriate to review and evaluate the Property, the nature and extent of
the Property, and operations of the Property, and all rights and liabilities
related thereto.  In consideration of the execution of this Agreement, Seller
agrees to cause to be provided to or made available to Buyer, at no cost to
Buyer, all items requested on the attached Exhibit B-1, via electronic mail
submission or electronic data room, in an electronic format from which Buyer can
generate an accurate and complete paper copy that is both legible and suitable
for inspection and review.  Buyer may request that other items be provided by
Seller in addition to those already requested or provided, which items shall be
mutually agreed upon by the Buyer and Seller in their reasonable
discretion.  During the Due Diligence Period and subject to the provisions of
Section 3.2 below, Buyer shall have reasonable access to the Property at all
reasonable times during normal business hours for the purpose of conducting
reasonably necessary tests, including surveys and architectural, engineering,
geotechnical and environmental inspections and tests, provided that, (a) when
practicable, Buyer will give Seller prior notice of any such inspection or test
and (b) all such tests shall be conducted by Buyer in compliance with Buyer’s
responsibilities set forth in Section 3.2 below.  Buyer shall provide Seller
with copies of the results of all such tests, studies and investigations
promptly upon Buyer’s receipt of the same.  If Closing occurs, the parties have
agreed to share certain expenses as provided in Section 9.4 below.  Otherwise,
except as otherwise expressly set forth herein, Buyer shall bear its own cost of
all such inspections or tests.
 
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3.2           Buyer’s Responsibilities.  In conducting any inspections,
investigations or tests of the Property, Buyer shall (i) not unreasonably
disturb the tenants or interfere with their use of the Property; (ii) not
materially or unreasonably interfere with the operation and maintenance of the
Property; (iii) not materially damage any part of the Property or any personal
property owned or held by any tenant or any third party; (iv) not injure or
otherwise cause bodily harm to Seller or its agents, guests, invitees,
contractors and employees or any tenants or their guests or invitees; (v) comply
in all material respects with all Applicable Laws; and (vi) not permit any Liens
to attach to the Property by reason of the exercise of its rights hereunder.  If
Buyer’s inspections and investigations result in any material damage to the any
part of the Property, Buyer shall promptly repair and restore the Property to
its former condition.  Buyer shall be responsible for, and shall defend,
indemnify and hold Seller and the Property harmless from and against, any and
all claims, demands, injuries, damages, costs, expenses (including reasonable
attorney's fees), liens or liabilities incurred by, or asserted against, Seller
or the Property arising as the direct result of, or in any way directly arising
out of the activities with respect to Buyer's inspections and investigations of
the Property. The provisions of this Section shall survive the Closing or the
termination of this Agreement.
 
3.3           Continuing Diligence and Inspection Rights.  Following the
expiration of the Due Diligence Period, and prior to the Closing or any earlier
termination of this Agreement, at reasonable times and upon reasonable notice,
Buyer or Buyer’s agent(s), consultants, or other retained professionals shall
have the right, at Buyer’s expense, to perform or complete such further
inspections and assessments of the Property as Buyer deems necessary or
desirable to comply with Buyer’s internal requirements or the requirements of
Buyer’s lenders, investors or members, including, without limitation, further
inspection of environmental and structural aspects, assessments of the
compliance of the Property with all Applicable Laws, and customary pre-closing
walk-throughs; provided, however, that nothing in this Section 3.3 shall extend
the Due Diligence Period.
 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
 
The Seller hereby represents and warrants to the Buyer as of the Effective Date
and as of the Closing as follows:
 
4.1         Organization; Good Standing of Seller.  Seller is a limited
liability company, validly existing and in good standing under the laws of the
State of Texas, and is duly qualified to do business in the State of Texas, with
all requisite company power and authority to carry on its business in the manner
and in the location in which such business has been and is now being conducted,
to execute and deliver this Agreement, and to perform its obligations hereunder.
 
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4.2         Consent of Third Parties.  No consent or approval of any third party
is required as a condition to the entering into, performance or delivery of this
Agreement by Seller other than such consent as has been previously obtained.
 
4.3         Authority; Enforceability.  The execution and delivery of this
Agreement has been duly authorized by Seller, and this Agreement constitutes the
valid and binding obligation and agreement of Seller, enforceable against Seller
in accordance with its terms (subject to the effect of bankruptcy, insolvency
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditor’s rights and remedies generally, and to limitations imposed by general
principles of equity, whether applied by a court of law or of equity).
 
4.4         Absence of Conflicts.  Neither the execution, delivery or
performance of this Agreement will (i) conflict with or result in any breach of
any of the terms, conditions or provisions of, (ii) constitute a default under,
(iii) result in a violation of, or (iv) give any third party the right to
modify, terminate, or accelerate any obligation under, the provisions of the
articles of organization or operating agreement of Seller and/or its Affiliates,
any indenture, mortgage, lease, loan agreement or other agreement or instrument
to which Seller and/or its Affiliates is bound or affected, the Property
Agreements or any Applicable Law.
 
4.5         No Judgments.  There are no judgments presently outstanding and
unsatisfied against the Property, the Seller or any of Seller’s assets.
 
4.6         No Governmental Approvals.  No order, permission, consent, approval,
license, authorization, registration or validation of, or filing with, or
exemption by, any governmental agency, commission, board or public authority is
required to authorize, or is required in connection with the execution, delivery
and performance by Seller of this Agreement or the taking of any action
contemplated by this Agreement, which has not been obtained.
 
4.7         Insurance.  Schedule 4.7 of the Seller Disclosure Letter sets forth
an accurate summary of all general liability, fire, theft, professional
liability and other insurance currently maintained with respect to the Property
and any and all claims made thereunder.  Neither Seller nor Tenant has taken any
action or failed to act in a manner, including the failure of Seller or Tenant,
to give any notice or information, which would limit or impair the rights of
Seller or Tenant under such insurance policies.  Prior to Closing Seller will
promptly notify Buyer of any potential losses or claims that may be covered by
the insurance and shall provide Buyer with current loss runs within fifteen (15)
days after the end of each month from the Effective Date until the Closing.
 
4.8         Litigation.  Except as set forth on Schedule 4.8 of the Seller
Disclosure Letter, there is no pending or threatened judgment, litigation,
proceeding, investigation or inquiry (by any person, governmental or
quasi-governmental agency or authority or otherwise): (i) to which Seller or the
Property is a party, including without limitation, litigation brought by Seller
against any third party, or (ii) to which the Tenant is a party, including
without limitation, litigation brought by Manager against any third party.
 
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4.9         Compliance with Laws.  Except with respect to environmental matters
which are specifically addressed in Section 4.10 below, the Property is
presently, and has been during the Seller Ownership Period, used and operated by
Seller, and to Seller’s Knowledge was constructed, in compliance in all respects
with, and in no way in violation of, any Applicable Law affecting the Property
or any part thereof.  Neither Seller nor Tenant has received notice of any such
violation.
 
4.10       Environmental Matters.  Neither Seller nor Tenant has generated,
stored or disposed of any hazardous substance at or on the Property except in
accordance with Applicable Law, and neither Seller nor Tenant has Knowledge of
any previous or present generation, storage, disposal or existence of any
hazardous substance at or on the Property other than in accordance with all
Applicable Laws.  The term “hazardous substance” shall mean “hazardous waste,”
“toxic substances,” “petroleum products,” “pollutants,” or other similar or
related terms as defined or used from time to time in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(“CERCLA”) (42 U.S.C. §§ 1801, et seq.), the Resource Conservation and Recovery
Act, as amended (42 U.S.C. § 6921, et seq.), similar state laws and regulations
(the “Environmental Laws”) adopted thereunder.  Neither Seller nor Tenant has
filed or been required to file any notice reporting a release of any hazardous
substance into the environment, and no notice pursuant to Section 103(a) or (c)
of the CERCLA, 42 U.S.C. § 9601, et seq. or any other Environmental Law has been
or was required to be filed.  Neither Seller nor Tenant has received any notice
letter under any Environmental Law or any notice or claim, and there is no
investigation pending, contemplated, or to Seller’s or knowledge threatened, to
the effect that Seller or Tenant is or may be liable for or as a result of the
release or threatened release of hazardous substance into the environment or for
the suspected unlawful presence of any hazardous waste on the Property.  Seller
agrees to indemnify and hold Buyer and its Affiliates harmless from any Loss
resulting from a breach of this Section 4.10.  Notwithstanding the provisions of
ARTICLE X, the agreement to indemnify in this Section 4.10 shall survive the
Closing without limitation.
 
4.11       Assessments.  There are no special or other assessments for public
improvements or otherwise now affecting the Property, no pending or threatened
special assessments affecting the Property, and no contemplated improvements
affecting the Property that may result in special assessments affecting the
Property.
 
4.12       Property Agreements.  The Property Agreements listed on Exhibit B of
the Seller Disclosure Letter are in full force and effect and are all of the
agreements relating to or affecting the Property.  Seller is not in default of
any of its obligations under any of the Property Agreements, and Seller has no
knowledge of any default on the part of any other party thereto.
 
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4.13       Licenses.  Exhibit C of the Seller Disclosure Letter is a true and
complete list of all Licenses held by the Seller and its Affiliates with respect
to the Property.  The Licenses listed on Exhibit C of the Seller Disclosure
Letter are valid and no material violations exist with respect to such
Licenses.  No other Licenses are required to be held by the Seller for the
lawful ownership, use, occupancy, operation and maintenance of the Property as a
skilled nursing facility.  No applications, complaints or proceedings are
pending or, to the knowledge of Seller, contemplated or threatened which may (i)
result in the revocation, modification, non-renewal or suspension of any License
or of the denial of any pending applications, (ii) the issuance of any cease and
desist order, or (iii) the imposition of any fines, forfeitures, or other
administrative actions with respect to the Property or its operation.  A list of
all unsatisfied or otherwise outstanding citations with respect to the Property
or its operation is shown on Exhibit F of the Seller Disclosure Letter.
 
4.14       Rent Roll.  Except as otherwise noted on Schedule 4.14 of the Seller
Disclosure Letter, the rent roll attached hereto as Exhibit E of the Seller
Disclosure Letter (the “Rent Roll”) is true and complete.  Seller is not in
default under any of its material obligations under any Resident Agreement or
any lease, and, except as set forth on Schedule 4.14 of the Seller Disclosure
Letter, Seller has no knowledge of any material default on the part of any other
party thereto.  All of the Resident Agreements identified on the Rent Roll are
currently in full force and effect as of the date of the Rent Roll.
 
4.15       Medicare; Medicaid.
 
(a)           Tenant is receiving payment under Titles XVIII and XIX of the
Social Security Act and is certified for participation in those governmental
payor programs (“Governmental Payor Programs”), including but not limited to the
Medicare and Medicaid programs, and is a party to valid participation agreements
for payment by the Governmental Payor Programs, which agreements are in full
force and effect.  True and correct copies of such agreements shall be delivered
to Buyer, to the extent not prohibited by Applicable Law.  Without limiting the
generality of the foregoing, the facilities, equipment, staffing and operations
of Seller and Tenant satisfy all material conditions of participation in the
Governmental Payor Programs.  Neither Seller nor Tenant has received notice of
pending, threatened or possible investigation by, or loss of participation in,
any Governmental Payor Programs, and there is no basis for any such notice.
 
(b)           There are no pending or threatened material claims (including
potential penalties) by any of such Governmental Payor Programs against Seller
or Tenant, and neither Seller nor Tenant has been subject to loss of waiver of
liability for utilization review denials with respect to any such Governmental
Payor Programs during the past two (2) years.
 
(c)           All billing practices of Seller and Tenant with respect to
Governmental Payor Programs and private insurance companies have been in
compliance with Applicable Laws, and neither Seller nor Tenant has billed or
received any payment or reimbursement in excess of amounts allowed by Applicable
Laws.
 
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(d)           Neither Seller nor Tenant has (i) offered or paid any
remuneration, in cash or in kind, to, or made any financial arrangements with,
any past, present or potential customers, past or present suppliers, patients,
medical staff members, contractors or third-party payors of Seller in order to
obtain business or payments from such persons other than in the ordinary course
of business; (ii) given or agreed to give, or is aware that there has been made
or that there is any agreement to make, any gift or gratuitous payment of any
kind, nature or description (whether in money, property or services) to any
customer or potential customer, supplier or potential supplier, contractor,
third party-payor or any other person other than in connection with promotional
or entertainment activities in the ordinary course of business; (iii) made or
agreed to make, or is aware that there has been made or that there is any
agreement to make, any contribution, payment or gift of funds or property to, or
for the private use of, any governmental official, employee or agent where
either the contribution, payment or gift or the purpose of such contribution,
payment or gift is or was illegal under Applicable Laws; (iv) established or
maintained any unrecorded fund or asset for any purpose or made any misleading,
false or artificial entries on any of its books or records for any reason; or
(v) made, or agreed to make, or is aware that there has been made or that there
is any agreement to make, any payment to any person with the intention or
understanding that any part of such payment would be used for any purpose other
than that described in the documents supporting such payment.
 
(e)           Neither Seller, Tenant, nor any partner, member, director, officer
or employee thereof, is a party to any contract, lease agreement or other
arrangement (including any joint venture or consulting agreement) with any
physician, health care facility, hospital, nursing facility, home health agency
or other person who is in a position to make or influence referrals to or
otherwise generate business for Seller or Tenant, or otherwise influence the
affairs of the Seller or Tenant, to provide services, lease space, lease
equipment or engage in any other venture or activity that is prohibited by law
or that did not provide commercially reasonable terms with fair market value
consideration for the goods, property, services or use of money provided,
exchanged or acquired thereunder at the time entered into.
 
4.16       Condemnation.  Neither Seller nor Tenant has received any written
notice of any pending or contemplated condemnation, eminent domain or similar
proceeding, with respect to all or any portion of the Property.
 
4.17       Condition of Property.
 
(a)           Real Property.  With regard to the Real Property  (i) there are no
material structural defects, (ii) there is no insect or rodent infestation,
(iii) the roof is free of leaks, (iv) there are no leaks in the foundation,
(v) there are no toxic mold or mold-related problems, and (vi) all mechanical
and utility systems servicing the Real Property are in good condition and proper
working order, free of material defects and in substantial compliance with all
Applicable Laws.

 
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(b)           Personal Property.  Except as described on Schedule 4.17 of the
Seller Disclosure Letter: (i) the Personal Property comprises all material
assets, rights or property used in the operation of the skilled nursing facility
located on the Real Property and constitutes all of the personal property used
or required for the operation of the Property as a skilled nursing facility, and
(ii) to Seller’s Knowledge, all of the Personal Property is in good condition,
working order and repair (ordinary wear and tear excepted).
 
4.18        Independent Property.  The Property is an independent unit which
does not rely on facilities (other than facilities of public utility, sewer and
water companies) located on any property not included in the Property (i) to
fulfill any zoning, building code, or other municipal or governmental
requirement, or (ii) for structural support or the furnishing of any essential
building systems or utilities, including, but not limited to, electric,
plumbing, mechanical, heating, ventilating and air conditioning systems.  No
building or other improvements not included in the Property relies on any part
of the Property to fulfill any zoning, building code, or other municipal or
governmental requirement or for structural support or the furnishing of any
essential building systems or utilities.
 
4.19        Utilities Access.  The Real Property has water supply, storm and
sanitary sewer facilities, access to telephone, gas and electricity connections,
fire protection, drainage, means of ingress and egress to and from public
highways and, without limitation, other public utilities, all sufficient for
normal operations.  The parking facilities located on the Property comply with
all Applicable Laws or meet requisite exceptions or variances to such laws.  All
public utilities are installed and operating, and all installation and
connection charges have been paid in full.  All streets and roads necessary for
access to and full utilization of the Property, and every part thereof, have
been built, completed, dedicated, and accepted for maintenance and public use by
the appropriate governmental authorities or are otherwise owned and maintained
by local governments for public use.  There is no fact or condition existing
that would result or could result in the termination or reduction of the current
access from the Property to the existing roads and highways or to sewer or other
utility services presently serving the Property.
 
4.20        Zoning.  The current use of the Property is permitted under the
applicable municipal zoning ordinances, or special exceptions, variances, or
conditions thereto, and the Property complies, to the extent required (including
any waiver or grandfathering), with all conditions, restrictions and
requirements of such zoning ordinances and all amendments thereto.
 
4.21        FIRPTA.  Seller is not a “foreign person” within the meaning of
Section 1445 of the Code and the Regulations issued thereunder.
 
4.22        Interests; Title.
 
(a)           Title to Real Property. Seller owns one hundred percent (100%) of
the ownership interest in the Real Property, free and clear of all Liens except
Permitted Exceptions.  There are no outstanding options or other rights to
purchase or otherwise acquire any ownership interest in the Property.  
 
(b)           Title to Personal Property.  Seller owns one hundred percent
(100%) of the ownership interest in the Personal Property, and as of the Closing
the Personal Property will be free and clear of all Liens except Permitted
Exceptions.  There are no outstanding options or other rights to purchase or
otherwise acquire any ownership interest in the Personal Property.  

 
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4.23        Title Encumbrances.  Seller is not in default under any of its
material obligations under any recorded agreement, easement or instrument
encumbering title to the Property, and there is no material default on the part
of any other party thereto.
 
4.24        Affordable Housing Units.  No bedroom or unit in the Property is
leased or reserved for lease as an affordable housing unit or for low- or
moderate-income residents.  The Property is not required to lease or reserve any
unit or bedroom as an affordable housing unit or bedroom or for low-income or
moderate-income residents pursuant to a presently existing agreement or
Applicable Law.
 
4.25        No New Survey Matters.  Since the dates of the most recent surveys
for the Real Property obtained by Seller and provided to Buyer prior to Closing,
no new survey matters have arisen in connection with the Real Property which
would otherwise be required under the applicable ALTA/ACSM standards to be shown
thereon.
 
4.26        Loans.  Except for the loans secured by Liens against the Property
as set forth in the Title Commitment, there are no loans on the Property.
 
4.27        Patriot Act Compliance.  To the extent applicable to Seller, to
Seller’s knowledge Seller has complied in all material respects with the
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001, which comprises Title III of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (the “Patriot Act”) and the regulations promulgated thereunder, and the
rules and regulations administered by the U.S. Treasury Department’s Office of
Foreign Assets Control (“OFAC”), to the extent such laws are applicable to
Seller.  Seller is not included on the List of Specially Designated Nationals
and Blocked Persons maintained by the OFAC, nor is it a resident in, or
organized or chartered under the laws of, (A) a jurisdiction that has been
designated by the U.S. Secretary of the Treasury under Section 311 or 312 of the
Patriot Act as warranting special measures due to money laundering concerns or
(B) any foreign country that has been designated as non-cooperative with
international anti-money laundering principles or procedures by an
intergovernmental group or organization, such as the Financial Action Task Force
on Money Laundering, of which the United States is a member and with which
designation the United States representative to the group or organization
continues to concur.
 
4.28        Broker’s or Finder’s Fees.    No agent, broker, investment banker or
other person or firm acting on behalf of or under the authority of Seller or any
Affiliate of Seller is or will be entitled to any broker’s or finder’s fee or
any other commission or similar fee, directly or indirectly, in connection with
the transactions contemplated by this Agreement.  This Section 4.28 shall
survive the Closing or the expiration or any termination of this Agreement.

4.29        Insolvency.  Neither Seller nor any of its Affiliates have not
(i) commenced a voluntary case or had entered against them a petition for relief
under any Applicable Law relative to bankruptcy, insolvency, or other relief for
debtors, (ii) caused, suffered or consented to the appointment of a receiver,
trustee, administrator, conservator, liquidator, or similar official in any
federal, state or foreign judicial or nonjudicial proceeding to hold,
administer, and/or liquidate all or substantially all of their respective
assets, (iii) had filed against them any involuntary petition seeking relief
under any Applicable Law relative to bankruptcy, insolvency, or other relief to
debtors which involuntary petition is not dismissed within sixty (60) days, or
(iv) made a general assignment for the benefit of creditors.

 
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
 
Buyer represents and warrants to Seller as of the Effective Date and as of the
Closing as follows:
 
5.1          Organization and Good Standing.  Buyer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware.  Buyer has all requisite corporate power to own, operate,
and lease the Property and carry on business as it is now being conducted and as
the same will be conducted following the Closing.  As of the Closing, Buyer will
be registered to do business under the laws of the State of Texas.
 
5.2          Consent of Third Parties.  No consent or approval of any third
party is required as a condition to the entering into, performance or delivery
of this Agreement by Buyer other than such consent as has been previously
obtained.
 
5.3          Authorization and Binding Effect of Documents.  The execution and
delivery of this Agreement has been duly authorized by Buyer, and this Agreement
constitutes the valid and binding obligation and agreement of Buyer, enforceable
in accordance with its terms (subject to the effect of bankruptcy, insolvency
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditor’s rights and remedies generally, and to limitations imposed by general
principles of equity, whether applied by a court of law or of equity).
 
5.4          Absence of Conflicts.  Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, will
(i) conflict with or result in any breach of any of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in a violation of,
or (iv) give any third party the right to modify, terminate, or accelerate any
obligation under, the provisions of the articles of organization and any
applicable limited liability company agreement or operating agreement of Buyer
and/or its Affiliates, any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which Buyer and/or its Affiliates is bound or
affected, or any Applicable Law to which Buyer and/or its Affiliates is subject.
 
5.5          Consents.  The execution, delivery and performance by Buyer and/or
its Affiliates of this Agreement and the other Documents, and consummation by
Buyer and/or its Affiliates of the transactions contemplated hereby and thereby,
do not and will not require the authorization, consent, approval, exemption,
clearance or other action by or notice or declaration to, or filing with, any
court or administrative or other governmental body, or the consent, waiver or
approval of any other person or entity, excluding consents that Seller is
obligated to obtain hereunder.

 
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5.6          Patriot Act Compliance.  To the extent applicable to Buyer, to
Buyer’s actual knowledge upon reasonable inquiry, Buyer has complied in all
material respects with the Patriot Act and the regulations promulgated
thereunder, and the rules and regulations administered by OFAC, to the extent
such laws are applicable to Buyer.  Buyer is not included on the List of
Specially Designated Nationals and Blocked Persons maintained by the OFAC, nor
is it a resident in, or organized or chartered under the laws of, (A) a
jurisdiction that has been designated by the U.S. Secretary of the Treasury
under Section 311 or 312 of the Patriot Act as warranting special measures due
to money laundering concerns or (B) any foreign country that has been designated
as non-cooperative with international anti-money laundering principles or
procedures by an intergovernmental group or organization, such as the Financial
Action Task Force on Money Laundering, of which the United States is a member
and with which designation the United States representative to the group or
organization continues to concur.
 
5.7          Broker’s or Finder’s Fees.  No agent, broker, investment banker, or
other person or firm acting on behalf of Buyer or any of its Affiliates or under
its authority, is or will be entitled to any broker’s or finder’s fee or any
other commission or similar fee, directly or indirectly, from Buyer or any of
its Affiliates in connection with the transactions contemplated by this
Agreement.  This Section 5.7 shall survive the Closing or the expiration or any
termination of this Agreement.
 
ARTICLE VI
OTHER COVENANTS
 
6.1          Conduct of Business Prior to the Closing.  Seller covenants and
agrees that from the Effective Date through the Closing, unless Buyer otherwise
consents in writing, Seller and its Affiliates shall:
 
(a)           Operate the Property in the ordinary course of business, including
(i) incurring expenses consistent with the past practices, (ii) using
commercially reasonable efforts to preserve the Property’s present business
operations, organization and goodwill and its relationships with residents,
customers, employees, advertisers, suppliers and other contractors, and (iii)
maintaining the Licenses listed on Exhibit C of the Seller Disclosure Letter.
 
(b)           Operate the Property and otherwise conduct business in accordance
with the terms or conditions of the Licenses listed on Exhibit C of the Seller
Disclosure Letter, all Applicable Laws having jurisdiction over any aspect of
the operation of the Property and all applicable insurance requirements.
 
(c)           Maintain the books and records for the Property.
 
(d)           Timely comply in all material respects with the Property
Agreements.
 
(e)           Not sell, lease, grant any rights in or to or otherwise dispose
of, or agree to sell, lease or otherwise dispose of, the Property in whole or in
part, except to residents of the facility in the ordinary course of business
using the current forms of resident agreement utilized by Tenant and copies of
which has been provided to Buyer.

 
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(f)            Take commercially reasonable efforts to maintain the Personal
Property currently in use in reasonably good operating condition and repair,
except for ordinary wear and tear, in a manner consistent with past practices.
 
(g)           Perform all covenants, terms, and conditions and make all payments
in a timely fashion, under any loans secured by the Property.
 
(h)           Not amend or modify the Property Agreements or take or fail to
take any action thereunder outside the ordinary course of Seller’s business.
 
(i)            Subject to Section 12.16 below, not make any alterations or
improvements to the Property or make any capital expenditure with respect to the
Property in excess of ONE HUNDRED THOUSAND AND NO/100 U.S. DOLLARS ($100,000.00)
other than those that are required by Applicable Law or that are necessary to
preserve the coverage under or comply with the terms of any insurance policy
with respect to the Property.
 
(j)            Not enter into any agreement which calls for annual payments in
excess of TEN THOUSAND AND NO/100 U.S. DOLLARS ($10,000.00) or for a term in
excess of one year, unless such agreement can be terminated upon not more than
sixty (60) days prior written notice without the payment of any termination fee
or penalty payment.
 
(k)           Provide the Buyer with a current Rent Roll on the first day of
each month.
 
6.2          Notification of Certain Matters.  Seller shall give prompt written
notice to Buyer, and Buyer shall give prompt written notice to Seller, of (i)
the occurrence, or failure to occur, of any event that would be likely to cause
any of its respective representations or warranties contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the
Effective Date to the Closing, and (ii) any failure to comply with or satisfy,
in any material respect, any covenant, condition, or agreement to be complied
with or satisfied under this Agreement.
 
6.3          Title; Additional Documents.  At the Closing, Seller shall transfer
and convey to Buyer good and indefeasible fee simple title to the Property, free
and clear of any Liens except Permitted Exceptions.  At the Closing, all
warranties and guaranties, to the extent assignable or transferable, relating to
the Property shall be transferred by Seller to and shall be held and owned by
Buyer.
 
6.4          Other Consents.  Seller shall obtain any consents or waivers to the
transactions contemplated by this Agreement required under the Property
Agreements.
 
6.5          Inspection and Access.  Seller shall, commencing on the Effective
Date of this Agreement, open the assets, books, accounting records,
correspondence and files of Seller (to the extent related to the operation of
the Property) for examination by Buyer, its officers, attorneys, accountants and
agents, with the right to make copies of such books, records and files or
extracts therefrom.  Such access will be available to Buyer during normal
business hours, upon notice, in such manner as will not unreasonably interfere
with the conduct of the business of the Property.  Seller will make available to
Buyer such additional data and other available information regarding the
Property as Buyer may reasonably request.  Those books, records and files which
relate to the Property that are not transferred to Buyer shall be preserved and
maintained by Seller for two (2) years after the Closing, or such greater amount
of time required by Applicable Law, and those books, records and files relating
to the Property the possession of which is being transferred to Buyer hereunder
shall be maintained and preserved by Buyer for a period of two (2) years after
the Closing, or such greater amount of time required by Applicable Law.

 
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6.6          Confidentiality.
 
(a)           Confidential Information.  Any and all nonpublic information,
documents, and instruments delivered to Buyer by Seller and any and all
nonpublic information, documents, and instruments delivered to Seller by Buyer,
including, without limitation, this Agreement, the Documents and all agreements
referenced herein, are of a confidential and proprietary nature.  Buyer and
Seller agree that prior to Closing, each will maintain the confidentiality of
all such confidential information, documents or instruments delivered to each by
the other party or its agents in connection with the negotiation of, or in
compliance with, this Agreement, and only disclose such information, documents,
and instruments to their duly authorized officers, directors, representatives,
agents, attorneys, accountants, consultants, engineers, other advisers, lenders,
investors, or as otherwise required by Applicable Law.  Buyer and Seller further
agree that if the transactions contemplated hereby are not consummated and this
Agreement is terminated, each will return all such documents and instruments and
all copies thereof in their possession to the other party.  This Section 6.6(a)
shall survive as to both Seller and Buyer in the event this Agreement is
terminated prior to Closing and shall survive as to Seller (and not Buyer)
following Closing.
 
(b)           Confidentiality of Agreement.  Seller and Buyer will not disclose
the economic terms or existence of this Agreement to any third party without the
prior written consent of the other party, except that Seller and Buyer may
disclose such terms to their respective attorneys, accountants, consultants,
engineers, other advisers, members, shareholders, Seller’s existing lender,
Buyer’s potential investors or lenders, and as required by Applicable Law or by
Section 7.7 without such prior written consent.  This Section 6.6(b) shall
survive as to both Seller and Buyer following Closing or in the event this
Agreement is terminated prior to Closing. Notwithstanding anything provided
herein to the contrary, Buyer and Seller are each expressly permitted to
disclose the existence of this Agreement to the Tenant, the Lease Guarantors and
the Loan Guarantors and are permitted to conduct discussions therewith regarding
the form of Amended and Restated Lease Agreement and the Lease Guarantor
regarding the form of Lease Guaranty.
 
(c)           Permitted Uses of Information.  Notwithstanding the forgoing,
nothing in this Section 6.6 shall prevent the Buyer from making any disclosure
regarding this Agreement to the Securities and Exchange Commission (the “SEC”)
necessary to comply with any reporting, disclosure, or filing requirements
imposed upon the Buyer by the SEC.
 
(d)           Irreparable Harm.  Seller and Buyer recognize that any breach of
this Section 6.6 would result in irreparable harm to the other party; therefore,
the Seller or the Buyer shall be entitled to an injunction to prohibit any such
breach or anticipated breach, without the necessity of proving actual damages or
posting a bond, cash or otherwise, in addition to all of other legal and
equitable remedies.

 
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6.7          Publicity.  The parties agree that no public release or
announcement concerning the transactions contemplated hereby shall be issued by
any party prior to Closing except as required by Applicable Law.
 
6.8          Reasonable Best Efforts.  Subject to the terms and conditions of
this Agreement, each party will use its commercially reasonable efforts to take
all actions and to do all things necessary, proper or advisable and in its power
to satisfy any condition for which such party is responsible hereunder and to
consummate and make effective as soon as practicable the transactions
contemplated by this Agreement.
 
6.9          Reports.  Seller shall file on a current and timely basis until the
Closing, any reports and documents required to be filed with respect to the
Licenses.  True and complete copies of all such reports filed as of the
Effective Date and continuing through the Closing shall be promptly supplied to
Buyer by Seller.
 
6.10        Post-Closing Obligations of Seller.  Following Closing, Seller shall
use, and shall cause Seller’s Affiliates to use, reasonable diligent efforts to
cooperate with Buyer and its Affiliates to (a) confirm that all Licenses are
obtained and held by the proper entity for operation of the Property, and (b) to
the extent not previously transferred to Buyer, to provide any records in
Seller’s custody or control which may be requested of Buyer by any authorized
governmental agency.  Further, upon Buyer’s request, for a period of one (1)
year after Closing, Seller shall make the operating statements and any and all
books, records, correspondence, financial data, leases, delinquency reports and
all other documents and matters maintained by Seller or its agents and relating
to receipts and expenditures pertaining to the Property for the three (3) most
recent full calendar years and the current calendar year (collectively, the
“Records”) available to Buyer for inspection, copying and audit by Buyer's
designated accountants, and at Buyer's expense.  This Section 6.10 shall survive
the Closing.

6.11        No Other Representations or Warranties.
 
(a)           Buyer agrees that, except for the representations and warranties
made by Seller and expressly set forth in this Agreement, neither the Seller nor
any of its Affiliates or its respective representatives have made (and shall not
be construed as having made) to Buyer or any representatives thereof any
representation or warranty of any kind.
 
(b)           Seller agrees that, except for the representations and warranties
made by Buyer and expressly set forth in this Agreement, neither Buyer nor any
of its Affiliates or its representatives have made (and shall not be construed
as having made) to Seller or to any of Seller’s Affiliates or any respective
representatives thereof any representation or warranty of any kind.
 
6.12        Noncompetition.  From the Closing through the second anniversary of
the Closing, Seller shall not directly or indirectly (unless acting in
accordance with Buyer’s written consent) own, manage, operate, finance or
participate in the ownership, management, operation or financing of, or permit
its name to be used by or in connection with, any competitive business or
enterprise located within a five (5) mile radius of the Real Property.  For
purposes of this Section 6.12, the term “competitive business or enterprise”
shall mean a skilled nursing facility.  This Section 6.12 shall survive Closing.

 
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6.13        Exclusivity.  From and after the Effective Date to the Closing or
termination of this Agreement according to the terms hereof, Seller shall not
take any action, directly or indirectly, to encourage, initiate or engage or
participate in discussions or negotiations with, or provide any information to,
any party, other than Buyer, concerning a potential transaction involving
the  purchase and sale of the Property, the purchase and sale of all or
substantially all of the ownership interest of Seller, or any transaction
similar to the foregoing.
 
6.14        Loan Guaranties  The Loan Guarantors shall provide the Loan
Guaranties. This Section 6.14 shall survive Closing.
 
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF BUYER TO CLOSE
 
Buyer’s obligation to close pursuant to the terms of this Agreement is subject
to the satisfaction, on or prior to the Closing, of each of the following
conditions, unless waived by Buyer in writing:
 
7.1          Accuracy of Representations and Warranties; Closing
Certificate.  Except for any changes permitted by the terms of this Agreement or
consented to in writing by Buyer, each of the representations and warranties
made by Seller in this Agreement or in any certificate delivered pursuant to
Section 9.2 shall be true and correct in all respects when made and shall be
true and correct in all respects at and as of the Closing as though such
representations and warranties were made or given on and as of the Closing.  In
the event the Seller provides Buyer with revisions to the Schedules and Exhibits
contained in the Seller Disclosure Letter after the Effective Date and prior to
Closing, then the condition to Buyer’s obligation to close contained in this
Section 7.1 shall not be deemed satisfied unless Buyer agrees to such revisions.
In the event Buyer proceeds to close without terminating this Agreement as a
result of such revisions, then such condition shall be deemed waived.
 
7.2          Performance of Agreement.  Seller and its Affiliates shall have
performed in all material respects all of their covenants, agreements and
obligations required by this Agreement to be performed or complied with by them
prior to or upon the Closing.
 
7.3          No Adverse Change.  No change or development shall have occurred
which has or is likely to have a material adverse affect on the Property, its
use or its value.
 
7.4          Conveyance of Property.  The Seller shall have conveyed to Buyer
the Property subject to the payment of the Purchase Price and the other
conditions to the Seller’s obligation to close contained in A.ARTICLE VIII.
 
 
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7.5          Title Insurance and Survey.
 
(a)           Seller has provided Buyer with a commitment for an owner’s policy
of title insurance (the “Title Commitment”) issued by the Title Insurer covering
fee simple title to the Property, in which the Title Insurer shall agree to
insure, in the amount of the Purchase Price, good and indefeasible title to the
Property free from the Schedule B standard printed exceptions and all other
exceptions except for (i) exceptions which, under applicable state rules and
regulations, cannot be deleted or modified and (ii) Permitted Exceptions, with
such endorsements as Buyer shall reasonably require and with insurance coverage
over any “gap” period.  Seller shall provide, or cause to be provided, to Buyer
complete, legible copies of all instruments noted as exceptions therein, and
shall be delivered promptly to Buyer upon receipt by Seller.
 
(b)           If (i) any of the Title Commitments reflect any exceptions to
title other than Permitted Exceptions (other than exceptions which constitute
Permitted Exceptions pursuant to Section A.7.5(b)(iii) below) which are not
acceptable to Buyer in Buyer’s sole discretion, or (ii) the Survey to be
obtained by Buyer pursuant to Section 7.5(e) below discloses anything not
acceptable to Buyer in Buyer’s sole discretion, or (iii) at any time prior to
the Closing, title to Seller’s interests in the Property is encumbered by any
exception to title other than Permitted Exceptions (other than exceptions which
constitute Permitted Exceptions pursuant to Section A.7.5(b)(iii) below), which
was not on the initial Title Commitment for the Property and is not acceptable
to Buyer in Buyer’s sole discretion (any such exception or unacceptable
statement of fact being referred to herein as a “Title Defect”), then Buyer
shall, on or before the later of ten (10) days after the Effective Date, or ten
(10) days after receipt of the updated Title Commitment, as the case may be,
give Seller written notice of such Title Defect (the “Title Notice”).  Such
Title Notice shall include a copy of the relevant Title Commitment and copies of
the exceptions.  Any exception to title that is (x) disclosed in the Title
Commitment, or (y) identified on a Survey, which, in either case, is not
identified as a Title Defect in the Title Notice, shall be deemed to be a
“Permitted Exception” for purposes of this Agreement.  Seller shall have the
right, but not the obligation, within ten (10) days after receipt of any such
Title Notice, to notify Buyer that Seller will take the action necessary to
remove such Title Defect.  If Seller elects to so notify Buyer, then, on or
before the earlier of (a) ten (10) days after receipt of such Title Notice, or
(b) the Closing, Seller shall provide Buyer with reasonable evidence of such
removal.  Notwithstanding anything contained herein to the contrary, the
following items (the “Required Cure Items”) must be cured prior to or at Closing
(with Seller having the right to apply the portion of the Purchase Price
allocated to either such party pursuant to Section 2.3 hereof, or a portion
thereof, for such purpose): (w) the encroachment of the building over the
setback as reflected on the survey and in the Title Notice, (x) all mortgages,
security deeds, and other security instruments, (y) all past Taxes, and (z) all
judgments against the Seller which may constitute a Lien against the Property.
 
(c)           In the event Buyer timely gives a Title Notice to Seller and the
Title Defects specified therein are not cured on or before the Closing and
Seller does not timely notify Buyer that Seller will remove Title Defects within
the applicable time period as specified above,  Buyer shall have the option, as
Buyer’s sole and exclusive remedy, either to:
 
 
(i)
accept Seller’s interest in the Real Property subject to such Title Defect(s) or
Required Cure Item(s), in which event such Title Defect(s) or Required Cure
Item(s) shall become part of the Permitted Exceptions, and to close the
transaction contemplated hereby in accordance with the terms of this Agreement;
or

 
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(ii)
by giving Seller written notice of Buyer’s election, terminate this Agreement
and receive a refund of the Earnest Money Deposit (less the Independent Contract
Consideration), in which event no party shall have any further rights or
obligations to the other hereunder, except for such rights and obligations that,
by the express terms hereof, survive any termination of this Agreement.

 
If Buyer fails to give notice of its election of option (ii) within fifteen (15)
days after receipt by Seller of the Title Notice, Buyer will be deemed to have
accepted such Title Defect(s) or Required Cure Item(s) as Permitted
Exceptions.  However, if the Closing is extended pursuant to Section 9.1(b),
Buyer obtains an updated Title Commitment reflecting additional items not
reflected on the original Title Commitment and Buyer provides an updated Title
Notice to Seller with respect to such additional items, then if Buyer fails to
give notice of its election of option (ii) above within fifteen (15) days after
receipt by Seller of such updated Title Notice, Buyer will be deemed to have
accepted such Title Defect(s) or Required Cure Item(s) as Permitted
Exceptions.  Notwithstanding the foregoing, nothing contained in section shall
limit the right of the Buyer to pursue any and all remedies provided in Section
11.2 of this Agreement as a result of Seller’s default other than with respect
to this subsection (c).  If the Title Defect is the encroachment of the building
over the setback as identified on the survey and in the Title Notice and so long
as either of the parties is actively pursuing the correction of such defect,
then the fifteen (15) day period provided for above in this paragraph shall,
with respect to such Title Defect only, be extended during the time when either
such party is pursuing such correction, not to exceed the Extended Closing
Date.  Both parties agree to use their best efforts in pursuing the correction
of such Title Defect.
 
(d)           In the event (x) Buyer timely gives a Title Notice to Seller, and
Seller gives timely notice that Seller will cure and remove Title Defects, and
such Title Defects specified therein are not cured on or before the Closing, or
(y) if Seller does cure and remove a Required Cure Item on or before the
Closing, Buyer shall have the option, as Buyer’s sole and exclusive remedy,
either to:
 
 
(i)
accept Seller’s interest in the Real Property subject to such Title Defect(s) or
Required Cure Item(s), in which event such Title Defect(s) or Required Cure
Item(s) shall become part of the Permitted Exceptions, and to close the
transaction contemplated hereby in accordance with the terms of this Agreement;

 
 
(ii)
by giving Seller written notice of Buyer’s election, pay any sum necessary to
cure the Title Defect(s) Seller agreed to cure and remove or the Required Cure
Item(s), as applicable, and deduct such amount from the Purchase Price in an
amount not to exceed $150,000; or

 
 
(iii)
by giving Seller written notice of Buyer’s election, terminate this Agreement
and receive a refund of the Earnest Money Deposit (less the Independent Contract
Consideration), in which event no party shall have any further rights or
obligations to the other hereunder, except for such rights and obligations that,
by the express terms hereof, survive any termination of this Agreement.

 
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If Buyer fails to give notice of its election of option (ii) or (iii) within
fifteen (15) days after receipt by Seller of the Title Notice, Buyer will be
deemed to have accepted such Title Defect(s) or Required Cure Item(s) as
Permitted Exceptions. However, if the Closing is extended pursuant to Section
9.1(b), Buyer obtains an updated Title Commitment reflecting additional items
not reflected on the original Title Commitment and Buyer provides an updated
Title Notice to Seller with respect to such additional items, then if Buyer
fails to give notice of its election of option (ii) or (iii) above within
fifteen (15) days after receipt by Seller of such updated Title Notice, Buyer
will be deemed to have accepted such Title Defect(s) or Required Cure Item(s) as
Permitted Exceptions. Notwithstanding the foregoing, nothing contained in
section shall limit the right of the Buyer to pursue any and all remedies
provided in Section 11.2 of this Agreement as a result of Seller’s default other
than with respect to (x), (y), or (z) above in this subsection (d).  If the
Title Defect is the encroachment of the building over the setback as identified
on the survey and in the Title Notice and so long as either of the parties is
actively pursuing the correction of such defect, then the fifteen (15) day
period provided for above in this paragraph shall, with respect to such Title
Defect only, be extended during the time when either such party is pursuing such
correction, not to exceed the Extended Closing Date.  Both parties agree to use
their best efforts in pursuing the correction of such Title Defect.
 
(e)           Seller has previously provided Buyer with copies of the most
current existing boundary survey for the Property.  Buyer may order one or more
boundary surveys for the Property (the “Survey”) prepared by a registered land
surveyor or surveyors satisfactory to Buyer.  Each Survey shall (i) be completed
in accordance with Buyer’s reasonable survey requirements, and shall be
certified to Buyer, the Title Insurer and any Lender of Buyer by such surveyor;
(ii) have one perimeter description for the Property; (iii) show all easements,
rights-of-way, setback lines, encroachments and other matters affecting the use
or development of the Property; and (iv) disclose on the face thereof the gross
and net acreage of the Property.  It is agreed that Buyer's failure to obtain
such Survey shall not extend the time within which Buyer shall give the Title
Notice as provided above, and Buyer shall not be entitled to object to any
matter subject to the receipt of the Survey.   In the event Buyer obtains a
Survey of the Property other than the Survey provided by Seller to Buyer, Buyer
shall provide a copy of such Survey to Seller promptly after Buyer's receipt of
same.
 
(f)            Notwithstanding anything in this Agreement to the contrary,
Seller covenants and agrees that at or prior to Closing, Seller shall (i) pay or
cause to be paid in full or cause to be canceled and discharged or otherwise
bond and discharge as liens against the Property all mechanics’, materialmen’s,
repairmen’s, contractors’ or other similar Liens which encumber the Property as
of the Effective Date created by, through or under Seller or which may be filed
against the Property after the Effective Date created by, through or under
Seller and on or prior to the Closing (ii) pay or cause to be paid in full all
past due ad valorem taxes and assessments of any kind constituting a lien
against the Property which are due and payable, and (iii) pay or cause to be
paid in full, or cause to be canceled and discharged all security deeds or other
security instruments encumbering the property and created by or through Seller,
except to the extent Buyer assumes any of the obligations secured by such
instruments, and all judgments which have attached to and become a lien against
the Property by, through or under Seller.  In the event Seller fails to cause
such liens and encumbrances to be paid or released at or prior to Closing, Buyer
shall be entitled to the remedies provided for in A.7.5(c).

 
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(g)           At Closing, the Title Insurer shall be prepared to issue a title
insurance policy in accordance with the Title Commitment, with all endorsements
reasonably required by Buyer and with coverage over any “gap” period.
 
(h)           Title expenses shall be paid by the parties in accordance with
Section 9.4 hereof.
 
7.6          Delivery of Closing Documents.  Seller shall have delivered or
caused to be delivered to Buyer on the Closing each of the Documents required to
be delivered pursuant to Section 9.2.
 
7.7          Licenses.
 
(a)           To the extent necessary and permitted or required by Applicable
Laws, Seller shall have completed the transfer and assignment of all the
Licenses listed on Exhibit C to the Buyer at or prior to the Closing.  To the
extent that any such Licenses are not transferable or assignable by Seller, the
Buyer shall have obtained, at the Buyer’s sole cost and expense, in the Buyer’s
own name, the Licenses, and Seller shall reasonably cooperate with the Buyer in
obtaining such Licenses at or prior to Closing, at no cost to Seller.  The Buyer
shall diligently pursue all required Licenses.  If any Licenses cannot be
obtained by the Buyer at or prior to the Initial Closing Date, Buyer shall have
the right to extend the Closing as provided for in Section 9.1.
 
(b)           In the event the regulatory authorities (i) assert that there are
violations and require repairs or alterations to be made to cure such
violations, or (ii) assess fines as a result of operational issues and require
such fines to be paid prior to issuing Licenses to the Buyer or prior to
confirming to Buyer that the Licenses are in place, no material violations
exist, and the Property is in good standing, the Seller’s performing of all such
required repairs and alterations at Seller’s expense and payment of any and all
such fines by Seller shall be a condition to Buyer’s Closing.  If any
operational changes are required by such regulatory authorities as a condition
to issuing Licenses, Seller’s implementing such action at Seller’s expense shall
be a material obligation and condition to Closing.  If Seller fails to take such
foregoing actions, Buyer shall have the remedy available under Section 11.2(a).
 
(c)           Sections 7.7(a) and (b) shall survive Closing.
 
7.8          Financing Contingency.  Buyer shall have obtained a binding
commitment in a form acceptable to Buyer in its sole discretion from Plains
Capital Bank (“Lender”) for financing secured by the Property in an amount not
less than SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($7,500,000)
with a term of not less than five (5) years, payments based on a twenty (20)
year amortization, a fixed rate of interest not to exceed seven percent (7.00%)
and such other terms as are satisfactory to Buyer in its sole discretion (the
“Loan”).  The guarantors of the existing loan secured by the Property (“Loan
Guarantors”) shall provide guaranties as additional security for the Loan on the
terms required by the Lender and approved  by the Loan Guarantors (or deemed
approved by the Loan Guarantors if not objected to in writing to Buyer prior to
Closing) (the “Loan Guaranties”).

 
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7.9          Governmental Approvals.  Seller shall have obtained any
authorizations, consents, orders, or approvals of, shall have made all
declarations or filings with, and shall have allowed the expiration of waiting
periods imposed by, any governmental agencies necessary for the consummation of
the transactions contemplated by this Agreement.
 
7.10        Third-Party Consents.  Seller shall have obtained any consents to
assignment, waivers and similar instruments as Buyer reasonably determines are
necessary to permit the conveyance of the Property to Buyer, in form and
substance reasonably satisfactory to Buyer.
 
7.11        Amended and Restated Lease Agreement and Lease Guaranty.  Effective
as of Closing, (a) the existing lease between Seller and Tenant (the “Lease”)
shall be  amended and restated in the form attached as Exhibit C-1 to this
Agreement (the “Amended and Restated Lease Agreement”), and (b) simultaneously
therewith, the Lease shall be assigned by Seller to Buyer at the Closing, and
the Buyer shall assume from Seller, Seller’s obligations thereunder solely to
the extent such obligations arise during and relate to the period from and after
the Closing and solely to the extent provided for in the Amended and Restated
Lease Agreement.  Seller shall cause any existing security deposit on the
existing lease to be transferred to Buyer by credit of the amount thereof
against the Purchase Price at Closing. Harden Healthcare, LLC, a Texas limited
liability company (“Lease Guarantor”), shall execute and deliver a guaranty of
Tenant’s obligations under the Amended and Restated Lease Agreement in the form
attached as Exhibit D-1 to this Agreement (the “Lease Guaranty”).
 
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF SELLER TO CLOSE
 
The obligation of the Seller to close pursuant to the terms of this Agreement is
subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, unless waived by Seller in writing:
 
8.1          Accuracy of Representations and Warranties.  The representations
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects on the Effective Date and as of the Closing with the same
effect as though made at such time, except for changes that are not materially
adverse to Seller.
 
8.2          Performance of Agreements.  Buyer shall have performed in all
material respects all of its covenants, agreements, and obligations required by
this Agreement and each of the other Documents to be performed or complied with
by it prior to or upon the Closing.
 
8.3          Delivery of Closing Documents.
 
Buyer shall have delivered or caused to be delivered to Seller on the Closing
each of the Documents required to be delivered pursuant to Section 9.3.

 
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ARTICLE IX
CLOSING
 
9.1          Closing Date and Place.
 
(a)           Initial Closing Date.  The Closing shall take place at the offices
of the Title Agent in Austin, Texas, on December 31, 2009 or at such earlier or
later date and time as may be agreed upon by the Buyer and Seller (the “Initial
Closing Date”). At Closing, Buyer shall deliver to the Title Company by wire
transfer or other immediately available funds acceptable to the Title Company
the Purchase Price.  It is expressly agreed that the funding of the Purchase
Price and the release of the net proceeds thereof to Seller shall, unless
otherwise agreed by Buyer and Seller, occur not later than 12:00 p.m., local
Austin, on the Initial Closing Date.
 
(b)           Extended Closing Date.  Notwithstanding the foregoing, if any of
Buyer’s conditions to Closing set forth in Article VII hereof are not satisfied
or otherwise waived by Buyer as of the Initial Closing Date, then Buyer shall
have the option, by written notice to Seller, to extend the Closing beyond the
Initial Closing Date until the date which is five (5) business days following
the date that all such conditions to Closing set forth in Article VII hereof are
satisfied, but in no event to exceed sixty (60) days beyond December 31, 2009
(the “Extended Closing Date”).
 
9.2          Deliveries of Seller.  At the Closing, Seller shall deliver or
cause to be delivered to Buyer the following, in each case in form and substance
reasonably satisfactory to Buyer:
 
(a)           A governmental certificate, dated as of a date as near as
practicable to the Closing, showing that Seller (i) is duly organized and in
good standing in the state of organization of Seller, and (ii) is qualified to
do business in the state in which the Property is located.
 
(b)           A certificate of the secretary (or the equivalent thereto if none)
of Seller attesting as to the incumbency of each manager, officer, and
authorized representative of Seller who executes this Agreement and any of the
other Documents, certifying that resolutions and consents necessary for Seller
to act in accordance with the terms of this Agreement have been adopted or
obtained (with copies thereof attached) and to similar customary matters.
 
(c)           A special warranty deed, bill of sale (with special warranty of
title) and other instruments of transfer and conveyance transferring the
Property to Buyer free of all Liens other than the Permitted Exceptions.
 
(d)           A certificate of non-foreign status under Section 1445 of the
Code, complying with the requirements of the Income Tax Regulations promulgated
pursuant to such Section.
 
(e)           A certificate that the conditions specified in Sections 7.1 and
7.2 are satisfied as of the Closing.
 
(f)           A true, correct and complete Rent Roll for the Property five (5)
days prior to Closing, certified by Seller, listing each resident as of the
Closing, the unit, bed or room number of such resident, the amount of monthly
fees to be paid by such resident, the amount of security deposit, the date of
the Resident Agreement, and the expiration date of such Resident Agreement.

 
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(g)           Duplicate counterpart originals of the Assignment and Assumption
Agreement for the Lease and Licenses from Seller, duly executed by Seller and
joined by the Tenant in the form attached hereto as Exhibit E-1.
 
(h)           All third-party consents described in Section 7.10.
 
(i)            Opinions from counsel for Seller in the form attached to the
Seller Disclosure Letter as Exhibit D, regarding the due organization, good
standing, power and authority, and due execution of this Agreement and all other
Documents by Seller.
 
(j)            A duly executed non-competition side letter agreement in a form
acceptable to Buyer.
 
(k)           Duly executed counterpart originals of the Amended and Restated
Lease Agreement executed by the Tenant.
 
(l)            Unaudited and unreviewed historical financial statements and any
other documents identified by Buyer that are required to allow the Buyer to
comply with any reporting, disclosure, or filing requirements imposed upon the
Buyer by the SEC with respect to the transactions contemplated by this
Agreement.  Additionally, Seller shall provide Buyer, but without expense to
Seller, with (a) an audit letter in substantially the form as Exhibit G attached
to the Seller Disclosure Letter and made a part hereof, and (b) copies of, or
access to, such factual information as may be reasonably requested by Buyer or
its designated accountants, and in the possession or control of Seller, to
enable Buyer to file any filings required by the SEC in connection with the
purchase of the Property.
 
(m)          Such additional information, materials, affidavits and certificates
as Buyer shall reasonably request to evidence the satisfaction of the conditions
to Seller’s obligations hereunder, including without limitation, evidence that
all consents and approvals required as a condition to Buyer’s obligation to
close hereunder have been obtained, title affidavits, such affidavits and
indemnities as the Title Insurer may reasonably require to issue the Title
Insurance policies, the gap coverage and all endorsements and any other
documents expressly required by this Agreement to be delivered by Seller at
Closing, or as may be reasonably required by the Title Insurer at Seller’s sole
cost and expense; provided, however, that to the extent such items are required
solely to issue any modifications, deletions or endorsements requested by Buyer
to the Title Insurance other than Required Cure Item(s), then the cost thereof
shall be borne equally by the parties pursuant to Section 9.4 and the parties
shall each be separately and severally obligated for one-half (1/2) of the
obligations and liabilities under any indemnities required for such requested
modifications, deletions or endorsements other than Required Cure Item(s).
 
(n)           The original of the Lease Guaranty, duly executed by the Lease
Guarantor.
 
(o)           The originals of the Loan Guaranties, duly executed by the Loan
Guarantors.

 
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9.3          Deliveries of Buyer.  At the Closing, Buyer shall deliver or cause
to be delivered to Seller the following, in each case in form and substance
reasonably satisfactory to Seller:
 
(a)           The Purchase Price in accordance with Section 2.3, subject to the
adjustments under Section 2.4.
 
(b)           A certificate that the conditions specified in Sections 8.1 and
8.2. are satisfied as of the Closing.
 
(c)           A duplicate counterpart original of the Assignment and Assumption
Agreement for the Lease and Licenses from Seller, duly executed by Buyer in the
form attached hereto as Exhibit E-1.
 
(d)           A duly executed counterpart original of the Restated and Amended
Lease Agreement executed by Buyer.
 
(e)           A governmental certificate, dated as of a date as near as
practicable to the Closing, showing that Buyer is (i) duly organized and in good
standing in the state of its formation, and (ii) is qualified to do business in
the state where the Property is located.
 
(f)            A certificate of the secretary (or the equivalent thereto if
none) of Buyer attesting as to the incumbency of each officer or authorized
representative of Buyer who executes this Agreement and/or any of the other
Documents, certifying that resolutions and consents necessary for Buyer to act
in accordance with the terms of this Agreement have been adopted or obtained
(with copies thereof attached) and to similar customary matters.
 
(g)           Opinions from counsel for Buyer in the same form attached to the
Seller Disclosure Letter as Exhibit D, regarding the due organization, good
standing, power and authority, and due execution of this Agreement and all other
Documents by Buyer.
 
(h)           A duly executed non-competition side letter agreement in a form
acceptable to Buyer.
 
(i)            Such additional information and materials as Seller shall have
reasonably requested to evidence the satisfaction of the conditions to its
obligations hereunder.
 
9.4          Closing Costs.  Buyer and Seller shall each pay their respective
attorneys’ fees and expenses.  Seller shall pay all fees and expenses associated
with the payoff of the existing loan secured by the Property.  All closing
costs, including, without limitation, all costs of title insurance, survey
(collectively, “Transaction Costs”) shall be borne equally by Buyer and
Seller.  The cost sharing referred to above shall occur only if the closing
occurs.  If Closing does not occur for any reason the provisions of Section 11.1
or 11.2, as applicable, shall determine each parties responsibility for the
costs incurred by the parties with respect to this Agreement.

 
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ARTICLE X
INDEMNIFICATION
 
10.1       General.  The rights to indemnification set forth in this ARTICLE X
and the other rights described in this Agreement shall be in addition to all
other rights to monetary damages that any party (or the party’s successors or
permitted assigns) would otherwise have by Applicable Law in connection with the
transactions contemplated by this Agreement or any other Document; provided,
however, that neither party shall have the right to be compensated more than
once for the same monetary damage.
 
10.2       Indemnification by Seller.  From and after Closing, Seller shall
indemnify, defend, and hold harmless Buyer, Tenant, and each of their officers,
directors, employees, Affiliates, successors and assigns from and against, and
pay or reimburse each of them for and with respect to, any Loss relating to,
arising out of or resulting from any of the following:
 
(a)           Any breach by Seller of any of its representations, warranties,
covenants or agreements in this Agreement or any other Document;
 
(b)           The ownership, operation or control of the Property during the
Seller Ownership Period, including without limitation, any and all liabilities
which relate to events occurring during the Seller Ownership Period, regardless
of when they are asserted or whether such was disclosed to Buyer and regardless
of whether such was a breach of any representation, warranty, or covenant by
Seller, except for (i) Assumed Obligations, and (ii) obligations, indebtedness
or liabilities to the extent of any Adjustment Amount credited to the Buyer; and
 
(c)           Claims by any other party claiming to have represented Seller as
broker or agent in connection with the transactions contemplated by this
Agreement.
 
10.3       Indemnification by Buyer.  From and after Closing, Buyer shall
indemnify, defend and hold harmless Seller and its officers, directors,
employees, agents, representatives, Affiliates, successors and assigns from and
against, and pay or reimburse each of them for and with respect to any Loss
relating to, arising out of or resulting from any of the following:
 
(a)           Any material breach by Buyer of any of its representations,
warranties, covenants or agreements in this Agreement or any other Document;
 
(b)           The Assumed Obligations;
 
(c)           The ownership, operation or control of the Property during any
Buyer Ownership Period; and
 
(d)           Claims by any party claiming to have represented Buyer as broker
or agent in connection with the transactions contemplated by this Agreement.
 
10.4       Administration of Indemnification.  For purposes of administering the
indemnification provisions set forth in Section 10.2 and Section 10.3, the
following procedure shall apply:

 
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(a)           Whenever a claim shall arise for indemnification under this
ARTICLE X, the party entitled to indemnification (the “Indemnified Party”) shall
give a reasonably prompt written notice to the party from whom indemnification
is sought (the “Indemnifying Party”) setting forth in reasonable detail, to the
extent then available, the facts concerning the nature of such claim and the
basis upon which the Indemnified Party believes that it is entitled to
indemnification hereunder.
 
(b)           In the event of any claim for indemnification resulting from or in
connection with any claim by a third party, the Indemnifying Party shall be
entitled, at its sole expense, either (i) to participate in defending against
such claim or (ii) to assume the entire defense with counsel which is selected
by it and which is reasonably satisfactory to the Indemnified Party, provided
that no settlement shall be made and no judgment consented to without the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld.  If, however, (x) the claim, action, suit or proceeding would, if
successful, result in the imposition of damages for which the Indemnifying Party
would not be solely responsible, or (y) representation of both parties by the
same counsel would otherwise be inappropriate due to actual or potential
differing interests between them, then the Indemnifying Party shall not be
entitled to assume the entire defense and each party shall be entitled to retain
counsel who shall cooperate with one another in defending against such
claim.  In the case of clause (x), the Indemnifying Party shall be obligated to
bear only that portion of the expense of the Indemnified Party’s counsel that is
in proportion to the damages indemnifiable by the Indemnifying Party compared to
the total amount of the third-party claim against the Indemnified Party.  In the
case of clause (y), the Indemnifying Party shall pay all costs of defense of
both itself and the actual out-of-pocket costs of the Indemnified Party.
 
(c)           If the Indemnifying Party does not choose to defend against a
claim by a third party, the Indemnified Party may defend in such manner as it
deems appropriate or settle the claim (after giving notice thereof to the
Indemnifying Party) on such terms as the Indemnified Party may deem appropriate,
and the Indemnified Party shall be entitled to periodic reimbursement from the
Indemnifying Party of defense expenses incurred and prompt indemnification from
the Indemnifying Party in accordance with this ARTICLE X.
 
(d)           Failure or delay by an Indemnified Party to give a reasonably
prompt notice of any claim shall not release, waive or otherwise affect an
Indemnifying Party’s obligations with respect to the claim, except to the extent
that the Indemnifying Party can demonstrate actual Loss or prejudice as a result
of such failure or delay.  Notwithstanding anything to the contrary contained
herein, the parties agree that no indemnification right or obligation shall
apply to the extent any such Loss or expense is paid to an Indemnified Party by
an insurance company.
 
(e)           The right to pursue indemnification as set forth in Sections
10.2(a) (other than with respect to a breach of the representations contained in
Section 4.15) and 10.3(a) shall survive the Closing hereunder for a period of
eighteen (18) months following the Closing, and the right to pursue
indemnification as set forth in all other Sections of this ARTICLE X shall
survive the Closing hereunder indefinitely.

 
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(f)           Notwithstanding anything to the contrary in this Agreement, the
right to pursue indemnification as set forth in this ARTICLE X shall be
actionable or payable only if valid claims for Losses, if any, collectively
aggregate more than Fifty Thousand and No/100 U.S. Dollars ($50,000) (the
“Floor”); provided, however, that the foregoing limitation shall not apply in
the case of fraud on the part of Buyer, Seller or any of their respective
Affiliates, or to any claims arising under Section 10.2(a) (with respect to a
breach of the representations contained in Section A.4.15), Section 10.2(b),
Section 10.2(c), Section 10.3(b), Section A.10.3(c) or Section A.10.3(d) (none
of which shall be limited in any manner whatsoever).  In addition, Buyer agrees
to concurrently seek recovery against Seller, under any insurance policies, the
Title Policy and other applicable agreements, and Seller shall not be liable to
Buyer to the extent Buyer’s claim is actually satisfied from any sums recovered
from such insurance policies, Title Policy or other applicable
agreements.  FINALLY, IN NO EVENT SHALL EITHER PARTY EVER BE LIABLE FOR ANY
CONSEQUENTIAL OR PUNITIVE DAMAGES WITH RESPECT TO ANY DEFAULT UNDER THIS
AGREEMENT OR ANY AGREEMENT OR DOCUMENTS EXECUTED AT CLOSING OTHER THAN IN THE
EVENT OF FRAUD.
 
ARTICLE XI
DEFAULT AND TERMINATION
 
11.1       Right of Termination.  This Agreement may be terminated prior to
Closing as follows:
 
(a)           By Buyer, in its sole and absolute discretion, at any time during
the Due Diligence Period for any reason or for no reason whatsoever;
 
(b)           By written agreement of Seller and Buyer;
 
(c)           By Buyer if, as of the Closing or such earlier date as specified
in this Agreement, all conditions in ARTICLE VII have not been met, or as
specifically provided for in Sections 7.5, 11.2(a)(i), 12.16, and 12.17;
provided, however, that nothing contained in this Section 11.1(c) shall limit
Seller’s rights pursuant to 11.2 below;
 
(d)           By Seller if, as of Closing or such earlier date as specified in
this Agreement, all conditions in ARTICLE VII have been met but the conditions
in ARTICLE VIII have not been met and Buyer defaults on its obligation to close
this transaction; provided, however, that nothing contained in this Section
11.1(d) shall limit Seller’s rights pursuant to 11.2 below; or
 
(e)           By Seller or Buyer if a court of competent jurisdiction or other
governmental agency shall have issued an order, decree, or ruling or taken any
other action (which order, decree, or ruling the parties hereto shall use their
diligent efforts to lift), in each case permanently retraining, enjoining, or
otherwise prohibiting the transactions contemplated by this Agreement, or
otherwise determining that the consummation of such transactions would be
unlawful, and such order, decree or ruling shall have become final and
nonappealable.

 
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In the event this Agreement is terminated pursuant to this Section 11.1 or
pursuant to any other express provision of this Agreement for any reason other
than a default by the Seller or Buyer hereunder, then (i) this Agreement shall
be of no further force or effect as of the date of delivery of such written
notice of termination, (ii) the Buyer and Seller shall equally share the
cancellation charges, if any, of the Escrow Agent and Title Insurer, and (iii)
no party shall have any further rights or obligations hereunder other than
pursuant to any provision hereof which expressly survives the termination of
this Agreement.
 
11.2       Remedies upon Default.
 
(a)           If Seller defaults on any of Seller’s obligations hereunder, and
such default continues for ten (10) days after written notice thereof specifying
such default, Buyer may serve notice in writing to the Seller in the manner
provided in this Agreement, and either:
 
 
(i)
Terminate this Agreement, receive from Seller reimbursement of all actual
third-party out-of-pocket expenses incurred by Buyer in pursuing the
transactions contemplated by this Agreement and pursue all legal remedies
available at law against Seller for Buyer’s actual damages arising from Seller’s
default hereunder; provided the total amount of such reimbursement and actual
damages shall not exceed $65,000.00; provided, however, that the foregoing
limitation on damages shall not apply in the event of a breach of Sections 6.6
or 6.7; or

 
 
(ii)
Waive any such conditions, title objections or defaults and consummate the
transaction contemplated by this Agreement in the same manner as if there had
been no title objections, conditions or defaults without any reduction in the
Purchase Price and without any further claim against the Seller therefor and, if
necessary, pursue an action for specific performance.

 
(b)           If Buyer defaults on its obligation to close this transaction
Seller’s exclusive remedy shall be to terminate this Agreement, retain the
Earnest Money Deposit and receive from Seller reimbursement of all actual
third-party out-of-pocket expenses incurred by Seller in pursuing the
transactions contemplated by this Agreement and pursue all legal remedies
available at law against Buyer for Seller’s actual damages arising from Buyer’s
default hereunder; provided the total amount of such reimbursement and actual
damages shall not exceed $40,000.00, in addition to the return of the Earnest
Money Deposit; provided, however, that the foregoing limitation on damages shall
not apply in the event of a breach of Sections 6.6 or 6.7.
 
11.3       Specific Performance.  Seller specifically agrees that Buyer shall be
entitled, in the event of a default by Seller, to enforcement of this Agreement
by a decree of specific performance or injunctive relief requiring Seller to
fulfill its obligations under this Agreement.  If Buyer elects to pursue an
action for specific performance, and if Buyer is unable to obtain specific
performance as the result of the actions of Seller or its Affiliates making
specific performance impossible, then Buyer shall be entitled to seek such other
relief to which Buyer may be entitled, including an action of its actual
monetary damages.
 
11.4       Obligations Upon Termination.  Except as otherwise provided herein,
if this Agreement is terminated, each of the parties shall bear its own costs
incurred in connection with the transactions contemplated by this Agreement.

 
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11.5       Termination Notice.  Each notice given by a party to terminate this
Agreement shall specify the Subsection of ARTICLE XI pursuant to which such
notice is given.  If at the time a party gives a termination notice, such party
is entitled to give such notice pursuant to more than one Subsection of ARTICLE
XI, the Subsection pursuant to which such notice is given and termination is
effected shall be deemed to be the section specified in such notice provided
that the party giving such notice is at such time entitled to terminate this
Agreement pursuant to the specified section.
 
11.6       Sole and Exclusive Remedy.  Seller and Buyer each acknowledge and
agree that prior to the Closing, such party’s sole and exclusive remedy with
respect to any and all claims made prior to the Closing for any breach or
liability under this Agreement or otherwise relating to the subject matter of
this Agreement and the transactions contemplated hereby shall be solely in
accordance with, and limited to, Sections 11.1, 11.2 and 11.3.  The foregoing
shall in no manner limit the rights and obligations of the parties provided in
ARTICLE X from and after the Closing which the parties each acknowledge and
agree constitute each such party’s sole and exclusive remedy with respect to any
and all claims made following the Closing for any breach or liability under this
Agreement.  In addition, in no event shall the provisions of this ARTICLE XI
limit the non-prevailing party’s obligation to pay the prevailing party’s
attorneys’ fees and costs pursuant to Section 12.14 hereof.
 
ARTICLE XII
MISCELLANEOUS
 
12.1       Further Actions.  From time to time before, at and after the Closing,
each party will execute and deliver such other documents as reasonably requested
by the Buyer, Seller or Escrow Agent to consummate the transactions contemplated
hereby subject to the terms and provisions of this Agreement.
 
12.2       Notices.  All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered by
facsimile (with written confirmation of receipt), by courier (including
overnight delivery service), by email (as to communications that are not
required notices or demands hereunder), or sent by registered or certified mail,
first class, postage prepaid, addressed as follows:
 
(a)
If to Seller, to:
SNF MESA VISTA, LLC
   
c/o Capstar Partners, LLC
   
1703 West Fifth Street, Suite 800
   
Austin, Texas  78703
   
Telephone:  512-634-4942
   
Facsimile:   512-524-3325
   
E-mail:  bhanson@hardenhealthcare.com
     
with copies to:
Ed McHorse
   
Graves, Dougherty, Hearon & Moody
   
401 Congress Avenue, Suite 2200
   
Austin, Texas  78701
   
Telephone:  (512) 480-5750
   
Facsimile:   (512) 480-5850
   
E-mail: emchorse@gdhm.com

 
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(b)
If to Buyer, to:
MVI HEALTH CENTER, LP
   
c/o Cornerstone Growth & Income REIT, Inc.
   
Attn:  Sharon C. Kaiser, Chief Financial Officer
   
1920 Main Street, Suite 400
   
Irvine, CA 92614
   
Telephone No.:  949.263.4326
   
Telecopy No.:    949.250.0592
       
with copies to:
Servant Healthcare Investments, LLC
   
Attn: Kevin Maddron
   
1000 Legion Place, Ste. 1650
   
Orlando, FL 32801
   
Telephone No.:  407.999.7772
   
Telecopy No.:    407.999.7759
       
and:
Michael A. Okaty, Esq.
   
Foley & Lardner LLP
   
111 N. Orange Avenue, Suite 1800
   
Orlando, FL 32801
   
Telephone:  407-423-7656
   
Fax:  407-648-1743
   
E-mail:  mokaty@foley.com
     
(c)
If to Title Agent or Escrow Agent, to:
         
Heritage Title Company of Austin, Inc.
   
Attn.: Jennifer Ramburg
   
410 Congress Avenue, Suite 1500
   
Austin, Texas   78701
   
Telephone: (512) 505-5000
   
Fax:  (512) 505-5024
   
E-mail: jramberg@heritage-title.com

or such other address as a party may from time to time notify the other parties
in writing (as provided above).  Any such notice, demand or communication shall
be deemed to have been given (i) if so sent by facsimile, upon receipt as
evidenced by the sender’s written confirmation of receipt, (ii) if so mailed, as
of the third (3rd) business day after deposit in the mail, assuming actual
receipt, (iii) if emailed, when sent (provided that e-mail does not constitute
delivery of any communication that is a required notice or demand hereunder),
and (iv) if so delivered by courier, on the first (1st) business day after the
date delivered to the courier, assuming actual receipt.

 
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12.3       Entire Agreement.  This Agreement and the other Documents constitute
the entire agreement and understanding between the parties with respect to the
subject matter hereof and supersede any prior negotiations, agreements,
understandings, or arrangements between the parties hereto with respect to the
subject matter hereof.
 
12.4       Binding Effect; Benefits.  Except as otherwise provided herein, this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors or permitted assigns.  Except to the extent
specified herein, nothing in this Agreement, express or implied, shall confer on
any person other than the parties hereto and any Indemnified Party and their
respective successors or permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
 
12.5       Assignment.  This Agreement may not be assigned by any party prior to
Closing without the written consent of the Buyer and Seller, which consent may
be given or withheld in each such party’s sole and absolute discretion, except
that Buyer may assign this Agreement and its rights hereunder without the
consent of Seller to an Affiliate of Buyer (a “Permitted Buyer-Assignee”).  In
the event of such an assignment to a Permitted Buyer-Assignee, Buyer shall not
be released from any of its duties, covenants, obligations or representations
and warranties under this Agreement and, from and after any such assignment,
Buyer and such Permitted Buyer-Assignee shall be jointly and severally liable
under this Agreement, and from and after any such assignment, the term “Buyer”
shall be deemed to mean such Permitted Buyer-Assignee under any such assignment.
 
12.6       Governing Law.  This Agreement shall in all respects be governed by
and construed in accordance with the laws of the state of Texas without regard
to its principles of conflicts of laws.  Venue for any dispute shall be in Bexar
County, Texas.
 
12.7       Amendments and Waivers.  No term or provision of this Agreement may
be amended, waived, discharged, or terminated orally, except by an instrument in
writing signed by Buyer and Seller with respect to any provision contained
herein.  Any waiver shall be effective only in accordance with its express terms
and conditions.
 
12.8       Joint and Several.  If there is more than one Seller hereunder,
Seller shall be jointly and severally liable with the other Seller for
performing all obligations of Seller under this Agreement.
 
12.9       Severability.  Any provision of this Agreement which is unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such unenforceability without invalidating the remaining provisions hereof,
and any such unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by Applicable Law, the parties hereto hereby waive any provision of Applicable
Law now or hereafter in effect which renders any provision hereof unenforceable
in any respect.
 
12.10     Headings.  The captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.

 
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12.11     Counterparts.  This Agreement may be executed and accepted in one or
more counterparts for the convenience of the parties, each of which will be
deemed an original and all of which, taken together, shall constitute one and
the same instrument.  Delivery of a counterpart hereof via facsimile
transmission or by electronic mail transmission shall be as effective as
delivery of a manually executed counterpart hereof.
 
12.12     References.  All references in this Agreement to Articles and Sections
are to Articles and Sections contained in this Agreement unless a different
document is expressly specified.
 
12.13     Seller Disclosure Letter.  The Seller Disclosure Letter delivered by
the Seller to Buyer pursuant to this Agreement, and each Schedule and Exhibit
comprising the Seller Disclosure Letter referred to in this Agreement, shall be
deemed to be attached hereto and incorporated by reference even though it may be
maintained separately from this Agreement or completed after the Effective Date
so long as it is acknowledged as a Schedule or an Exhibit to this Agreement by
the parties hereto as of Closing.  Any item disclosed hereunder (including in
the Schedules and Exhibits hereto) shall be deemed disclosed for all purposes
hereof irrespective of the specific representation or warranty to which it is
explicitly referenced.
 
12.14     Attorneys’ Fees.  In the event either party brings an action to
enforce or interpret any of the provisions of this Agreement, the “prevailing
party” in such action shall, in addition to any other recovery, be entitled to
its reasonable attorneys’ fees and expenses arising from such action and any
appeal or any bankruptcy action related thereto, whether or not such matter
proceeds to trial.  For purposes of this Section 12.14, “prevailing party” shall
mean, in the case of a person asserting a claim, such person is successful in
obtaining substantially all of the relief sought, and in the case of a person
defending against or responding to a claim, such person is successful in denying
substantially all of the relief sought or, in the event of the dismissal of any
action brought with respect to this Agreement for any reason other than
settlement thereof, the nondismissing party shall be the “prevailing party”.
 
12.15     Section 1031 Exchange/Tax Planning.  If requested by either Buyer or
Seller, the other party shall cooperate in permitting the other to accomplish an
exchange under Section 1031 of the Code or to restructure this transaction in a
way which is more advantageous for tax purposes; provided, however, that such
exchange or restructuring shall not modify any underlying financial or other
material terms of this Agreement, shall not delay the Closing, shall not relieve
Buyer or Seller of any liability for their respective obligations hereunder, and
shall not result in any other party incurring any greater cost or expense that
it otherwise would if any such exchange had not been elected.

 
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12.16     Casualty.  The risk of any loss or damage to the Property by fire or
other casualty before the Closing shall continue to be borne by Seller.  Seller
shall promptly give Buyer written notice of any fire or other casualty (in any
event within five (5) days after Seller first has knowledge of the occurrence of
same), which notice shall include a description thereof in reasonable detail and
an estimate of the cost of time to repair.  If (i) any portion of the Property
is damaged by fire or casualty after the Effective Date and is not repaired and
restored substantially to its original condition prior to Closing, or (ii) at
the time of Closing the estimated cost of repairs as to the Property is ONE
HUNDRED THOUSAND U.S. DOLLARS ($100,000.00) or less, as determined by an
independent adjuster selected by Seller, Buyer shall be required to purchase the
Property in accordance with this Agreement, and Buyer shall, at Buyer’s option,
either: (x) receive a credit at Closing of the estimated cost or repairs to the
Property, as determined by the aforesaid independent adjuster, plus any
reasonably estimated lost revenue following Closing arising from such fire or
casualty; or (y) receive from Seller at Closing (I) an assignment, without
representation of warranty by or recourse against Seller, of all insurance
claims and proceeds with respect thereto, plus (II) an amount equal to Seller’s
insurance deductible.  If the estimated cost of repairing such damage to the
Property is more than ONE HUNDRED THOUSAND U.S. DOLLARS ($100,000.00), as
determined by such independent adjuster, Buyer may, at its sole option and as
its sole remedy with respect to such casualty (but without waiving any of
Buyer’s rights hereunder, including, without limitation its rights in A.ARTICLE
XI, arising as a result of a Seller default): (x) terminate this Agreement by
notice to Seller on or before the earlier of the Closing or the tenth (10th) day
after receipt of such notice described above, in which event the Earnest Money
Deposit shall be returned to Buyer and, except as otherwise provided herein, no
party shall have any further liability to the party under this Agreement; or (y)
proceed to Closing as provided in this Section 12.16.  The parties’ obligations,
if any, under this Section 12.16 shall survive the expiration or any termination
of this Agreement.
 
12.17     Condemnation.  The risk of any loss or damage to the Property by
condemnation before the Closing shall continue to be borne by Seller.  In the
event any condemnation proceeding is commenced or threatened, Seller shall
promptly give Buyer written notice thereof (in any event within five (5) days
after Seller first has knowledge of the occurrence of same), together with such
reasonable details with respect thereto as to which Seller may have
knowledge.  If, prior to Closing, there is a material taking by eminent domain
at the Property, and as Buyer’s sole and exclusive remedy with respect to such
condemnation (but without waiving any of Buyer’s rights hereunder, including,
without limitation its rights in A.ARTICLE XI, arising as a result of a Seller
default), either: (i) terminate this Agreement by notice to Seller on or before
the earlier of the Closing or the tenth (10th) day after receipt of such notice
described above, in which event the Earnest Money shall be returned to Buyer
and, except as otherwise provided herein, no party shall have any further
liability to the party under this Agreement; or (ii) proceed to Closing.  If
Buyer elects to proceed and to consummate the purchase despite said material
taking, or if there is less than a material taking prior to Closing, there shall
be no reduction in or abatement of the Purchase Price and Buyer shall be
required to purchase the Property in accordance with the terms of this
Agreement, and Seller shall assign to Buyer, without representation of warranty
by or recourse against Seller, all of Seller’s right, title and interest in and
to any award made or to be made in the condemnation proceeding (in which event
Buyer shall have the right to participate in the adjustment and settlement of
any insurance claim relating to said damage).  For the purpose of this Section
12.17, the term “material” shall mean any taking of in excess of five percent
(5%) of the square footage of the Property or ten percent (10%) of the Real
Property associated with the Property.  The parties’ obligations, if any, under
this Section 12.17 shall survive the expiration or any termination of this
Agreement.
 
12.18     Limited Liability.  No past, present, or future member, partner,
shareholder, director, officer of employee of any party to this Agreement shall
have any liability or obligation of any nature whatsoever in connection with or
under this Agreement or Document contemplated hereby or in connection with the
transactions contemplated by this Agreement or any such other agreement.

 
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12.19     Survival of Defined Terms.  Where this Agreement provides that a term
or provision shall survive the Closing or the expiration or earlier termination
of this Agreement, any defined terms contained in ARTICLE I that are used in
such surviving term or provision shall also survive.
 
12.20     Time of Essence.  Time shall be of the essence with respect to all
matters contemplated by this Agreement. If the expiration of any time period set
forth herein falls on a Saturday, Sunday or legal holiday, such time period
shall be deemed to expire on the next day which is not a Saturday, Sunday or
legal holiday.   The last day of any period of time described herein shall be
deemed to end at 5:00 p.m., local Austin, Texas time.
 
12.21     No Third-Party Beneficiary.  The provisions of this Agreement and of
the documents to be executed and delivered at Closing are and will be for the
benefit of the Buyer and Seller only and are not for the benefit of any third
party; and, accordingly, no third party shall have the right to enforce the
provisions of this Agreement or of the documents to be executed and delivered at
Closing.
 
12.22     WAIVER OF JURY TRIAL.  EACH PARTY HEREBY AGREES NOT TO ELECT A TRIAL
BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THIS AGREEMENT, OR ANY OTHER DOCUMENT RELATED TO THIS AGREEMENT, OR
ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH
PARTY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  ANY PARTY IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY EACH PARTY HERETO.
 
(Signature pages follow)

 
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IN WITNESS WHEREOF, each of the parties hereto has caused this Purchase and Sale
Agreement to be executed as of the Effective Date.
 
SELLER:
 
SNF MESA VISTA, LLC, a Texas limited liability company
       
By:
  
     
BUYER:
 
MVI HEALTH CENTER, LP,
a Delaware limited partnership
     
BY:
MVI Health Center GP, LLC,
 
a Delaware limited liability company,
 
as its General Partner
   
BY:
CGI Healthcare Operating Partnership,
 
L.P., a Delaware limited partnership,
 
as its sole Member
   
BY:
Cornerstone Growth & Income Operating
 
Partnership, L.P., a Delaware limited partnership,
 
as its General Partner
   
BY:
Cornerstone Growth & Income REIT, Inc.,
 
a Maryland corporation,
 
as its General Partner
       
By:
  
   
Terry G. Roussel, President and
   
Chief Executive Officer

LOAN GUARANTORS:
(solely for purposes of Section 6.14 and
Section 7.8 only)
 
  
 
  
 
  

 
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ACKNOWLEDGEMENT OF RECEIPT OF AGREEMENT

The undersigned acknowledges receipt of the foregoing Purchase and Sale
Agreement executed by Seller and Buyer this 31st day of December, 2009.

HERITAGE TITLE COMPANY OF AUSTIN, INC.
   
By:
  
Name:
  
Title:
  

 
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