EX-10.78.02

 
AGREEMENT OF PURCHASE AND SALE
 
between
 
STAYTON SW ASSISTED LIVING, L.L.C.

Stayton

– and –
 
BRE/SW PORTFOLIO LLC,
 
a Delaware limited liability company
 
as Purchaser
 

 

 
January 15, 2010

 

 
 

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PAGE
ARTICLE 1 DEFINITIONS
2
1.1
Definitions
2
1.2
References to Exhibits, Articles and Sections; Incorporation of Exhibits
19
1.3
Headings and Table of Contents
20
1.4
Gender, Number and Meaning
20
1.5
Exhibits
20
ARTICLE 2 PURCHASE AND SALE
21
2.1
Purchase and Sale of the Property
21
2.2
Purchase Price
23
2.3
Allocation of Purchase Price
23
2.4
Purchaser's Deposit in Escrow
23
2.5
Adjustment and Payment of Cash Consideration Amount
24
2.6
Rollover Equity
25
2.7
Title
26
ARTICLE 3 PURCHASER'S INVESTIGATION AND DUE DILIGENCE
26
3.1
Title Reports and Surveys
26
3.2
Status of Purchaser's Due Diligence
27
3.3
Disclosure Schedule
27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
28
4.1
Representations and Warranties of Stayton
28
4.2
Representations and Warranties of Purchaser
35
4.3
Disclaimer of Additional Representations or Warranties
36
4.4
Survival of Representations and Warranties
38
4.5
Updates to Stayton Representations and Warranties.
38
ARTICLE 5 PRE-CLOSING COVENANTS OF STAYTON
38
5.1
Stayton's Affirmative Pre-Closing Covenants
38
5.2
Stayton's Negative Pre-Closing Covenants
43
ARTICLE 6 PRE-CLOSING COVENANTS OF PURCHASER
45
ARTICLE 7 CONDITIONS PRECEDENT
46
7.1
Conditions for the Benefit of Purchaser
46
7.2
Conditions for the Benefit of Stayton
49

 
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ARTICLE 8 CLOSING
50
8.1
Location and Time of Closing
50
8.2
Execution of Instruments
50
8.3
Deliveries by Stayton
50
8.4
Deliveries by Purchaser
53
8.5
Proration of Expenses and Revenues
54
8.6
Deferred Closings
57
ARTICLE 9 ADDITIONAL COVENANTS
58
9.1
HSR Act Filing
58
9.2
Employee Matters
58
9.3
Assumed Contracts.
60
9.4
Licensing Requirements.
61
9.5
Post-Closing Accounts
64
9.6
Preservation of, and Stayton's Access to, Records
69
9.7
Applicability of Licensure Laws
70
9.8
Cooperation Following Closing
70
9.9
Cost Reports
70
9.1
Use of Excluded Business Names/Policies and Procedures
71
9.11
Post-Closing Operation of Properties
71
ARTICLE 10 AUCTION, BREAK-UP FEE AND EXPENSE REIMBURSEMENT
71
10.1
Sale & Auction Motion and Auction Order
71
10.2
Break-Up Fee and Expense Reimbursement
71
10.3
Bid Requirements
73
ARTICLE 11 CONDEMNATION AND CASUALTY
73
11.1
Condemnation
73
11.2
Casualty
73
11.3
Effect of Termination Under this Article 11
74
ARTICLE 12 TERMINATION
74
12.1
Termination
74
12.2
Effect of Termination
75
ARTICLE 13 DEFAULT AND REMEDIES
75
13.1
Purchaser's Default
75
13.2
Stayton's Default
76

 
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ARTICLE 14 GENERAL PROVISIONS
76
14.1
Notices
76
14.2
Brokers
79
14.3
Assignment
79
14.4
Sunwest
80
14.5
Effect of Agreement
80
14.6
Counterparts
80
14.7
Severability
80
14.8
Interpretation
80
14.9
Entire Agreement
80
14.1
Governing Law
81
14.11
Further Assurances
81
14.12
Escrow Provisions
81
14.13
Settlement Costs
82
14.14
Time of Essence
82
14.15
Confidentiality
82
14.16
Currency
83
14.17
Assistance with 1031 Exchanges
83
14.18
No Admission to Third Parties
83

 
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Exhibit
Description
A-1
Legal Descriptions of Lands
A-2
Allocated Purchase Price
B
List of Properties (Assisted Living, Independent Living, Skilled Nursing)
C
Form of Deed
D
Excluded Personal Property
E
Encumbrances on Personal Property
F
Form of Bill of Sale
G
Form of Assignment and Assumption Agreement
H
FIRPTA Affidavit
I-1
Description of Existing Real Property Loans
I-2
Description of Existing Personal Property Debt
J
Non-Terminable Operating Contracts
K
Stayton Provided Information
L
Bid Procedures
M-1
List of reports constituting the Title Report
M-2
Title Companies
M-3
Required Removal Exceptions
M-4
Required Affirmative Insurance
M-5
Required Title Consent Properties
M-6
Required Title Notice Properties
M-7
Required Title Option Properties
M-8
Missing Surveys
N
Utility Company Deposits
O-1
Modification Schedule
O-2
Underwritten Rate Calculation
O-3
Form Modification Documents
O-4
CS-20 Term Sheet
O-5
CS-27 Term Sheet
O-6
GE Term Sheet
O-7
Forward Curve
O-8
DSCR Test Modifications
O-9
Underwritten Assumed Real Property Loan Balance (allocated by the applicable
Existing Real Property Loan)
O-10
Permitted Discrepancies
P
Motor Vehicles
Q
Reorganization Plan
R
[Intentionally Deleted]
S
Form of Interim Operating Agreement
T
Blackstone Venture LLC Agreement
U
Resident Agreement Brokers
V
Facility Managers
W
Form of Ground Lease Estoppel

 

 
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AGREEMENT OF PURCHASE AND SALE
 
THIS AGREEMENT OF PURCHASE AND SALE is made and entered into this January 15,
2010 by and among Stayton SW Assisted Living, L.L.C. ("Stayton"), an Oregon
limited liability company constituting the Unitary Sunwest Enterprise designated
in the Approval Order of the United States District Court for the District of
Oregon dated October 2, 2009, and BRE/SW Portfolio LLC, a Delaware limited
liability company (hereinafter referred to as "Purchaser").
 
RECITALS
 
WHEREAS, prior to December 30, 2008, Sunwest Management, Inc. ("Sunwest") was
part of a group of related entities involved in acquisition, development,
design, construction, financing, insuring and operating senior living and other
properties, assets and operations (the "Sunwest Enterprise"); and
 
WHEREAS, each Sunwest-affiliated property had separate ownership, often
involving multiple investors; and
 
WHEREAS, on or about December 30, 2008, Sunwest's founder filed an individual
voluntary petition for bankruptcy relief in the United States Bankruptcy Court
for the District of Oregon, Case No. 08-37225-tmb11; and
 
WHEREAS, several of the entities owning or operating Sunwest senior living
facilities  also commenced bankruptcy cases, commencing as early as August 19,
2008 in Tennessee and December 1, 2008 in Oregon; and
 
WHEREAS, the United States District Court for the District of Oregon ("Court")
has withdrawn the reference of the bankruptcy cases commenced in Oregon and most
of the bankruptcy cases commenced in Tennessee have been transferred to the
Court; and
 
WHEREAS, on March 2, 2009 the United States Securities and Exchange Commission
("SEC") commenced the SEC Enforcement Action against Sunwest; and
 
WHEREAS, in the SEC Enforcement Action, the SEC alleged that the Sunwest
Enterprise was a unitary enterprise; and
 
WHEREAS, on March 10, 2009, the Court entered its Order in the SEC Enforcement
Action appointing Michael A. Grassmueck as Receiver ("Receiver") and Clyde A.
Hamstreet as CRO of the Receivership Entities comprising the Sunwest Enterprise;
and
 
WHEREAS, on October 2, 2009 the Court in the SEC Enforcement Action entered its
Findings of Facts and Conclusions of Law regarding Approval of Distribution Plan
Jointly Proposed by Receiver and CRO and its Order Approving Distribution Plan
("Approval Order"); and
 

 
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WHEREAS, the Court found that the Sunwest Enterprise was operated as a unitary
enterprise and that a single Chapter 11 bankruptcy to reorganize the Unitary
Sunwest Enterprise is warranted and appropriate; and
 
WHEREAS, the Distribution Plan consolidates all assets and liabilities of the
Sunwest Enterprise into the bankruptcy estate of Stayton pending in the Court as
In re Stayton SW Assisted Living, LLC, Case No. 6:09-CV-6082 (the "Unitary
Bankruptcy Case"); and
 
WHEREAS, the Approval Order authorizes and directs the Receiver and the CRO to
take all actions necessary and appropriate to implement the Distribution Plan,
including the reorganization of the Sunwest Enterprise through the Unitary
Bankruptcy Case; and
 
WHEREAS, on December 22, 2009, the Court in the Unitary Bankruptcy Case entered
its Order Granting the Joint Motion of Debtor, the Tenants-in-Common Committee
and the Unsecured Creditor Committee for Substantive Consolidation of Assets and
Liabilities of Sunwest Related Entities (the “Consolidation Order”); and
 
WHEREAS, Stayton has filed multiple adversary proceedings pursuant to 11 USC
§ 363(h) seeking Court Orders authorizing Stayton to sell the interests of
co-owners of Properties to Purchaser;
 
WHEREAS, the Court shall have authorized Stayton, as the Unitary Sunwest
Enterprise, to sell the Properties which are reflected of record as owned by
Sunwest Record Owner and operated pursuant to licenses held by the Sunwest
Licenseholder;
 
WHEREAS, Stayton expects that the Court will enter Orders in the adversary
proceedings authorizing Stayton to sell the interests of co-owners of
Properties; and
 
WHEREAS, Stayton wishes to sell the Properties, as hereinafter defined, to
Purchaser and Purchaser wishes to purchase the Properties, pursuant to the
terms, covenants and conditions set forth herein.
 
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound hereby, and subject to entry of the Auction Order, agree as
follows:
 
ARTICLE 1
 
DEFINITIONS
 
1.1 Definitions
 
As used in this Agreement, the following initially capitalized terms shall have
the following respective meanings:
 
"Accessible Funds" has the meaning set forth in Section 8.5(g).
 

 
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“Actual Assumed Real Property Loan Balance” shall mean the outstanding principal
balance (including all accrued and unpaid interest and lender expenses which
have been paid or incurred on behalf of the borrower and capitalized by the
lender) of all Assumed Real Property Loans for which a Closing has occurred,
calculated at the time of the Closing Date related to the applicable Property,
without giving effect to any principal payments or reductions occurring after
such Closing Date.
 
"Actual Interest NPV" means the net present value (using a 12% discount rate) of
the interest payments on all Assumed Real Property Loans for which a Closing has
occurred (excluding the CS-20 Loan, CS-27 Loan and GE Loans) taken together
through a five year loan term, assuming an interest rate equal to the Actual
Rate, with such net present value being calculated at the time of the Closing
Date related to the underlying Property (and not giving effect to any principal
payments or reductions which may occur after such Closing Date).
 
"Actual Rate" means the actual dollar-weighted interest rate for each applicable
period of the five year term of the Assumed Real Property Loans taken together
(calculated using the Forward Curve for LIBOR Rate and Prime Rate, as
applicable, with respect to any interest calculated with reference to LIBOR Rate
or Prime Rate); provided, that for purposes of calculating the actual dollar
weighted interest rate the following items shall be taken into account: (i) any
floors related to LIBOR Rate or Prime Rate contemplated by the Assumed Real
Property Loan Documents shall be considered the effective LIBOR Rate or Prime
Rate, if greater than the rates provided in the Forward Curve, (ii) any ceilings
related to LIBOR Rate or Prime Rate contemplated by the Assumed Real Property
Loan Documents shall be considered the effective LIBOR Rate or Prime Rate, if
lower than the rates provided in the Forward Curve, and, (iii) any loan fees,
extension fees or other fees required to be paid pursuant to the Assumed Real
Property Loan Documents shall be added to the otherwise effective interest rate
for such year for such loan.
 
"Affiliate" means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such Person.
 
"Agreement" means this agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time, and includes all Exhibits
hereto.
 
"Allocated Cash/Equity Portion of the Purchase Price" is the Cash/Equity Portion
of the Purchase Price allocated to an individual Property as more particularly
set forth on Exhibit A-2, as such amount may be adjusted pursuant to the terms
of this Agreement.  The Allocated Cash/Equity Portion of the Purchase Price
shall only be applicable for the purposes expressly provided for in this
Agreement and shall not be binding upon any party for purposes of tax returns.
 
"Allocated Purchase Price" for an individual Property is (x) the Allocated
Cash/Equity Portion of the Purchase Price of such individual Property plus (y)
the Existing Loans allocated to such the individual Properties as more
particularly set forth on Exhibit A-2, as such amount may be adjusted pursuant
to the terms of this Agreement.  The Allocated Purchase Price shall only be
 

 
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applicable for the purposes expressly provided for in this Agreement and shall
not be binding upon any party for purposes of tax returns.
 
"Assumed Liabilities" means the obligations arising under the Assumed Unexpired
Leases, the Resident Agreements, the Assumed Operating Contracts, the Entrance
Fees, the Concessions of Rent, the Assumed Real Property Loans and the Assumed
Personal Property Debt, in each case from and after the Closing.
 
"Assumed Loan Documents" means the Existing Loan Documents as modified by all
agreements entered into in accordance with this Agreement to amend, modify,
supplement or restate the Existing Loan Documents and effectuate the terms of
the Assumed Real Property Loans and Assumed Personal Property Debt, including,
any assumption agreement with respect to the Assumed Personal Property Debt.
 
"Assumed Mortgages" means those mortgages or deeds of trust relating to the
Assumed Real Property Loans held by Lenders secured by the various individual
Properties or groups of Properties set forth on Exhibit B, as modified in
accordance with this Agreement.
 
"Assumed Operating Contracts" has the meaning set forth in Section 9.3.
 
"Assumed Personal Property Debt" means the Existing Personal Property Loans, as
modified in accordance with this Agreement, if assumed by Purchaser as an
Assumed Operating Contract in accordance with Section 9.3.
 
"Assumed Real Property Loans" means the Existing Real Property Loans, as
modified in accordance with this Agreement.
 
"Assumed Unexpired Leases" has the meaning set forth in Section 9.3.
 
"Auction" means the auction of all of the Properties as a whole conducted
pursuant to Article 10 of this Agreement and the Bid Procedures set forth in
Exhibit L, as approved in the Auction Order.
 
"Auction Order" means an order of the Court, satisfactory in form and substance
to Purchaser, Stayton and their respective counsel which (a) approves this
Agreement, (b) approves the Bid Procedures, (b) authorizes and schedules an
Auction, (c) approves the Break-Up Fee and Expense Reimbursement, (d) approves
the form and manner of notices, and (e) scheduling a hearing for final approval
of the sale.
 
"Bankruptcy-Related Defaults" means any defaults which have occurred or are
alleged to have occurred as a result of the Unitary Bankruptcy Case or the
commencement by Stayton or its Affiliates of any other bankruptcy cases.
 
"Bid Procedures" means the procedures specified in Exhibit L.
 
"Blackstone" means Blackstone Real Estate Advisors VI L.P., a Delaware limited
liability company.
 

 
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"Blackstone Venture LLC Agreement" has the meaning set forth in Section
2.6(b)(ii).
 
"Blackstone Venture Member" shall mean BRE/SW Member LLC, a Delaware limited
liability company.
 
"Break-Up Fee" shall mean an amount equal to the greater of (x) $9,000,000 and
(y) ten percent of the amount by which the Cash/Equity Portion of Purchase Price
reflected by the Successful Bid (as defined in the Bid Procedures) exceeds
$235,000,000.
 
"Brokers" has the meaning set forth in Section 14.2.
 
"Business Day" means any day other than a Saturday, Sunday or other day on which
banks in Portland, Oregon are authorized or required by law to be closed.
 
"Business Names" has the meaning set forth in Section 2.1(i).
 
"Buy-In Agreement" means any agreement with residents at the Properties
providing for lump-sum payment to Stayton or its Affiliates of an amount equal
to more than two months occupancy payments at the inception of residency in the
Property, coupled with an undertaking of Stayton to return to such resident or
to such resident's successors in interest a portion of such payment following
such resident's death, move-out or sale of such resident's unit.
 
“Capitalized Stayton Expenses” shall mean an amount equal to (x) all accrued and
unpaid interest and lender expenses which have been paid or incurred on behalf
of the borrower under the Assumed Real Property Loans, plus (y) any assumption
fees, modification fees, extension fees or similar fees in connection with the
modification assumption of the Assumed Real Property Loans due and payable on or
prior to the Closing Date, in each case which are capitalized by the lenders
under the Assumed Real Property Loans.
 
"Cash Consideration Amount" has the meaning set forth in Section 2.2(b).
 
"Cash/Equity Portion of Purchase Price" has the meaning set forth in Section
2.2(a).
 
"Change of Control" of Purchaser means: (a) a change of control of Purchaser as
such control exists on the date of this Agreement, with the term "control"
having the definition given such term under Rule 12b-2 under the Securities
Exchange Act of 1934, as amended; or (b) acquisition by a Person or Persons
other than Blackstone, Emeritus or Columbia Pacific, or their respective
Affiliates, of direct or indirect ownership of in excess of 20 percent of the
capital and profits interest in Purchaser.
 
“CHOW Corrective Actions” has the meaning set forth in Section 9.4(a)(iii).
 
"CHOW Liabilities" shall mean any and all costs associated with the change of
ownership and/or licensure and/or certification survey process including, but
not limited to, any physical plant or other changes required to bring the
Properties into compliance with the currently effective licensure and
certification or other legal requirements if and to the extent (i) it is not
currently in compliance and such compliance is required as a matter of state or
federal law and (ii) Stayton, Sunwest Record Owner or Sunwest Licenseholder was
required by written
 

 
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notice issued by a Governmental Entity having jurisdiction in connection with
its acquisition or operation of the Properties to make such changes and such
requirements have not been fulfilled as of the Closing Date (but which shall not
include any liabilities first arising in connection with any change of ownership
or licensure to Purchaser or Purchaser’ Manager pursuant to this Agreement and
not previously cited in connection with Stayton's, Sunwest Record Owner’s or
Sunwest Licenseholder’s ownership and/or operation of the Properties).  CHOW
Liabilities shall include any obligations of Stayton, Sunwest Licenseholder or
any Sunwest Record Owner for physical plant maintenance and compliance with
licensure requirements under the Unexpired Leases, prior to the Closing Date, to
the extent, and only to the extent enumerated in clauses (i) and (ii) of the
previous sentence.
 
"CLIA Numbers" means license, registration and waiver identification numbers
assigned pursuant to the Clinical Laboratory Improvement Amendments (CLIA) of
1988.
 
"Closing" has the meaning set forth in Section 8.1.
 
"Closing Date" has the meaning set forth in Section 8.1.
 
"Columbia Pacific" means CPDF II LLC, a Delaware limited liability company, or
such other Affiliate of Columbia Pacific Management, Inc., a Washington
corporation, as may hold a direct or indirect membership interest in Purchaser.
 
"Concessions of Rent" means any financial incentives in the form of future rent
abatement, rent deferral or rent freezes granted to residents of the Properties
which are still continuing in effect as of the date of this Agreement.
 
"Consolidation Order" has the meaning set forth in the recitals.
 
"Contract Assumptions" has the meaning set forth in Section 9.3.
 
"Control" means the power to direct or cause the direction of the management or
policies (including investment policies) of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  "Controlled by",
"controlling" and "under common control with" shall have the respective
correlative meaning thereto.
 
"Corporate Employees" means, at any applicable time, the employees employed by
Stayton or its Affiliates at the corporate headquarters of Stayton.  For the
avoidance of doubt, “Corporate Employees” shall not include the Facility
Employees.
 
"Court" has the meaning set forth in the recitals.
 
"Court of Appeals" means the United States Court of Appeals for the Ninth
Circuit.
 
"CRO" means Clyde A. Hamstreet, in his capacity as Chief Restructuring Officer
for the Receivership Entities pursuant to the Receivership Order.
 

 
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"CS-20 Loan" means that loan between Columbia Pacific SW/CS, LLC (as
successor-in-interest to Column Financial, Inc.) as lender and certain
Affiliates of Stayton as borrower in the original principal amount of
$159,250,000 dated as of May 30, 2007.
 
"CS-27 Loan" means that loan between Columbia Pacific Distressed Fund, L.P. and
its participants (as successor-in-interest to Column Financial, Inc.) as lender
and certain Affiliates of Stayton as borrower in the original principal amount
of $128,334,000 dated as of July 12, 2006.
 
“CS Divestco Assets” means (i) with respect to the CS-20 Loan, the assets known
as Colonial Gardens and Plaza at Sun Mountain and (ii) with respect to the CS-27
Loan, the assets known as Weatherly Springs, Willows at Sherman and Deer
Meadows.
 
“Debt Modification Schedules” means Exhibits O-1, O-2, O-3, O-4, O-5, O-6, O-7,
O-8, O-9 and O-10.
 
"Deferred Closing Date" has the meaning set forth in Section 8.1.
 
"Deferred Property" has the meaning set forth in Section 8.6(a).
 
"Deferred Property (Licensing)" has the meaning set forth in Section 8.6(d).
 
"Deficient Ground Lease Properties" means the Properties identified on Exhibit B
as Lassen House, Oakridge and River Road.
 
"Delinquent Rents" has the meaning set forth in Section 8.5(k).
 
"Deposit" has the meaning set forth in Section 2.4.
 
“Designated Corporate Employee” has the meaning set forth in Section 9.2(a).
 
"Discounted Payoff" has the meaning set forth in Section 2.6(c).
 
"Disclosure Schedule" means the schedules and information delivered to
Purchaser, as more particularly described in Section 3.3.
 
"Distribution Plan" means the Distribution Plan approved by Order Approving
Distribution Plan Jointly Proposed by Receiver and CRO entered into on October
2, 2009 in the SEC Enforcement Action.
 
"Due Diligence Material" has the meaning set forth in Section 4.1(s).
 
"Effective Date" means the date that is thirty one (31) days following the date
on which the Reorganization Plan is entered into, without being subject to a
stay.
 
"Emeritus" means Emeritus Corporation, a Washington corporation, or such
Affiliate thereof as may hold a direct or indirect membership interest in
Purchaser.
 
"Encumbrances" means any and all encumbrances, liens, charges, security
interests, options, claims, mortgages, deeds of trust, equitable interests,
rights of way, easements,
 

 
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encroachments, servitudes, adverse claims, exceptions, reservations, rights of
occupation, purchase options, rights of first refusal, first offer or first
negotiation or similar restrictions, or any other matter affecting title,
transfer, use, or other attributes of ownership of any nature whatsoever.
 
"Entrance Fees" means any and all obligations owed to residents of Properties
pursuant to Buy-In Agreements at any of the Properties as of the Closing Date.
 
"Environmental Reports" has the meaning set forth in Section 4.1(x).
 
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
 
"Escrow Agent" means Chicago Title Insurance Company.
 
"Excluded Business Names" has the meaning set forth in Section 2.1(i).
 
"Excluded Obligations" has the meaning set forth in Section 2.1.
 
"Excluded Personal Property" has the meaning set forth in Section 2.1.
 
"Existing Loan Documents" means any and all documents or instruments evidencing
or securing the Existing Real Property Loans and Existing Personal Property
Loans.
 
“Existing Loans” means the Existing Personal Property Loans and the Existing
Real Property Loans.
 
"Existing Personal Property Loans" means only those loans held by the Lenders,
secured by the certain Personal Property, which are set forth on Exhibit I-2.
 
"Existing Real Property Loans" means only those loans held by the Lenders,
secured by the various individual Properties, or groups of Properties, which are
set forth on Exhibit I-1.
 
"Expense Reimbursement" shall mean an amount equal to the sum of the Purchaser's
reasonable and out-of-pocket expenses paid by Purchaser in connection with or
related to Purchaser's due diligence and the preparation, negotiation, execution
and performance of the transactions contemplated by this Agreement (including
the modification of the Existing Real Property Loans and the assumption thereof
by Purchaser), including without limitation, consultant fees, legal fees, title
and survey costs, expenses of financing sources, accountants and financial
advisors.
 
"Facility Employees" means, at any applicable time, the employees employed by
Stayton or its Affiliates at any of the Properties at such time.
 
“Failed Loan Modification” has the meaning set forth in Section 7.1(i).
 
"FAS" means supply items included within "Facility and Equipment" under GAAP,
including, but not limited to, linen, china, glassware, silver, uniforms, and
similar items, whether used in connection with public space or in resident
rooms, but specifically excluding Inventories.
 

 
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"FF&E" means all appliances, machinery, devices, fixtures, appurtenances,
equipment, furniture, furnishings and articles of tangible personal property of
every kind and nature whatsoever owned by Stayton or any of its Affiliates, and
located in or at, or used in connection with the ownership, operation or
maintenance of the Properties, other than Motor Vehicles, but in any event
excluding any Excluded Personal Property.  FF&E shall include, but not be
limited to: (a) all equipment, machinery, fixtures, and other items of property,
now or hereafter permanently affixed to or incorporated into the Properties,
including, without limitation, all appliances, furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, dishwashing,
kitchen and laundry equipment, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, all of
which, to the maximum extent permitted by law, are hereby deemed by the parties
hereto to constitute real estate, together with all replacements, modifications,
alterations and additions thereto; (b) all furniture, furnishings, movable walls
or partitions, moveable machinery, moveable equipment, computers or trade
fixtures or other personal property of any kind or description used or useful in
the business on or in the Property, and located on or in the Properties, and all
modifications, replacements, alterations and additions to such personal
property; (c) the FAS; and (d) and all other tangible personal property used in
connection with the operation, ownership, or maintenance of the Properties (as
such terms are customarily used and defined in the most broad and inclusive
sense) but specifically excluding Inventories.
 
"Forward Curve" shall mean the forward curve applicable to one-month LIBOR and
Prime interest rates as more particularly set forth in Exhibit O-7 attached
hereto.
 
“GE Divestco Assets” shall means the assets known as Canyon Crest, Chancellor
Place, Legacy at Dallas, Cooper Villa and Grayonsview-Harrisburg.
 
"GE Loans" means, collectively, (i) that loan between General Electric Capital
Corporation, as lender, and certain Sellers, as borrower, in the original
principal amount of $45,600,000, dated as of January 31, 2006, (ii) that loan
between General Electric Capital Corporation, as lender, and certain Sellers, as
borrower, in the original principal amount of $49,578,350, dated as of February
28, 2007, (iii) that loan between General Electric Capital Corporation, as
lender, and certain Sellers, as borrower, in the original principal amount of
$51,076,500, dated as of December 27, 2006, (iv) that loan between GE Business
Financial Services, Inc. (as successor-in-interest to Merrill Lynch Capital), as
lender and certain Sellers, as borrower, in the original principal amount of
$32,935,000, (v) that loan between GE Business Financial Services, Inc. (as
successor-in-interest to Merrill Lynch Capital), as lender and certain Sellers,
as borrower, in the original principal amount of $26,910,000, and (vi) that loan
between GE Business Financial Services, Inc. (as successor-in-interest to
Merrill Lynch Capital), as lender and certain Sellers, as borrower, in the
original principal amount of $44,985,000.
 
"Governmental Entity" means any (a) nation, state, county, city, town, borough,
village, district or other jurisdiction, (b) federal, state, local, municipal or
other government, (c) governmental or quasi-governmental entity of any nature
(including without limitation, any agency, branch, department, board,
commission, court, tribunal, arbitrator or other entity exercising governmental
or quasi-governmental power), (d) body exercising, or entitled or
 

 
9

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purporting to exercise, any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power, or (e) any official of the
foregoing.
 
"Government Programs" has the meaning set forth in Section 4.1(bb).
 
"Ground Leases" means those certain ground leases (and all agreements,
modifications and amendments thereto) pursuant to which Sunwest Record Owner
leases the applicable Real Property, as more particularly set forth in Section
4.1(v) of the Disclosure Schedule.
 
"Hazardous Materials" means materials, wastes or substances that are (i)
included within the definition of any one or more of the terms "hazardous
substances," "hazardous materials," "toxic substances," "toxic pollutants" and
"hazardous waste" in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901, et
seq.), the Clean Water Act (33 U.S.C. Section 1251, et seq.), the Safe Drinking
Water Act (14 U.S.C. Section 1401, et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801, et seq.) and the Toxic Substance
Control Act (15 U.S.C. Section 2601, et seq.) and the regulations promulgated
pursuant to such laws, (ii) regulated, or classified as hazardous or toxic,
under federal, state or local environmental laws or regulations, (iii) petroleum
or petroleum by-products, including gasoline and diesel, (iv) asbestos or
asbestos-containing materials, (v) polychlorinated biphenyls, (vi) flammable
explosives and (vii) radioactive materials.
 
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
 
"Improvements" has the meaning set forth in Section 2.1(b).
 
"Incremental Capital" has the meaning set forth in Section 2.6(c).
 
"Initial Closing Date" has the meaning set forth in Section 8.1.
 
"Initial Closing Licensed Properties" shall mean the Purchaser Licensed
Properties included in satisfaction of the Minimum Licensing Threshold set forth
in Section 7.1(k).
 
"Initial Closing Managed Properties" means the Properties which as of the
Initial Closing Date, (i) are not Purchaser Licensed Properties, (ii) do not
have any Unsatisfied Closing Conditions related to it (or to any Properties
subject to the same Existing Real Property Loan) and (iii) are located in
jurisdictions in which the applicable Law recognizes and permits the management
of the Properties by Purchaser’s Manager pursuant to an Interim Operating
Agreement.
 
"Initial Closing Properties" means the Initial Closing Licensed Properties and
the Initial Closing Managed Properties.
 
"Interim Operating Agreements" has the meaning set forth in Section 9.4(d).
 
"Intervention" means the acknowledgements executed by Sunwest, Emeritus and
Columbia Pacific attached hereto.
 

 
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"Inventories" means "Inventories" as defined by GAAP such as, but not limited
to, provisions in storerooms, refrigerators, pantries and kitchens; medical
supplies; other merchandise intended for sale or use in connection with the
operation of the Properties; fuel; mechanical supplies; stationery; and other
expensed supplies and similar items.
 
“Key Corporate Employees” shall refer to certain specific Corporate Employees
identified in writing to Purchaser on or prior to the date hereof as key recent
hires by Stayton.
 
"Known to Stayton," or "to Stayton's Knowledge" means the actual conscious
knowledge of the CRO, without any obligation to investigate other than to
inquire of Darryl Fisher, Shirley Dunn, Brett Salmon, Kristy Petersen and Matt
Marcos and without the imputation of the knowledge of any Person.

"Lands" has the meaning set forth in Section 2.1(a).
 
"Law" means any federal, state, local, municipal or other law, statute, common
law, code, ordinance, policy, circular, guideline, regulation, rule, or
accreditation standard.
 
"Lender Reserves" has the meaning set forth in Section 8.5(g).
 
"Lenders" means the holders of the Assumed Real Property Loans and the Assumed
Personal Property Debt as enumerated on Exhibits I-1 and I-2
 
"Licenses" means all governmental permits and approvals, including licenses,
Medicare, Medicaid and other third party payor provider agreements or contracts,
and authorizations, required for the ownership, use, occupancy, operation and
maintenance of the Properties, including without limitation healthcare
regulatory licenses, skilled nursing facility licenses, residential care for the
elderly licenses, assisted living licenses, occupational licenses and/or
qualifications to do business, certificates of need, certificates of authority,
certificates of occupancy, building permits, signage permits, site use
approvals, zoning certificates, environmental and land use permits, and any and
all necessary approvals from state or local authorities and other approvals
granted by any public body.
 
"Licensing Approvals" has the meaning set forth in Section 9.4(a)(i).
 
"Licensure Laws" has the meaning set forth in Section 9.7.
 
“Loan Adjustments” has the meaning set forth in Section 2.5(b).
 
"Losses" has the meaning set forth in Section 9.1.
 
"Management Agreements" means, with respect to each Property, any and all
management agreements, consulting agreements, operating leases, lease
agreements, subleases or other agreements pursuant to which such Property is
operated or managed by any party (including third parties or Sunwest Affiliates)
and all amendments, modifications, supplements or restatements thereto and
thereof.
 
“Maximum Loan Adjustment” has the meaning set forth in Section 2.5(b).
 

 
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"Minimum Licensing Threshold" has the meaning set forth in Section 7.1(k).
 
"Missing Survey Properties" has the meaning set forth in Section 3.1(b).
 
“MLA Termination” has the meaning set forth in Section 2.5(b).
 
"Modification Schedule" means the schedule of modifications to the terms of the
Existing Real Property Loans and Existing Personal Property Loans, attached
hereto as Exhibit O-1.
 
"Motor Vehicles" means those motor vehicles, regardless of whether leased or
owned and described in Exhibit P attached hereto.
 
"New Surveys" has the meaning set forth in Section 3.1(b).
 
"Non-Terminable Operating Contracts" has the meaning set forth in Section
4.1(ee).
 
“Non-Transferred Corporate Employee” has the meaning set forth in Section
9.2(c).
 
“Non-Transferred Facility Employee” has the meaning set forth in Section 9.2(b).
 
"Operating Contracts" means written service, equipment, supply, utility,
maintenance, concession, salon leases and other agreements in effect in
connection with the ownership, operation or use of the Properties or the conduct
of any business thereon other than (i) Management Agreements, (ii) Resident
Agreements and (iii) Unexpired Leases.
 
"Order" means any order, writ, judgment, decision, decree, ruling, assessment,
instruction, award, injunction or similar order or requirement.
 
"Outside Closing Date" has the meaning set forth in Section 12.1(d).
 
"Owner's Title Policy" has the meaning set forth in Section 7.1(n)(v).
 
"Pending Appeals" shall collectively mean (i) the appeal dated March 25, 2009 to
the Court of Appeals from the Order dated March 10, 2009 in the SEC Enforcement
Action Granting Preliminary Injunction and Appointing Receiver; (ii) the appeal
dated September 25, 2009 to the Court of Appeals from the Order dated September
2, 2009 in the SEC Enforcement Action Granting Additional Preliminary Injunction
and Appointing Receiver for Additional Entities; and (iii) the appeal dated
October 2, 2009 to the Court of Appeals from the Order dated October 2, 2009 in
the SEC Enforcement Action Approving Distribution Plan.
 
"Permitted Exceptions" means (i) those certain exceptions to title to the
Properties reflected in the Title Report and (ii) any special exceptions as a
result of pending appeals to the Sale Approval Order or the Reorganization Plan
following a waiver by Purchaser of the closing condition in Section 7.1(e) as it
relates to such pending appeal, provided, however, "Permitted Exceptions" shall
(A) not include any Required Removal Exceptions and (B) be modified by the
Required Affirmative Insurance.
 

 
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"Person" means any individual, corporation, partnership, joint venture, limited
liability company, estate, trust, unincorporated association, any federal,
state, county or municipal government or any bureau, department or agency
thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
 
"Personal Property" has the meaning set forth in Section 2.1.
 
"Plans and Drawings" means all architectural and engineering plans, designs,
drawings, surveys, and studies pertaining to the Properties.
 
“Pre-Approved Monthly Maintenance Amount” has the meaning set forth in Section
5.1(d).
 
"Promotional Materials" has the meaning set forth in Section 2.1(i).
 
"Property" has the meaning set forth in Section 2.1.
 
"Properties" means collectively each and every Property.
 
"Purchaser Licensed Properties" means the Properties (i) for which Purchaser
and/or Purchaser's Manager shall have received on the Closing Date all Licenses
necessary to own and operate the Properties in compliance with Law, (ii) located
in States where the parties acknowledge and agree that Purchaser or Purchaser's
Manager will be permitted, as a matter of law, to operate under the applicable
Sunwest Licenseholder’s license until the Licensing Approvals have been issued
to Purchaser or Purchaser's Manager, (iii) for which Purchaser or Purchaser's
Manager has obtained all Licensing Approvals other than any approvals required
for Purchaser or Purchaser's Manager to bill under Medicare, Medicaid (however
denominated by the applicable State) or other third party payor and Purchaser or
Purchaser's Manager advises Stayton in writing of its election not to bill
Medicare, Medicaid (however denominated by the applicable State) or other third
party payor until such approvals have been granted to Purchaser or Purchaser's
Manager or (iv) located in States where Purchaser or Purchaser’s Manager has
received acceptable assurances that Purchaser or Purchaser’s Manager shall
receive all Licensing Approvals upon any required confirmation by the States
that the transfer of the Property has occurred.
 
"Purchaser's Manager" means the third-party manager or operator engaged by
Purchaser to operate and manage any of the Properties.
 
"Purchase Price" has the meaning set forth in Section 2.2(a).
 
"Real Property" has the meaning set forth in Section 2.1(d).
 
"Receiver" means Michael A. Grassmueck, or any Court-appointed successor, in his
capacity as Receiver for the Receivership Entities pursuant to the Receivership
Order.
 
"Receivership Entities" means the entities over which the Receiver has been
appointed to act as a federal equity receiver and the CRO has been appointed to
act as Chief Restructuring Officer pursuant to the Receivership Order.
 

 
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"Receivership Order" means the Order entered by the Court on March 10, 2009 in
the SEC Enforcement Action, together with the Unopposed Order Granting
Additional Preliminary Injunction and Appointing Receiver for Additional
Entities entered by the Court on May 27, 2009, and the Further Order Granting
Additional Preliminary Injunction and Appointing Receiver for further Entities
entered by the Court on August 28, 2009.
 
"Records" has the meaning set forth in Section 5.1(h).
 
"Reimbursement Obligations" shall mean any obligation to repay payments from
Medicare, Medicaid (however denominated by the applicable State) or any other
third party payor with respect to its operations at the Properties prior to the
Closing Date.
 
"Rent Rolls" has the meaning set forth in Section 4.1(k).
 
"Rents" has the meaning set forth in Section 8.5(k).
 
"Reorganization Plan" means the Plan of Reorganization (including any amendments
thereto) to be confirmed by Order of the Court in the Unitary Bankruptcy Case,
which Reorganization Plan shall be consistent in form and content to the
Reorganization Plan attached as Exhibit Q to this Agreement.
 
"Required Affirmative Insurance" means affirmative insurance against forfeiture,
reversion of interest and forced removal of improvements with respect to (i) the
exceptions listed on Exhibit M-4 hereto and (ii) such other exceptions as
Purchaser may require, provided that Stayton shall not be required to provide
any indemnity with respect thereto.
 
"Required Removal Exceptions" means all exceptions or requirements related to
(i) documentation evidencing or relating to the ownership interests of the TIC
Investors (including, without limitation, any tenancy-in-common agreements,
master leases, master purchase option agreements), (ii) mechanic's liens and
similar statutory liens, (iii) judgment liens, lis pendens, and any exceptions
related to any litigation claims (including any civil or criminal proceedings)
or any foreclosure, receivership or bankruptcy actions, (iv) Operating
Contracts, Management Agreements and Unexpired Leases (or any memorandums of
such agreements or any recorded rights related thereto) which Purchaser is not
expressly assuming pursuant to this Agreement, (v) mortgages, deeds of trust,
UCC financing statements and other security instruments evidencing debt other
than the Existing Real Property Loans and Existing Personal Property Loans, (vi)
rights of tenants, other than the rights of residents under the Resident
Agreements and tenants under the Assumed Unexpired Leases in each case to occupy
as tenants only (without any options to purchase), and (vii) the other
exceptions and standard exceptions set forth in Exhibit M-3 (excluding items
listed on Exhibit M-3 which Purchaser assumes as Assumed Operating Contracts and
Assumed Unexpired Leases pursuant to Section 9.3).
 
"Required Title Consent Properties" means those certain Properties with
Encumbrances of record which require the consent of third parties in order to
consummate the transactions contemplated by this Agreement, as more particularly
set forth on Exhibit M-5.
 

 
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"Required Title Notice Properties" means those certain Properties with
Encumbrances of record which require that notices be sent to third parties in
order to consummate the transactions contemplated by this Agreement, as more
particularly set forth on Exhibit M-6.
 
"Required Title Option Properties" means those certain Properties with
Encumbrances of record which grant a third party with a right of first refusal
or purchase option, as more particularly set forth on Exhibit M-7.
 
"Resident Agreements" has the meaning set forth in Section 2.1(e).
 
"Resident Rents" has the meaning set forth in Section 8.5(k).
 
"Rollover Equity Amount" has the meaning set forth in Section 2.6(a).
 
"Rollover Equity Election" has the meaning set forth in Section 2.6(a).
 
"Rollover Member" shall mean a single purpose Delaware limited liability
company, owned solely by Investors (as such term is defined in the
Reorganization Plan) who have not filed an appeal to the Reorganization Plan,
TIC Orders, Consolidation Order or Sale Approval Order and administered from and
after the Closing Date by a single individual administrator appointed by the
Court.

"Rollover Pro-Rata Share" has the meaning set forth in Section 2.6(b)(iv).
 
"Sale & Auction Process Motion" has the meaning set forth in Section 10.1.

"Sale Approval Order" means an order of the Court, satisfactory in form and
substance to Purchaser, Stayton and their respective counsel, entered after a
hearing conducted with adequate notice given in accordance with the Auction
Order relating to the transactions contemplated by this Agreement, including the
sale of the Properties and the assignment and assumption of the Ground Leases,
Assumed Real Property Loans, Assumed Personal Property Debt, Assumed Unexpired
Leases, Resident Agreements and Assumed Operating Contracts.  Without limiting
the generality of the foregoing, such order shall find and provide, among other
things, that (i) the Property sold to Purchaser pursuant to this Agreement shall
be transferred to Purchaser free and clear of all liens, liabilities or
obligations related to the Required Removal Exceptions, with any claims thereto
attaching to the net proceeds from the sale of the Property to the same
validity, force and effect, and in the same order of priority, which such claims
now have against the Property or the proceeds, subject to any rights, claims and
defenses Stayton or its estate, as applicable, may possess with respect thereto
and all Persons are enjoined from in any way pursuing Purchaser or the
Properties by suit or otherwise to recover on any claims which they may have
against Stayton or the Properties as of the Closing Date; (ii) this Agreement
was negotiated, proposed and entered into by the parties without collusion, in
good faith and from arm's length bargaining positions; (iii)  Purchaser has not
assumed any liability or obligations with respect to the Excluded Obligations
and all Persons are enjoined from in any way pursuing Purchaser or the
Properties by suit or otherwise to recover on any claims which they may have
against Stayton (or its Affiliates) with respect to the Excluded Obligations;
(iv) Purchaser is not merely a continuation of Stayton or its Affiliates, there
is no continuity of

 
15

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enterprise between Stayton or its Affiliates and Purchaser, Purchaser is not a
successor to Stayton and the transactions contemplated by this Agreement do not
amount to, or otherwise constitute a consolidation, merger or de facto merger of
Purchaser and Stayton; (v) the Court shall retain jurisdiction to resolve any
controversy or claim arising out of or relating to this Agreement; (vi) the
assignment and assumption of the Ground Leases, Assumed Operating Contracts and
Assumed Unexpired Leases, as provided herein is approved pursuant to Sections
363(b), (f) and (m), and 365(a) and (f) of the Bankruptcy Code; (vii) all
defaults under the Assumed Loan Documents, Ground Leases, Assumed Operating
Contracts and Assumed Unexpired Leases, have been cured or waived by the
counterparties to the Assumed Loan Documents, Ground Leases, Assumed Operating
Contracts and Assumed Unexpired Leases, or Purchaser has provided adequate
assurances of future performance in respect of the Assumed Loan Documents,
Ground Leases, Assumed Operating and Assumed Unexpired Leases; (viii) the sale
and transfer of the Properties to Purchaser is exempt from state and local
transfer taxes pursuant to Section 1146(a) of the Bankruptcy Code; and (ix) to
the extent permitted under the Bankruptcy Code or other applicable law, such
Sale Approval Order shall be binding upon and shall govern the acts of all
entities, including, but not limited to, any subsequently appointed chapter 11
or chapter 7 trustee of Stayton, all taxing authorities, filing agents, filing
officers, title agents, title companies, recorders and/or registrars of
mortgages, recorders and/or registrars of deeds, administrative agencies,
governmental agencies or departments, secretaries of state, federal, state and
local officials and all other persons and entities who may be required by
operation of law, the duties of their office or contract, to accept, file
register or otherwise record or release any documents or instruments, or who may
be required to report or insure as to title or state of title in or to the
Properties or any part thereof and may be specifically enforced by Stayton, any
chapter 7 or chapter 11 trustee of Stayton, or any other person (including,
without limitation, by Purchaser).

“Salem HQ Lease” shall mean a sublease between Stayton as sublandlord and
Purchaser’s Manager as subtenant, of that certain office space occupied by
Stayton as a headquarters as of the Initial Closing Date for a term of six (6)
months, at a market rent and on a form customary for similar space in Oregon,
provided however, if the headquarters office is not located at 3723 Fairview
Industrial Drive, Suite 270, Salem, Oregon, then such space shall be comparable
space reasonably acceptable to Purchaser.
 
"Scheduled Closing Date" has the meaning set forth in Section 8.1.
 
"SEC" has the meaning set forth in the recitals.
 
"SEC Enforcement Action" means the civil lawsuit commenced by the United States
Securities and Exchange Commission on March 2, 2009 and pending as Securities
and Exchange Commission v. Sunwest Management, Inc. et al., United States
District Court for the District of Oregon, Case No. 6:09-CV-6056.
 
"Security Deposit" means amounts being held by Stayton on behalf of residents of
any Property.
 
"Security Deposit/Prepaid Rent Schedule" has the meaning set forth in Section
4.1(k).
 

 
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"Sellers" means collectively Stayton, as the Unitary Sunwest Enterprise, the
Sunwest Record Owners and the TIC Investors.
 
"Stayton Benefit Plans" means any compensation or benefits arrangements of
Stayton and its Affiliates as a result of the transactions contemplated by this
Agreement, including in respect of any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA), "employee welfare benefit plan" (as defined
in Section 3(1) of ERISA), multiemployer plans (as defined in Section 3(37) of
ERISA), formal or informal stock option or other equity based, employment,
bonus, incentive or deferred compensation or welfare, life, medical, or dental
benefits, retention, severance plan, program, policy, arrangement or agreement
(including any collectively bargained or union agreement), whether or not
subject to ERISA, that in each case is: (a) sponsored, maintained, contributed
to or required to be contributed to by Stayton or its Affiliates or any person
or entity that, together with Stayton and its Affiliates, is treated as a single
employer under Section 414(b), (c) or (m) of the Code, or (b) in which any
Facility Employee or Corporate Employee participates or is eligible to
participate.
 
"Stayton Indemnified Parties" has the meaning set forth in Section 9.11.
 
"Stayton Provided Information" has the meaning set forth in Section 4.1(cc).
 
"Stayton Representation Update" has the meaning set forth in Section 4.5(a).
 
"Stipulated Prior Expenses" has the meaning set forth in Section 10.2(b).
 
“Successful Bid” has the meaning set forth in the Bid Procedures attached as
Exhibit L.
 
"Successful Bidder" has the meaning set forth in the Bid Procedures attached as
Exhibit L.
 
"Sunwest" means Sunwest Management, Inc., an Oregon corporation.
 
"Sunwest Affiliate Contracts" shall mean any management, service, equipment,
supply, utility, maintenance, concession, salon leases and other agreements in
effect in connection with the construction, management, ownership, operation,
staffing or use of the Properties or the conduct of any business thereon with
Sunwest Affiliate Vendors.
 
"Sunwest Affiliate Vendors" shall mean any Affiliate of Stayton, Sunwest, Jon
Harder, Kristin Harder, Darryl Fisher, or Wallace Gutzler including, without
limitation, Senenet, Inc. (an Oregon corporation), Contract Interiors LLC (an
Oregon limited liability company), KDA Construction, Inc. (an Oregon
corporation), Fuse Advertising Agency, Inc. (an Oregon corporation) and Canyon
Creek Development, Inc. (an Oregon corporation).
 
“Sunwest Licenseholder” shall mean the entities as of the date hereof which hold
the Licenses required to operate the Properties.
 
“Sunwest Manager” shall mean those certain Affiliates of Sunwest which manage or
managed the Properties.
 

 
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“Sunwest Record Owner” shall mean those certain Affiliates of Sunwest which are
reflected on Exhibit B as the record owner of the applicable fee or leasehold
interest to the Properties.
 
"Taxes" means all United States federal, state, local or foreign income,
profits, estimated, gross receipts, windfall profits, severance, property,
intangible property, occupation, production, sales, use, license, excise,
emergency excise, franchise, capital gains, capital stock, employment,
withholding, transfer, stamp, payroll, goods and services, value added,
alternative or add-on minimum tax, or any other tax, custom, duty or
governmental fee, or other like assessment or charge of any kind whatsoever,
together with any interest, penalties, fines, related liabilities or additions
to tax that may become payable in respect thereof imposed by any Governmental
Entity.
 
"Tax Liabilities" means any liability of Sellers with respect to Taxes for
periods or portions thereof ending on or prior to the Closing Date, including
Taxes upon Sellers arising in connection with the consummation of the
transactions contemplated in this Agreement.
 
"Tax Return" shall mean any return, declaration, report or similar statement
required to be filed with respect any Taxes (including any attached schedules),
including, without limitation, any information return, claim or refund, amended
return and declaration of estimated Taxes.
 
"Terminated Properties" shall mean Properties which are not acquired by
Purchaser at Closing as a result of the termination of this Agreement related to
such Property in accordance with the terms of this Agreement (including,
Sections 7.1(e), 7.1(i), 8.6, 11.1 or 11.2).
 
"Third Party Rents" has the meaning set forth in Section 8.5(k).
 
"TIC Investor" shall mean any Person (other than Stayton) owning a
tenancy-in-common interest in the Real Property.
 
"TIC Orders" means the Orders of the Court, entered pursuant to the adversary
proceedings authorizing Stayton to sell the interests of the TIC Investors in
the Properties.
 
"Title Company" means, collectively, Chicago Title Insurance Company and the
title insurance companies set forth in Exhibit M-2.
 
"Title Report" has the meaning set forth in Section 3.1(a).
 
"Tort Liabilities" means all direct or indirect liabilities associated with any
known or unknown tort claims of residents of any of the Properties arising out
of occurrences prior to Closing, whether pending, threatened or not yet
asserted.
 
"Transaction Documents" means this Agreement and any other document or
instrument contemplated by this Agreement or necessary or advisable to conclude
the transactions contemplated by this Agreement.
 
“Transferred Corporate Employee” has the meaning set forth in Section 9.2(c).
 

 
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"Transferred Facility Employee" has the meaning set forth in Section 9.2(b).
 
"Transition Property" or "Transition Properties" has the meaning set forth in
Section 9.4(d).
 
“Trust Funds” has the meaning set forth in Section 5.1(p).
 
"Unadjusted Purchase Price" has the meaning set forth in Section 2.2(a).
 
"Underwritten Assumed Real Property Loan Balance" shall mean $917,619,593, as
such amount may be reduced by reductions resulting from (i) Discounted Payoffs,
(ii) Purchaser not assuming the Existing Real Property Loans related to any
Terminated Properties and (iii) any Deferred Properties for which a Closing has
not yet occurred.  The principal balances related to the applicable Existing
Real Property Loans set forth on Exhibit O-9 shall be used for purposes of any
reduction contemplated by clauses (ii) and (iii).
 
"Underwritten Interest NPV" means the net present value (using a 12% discount
rate) of the interest payments on all Assumed Real Property Loans (excluding the
CS-20 Loan, CS-27 Loan and GE Loans) for which a Closing has occurred, taken
together through a five year loan term, assuming an interest rate equal to the
Underwritten Rate, with such net present value being calculated at the time of
the Closing Date related to the underlying Property (and not giving effect to
any principal payments or reductions which may occur after such Closing
Date).  If the Actual Assumed Real Property Loan Balance at Closing (excluding
the CS-20 Loan, CS-27 Loan and GE Loans) is $439,956,936 (and there are no
Discounted Payoffs, Terminated Properties or Deferred Properties), the
Underwritten Interest NPV would be equal to $92,337,428.
 
"Underwritten Rate" has the meaning set forth in Exhibit O-2.
 
"Unexpired Leases" means those unexpired leases set forth in Section 4.1(n) of
the Disclosure Schedules.  For the avoidance of doubt, "Unexpired Leases" does
not include Resident Agreements or Management Agreements.
 
"Unitary Bankruptcy Case" has the meaning set forth in the recitals.
 
"Unitary Sunwest Enterprise" means Stayton.
 
“Unsatisfied Closing Condition” has the meaning set forth in Section 8.6(a).
 
"WARN Act" means the Workers Adjustment and Retraining Notification Act.
 
"Website Materials" has the meaning set forth in Section 2.1(i).
 
1.2 References to Exhibits, Articles and Sections; Incorporation of Exhibits
 
Each reference in this Agreement to Exhibits, Articles or Sections, unless
otherwise qualified, will be to the Exhibits attached to this Agreement or to
the Articles or Sections contained in this Agreement.  Each Exhibit referred to
in this Agreement is incorporated into this Agreement.
 

 
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1.3 Headings and Table of Contents
 
The inclusion of headings and a table of contents in this Agreement is for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
 
1.4 Gender, Number and Meaning
 
In this Agreement, unless the context otherwise requires, words importing the
singular include the plural and vice versa and words importing gender include
all genders.
 
1.5 Exhibits
 
The following are the Exhibits attached to this Agreement and forming part
hereof:
 

 
20

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Exhibit
Description
A-1
Legal Descriptions of Lands
A-2
Allocated Cash Equity Portion of the Purchase Price
B
List of Properties (Assisted Living, Independent Living, Skilled Nursing)
C
Form of Deed
D
Excluded Personal Property
E
Encumbrances on Personal Property
F
Form of Bill of Sale
G
Form of Assignment and Assumption Agreement
H
FIRPTA Affidavit
I-1
Description of Existing Real Property Loans
I-2
Description of Existing Personal Property Debt
J
Non-Terminable Operating Contracts
K
Stayton Provided Information
L
Bid Procedures
M-1
List of reports constituting the Title Report
M-2
Title Companies
M-3
Required Removal Exceptions
M-4
Required Affirmative Insurance
M-5
Required Title Consent Properties
M-6
Required Title Notice Properties
M-7
Required Title Option Properties
M-8
Missing Surveys
N
Utility Company Deposits
O-1
Modification Schedule
O-2
Underwritten Rate Calculation
O-3
Form Modification Documents
O-4
CS-20 Term Sheet
O-5
CS-27 Term Sheet
O-6
GE Term Sheet
O-7
Forward Curve
O-8
DSCR Test Modifications
O-9
Underwritten Assumed Real Property Loan Balance (allocated by the applicable
Existing Real Property Loan)
O-10
Permitted Discrepancies
P
Motor Vehicles
Q
Reorganization Plan
R
[Intentionally Deleted]
S
Form of Interim Operating Agreement
T
Blackstone Venture LLC Agreement
U
Resident Agreement Brokers
V
Facility Managers
W
Form of Ground Lease Estoppel

 

 
21

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ARTICLE 2
 
PURCHASE AND SALE
 
2.1 Purchase and Sale of the Property
 
Stayton, as the Unitary Sunwest Enterprise, and as authorized by the TIC Orders
to convey title held by the TIC Investors, agrees to sell to Purchaser, and
Purchaser agrees to purchase, upon the terms and conditions set forth in this
Agreement, all of Sellers’ right, title and interest in and to the Properties on
the Closing Date.  The terms "Property" or "Properties" shall include, without
limitation, the following:
 
(a) all those pieces or parcels of land set forth on Exhibit A-1 as being owned
or leased by Sellers, together with all rights, privileges, servitudes and
appurtenances thereunto belonging (the "Lands");
 
(b) all buildings and other improvements thereon (collectively, the
"Improvements");
 
(c) all easements, rights of way, development rights, riparian rights,
privileges, appurtenances and other rights pertaining thereto;
 
(d) all right, title and interest of Sellers in and to (i) any land lying in the
bed of any street, road or avenue opened or proposed, public or private, in
front of or adjoining such Property, (ii) any award made or to be made in lieu
thereof, (iii) any unpaid award for damage to such Property by reason of change
of grade of any street, and (iv) any strips, gaps and gores adjoining or
adjacent to such Land (the items described in clauses (a) through (d) of this
Section 2.1, collectively the "Real Property");
 
(e) all rights of Sellers under agreements for the use or occupancy of its
Property by a Person or Persons residing in the senior care facilities, or other
Persons residing at such Property, and all modifications and amendments thereto
and renewals or extensions thereof (including any agreements relating to any
notes, mortgages or other security granted to Sellers in connection with any
Concessions of Rent) (collectively, the "Resident Agreements");
 
(f) all rights of Sellers under the Ground Leases, Assumed Operating Contracts,
Assumed Unexpired Leases and Assumed Loan Documents;
 
(g) all right, title and interest of Sellers in and to fixtures, machinery,
furniture, equipment, articles of personal property and improvements in the
nature of personal property attached or appurtenant to, or located on, or used
in connection with the use or operation of, or used or adapted for use in
connection with the enjoyment or occupancy of, the Lands or the Improvements,
including, without limitation, all FF&E, Inventories, Motor Vehicles, and Plans
and Drawings;
 
(h) all guarantees, warranties, and similar agreements from contractors,
subcontractors, manufacturers, distributors, vendors or suppliers relating to
the Properties;
 

 
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(i) the (i) business names and trade names (the "Business Names") of or used at
the Properties provided however that, except as otherwise specifically provided
in Section 9.10, such business or trade names shall not include the names
Sunwest or Sunwest Management, Inc. or any related or similar names which may be
used at the Properties (the "Excluded Business Names"), (ii) Internet domain
names and websites used by the Properties, including all databases, source code,
servers (but not main servers), software (to the extent licenses for such
software are assignable or assumable) used in conjunction with any website or
server, all up-to-date and archived data, and any files used in conjunction with
any website or server used by the Properties (the "Website Materials"), (iii)
the telephone and telecopy number(s) for the Properties and (iv) all
Property-specific marketing materials, advertising and promotional materials,
including customer lists, brochures, and post office boxes used in connection
with the operation and marketing of the Properties and all Property-specific
online marketing and advertising assets or operations of any sort, including
search engine optimization, advertising purchases and any other online
advertising accounts or agreements, (the "Promotional Materials").  Without
limiting the generality of the foregoing, Stayton shall furnish to Purchaser at
Closing, all source materials related to the Website Materials and Promotional
Materials, including photographs, negatives, advertising copy and a list of
photographers, printers, designers, web designers, programmers and other vendors
who produced such Promotional Materials and Website Materials, if in Stayton's
custody or control;
 
(j) all Licenses (to the extent assignable by law) and CLIA Numbers related to
the Properties;
 
(k) all Records related to the Properties; and
 
(l) all other property, real or personal, tangible or intangible, related to the
facilities listed on Exhibit B that is not Excluded Personal Property.
 
The items described in clauses (e) through (l) of this Section 2.1,
collectively, the "Personal Property"); provided, however, that the Personal
Property shall not include any of the articles of personal property included on
Exhibit D (the "Excluded Personal Property").
 
Notwithstanding anything contained herein to the contrary, Purchaser is not
assuming and shall have no liability for any debt, obligation, lease, contract
or any liability of Sellers or their subsidiaries, affiliates, or owners, of any
kind or nature whatsoever, absolute or contingent, known or unknown, whether
such liability or obligations arose prior to or after the Closing (including,
without limitation, the Tort Liabilities, all Stayton Benefit Plans,
Reimbursement Obligations, Tax Liabilities and any liabilities or obligations
under the Management Agreements and any Operating Contracts and Unexpired Leases
which Purchaser is not expressly assuming under this Agreement) other than the
Assumed Liabilities (collectively, the "Excluded Obligations"), and Sellers
shall remain responsible for all such Excluded Obligations.
 
2.2 Purchase Price
 
(a) The aggregate unadjusted purchase price for the Properties (the "Unadjusted
Purchase Price") shall consist of: (a) $235,000,000 (the "Cash/Equity Portion of
Purchase Price"); plus (b) assumption by Purchaser of the Assumed Real Property
Loans and
 

 
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the Assumed Personal Property Debt, which amount is subject to adjustment in
accordance with Sections 2.5, 7.1(i), 8.5, 8.6, 9.3, 11.1, 11.2, 13.2 or as
otherwise provided for in this Agreement (the Unadjusted Purchase Price as so
adjusted, the "Purchase Price").
 
(b) The Cash/Equity Portion of the Purchase Price shall consist of (i)
membership interests in Blackstone Venture in an amount equal to the Rollover
Equity Amount, if applicable pursuant to Section 2.6 and (ii) cash in an amount
equal to the Cash/Equity Portion of the Purchase Price less the Rollover Equity
Amount (the "Cash Consideration Amount")
 
2.3 Allocation of Purchase Price
 
Following the Closing, each of Purchaser and Stayton shall timely file or cause
to be filed Internal Revenue Service Forms 8594, and all federal, state, local
and foreign Tax Returns allocating the Purchase Price among the Properties in
accordance with Section 1060 of the Internal Revenue Code and the regulations
thereunder.  Each of Purchaser and Stayton shall promptly provide to the other
any other information required to complete Form 8594.
 
2.4 Purchaser's Deposit in Escrow
 
No later than three (3) Business Days following the date of this Agreement,
Purchaser shall (i) deposit with the Escrow Agent the sum of $50,000,000 in cash
in an account located in Portland, Oregon, or (ii) lodge with the Escrow Agent
an irrevocable, unconditional letter of credit in the principal amount of
$50,000,000, in form and substance acceptable to the CRO and the Receiver,
issued by an affiliate of Citibank N.A., naming Stayton as beneficiary of such
letter of credit, which letter of credit may be drawn upon presentation of a
sight draft via facsimile, in accordance with its terms (any such cash deposit
or the proceeds of the drawing of any letter of credit, in each case, together
with any interest accrued thereon, shall be referred to herein as the
"Deposit").  Any amounts drawn under such letter of credit shall be deposited
with the Escrow Agent into an account located in Portland, Oregon and disbursed
only in accordance with this Agreement.  The Escrow Agent shall hold the Deposit
as security for performance of Purchaser's obligations under this Agreement,
pursuant to the terms and conditions hereinafter set forth.  At each Closing, a
portion of the Deposit shall be applied to the Cash/Equity Portion of the
Purchase Price due in connection with such Closing in an amount which would
result in the remaining Deposit being equal to 5% of the Allocated Purchase
Price related to the remaining Deferred Properties after such Closing (or in the
event that the Deposit is in the form of a letter of credit, such letter of
credit shall be authorized to be reduced to such amount).  In the event
Purchaser fails to close the purchase and sale of the Property hereunder and all
of the conditions under Section 7.1 have been satisfied or waived in writing by
Purchaser, the balance of the Deposit, upon Order of the Court, shall be paid to
Stayton for the benefit of Sellers as Sellers' sole and exclusive remedy and as
liquidated damages in accordance with Section 13.1.  In the event that this
Agreement is terminated other than as a result of a default by Purchaser
pursuant to Section 13.1, the Deposit shall be returned to Purchaser.
 
2.5 Adjustment and Payment of Cash Consideration Amount
 
(a) Subject to Section 2.5(b), the Cash Consideration Amount shall be adjusted
as follows:
 

 
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(i) In the event that the Actual Assumed Real Property Loan Balance on the
applicable Closing Date (A) exceeds the Underwritten Assumed Real Property Loan
Balance, the Cash Consideration Amount shall be reduced by an amount equal to
such excess or (B) is less than the Underwritten Assumed Real Property Loan
Balance, the Cash Consideration Amount shall be increased by an amount equal to
such difference.  Any increase or reduction to the Cash Consideration Amount
pursuant to this Section 2.5(a)(i) shall be net of any prior increase or
reduction which occurred at any prior Closing Date as a result of this Section
2.5(a)(i).  For illustrative purposes, an example of the calculation of the
increase or reduction contemplated by this Section 2.5(a)(i) is attached hereto
as Exhibit O-2.
 
(ii) In the event that the Actual Interest NPV exceeds the Underwritten Interest
NPV by more than $2,300,000, the Cash Consideration Amount shall be reduced by
an amount equal to such excess.  Any reduction in the Cash Consideration Amount
pursuant to this Section 2.5(a)(ii) shall be net of any prior reduction which
occurred at any prior Closing Date as a result of this Section 2.5(a)(ii).  For
illustrative purposes, an example of the calculation of the reduction
contemplated by this Section 2.5(a)(ii) is attached hereto as Exhibit O-2.
 
(iii) The Cash Consideration Amount shall be increased or decreased by the
aggregate credits or debits to Purchaser in accordance with the proration and
Purchase Price adjustment provisions of this Agreement contained in Sections
8.5, 9.3, 11.1, 11.2 and 13.2.
 
(b) Notwithstanding any other provision of this Agreement to the contrary, in
the event that the net aggregate adjustment to the Cash Consideration Amount
pursuant to Sections 2.5(a)(i) and 2.5(a)(ii) (collectively, the “Loan
Adjustment”) would exceed an amount equal to the sum of (x) $33,367,000 and (y)
the Capitalized Stayton Expenses (the "Maximum Loan Adjustment"), then, Stayton
shall have the right upon written notice to Purchaser, to elect to terminate
this Agreement (a “MLA Termination”).  Purchaser may, within three Business Days
of receipt of a notice of a MLA Termination, void such termination by agreeing
to accept a Loan Adjustment equal to the Maximum Loan Adjustment and proceeding
to Closing in accordance with this Agreement.  If Purchaser does not void the
MLA Termination, this Agreement shall terminate, in which case Purchaser shall
be entitled to receive (i) a return of the Deposit and (ii) $3,000,000 from
Stayton in immediately available funds, in which case, neither Stayton nor
Purchaser shall have any further rights or obligations hereunder except as
otherwise expressly provided herein.  In the event that Stayton terminates this
Agreement pursuant to this Section 2.5(b) and within one year of such
termination enters into any contract or agreement to sell or transfer all or
substantially all of the Properties (directly or indirectly, through a sale of
the Properties or the sale or transfer of equity interests in any entity or
entities which directly or indirectly owns all or substantially all of the
Properties) to an entity that is not owned 50% or more by creditors or investors
of Stayton, then Stayton shall promptly pay to Purchaser the Break-Up Fee.
 
(c) The Cash Consideration Amount shall be payable to Stayton as follows:
 
(i)           on the Initial Closing Date for the sale of the Initial Closing
Properties, Purchaser shall pay to Stayton an amount equal to (x) the Allocated
Cash/Equity Portion of the Purchase Price related to the Initial Closing
Properties less (y) the Rollover Equity
 

 
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Amount, after taking into account the adjustments and amounts enumerated in
Sections 2.4 and 2.5(a) above;
 
(ii)           on each subsequent Deferred Closing Date, Purchaser shall pay to
Stayton in cash an amount equal to the Allocated Cash/Equity Portion of the
Purchase Price related to the applicable Deferred Property that is the subject
of such Deferred Closing, after taking into account the adjustments and amounts
enumerated in Sections 2.4 and 2.5(a) above; and
 
The Cash Consideration Amount (and any portion thereof) shall be paid by the
Purchaser by wire transfer of immediately available funds to such account or
accounts designated by Stayton or otherwise as agreed to by Stayton and
Purchaser.
 
2.6 Rollover Equity
 
(a) Stayton shall have the right to elect to receive a portion of the
Cash/Equity Portion of the Purchase Price in the form of an issuance to the
Rollover Member of a membership interest in Purchaser or an affiliate of
Purchaser designated by Purchaser, which indirectly, acquires title to the
Properties.  Stayton must exercise such election (the "Rollover Equity
Election") by delivering to Purchaser a written notice stating the value of the
interests in Purchaser which it has elected to receive (the "Rollover Equity
Amount") no later than 10 days following the date that the Court approves the
Reorganization Plan.  Except as expressly provided in Section 2.6(c) below, the
Rollover Equity Amount shall not exceed $25,000,000 or be less than $10,000,000.
 
(b) In the event that a Rollover Equity Election has been made, on the Initial
Closing Date:
 
(i) Purchaser shall deliver to the Rollover Member, and the Rollover Member
shall acquire and accept from Purchaser the Rollover Equity Interest (as defined
in the Blackstone Venture LLC Agreement) free and clear of any and all
Encumbrances (other than those created pursuant to the terms of the Blackstone
Venture LLC Agreement);
 
(ii) Blackstone Venture Member, Emeritus, Columbia Pacific and Rollover Member
shall execute and deliver the Amended and Restated Limited Liability Company
Agreement of Purchaser in substantially the form attached hereto as Exhibit T
(the "Blackstone Venture LLC Agreement"); and
 
(iii) Rollover Member shall be admitted as the Investor (as defined in the
Blackstone Venture LLC Agreement); and
 
(iv) The Rollover Member's Company Percentage (as defined in the Blackstone
Venture LLC Agreement) in Purchaser (the "Rollover Pro-Rata Share") shall be
calculated by dividing (x) the Rollover Equity Amount by (y) the total capital
contributed by all members in the Blackstone Venture pursuant to Section 3.1 of
the Blackstone Venture LLC Agreement (other than on account of BREA/ESC Excluded
Costs (as defined in the Blackstone Venture LLC Agreement)) plus the Rollover
Equity Amount.
 

 
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(c) Purchaser may elect in its sole discretion to be funded with additional
capital (the "Incremental Capital") in order to acquire any of the Existing Real
Property Loans at a discount on or about the Closing (each a "Discounted
Payoff"); provided that the Incremental Capital shall not exceed
$75,000,000.  In the event that Incremental Capital is required, Rollover Member
may elect, by written notice delivered to Purchaser no later than ten (10)
Business Days prior to the Closing to increase the Rollover Equity Amount by an
amount equal to the Rollover Pro-Rata Share of the Incremental Capital.  For
example, if the Purchaser is initially intended to be funded at Closing with
$280,000,000 (including a Rollover Equity Amount of $25,000,000), the Rollover
Pro-Rata Share would be 8.93%.  If Incremental Capital of $75,000,000 is to be
funded to the Purchaser and Rollover Member wishes to avoid a reduction in the
Rollover Pro-Rata Share by increasing the Rollover Amount by an amount equal to
$6,697,500 (i.e. $75,000,000 x 8.93%), the Cash Consideration Amount would be
reduced by the same amount.  In the event that Rollover Member does not elect to
fund the Rollover Pro-Rata Share of any Incremental Capital, the Rollover
Pro-Rata Share shall be reduced accordingly.
 
2.7 Title
 
At the Closing, Stayton shall convey to Purchaser all of Sellers' right, title
and interest in and to the Property, free and clear of all Encumbrances,
excepting, however, only the Assumed Mortgages, Resident Agreements, the Assumed
Unexpired Leases, the Assumed Operating Contracts and those matters defined as
Permitted Exceptions.
 
ARTICLE 3
 
PURCHASER'S INVESTIGATION AND DUE DILIGENCE
 
3.1 Title Reports and Surveys
 
(a) Prior to the date of this Agreement, Stayton has obtained from the Title
Company and provided copies to Purchaser, the Title Company's commitment to
insure fee title, or a leasehold interest, as reflected by Exhibit M-1, (the
commitments in the form provided as of the date hereof, collectively, "Title
Report") to each Property, together with copies of all documents listed as
exceptions to title in such Title Report.  A list of the separate reports
comprising the Title Report, including the report numbers and effective dates
thereof, is attached as Exhibit M-1.
 
(b) Except for the Properties set forth in Exhibit M-8 (the "Missing Survey
Properties"), true, correct and complete "as-built" ALTA surveys of the
Properties within the control or possession of Stayton have been made available
to Purchaser for inspection.  New "as-built" ALTA surveys for the Missing Survey
Properties shall be ordered by Purchaser at Purchaser's expense within five (5)
Business days following the date of this Agreement (the "New
Surveys").  Purchaser shall forthwith provide to Stayton upon receipt copies of
New Surveys.
 
3.2 Status of Purchaser's Due Diligence
 
As of the date of this Agreement, Purchaser has completed its due diligence and
investigation of the Properties and the business and operations of Sunwest and
Stayton; provided,
 

 
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however, nothing herein shall be construed as relieving Stayton from its
obligations to provide the information and access to Purchaser and Purchaser's
Manager as contemplated by the terms of this Agreement.
 
3.3 Disclosure Schedule
 
Stayton has delivered to Purchaser the Disclosure Schedule containing, in
addition to other information concerning the Properties:
 
(a) a list and copies of all Unexpired Leases and Ground Leases;
 
(b) a list of material pending litigation Known to Stayton concerning Stayton,
Sunwest or its Affiliates (if such litigation of Stayton, Sunwest or its
Affiliates is related to any Property), provided that such list does not include
references to litigation consisting of the SEC Enforcement Action or adversary
proceedings pending in the Unitary Bankruptcy Case;
 
(c) a list and copies of insurance certificates relating to the insurance in
force for each Property described in such insurance certificates;
 
(d) a list of (i) all Facility Employees and (ii) Corporate Employees, as more
particularly described in Section 4.1(aa);
 
(e) descriptions of all presently existing policies or practices of Stayton
pertaining to collection of Entrance Fees or the granting of Concessions of
Rent, together with Stayton's good faith estimate of the aggregate financial
amount of such Entrance Fees and Concessions of Rent; and
 
(f) schedules relating to the representations and warranties of Stayton set
forth in Section 4.1.
 
ARTICLE 4
 
REPRESENTATIONS AND WARRANTIES
 
4.1 Representations and Warranties of Stayton
 
To induce Purchaser to enter into this Agreement, Stayton hereby represents and
warrants to Purchaser, which representations and warranties shall be true as of
the date hereof and as of the Closing Date, that:
 
(a) Stayton is the Sunwest Unitary Enterprise into which all of the assets and
liabilities of the Sunwest Enterprise have been consolidated in the Unitary
Bankruptcy Case pursuant to the Approval Order of the Court.
 
(b) In its complaint in the SEC Enforcement Action, the SEC alleged, among other
matters, that Sunwest and others committed violations of securities laws in the
offering of interests in the Sunwest Enterprise and operated the Sunwest
Enterprise as a unitary enterprise virtually as a "Ponzi" scheme.
 

 
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(c) In its October 2, 2009 Findings of Fact and Conclusions of Law, the Court
found, among other matters, that: (i) the Sunwest Enterprise was managed as a
unitary enterprise that generally did not respect the separateness of the
Receivership Entities nor the restricted purposes of invested funds that were
intended to be limited to use for specific facilities; (ii) there existed
substantial evidence of the Sunwest Enterprise procuring and using funds in a
commingled manner without the knowledge or consent of investors and creditors,
and in a manner inconsistent with the representations to investors and
creditors; (iii) such commingling, coupled with the inability to trace funds,
the evidence of recordation of descriptions that were inconsistent, changed
after the fact, and/or inaccurate, and evidence that the Sunwest Enterprise
decided how and where to use funds on a "who-needs-the cash now" basis warranted
the finding of the existence of a unitary enterprise.
 
(d) The Receiver and the CRO were appointed by the Court on March 10, 2009.  The
Receiver and the CRO were not engaged in the management or control of the
Sunwest Enterprise prior to March 10, 2009 and November 26, 2008,
respectively.  The Receiver and the CRO have not engaged in a comprehensive
review of the allegations of the SEC in the SEC Enforcement Action and have not
conducted an independent review of the historical financial or operational
condition or results of operations of the Sunwest Enterprise or any of its
components.  The representations and warranties of Stayton contained in this
Agreement are based upon information and belief and to the Knowledge of Stayton
as defined herein.
 
(e) Stayton has, or on the Effective Date will have, all necessary authority to
enter into this Agreement and consummate the transactions contemplated hereby,
and has, or on the Effective Date will have, obtained the necessary approvals
required to sell and convey the Properties on the terms and conditions
contemplated by this Agreement and to enter into, execute and deliver this
Agreement and the other Transaction Documents.
 
(f) Stayton has taken, or on the Effective Date will have taken, all necessary
actions to authorize the execution and delivery of this Agreement and the other
Transaction Documents, and the Receiver and the CRO are authorized to execute
and deliver this Agreement and the other Transaction Documents and are or will
be on the Effective Date authorized to take all actions pursuant to this
Agreement and the other Transaction Documents on behalf of Stayton and to
receive all amounts payable to Sellers pursuant to this Agreement.  Upon entry
of the Auction Order, this Agreement will have been duly authorized, executed
and delivered and constitute a legal, valid and binding obligation of Stayton,
enforceable against Stayton in accordance with its terms, and the other
Transaction Documents when executed and delivered by Stayton will constitute the
legal, valid and binding obligations of Stayton, enforceable in accordance with
their respective terms.
 
(g) Except as set forth on Section 4.1(g) of the Disclosure Schedule and except
for certain licensing approvals or filings which may have been required as a
result of the Unitary Bankruptcy Case, Stayton has obtained, or on the Effective
Date will have obtained, all consents and approvals on its part, and has made,
or will on the Effective Date have made, all required notices and filings with
applicable Governmental Entities, required on its part for Stayton's operation
of each of the Properties that Stayton owns, as described in this Agreement, and
all such consents and approvals are, or will be on the Closing Date, in full
force and effect.
 

 
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(h) INTENTIONALLY DELETED.
 
(i) To Stayton's Knowledge, no consent for the purchase and sale of the Property
from, or notice to, any Governmental Entity or any other Person, is required to
permit Stayton to execute, deliver and perform this Agreement and the other
Transaction Documents, other than under the HSR Act, consent of the Court, and
those consents of the applicable Governmental Entity having jurisdiction, if
Purchaser desires to operate the existing business in the same manner as Stayton
conducts at each Property as of the date of this Agreement.
 
(j) To Stayton's Knowledge, this Agreement does not, or on the Closing Date will
not, conflict with or breach any material agreement to which Stayton is a party
(including, without limitation, the Resident Agreements and the Operating
Agreements).  Other than as disclosed in Section 4.1(j) of the Disclosure
Schedule, to Stayton's Knowledge there is no litigation or administrative or
governmental proceeding pending or threatened against it or relating to the
Property which would prevent the operation of the business that is currently
conducted thereon or which could adversely affect the consummation of the
transactions contemplated hereby or Purchaser's purchase, ownership, operation
of and construction on the Property.
 
(k) The rent rolls/census reports covering the Resident Agreements (the "Rent
Rolls") and the schedule of Security Deposits and prepaid rents related to any
residents at the Properties (the "Security Deposit/Prepaid Rent Schedule"),
which have heretofore been made available to Purchaser were, to Stayton's
Knowledge, true, correct and complete in all material respects as of the date of
such Rent Rolls and Security Deposit/Prepaid Rent Schedule.
 
(l) To Stayton's Knowledge, there are no agreements, oral or written, in the
nature of leases, licenses, permits, franchises, concessions, dedications or
occupancy agreements affecting the Properties or the use of the Properties (but
not including the Excluded Personal Property) other than the Resident
Agreements, the Assumed Unexpired Leases and the Assumed Operating Contracts
that will be assigned to, and assumed by, Purchaser, true and complete copies of
which were included with the copies of such documents heretofore made available
to Purchaser, and there are no modifications, extensions, renewals or options
thereto.
 
(m) Section 4.1(m) of the Disclosure Schedule provides a true, correct and
complete list of all agreements Known to Stayton comprising the Operating
Contracts.  True, correct and complete copies of all Operating Contracts have
been made available to Purchaser for inspection, including all amendments and
modifications thereto.  True, correct and complete copies of the forms of
Resident Agreements used by Stayton have been made available to Purchaser and,
to Stayton's Knowledge, Stayton is not party to any Resident Agreements that
deviate in any material respect from such forms.  To Stayton's Knowledge, except
for Bankruptcy-Related Defaults, Stayton has not received written notices from
any party thereto that Stayton has materially defaulted in performing any of its
material obligations under the Operating Contracts.
 
(n) Section 4.1(n) of the Disclosure Schedule provides a true, correct and
complete list of all agreements Known to Stayton comprising the Unexpired
Leases.  True, correct and complete copies of all Unexpired Leases have been
made available to Purchaser for
 

 
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inspection.  To Stayton's Knowledge, except as set forth in Section 4.1(n) of
the Disclosure Schedule, (i) the Unexpired Leases are in full force and effect
as of the date hereof, (ii) except for Bankruptcy-Related Defaults, Stayton has
not received Knowledge that Stayton has defaulted in performing any of its
obligations under the Unexpired Leases, and (iii) there are no other agreements
which provide tenants the rights to use or occupy the Properties (whether by
lease, license or otherwise) except for the Unexpired Leases and the Resident
Agreements.
 
(o) Each of the Resident Agreements is assignable to Purchaser without payment
of any amount and without the necessity of consent by the resident thereunder or
any third party.  As of the Closing Date, the Resident Agreements, the Security
Deposits held thereunder and the rents or other charges or amounts payable
thereunder will not be assigned, pledged, hypothecated or otherwise encumbered
by Stayton except with respect to the Assumed Liabilities.
 
(p) Except as set forth on Exhibit U, no brokerage or leasing commissions or
other compensation is currently or will be due or payable to any Person on
account of any of the Resident Agreements or the consummation of the transaction
described in this Agreement.
 
(q) As of the date of this Agreement, Stayton has the insurance for each
Property described on the insurance certificates attached to Section 4.1(q) of
the Disclosure Schedule and such insurance is in full force and effect.  There
is now, and until Closing there will remain, in full force and effect with
reputable insurance companies, property insurance (including windstorm and
flood) and commercial general and professional liability insurance in such
amounts and with such deductibles as are set forth in Section 4.1(q) of the
Disclosure Schedule.  To Stayton's Knowledge, Stayton has not received any
written notice from any insurance carrier of defects or inadequacies in the
Properties which, if not corrected, would result in termination of the insurance
coverage or a material increase in the premiums charged therefor.  Any captive
insurance provider of the insurance set forth in Section 4.1(q) of the
Disclosure Schedule has and shall maintain adequate loss reserves under
applicable regulatory standards to provide the coverage under its captive
insurance policies to Stayton.
 
(r) Stayton is not a "foreign person" as defined in the Foreign Investment Real
Property Tax Act, Section 1445 of the Internal Revenue Code, and will deliver at
Closing an affidavit as to such fact.
 
(s) To Stayton's Knowledge, except as set forth in Section 4.1(s) of the
Disclosure Schedule, Stayton has not failed or refused to provide to Purchaser
and Purchaser's representatives and consultants such information, records,
documents and other materials within Stayton’s control or possession concerning
or affecting the Property and/or the operation or maintenance thereof and/or the
physical condition, environmental condition, authorization to conduct business
and other economic status of the Property (collectively, "Due Diligence
Material") which has been requested.
 
(t) Stayton is not acting, directly or indirectly for, or on behalf of, any
Person or Governmental Entity named by any Executive Order (including the
September 24, 2001, Executive Order Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism)
or the United States Treasury Department as a
 

 
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terrorist, "Specially Designated National and Blocked Person," or other banned
or blocked Person or Governmental Entity pursuant to any Law that is enforced or
administered by the Office of Foreign Assets Control, and is not engaging in the
transactions contemplated by this Agreement, directly or indirectly, on behalf
of, or instigating or facilitating the transactions contemplated by this
Agreement, directly or indirectly, on behalf of, any such Person or Governmental
Entity; provided that this Section 4.1(t) shall not constitute a representation
with respect to any individual who, prior to the Effective Date, directly or
indirectly owned an interest in any Property.
 
(u) Sellers are, or will be on the Closing Date, the sole owner or lessee of
Sellers' Real Property and Sellers' Personal Property, free and clear of all
Encumbrances (except for the Assumed Mortgages, Resident Agreements, Assumed
Unexpired Leases, Assumed Operating Contracts and those matters defined as
Permitted Exceptions and as set forth in Exhibit E), other than the Personal
Property which is leased by Sellers pursuant to one of the Assumed Operating
Contracts, true, correct and complete copies of which, including all amendments
thereto, have been made available to Purchaser.  The Real Property described in
Exhibit A-1 is all of the real property interests owned or leased by Sellers in
connection with the ownership and operation of the assisted living, skilled
nursing and independent living facilities listed in Exhibit B.  Exhibit B sets
forth the true and correct description of (i) the nature of Seller’s ownership
interest in the applicable Real Property (i.e. fee or leasehold interest), (ii)
the type of services provided at such facility (i.e. assisted living, skilled
nursing and/or independent living), (iii) the number of units at such facility,
(iv) the Sunwest Record Owner with respect to such Real Property; and (v) the
Sunwest Licenseholder which holds the Licenses related to the applicable
Property.
 
(v) Section 4.1(v) of the Disclosure Schedule provides a true, correct and
complete list of all agreements comprising the Ground Leases.  Stayton has
delivered to Purchaser a true, correct and complete copy of each such Ground
Lease, including all amendments and modifications thereto.  Except for the
Ground Leases, there are no other ground leases affecting any of the
Properties.  Except for Bankruptcy-Related Defaults, Stayton has not received
any written notice of default thereunder from the ground lessor party thereto
and Stayton has not delivered any written notice of default to the ground lessor
thereunder. To Stayton's Knowledge, no event has occurred or circumstances exist
which, with notice or the passage of time or both, would result in a breach or
default by the ground lessee or the other party thereunder, except for
Bankruptcy-Related Defaults.
 
(w) Except as set forth in Section 4.1(w) of the Disclosure Schedule, to
Stayton's Knowledge there is no material pending, or threatened (in writing)
litigation, proceeding or investigation (by any Person, Governmental Entity, or
otherwise) relating to the Properties, including, without limitation, litigation
brought by Stayton against third parties; provided that the Disclosure Schedule
does not include references to litigation consisting of the SEC Enforcement
Action or adversary proceedings or other actions pending in the Unitary
Bankruptcy Case. Section 4.1(w) of the Disclosure Schedule includes a list of
all material pending litigation Known to Stayton concerning Stayton, Sunwest or
its Affiliates (but only such litigation of Sunwest or its Affiliates that is
related to any Property), and unless indicated on Section 4.1(w) of the
Disclosure Schedule, Stayton’s liability with respect to such litigation is
covered by insurance, provided that such list does not include references to
litigation consisting
 

 
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of the SEC Enforcement Action or adversary proceedings pending in the Unitary
Bankruptcy Case.
 
(x) Stayton has made available to Purchaser true, correct and complete copies of
all phase I reports, other environmental reports, property condition evaluations
or similar reports or studies relating to the Properties Known to Stayton and in
Stayton's possession or control (the "Environmental Reports").  To Stayton's
Knowledge, Stayton has not received any written notice of any pending or
threatened action or proceeding arising out of the environmental condition of
the Properties, Hazardous Materials located on the Properties, or any alleged
violation of Law.
 
(y) Except as set forth in Section 4.1(y) of the Disclosure Schedule, to
Stayton's Knowledge, Stayton has not received written notice of any actual,
alleged or potential violation of or failure to comply with any Law or Licenses
of any type whatsoever affecting the Properties.
 
(z) Except as set forth in Section 4.1(z) of the Disclosure Schedule, to
Stayton's Knowledge, neither Stayton nor any of its Affiliates 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 Properties and no
such condemnation proceeding has been threatened in writing.
 
(aa) Section 4.1(aa) of the Disclosure Schedule sets forth a true, correct and
complete list of all Facility Employees, as of the date of this Agreement,
including base salary (or other wage or rate of pay), bonus opportunities (if
applicable), title, location, positions and terms of employment.  Stayton has
provided to Purchaser a true, correct and complete list of all Corporate
Employees, as of the date of this Agreement, including base salary (or other
wage or rate of pay), bonus opportunities (if applicable), title, location,
positions and terms of employment.  Purchaser shall have no liability in respect
of any compensation or benefits arrangements of Stayton and its Affiliates
attributable to any period before Closing as a result of the transactions
contemplated by this Agreement, including in respect of any Stayton Benefit
Plans.  Except as set forth in Section 4.1(aa) of the Disclosure Schedule, to
Stayton's Knowledge, during the three (3) years preceding the date hereof,
neither Stayton nor any manager of the Properties has experienced any material
labor disputes or labor trouble.  Stayton is not a party to any employment
contract and no union is presently serving as collective bargaining agent for
any employees.  Except as set forth in Section 4.1(aa) of the Disclosure
Schedule, neither Stayton nor any manager of the Properties has entered into any
oral or written agreements which would bind or obligate Purchaser to engage the
services of any person as an employee or an independent contractor relating to
the Properties.  Except as set forth in Section 4.1(aa) of the Disclosure
Schedule, to Stayton's Knowledge, no union presently is conducting, and neither
Stayton nor any manager of the Properties has received written notice that any
union is planning to conduct, an organizational campaign for any employees at
the Properties.  To Stayton's Knowledge, neither Stayton nor any manager of the
Properties has received written notice of any attempts within the past three (3)
years by any employees to initiate any collective bargaining agreements with
respect to the Properties.  To Stayton's Knowledge, there has been no event
within the past three (3) years that has caused or required Stayton or a manager
of the Properties to issue a notice under the WARN Act or any similar law with
respect to the employees.
 

 
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(bb) (i) Section 4.1(bb) of the Disclosure Schedule identifies which Properties
are Known to Stayton to be certified for participation in Medicare, Medicaid or
other third party payor programs (the "Government Programs") for the provision
of skilled nursing, assisted living and other related healthcare and support
services.  True and complete copies of all such provider agreements have been
made available to Purchaser.  Section 4.1(bb)  of the Disclosure Schedule sets
forth Stayton's good faith estimate of liabilities to any third party fiscal
intermediary or carrier administering the Government Programs, directly to the
Government Programs or any Governmental Entity, or to any other third party
payor for the recoupment of any amounts previously paid to Stayton by any such
third party fiscal intermediary, carrier, Government Program or other third
party payor.  To Stayton's Knowledge, there are no pending or threatened actions
by any third party fiscal intermediary or carrier administering the Government
Programs or any Governmental Entity, by the Department of Health and Human
Services, any state Medicaid agency or any third party payor, to suspend
payments to Stayton.
 
(ii) Except as set forth in Section 4.1(bb) of the Disclosure Schedule, Stayton,
and to Stayton's Knowledge, no other Person (i) who has a direct or indirect
ownership interest (as those terms are defined in 42 C.F.R. Section
1001.1001(a)(2)) in Stayton, or (ii) who has an ownership or control interest
(as defined in 42 C.F.R. Section 420.201) in Stayton, or (iii) who is an
officer, director, manager, agent (as defined in 42 C.F.R. Section
1001.1001(a)(2)) or managing employee (as defined in 42 C.F.R. Section 420.201)
of Stayton, or (iv) who has an indirect ownership interest (as that term is
defined in 42 C.F.R. Section 1001.1001(a)(2)) in Stayton, has engaged in any
activities which are prohibited, or are cause for civil penalties or mandatory
or permissive exclusion from Medicare, Medicaid, or any other State Health Care
Program or Federal Health Care Program (as those terms are defined in 42 C.F.R.
Section 1001.2) under 42 U.S.C. Sections 1320a-7, 1320a-7a, 1320a-7b, or 1395nn,
or the regulations promulgated pursuant to such statutes, or related state or
local/municipal statutes or which are prohibited by any private accrediting
organization from which Stayton seeks accreditation or by generally recognized
standards of care or conduct, including not having engaged in or experienced any
of the following: (i) a civil monetary penalty assessed against it under 42
U.S.C. Section 1320a-7a;  (ii) been excluded from participation under Medicare,
Medicaid or any other State Health Care Program or Federal Health Care Program
under 42 U.S.C. Sections 1320a-7 or 1320a-7a; (iii) been convicted (as that term
is defined in 42 C.F.R. Section 1001.2) of any of the offenses described in 42
U.S.C. Sections 1320a-7(a) and (b)(1), (2), (3) that could lead to a mandatory
or permissive exclusion from any State Health Care Program or Federal Health
Care Programs; or (iv) been suspended, debarred, or excluded from any federal
program under 45 C.F.R. Part 76.
 
(cc) Stayton has furnished to Purchaser true, correct and complete copies of the
unaudited internal materials more particularly described in Exhibit K ("Stayton
Provided Information").  The Stayton Provided Information is (i) the unaudited
internal information used by CRO in connection with the operation of the
Properties and (ii) is not Known to Stayton to be materially misleading, taken
together as a whole.  To Stayton's Knowledge, nothing has come to the attention
of the CRO to suggest that the information with respect to the Properties which
has been made available to the Purchaser omits any material information which
the CRO reasonably expects to materially impair the use or value of the
Properties, taken as a whole.
 

 
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(dd) Section 4.1(dd) of the Disclosure Schedule is a true, correct and complete
list of all (i) debt affecting the Real Property or Personal Property,
indicating the lender, borrower and outstanding principal balance as of the date
hereof and (ii) all Existing Loan Documents.  Stayton has provided Purchaser
with true, correct and complete copies of all Existing Loan Documents in
Stayton's control or possession.
 
(ee) Exhibit J is a true, correct and complete list of all Operating Contracts
Known to Stayton which are not terminable on 60 days' notice (collectively, the
"Non-Terminable Operating Contracts") and indicates the expiration date of such
Non-Terminable Operating Contracts and whether the third party has renewal or
extension rights (and the length of such renewals/extensions).  Stayton has made
available to Purchaser true, correct and complete copies of all such
Non-Terminable Operating Contracts, including all amendments and modifications
thereto.
 
(ff) Section 4.1(m) of the Disclosure Schedule includes a true, correct and
complete list of all Operating Contracts Known to Stayton which require the
payment of a termination fee pursuant to their terms.  Stayton has made
available to Purchaser true, correct and complete copies of all Operating
Contracts listed in Section 4.1(m) of the Disclosure Schedule, including all
amendments and modifications thereto.
 
(gg) Section 4.1(gg) of the Disclosure Schedule sets forth a true, correct and
complete list of all Entrance Fees which are to be assumed by Purchaser, and all
such Entrance Fees were collected pursuant to Buy-In Agreements entered into in
the ordinary course of business.
 
(hh) Section 4.1(hh) of the Disclosure Schedule sets forth a true, correct and
complete list of all Concessions of Rent which are to be assumed by Purchaser
and all such Concessions of Rent were granted in the ordinary course of business
or assumed by Stayton in connection with acquisitions.
 
(ii) To Stayton’s Knowledge, there are no CHOW Liabilities with respect to the
Properties which have not been satisfied or fulfilled, except for those matters
more particularly set forth on Section 4.1(ii) of the Disclosure Schedule which
are in the process of being satisfied or fulfilled.
 
All references to the “Stayton” in the representations in clauses (a) through
(hh) above (other than the defined term “Known to Stayton” or “Stayton’s
Knowledge”) shall be deemed to refer to Stayton and each Sunwest Record Owner,
Sunwest Licenseholder and Sunwest Manager.
 
4.2 Representations and Warranties of Purchaser
 
To induce Stayton to enter into this Agreement, Purchaser hereby represents and
warrants to Stayton as follows:
 
(a) Purchaser is a limited liability company organized and existing under the
laws of the state of Delaware.
 

 
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(b) Purchaser is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has the full power and authority to
purchase the Property on the terms and conditions contemplated by this Agreement
and to enter into, execute and deliver this Agreement and all other Transaction
Documents.
 
(c) The sole members of Purchaser are BRE/SW Member LLC, Emeritus and Columbia
Pacific.
 
(d) Purchaser meets, and will at the Closing meet, all of the qualifications of
a Qualified Bidder contained in Section 1(a) of the Bid Procedures.
 
(e) Purchaser has taken all necessary actions to authorize the execution and
delivery of this Agreement and of all other Transaction Documents.  This
Agreement constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, and the Transaction
Documents, when executed and delivered by Purchaser, shall constitute the legal,
valid and binding obligations of Purchaser, enforceable in accordance with their
respective terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors generally
and to the exercise of judicial discretion in accordance with general principles
of equity, whether applied by a court of law or equity.
 
(f) No material consent for the purchase of the Property from, or notice to, any
Governmental Entity or any other Person, is required to permit Purchaser to
execute and deliver this Agreement and the other Transaction Documents, other
than under the HSR Act, consent of the Court and those consents of the
applicable Governmental Entity having jurisdiction if Purchaser or Purchaser's
Manager desires to operate the existing business in the same manner as Stayton
conducts at each Property as of the date of this Agreement.
 
(g) Purchaser has, or has access to, sufficient financial and other resources
and funds to purchase the Properties pursuant to the terms contained in this
Agreement.  In no event shall the receipt or availability of any funds or
financing by Purchaser be a condition to any of Purchaser's obligations
hereunder.
 
(h) Purchaser has sufficient relationships, or as of the Closing Date will have
sufficient relationships, with third party managers or operators of senior
living facilities similar to the Properties to apply for applicable Licenses in
each of the states in which the Properties are located and Purchaser will cause
such third party managers or operators to diligently pursue such applications in
good faith.
 
(i) Neither Purchaser nor any member of Purchaser is the subject of any pending
or contemplated bankruptcy proceeding, reorganization or insolvency proceeding.
 
(j) The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not violate, or constitute a breach of, or
a default under, Purchaser's organizational documents or any other constituting
documents or any agreement, document or instrument to which Purchaser is a party
or by which it is or may be bound; and such execution, delivery and consummation
does not violate any applicable Law or Order.
 

 
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(k) Purchaser is not acting, directly or indirectly for, or on behalf of, any
Person or Governmental Entity named by any Executive Order (including the
September 24, 2001, Executive Order Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism)
or the United States Treasury Department as a terrorist, "Specially Designated
National and Blocked Person," or other banned or blocked Person or Governmental
Entity pursuant to any Law that is enforced or administered by the Office of
Foreign Assets Control, and is not engaging in the transactions contemplated by
this Agreement, directly or indirectly, on behalf of, or instigating or
facilitating the transactions contemplated by this Agreement, directly or
indirectly, on behalf of, any such Person or Governmental Entity.
 
4.3 Disclaimer of Additional Representations or Warranties
 
(a) Except as expressly set forth in this Agreement or the other Transaction
Documents, it is understood and agreed that the Properties are being sold and
conveyed hereunder "as is" with any and all faults and latent and patent
defects, without any express or implied representation or warranty by Stayton,
the CRO or the Receiver.  Except as expressly set forth herein or in any other
Transaction Document, none of Stayton, the CRO or the Receiver has made, and do
not hereby make, and hereby expressly disclaim (except as expressly set forth
herein or in any other Transaction Document), any representations or warranties
of any kind or character whatsoever, express or implied, with respect to any
Property, its condition (including without limitation any representation or
warranty regarding quality of construction, state of repair, workmanship,
merchantability, suitability or fitness for any particular purpose), its
compliance with environmental laws or other laws, the presence within, on or
beneath the Property (or any parcel in proximity thereto) of hazardous
substances, materials, chemicals or wastes that are categorized as hazardous,
toxic, or otherwise harmful to human health or the environment under any local,
state or federal law, statute, ordinance, rule or regulation, whether any of the
properties is within an area that has been identified as an area having special
flood hazards under the Federal Flood Disaster Protection Act, as amended, or
otherwise, availability of access, ingress or egress, income to be derived
therefrom or expenses to be incurred with respect thereto, the obligations,
responsibilities or liabilities of the owner thereof, or any other matter or
thing relating to or affecting the Properties and Stayton hereby disclaims and
renounces any other representation or warranty.  Purchaser acknowledges and
agrees that Purchaser is entering into this Agreement without relying (except as
expressly set forth in this Agreement and in the other Transaction Documents)
upon any such representation, warranty, statement or other assertion, oral or
written, made by Stayton, the CRO or the Receiver, or any representative of
Stayton or any other Person acting or purporting to act for or on behalf of
Stayton, the CRO or the Receiver with respect to the Properties but rather is
relying upon its own examination and inspection of the Properties.  Purchaser
represents that it is a knowledgeable purchaser of real estate and senior living
facilities and that, except as provided in this Agreement and in the other
Transaction Documents, it is relying solely on its own investigation and
expertise and that of its consultants in purchasing the Properties.  The terms
and conditions of this Section shall expressly survive Closing, shall not merge
with the provisions of any Closing document and shall be incorporated into the
Transaction Documents to be delivered by Stayton at Closing.  Purchaser further
acknowledges and agrees that the provisions of this Section and the
representations and warranties made by Stayton in this Agreement and the
Transaction Documents were a material factor in the determination of the
Purchase Price for the Properties.
 

 
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(b) Purchaser acknowledges that Stayton has advised Purchaser of the possible
existence of asbestos containing material (as defined in 29 CFR § 1926.1101(b)
and/or other applicable laws, regulations or governmental requirements, "ACM")
and presumed asbestos containing material (as defined in 29 CFR § 1926.1101(b)
and/or other applicable laws, regulations or governmental requirements, "PACM")
in the improvements comprising a part of the Properties.  As used herein:  "ACM"
includes any material containing more than one percent asbestos; and "PACM"
includes, in buildings constructed no later than 1980, thermal system insulation
(such as insulation applied to pipes, fittings, boilers, breeching, tanks, ducts
or other structural components) and sprayed or troweled on, or otherwise
applied, surfacing material (such as asphalt and vinyl flooring material,
acoustical plaster on ceilings and fireproofing materials on structural
members). Except as set forth in this Agreement and in the other Transaction
Documents, none of Stayton, the CRO, the Receiver or Sunwest makes any warranty
or representation, express or implied, with respect to the presence, absence or
effect of ACM and/or PACM in or on the Properties, including but not limited to
violation or compliance or noncompliance with environmental, health, safety or
other laws, rules, regulations, ordinances or orders of the United States or any
agency or department thereof or of any state, local or other political
subdivision thereof or any agency or department or other body organized under
any of the foregoing.  Except as set forth in this Agreement and in the other
Transaction Documents, Purchaser agrees that Stayton, the CRO, the Receiver and
Sunwest shall have no liability or responsibility to Purchaser to take or for
failure to take any action to comply with such laws, rules, regulations,
ordinances or orders and shall have no liability to Purchaser for claims or
causes of action against Stayton, the CRO, the Receiver and Sunwest in any way
arising out of or relating to the presence of ACM or PACM or on the Properties
as of the Closing Date.  The terms and provisions of this Section 4.3(b) are in
addition to and not in derogation of the terms and provisions of Section 4.3(a)
above, shall expressly survive Closing, shall not merge with the provisions of
any Closing document and shall be incorporated into the Transaction Documents to
be delivered by Stayton at each Closing.
 
4.4 Survival of Representations and Warranties
 
(a) The representations and warranties of Stayton contained in this Agreement,
including, without limitation, Section 4.1, and in the other Transaction
Documents, shall not survive the Closing.
 
(b) The representations and warranties of Purchaser contained in this Agreement
and in the other Transaction Documents shall survive the Closing for a period of
12 months following the Closing Date, including, if applicable, any Deferred
Closing Date.
 
(c) The Closing shall not constitute or be construed as a waiver of any rights
of any party to this Agreement by reason of any misrepresentation by any other
party to this Agreement or failure of any other party to comply with any of its
agreements hereunder unless and to the extent that such deficiencies have been
waived by the party asserting such rights in writing.
 
4.5 Updates to Stayton Representations and Warranties.
 

 
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(a) From the date hereof until the Closing Date, promptly upon discovery thereof
by Stayton, Stayton shall disclose to Purchaser in writing, any inaccuracies or
variances with respect to the representations and warranties contained in
Section 4.1 in the form of an update or modification to the Disclosure Schedule
in a “blackline comparison” or other manner which clearly identifies the
specific inaccuracy or variance (each a “Stayton Representation
Update”).  Within ten Business Days after delivery of the Stayton Representation
Update, or if delivered less than ten Business Days prior the Closing Date, at
any time up to the Closing, Purchaser shall provide Stayton with written notice
if, Purchaser claims in Purchaser’s good faith judgment, that such Stayton
Representation Update (when taken together with the inaccuracies or variances of
all prior Stayton Representation Updates delivered pursuant this Section 4.5)
would reasonably be expected to result in the failure of the closing condition
set forth in Section 7.1(a).
 
(b) Notwithstanding any provision in this Agreement to the contrary, in the
event that the Closing occurs, Purchaser shall be deemed to have accepted the
disclosures set forth in any Stayton Representation Update, and such updates
shall be deemed to have cured any misrepresentation or breach of warranty that
may otherwise have existed hereunder by reason of such variance or inaccuracy,
and Purchaser shall not have any claim (whether for indemnification or
otherwise) against Stayton for any such variance or inaccuracy.
 
ARTICLE 5
 
PRE-CLOSING COVENANTS OF STAYTON
 
5.1 Stayton's Affirmative Pre-Closing Covenants
 
Between the date of this Agreement and each Closing, unless the Agreement shall
earlier have been terminated:
 
(a) Subject to Section 9.4 and the other provisions of this Agreement, Stayton
shall take all commercially reasonable actions required on Stayton's part for
Seller and/or Purchaser or Purchaser's Manager to obtain at the earliest
practicable date all consents, permits, waivers, approvals, authorizations and
agreements of any third-parties and Governmental Entities necessary in order for
Stayton to authorize, approve, or permit the consummation of the transactions
contemplated hereby.  Stayton shall take all commercially reasonable actions to
renew any Licenses including paying any required licensure fees, to cause any
expiring Licenses to be timely renewed effective as of the expiration date
thereof and will promptly provide Purchaser with copies of all renewal licenses.
 
(b) Stayton shall pursue diligently and in good faith and shall use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do or cause to be done, all things necessary or advisable under applicable
laws and regulations to put, consummate and make effective the transactions
contemplated hereby, subject to the Auction Order.
 
(c) Stayton shall pursue diligently and in good faith and shall use all
commercially reasonable efforts to take, or cause to be taken, all actions
necessary or advisable to obtain confirmation of the Reorganization Plan and
cause the Effective Date to occur; provided, however, Stayton shall have no
right to file any change of ownership applications
 

 
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related thereto unless and until authorized to do so by Purchaser or if required
to do so by any Governmental Entity.
 
(d) Stayton shall use commercially reasonable efforts to operate and maintain
the Properties in the same manner as currently operated and maintained, timely
making all payments due for utilities and under the Operating Contracts (and any
other payments owed for goods and services), including without limitation,
payments when due for services provided at such Property, in accordance with
Stayton's existing practice, maintaining the insurance set forth in Section
4.1(q), and otherwise complying with all of Stayton's contractual obligations
provided for in this Agreement.  With respect to any events or conditions Known
to Stayton which could reasonably be expected to constitute an imminent risk of
significant bodily harm to residents at the Properties, Stayton shall use
commercially reasonable efforts to act in accordance with applicable Laws in all
material respects.  Stayton shall use commercially reasonable efforts to spend
an amount equal to $500,000 per month (at all the Properties in the aggregate)
from the date hereof until the Closing (“Pre-Approved Monthly Maintenance
Amount”) on immediate repairs, routine maintenance, refurbishments and other
contingency projects at the Properties which are disclosed to Purchaser in
writing.  Purchaser’s prior written approval (which may be withheld in its sole
discretion) shall be required in connection with (i) any amounts to be spent in
connection with the work described above (or with respect to capital
expenditures) which are in excess of the Pre-Approved Monthly Maintenance Amount
and (ii) the scope of the work related to such excess amounts.  In the event
Stayton fails to spend the Pre-Approved Monthly Maintenance Amount contemplated
by this Section 5.1(d), Purchaser shall not be entitled to terminate this
Agreement solely as a result of such failure and Purchaser’s sole remedy shall
be to receive an adjustment to the Cash Consideration Amount at Closing pursuant
to Section 8.5(j).  Stayton shall use commercially reasonable efforts to cause
the work performed in connection with this Section 5.1(d) to be performed in
substantially the same manner and condition as similar work currently being
performed by Stayton.
 
(e) Stayton shall promptly notify Purchaser to the extent Stayton acquires
Knowledge of any event or occurrence having a material effect on the operation,
leasing, or condition of the Property or receives written notice from a third
party, including but not limited to fire or other casualty loss, or receipt of
notice of condemnation or violation of any applicable Law or Order, including
without limitation, any health, safety, fire, environmental or zoning Law.
 
(f) Stayton shall use Stayton's commercially reasonable efforts to perform and
enforce all of the covenants and obligations to be performed under each of the
Resident Agreements.
 
(g) Stayton shall use Stayton's commercially reasonable efforts to cause all of
the conditions set forth in Section 7.1 to be satisfied by the Scheduled Closing
Date.
 
(h) Stayton shall use Stayton's commercially reasonable efforts to assist
Purchaser and/or Purchaser's Manager to transfer, with effect from the Closing
Date, electronic copies of all current patient/resident records, current
employee records, accounting records and marketing records (collectively, the
"Records") to the extent such Records are in electronic form and such transfer
is permitted by applicable Law, including without limitation the Health
 

 
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Insurance Portability and Accountability Act of 1996 and other similar and
applicable patient/resident information and privacy protection acts, from
Stayton's computer systems (including functions Stayton has outsourced) to the
computer systems of Purchaser and/or Purchaser's Manager (or to the outsourced
system, if applicable) and to the extent that such transfer has not been
effected by the Closing Date, Stayton shall maintain the Records in electronic
form as currently maintained and to the extent not prohibited by applicable Law,
shall permit Purchaser and/or Purchaser's Manager, as applicable, to have access
thereto; provided that such access and transfer shall be at Purchaser's cost and
expense, if additional costs are incurred by Stayton; provided further that to
the extent Stayton retains Records in electronic form after the Closing Date for
the benefit of Purchaser, Purchaser or Purchaser's Manager shall reimburse
Stayton, in addition to the costs for access and transfer, for Stayton’s
out-of-pocket costs to retain the Records in electronic format.
 
(i) Stayton shall (i) take commercially reasonable actions required to obtain
consent of the holders of Existing Real Property Loans and the Existing Personal
Property Loans to the modifications set forth in the Modification Schedule and
(ii) take commercially reasonable actions required to incorporate into the
Reorganization Plan a modification of the Existing Real Property Loans and the
Existing Personal Property Loans in accordance with the Modification Schedule
which are not consensually modified by the applicable Lenders.  Stayton shall
keep Purchaser informed of the status of any discussions with Lenders in
connection with the modification of the Existing Real Property Loans and
Existing Personal Property Loans and shall promptly forward to Purchaser for its
review and reasonable approval any drafts of term sheets or agreements related
to such modifications, and Purchaser shall be deemed to have approved such
drafts if it has not provided a response within two (2) Business Days after
receipt.  For all existing Real Property Loans that are not consensually
modified by the applicable lenders, Stayton shall use commercially reasonable
efforts to cause the loan documents evidencing the Assumed Real Property Loans
to be in substantially the same form as the loan agreement and note attached
hereto as Exhibit O-3.  Stayton shall use commercially reasonable efforts to
modify the loans such that the discrepancies enumerated in the Modification
Schedule noted on Exhibit O-10 are substantially eliminated or otherwise
modified in a manner reasonably acceptable to Purchaser, provided, that such
elimination or modification is not a condition to the Purchaser’s obligations to
close under Section 7.1(l).  Upon request of Purchaser, Stayton shall use
commercially reasonable efforts to modify the Existing Real Property Loans, such
that they comply with Section 514(c)(9) of the Internal Revenue Code in a manner
reasonably acceptable to Purchaser, provided, that such modification is not a
condition to the Purchaser’s obligations to close under Section 7.1(l).  Stayton
shall pay all scheduled principal and interest payments due under the Existing
Real Property Loans from the date hereof through the Closing Date.  Prior to the
Closing, Stayton shall cause the CS Divestco Assets to be removed as collateral
under the CS-20 Loan and CS-27 Loan in accordance the modification term sheets
entered into by Stayton on December 21, 2009 with respect to CS-20 Loan and
CS-27 Loan.  Prior to the Closing, Stayton shall cause the GE Divestco Assets to
be removed as collateral under the GE Loans by paying to the lender the
following amounts in cash in order to effectuate such release:
 
GE Divestco Asset
Required Prepayment Amount
Canyon Crest
$9,100,000
Chancellor Place
$6,500,000
Legacy at Dallas
$6,000,000

 
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Cooper Villa
$4,700,000
Grayson View-Harrisburg
$3,750,000

(j) Stayton shall (i) advise Purchaser promptly of any litigation, arbitration
proceeding or administrative hearing (including condemnation) before any
Governmental Authority Known to Stayton which affects any portion of the
Property, which is instituted after the date of this Agreement and (ii) deliver
to the Purchaser promptly after receipt thereof copies of any written notices of
violations or other notices regarding the Property received by Stayton.
 
(k) Promptly following the execution of this Agreement, but no later than five
(5) Business Days after the date of this Agreement, Stayton shall amend the
draft Reorganization Plan of Unitary Sunwest Enterprise to provide for the
transactions contemplated in this Agreement (including the Auction) and no other
alternative transactions with respect to all or any portion of the
Property.  Stayton shall provide Purchaser with drafts of all documents,
motions, orders, filings or pleadings that it proposes to file with the Court
that relate to the approval of this Agreement and the consummation of the
transactions contemplated hereby, and will provide Purchaser with reasonable
opportunity to review and comment relating to such filings.  Stayton shall also
promptly provide Purchaser with copies of all pleadings received by or served by
or upon Stayton in connection with the Unitary Bankruptcy Case that relate to or
may reasonably be expected to affect the transactions provided for in this
Agreement and which have not otherwise been served on Purchaser.
 
(l) On or prior to Closing, Stayton shall obtain and shall thereafter maintain
tail insurance coverage (extended reporting period) in the amount of $1,000,000
per occurrence / $3,000,000 policy aggregate and allowing claims to be reported
for a period of two years after Closing, with respect to the prior operation of
the Properties prior to Closing.  Stayton shall cause any captive insurance
provider of the insurance set forth in Section 4.1(q) to maintain adequate loss
reserves to provide such coverage, which shall be evidenced by delivery of
financial statements reasonably acceptable to Purchaser.  Stayton's obligations
under this Section 5.1(l) shall expressly survive Closing.
 
(m) In connection with the Auction and Bid Procedures, Stayton shall (i) provide
to Purchaser for its review and comment any marketing or offering materials
which Stayton intends to send or have its representatives send to prospective
bidders, (ii) provide Purchaser with access to all materials and information
which is made available to any prospective bidders and (iii) provide Purchaser
with access to all employees, management personnel and advisors in a manner
substantially consistent with the level of access provided to any prospective
bidders.
 
(n) In connection with any Deficient Ground Lease Properties, Required Title
Option Properties, Required Title Consent Properties and Required Title Notice
Properties, Stayton shall use commercially reasonable efforts to satisfy the
closing conditions in Section 7.1(n) related thereto, and shall keep Purchaser
updated as to the status.
 
(o) Subject to the applicable limitations set forth in this Agreement, until the
Closing or earlier termination of this Agreement, Stayton agrees to:
 

 
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(i)           provide Purchaser and its representatives access to the assets,
books, accounting records, correspondence and files of Stayton (to the extent
related to the Properties or Stayton's operations) during normal business hours,
upon reasonable notice and in such manner as will not unreasonably interfere
with the conduct of the business of the Properties pursuant to a process agreed
to in writing;
 
(ii)           allow Purchaser to review annual budgets, development and capital
expenditure plans, and long-term purchase order plans with respect to the
Properties and to offer input and suggestions relating to the foregoing,
provided that such rights will not require Stayton to operate the Properties in
a substantially different manner than the current operations of the Properties
nor obligate Stayton to make or incur any capital expenditures at the Properties
(other than as set forth in Section 5.1(d));
 
(iii)           allow Purchaser to generally discuss and consult (including
calling meetings) with Stayton, and provide advice with respect to material
matters relating to the Properties;
 
(iv)           send to Purchaser all financial statements, operating reports,
budgets or other financial reports relating to the Properties which are prepared
by or for Stayton in the ordinary course of business;
 
(v)           send a current Rent Roll and Security Deposit/Prepaid Rent
Schedule within 15 days after the end of each month;
 
 
(vi)
send all surveys of Properties and plans of correction thereto, to the extent in
Stayton's possession or received by Stayton prior to Closing, and correspondence
from any regulatory authority or other Governmental Entity relating to Licenses
or Resident Agreements;

 
(vii)           provide Purchaser with such other additional information
relating to the Properties as Purchaser may reasonably request at reasonable
times and intervals in light of Stayton's normal business operations concerning
the general status of the financial condition and operations of the Properties
but only to the extent such information is reasonably available to Stayton and
in a form consistent with the manner in which Stayton then maintains such
information; and
 
(viii)           subject to Section 9.4(a)(i), upon Purchaser's selection as the
Successful Bidder, provide Purchaser and Purchaser's Manager with access to the
Facility Employees and Corporate Employees and cooperate and assist Purchaser
with establishing a transition plan for the operation of the Properties.
 
(p) Prior to Closing Stayton shall deliver to Purchaser or Purchaser’s Manager a
schedule for each of the Properties of the resident/patient trust funds held by
it in trust for the residents/patients of the Properties (the “Trust Funds”)
and, unless prohibited by applicable law,
 

 
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Stayton shall, or cause the applicable Sunwest Licenseholder to, return all such
Trust Funds to the residents/patients or their responsible parties as of, or
prior to, the Closing Date. To the extent any such Trust Funds cannot, under
applicable law, be returned to the residents/patients, then Stayton shall, or
shall cause the Sunwest Licenseholders to, cooperate in complying with any
requirements, including, but not limited to, audit requirements, applicable to
the transfer of such Trust Funds to Purchaser or Purchaser’s Manager at Closing.
Neither Purchaser nor Purchaser’s Manager shall assume any liability in the
event the amount of the Trust Funds transferred to them by the Sunwest
Licenseholders is less than the funds deposited by the applicable
residents/patients to be held by trust by the Sunwest Licenseholders.  This
Section 5.1(p) shall survive the Closing.
 
(q) In connection with the Property listed as Churchill on Exhibit B, Stayton
shall use commercially reasonable efforts to cause the Property to be reconveyed
to Stayton prior to the Closing and conveyed to Purchaser at the Closing,
including exercising and enforcing its purchase option under that certain
Irrevocable Purchase Option Agreement dated as of December 31, 2009.
 
With respect to all covenants in this Section 5.1, “Stayton” shall be deemed to
refer to include Stayton, Sunwest Record Owner, Sunwest Licenseholder and
Sunwest Manager.
 
5.2 Stayton's Negative Pre-Closing Covenants
 
Between the date of this Agreement and the Closing, unless the Agreement shall
earlier have been terminated:
 
(a) Stayton shall not materially modify, sell (or market for sale, other than
pursuant to the Auction), assign, convey, transfer, pledge, mortgage, lease,
license, or otherwise dispose of or encumber any of the Properties (or interests
therein), whether in the ordinary course or otherwise, or take any action
inconsistent with this Agreement.  Notwithstanding the previous sentence,
Stayton may, in consultation with Purchaser, negotiate with holders of Assumed
Loans for modification of the terms of such indebtedness consistent with the
Modification Schedule.
 
(b) Stayton shall not remove any fixtures or Personal Property from any of the
Properties unless such removal is in the ordinary course of business and is due
to obsolescence and is for the purpose of repairing, maintaining or replacing
such property.
 
(c) Except in the ordinary course of business consistent with current practice,
Stayton shall not enter into, modify, extend, renew, amend, terminate, accept
the surrender of or otherwise alter any of the Resident Agreements; provided,
however, Stayton shall not (i) grant Concessions of Rent which would still be in
effect after the Closing Date without Purchaser's consent (which consent shall
not be unreasonably withheld), (ii) enter into new Buy-In Agreements or amend
any existing Buy-In Agreements without Purchaser's consent (which consent shall
not be unreasonably withheld) or (iii) increase the percentage of revenue that
is derived from Medicare at any Property.
 
(d) Except in the ordinary course of business consistent with current practice
or as required by the terms of this Agreement, Stayton shall not enter into,
modify, amend, renew, extend, terminate or otherwise alter any of the Operating
Contracts affecting any of the
 

 
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Properties or order any goods, products or services pursuant to the Operating
Contracts or otherwise in excess of amounts necessary for the operation of any
of the Properties in the ordinary course of business or in excess of amounts
historically ordered by Stayton in the ordinary course of business.
 
(e) Stayton shall not (i) increase or modify the compensation or benefits
payable or to become payable to any of the Facility Employees or Corporate
Employees except for standard cost of living adjustments and non-material
increases in the ordinary course of business, (ii) enter into any employment
agreement or grant any retention, severance, change of control or termination
pay to any of the Facility Employees or Corporate Employees, (iii) enter into
any collective bargaining agreement or labor union contract applicable to the
Employees, (iv) enter into, or modify, any existing Stayton Benefit Plan to the
extent related to a Facility Employee or Corporate Employee, (v) except in the
ordinary course of business, Stayton shall not employ any additional Persons as
Facility Employees or Corporate Employees.  In the event that an administrator
or executive director at a Property is terminated and a replacement is not hired
within 30 days, Stayton shall provide Purchaser with written notice of such
vacant position.
 
(f) Stayton shall not initiate or consent to any material zoning
reclassification of any Property or any material change to any approved site
plan, special use permit, planned unit development approval or other land use
entitlement affecting any Property.
 
(g) Stayton shall not reduce the licensed bed/unit capacity of any of the
Properties or change the licensure designation of any of the Properties other
than changes arising from changes in the law affecting all similarly situated
skilled nursing or assisted living providers.
 
With respect to all covenants in this Section 5.2, “Stayton” shall be deemed to
refer to include Stayton, Sunwest Record Owner, Sunwest Licenseholder and
Sunwest Manager.
 

 
ARTICLE 6
 
PRE-CLOSING COVENANTS OF PURCHASER
 
Between the date of this Agreement and the Closing, unless the Agreement shall
earlier have been terminated:
 
(a) Subject to Stayton complying with its obligations under Section 5.1(a) and
Section 9.4, Purchaser shall take, or shall cause Purchaser's Manager to take,
all reasonable actions required on the part of Purchaser or Purchaser's Manager
to obtain at the earliest practicable date all consents, permits, waivers,
approvals, authorizations and agreements of any third-parties and Governmental
Entities necessary in order for Purchaser and/or Purchaser's Manager to
authorize, approve, or permit the consummation of the transactions contemplated
hereby, and, in connection therewith, forthwith upon entry of the Sale Approval
Order, Purchaser shall promptly give or cause Purchaser's Manager to give all
required notices from Purchaser or Purchaser's Manager, as applicable, to, and
make all required registrations and filings by Purchaser or Purchaser's Manager,
as applicable, with or submissions by Purchaser or Purchaser's Manager, as
applicable, to, such third parties and Governmental Entities; provided,
 

 
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however, nothing herein shall be construed as imposing any obligation on
Purchaser or Purchaser's Manager with respect to any of the Excluded Obligations
even if the satisfaction or correction thereof is a condition to securing the
consents, permits, waivers, approvals, authorizations or agreements contemplated
by this section.
 
(b) Purchaser shall pursue diligently and in good faith and use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or advisable under applicable laws and regulations to
put, consummate and make effective the transactions contemplated by this
Agreement, subject to the Auction Order.
 
(c) Purchaser shall reasonably cooperate with Stayton with respect to Stayton's
efforts to modify the other Existing Real Property Loans and the Existing
Personal Property Loans in accordance with the modifications set forth in the
Modification Schedule.
 
(d) Purchaser shall use commercially reasonable efforts to consummate the
assumption of the, CS-20 Loan, CS-27 Loan and GE Loans in accordance with the
term sheets attached hereto as Exhibits O-4, O-5 and O-6 respectively.
 
(e) None of Purchaser, Emeritus or Columbia Pacific, or any of their Affiliates
shall take any action that would result in any of the representations and
warranties of Purchaser set forth in this Agreement becoming materially untrue.
 
(f) Not less than three (3) Business Days prior to Closing, Purchaser shall
notify Stayton of any request by Purchaser or Purchaser's Manager that Stayton
or an Affiliate of Stayton, enters into the Interim Operating Agreements with
respect to such of the Properties as Purchaser shall reasonably request and
shall agree to enter into such Interim Operating Agreements.
 
(g) Purchaser shall order all required New Surveys within five (5) Business Days
following the date of this Agreement and shall use commercially reasonable
efforts to obtain such surveys within 60 days thereafter.
 
ARTICLE 7
 
CONDITIONS PRECEDENT
 
7.1 Conditions for the Benefit of Purchaser
 
Subject to Section 8.6, the obligation of Purchaser under this Agreement to
purchase the Properties and to pay the Purchase Price is subject to the
satisfaction at the time of each Closing of each of the following conditions
(any of which may be waived in whole or in part by Purchaser at or prior to
Closing):
 
(a) The representations and warranties of Stayton in Section 4.1 shall be true
and correct as of the Closing Date in all material respects, as though such
representations and warranties were made at and as of the Closing Date
(provided, however, that any such representations that are limited by
materiality, material adverse effect or similar qualifiers shall be true and
correct in all respects as though such representations and warranties were made
at and as of the Closing Date) and Stayton shall deliver a certificate
confirming the same.
 

 
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(b) Stayton shall have performed, observed and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to be
performed, observed and complied with by Stayton as of Closing.  Purchaser shall
have received all documents required to be delivered under Section 8.3.
 
(c) Excluding any waiting periods required for Licensing Approvals, all waiting
periods specified by Law, including waiting periods under the HSR Act, the
passing of which is necessary for consummation of the transactions contemplated
by this Agreement, shall have expired or terminated.
 
(d) The Court shall have entered (i) the Auction Order and (ii) the TIC Orders
and.
 
(e) The Sale Approval Order approving the sale of the Properties to Purchaser,
the TIC Orders, the Consolidation Order and the Order of the Court confirming
the Reorganization Plan shall each have been entered by the Court and shall not
have been stayed and shall not be subject to any pending appeals provided, that
if all other conditions to Purchaser's obligation to Close shall have been met,
and if there shall be pending any such appeal, in such event Purchaser shall,
within three Business Days prior to the Scheduled Closing Date, either (i) waive
such condition and forthwith proceed to Closing, (ii) defer the Closing with
respect to one or more of the Properties affected by such appeal in accordance
with Section 8.6 or (iii) terminate this Agreement with respect to all of the
Properties in which case Purchaser shall be entitled to return of the Deposit
but not be entitled to receive the Break-Up Fee or the Expense Reimbursement, in
which case, neither Stayton nor Purchaser shall have any further rights or
obligations hereunder, except as provided herein.
 
(f) The Effective Date shall have occurred and at least 42 days have passed
since the entry of the Sale Approval Order.
 
(g) Stayton shall have delivered to Purchaser currently effective certificates
of liability insurance, the premiums for which have been paid on the monthly
basis, and otherwise on the same terms and conditions as are described in
Section 4.1(q) with respect to the liability insurance for as long as Stayton
owns or manages the Property and the tail insurance required by Section 5.1(l).
 
(h) Purchaser shall have received from Stayton its agreement to defend,
indemnify and hold harmless Purchaser, Blackstone Venture Member, Columbia
Pacific, Emeritus and their respective Affiliates from and against all loss,
liability, expense and damage arising out of the Tort Liabilities and
Reimbursement Obligations.
 
(i) Except for the discrepancies agreed to by Purchaser as described in Exhibit
O-10, each of the Existing Real Property Loans and Existing Personal Property
Loans shall have been modified in accordance with the Modification Schedule;
provided, however, in the event that all other modifications required by the
Modification Schedule have been satisfied, but the Actual Rate is greater than
the Underwritten Rate, this Section 7.1(i) shall nevertheless be deemed
satisfied subject to Section 2.5(b) and the Cash Consideration Amount shall be
adjusted accordingly pursuant to Section 2.5(a)(ii).  In the event of a failure
of this Section 7.1(i) with
 

 
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respect to one or more of the Existing Real Property Loans (each a “Failed Loan
Modification”), Purchaser shall have the right to (i) terminate this Agreement
with respect to the Properties related to any such Failed Loan Modification and
(A) such Properties shall be deemed excluded from the transactions contemplated
under this Agreement and (B) the aggregate Cash/Equity Portion of the Purchase
Price shall be reduced by the Allocated Cash/Equity Portion of the Purchase
Price applicable to such excluded Properties and (C) Purchaser shall not assume
the Existing Loans related to such excluded Properties.  Notwithstanding the
foregoing termination right, in the event that the Properties excluded as a
result of this Section 7.1(i) shall exceed ten (10), then Purchaser shall only
have the right to terminate the Agreement with respect to all of the
Properties.  In the event that Purchaser terminates this Agreement with respect
to all of the Properties as a result of a failure of this Section 7.1(i),
Purchaser shall be entitled to the return of the Deposit and Stayton shall be
required to pay to Purchaser $3,000,000 in immediately available funds, in which
case, neither Seller nor Purchaser shall have any further rights or obligations
hereunder except as otherwise provided herein.
 
(j) Stayton shall have, at its own cost, terminated (i) the Sunwest Affiliate
Contracts, (ii) all Operating Contracts other than the Assumed Operating
Contracts and (iii) all Management Agreements, and the party thereto shall have
surrendered possession and Stayton shall have provided evidence of such
termination reasonably satisfactory to Purchaser.
 
(k) There shall be at least 114 Purchaser Licensed Properties representing not
less than 85 percent of the Allocated Purchase Price (the "Minimum Licensing
Threshold"); provided, however, Purchaser Licensed Properties which (i) are
subject to an Unsatisfied Closing Condition or (ii) are subject to Existing Real
Property Debt with any other Property for which Purchaser or Purchaser's Manager
has not received all Licensing Approvals and an Interim Operating Agreement is
not permitted by law to be entered into with respect to such other Property,
shall not be included in the total when determining whether the Minimum
Licensing Threshold has been satisfied.
 
(l) With respect to the Closing of any Deferred Property (Licensing), Purchaser
or Purchaser's Manager shall have received all Licenses necessary to own and
operate such Deferred Property (Licensing) in compliance with Law.
 
(m) Sellers shall have delivered to Purchaser true and correct copies of validly
existing certificates of occupancy with respect to each Property or evidence
reasonably acceptable to Purchaser that no certificate of occupancy is required
by applicable Law.
 
(n) The following title and survey matters shall be satisfied:
 
(i) With respect to each of the Deficient Ground Lease Properties, Stayton shall
deliver an original (i) memorandum of lease, duly executed by the applicable
ground lessor and ground lessee and (ii) a non-disturbance agreement duly
executed by the applicable ground lessee and fee mortgagee (if any), providing
that the lessee’s leasehold interest shall not be disturbed so long as the
lessee is not in default of the applicable Ground Lease, in each case in
recordable form and reasonably acceptable to Purchaser and the Title Company.
 

 
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(ii) With respect to each of the Required Title Option Properties, the third
party holding the applicable right/option shall not have exercised such
right/option and Stayton shall deliver evidence reasonably acceptable to
Purchaser and the Title Company of such rejection or effective deemed rejection
(including copies of all notices and agreements related thereto).
 
(iii) With respect to each of the Required Title Consent Properties, the third
party holding the applicable consent right shall have granted its consent and
Stayton shall deliver evidence reasonably acceptable to Purchaser and the Title
Company that such consent has been granted or effectively deemed granted
(including copies of all notices and agreements related thereto).
 
(iv) With respect to each of the Required Title Notice Properties, Stayton shall
have timely delivered the required notices (in forms reasonably approved by
Purchaser) and shall deliver evidence reasonably acceptable to Purchaser and the
Title Company that such notices have been properly delivered (including copies
thereof and correspondence related thereto).
 
(v) The Title Company shall be unconditionally prepared, subject only to the
payment of the applicable title insurance premium and other related charges, to
issue to Purchaser with respect to each parcel of Real Property an Owner's Title
Policy, insuring that title to such parcel of Real Property is vested in
Purchaser and subject only to the Assumed Mortgages, Resident Agreements,
Assumed Unexpired Leases, Assumed Operating Contracts and those matters defined
as Permitted Exceptions.  For purposes of this Agreement, the term "Owner's
Title Policy" shall mean a 2006 ALTA Owner's Form of title insurance policy (or
comparable form in states in which the ALTA form is not available) in the amount
of the Purchase Price, insuring Purchaser's title to such Property, subject only
to the Assumed Mortgages, Resident Agreements, Assumed Unexpired Leases, Assumed
Operating Contracts and those matters defined as Permitted Exceptions, together
with the following endorsements (to the extent that such endorsements are
available in the state in which the Property is located): (a) "land same as
survey" (survey matches legal title); (b) contiguity (if applicable); (c)
separately assessed tax parcel; (d) comprehensive ALTA 9.2 (T19.1 in Texas); (e)
creditor's rights exclusion deletion; (f) subdivision, (g) zoning-improved
property, with parking, (h) EPA lien endorsement, (i) leasehold (if applicable),
(j) access and (k) address/location of improvements.
 
(vi) Subject to Purchaser's compliance with Section 6(g), the New Surveys for
any individual Missing Survey Property shall not disclose any defects that have
a material adverse effect on the ownership, operation or value of such
individual Property.
 
7.2 Conditions for the Benefit of Stayton
 
Subject to Section 8.6, the obligation of Stayton under this Agreement to sell
the Properties to Purchaser and to effectuate at Closing the transactions
contemplated hereby is subject to the satisfaction at the time of Closing of
each of the following conditions (any one of which may be waived in whole or in
part by Stayton at or prior to Closing):
 

 
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(a) All of the representations and warranties by Purchaser in Section 4.2 shall
be true and correct as of the Closing Date in all material respects, as though
such representations and warranties were made at and as of the Closing Date
(provided, however, that any such representations that are limited by
materiality, material adverse effect or similar qualifiers shall be true and
correct in all respects as though such representations and warranties were made
at and as of the Closing Date) and Purchaser shall deliver a certificate
confirming the same.
 
(b) Purchaser shall have performed, observed and complied in all material
respects with all covenants, agreements and conditions required by this
Agreement to be performed, observed and complied with on its part as of
Closing.  Stayton shall have received all documents required to be delivered
under Section 8.4.
 
(c) Excluding any waiting periods required for Licensing Approvals, all waiting
periods specified by Law, including waiting periods under the HSR Act, the
passing of which is necessary for consummation of the transactions contemplated
by this Agreement, shall have expired or terminated.
 
(d) The Court shall have entered the Auction Order.
 
(e) The Sale Approval Order, approving the sale of the Properties to Purchaser
and the Order of the Court confirming the Reorganization Plan, shall have been
entered by the Court and shall not have been stayed.
 
(f) The Effective Date shall have occurred.
 
(g) With respect to the Initial Closing Date, Purchaser shall be prepared to
Close with respect to at least 85 percent of the total number of Properties
representing at least 85 percent of the Allocated Purchase Price.
 
ARTICLE 8
 
CLOSING
 
8.1 Location and Time of Closing
 
Subject to Sections 2.5(b), 7.1(e), 7.1(i) and 8.6, provided that this Agreement
shall not have been previously terminated, and upon the terms and conditions set
forth in this Agreement and in the Auction Order and the Sale Approval Order,
the closing and settlement of the transactions contemplated by this Agreement
with respect to the Initial Closing Properties, or each Deferred Property, as
applicable (each, a "Closing") shall occur by the delivery of all documents and
agreements required to be delivered for the Closing to the offices of Tonkon
Torp LLP, 1600 Pioneer Tower, 888 SW Fifth Avenue, Portland, Oregon and be held
beginning at 10:00 A.M. Portland time on (i) in the case of the Initial Closing
Properties, the third Business Day following the satisfaction of the closing
conditions in Section 7.1 (excluding subsection (l)) and (ii) in the case of a
Deferred Property, the third Business Day following the satisfaction of the
closing conditions in Section 7.1 (including subsection (l)) (each, a "Scheduled
Closing Date").  Possession of the applicable Properties shall be delivered to
Purchaser at Closing, subject only to the occupancy rights of residents under
the Resident Agreements and occupancy rights of tenants under Assumed Unexpired
Leases.  The date, time and/or place of the Closing
 

 
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may be changed by agreement of Stayton and Purchaser.  The day on which the
Closing occurs is referred to herein as (i) the "Initial Closing Date" with
respect to the Initial Closing Properties and (ii) the "Deferred Closing Date"
with respect to each of the Deferred Properties (the Initial Closing Date and
the Deferred Closing Date, collectively, the "Closing Date", as applicable).
 
8.2 Execution of Instruments
 
Stayton shall execute and deliver to Purchaser at the Closing all proper and
necessary instruments for the conveyance of all of Sellers' right, title and
interest in, to and under the Property.  If Stayton shall not convey all of
Sellers' right, title and interest in, to and under the Property at the Closing,
then Stayton shall, on demand thereafter, execute all such proper and necessary
instruments for the conveyance of any such right, title or interest.
 
8.3 Deliveries by Stayton
 
At Closing, Stayton shall deliver to Purchaser with respect to the Initial
Closing Properties, or each Deferred Property, as applicable, the following:
 
(a) a deed executed by Stayton in substantially the form of Exhibit C, conveying
to Purchaser all right, title and interest of Sellers in the applicable
Properties, free and clear of any Encumbrances other than the Assumed Mortgages,
Resident Agreements, Assumed Unexpired Leases, Assumed Operating Contracts and
those matters defined in Permitted Exceptions.
 
(b) a bill of sale executed by Stayton for the all of the applicable Personal
Property, in substantially the form attached hereto as Exhibit F, subject to no
Encumbrances other than Permitted Exceptions and the encumbrances described on
Exhibit E;
 
(c) a fully executed assignment and assumption agreement, reflecting assignment
and delegation by Stayton to Purchaser of Stayton's interest in: (i) all Assumed
Liabilities; (ii) all guarantees, warranties and agreements from vendors or
suppliers of services or materials to the Property, (iii) the Business Names,
the Website Materials and the Promotional Materials, (iv) the telephone
number(s) for the Property, and (v) all Licenses (to the extent the same are
assignable) related to the Property and the Improvements, in substantially the
form attached hereto as Exhibit G;
 
(d) with respect to those Properties with respect to which notice was not given
to residents pursuant to Section 9.4(b), notification letters to be delivered to
each resident of the Property, in the form drafted by Purchaser and mutually
acceptable to Stayton and Purchaser, as such form may be modified to comply with
and as may be required by applicable Law and containing such other information
as Purchaser may reasonably request, including without limitation information
concerning Purchaser and/or Purchaser's Manager;
 
(e) in connection with the Closing of the Initial Closing Properties only, with
respect to Properties in which Purchaser (and/or Purchaser's Manager, as
applicable) has NOT received all Licensing Approvals on or prior to the Initial
Closing Date, signed Interim Operating Agreements where permitted to be entered
into by Law, with all exhibits and schedules attached thereto;
 

 
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(f) an assignment and assumption agreement signed on behalf of Stayton, in form
and content acceptable to Stayton and Purchaser, assigning and delegating
performance of each respective Assumed Real Property Loans from and after the
Closing Date, and the assumption of such Assumed Real Property Loan from and
after the Closing Date by Purchaser, stating the amount of the unpaid principal,
escrow balance, reserve balance, date of maturity, rate of interest, date on
which interest was last paid, amount of periodic payments of principal and
interest and payments out of escrow (in each case, as confirmed in writing by
the applicable Lenders);
 
(g) such unaudited internal operating statements of the applicable Property as
are available as of the Closing Date, certified by Stayton as being true,
complete and correct to Stayton's Knowledge;
 
(h) an affidavit attesting to the representation made in Section 4.1(s),
substantially in the form attached hereto as Exhibit H;
 
(i) such other documents as may be reasonably required by Purchaser's attorney
to carry out the intent and purpose of this Agreement;
 
(j) all property records, insurance certificates, licenses, plans and
specifications for Improvements, tax bills, Assumed Operating Contracts,
Resident Agreements, keys (and all codes and other items necessary to give
Purchaser access to the applicable Properties) and hard copies of any Records
shall remain at the Properties and shall be turned over to a representative of
Purchaser on site at the applicable Properties on the Closing Date;
 
(k) updated (as of the most recent practicable date) Rent Rolls and Security
Deposit/Prepaid Rent Schedule with a blanket certificate from an executive
officer of Stayton as being true and correct as of the Closing Date listing each
resident, the unit, bed or room number of such resident, and the amount of
monthly fees to be paid by such resident (including room, meal and other
applicable monthly fees), the amount of security deposit, if any, date of
Resident Agreement and the expiration of such Resident Agreement;
 
(l) an indemnity agreement in such form and substance reasonably acceptable to
Purchaser in accordance with Section 7.1(h);
 
(m) if applicable, duly completed and executed real estate transfer tax filings
for the Properties prepared by Sellers consistent with Section 14.13(c);
 
(n) such affidavits, instruments or indemnities reasonably required by the Title
Company to permit the Title Company to deliver the Owner's Title Policy, duly
executed by Stayton and such other affidavits and/or certifications as may be
reasonably necessary to consummate the transactions contemplated hereby;
 
(o) any documents or certificates necessary to transfer title to, or leasehold
interests in, the Motor Vehicles;
 
(p) updated (as of the most recent practicable date) schedules setting forth:
(i) the name of each of the Facility Employees and Corporate Employees as of the
Closing Date,
 

 
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and (ii) each such Facility Employee's and Corporate Employee’s position and
rate of pay, in electronic format;
 
(q) a written accounting (certified by an accountant if and only as required by
applicable Law) of any funds being held by Stayton in trust for the benefit of
the residents of the Property, along with such trust funds and Stayton's written
certification that, to Stayton's Knowledge, the funds delivered to Purchaser or
Purchaser's Manager represent all of the funds delivered to Stayton by the
residents of the Property identified in such accounting which are held in trust
by Stayton;
 
(r) a written accounting (certified by an accountant if and only as required by
applicable Law) of all Entrance Fees or similarly designated payments being held
by Stayton which are subject to a refund obligation on the part of Stayton,
along with such funds and Stayton's written certification that, to Stayton's
Knowledge, the funds delivered to Purchaser or Purchaser's Manager represent all
of the funds which Stayton is required, as of the Closing Date, to refund to the
residents of the applicable Property;
 
(s) the Salem HQ Lease executed by Stayton, as landlord or sublandlord (as
applicable);
 
(t) a closing statement, prepared and approved by Stayton and Purchaser,
consistent with the terms of this Agreement and duly executed by Purchaser;
 
(u) with respect to the Ground Lease referred to as Oakridge on Exhibit B, an
amendment duly executed by the landlord, reducing the monthly rent to $85,000
per month;
 
(v) with respect to each Ground Lease, an estoppel certificate, prepared by
Seller in the form attached hereto as Exhibit W (with conforming informational
modifications reasonably approved by Purchaser prior to delivery to the
applicable landlord) and executed by landlord without any material
modifications; and
 
(w) such other assignments, instruments of transfer, and other documents as
Purchaser may reasonably require (or as may be required under applicable Law) in
order to complete the transactions contemplated hereunder or to evidence
compliance by Stayton with the covenants, agreements, representations and
warranties made by it hereunder, in each case, duly executed by Stayton.
 
8.4 Deliveries by Purchaser
 
At each Closing, Purchaser shall deliver to Stayton with respect to the Initial
Closing Properties, or each Deferred Property being conveyed, as applicable, the
following:
 
(a) the Cash Consideration Amount payable to Stayton at the applicable Closing
in accordance with Section 2.5(c), and, if applicable in connection with the
Initial Closing, the instruments contemplated by Section 2.6(b) evidencing the
Rollover Equity;
 
(b) a fully executed assignment and assumption agreement described in Section
8.3(c) above;
 

 
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(c) in connection with the Closing of the Initial Closing Properties only, with
respect to Properties in which Purchaser has NOT received all Licensing
Approvals on or prior to the Initial Closing Date, a signed Interim Operating
Agreement, with all exhibits and schedules attached thereto;
 
(d) a fully executed assignment and assumption agreement described in Section
8.3(f) above;
 
(e) if applicable, duly completed and executed real estate transfer tax filings
for the applicable Properties consistent with Section 14.13(c);
 
(f) a closing statement, prepared and approved by Stayton and Purchaser,
consistent with the terms of this Agreement and duly executed by Purchaser;
 
(g) such other assignments, instruments of transfer, and other documents as
Stayton may reasonably require in order to complete the transactions
contemplated hereunder or to evidence compliance by Purchaser with the
covenants, agreements, representations and warranties made by it hereunder, in
each case, duly executed by Purchaser;
 
(h) a duly executed and sworn Secretary's Certificate from Purchaser  certifying
that Purchaser has taken all necessary action to authorize the execution of all
documents being delivered hereunder and the consummation of all of the
transactions contemplated hereby and that such authorization has not been
revoked, modified or amended; and
 
(i) an executed and acknowledged incumbency certificate from Purchaser
certifying the authority of the officers of Purchaser to execute this Agreement
and the other documents delivered by Purchaser to Stayton at the Closing.
 
8.5 Proration of Expenses and Revenues
 
(a) Basis for Prorations.  All prorations in this Section 8.5 shall be made on
the basis of actual days elapsed in the relevant accounting, billing or revenue
period and shall be based on the most recent information available.  The net
amount of the adjustments under this Section 8.5 shall be added to (if such net
amount is in Stayton's favor) or deducted from (if such net amount is in the
Purchaser's favor) the Cash Consideration Amount at Closing.
 
(b) Taxes and Assessments.  Ad valorem real estate and personal property taxes
and assessments with respect to Properties shall be adjusted and prorated based
on (a) the periods of ownership by Stayton (including any Affiliates of Stayton)
and Purchaser, and (b) the most current official real property tax information
available from the county assessor's office where such Property is located or
other assessing authorities.  If real property tax and assessment figures for
the taxes or assessments to be apportioned between the Purchaser and Stayton
pursuant to this Section are not available, real property taxes shall be
prorated based on the most recent assessment, subject to further and final
adjustment when the tax rate and/or assessed valuation for such taxes and
assessments for such Property is fixed.  In the event that such Property or any
part thereof shall be or shall have been affected by an assessment or
assessments, whether or not the same become payable in annual installments,
Stayton shall be responsible for
 

 
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any such assessment (or any installments thereof) relating to periods prior to
the Closing and the Purchaser shall be responsible for any such assessment (or
any installments thereof) relating to periods on or after the Closing.
 
(c) Utility Charges.  Water rates, water meter charges, sewer rents and vault
charges and any gas, steam, electricity and other public utility charges, if
any, with respect to any Property, shall be adjusted and prorated on the basis
of the fiscal period for which assessed.  Stayton shall arrange for a final
reading of all utility meters (covering gas, water, steam and electricity) at
any Property as of the Closing or a date not more than 30 days prior to the
Closing and the unfixed meter charges and the unfixed sewer rent thereon for the
time intervening from the date of the last reading shall be apportioned on the
basis of such last reading, and shall be appropriately readjusted after the
Closing on the basis of the next subsequent bills.  Unmetered water charges
shall be apportioned on the basis of the charges therefor for the same period of
the preceding calendar year, but applying the current rate thereto.  Any bill
which shall be rendered which shall cover a period commencing before and ending
after the date of Closing shall be apportioned between the Purchaser and Stayton
as of the Closing.  Stayton shall be entitled to a refund from the applicable
utility company of all deposits held by utility companies, including those
listed on Exhibit N, if applicable.  In the event that such utility deposits are
retained by the utility company for the benefit of Purchaser, as owner of the
Property, then Seller shall be entitled to a credit equal to such retained
deposit.
 
(d) Assumed Contracts.  Fees, expenses and payments under all Assumed Operating
Contracts, Assumed Unexpired Leases and Ground Leases shall be pro-rated as of
the Closing Date.  For the avoidance of doubt, any deferred and unpaid rent or
other payments under any Ground Lease (including the deferred rent under the
Oakridge Ground Lease disclosed on Section 4.1(v) of the Disclosure Schedule)
related to periods prior to the Closing Date, shall be credited to Purchaser at
Closing as Purchaser’s sole remedy.
 
(e) Deposits.  Purchaser shall receive a credit at Closing equal to the actual
amounts of the Security Deposits provided for under Resident Agreements, less
any amounts maintained in segregated accounts with respect to Security Deposits
that are transferred to Purchaser.
 
(f) Entrance Fees.  Purchaser shall receive a credit equal to 50% of the amount
of the unamortized Entrance Fees.  Stayton shall receive a credit equal to the
discounted present value over a period of five years at a discount rate of 12%
per year of 100% of the Entrance Fees held by lenders under the Assumed Real
Property Loans.
 
(g) Lender Reserves.  Stayton shall receive a credit for the outstanding
balances in reserve accounts and the outstanding balances in blocked accounts in
favor of Lenders under the Assumed Real Property Loans (the "Lender Reserves"),
in each case to the extent the funds in such accounts will be accessible for use
by Purchaser during the 12 month period following the Closing (the "Accessible
Funds").  With respect to any Lender Reserves which are not Accessible Funds,
(i) Purchaser shall receive a credit in an amount equal to any under-funding or
deficiencies of such Lender Reserves and (ii) Stayton shall receive a credit for
any amounts held in such Lender Reserves which do not constitute Accessible
Funds but which are accessible for use by Purchaser (either for specific
purposes or for application to the principal
 

 
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amount of the corresponding Assumed Real Property Loan) within five (5) years of
the Closing Date, in an amount equal to the discounted present value over a
period of five years at a discount rate of 12% per year of 100% of such reserved
amounts.
 
(h) Common Charges & Other Expenses.  Any dues, fees, common charges,
maintenance fees relating to any homeowners associations, planned unit
developments and reciprocal easement agreements, and any other expenses
pertaining to the Property (other than Excluded Obligations) shall be prorated
between Stayton and Purchaser, with Stayton being responsible for expenses
incurred in the operation of the Properties prior to the Closing.  In making
such prorations, Stayton shall receive a credit for all such expenses which have
actually been paid by Stayton prior to the Closing and which pertain exclusively
to the period following the Closing.  To the extent such charges are not able to
be so allocated, determined or credited on the Closing Date, Stayton or
Purchaser, as applicable, shall remit any and all unpaid invoices which reflect
expenses for the time period prior to the Closing, and Stayton shall be
responsible for any such expenses.  Purchaser is responsible for the payment of
any invoices which reflect expenses for the operating of the Properties after
the Closing, even if an Interim Operating Agreement is in effect with respect to
the subject property.  Upon receipt of a check or invoice credit for such
utility deposit, Purchaser shall promptly reimburse Stayton.
 
(i) Transferred Employees.  If Purchaser's Manager elects to credit any
Transferred Facility Employees or Transferred Corporate Employees for any unused
paid time off, vacation time or sick pay, which amounts are attributable to
terms of employment prior to Closing, Purchaser shall receive a credit for all
such accrued amounts.
 
(j) Pre-Approved Monthly Maintenance Amount.  If Stayton has not spent the
Pre-Approved Monthly Maintenance Amount at the Properties from the date hereof
through the Closing Date in connection with the work contemplated by Section
5.1(d), Purchaser shall, as Purchaser’s sole remedy, receive a credit equal to
(x) the aggregate Pre-Approved Monthly Maintenance Amount through the Closing
Date (together with any pro-rated partial months) less (y) the amount actually
expended by Stayton in accordance with Section 5.1(d).  If Stayton has spent
amounts in excess of the aggregate Pre-Approved Monthly Maintenance Amount at
the Properties from the date hereof through the Closing Date (together with any
pro-rated partial months), which amounts are (i) related to CHOW Corrective
Actions performed by Stayton at Purchaser’s request pursuant to Section
9.4(a)(iii) or (ii) are approved in writing by Purchaser in accordance with
Section 5.1(d), then Stayton shall receive a credit equal to such excess.
 
(k) Revenues.  Items of revenue, including without limitation, basic rent,
additional rent and percentage rent, and other charges payable by residents
under the Resident Agreements (whether paid by the residents, third party payors
or private payors) (the "Resident Rents") or by other tenants under other
agreements pertaining to the Properties (the "Third Party Rents", together with
the Resident Rents, collectively the "Rents"), shall be prorated on an if, as
and when collected basis.  Any such Rents attributable to the time period after
the Closing Date which have been prepaid to Stayton prior to the Closing Date
shall be credited to Purchaser at Closing.  Any Resident Rents collected by
Purchaser or Stayton after the Closing, shall be applied in the manner set forth
in Section 9.5.  Each such amount, less any costs of collection (including
reasonable counsel fees) reasonably allocable thereto, shall be adjusted and
prorated as provided in Section 9.5.  Stayton further agree that Stayton shall
not be entitled to
 

 
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terminate any Resident Agreement or create or place any Encumbrance on the
Properties or such resident's (or tenant's) interest therein, as a result of the
existence of any unpaid Resident Rents which are in respect of periods prior to
Closing ("Delinquent Rents") and Stayton's rights with respect to such
Delinquent Rents shall be subject to Section 9.5.  
 
(l) Hillside CCRC License Reserve.  At the Closing of the Property reflected on
Exhibit B as Hillside, Purchaser shall receive a credit equal to $2,000,000 in
connection with the reserves required by the Oregon Department of Human Services
for the Licenses related thereto.
 
(m) Inventories.  To the extent Stayton has ordered goods, products and services
before the Closing, which are invoiced after the Closing Date and used at the
Property after the Closing Date, Purchaser shall be responsible for the payment
of such invoices, but only to the extent that such goods, products and services
were ordered by Stayton in amounts and type customarily ordered by Stayton in
the normal course of business and not in violation of this Agreement and are not
consumed at the Properties prior to the Closing Date.
 
(n) Cash.  On the Closing Date, Stayton shall retain all cash maintained at each
Property.
 
(o) Estimates.  Except as expressly provided herein, any item related to the
ownership of the Property and not otherwise described in this Section 8.5 which
cannot be accurately prorated as of the Closing Date shall be prorated at
Closing on the basis of the parties' good faith estimates, utilizing bills and
receipts therefor for the comparable period during the immediate preceding year,
applied in the case of real estate taxes and assessments, to the latest assessed
valuation, and such proration shall be recalculated as soon after Closing as
precise information becomes available.
 
(p) Adjustment of Prorations.  If any errors or omissions in computing the
apportionments under Section 8.5 shall be discovered, Stayton and Purchaser
shall promptly make appropriate adjusting payments to each other to correct such
errors or omissions.  All amounts owing from or to Stayton, or from or to
Purchaser, that require adjustment after the Closing Date shall be settled
within 120 days after the Closing Date.  Purchaser and Stayton shall each make
such records available for inspection by the other party as are reasonable to
demonstrate the accuracy of any adjustments.
 
8.6 Deferred Closings
 
(a) In the event that a closing condition under Section 7.1 is not satisfied (an
“Unsatisfied Closing Condition”) with respect to one or more of the Properties,
then subject to Section 7.2(g), and in addition to any other right Purchaser has
under this Agreement, Purchaser shall have the right to (i) defer the closing on
such Property (a "Deferred Property") until such condition is satisfied or
waived by Purchaser in accordance with this Section 8.6 and complete the Closing
with respect to the remaining Properties and (ii) terminate the Agreement with
respect to any such Deferred Property on the Outside Closing Date if the
Unsatisfied Closing Condition remains unsatisfied (or has not been waived by
Purchaser) and complete the Closing with respect to the remaining
Properties.  For the avoidance of doubt in the event that an
 

 
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Unsatisfied Closing Condition exists with respect to any Property that is
subject to an Existing Real Property Loan with other Properties, then the
Unsatisfied Closing Condition shall be deemed to apply to all of the Properties
subject to such Existing Real Property Loan.
 
(b) The Closing on any Deferred Property shall occur on the third Business Day
following the satisfaction of all closing conditions with respect to such
Deferred Property (including the Unsatisfied Closing Condition) in accordance
with, and subject to the terms and conditions of, this Agreement.  At each
Closing with respect to a Deferred Property, (i) Purchaser shall pay to Stayton,
an amount equal to the Allocated Cash/Equity Portion of the Purchase Price
applicable to such Deferred Property in accordance with Section 2.5(c)(ii), as
adjusted pursuant to the terms of this Agreement, (ii) assume the Assumed Loans
related to such Deferred Property and (iii) each of Purchaser and Stayton shall
perform their other obligations, and deliver such documents with respect to such
Deferred Property, as are required to be performed and delivered pursuant to
this Agreement.
 
(c) If any Unsatisfied Closing Condition has not been satisfied on or prior to
the Outside Closing Date, Purchaser, in its sole discretion may either (i) waive
the Unsatisfied Closing Condition and proceed with the Closing on such Deferred
Property or (ii) terminate this Agreement with respect to such Deferred Property
and (A) such Deferred Property shall be deemed excluded from the transactions
contemplated under this Agreement, (B) the aggregate Cash/Equity Portion of the
Purchase Price shall be reduced by the Allocated Cash/Equity Portion of the
Purchase Price applicable to such excluded Deferred Property, (C) Purchaser
shall not assume the Existing Loans related to such excluded Deferred Property
and (D) the balance of the Deposit shall be returned to Purchaser within three
(3) Business Days of notice thereof.
 
(d) In the event that Purchaser elects to waive the closing condition in Section
7.1(l) with respect to any Deferred Property (a "Deferred Property (Licensing)")
and proceed with the Closing on such Deferred Property (Licensing), Stayton
shall, at Purchaser's request, continue to operate and manage the Deferred
Property (Licensing) on Purchaser's behalf pursuant to a lease agreement
reasonably acceptable to Stayton and Purchaser, until such time as Purchaser or
Purchaser's Manager obtains all necessary Licensing Approvals (with rent under
such lease being equal to the net profits of such Deferred Property (Licensing)
after the payment to the Stayton or its Affiliate of a management fee in an
amount equal to 6% of the gross revenues collected at such Deferred Property
(Licensing)).
 
ARTICLE 9
 
ADDITIONAL COVENANTS
 
All of the following obligations, duties, provisions and agreements shall
survive Closing.
 
9.1 HSR Act Filing
 
(a) Each of the Parties will give any notices to, make any filings with, and use
its reasonable best efforts to obtain any authorizations, consents, and
approvals of Governmental Entities required under the HSR Act or similar state
Law.  With respect to the HSR Act, each of the Parties will make all necessary
filings as promptly as practicable.  Purchaser shall be
 

 
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responsible for payment of the filing fees with regard to the filing.  Stayton
shall coordinate and cooperate with Purchaser in exchanging such information and
assistance as Purchaser may reasonably request in connection with all of the
foregoing. Each party agrees to supply as promptly as practicable any additional
information and documentary material that may be requested by applicable
Governmental Entity pursuant to the HSR Act and to use reasonable best efforts
to cause the expiration or termination of the applicable waiting periods under
the HSR Act in order to facilitate a Closing as soon as practicable.
 
(b) In furtherance and not in limitation of the covenants of the parties
contained in Section 9.1(a), if any objections are asserted by any Governmental
Entity or any third party with respect to the transactions contemplated hereby
under any Law, then each of Purchaser and Stayton shall use their reasonable
best efforts to resolve any such objections so as to permit the consummation of
the transactions contemplated by this Agreement.
 
9.2 Employee Matters
 
(a) Not less than five (5) Business Days prior to Closing, Stayton shall deliver
to Purchaser an updated schedule of the Facility Employees and Corporate
Employees including the information required pursuant to Section
4.1(aa).  Within five (5) Business Days following the Sale Approval Order,
Purchaser shall submit to Stayton a list of the Corporate Employees, from which
list Purchaser shall select in writing within ten (10) Business Days prior to
the Closing Date, which Corporate Employees it will agree to offer employment to
on the Closing Date in accordance with this Section 9.2 (each such selected
Corporate Employees, a “Designated Corporate Employee”).
 
(b) On the Closing Date, (i) Stayton (or, if applicable, one of its Affiliates)
shall terminate the employment of those individuals who are Facility Employees
as of the Closing Date (if not previously terminated) and (ii) Purchaser shall
cause one of its Affiliates or another Person, which may include Purchaser's
Manager, to offer employment to such Facility Employees as of the Closing Date
at a base salary (or other wage or rate of pay) and bonus opportunity (if
applicable) consistent with the updated Schedule 4.1(aa) of the Disclosure
Schedule and upon such additional terms and conditions of employment as
Purchaser or the applicable employer shall determine.  Any such Facility
Employee who accepts such employment and commences work after the Closing Date
shall be referred to as a "Transferred Facility Employee".  Any Facility
Employee who is not a Transferred Facility Employee shall be referred to as a
“Non-Transferred Facility Employee”.  The parties do not believe the provisions
of the WARN Act apply to this transaction and do not expect to incur any such
liability as a result of actions taken or not taken prior to the Closing Date.
 
(c) On the Closing Date, (i) Stayton (or, if applicable, one of its Affiliates)
shall terminate the employment of those individuals who are Corporate Employees
as of the Closing Date (if not previously terminated) and (ii) Purchaser shall
cause one of its Affiliates or another Person, which may include Purchaser's
Manager, to offer employment to the Designated Corporate Employees in accordance
with Section 9.2(d).  Any such Designated Corporate Employee who accepts such
employment and commences work after the Closing Date shall be referred to as a
"Transferred Corporate Employee".  Any Corporate Employee who is not a
 

 
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Transferred Corporate Employee shall be referred to as a “Non-Transferred
Corporate Employee”.
 
(d) For a period of at least one hundred twenty (120) days after the Closing
Date, Purchaser shall take all action necessary to provide that during each
Transferred Corporate Employee’s period of employment with Purchaser’s Manager
or any of its Affiliates, (A) such employment shall be on terms and conditions
reasonably comparable to the terms and conditions applicable to such Transferred
Corporate Employee’s employment with Stayton immediately prior to the Closing
Date, and (B) such Transferred Corporate Employee shall receive a base salary
(or other wage or rate of pay) and bonus opportunity (if applicable) consistent
with the updated Schedule 4.1(aa). In addition, the Transferred Corporate
Employees shall be eligible for employee benefits that are no less favorable in
the aggregate than the employee benefits provided to such Transferred Corporate
Employees immediately prior to the Closing Date.
 
(e) Stayton shall be responsible for, and hereby agrees to indemnify Purchaser
for any losses related to, all compensation, wages and benefits accrued or
otherwise related to periods on or before the Closing Date in respect of the
Facility Employees and the Corporate Employees, including, without limitation,
all severance or termination pay and benefits payable to the Non-Transferred
Facility Employees and the Non-Transferred Corporate Employees.  Subject to
Section 9.2(f), Purchaser or the applicable employer shall be responsible, and
Purchaser hereby agrees to indemnify Stayton from and against any losses related
to, compensation, wages and benefits accrued or otherwise related to periods on
or after the Closing Date in respect of the Transferred Facility Employees and
Transferred Corporate Employees.  Without limiting the generality of the
foregoing, Purchaser shall not be responsible for any amounts owing or other
benefits or liabilities to any Non-Transferred Facility Employees or
Non-Transferred Corporate Employees or for any Stayton Benefit Plans.
 
(f) With respect to any Transferred Corporate Employee who is terminated by
Purchaser or its affiliate (or Purchaser’s Manager) between 120 days and 180
days following the Closing, Purchaser shall be responsible for the payment of
all severance and termination costs payable to such Transferred Corporate
Employee, provided, however, Stayton shall promptly pay to Purchaser (i) an
amount equal to one-month of base salary for each year that such terminated
Transferred Corporate Employee was employed by Stayton or its affiliates
(subject to a cap equal to six months of base salary) with respect to all
Transferred Corporate Employees who are not Key Corporate Employees and (ii) an
amount equal to six-months of base salary for the terminated Transferred
Corporate Employees who are Key Corporate Employees.  This Section 9.2 shall
survive the Closing Date.
 
(g) Stayton may determine in its sole discretion, to offer employment to
Non-Transferred Corporate Employees after the Closing upon terms and conditions
determined by Stayton in Stayton’s discretion.
 
(h) None of Stayton, Sunwest or any of their respective Affiliates shall hire or
solicit any of facility managers listed in Exhibit V (which Exhibit V shall be
updated at Closing to reflect any additional facility managers as of the Closing
Date) for employment by Stayton, Sunwest or any of their respective Affiliates,
for a period of twelve (12) months from and after the Closing Date; provided,
that nothing herein shall preclude Stayton, Sunwest or any of their
 

 
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Affiliates from undertaking recruiting activities of a general nature that are
not specifically directed at any facility managers so identified.
 
(i) Except to the extent specifically otherwise provided herein, none of
Purchaser, Emeritus or Columbia Pacific or any of Affiliates of Emeritus or
Columbia Pacific shall hire or solicit any of the facility managers or
executives of Stayton for employment prior to Closing and for a period of twelve
(12) months following any termination of this Agreement, provided that nothing
herein shall preclude any such party from undertaking recruiting activities of a
general nature that are not specifically directed at any such facility manager
or executive, and provided further that nothing herein shall preclude any such
party from hiring or soliciting facility managers or executives whose employment
is terminated by Stayton.
 
(j) It is expressly agreed that no employee of Stayton (including the Facility
Employees and the Corporate Employees) shall be a third party beneficiary of (or
otherwise have any rights in respect of) this Agreement.
 
9.3 Assumed Contracts.
 
Purchaser shall, at least forty-five (45) calendar days prior to the Closing
Date, deliver to Stayton a written notice setting forth those Operating
Contracts and Unexpired Leases which Purchaser requests be assumed on or before
the Closing Date (the "Contract Assumptions").  Stayton shall terminate all of
the Operating Contracts and Unexpired Leases on or prior to Closing other than
(i) the Non-Terminable Operating Contracts and (ii) the Operating Contracts and
Unexpired Leases included in the Contract Assumptions (respectively, the
"Assumed Operating Contracts" and "Assumed Unexpired Leases"), provided that any
such terminations shall be timed and effectuated in a manner to allow Stayton to
operate and maintain the Properties in the same manner as the Properties are
currently operated and maintained until the Closing Date.  Assumed Operating
Contracts and Assumed Unexpired Leases shall not be Required Removal Exceptions,
notwithstanding anything to the contrary in Exhibit M-3.  If any of the
Operating Contracts and Unexpired Leases terminated pursuant to this Section
require the payment of a termination fee pursuant to its terms, Stayton shall
pay, in addition to other amounts prorated at Closing, all such contractual
termination fees of such Operating Contracts and Unexpired Leases.  At Closing,
Purchaser shall only assume the Assumed Operating Contracts and Assumed
Unexpired Leases.  Notwithstanding anything to the contrary contained herein,
Purchaser shall not be required to assume (A) any Management Agreements or (B)
any Operating Contracts or Unexpired Leases with Sunwest Affiliate Vendors, and
any agreements pursuant to clauses (A) or (B) shall not constitute Assumed
Operating Contracts or Assumed Unexpired Leases unless Purchaser elects to
assume such agreements pursuant to its notice of Contract Assumptions.
 
9.4 Licensing Requirements.
 
In furtherance and not in limitations of the affirmative covenants of Stayton
and Purchaser set forth in Articles 5 and 6 hereof, respectively, the parties
further agree as follows:
 
(a) Applications for Approvals and CHOW Corrective Actions.
 

 
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(i)           Upon execution and delivery of this Agreement (A) Stayton shall,
and shall cause the Rollover Member to, provide Purchaser or Purchaser's Manager
with information, documentation and cooperation required on Stayton or Rollover
Member’s part for the completion by Purchaser's Manager of the application for
the Licensing Approvals, including, without limitation, executing documents
(including notices or letters to the appropriate Governmental Entity) and
permitting site visits and inspections by Purchaser, and (B) Purchaser and
Purchaser's Manager shall be  permitted to contact the personnel at the
Properties and Stayton’s outside consultants to obtain information,
documentation or cooperation needed by Purchaser to apply for Licensing
Approvals and Stayton shall direct such personnel and outside consultants to
reasonably cooperate with any such information, documentation or cooperation
requests from Purchaser or Purchaser's Manager (or its representatives).  Such
contacts shall be coordinated through, and facilitated by, a designated
executive of Stayton who shall arrange for expedited treatment of requests and
shall retain control copies of written information provided. Subject to Section
9.4(a)(v) Purchaser shall submit to the appropriate Governmental Entity
completed applications with schedules and required background information in
order to obtain all certificate of need approval or determinations of
non-reviewability, CLIA waivers, licensing approvals and other Governmental
Entity approvals as may be required for Purchaser or Purchaser's Manager (or
their respective Affiliates) to own and/or operate each Property and all
approvals required to process a change of ownership or new application for
Medicare and/or Medicaid or any other third party payor certification, if
applicable (collectively, the "Licensing Approvals").
 
(ii)           Purchaser shall and/or shall cause Purchaser's Manager, as
applicable, to diligently pursue in good faith the Licensing Approvals,
including without limitation, completing information requested in a timely
manner, attaching required information and exhibits to the Licensing Approvals
applications and promptly responding to requests made in connection with the
Licensing Approvals; provided, however, neither Purchaser nor Purchaser's
Manager shall be in breach of its obligations under this Section 9.4(a) in the
event that they are unable to submit such information as a result of a breach by
Stayton of Stayton's cooperation obligation as set forth in this Section 9.4(a).
 
(iii)           Subject to the adjustments contemplated by Section 8.5(j),
Purchaser shall be solely responsible for any and all costs associated with the
change of ownership process of the Properties acquired by Purchaser at Closing,
including, any physical plant or other changes required to bring the Properties
into compliance with the currently effective licensing and certification and
other legal requirements if and to the extent such Properties are not currently
in such compliance and such compliance is required as a matter of Law, whether
such costs or actions are required to be performed prior to the issuance of the
Licensing Approvals or are required as a further condition to be satisfied after
such issuance (“CHOW Corrective Actions”).  Notwithstanding anything to the
contrary contained herein, in the event that Purchaser reasonably determines
that the expenses to be incurred as a result of CHOW Corrective Actions shall
exceed $10,000,000 in the aggregate, Purchaser shall have the right to terminate
this Agreement with respect to all of the Properties; provided, however, for
purposes of this termination right, CHOW Corrective Actions shall not include
any improvements, betterments, renovations or repairs beyond the scope of the
specific written requirements imposed by
 

 
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the applicable Governmental Entity.  In the event that Purchaser terminates this
Agreement pursuant to this Section 9.4(a)(iii), Purchaser shall have no
liability with respect to any CHOW Corrective Actions and shall be entitled to
the return of the Deposit and neither Stayton nor Purchaser shall have any
further rights or obligations hereunder except as otherwise provided herein.
 
(iv)           Stayton shall, and shall cause the Rollover Member to, cooperate
with, and take all actions reasonably necessary and required, to facilitate the
efforts of Purchaser and/or Purchaser's Manager to obtain the Licensing
Approvals.  Such cooperation shall include, without limitation, at any time when
Purchaser is permitted to take such action pursuant to Section 9.4(a)(v),
permitting  inspections at the Properties by Governmental Entities if and as
necessary to obtain the Licensing Approvals, contracting for the performance of
any CHOW Corrective Actions (at Purchaser’s reasonable direction and subject to
the Closing expense adjustments contemplated by Section 8.5(j)) or at
Purchaser’s request, permitting Purchaser or Purchaser’s Manager, without
unreasonably interfering with normal business operations, to perform on
Stayton’s behalf any CHOW Corrective Actions, if and to the extent required by
any Governmental Authority as a condition to the issuance of the Licensing
Approvals, providing such documentation and information as may be required for
Purchaser and/or Purchaser's Manager to submit complete applications for the
Licensing Approvals and/or to respond to screening questions related to their
applications for the Licensing Approvals, executing such documents and/or taking
such actions as may be necessary in connection with the assignment of any
Medicare, Medicaid (however denominated by the applicable State) or other third
party payor provider agreements and contracts in effect with respect to the
Properties or the issuance to Purchaser or Purchaser's Manager of new Medicare,
Medicaid (however denominated by the applicable State) or other third party
payor provider agreements or contracts for Properties, and, in addition to the
resident notices and relinquishment notices contemplated by Sections 9.4(b) and
(c), providing such other notices as may be required by applicable Law or
agreements to be given to Governmental Entities or other Persons, which notices
shall be in the form prepared by Purchaser or, if prepared by Stayton, shall be
subject to the prior written approval of Purchaser. 
 
(v)           Stayton and Purchaser agree that upon entry of the Auction Order
(and not prior thereto), Purchaser is authorized to send pre-filing notices,
file for NPI numbers and apply for all Licensing Approvals and to disclose the
transactions contemplated by this Agreement to all Governmental Entities,
schedule inspections (provided that such inspection shall not occur prior to
Purchaser being selected as the Successful Bidder), provided, however, (i)
Purchaser and Stayton shall reasonably cooperate with each other to identify any
specific Properties for which the parties reasonably agree such applications
should be delayed in order to mitigate the occurrence of inspections or the
imposition of obligations for CHOW Corrective Actions at such Properties prior
to the completion of the Auction and (ii) Purchaser shall promptly withdraw all
applications and terminate all NPI numbers in the event that the Purchaser is
not selected as the Successful Bidder.  Commencing on the date on which
Purchaser is selected as the Successful Bidder, Purchaser shall be permitted to
take all other actions related to the Properties relating to Licensing
Approvals, including, without unreasonably interfering with normal
 

 
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business operations, curing any outstanding deficiencies (whether physical plant
or operational deficiencies).
 
(b) Notices to Residents.  For those Properties in jurisdictions that require
that advance notice be given to residents in connection with the transactions
contemplated by this Agreement, as soon as practical after entry of the Sale
Approval Order, Stayton will dispatch notification letters to each resident of
such Properties, in the form drafted by Purchaser and mutually acceptable to
Stayton and Purchaser, as such form may be modified to comply with and as may be
required by applicable Law and containing such other information as Purchaser
may reasonably request, including without limitation information concerning
Purchaser and/or Purchaser's Manager.  Following delivery by Stayton of such
notification letters, Purchaser may deliver additional introduction or
notification letters to each resident of the same Property, in the form drafted
by Purchaser and mutually acceptable to Stayton and Purchaser, as such form may
be modified to comply with and as may be required by applicable Law.
 
(c) Relinquishment of Authority.  If the Governmental Entity having jurisdiction
over issuance of Licensing Approvals requires Stayton to have relinquished in
writing Stayton's Licensing Approvals as a condition of Purchaser or Purchaser's
Manager obtaining Licensing Approval comparable to the Licensing Approval for
such Property on the date of this Agreement, Stayton shall execute and deliver
such documents as may be necessary for Stayton to relinquish Stayton's Licensing
Approvals effective on the Closing Date upon the request of Purchaser.
 
(d) Interim Operating Agreements.  If Purchaser and/or Purchaser's Manager has
not obtained all Licensing Approvals on or before the Closing Date with respect
to any Initial Closing Property (each a "Transition Property" and collectively,
the "Transition Properties"), then at Closing, Stayton, Purchaser, and
Purchaser's Manager shall enter into an interim lease and services agreement in
the form attached hereto as Exhibit S (collectively, the "Interim Operating
Agreements"); provided,  however, this provision shall not apply (i) in States
where the parties acknowledge and agree that the Interim Operating Agreements
are not permitted as a matter of law, (ii) in States where the parties
acknowledge and agree that Purchaser or Purchaser's Manager will be permitted,
as a matter of law, to operate under the applicable Stayton's license until the
Licensing Approvals have been issued to Purchaser or Purchaser's Manager, (iii)
if Purchaser or Purchaser's Manager has obtained all Licensing Approvals with
respect to a Property other than any approvals required for Purchaser or
Purchaser's Manager to bill under Medicare, Medicaid (however denominated by the
applicable State) or other third party payor and Purchaser or Purchaser's
Manager advises Stayton in writing of its election not to bill Medicare,
Medicaid (however denominated by the applicable State) or other third party
payor until such approvals have been granted to Purchaser or Purchaser's Manager
or (iv) in States where Purchaser or Purchaser’s Manager has received acceptable
assurances that Purchaser shall receive all Licensing Approvals upon any
required confirmation by the States that the transfer of the Property has
occurred.
 
(e) With respect to the covenants in this Section 9.4, “Stayton” shall be deemed
to include Stayton, Sunwest Record Owner, Sunwest Licenseholder and Sunwest
Manager which holds the applicable licenses related to the operation of the
Properties.
 

 
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9.5 Post-Closing Accounts
 
(a) Stayton shall retain its right, title and interest in and to all unpaid
accounts receivable with respect to the Properties which relate to the period
prior to the Closing Date, including, but not limited to, any accounts
receivable arising from rate adjustments which relate to such period even if
such adjustments occur after the Closing Date and Purchaser or Purchaser's
Manager, as applicable, shall retain its right, title and interest in and to all
unpaid accounts receivable with respect to the Properties which relate to the
period from and after the Closing Date.  On the Closing Date, with respect to
Resident Rents, Stayton shall provide Purchaser with a schedule setting forth by
Property and by resident their outstanding accounts receivable as of the Closing
Date and showing dates of service related to each such outstanding account
receivable.  Stayton, on the one hand, and Purchaser or Purchaser's Manager, on
the other hand, shall retain or remit any payments received by it on outstanding
Facility accounts receivable in a manner consistent with this Section 9.5.
 
(b) In furtherance and not in limitation of the requirements set forth in
Section 9.5(a), payments received on account of Resident Rents by Purchaser or
Purchaser's Manager from and after the Closing Date from third party payors,
including but not limited to Medicare, Medicaid (however denominated by the
applicable State), VA, managed care and health insurance, shall be handled as
follows:
 
(i)           If such payments specifically indicate on the accompanying
remittance advice that they relate to the period prior to the Closing Date, they
shall be forwarded to or as directed by Stayton, along with the applicable
remittance advice;
 
(ii)           If such payments specifically indicate on the accompanying
remittance advice that they relate to the period on or after the Closing Date,
they shall be retained by Purchaser or Purchaser's Manager;
 
(iii)           If such payments specifically indicate on the accompanying
remittance advice that they relate to the period both prior to and on or after
the Closing Date, the portion thereof which relates to the period prior to the
Closing Date shall be handled in the manner set forth in Section 9.5(b)(i) and
the portion thereof which relates to the period on and after the Closing Date
shall be handled in the manner set forth in Section 9.5(b)(ii);
 
(iv)           If the period(s) for which such payments are made is not
indicated on the accompanying remittance advice, then:
 
 
(1)
during the first ninety (90) days after the Closing Date, the payment shall be
deemed to relate (A) first, to any amounts which are due and owing for goods
sold or services rendered or to be rendered by Stayton and/or Purchaser or
Purchaser’s Manager, as applicable, during the month in which the Closing occurs
to the resident on whose behalf such payment is being made, with such payment to
be allocated between Stayton and Purchaser on a pro

 

 
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rata basis based on the number of days in the month preceding the Closing Date
and the number of days in the month from and after the Closing Date, (B) second,
if and to the extent there are funds remaining after the application of the
payment in the manner set forth in clause (A), then to amounts, if any, which
are due and owing to Stayton for goods sold or services rendered to the resident
on whose behalf such payment is being made during the month immediately prior to
the month in which the Closing occurs,  (C) third, if and to the extent there
are funds remaining after the application of the payment in the manner set forth
in clauses (A) and (B), to any amounts which are due and owing for goods sold or
services rendered or to be rendered by Purchaser or Purchaser’s Manager, as
applicable, during any period from and after the month in which the Closing
occurs to the resident on whose behalf such payment is being made and (D)
fourth, if and to the extent there are funds remaining after the application of
the payment in the manner set forth in clauses (A), (B) and (C), to any other
amounts which are due and owing for goods sold or services rendered by Stayton
prior to Closing to the resident on whose behalf such payment is being made. Any
such payments received shall be remitted to or as directed by Stayton or
retained by Purchaser or Purchaser's Manager in accordance with the foregoing;
and
 
 
(2)
from and after the ninety first (91st) day after the Closing Date, such payment
shall be applied to amounts which are due and owing for goods sold or services
rendered by Purchaser or Purchaser’s Manager from and after the Closing Date to
the resident on whose behalf such payment is being made, with the excess, if
any, remitted to Stayton if and to the extent such resident has any outstanding
balances for services rendered or goods sold to such resident by Stayton prior
to the Closing Date.

 
(c) In furtherance and not in limitation of the requirements set forth in
Section 9.5(a), payments received on account of Resident Rents by Stayton from
and after the Closing Date from third party payors, including but not limited to
Medicare, Medicaid (however denominated by the applicable State), VA, managed
care and health insurance, shall be handled as follows:
 
(i)           If such payments specifically indicate on the accompanying
remittance advice that they relate to the period prior to the Closing Date, they
shall be retained by Stayton;
 
(ii)           If such payments indicate on the accompanying remittance advice
that they relate to the period on or after the Closing Date they shall be
remitted by Stayton to Purchaser or Purchaser's Manager along with the
applicable remittance advice;
 

 
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(iii)           If such payments specifically indicate on the accompanying
remittance advice that they relate to the period both prior to and on or after
the Closing Date, the portion thereof which relates to the period prior to the
Closing Date shall be handled in the manner set forth in Section 9.5(c)(i) and
the portion thereof which relates to the period on and after the Closing Date
shall be handled in the manner set forth in Section 9.5(c)(ii);
 
(iv)           If the period(s) for which such payments are made is not
indicated on the accompanying remittance advice, then:
 
 
(1)
during the first ninety (90) days after the Closing Date, the payment shall be
deemed to relate (A) first, to any amounts which are due and owing for goods
sold or services rendered or to be rendered by Stayton and/or Purchaser or
Purchaser’s Manager, as applicable, during the month in which the Closing occurs
to the resident on whose behalf such payment is being made, with such payment to
be allocated between Stayton and Purchaser on a pro rata basis based on the
number of days in the month preceding the Closing Date and the number of days in
the month from and after the Closing Date, (B) second, if and to the extent
there are funds remaining after the application of the payment in the manner set
forth in clause (A), then to amounts, if any, which are due and owing to Stayton
for goods sold or services rendered to the resident on whose behalf such payment
is being made during the month immediately prior to the month in which the
Closing occurs,  (C) third, if and to the extent there are funds remaining after
the application of the payment in the manner set forth in clauses (A) and (B),
to any amounts which are due and owing for goods sold or services rendered or to
be rendered by Purchaser or Purchaser’s Manager during any period from and after
the month in which the Closing occurs to the resident on whose behalf such
payment is being made and (D) fourth, if and to the extent there are funds
remaining after the application of the payment in the manner set forth in
clauses (A), (B) and (C), to any other amounts which are due and owing for goods
sold or services rendered by Stayton prior to Closing to the resident on whose
behalf such payment is being made. Any such payments received shall be remitted
to or as directed by Purchaser or Purchaser’s Manager or retained by Stayton in
accordance with the foregoing; and

 
 
(2)
from and after the ninety first (91st) day after the Closing Date, such payment
shall be applied to amounts which are due and owing for goods sold or services
rendered by Purchaser or Purchaser’s Manager from and after the Closing Date to
the resident on whose behalf such payment is being made, with the excess, if
any, remitted to Stayton if and to the extent such resident

 

 
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has any outstanding balances for services rendered or goods sold to such
resident by Stayton prior to the Closing Date.
 
(d) Any payments on account of Resident Rents received by Stayton, Purchaser or
Purchaser's Manager after the Closing Date from or on behalf of private pay
patients with outstanding balances as of the Closing Date, shall be handled as
follows (and the party receiving such amounts shall remit or retain such
payments accordingly):
 
(i)           If such payments specifically indicate that they relate to the
period prior to the Closing Date, they shall be retained by or remitted to
Stayton, as applicable;
 
(ii)           If such payments specifically indicate that they relate to the
period on or after the Closing Date they shall be retained by or remitted to
Purchaser or Purchaser's Manager;
 
(iii)           If such payments specifically indicate that they relate to the
period both prior to and on or after the Closing Date, the portion thereof which
relates to the period prior to the Closing Date shall be handled in the manner
set forth in Section 9.5(d)(i) and the portion thereof which relates to the
period on and after the Closing Date shall be handled in the manner set forth in
Section 9.5(d)(ii);
 
(iv)           If the period(s) for which such payments are made is not
indicated, then:
 
 
(1)
during the first ninety (90) days after the Closing Date, the payment shall be
deemed to relate (A) first, to any amounts which are due and owing for goods
sold or services rendered or to be rendered by Stayton and/or Purchaser or
Purchaser’s Manager, as applicable, during the month in which the Closing occurs
to the resident on whose behalf such payment is being made, with such payment to
be allocated between Stayton and Purchaser on a pro rata basis based on the
number of days in the month preceding the Closing Date and the number of days in
the month from and after the Closing Date, (B) second, if and to the extent
there are funds remaining after the application of the payment in the manner set
forth in clause (A), then to amounts, if any, which are due and owing to Stayton
for goods sold or services rendered to the resident on whose behalf such payment
is being made during the month immediately prior to the month in which the
Closing occurs,  (C) third, if and to the extent there are funds remaining after
the application of the payment in the manner set forth in clauses (A) and (B),
to any amounts which are due and owing for goods sold or services rendered or to
be rendered by Purchaser or Purchaser’s Manager during any period from and after
the month in which the Closing occurs to the resident on whose behalf such
payment is being made and (D) fourth, if and to the extent there are funds

 

 
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remaining after the application of the payment in the manner set forth in
clauses (A), (B) and (C), to any other amounts which are due and owing for goods
sold or services rendered by Stayton prior to Closing to the resident on whose
behalf such payment is being made. Any such payments received shall be remitted
to or as directed by Purchaser or Purchaser’s Manager or retained by Stayton in
accordance with the foregoing;
 
 
(2)
from and after the ninety first (91st) day after the Closing Date, such payment
shall be applied to amounts which are due and owing for goods sold or services
rendered by Purchaser or Purchaser’s Manager from and after the Closing Date to
the resident on whose behalf such payment is being made, with the excess, if
any, remitted to Stayton if and to the extent such resident has any outstanding
balances for services rendered or goods sold to such resident by Stayton prior
to the Closing Date.

 
(e) Nothing herein shall be deemed to limit in any way Stayton's rights and
remedies to recover accounts receivable due and owing to Stayton under the terms
of this Agreement so long as (i) no eviction or termination action is commenced
against any resident with respect to such collection attempts and (ii) no
Encumbrance is placed on any Property.
 
(f) Each of the parties hereto shall have the right, upon request and during
normal business hours, to inspect the books and records of the other parties to
ensure their compliance with their obligations under this Section 9.5  In the
event the parties mutually determine that any payment hereunder was misapplied
by the parties, the party which erroneously received said payment shall remit
the same to the other within ten (10) Business Days after such determination is
made, provided that Purchaser shall not be required to remit until the 20th
calendar day (or the next succeeding Business Day if such day is not a Business
Day) of the following month.
 
(g) The payments due hereunder shall be remitted by each party to the other on
or prior to the 20th calendar day (or the next succeeding Business Day) of the
month following receipt.
 
(h) Subject to the rights granted to Purchaser under Section 9.5(f), the failure
of either party to forward to the other party any payment received by such party
in accordance with the terms of this Section 9.5, shall entitle the other party
(among all other remedies allowed by law and this Agreement) to interest on the
amount owed at the rate per annum equal to the Prime Rate as set forth in the
Money Rates Section of The Wall Street Journal, as the same may change from time
to time, plus 5%, simple interest, until such payment has been paid.  The
payment of any interest imposed under this Section 9.5, if any, shall be made
together with the underlying payment therefor.
 
(i) Subject to the rights granted to Purchaser under Section 9.5(f), the
obligations of the parties to forward the accounts receivable payments pursuant
to this Section 9.5 are absolute and unconditional and irrespective of any
circumstances whatsoever which
 

 
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might constitute a legal or equitable discharge, recoupment, offset,
counterclaim or defense of the parties, the right to assert any of which with
respect to proceeds of any accounts receivable is hereby waived.
 
(j) Provided that Stayton provides to Purchaser on the Closing Date, the
schedule of outstanding accounts receivable contemplated by Section 9.5(a),
Purchaser shall provide to Stayton, on a monthly basis for the first four months
after Closing to enable Stayton to track Purchaser's obligations under this
Section 9.5: (a) a schedule setting forth by Property and by resident the
residents' outstanding accounts receivable; and (b) a rent roll for each
Property. Stayton shall use such information solely for the purpose set forth in
this Section 9.5(j) and for no other purpose.  Stayton shall provide to
Purchaser on a monthly basis a written accounting of the payments it has
received under this Section 9.5 for the first four months after the Closing.
 
With respect to all covenants in this Section 9.5, “Stayton” shall be deemed to
refer to include Stayton, Sunwest Record Owner, Sunwest Licenseholder and
Sunwest Manager.
 
9.6 Preservation of, and Stayton's Access to, Records
 
(a) After the Closing, so long as Purchaser or an Affiliate of Purchaser retains
ownership of a Property, Purchaser or Purchaser's Manager shall keep and
preserve all medical records, employee records and other records that it
obtained from Stayton for persons who were residents or employees of such
Property but in no event longer than seven (7) years following the delivery of
such records to Purchaser at the Closing, or such time as may be required by any
applicable Law if longer than seven years.  Notwithstanding the foregoing, none
of the Purchaser, Purchaser's Manager nor any Affiliate of Purchaser or
Purchaser's Manager shall assume any liability with respect to inaccurate,
missing or incomplete records obtained from Stayton pursuant to this Section
that pertain to the period of time prior to the Closing Date.
 
(b) After the Closing, all records pertaining to the operation of the Property
prior to the Closing Date shall be open for inspection and copying (at Stayton's
expense) by the CRO, the Receiver and Stayton, and their respective Affiliates
and agents during regular business hours, among other purposes: (i) to evaluate,
audit and resolve claims and complete the claims allowance process as stated in
the Distribution Plan; (ii) prepare, complete, file and resolve the returns and
reports; and (iii) to the extent required by applicable Law or Order or pursuant
to pending litigation involving a resident to whom such record or chart refers
and in response to a subpoena or Order or for purposes of introduction into
evidence.
 
(c) Purchaser acknowledges and agrees that the medical records, employee records
and other records described in this Section 9.6 to the extent the same are
delivered to Purchaser by Stayton at Closing, are unique and the event of a
breach by Purchaser of its obligations under this Section 9.6 shall entitle
Stayton to compel performance or to seek to enjoin a breach by Purchaser of its
obligations under this Section 9.6.
 
9.7 Applicability of Licensure Laws
 
Notwithstanding any other provision of this Agreement to the contrary, all
actions to be taken by a party under this Agreement must be in compliance with
all applicable licensure laws and regulations ("Licensure Laws").  In the event
a provision of this Agreement is not
 

 
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consistent with the requirements of the Licensure Laws (such as a prohibition on
transfer of resident contracts or other operational assets prior to Licensing
Approval being obtained), then the Licensure Laws shall prevail over such
inconsistent provisions and the parties agree to work together in good faith to
achieve the intent of this Agreement through other reasonable approaches.
 
9.8 Cooperation Following Closing
 
After the Closing, Purchaser and Purchaser's Manager shall direct their
respective employees to render cooperation to Stayton, the CRO and the Receiver,
at Stayton's expense, as Stayton, the CRO or the Receiver may reasonably
request, including, without limitation, to the extent reasonably requested,
providing information or testimony, in aid of the purposes enumerated in Section
9.6(b).
 
9.9 Cost Reports
 
Stayton shall file as and when due any final Medicare, Medicaid (however
denominated in the applicable State) or other third party payor cost reports
with respect to periods prior to Closing and shall provide Purchaser and
Purchaser's Manager with a copy thereof, it being understood and agreed that
Stayton's failure to timely file such cost reports could adversely affect the
reimbursement paid to Purchaser or Purchaser's Manager from and after the
Closing. Upon request Purchaser or Purchaser's Manager shall have the right to
review and consult with respect to any such cost reports before the filing
thereof and to facilitate such review Stayton shall provide Purchaser or
Purchaser's Manager with a copy thereof no later than ten (10) days prior to the
date on which the same are required to be filed.
 
9.10 Use of Excluded Business Names/Policies and Procedures
 
(a)           Purchaser and Purchaser's Manager shall have the right, for a
period of up to 270 days after the Closing, to use the Excluded Business Names
solely in connection with the operation of the Properties and only if and to the
extent they appear on the signage and collateral materials, such as marketing
materials, Resident Agreements, and policies and procedures, then being used in
connection with the operation of the Properties. Stayton acknowledges and agrees
that at such time as Purchaser replaces the signage at the Properties, the
current signage will be removed and destroyed unless Stayton makes other
arrangements for the delivery thereof to Stayton.
 
(b)           If and to the extent required to comply with law, Purchaser and
Purchaser's Manager shall have the right to use Stayton's operating policies and
procedures (including the use of any menus or other items required by law) with
respect to the Properties for a period of up to 270 days after the Closing but
only in connection with the operation of the Properties.
 
9.11 Post-Closing Operation of Properties
 
Purchaser shall indemnify, defend and hold harmless Stayton, and Stayton's
officers, directors, agents, employees, Affiliates and insurers, including,
without limitation, the CRO and the Receiver, (collectively, "Stayton
Indemnified Parties") from and against any and

 
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all loss, liability, expense or damage (“Losses”) which any Seller Indemnified
Party may suffer or incur as a result of, or arising, in whole or in part from
any act, omission, occurrence, condition, fact or event occurring at the
Properties after the Closing Date, provided, however, the foregoing indemnity
shall not apply to (A) the Excluded Obligations and (B) any Losses proximately
caused by the gross negligence or willful misconduct of the Stayton Indemnified
Parties.

ARTICLE 10
AUCTION, BREAK-UP FEE AND EXPENSE REIMBURSEMENT

 
10.1 Sale & Auction Motion and Auction Order
 
Within two (2) Business Days following the date of this Agreement, Stayton shall
file with the Court a copy of this Agreement and a notice of hearing or motion
materials (all in form and substance reasonably satisfactory to Purchaser)
("Sale & Auction Process Motion"), as applicable, pursuant to which Stayton will
seek approval of the Auction Order, which, for the avoidance of doubt, shall
include approval by the Court of this Agreement and the transactions
contemplated thereby, including, as approved by the Court, the Break-Up Fee, the
Expense Reimbursement, the Stipulated Prior Expenses and the Bid Procedures
attached hereto as Exhibit L.  Stayton shall not modify or withdraw the Sale &
Auction Process Motion without Purchaser's consent.

10.2 Break-Up Fee and Expense Reimbursement
 
(a) Stayton agrees (in addition to all other rights and remedies as Purchaser
may have hereunder and subject to entry of the Auction Order), to pay to
Purchaser an amount equal to the sum of (a) the Expense Reimbursement; plus (b)
the Break-Up Fee, which sum of the Expense Reimbursement and the Break-Up Fee
shall be payable to Purchaser in accordance with Section 10.2(c), in the event
that: (x) Stayton willfully fails to close the transactions contemplated by this
Agreement after the Court enters the Sale Approval Order, (y) the Court approves
a sale of the Properties in favor of a Successful Bidder other than Purchaser or
Purchaser's assignee or (z) the sale of the Properties to Purchaser pursuant to
this Agreement does not occur because the Court, after entry of the Auction
Order, confirms a plan of reorganization that does not include the sale of the
Properties to Purchaser pursuant to this Agreement (including, without
limitation, the Bid Procedures).  For avoidance of doubt, Stayton shall not be
deemed to have willfully failed to Close the transactions contemplated by this
Agreement solely because of Stayton's breach or failure to comply with any of
Stayton's representations or warranties hereunder or due to failure of any
condition contained in Section 7.1, unless such misrepresentation by Stayton or
failure to satisfy a closing condition by Stayton is willful.
 
(b) Purchaser and Stayton agree that the expenses incurred by Purchaser as of
the date of this Agreement which would be subject to Expense Reimbursement under
this Agreement is $4,156,105.80 (the "Stipulated Prior Expenses").  In addition
to the Stipulated Prior Expenses, upon termination of this Agreement by
Purchaser, Purchaser shall advise Stayton of the total amount of expenses for
which it seeks reimbursement pursuant to the Expense
 

 
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Reimbursement, which notice shall include an itemized statement of such
costs.  Any dispute with respect to the Expense Reimbursement shall be submitted
to the Court by motion.
 
(c) In the event that any Expense Reimbursement or Break-Up Fee is due pursuant
to this Section 10.2, Stayton shall make such payment to Purchaser by wire
transfer of immediately available federal funds to an account to be designated
by Purchaser on the following dates:
 
(i) in the event that the Expense Reimbursement or Break-Up Fee is due as a
result of clause (x) in Section 10.2(a), then Stayton shall pay such amounts
within ten (10) Business Days after that date such willful failure to close
occurs;
 
(ii) in the event that the Expense Reimbursement or Break-Up Fee is due as a
result of clause (y) in Section 10.2(a), then Stayton shall pay such amounts (i)
on the date that the initial closing of all or any of the Properties to such
Successful Bidder or (ii) if the Final Sale Agreement with the Successful Bidder
is terminated, within ten (10) Business Days after that date of such
termination; and
 
(iii) in the event that the Expense Reimbursement or Break-Up Fee is due as a
result of clause (z) in Section 10.2(a), then Stayton shall pay such amounts
within ten (10) Business Days after that date after the confirmation of a plan
of reorganization that does not include the sale of the Properties to Purchaser
pursuant to this Agreement.
 

10.3 Bid Requirements
 
Qualifying bids for the Property must meet the criteria set forth in the Bid
Procedures.

ARTICLE 11
 
CONDEMNATION AND CASUALTY
 
11.1 Condemnation
 
If, prior to the Closing Date, all or any material portion of any Property is
taken by eminent domain, Stayton shall notify Purchaser in writing of such fact
and Purchaser shall have the option to (A) proceed to Closing with respect to
all Properties, (B) terminate this Agreement in its entirety, or (C) terminate
this Agreement with respect to any Property with respect to which a material
portion of such Property is taken by eminent domain (but this Agreement shall
remain in full force and effect with respect to the other Properties), in which
case (i) such Property shall be excluded from the transactions contemplated
under this Agreement, (ii) the aggregate Cash/Equity Portion of the Purchase
Price payable by the Purchaser shall be reduced by the Allocated Cash/Equity
Portion of the Purchase Price applicable to such excluded Property and (iii)
Purchaser shall not assume the Existing Loans related to such excluded
Property.  Purchaser shall make the foregoing option by notice to Stayton within
ten (10) days after receipt of Stayton's notice.  If Purchaser elects to proceed
to Closing with respect to all Properties pursuant to this Section 11.1, Stayton
shall assign and turn over, and Purchaser shall be entitled to receive and keep,
all awards for the taking by eminent
 

 
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domain. A taking shall be considered "material" if it would decrease the value
of an individual Property in excess of 10% of the Allocated Purchase Price for
such Property.  A pending or contemplated taking set forth in Section 4.1(z) of
the Disclosure Schedule shall not be deemed material for purposes of this
Section 11.1
 
11.2 Casualty
 
Except as otherwise provided herein, the risk of loss for any damage or loss
from fire or other casualty to the Property shall remain with Stayton until such
time as title has passed to Purchaser pursuant to this Agreement.  If a material
part of an individual Property is damaged or destroyed by fire or other
casualty, Stayton shall notify Purchaser in writing of such fact and Purchaser
shall have the option to (A) proceed to Closing with respect to all Properties,
(B) terminate this Agreement in its entirety, or (C) terminate this Agreement
with respect to any Property with respect to which a material portion of such
Property is damaged or destroyed by fire or other casualty (but this Agreement
shall remain in full force and effect with respect to the other Properties), in
which case (i) such Property shall be excluded from the transactions
contemplated under this Agreement, (ii) the aggregate Cash/Equity Portion of the
Purchase Price payable by the Purchaser shall be reduced by the Allocated
Cash/Equity Portion of the Purchase Price applicable to such excluded Property
and (iii) Purchaser shall not assume the Existing Loans related to such excluded
Property.  Purchaser shall make the foregoing option by notice to Stayton within
ten (10) days after receipt of Stayton's notice.  If Purchaser elects to proceed
to Closing with respect to all Properties pursuant to this Section 11.2, Stayton
shall assign to Purchaser at the Closing all of Stayton's right, title and
interest in and to the insurance proceeds awarded or to be awarded to Stayton as
the result of such damage or destruction, in which case the Purchase Price shall
be reduced by an amount, if any, equal to the excess of the reasonably estimated
amount required to complete repairs to the subject Property over the amount of
such insurance proceeds.  If there is damage to or destruction of an immaterial
part of a Property by fire or other casualty, Closing shall not be delayed and,
at the option of Purchaser, Stayton shall assign to Purchaser at the Closing all
of Stayton's right, title and interest in and to the insurance proceeds awarded
or to be awarded to Stayton as the result of such damage or destruction and the
Purchase Price shall be reduced by an amount equal to the excess of the
reasonably estimated amount required to complete such repairs over the amount of
such insurance proceeds.  An "immaterial" part of any individual Property shall
be deemed to have been damaged or destroyed if the reasonably estimated cost of
repair or replacement thereof shall be less than 10% of the Allocated Purchase
Price for such Property, and a "material" part of any individual Property or
group of Properties shall be deemed to have been damaged or destroyed if the
cost of repair or replacement thereof shall be equal to or in excess of 10% of
the Allocated Purchase Price thereof.
 
11.3 Effect of Termination Under this Article 11
 
Upon any termination of this Agreement with respect to all of the Properties
pursuant to this Article 11, the Deposit shall be returned to Purchaser, and
thereafter neither Stayton nor Purchaser shall have any further rights or
obligations hereunder, except with respect to Section 14.2.
 

 
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ARTICLE 12
 
TERMINATION
 
12.1 Termination
 
Subject to Section 8.6, Article 11 and Article 13 and, with respect to any
termination by Stayton, subject to approval of the Court, this Agreement may be
terminated in its entirety, or, in the limited circumstances provided herein, as
to some, but not all of the Properties, prior to the Closing only:
 
(a) by mutual written consent executed by Stayton and Purchaser at any time;
 
(b) by Purchaser if the Auction Order is not entered by the Court on or before
January 28, 2010;
 
(c) by Purchaser if the Closing has not occurred by April 30, 2010 but only if
the conditions to Purchaser's obligations set forth in Section 7.1 shall not
have been satisfied or waived;
 
(d) by Stayton or Purchaser if the Closing has not occurred on or before
July 30, 2010 (the "Outside Closing Date");
 
(e) in accordance with the provision of Sections 2.5(b), 7.1(e), 7.1(i), 8.6,
9.4(a)(iii) or 13.2.;
 
(f) in the event that Purchaser is not selected as the Successful Bidder
pursuant to the Bid Procedures; or
 
(g) by Stayton if the definitive documentation evidencing the modification of
the CS-20 Loan and CS-27 Loan as contemplated by the modification term sheets
entered into on or about the date hereof between Stayton and the applicable
lender is not executed and delivered within two (2) Business Days following the
entry of the Auction Order (and in such event, Stayton may withdraw the Sale &
Auction Process Motion).
 
12.2 Effect of Termination
 
Subject to Sections 2.5(b), 7.1(e), 7.1(i), 8.6, 10.2, 11.3 and Article 13, in
the event of termination of this Agreement pursuant to Section 12.1:
 
(a) each party shall redeliver all documents, work papers and other material of
any other party relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the same;
 
(b) no confidential information received by any party with respect to the
business of any other or its Affiliates shall be disclosed to any third party,
unless required by law or court order;
 

 
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(c) the Deposit shall be returned to the party entitled thereto in accordance
with the terms of this Agreement; and
 
(d) all obligations of the parties hereto under this Agreement (other than
Sections 2.5(b), 7.1(e), 7.1(i) and 10.2) shall terminate and there shall be no
liability of any party hereto to any other party and each party hereto shall
bear its own expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement.
 
ARTICLE 13
 
DEFAULT AND REMEDIES
 
13.1 Purchaser's Default
 
If all of the conditions to the obligations of Purchaser to consummate the
transactions contemplated by this Agreement are satisfied in full and Purchaser
fails to so consummate the transactions contemplated by this Agreement on the
date for performance provided herein or in accordance with the provisions of
Article 8, then Stayton shall give Purchaser written notice thereof and
opportunity to cure and if Purchaser does not cure within two (2) business days
thereafter, then Stayton's sole and exclusive remedy shall be to elect to
terminate this Agreement by giving notice of such termination to Purchaser and
the Escrow Agent, whereupon this Agreement will be terminated, the Escrow Agent
shall disburse the balance of the Deposit to Stayton, and neither party shall
have any further rights or obligations under this Agreement except as expressly
provided herein.  Purchaser and Stayton agree that it would be impractical and
extremely difficult to estimate the damages that Stayton may suffer.  Therefore,
Purchaser and Stayton agree that a reasonable estimate of the total net
detriment that Stayton would suffer in the event that Purchaser defaults and
fails to complete the purchase of the Property is and shall be the then face
amount of the Deposit, and Stayton's sole and exclusive remedy (whether at law
or in equity), shall be to receive proceeds from the Deposit as provided herein
and if such Deposit is non-negotiable or has been cancelled or terminated, good
funds in the face amount of the Deposit.  The Deposit will be the full, agreed
and liquidated damages in the event that Purchaser defaults and fails to
complete the purchase of the Property.  The payment of the Deposit as liquidated
damages is not intended as a forfeiture or penalty, but is intended to
constitute liquidated damages to Stayton.
 
13.2 Stayton's Default
 
Subject to Section 2.5(b), 7.1(e), 7.1(i), 8.6 and 10.2, if any warranty or
representation of Stayton made herein shall prove untrue in any material respect
or if Stayton shall fail to perform any of its material obligations under this
Agreement on or prior to the date for performance provided herein or if by the
Scheduled Closing Date, Stayton through its acts or omissions shall have failed
to satisfy the conditions to the obligations of the Purchaser contained herein,
then Purchaser shall give Stayton written notice thereof and opportunity to
cure, and if Stayton does not cure within two (2) business days thereafter, then
Purchaser's sole remedy at Purchaser's sole discretion, shall be to either:  (i)
obtain specific performance of Stayton's obligations hereunder to complete the
transaction, (and if applicable, accept title to the Property with a monetary
encumbrance on a Property provided that the Purchase Price shall be reduced by
the amount necessary to remove such monetary Encumbrance as an Encumbrance on
the
 

 
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Property), or (ii) terminate this Agreement, in which event Purchaser shall
receive a return of its Deposit.  Whereupon this Agreement shall be terminated,
and neither party shall have any further rights or obligations under it except
as expressly provided herein.
 
ARTICLE 14
GENERAL PROVISIONS

14.1 Notices
 
All notices and other communications under this Agreement must be in writing and
shall be deemed to be properly given or served by hand delivery or overnight
courier, or by facsimile or uneditable electronic mail (e.g., Adobe/PDF) with a
copy sent by overnight courier delivery, or by depositing same in the mail in
the United States, postage prepaid and registered or certified mail, return
receipt requested, addressed to the respective party to whom the same is
intended to be given or served at the address set forth below:
 
If to Stayton:                                           Clyde A. Hamstreet
One SW Columbia
Suite 1000
Portland, OR  97258
(503) 223-6222 (voice)
(503) 546-6579 (facsimile)
chamstreet@hamstreet.net (email)

with a copy to:                                           Thomas J. Wettlaufer
3723 Fairview Industrial Drive, Suite 270
Salem, OR  97302-0006
(503) 485-8596 (phone)
tom.wettlaufer@sunwestmanagement.com (email)

Michael A. Grassmueck, CIRA
Fiduciary and Insolvency Services
Grassmueck Group
P.O. Box 3649
Portland, OR 97208
(503)294-9928 (Phone)
(503)294-7961 (Fax)
mgrassmueck@grassmueckgroup.com  (email)

 
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Albert N. Kennedy
Tonkon Torp LLP
1600 Pioneer Tower
888 SW Fifth Avenue
Portland, OR  97204
(503) 802-2013 (Phone)
(503) 972-3713  (Fax)
al.kennedy@tonkon.com (email)

David Zaro
Allen Matkins Leck Gamble Mallory & Natsis, LLP
515 South Figueroa St. 9th Floor
Los Angeles, CA 90071-3309
(213) 622-5555 (Phone)
(213) 620-8816 (Fax)
dzaro@allenmatkins.com  (email)

If to Purchaser:
BRE/SW Portfolio LLC
c/o The Blackstone Group
345 Park Avenue
New York, New York  10154
Attention:   Mr. David Roth
Telephone:                      (212) 583-5885
Facsimile:                      (212) 583-5202
roth@blackstone.com (email)

with a copy to:

BRE/SW Portfolio LLC
c/o The Blackstone Group
345 Park Avenue
New York, New York  10154
Attention:   Mr. Andrew Lax
Telephone:                      (212) 583-5158
Facsimile:                      (212) 583-5202
lax@blackstone.com (email)

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attn: Gregory J. Ressa

 
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(212) 455-7430 (Phone)
(212) 455-2502 (Fax)
gressa@stblaw.com (email)

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attn: Erik G. Quarfordt
(212) 455-2459 (Phone)
(212) 455-2502 (Fax)
equarfordt@stblaw.com (email)

Emeritus Corporation
3131 Elliott Avenue
Suite 500
Seattle, WA  98121
Attn: Eric Mendelsohn, Sr Vice President Corporate Development
(206) 301-4493 (Phone)
(206) 357-7388 (Fax)
eMendelsohn@emeritus.com (email)

CPDF II, LLC
c/o Columbia Pacific Management, Inc.
1910 Fairview Ave., Suite 202
Seattle, WA  98102
Attention:   Stan Baty
Telephone:                      (206) 728-9063
Facsimile:                      (206) 728-9327
stanb@col-pac.com  (email)

 
If to Escrow Agent:  
                                      Chicago Title Insurance Company
711 Third Ave, #500
New York, NY 10017
Attn:  Neal Miranda, VP/Senior Counsel
212-880-1237 (Direct)
917-591-2689 (Fax)
neal.miranda@ctt.com  (email)

All such notices and other communications shall, except as hereinafter set
forth, be effective upon delivery or receipt, or if given by means of facsimile
or electronic transmission, upon receipt as stated on the transmission
confirmation notice, provided, however, that if the confirmed time of receipt is
later than 5:00 p.m. local time at the receiving party, the notice will be
deemed received on the following Business Day.  Rejection or other refusal to
accept, or the
 

 
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inability to deliver because of a changed address of which no notice was given
hereunder shall be deemed to be receipt of the notice or other
communications.  Each party shall have the right from time to time and at any
time, upon at least ten days prior written notice thereof in accordance with the
provisions hereof, to change its address by specifying any other address within
the United States of America; provided, however, notwithstanding anything
contained herein to the contrary, in order for such notice of address change to
be effective it must actually be received.
 
14.2 Brokers
 
Stayton and Purchaser each represent and warrant to each other that they have
not dealt with any broker, salesperson or finder in connection with the
transactions contemplated herein other than Moelis & Company LLC (collectively,
the "Brokers").  Stayton shall pay all commissions due to the Brokers in
connection with this sale pursuant to one or more separate agreements to be made
between Stayton and the Brokers.  Each party hereto shall indemnify, defend, and
hold harmless the other party hereto from and against any demand or claim
(including, without limitation, reasonable attorneys' fees and expenses)
asserted against the indemnified party by any broker or salesperson for a
brokerage commission or fee, which claim results from the act of the
indemnifying party or any misrepresentation or breach of covenant by the
indemnifying party pursuant to this Section 14.2.
 
14.3 Assignment
 
This Agreement shall inure to the benefit of, and be binding upon, the parties
hereto, their successors, administrators and assigns.  Prior to the Closing
Date, Purchaser shall not assign its rights or obligations under this Agreement,
or any interest herein, without the prior written consent of Stayton.  Any
attempt to assign Purchaser's interest contrary to this Section 14.3 shall be
null and void.  This provision shall apply to transfers by operation of law.  A
Change of Control of Purchaser shall constitute an assignment under this Section
14.3.  No consent in one instance shall prevent the provisions of this Section
14.3 from applying to a subsequent instance.  No assignment by Purchaser shall
relieve Purchaser from any of its obligations or liability under this
Agreement.  Notwithstanding the foregoing, Purchaser may at any time on or prior
to the Closing Date, with written notice to Stayton, (i) assign some or all of
its rights and obligations under this Agreement to one or more Affiliates of
Purchaser or Purchaser's Manager or (ii) assign its rights and obligations under
this Agreement with respect to individual Properties to one or more Affiliates
of Purchaser or designate one or more Affiliates of Purchaser to take title to
one or more Properties (and any related Personal Property), provided that
Purchaser will continue to remain primarily liable under this Agreement
notwithstanding any such assignment or designation.
 
14.4 Sunwest
 
The parties hereto confirm that Sunwest is not a party to this Agreement other
than as provided in the Intervention.
 
14.5 Effect of Agreement
 

 
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Upon entry of the Auction Order, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, and permitted successors and
assigns.
 
14.6 Counterparts
 
This Agreement may be executed in two or more identical counterparts which, when
taken together, will constitute one and the same instrument.  Facsimile copies
of signature pages shall be deemed originals for the purposes of the creation of
a fully executed, delivered and enforceable counterpart Agreement.
 
14.7 Severability
 
In case any one or more of the provisions contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
 
14.8 Interpretation
 
Purchaser and Stayton each acknowledge that (a) it has been represented by
independent counsel in connection with this Agreement; (b) it has executed this
Agreement with the advice of such counsel; and (c) this Agreement is the result
of negotiations between the parties hereto and the advice and assistance of its
respective counsel.  The fact that this Agreement was prepared by counsel to any
particular party as a matter of convenience shall have no import or significance
in interpreting the provisions hereof.
 
14.9 Entire Agreement
 
This Agreement and the other Transaction Documents embody and constitute the
entire understanding between the parties with respect to the transactions
contemplated herein, and all prior or contemporaneous agreements,
understandings, representations and statements, oral or written, including,
without limitation, the Proposed Terms and Conditions of the Transaction, dated
as of September 14, 2009, among the CRO, the Receiver, Emeritus Corporation and
Blackstone Real Estate Advisors VI, L.P., are merged into this
Agreement.  Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument in writing
signed by the party against which the enforcement of such waiver, modification,
amendment, discharge or termination is sought, and then only to the extent set
forth in such instrument.
 

 
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14.10 Governing Law
 
This agreement shall be governed by and construed in accordance with the laws of
the State of Oregon without regard to its conflict of law principles.  The
parties hereto hereby agree to the exclusive jurisdiction of the courts of
general jurisdiction of the State of Oregon or the United States District Court
for the District of Oregon in all actions between the parties hereto, and
consent to service of process by certified mail, return receipt requested, to
their respective addresses set forth in Section 14.1 hereof.
 
14.11 Further Assurances
 
In addition to the obligations required to be performed hereunder at or prior to
Closing, Stayton and Purchaser shall each execute, acknowledge and deliver,
subsequent to Closing, such other instruments and documents as the other party
hereto may reasonably request and as shall be necessary in order to effectuate
the transactions contemplated herein.
 
14.12 Escrow Provisions
 
(a) If the Deposit is cash, the Escrow Agent shall hold the cash Deposit in
escrow in an interest-bearing bank account approved by Stayton and Purchaser
(the “Escrow Account”).
 
(b) The Escrow Agent shall hold the Deposit in escrow in the Escrow Account
until the Closing or sooner termination of this Agreement and shall hold or
apply such proceeds in accordance with this Agreement.  Stayton and Purchaser
understand that no interest is earned on the Deposit during the time it takes to
transfer into and out of the Escrow Account.  If for any reason either party
makes a written demand upon the Escrow Agent for payment of the Deposit, the
Escrow Agent shall, within 24 hours, give written notice to the other party of
such demand.  If the Escrow Agent does not receive a written objection within
five Business Days after the giving of such notice, the Escrow Agent is hereby
authorized to make such payment.  If the Escrow Agent does receive such written
objection within such five Business Day period, the Escrow Agent shall deposit
the Deposit with the clerk of the Court.  The Escrow Agent shall give written
notice of such deposit to Stayton and Purchaser.  Upon such deposit the Escrow
Agent shall be relieved and discharged of all further obligations and
responsibilities hereunder.
 
(c) The parties acknowledge that the Escrow Agent is acting solely as a
stakeholder at their request and for their convenience, that the Escrow Agent
shall not be deemed to be the agent of either of the parties, and the Escrow
Agent shall not be liable to either of the parties for any act or omission on
its part, other than for its gross negligence or willful misconduct.  Stayton
and Purchaser shall jointly and severally indemnify and hold the Escrow Agent
harmless from and against all costs, claims and expenses, including attorneys’
fees and disbursements, incurred in connection with the performance of the
Escrow Agent’s duties hereunder.
 
(d) The Escrow Agent has acknowledged its agreement to these provisions by
signing this Agreement in the place indicated following the signatures of
Stayton and the Purchaser.
 

 
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14.13 Settlement Costs
 
(a) Stayton shall pay (i) Stayton's own attorneys' fees and costs related to
this transaction contemplated by this Agreement; (ii) all capital gains or other
income taxes imposed upon Stayton in respect of the transactions contemplated by
this Agreement; (iii) any state and local transfer taxes, documentary fees,
sales, use and excise taxes, if any, imposed upon or relating to the conveyance
of title to the Properties and/or the other transactions contemplated by this
Agreement; (iv) all costs and expenses (including the cost of any title
endorsements or affirmative insurance) in connection with the removal of record
(or other manner satisfactory to the Title Company to insure over) of the
Required Removal Exceptions and (v) any assumption fees, modification fees,
extension fees or similar fees in connection with the modification and
assumption of the Assumed Real Property Loans due and payable on or prior to the
Closing Date, to the extent not capitalized in the Assumed Real Property Loans.
 
(b) Other than in connection with the Expense Reimbursement pursuant to Section
10.2(a), Purchaser shall pay (i) its own attorneys' fees and costs related to
this transaction contemplated by this Agreement; (ii) all of its own costs for
any inspections and tests performed at the Properties; (iii) the cost of the
premiums for owner's (or lessee's, if applicable) title insurance policies for
each of the Properties; and (iv) all fees, costs and expenses incurred in
connection with the assumption by Purchaser of the Assumed Real Property Loans,
including the Lender's attorneys' fees and costs, premiums for endorsements to
Lender's title policies, costs and fees related to all updates to any third
party inspections or reports required by any Lender (but excluding any
assumption fees, modification fees, extension fees or similar fees).
 
(c) Stayton shall use reasonable efforts to obtain appropriate exemptions from
the Court in order for such transactions to be, to the greatest extent
permissible under applicable law, subject to the provisions of 11 U.S.C. §
1146(a), and, accordingly, free of any state and local transfer taxes,
documentary stamp tax, sales use and excise taxes.  Any litigation over a
dispute about the applicability of Section 1146(a) of the Bankruptcy Code shall
be conducted in the Court upon the instigation or response of Stayton and/or
Purchaser, and if commenced elsewhere, Stayton shall timely remove it to the
Court.  If, for any reason, Purchaser and its attorneys are denied standing to
exercise its own rights or defenses, then Stayton shall assert them at
Purchaser's direction and expense, and Purchaser shall reimburse Stayton for all
reasonable expenses incurred in so doing.
 
14.14 Time of Essence
 
Each of the parties hereto hereby agrees that, with regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
 
14.15 Confidentiality
 
(a) The parties agree that, unless consented to in writing by the other party,
no party may issue press releases with respect to the transactions contemplated
by this Agreement other than the press release agreed to by the parties and
issued upon execution of this Agreement; provided, however, Emeritus may issue a
separate press release within 3 days of the date hereof, so long as Stayton is
provided a copy in advance for its review and input.  Except for the filing of
 

 
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this Agreement with the Court pursuant to Section 10.1 in connection with the
Sale & Auction Process Motion, this Agreement (including the Debt Modification
Schedules) may not be disclosed (i) to any holder of the Existing Real Property
Loans or the Existing Personal Property Loans and (ii) until the Court approves
the Sale & Auction Process Motion, to any potential bidders for the Properties.
 
(b) Stayton agrees that none of Stayton, the CRO, the Receiver or their
respective representatives shall provide to any Person that is not an Affiliate
of Stayton any non-public information with respect to the financial condition,
results of operations, business prospects, financial and other forecasts and
projections of Stayton and/or its affiliates related to the Properties, except
(i) as contemplated by the Bid Procedures or (ii) as required or requested by
the Court, provided, however, that any parties receiving such information must
be subject to a confidentiality agreement with Stayton in form and substance
substantially similar to the forms of confidentiality agreement previously
disclosed to Purchaser.  For the avoidance of doubt, this Section 14.15(b) shall
not prohibit Stayton from providing (i) to any Person that would be entitled to
distributions of proceeds from the Cash/Equity Portion of the Purchase Price
under the Reorganization Plan, estimated calculations of such Person’s potential
distributions and (ii) to Corporate Employees and Facility Employees,
information or summaries concerning the material terms of employment for
employees hired by Purchaser’s Manager at Closing pursuant to Article 9;
provided that, any written materials to be provided by Stayton to any such
Corporate Employees or Facility Employees shall be provided to Purchaser and
Purchaser’s Manager in advance for their review and input.
 
14.16 Currency
 
All amounts set forth in this agreement are in United State Dollars whether or
not specified in any reference herein.
 
14.17 Assistance with 1031 Exchanges
 
Purchaser and Stayton agree, upon reasonable and timely request of the record or
beneficial owner of a Property or undivided interest in a Property, to
reasonably cooperate with the conveyance of some of the Properties to
accommodate an exchange by one or more such owners pursuant to Section 1031 of
the Internal Revenue Code, provided that Purchaser shall not be required to take
title to any property other than the Properties, but Purchaser shall accept
deeds in fractional interests from Stayton and such beneficial owners in order
to accommodate such 1031 exchange, as long as such acceptance of deeds does not
change the title conveyed hereunder or to be insured in the name of Purchaser by
the Title Company hereunder; provided further that (i) Purchaser shall not be
required to incur any costs, expenses or liabilities with respect to such
additional transfers of such interests, (ii) such transfers shall not be a
condition to or delay the Closing, (iii) Purchaser shall not be required to
accept or agree with any allocations of the Purchase Price by Stayton or any of
the TIC Investors for tax purposes.
 
14.18 No Admission to Third Parties
 
The inclusion of any possible or alleged breach or violation or law or contract
or any possible notices, consents or options implicated by any contract shall
not be construed as an
 

 
84

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admission or indication by Stayton or Purchaser that any such breach or
violation exists or has actually occurred, or that any notice, consent or option
is actually required by such contract.
 

 

 
85

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
 
Purchaser:
Sellers:
    BRE/SW PORTFOLIO LLC,
    a Delaware limited liability company
 
    By:/s/ David Roth
    Name: _ David Roth
   Title:Managing Director
On Behalf of Stayton:
    STAYTON SW ASSISTED LIVING, L.L.C.
    an Oregon limited liability company
 
 
    By: _/s/ Clyde A. Hamstreet
    Clyde A. Hamstreet, in his capacity as
    Chief Restructuring Officer for Debtor
             and the Receivership Entities
 
 
    By: /s/ Michael A. Grassmueck
           Michael A. Grassmueck, in his capacity
           as Receiver for Debtor and the
            Receivership Entities
 
 

 
 

--------------------------------------------------------------------------------

 

Intervention
 
Sunwest hereby intervenes in the foregoing Agreement for the purpose of
acknowledging Section 9.2(h) of the Agreement and agreeing that it is bound by
such Section.  Additionally, Sunwest agrees to provide to Stayton all
information and materials in its possession or control, or the possession or
control of its Affiliates, that Stayton has agreed to provide to Purchaser
pursuant to this Agreement.
 
SUNWEST MANAGEMENT, INC.
 
 
By: _/s/ Clyde A. Hamstreet _
Name:Clyde A. Hamstreet
Title: Chief Restructuring Officer for Debtor
and the Receivership Entities
 
Emeritus Corporation and Columbia Pacific hereby intervene in the foregoing
Agreement solely for the purpose of acknowledging Section 9.2(i) of the
Agreement and agreeing that they are bound by such section.
 
Emeritus Corporation
 
 
By: /s/ Eric Mendelsohn
Eric Mendelsohn
Its: SVP Corporate Development
 
CPDF II, LLC,
a Washington limited liability company
 
By: Columbia Pacific Advisors LLC
a Washington limited liability company, its Manager
 
By: /s/Alexander Washburn
Name: Alexander Washburn
Title: Manager
 

 

 
 

--------------------------------------------------------------------------------

 

JOINDER BY ESCROW AGENT
 
Chicago Title Insurance Company, referred to in this Agreement as the "Escrow
Agent," hereby acknowledges that it received this Agreement executed by
Purchaser and Stayton as of the ___ day of January, 2010, and accepts the
obligations of the Escrow Agent as set forth herein.  The Escrow Agent hereby
agrees to hold and distribute the Deposit in accordance with the terms and
provisions of the Agreement.
 
CHICAGO TITLE INSURANCE COMPANY
 
 
By:          /s/ Neal J. Miranda
Neal J. Miranda, VP/Senior Counsel
CTIC #1209-3105 --- (212) 880-1237

 
 

--------------------------------------------------------------------------------

 

EXHIBIT A-1
Legal Descriptions of Lands

[see attached]

 
 

--------------------------------------------------------------------------------

 

EXHIBIT A-2
Allocated Purchase Price

[see attached]

 
 

--------------------------------------------------------------------------------

 

EXHIBIT B
List of Properties
(Assisted Living, Independent Living, Skilled Nursing)

[see attached]

 
 

--------------------------------------------------------------------------------

 

EXHIBIT C

Form of Deed

(see attached)

 
 

--------------------------------------------------------------------------------

 

SPACE ABOVE RESERVED FOR RECORDER

Prepared under local supervision (exc MD) by and when recorded, return to:
Irina Petrova, Esq. @ Simpson Thacher & Bartlett LLP
425 Lexington Ave, NY, NY 10017

Preparer’s Signature (exc MD) as to KY:
_______________________________________

Community # and Community Name:
_______________________________________

Notice To Recorder:
This instrument to be indexed against the record owner(s) identified on Schedule
B hereto, Grantor and Grantee

Real property tax bills to be sent to:
Grantee

Instrument:
Deed --- [Form for use in AL, AZ, CA, CO, CT, GA, IA, IN, KY, MD, MN, MO, MS,
MT, NC, ND, NE, NM, NY, OK, OR, PA, SC, TN, TX, UT, VA, WA, WI, WV & WY]

Dated:
As of the earliest notary date, but effective as of _____/_____/10

Grantor:
Stayton SW Assisted Living, L.L.C., an Oregon limited liability company, with
address at _________________________ (subject to confirm), (i) as
successor-in-interest to the record owner(s) identified on Schedule B-1 hereto,
pursuant to (A) an order entered on October 2, 2009, in U.S. District Court Case
No. ___ (United States District Court for the District of Oregon), approving the
distribution plan and (B) an order entered on December 22, 2009, in U.S.
District Court Case No. ___ (United States District Court for the District of
Oregon), pursuant to which the assets of such record owner(s) were substantively
consolidated and made part of the bankruptcy estate of Stayton SW Assisted
Living, L.L.C., and (2) as authorized by an order entered on [_______ ___,
2010], in U.S. District Court Case No. ___ (United States District

 
 

--------------------------------------------------------------------------------

 

Court for the District of Oregon) to sell, transfer and convey the interest held
by the record owner(s) identified on Schedule B-2 hereto in the Premises.

Grantee:
[__________], a Delaware limited liability company, c/o Blackstone, 345 Park
Ave, NY, NY 10154
Nature of Instrument:
This Instrument is a conveyance pursuant to [identify relevant BR Order]

Witnesseth:
That the Grantor, in consideration of the sum of $1 (or as otherwise provided on
Schedule of Consideration, if annexed) paid by Grantee, the receipt and
sufficiency of which is hereby acknowledged, does hereby grant and convey,
transfer, assign and release unto Grantee, its successors and assigns, all of
its estate, right, title and interest in and to that certain plot, piece or
parcel of land (together with the buildings and improvements thereon erected)
described on Schedule A hereto (the “Premises”).

Together with:
All right, title and interest (if any) of Grantor in and to any streets and
roads abutting the Premises to the center line thereof, as well as any gaps,
strips or gores on, around or within the Premises.

Together with:
All right, title and interest (if any) of Grantor in and to any hereditaments
and appurtenances, and all of the estate and rights of Grantor, including any
after-acquired estates or interests.

To have and to hold:
The Premises herein conveyed unto the Grantee, its successors and assigns
forever.
 
 
Disclaimer of Warranties of Title as to the Premises Conveyed Herein:
Notwithstanding anything to the contrary, this Instrument is executed and
delivered without warranties of title, express or implied, of any kind
whatsoever.

 
 

--------------------------------------------------------------------------------

 

In witness whereof:
The undersigned, by its duly elected officer and pursuant to proper authority,
has duly executed, acknowledged and delivered this instrument as of the day and
year first above written.

Grantor:
Stayton SW Assisted Living, L.L.C., an Oregon limited liability company, with
address at _________________________ (subject to confirm), (i) as
successor-in-interest to the record owner(s) identified on Schedule B-1 hereto,
pursuant to (A) an order entered on October 2, 2009, in U.S. District Court Case
No. ___ (United States District Court for the District of Oregon), approving the
distribution plan and (B) an order entered on December 22, 2009, in U.S.
District Court Case No. ___ (United States District Court for the District of
Oregon), pursuant to which the assets of such record owner(s) were substantively
consolidated and made part of the bankruptcy estate of Stayton SW Assisted
Living, L.L.C., and (2) as authorized by an order entered on [________ ___,
2010], in U.S. District Court Case No. ___ (United States District Court for the
District of Oregon) to sell, transfer and convey the interest held by the record
owner(s) identified on Schedule B-2 hereto in the Premises.
By:           ____________________________________________
Clyde Hamstreet, Chief Restructuring Officer

Witness #1 as to Premises in CT, GA, LA, PA & SC:

____________________________________________
Name:  _____________________________________

Witness #2 as to Premises in CT, GA, LA, PA & SC:

____________________________________________
Name:  _____________________________________

Notary Public as to Premises in GA:

_________________________________________
Notary Public

 
 

--------------------------------------------------------------------------------

 

The following acknowledgment page, including notary execution, is hereby
incorporated by reference into this page as if set forth hereon in its entirety.

 
 

--------------------------------------------------------------------------------

 

County of Multnomah, State of Oregon:
Multi-State Acknowledgment:
On _____/_____/10, before me, the undersigned officer, personally appeared Clyde
Hamstreet, personally known and acknowledged himself to me (or proved to me on
the basis of satisfactory evidence) to be the Chief Restructuring Officer  of
the foregoing executing Grantor (hereinafter, the “Grantor”) and that as such
officer, being duly sworn, and being authorized to do so, executed, subscribed
and acknowledged the due execution of the foregoing instrument for the purposes
therein contained, by signing the name of the Grantor by himself in his
authorized capacity as such officer as his free and voluntary act and deed and
the free and voluntary act and deed of said Grantor. *** Witness my hand and
official seal.
Uniform Acknowledgment which is supplemental to the foregoing acknowledgment:
On _____/_____/10, before me, the undersigned, a Notary Public in and for said
State, personally appeared Clyde Hamstreet, personally known to me or proved to
me on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument. *** [If notarized in CA --- I certify under PENALTY OF
PERJURY under the laws of the State of California that the foregoing paragraph
is true and correct.] *** Witness my hand and official seal.

_________________________________________
Notary Public, State of Oregon

 
 

--------------------------------------------------------------------------------

 

Schedule of Consideration, aka Consideration Certificate Addendum:
As to Premises in AL, KY, MD, MO, PA& WV:
The actual monetary consideration is $________________________

As to Premises in KY:
As to Premises in KY, Grantor and Grantee hereunder each certify, pursuant to
KRS Chapter 382, that the consideration is $____________________, which is the
true, correct and full consideration paid for the property herein conveyed.

 
Grantor By:

Stayton SW Assisted Living, L.L.C., an Oregon limited liability company, with
address at _________________________ (subject to confirm), (i) as
successor-in-interest to the record owner(s) identified on Schedule B-1 hereto,
pursuant to (A) an order entered on October 2, 2009, in U.S. District Court Case
No. ___ (United States District Court for the District of Oregon), approving the
distribution plan and (B) an order entered on December 22, 2009, in U.S.
District Court Case No. ___ (United States District Court for the District of
Oregon), pursuant to which the assets of such record owner(s) were substantively
consolidated and made part of the bankruptcy estate of Stayton SW Assisted
Living, L.L.C., and (2) as authorized by an order entered on [_______ ___,
2010], in U.S. District Court Case No. ___ (United States District Court for the
District of Oregon) to sell, transfer and convey the interest held by the record
owner(s) identified on Schedule B-2 hereto in the Premises.
 
By:  _____________________________________

 
Clyde Hamstreet, Chief Restructuring Officer

Grantee By:
_____________________________________

 
Name:
_______________________________

 
Title:
_______________________________

 
 

--------------------------------------------------------------------------------

 

CA Documentary Transfer Tax Declaration Addendum --- NOT TO BE RECORDED:

Instrument:
Limited Warranty Deed (Quitclaim Deed as to land in RI)

Dated:
As of the earliest notary date, but effective as of _____/_____/10

Grantor:
Stayton SW Assisted Living, L.L.C., an Oregon limited liability company, with
address at _________________________ (subject to confirm), (i) as
successor-in-interest to the record owner(s) identified on Schedule B-1 hereto,
pursuant to (A) an order entered on October 2, 2009, in U.S. District Court Case
No. ___ (United States District Court for the District of Oregon), approving the
distribution plan and (B) an order entered on December 22, 2009, in U.S.
District Court Case No. ___ (United States District Court for the District of
Oregon), pursuant to which the assets of such record owner(s) were substantively
consolidated and made part of the bankruptcy estate of Stayton SW Assisted
Living, L.L.C., and (2) as authorized by an order entered on [_______ ___,
2010], in U.S. District Court Case No. ___ (United States District Court for the
District of Oregon) to sell, transfer and convey the interest held by the record
owner(s) identified on Schedule B-2 hereto in the Premises.

Grantee:
[__________], a Delaware limited liability company, c/o Blackstone, 345 Park
Ave, NY, NY 10154

Premises:
See Schedule A annexed to the Instrument

CA Documentary Transfer Tax Declaration:
Grantor hereby declares that the Documentary Transfer Tax is $0 --- Exempt
pursuant to Revenue & Taxation Code Section 11923 (subject to confirm).

 
 

--------------------------------------------------------------------------------

 

MD Preparer’s Certification Addendum:
This is to certify that the foregoing instrument was prepared by the
undersigned, one (1) of the parties named herein.

Grantee By:
_____________________________________

 
Name:
_______________________________

 
Title:
_______________________________

 
 

--------------------------------------------------------------------------------

 

NC Residency Addendum:
The Premises is IS NOT the primary residence of Grantor.

 
 

--------------------------------------------------------------------------------

 

NY Section 13 Lien Law Recital Addendum:
Grantor, in compliance with Section 13 of the NY Lien Law, covenants that it
will receive the consideration for this conveyance and will hold the right to
receive such consideration as a trust fund to be applied first for the purpose
of paying the cost of the improvement(s) and will apply the same first to the
payment of the cost of the improvement(s) before using any part of the total of
the same for any other purpose.

 
 

--------------------------------------------------------------------------------

 

OR Addendum:
BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON TRANSFERRING FEE TITLE
SHOULD INQUIRE ABOUT THE PERSON'S RIGHTS, IF ANY, UNDER ORS 195.300, 195.301 AND
195.305 TO 195.336 AND SECTIONS 5 TO 11, CHAPTER 424, OREGON LAWS 2007. THIS
INSTRUMENT DOES NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS INSTRUMENT IN
VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE SIGNING OR
ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD
CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY THAT THE
UNIT OF LAND BEING TRANSFERRED IS A LAWFULLY ESTABLISHED LOT OR PARCEL, AS
DEFINED IN ORS 92.010 OR 215.010, TO VERIFY THE APPROVED USES OF THE LOT OR
PARCEL, TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST PRACTICES
AS DEFINED IN ORS 30.930, AND TO INQUIRE ABOUT THE RIGHTS OF NEIGHBORING
PROPERTY OWNERS, IF ANY, UNDER ORS 195.300, 195.301 AND 195.305 TO 195.336 AND
SECTIONS 5 TO 11, CHAPTER 424, OREGON LAWS 2007.

 
 

--------------------------------------------------------------------------------

 

PA Address Certification Addendum:
Grantee hereby certifies that its precise address is c/o Blackstone, 345 Park
Ave, NY, NY 10154

Grantee By:
___________________________________

 
Name:
_____________________________

 
Title:
_____________________________

 
 

 
 

--------------------------------------------------------------------------------

 

PA Coal Notice as to real property in all counties within the Commonwealth of PA
but for Berks, Bucks, Chester, Crawford, Delaware, Erie, Lancaster, Lebanon,
Lehigh, McKean, Montgomery, Northampton, Philadelphia, Potter, Warren and York
Addendum:
NOTICE --- THIS DOCUMENT MAY NOT/DOES NOT SELL, CONVEY, TRANSFER, INCLUDE OR
INSURE THE TITLE TO THE COAL AND RIGHT OF SUPPORT UNDERNEATH THE SURFACE LAND
DESCRIBED OR REFERRED TO HEREIN, AND THE OWNER OR OWNERS OF SUCH COAL MAY HAVE
THE COMPLETE LEGAL RIGHT TO REMOVE ALL OF SUCH COAL AND, IN THAT CONNECTION,
DAMAGE MAY RESULT TO THE SURFACE OF THE LAND AND ANY HOUSE, BUILDING OR OTHER
STRUCTURE ON OR IN SUCH LAND. THE INCLUSION OF THIS NOTICE DOES NOT ENLARGE,
RESTRICT OR MODIFY ANY LEGAL RIGHTS OR ESTATES OTHERWISE CREATED, TRANSFERRED,
EXCEPTED OR RESERVED BY THIS INSTRUMENT. [This notice is set forth in the manner
provided in Section 1 of the Act of July 17, 1957, P.L. 984, as amended, and is
not intended as notice of unrecorded instruments, if any].
 
 

 
 

--------------------------------------------------------------------------------

 

TN Affidavit of Consideration or Value Addendum:
County of __________________, State of _________:
The actual consideration or value, whichever is greater, for this transfer is
$_______________

Grantee By:
_______________________________________

 
Name:
_________________________________

 
Title:
_________________________________

Sworn to before me on _____/_____/10

__________________________________
Notary Public

 
 

--------------------------------------------------------------------------------

 

Schedule A:
See annexed Legal Description of Premises

 
 

--------------------------------------------------------------------------------

 

Schedule B-1:
See annexed Record Owner(s) [Sunwest entities]

 
 

--------------------------------------------------------------------------------

 

Schedule B-2:
See annexed Record Owner(s) [TIC entities]

 
 

--------------------------------------------------------------------------------

 

EXHIBIT D
Excluded Personal Property

Unassignable licensed software and mainframe servers will be excluded.

"Excluded Assets" means those assets of Stayton other than the Properties, and
also includes those assets of Stayton identified as follows:

a)  
Tax refunds, if any, for periods prior to or ending upon the Closing Date and
prepaid taxes not otherwise subject to proration pursuant to section 8.5 of this
Agreement;

b)  
The rights of Stayton applicable to or associated with any obligations or
liabilities of Stayton which are not Assumed Liabilities;

c)  
The right, title and interest of Stayton with respect to any warranty,
indemnification and other claims under the purchase and sale agreements and
related documents attendant to the acquisition by Stayton or its affiliates of
the Properties or any of them;

d)  
Cash, notes, bonds, cash equivalents, marketable securities and accounts
receivable (except to the extent that such accounts receivable are subject to
pro ration pursuant to section 8.5 of this Agreement);

e)  
Any licenses, permits or certifications that are non-transferable pursuant to
applicable federal or state laws and regulations;

f)  
Corporate records of Stayton which are not related to the Properties;

g)  
Insurance policies and contracts, and claims and recoveries thereunder, with
respect to losses or occurrences prior to the Closing Date;  and

h)  
Any other asset of Stayton which is not one of the Properties.

 
 

--------------------------------------------------------------------------------

 

EXHIBIT E
Encumbrances on Personal Property

The Operating Contracts disclosed in Section 4.1(m) that are denoted as
"Personal Property with Encumbrances" by an "x" in the applicable column of the
spreadsheet attached to Section 4.1(m) are incorporated into this Exhibit E by
this reference.

 
 

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EXHIBIT F
[Form of]
BILL OF SALE

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned, Stayton SW Assisted Living, L.L.C., an
Oregon limited liability company, (1) as successor-in-interest to the record
owner(s) identified on Schedule 1 hereto, pursuant to (A) an order entered on
October 2, 2009, in U.S. District Court Case No. ___ (United States District
Court for the District of Oregon), approving the distribution plan and (B) an
order entered on December 22, 2009, in U.S. District Court Case No. ___ (United
States District Court for the District of Oregon), pursuant to which the assets
of such record owner(s) were substantively consolidated and made part of the
bankruptcy estate of Stayton SW Assisted Living, L.L.C., and (2) as authorized
by an order entered on [_________ ___, 2010], in U.S. District Court Case No.
___ (United States District Court for the District of Oregon) to sell, transfer
and convey the interest held by the record owner(s) identified on Schedule 2
hereto in the Properties set forth on Annex 1 attached hereto ("Stayton"), and
subject to the terms and conditions of the Agreement of Purchase and Sale dated
January 15, 2010 ("Agreement") between Stayton and BRE/SW Portfolio LLC
("Purchaser") hereby sells, grants, conveys, assigns, transfers and delivers to
Purchaser, Purchaser's successors and assigns, all of Sellers’ estate, right,
title and interest in and to all of the Personal Property (as defined in the
Agreement) with respect to the Properties set forth on Annex 1 attached
hereto.  This Bill of Sale is executed and delivered pursuant to the Agreement
and the Sale Approval Order (as defined in the Agreement).

EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT OR IN THIS BILL OF SALE, THE
PERSONAL PROPERTY IS CONVEYED ON AN "AS IS, WHERE IS" BASIS AND WITH ALL FAULTS;
STAYTON MAKES NO IMPLIED OR EXPRESS WARRANTIES OR REPRESENTATIONS OF ANY KIND OR
NATURE WHATSOEVER, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OR
REPRESENTATIONS CONCERNING THE DESIGN, CONSTRUCTION, CONDITION OR VALUE OF THE
PERSONAL PROPERTY, ANY IMPLIED WARRANTIES OF FITNESS OR MERCHANTABILITY, OR ANY
EXPRESS OR IMPLIED WARRANTIES REGARDING COMPLIANCE WITH APPLICABLE LAWS, CODES,
ORDINANCES OR GOVERNMENTAL REGULATIONS RELATING TO THE ENVIRONMENT, HEALTH AND
SAFETY OR OTHERWISE.

 
 

--------------------------------------------------------------------------------

 

Date: ____________________, 2010.

 
Stayton SW Assisted Living, L.L.C., an Oregon limited liability company, (1) as
successor-in-interest to the record owner(s) identified on Schedule 1 hereto,
pursuant to (A) an order entered on October 2, 2009, in U.S. District Court Case
No. ___ (United States District Court for the District of Oregon), approving the
distribution plan and (B) an order entered on December 22, 2009, in U.S.
District Court Case No. ___ (United States District Court for the District of
Oregon), pursuant to which the assets of such record owner(s) were substantively
consolidated and made part of the bankruptcy estate of Stayton SW Assisted
Living, L.L.C., and (2) as authorized by an order entered on [________ ___,
2010], in U.S. District Court Case No. ___ (United States District Court for the
District of Oregon) to sell, transfer and convey the interest held by the record
owner(s) identified on Schedule 2 hereto in the Properties set forth on Annex 1
attached hereto
 
 
 
By: __________________________________________
       Clyde A. Hamstreet, Chief Restructuring Officer

 
 

--------------------------------------------------------------------------------

 

ANNEX 1

[List of Properties for the applicable Closing]

 
 

--------------------------------------------------------------------------------

 

Schedule 1:
See annexed Record Owner(s) [Sunwest entities]

 
 

--------------------------------------------------------------------------------

 

Schedule 2:
See annexed Record Owner(s) [TIC entities]

 
 

--------------------------------------------------------------------------------

 

EXHIBIT G
Form of Assignment and Assumption Agreement

This Assignment and Assumption Agreement, dated as of ______________, 2010, is
by and between Stayton SW Assisted Living, L.L.C., an Oregon limited liability
company, (1) as successor-in-interest to the record owner(s) identified on
Schedule 1 hereto, pursuant to (A) an order entered on October 2, 2009, in U.S.
District Court Case No. ___ (United States District Court for the District of
Oregon), approving the distribution plan and (B) an order entered on December
22, 2009, in U.S. District Court Case No. ___ (United States District Court for
the District of Oregon), pursuant to which the assets of such record owner(s)
were substantively consolidated and made part of the bankruptcy estate of
Stayton SW Assisted Living, L.L.C., and (2) as authorized by an order entered on
[__________ ___, 2010], in U.S. District Court Case No. ___ (United States
District Court for the District of Oregon) to sell, transfer and convey the
interest held by the record owner(s) identified on Schedule 2 hereto in the
Purchased Properties ("Stayton") and BRE/SW Portfolio LLC, a Delaware limited
liability company ("Purchaser").

Stayton and Purchaser have entered into an Agreement of Purchase and Sale  dated
as of January 15, 2010 ("Purchase Agreement") pursuant to which Purchaser is
purchasing, upon the terms and conditions, and subject to the covenants and
conditions, set forth in the Purchase Agreement.  Capitalized terms used herein
and not defined shall have the meaning assigned thereto in the Purchase
Agreement.  For avoidance of doubt, the "Assumed Liabilities" include
Purchaser's performance from and after the date hereof of each of the Assumed
Real Property Loans identified on Annex 2 to this Assignment and Assumption
Agreement.

In connection with Purchaser's purchase of the Properties set forth on Annex 1
attached hereto (the “Purchased Properties”), Stayton desires to assign,
transfer, set over and convey to Purchaser all of Sellers’ right title and
interest under the following with respect to the Purchased Properties
(collectively, the "Assigned Rights and Obligations”):

 
(i)
the Resident Agreements (including, without limitation, all Security Deposits,
Entrance Fees and Concessions of Rent);

 
(ii)
the Assumed Operating Contracts set forth on Schedule A attached hereto;

 
(iii)
the Assumed Unexpired Leases set forth on Schedule B attached hereto;

 
(iv)
the Assumed Loan Documents set forth on Schedule C attached hereto;

 
(v)
the Ground Leases set forth on Schedule D attached hereto;

 
(vi)
all guarantees, warranties and similar agreements from vendors, contractors,
subcontractors, manufacturers, distributors or suppliers of services or
materials to the Purchased Properties;

 
(vii)
the telephone numbers for the Purchased Properties;

 
(viii)
all Licenses (to the extent the same are assignable) related to the Purchased
Properties and the Improvements and CLIA Numbers related to the Purchased
Properties; and

 
(ix)
all Trust Funds which are not returned to the residents/patients pursuant to
Section 5.1(p) of the Purchase Agreement.

 
 

--------------------------------------------------------------------------------

 

THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

1.  
Stayton hereby sells, assigns, transfers, delegates and conveys to Purchaser all
of Sellers’ right, title and interest in and to the Assigned Rights and
Obligations (including the obligations and liabilities which arise with respect
to acts or events occurring, on or after the date hereof).

2.  
Purchaser hereby accepts the foregoing assignment and delegation, and assumes
and agrees to pay, perform and discharge the liabilities of Sellers under and
with respect to the Assigned Rights and Obligations (including, the Assumed
Liabilities with respect to such Purchased Properties) which arise with respect
to acts or events occurring, on or after the date hereof.

3.  
This Assignment and Assumption Agreement is executed and delivered pursuant to
the Purchase Agreement and the Sale Approval Order.  In the event of any
conflict or inconsistency between the terms of the Purchase Agreement and the
terms of this Assignment and Assumption Agreement, the terms of the Purchase
Agreement shall govern.

4.  
Stayton and Purchaser hereby agree, without further consideration, to execute,
make, acknowledge, and deliver such instruments, agreements and other documents
as may be reasonably required to effectuate the purposes of this Assignment and
Assumption Agreement and to consummate the transactions contemplated hereby.

5.  
This Assignment and Assumption Agreement shall be governed by, and construed in
accordance with, the laws of the State of Oregon without regard to the conflict
of laws principles thereof.

6.  
Neither this Assignment and Assumption Agreement nor any term hereof may be
amended, changed, waived, discharged or terminated other than by an instrument
in writing, signed by the party against which enforcement of such amendment,
change, waiver, discharge or termination is sought.

7.  
This Assignment and Assumption Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.

8.  
Nothing expressed or implied in this Assignment and Assumption Agreement is
intended to confer upon any person, other than the parties hereto, or their
respective successors or permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Assignment.

9.  
This Assignment and Assumption Agreement and the terms and provisions hereof
shall insure to the benefit of, and shall be binding upon, the respective
successors and permitted assigns of Stayton and Purchaser.

 
 

--------------------------------------------------------------------------------

 

PURCHASER:
 
BRE/SW Portfolio LLC,
   a Delaware limited liability company
 
 
 
 
By: _______________________________
 
Its: _______________________________
STAYTON:
 
Stayton SW Assisted Living, L.L.C., (1) as successor-in-interest to the record
owner(s) identified on Schedule 1 hereto, pursuant to (A) an order entered on
October 2, 2009, in U.S. District Court Case No. ___ (United States District
Court for the District of Oregon), approving the distribution plan and (B)  an
order entered on December 22, 2009, in U.S. District Court Case No. ___ (United
States District Court for the District of Oregon), pursuant to which the assets
of such record owner(s) were substantively consolidated and made part of the
bankruptcy estate of Stayton SW Assisted Living, L.L.C., and (2) as authorized
by an order entered on [______ ___, 2010], in U.S. District Court Case No. ___
(United States District Court for the District of Oregon) to sell, transfer and
convey the interest held by the record owner(s) identified on Schedule 2 hereto
in the Purchased Properties.
 
 
By: ____________________________________
       Clyde A. Hamstreet, Chief Restructuring
       Officer

 
 

--------------------------------------------------------------------------------

 

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT

Assumed Real Property Loans at Closing Date

 
 

--------------------------------------------------------------------------------

 

ANNEX 2 TO ASSIGNMENT AND ASSUMPTION AGREEMENT

Assumed Real Property Loans at Closing Date
 

 
 

--------------------------------------------------------------------------------

 

034845/00001/1886989v1

Schedules to be completed and attached at Closing

Schedule A – Assumed Operating Contracts
Schedule B – Assumed Unexpired Leases
Schedule C – Assumed Loan Documents
Schedule D – Ground Leases [if applicable]
Schedule 1 – Record Owner
Schedule 2 – TIC Investor

 
 

--------------------------------------------------------------------------------

 

EXHIBIT H
Form of FIRPTA Affidavit
 
STATE OF _____________                                                      )
)           ss.:
COUNTY OF _________                                           )

___________________, being duly sworn, states under penalty of perjury:
 
(1)           That I am   of   , the seller-transferor (hereinafter referred to
as "Stayton") of property located at ________________________________________,
and am familiar with Stayton and the sale of such property;
 
(2)           That the United States Tax Identification Number of Stayton is:
 
                              ; and
 
(3)           That Stayton is not a "foreign person" as that term is defined in
Section 1445(f) of the Internal Revenue Code; and
 
(4)           That the affidavit is given for the purpose of establishing and
documenting the non-foreign exemption to the withholding of part of the purchase
price paid to Stayton for purchase of the above-referenced property.
 

_____________________________

Acknowledged and sworn to
before me this  day of
                   , 20____

_____________________________
      Notary Public

 
 

--------------------------------------------------------------------------------

 

EXHIBIT I-1
Description of Existing Real Property Loans

The information in Schedule 4.1(dd) relating to Existing Real Property Loans is
incorporated into this Exhibit I-1 by this reference.

 
 

--------------------------------------------------------------------------------

 

EXHIBIT I-2
Description of Existing Personal Property Debt

The information in Schedule 4.1(dd) relating to Existing Personal Property Loans
is incorporated into this Exhibit I-1 by this reference.
 

 
 

--------------------------------------------------------------------------------

 

EXHIBIT J
 
Non-Terminable Operating Contracts
 
The Operating Contracts disclosed in Section 4.1(m) that are denoted as
Non-Terminable by an "x" in the applicable column of the spreadsheet attached to
Section 4.1(m) are incorporated into this Exhibit J by this reference.

 
 

--------------------------------------------------------------------------------

 

EXHIBIT K
Stayton Provided Information

1.           MAS format wide report income statements and balance sheets in
excel:
·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/07-09, 2009 YTD/Operating Statements/August 12 Month Trailing Wide
Income Stmts ATOE.xls & August 12 Month Trailing Wide Income Stmts FTOP.xls &
August 12 Month Trailing Wide Income Stmts PTOY.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/07-09, 2009 YTD/Balance Sheet/Aug09 MAS Format Bal Sheet.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/12-2008 YTD/Operating Statements/December 2008 ATOE.xls & December
2008 FTOP.xls & December 2008 PTOY.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/12-2008 YTD/Balance Sheet/2008 MAS Format Bal Sheet.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/12-2007YTD/December 2007 ATOE.xls & December 2007 FTOP.xls & December
2007 PTOY.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/12-2007 YTD/2007 MAS Format Bal Sheet.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/07-09, 2009 YTD/Operating Statements/September 09 Twelve Month
Trailing Wide Income Statement ATOE.xls & September 09 Twelve Month Trailing
Income Statement FTOP.xls & September 09 Twelve Month Trailing Income Statement
PTOY.xls"

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/Orchard Glen/Receiver Reports

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/Englewood Heights/Receiver Reports/2009

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/Villa Del Rey/Villa Del Rey Receiver Reports

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/Northpark Place/Northpark Place 2007-Sep2009.xlsx

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/Heritage Place/Receiver Reports/2009

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/Sequoia Springs/Receiver Reports

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/07-09, 2009 YTD/Operating Statements/October 09 Twelve Month Trailing
Wide Income Statement ATOE.xls & October 09 Twelve Month Trailing Income
Statement FTOP.xls & October 09 Twelve Month Trailing Income Statement PTOY.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/07-09, 2009 YTD/Operating Statements/November 09 Twelve Month
Trailing Wide Income Statement ATOE.xls & November 09 Twelve Month Trailing Wide
Income Statement FTOP.xls & November 09 Twelve Month Trailing Wide Income
Statement PTOY.xls

 
 

--------------------------------------------------------------------------------

 

2.      Buy-in contract information
·  
Holdco Senior Housing/Financial/Residents Buy-ins/Draft Buy-in Analysis
10-5-09.xls

3.      New York Properties – income statements provided by third party manager
·  
Misc. Information/2. New York facilities information/Reconc. to SubLessee
financials/0809 AUG Financial Statements Final.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/New York 4 Operations/2008 Financials/12 Dec/12-08 DEC Financial
Statements – Final.xls

·  
Holdco Senior Housing/Financial/Operating Statements and YTD Operating
Statements/New York 4 Operations/2007 Financials/12 Dec 07/Sunwest Financials -
Dec 2007 DRAFT WF 2-5-08.xls

4.      Aging of Receivables
·  
Holdco Senior Housing/Financial/Accounts receivable aging – Excel/2009-09-23/All
Items 9-23-09

5.      Rent Rolls
·  
Holdco Senior Housing/Financial/Rent Rolls (dated 9.17.09)

·  
Holdco Senior Housing/Financial/Rent Rolls (dated 11.26.09)

 
 

--------------------------------------------------------------------------------

 

EXHIBIT L
Bid Procedures

The following procedures shall govern conduct of the Auction provided for in the
Reorganization Plan and Article 10 of the Agreement.  Initially capitalized
terms used in these Bid Procedures and not otherwise defined in these Bid
Procedures shall have the meanings defined for such terms in the Agreement.  For
clarity, Purchaser shall be referred to in this Exhibit L as “Blackstone
Purchaser”.

If a Superior Offer (as defined below) for the Properties is submitted by a
"Qualified Bidder" on or before the "Bid Deadline," Stayton shall cause to be
conducted an Auction for the sale of the Properties in accord with the following
terms and conditions.

1.  
Qualified Bidders

A “Qualified Bidder” is a Person which meets all of the following
qualifications:

a)  
Each prospective Qualified Bidder shall be any Person that is controlled by,
controlling or commonly controlled with, a Person that: (i) has total assets
(owned or under management) in excess of $2,500,000,000 and capital and
statutory surplus, or shareholder's equity or equivalent irrevocable drawing
rights or other irrevocably committed equity funds of not less than
$500,000,000; and (ii) is regularly engaged in the business of owning or
operating commercial real estate or senior living facilities; provided, that any
such controlling or commonly controlled person unconditionally and irrevocably
guarantees performance by such prospective Qualified Bidder of its
obligations.  Each prospective Qualified Bidder shall submit to Stayton and to
the Court financial statements demonstrating that such bidder meets the
financial and other criteria set forth in this sub-paragraph.

b)  
Each prospective Qualified Bidder shall submit a management narrative and other
evidence demonstrating to the satisfaction of Stayton and the Court that such
prospective Qualified Bidder has engaged the services of a Qualified Operator,
as defined in this sub-paragraph.  A "Qualified Operator" shall mean either
(i) a management company that is an affiliate of Emeritus Corporation, (ii) the
Sunwest Unitary Enterprise or a management company that is an affiliate of the
Sunwest Unitary Enterprise, or (iii) one or more reputable national or regional
operator(s) of senior living facilities which has operated for at least five
years, as approved by the Court in the Unitary Bankruptcy Case.

c)  
Each prospective Qualified Bidder shall acknowledge in writing that: (i) such
prospective Qualifying Bidder has had an opportunity to conduct any and all due
diligence regarding the business and operations of Sunwest, Stayton, their
respective Affiliates, the Properties and the Assumed Liabilities prior to
submitting its bid; (ii) the prospective Qualifying Bidder has relied solely
upon its own independent review, investigation and/or inspection of any
documents and/or the Properties and/or the Assumed Liabilities in making its
bid; (iii) such prospective Qualifying Bidder did not

 
1

--------------------------------------------------------------------------------

 

rely upon any written or oral statements, representations, promises, warranties
or guaranties whatsoever, whether express, implied, by operation of law or
otherwise, regarding the Properties, the Assumed Liabilities or the completeness
of any information provided in connection therewith or the Auction, except as
expressly stated in these Bid Procedures and Stayton's representations and
warranties in the Agreement; and (iv) such bid is not contingent upon any
additional due diligence.

d)  
Stayton shall be entitled to perform due diligence with respect to each
prospective Qualified Bidder, upon execution of a confidentiality agreement in
form and substance satisfactory to Stayton and such prospective Qualified
Bidder.  Failure by a prospective Qualified Bidder to fully comply with the
reasonable due diligence requests by Stayton shall be a basis for Stayton to
determine that a bid made by such Qualified Bidder is not a Qualified Bid.

2.  
Bid Deadline

Bids for the Properties, together with all accompanying documentation required
for submission of Qualified Bids, must be submitted to the address specified in
the notice to Qualified Bidders no later than 4:00 P.M. Pacific Time on the date
which is 42 days after the entry of the Auction Order (the "Bid Deadline").
 
3.  
Qualified Bids

 
A bid shall be considered a “Qualified Bid” if it shall:

a)  
Be accompanied by an executed confidentiality agreement in form and substance
satisfactory to Stayton;

b)  
Be accompanied by such bidder's Deposit in the form of cash or letter of credit
equal to $50 million, which deposit or letter of credit shall meet all the
requirements set forth in Section 2.4 of the Agreement;

c)  
Constitute such bidder's binding and irrevocable contractual commitment to
purchase all, but not less than all, of the Properties, without being subject to
any due diligence, inspection, financing or other contingencies;

d)  
Provide for (i) payment of cash in respect of that portion of the Purchase Price
representing the Cash Consideration Amount and (ii) issuance of an equity
interest to the Rollover Member in accordance with Section 2.6 of the Agreement
if the Rollover Equity Election is made by Stayton;

e)  
Be accompanied by executed copies of the Transaction Documents, modified, as
necessary, to reflect the terms of the bid (and shall include a redline of the
bidder's proposed modifications against the Transaction Documents theretofore
executed by Blackstone Purchaser);

f)  
Be consistent in all material respects with the Transaction Documents executed
by Blackstone Purchaser without requiring any further modifications to the
Distribution Plan, the Reorganization Plan or the other Plan Documents; and

g)  
Provide that Stayton is entitled to perform due diligence with respect to such
Qualified Bidder in accordance with the Bid Procedures.

 
2

--------------------------------------------------------------------------------

 

Superior Offer

A "Superior Offer" shall mean a Qualified Bid for a Purchase Price which
includes a Cash/Equity Portion of Purchase Price equal to or greater than
$261,242,485, payable in cash, plus the assumption of the Assumed Real Property
Loans and the Assumed Personal Property Debt.

4.  
Conduct of Auction

If a Superior Offer is submitted by a Qualified Bidder on or before the Bid
Deadline, Stayton shall conduct an Auction for the Properties.  If no Superior
Offer is received by a Qualified Bidder before the Bid Deadline, there shall be
no Auction and Blackstone Purchaser and Stayton shall be obligated to complete
the Transaction subject to the terms and conditions in the Agreement.  The
Auction shall be conducted on the following terms:
 
a)  
The Auction shall be conducted on the fifth Business Day following the Bid
Deadline and upon at least three Business Days' notice to Blackstone Purchaser
and each Qualified Bidder which has submitted a Superior Offer ("Superior
Bidders").

b)  
Only Blackstone Purchaser and the Superior Bidders may bid in the Auction.

c)  
Formal proceedings of the Auction shall be conducted on the record in the court
room of the Court.  The Court may make available to Superior Bidders, Stayton
and their respective representatives additional premises for private
consultations during the auction or recesses from the Auction.

d)  
The Auction may be recessed from time to time in the discretion of the Court at
the request of the CRO, the Receiver or Superior Bidders but shall continue
until conclusion of the Auction.

e)  
During the Auction, bidding shall begin initially with the highest Superior
Offer and subsequently continue in minimum incremental bids of at least
$1,000,000 (each such bid submitted, a "Qualified Overbid").

f)  
Bids at the Auction may be submitted and received orally, in writing or in
sealed or other form as directed by the Court.

g)  
Bidding at the Auction will continue until such time as the highest and best
Qualified Overbid (the "Successful Bid") is selected as follows: immediately
prior to conclusion of the Auction, Stayton will review each Qualified Overbid
on the basis of financial and contractual terms and other factors relevant to
(x) the determination of which transaction is in the best interests of the
creditors and estates of Stayton and its Affiliates, and (y) the sale process,
including those factors affecting the speed and certainty of consummating a
transaction and in the exercise of their business judgment, select the
Successful Bid.

h)  
Forthwith after announcement of the Successful Bid, the maker thereof (the
“Successful Bidder”) shall execute and deliver a purchase agreement
incorporating the price and terms offered in the Successful Bid (the "Final Sale
Agreement").  Upon submission of the Final Sale Agreement by the Successful
Bidder, Stayton will execute the Final Sale Agreement and shall seek Court
approval of the Final Sale Agreement.  Subsection 2.5(b) of the Agreement shall
be deleted from the Final Sale Agreement in its entirety.

i)  
Stayton, may: (a) determine in their business judgment which Qualified Overbid,
if any, is the highest or otherwise best offer; and (b) reject any Qualified
Overbid that Stayton determines to be: (i) inadequate or insufficient; (ii) not
in conformity with the

 
3

--------------------------------------------------------------------------------

 

requirements of applicable bankruptcy Laws or these Bid Procedures; or (iii)
contrary to the best interests of Stayton, its estates and its creditors.
j)  
In determining the Successful Bid, Blackstone Purchaser shall receive credit for
its Break-Up Fee and Expense Reimbursement, determined pursuant to Section 10.2
of the Agreement, in connection with calculation of the value of its Auction
bids.

k)  
The Deposits of all Qualifying Bidders will be retained by the Receiver and all
Qualified Overbids will remain open until the closing of a transaction with the
Successful Bidder in respect of the Successful Bid; provided, however, that if
no such closing occurs on or before 20 Business Days after execution of the
Final Sale Agreement, then Stayton shall, except as provided in the following
paragraph, within 25 Business Days after expiration of such 20-day period,
return or cause to be returned each Deposit to its respective Qualifying Bidder.

l)  
Stayton shall have the right to adopt such other rules for the Bid Process
which, in its sole judgment, will better promote the goals of the Bidding
Process and which are not inconsistent with any of the provisions of these Bid
Procedures, the Auction Order or of any other order of the Court.

5.  
Treatment of Break-up Fee at Auction

In the event that Blackstone Purchaser is not chosen as the Successful Bidder at
the Auction or elects not to submit a bid at the Auction and the Court, in the
Sale Approval Order, confirms a sale of the Properties to a Successful Bidder
other than Blackstone Purchaser, Stayton shall pay to Blackstone Purchaser the
Break-Up Fee as provided in Section 10.2 of the Agreement.
 

 
4

--------------------------------------------------------------------------------

 

EXHIBIT M-1

Title Report

NAME
CITY
STATE
COUNTY
NBG NO.
TITLE NO.
Absaroka
Cody
WY
Park
70901125
P-5816
Alpine Court
Eugene
OR
Lane
70901126
4609011328-FTEUG25
Alpine Springs
Eugene
OR
Lane
70901127
4609011329-FTEUG25
Azalea Gardens
Oxford
MS
Lafayette
70901131
Azalea Gardens
Big Sky
Butte
MT
Silver Bow
70901132
C-9912-091098
Brentmoor
Minot
ND
Ward
70901133
32287
Briarwood
Springfield
OR
Lane
70901134
4609011341-FTEUG25
Brookside
Buford
GA
Gwinnett
70901135
09-1026AH
Buckingham Estates
Glastonbury
CT
Hartford
70901136
2941-25095
Cambridge Place
Great Falls
MT
Cascade
70901137
85285-01
Canterbury Court
Harlingen
TX
Cameron
70901138
187297
Canterbury Gardens
Harlingen
TX
Cameron
70901139
187298
Canyonview Estates
Amarillo
TX
Potter
70901140
09-187329
Carriage Inn
Portland
TX
San Patricio
70901141
187299
Cedar Ridge
Broken Arrow
OK
Tulsa
70901142
9090198
Century Fields
Lebanon
OR
Linn
70901143
FT090019865-FTMWV23
Champlin Shores
Champlin
MN
Hennepin
70901144
32288
Chandler Place
Rock Hill
SC
York
70901145
CT-09-046(7977)
Chehalem Springs
Newberg
OR
Yamhill
70901146
3626020539TO-TTPOR71

 
5

--------------------------------------------------------------------------------

 

Chesterley Court
Yakima
WA
Yakima
70901147
75203-KA
Chesterley Meadows
Yakima
WA
Yakima
70901148
75204-KA
Chris Ridge
Phoenix
AZ
Maricopa
70901150
CT0909072-CT2947
Churchill
Mooresville
NC
Iredell
70901151
09-0020225
Cliff View
St. George
UT
Washington
70901152
F-78122WA
Cordova Estates
Cordova
TN
Shelby
70901153
2132532
Cottage Village
Lubbock
TX
Lubbock
70901154
187300
The Cottages
Albuquerque
NM
Bernalillo
70901155
FT000036842
Cougar Springs
Redmond
OR
Deschutes
70901156
118607
Court at Clifton Park/Beacon Pointe/Willow Trace
Clifton Park
NY
Saratoga
70901157
2903-30637
Court at Greece/Crimson Ridge Gardens/Harvest Glen
Greece
NY
Monroe
70901158
2903-30638
Court at Orchard Park/Quaker's Landing
Orchard Park
NY
Erie
70901159
2903-30639
Courtyard Gardens
Lawrenceville
GA
Gwinnett
70901160
09-1060ah
Culpepper Place
Paducah
KY
McCracken
70901161
12460
Dry Creek
Ellensburg
WA
Kittitas
70901164
110119
Eagle Cove
Eagle Pointe
OR
Jackson
70901165
470309002637-TTJA02
Eagle Meadows
College Place
WA
Walla Walla
70901166
30935
Eden Estates
Bedford
TX
Tarrant
70901168
187334
Eldorado Heights
Klamath Falls
OR
Klamath
70901169
86071
Emerald Estates
Baltimore
MD
Baltimore
70901170
4509-45390
Emerald Pointe
Cedar City
UT
Iron
70901171
F-77953IR

 
6

--------------------------------------------------------------------------------

 

Englewood Heights
Yakima
WA
Yakima
70901172
75147-KA
Fishers Landing
Vancouver
WA
Clark
70901173
K164106
Flint River
Macon
GA
Bibb
70901174
09-1029JG
Fox River
Appleton
WI
Outagamie
70901176
PT04239
Georgian Place
Newnan
GA
Coweta
70901177
09-1028JG
Glendale Place
Murray
KY
Calloway
70901178
12780
Grayson View Selinsgrove
Selinsgrove
PA
Snyder
70901180
2922835
Hawthorne Inn at Greenville
Greenville
SC
Greenville
70901181
116165-00047-09LWB
Hawthorne Inn at Hilton Head
Hilton Head
SC
Beaufort
70901182
116165-00046-09LWB
Heartland Park
Seward
NE
Seward
70901183
20093590
Heritage Place
Tahlequah
OK
Cherokee
70901184
9090703
The Heritage
Bridgeport
WV
Harrison
70901185
1739
Hermiston Terrace
Hermiston
OR
Umatilla
70901186
0064487
Heron Pointe
Monmouth
OR
Polk
70901187
FT090020099-FTMWV23
Hillside
McMinnville
OR
Yamhill
70901189
3626021083TO-TTPOR71
Holiday Lane Estates
North Richland Hills
TX
Tarrant
70901190
187359
Lake Pointe
Hartwell
GA
Hart
70901191
09-1089vc
Lake Springs
Buford
GA
Gwinnett
70901192
09-1088AH
Lake Springs Cottages
Buford
GA
Gwinnett
70901193
09-1087AH
Lakeside
Stayton
OR
Marion
70901194
FT090020101-FTMWV23
Lakeside Cottages
Stayton
OR
Marion
70901195
FT090020102-FTMWV23
Lassen House
Red Bluff
CA
Tehama
70901196
09-55201620-A-TV

 
7

--------------------------------------------------------------------------------

 

Laurel Gardens
Florence
SC
Florence
70901197
UT09-035NBU
LaVilla
Roswell
NM
Chaves
70901198
FT000037745
Legacy Crossing
Franklin
TN
Williamson
70901199
534931
Legacy Gardens
Madison
WI
Dane
70901200
109100017
Lexington Gardens
West Columbia
SC
Lexington
70901201
09-CT-038
Magnolia Gardens
Muskogee
OK
Muskogee
70901202
9090284
Manchester House
Oklahoma City
OK
Oklahoma
70901203
9090283
Manor House
Roseburg
OR
Douglas
70901204
472209001070-TTDOU22
Maplewood
Bridgeport
WV
Harrison
70901205
1740
Meadowlark
Yreka
CA
Siskiyou
70901206
00211903-300
Medallion
Dallas
TX
Dallas
70901207
187360
Minnetonka
Minnetonka
MN
Hennepin
70901208
32262
Monroe House
Sterling
VA
Loudoun
70901209
297300496
Montclair Park
Poulsbo
WA
Kitsap
70901210
MM-20356943
Moses Lake
Moses Lake
WA
Grant
70901211
328724-GM
Mountain Laurel
Glastonbury
CT
Hartford
70901212
2941-25108
Mountain View Ashland
Ashland
OR
Jackson
70901213
470309002638TTJA03
Necanicum Village
Seaside
OR
Clatsop
70901214
360409002028-TTAST04
Northpark Place
Sioux City
IA
Woodbury
70901215
32264
Northridge
Kearney
NE
Buffalo
70901216
020093618
Oak Tree Village
St. Peters
MO
Charles
70901217
020093515
Oakridge
Stevens Point
WI
Portage
70901218
CH-12588

 
8

--------------------------------------------------------------------------------

 

The Oaks
Wayne
NE
Wayne
70901219
020093617
Orchard Glen
Orchard Park
NY
Erie
70901220
2903-30660
Orchard Park
Clearlake
CA
Lake
70901221
09-175105456-DP
Osprey Court
McMinnville
OR
Yamhill
70901222
3626020198TO-TTPOR71
Oswego Springs
Portland
OR
Multnomah
70901223
472509473912TO-CTOR
Palm Meadows Court
Hilton Head
SC
Beaufort
70901224
116165-00050-09LWB
Palm Meadows Village
Hilton Head
SC
Beaufort
70901225
116165-00049-09LWB
The Palms
Roseville
CA
Placer
70901226
09-76103951-DP
Paradise Valley
Phoenix
AZ
Maricopa
70901227
CT0909874
Park Avenue Estates
Lexington
NE
Dawson
70901228
020093516
Park Place-OR
Portland
OR
Washington
70901229
473261
Parkway Village
Spokane
WA
Spokane
70901230
160829
Peachtree Village-GA
Commerce
GA
Jackson
70901231
09-1086AH
Peridot
Prescott
AZ
Yavapai
70901233
01696995
Plaza on the River
Kerrville
TX
Kerr
70901234
187306
Quail Hollow
Richland
WA
Benton
70901235
328983-JL
Remington House
Kingsport
TN
Sullivan
70901236
534932
River Road
Keizer
OR
Marion
70901237
FT090020103-FTMWV23
River Valley Landing
Tualatin
OR
Clackamas
70901239
472509473913TO-CT03
Rose Terrace
Memphis
TN
Shelby
70901240
2132978
Rose Valley
Scappoose
OR
Columbia
70901241
73809001824-TTCOL07
Rosemont at Clearlake
Houston
TX
Harrison
70901243
09-187305

 
9

--------------------------------------------------------------------------------

 

Sandia Springs
Rio Rancho
NM
Sandoval
70901244
FT000036985
Sellwood Landing
Portland
OR
Multnomah
70901245
472509473914-CT0R
Sequoia Springs
Fortuna
CA
Humboldt
70901246
09-502893-CJ
Spring Arbor
Rock Hill
SC
York
70901248
CT-09-044(7979)
Spring Creek Gardens
Plano
TX
Collin
70901249
187317
Spring Estates
Kenmore
WA
King
70901250
1294042
Spring Mountain
Marietta
GA
Cobb
70901251
09-1085VC
Spring Pointe
Grants Pass
OR
Josephine
70901252
472609002018-TTJOS26
Spring Village
Grants Pass
OR
Josephine
70901253
472609002017-TTJOS26
Statesman Club
Oklahoma City
OK
Oklahoma
70901254
See Manchester House
Stone Mountain
Stone Mountain
GA
DeKalb
70901255
09-1099
Stonebridge
Vancouver
WA
Clark
70901256
K164304
Sugarland Ridge
Sheridan
WY
Sheridan
70901257
S-5820
Sunrise Creek
Montrose
CO
Montrose
70901258
1466063-2
Sunshine Village
Phoenix
AZ
Maricopa
70901259
CT0909868
Sweetwater Springs
Lithia Springs
GA
Douglas
70901260
09-1054
Terrace at Bluegrass
Hendersonville
TN
Sumner
70901261
535332
Terrace at Jasper
Jasper
AL
Walker
70901262
4834C-09
Terrace at Riverstone
Canton
GA
Cherokee
70901263
09-1036VC
Terrace at Woodstock
Woodstock
GA
Cherokee
70901264
09-1037JG
Villa Del Rey
Roswell
NM
Chaves
70901266
6411011094
Village at Greece/Crimson Ridge Meadows
Greece
NY
Monroe
70901267
2903-30659

 
10

--------------------------------------------------------------------------------

 

Waterford in Bellevue
Nashville
TN
Davidson
70901268
534933
West Park Place
West Allis
WI
Milwaukee
70901269
091624
Willow Ridge
McCook
NE
Red Willow
70901272
020093616
Windfield Village
Wilsonville
OR
Clackamas
70901273
472509473915TO-CTOR
Woodside Village
Springfield
OR
Lane
70901274
4609011606-FTEUG25
Woodstock Estates
Woodstock
GA
Cherokee
70901275
09-1084AH

 
11

--------------------------------------------------------------------------------

 

EXHIBIT M-2
Title Companies

Chicago Title Insurance Company, a NE corporation

Lawyers Title Insurance Corporation, a NE corporation

Stewart Title Guaranty Company, a TX corporation, by National Land Tenure (as to
non-NY sites) and Stewart Title Insurance Company, a NY corporation, by National
Land Tenure (as to NY sites)

First American Title Insurance Company of California, a CA corporation (as to
non-NY sites) and First American Title Insurance Company of New York, a NY
corporation (as to NY sites)

Stewart Title Guaranty Company, a TX corporation, by Title Associates (as to
non-NY sites) and Stewart Title Insurance Company, a NY corporation, by Title
Associates (as to NY sites)

Fidelity National Title Insurance Company, a CA corporation
 
 
Ticor Title Insurance Company, a CA corporation

 
12

--------------------------------------------------------------------------------

 

EXHIBIT M-3
REQUIRED REMOVAL EXCEPTIONS

1.  
Any standard exceptions with respect to the following matters shall be removed
for all Properties:

 
a.  
Rights or claims of tenants or parties in possession not shown by the public
records

 
b.  
Easements, or claims of easements, not shown by the public records

 
c.  
Any lien, or right to a lien, for services, labor, or material heretofore or
hereafter furnished, imposed by law and not shown by the public records

 
d.  
Taxes or special assessments which are not shown as existing liens by the public
records

 
e.  
Defects, liens, encumbrances, adverse claims and other matters, if any, created,
first appearing in the public records or attaching subsequent to the effective
date of the title commitment, but prior to the date the proposed insured
acquires for value of record the estate or interest covered by the title
commitment

 
2.  
Any standard exceptions with respect to the following matters shall be removed
for all Properties other than Missing Survey properties:

 
a.  
Encroachments, overlaps, boundary line disputes, and any matters which would be
disclosed by an accurate survey and inspection of the premises

 
3.  
Any exceptions with respect to the following matters shall be removed for all
ground-leased Properties:

 
a.  
The effect of any failure to comply with the terms, covenants, conditions and
provisions of the ground lease arising before the effective date of the policy

 
b.  
Any facts, rights, interests or claims in the ground lease, which are not shown
by the public records, but which could be ascertained by making inquiry of the
lessors and their successors-in-interest

 
c.  
Any defect or invalidity of, or other matter relating to the leasehold estate,
which would be disclosed by an examination of the unrecorded lease

 
4.  
The following exceptions shall be removed:

 
a.  
Alpine Springs (OR)

 
i.  
Exception #18: Lease between Alpine Springs, LLC and Alpine Springs III, LLC,
dated 9/30/02, as disclosed by Memorandum of Lease filed on 10/1/02

 
b.  
Azalea Garden (MS)

 
i.  
Exception #11: Apparent scrivener’s error beginning in Special Warranty Deed
from Azalea Gardens, LLC to Oxford Senior Living, LLC as filed in instrument
Number 200609488 and each subsequent transfer thereafter

 
c.  
Buckingham Estates (CT)

 
i.  
Exception #10: Lease between Fairway Crossing Senior Living, LLC and
Fairway  Crossing Senior Living Property, LLC and related Subordination,

 

 
13

--------------------------------------------------------------------------------

 

Non-Disturbance and Attornment Agreement, dated 2/28/07, in favor of General
Electric Capital Corporation
 
d.  
Carriage Inn (TX)

 
i.  
Exception #23: Performance Bond and Payment Bond, dated 10/3/97, by White Oak
Builders, Inc., Carriage Inn-North Shore, L.P. and National American Insurance
Company, and recorded on 10/13/97

 
ii.  
Exception #24: Affidavit of Commencement by The Retirement Group, Inc., dated
12/5/97 and recorded 1/20/98

 
iii.  
Exception #25: Performance Bond and Texas Statutory Payment Bond (Property
Code-Private Work), dated 1/7/98, by Williams Industries, Inc., The Hartford
Fire Insurance Company and Carriage Inn-North Shore, L.P., and recorded on
3/11/98

 
e.  
Canterbury Court (TX)

 
i.  
Exception #10 (Sch. C): Any rights (including, without limitation, any right of
first refusal) pursuant to (i) that certain Lease, dated 10/1/01, between LSOF
Harlingen, L.P. and LSOF Tenant, Inc., (ii) that certain Management Agreement,
dated 10/2/01, between LSOF Tenant, Inc. and ARV Assisted Living Inc., and (iii)
that certain First Right to Purchase Agreement, dated 10/2/01, between LSOF
Harlingen, L.P. and ARV Assisted Living Inc., each as referred to in that
certain Collateral Assignment of Management Agreement and Subordination of
Property Management and Broker’s Liens and Subordination of Right of First
Refusal, dated 10/3/01, by ARV Assisted Living Inc., LSOF Harlingen, L.P. and
LSOF Tenant, Inc. for the benefit of Heller Healthcare Finance, Inc., recorded
on 10/5/01

 
f.  
Century Fields (OR)

 
i.  
Exception #15: Unrecorded Triple-Net Lease Agreement, dated November 29, 2004

 
g.  
Chris Ridge (AZ)

 
i.  
Exception #14: Public Purposes Agreement, dated 12/01/85, between City of
Phoenix and CVR Limited Partnership, and recorded on 1/20/86

 
ii.  
Exception #17: Regulatory Agreement for Tax Exemption, dated 5/1/92, between CVR
Limited Partnership and The Industrial Development Authority of the City of
Phoenix, Arizona, and recorded on 6/3/92

 
h.  
Cordova Estates (TN)

 
i.  
Exception 9: Land Use Restriction Agreement, recorded as Instrument No. FZ 0274,
as corrected by Instrument No. FZ 1730 and assumed pursuant to instrument No.
050744147

 
i.  
Court at Orchard Park/Quaker’s Landing (NY)

 
i.  
Exception #3: Lease between Orchard Park Sterling Drive, LLC and Orchard Park
Sterling Road Partners, LLC

 

 
14

--------------------------------------------------------------------------------

 

j.  
Culpepper Place (KY)

 
i.  
Exception #10: Construction Easement in favor of McCracken County, dated
10/15/96 and recorded on 11/22/96

 
ii.  
Exception #13: Master Lease between Paducah Senior Living Property, LLC and
Paducah Senior Living, LLC, as reflected in a Memorandum of Lease, dated April
30, 2007

 
k.  
Eagle Cove (OR)

 
i.  
Exception #13: Lease between Eagle Cove Senior Living, LLC and Bear Creek
Clinic, P.C. (d/b/a Eagle Point Medical Center)

 
l.  
Englewood Heights (WA)

 
i.  
Exception #8: Lease between Yakima Senior Living Property, LLC and Yakima Senior
Living LLC and related Subordination, Non-Disturbance and Attornment Agreement,
recorded on April 4, 2007

 
m.  
Fisher’s Landing (WA)

 
i.  
Exception #7: Contract and Agreement, dated June 5, 1998, between WRG Phase II
Equities Eight Towncenter, LLC and John Leyerzaph, Bonnie Leyerzaph and Patricia
Haugen, evidenced by a Memorandum of Contract, recorded on November 10, 1998

 
n.  
Flint River(GA)

 
i.  
Exception #8: Lease between Macon Senior Living, LLC and Macon Senior Living
Property, LLC and related Subordination, Non-Disturbance and Attornment
Agreement, dated December 27, 2006

 
o.  
Georgian Place (GA)

 
i.  
Exception #15: Unrecorded Triple Net Lease and related Subordination and
Standstill Agreements, dated May 10, 2007 and February 22, 2008

 
p.  
Heron Pointe (OR)

 
i.  
Exception #16: Lease between Heron Pointe Retirement and Assisted Living
Residence, L.L.C., and Heron Pointe III, LLC, dated 9/30/02, as disclosed by a
Memorandum of Lease filed on 9/30/02

 
q.  
Lake Springs Cottages (GA)

 
i.  
Exception #11: Management Agreement between Swan Enterprises, LLC and Elder
Healthcare Developers, LLC, as affected by First Amendment to Management
Agreement and Notice of Right of First Refusal, dated 5/31/99

 
r.  
LaVilla (NM)

 
i.  
Exception #1(c), Sch. B, Sec. I: Any rights (including, without limitation, any
right of first refusal) pursuant to (i) that certain Lease, dated 10/1/01,
between LSOF Roswell II, LLC and LSOF Tenant, Inc., (ii) that certain Management
Agreement, dated 10/2/01, between LSOF Tenant, Inc. and ARV Assisted Living
Inc., and (iii) that certain First Right to Purchase Agreement, dated

 

 
15

--------------------------------------------------------------------------------

 

10/2/01, between LSOF Roswell II, LLC and ARV Assisted Living Inc., each as
referred to in that certain Collateral Assignment of Management Agreement and
Subordination of Property Management and Broker’s Liens and Subordination of
Right of First Refusal, dated 10/3/01, by ARV Assisted Living Inc., LSOF Roswell
II, LLC and LSOF Tenant, Inc. for the benefit of Heller Healthcare Finance, Inc.
 
s.  
Legacy Crossing (TN)

 
i.  
Exception #14: Unrecorded Triple Net Lease

 
t.  
Lexington Gardens (SC)

 
i.  
Exception #20, Sch. B, Sec. I: Lease between SC Lexington, LLC and West Columbia
Associates, LLC

 
u.  
Medallion (TX)

 
i.  
Exception 10(i): Lease between Marriott Senior Living Services, Inc. and
National Health Investors, Inc., dated 7/1/96 and evidenced by a Memorandum of
Lease filed on 8/8/96

 
v.  
Montclair Park (WA)

 
i.  
Exception #10: Use Limitations and Declaration of Restrictive Covenants recorded
on 5/22/02, as amended by Amended and Restated Use Limitation and Declaration of
Restrictive Covenants recorded on 1/22/03

 
w.  
Northpark Place (IA)

 
i.  
Exception #16: Evidence that in connection with the 2007 transfer of this
Property St. Luke’s Health System, Inc. released or elected not to exercise the
right of first refusal created in its favor by Memorandum of Restrictive
Covenants, dated 12/15/03 and recorded on 12/15/03.

 
x.  
Park Place (OR)

 
i.  
Exception #11: Lease between LTC West, Inc. and Regent Assisted Living, Inc.,
recorded on 6/5/98

 
y.  
Parkway Village (WA)

 
i.  
Exceptions #5 & 6: Unrecorded leases and related Subordination and Standstill
Agreement, recorded 8/14/06

 
z.  
Plaza on the River (TX)

 
i.  
Exceptions #53 and 54, Sch. C: Any rights pursuant to (i) that certain Master
Lease Agreement, dated 12/27/06, between Kerrville Senior Living Property
Limited Partnership and Kerrville Senior Living Limited Partnership, and (ii)
that certain Sublease Agreement, dated 10/24/06, between Kerrville Senior Living
Limited Partnership and TI- Kerrville, L.L.C., as referred to in (x) the
Subordination, Non-Disturbance and Attornment Agreement, dated 12/27/06, among
Kerrville Senior Living Property Limited Partnership, Kerrville Senior Living
Limited Partnership and General Electric Capital Corporation, and (y) the
Subordination, Non-Disturbance and Attornment Agreement, dated

 

 
16

--------------------------------------------------------------------------------

 

12/27/06, among Kerrville Senior Living Limited Partnership, TI- Kerrville,
L.L.C. and General Electric Capital Corporation
 
aa.  
Remington House (TN)

 
i.  
Exception #6: Deed restriction and Regulatory Agreement, dated 3/1/98, between
Sentinel Trust Company and Kingsport Senior Housing, L.L.C.

 
ii.  
Exception #8: Unrecorded Triple Net lease

 
bb.  
River Road (OR)

 
i.  
Exception #18: Regulatory Agreement and Declaration of Restrictive Covenants,
dated 11/25/98, between Jilar Keizer Enterprises, L.L.C. and the Oregon Housing
and Community Services Department, and recorded on 12/1/98

 
cc.  
Rosemont at Clearlake (TX)

 
i.  
Exception #10(l): Lease between Clearlake Senior Living Property Limited
Partnership and Clearlake Senior Living Limited Partnership

 
dd.  
Sellwood Landing (OR)

 
i.  
Exception #20: Required recording of a Memorandum of the First Amended and
Restated Ground Lease Agreement

 
ee.  
Spring Arbor (SC)

 
i.  
Exception #14: Lease between Spring Arbor Property, LLC and Spring Arbor Senior
Living, LLC, evidenced by Memorandum of Lease, recorded on 4/14/06

 
ff.  
Spring Estates (WA)

 
i.  
Exception #14: Lease between Kenmore Senior Living, LLC and Northshore House
Operations, LLC

 
gg.  
Terrace at Bluegrass (TN)

 
i.  
Exception #6: Operating Lease between Hendersonville BG Property, LLC and the
other parties named therein

 
hh.  
Waterford in Bellevue (TN)

 
i.  
Exception #13: Unrecorded Triple Net Lease

 
ii.  
Woodside Village (OR)

 
i.  
Exception #24: Right, title and interest of Woodside Retirement and ALF, as
disclosed by Lane County Personal Property Tax Statement.

 
Missing Title Documents
 
Purchaser has not yet received copies of the following exception
documents.  These exceptions shall be deemed Required Removal Exceptions until
such time as Purchaser has reviewed and approved copies of the underlying
exception documents.
 

 
17

--------------------------------------------------------------------------------

 

Property (State)
Exception
Alpine Court (OR)
Exception #14: Planned Unit Development Agreement, disclosed by Notice of
Planned Unit Development Agreement, recorded 3/20/00 as Rec. No. 2000018086.
Alpine Springs (OR)
Exception #11: Planned Unit Development Agreement between Sunwest Management,
Inc. and the City of Eugene referenced in the Notice of Planned Unit Development
Agreement between Sunwest and the City of Eugene.
Big Sky (MT)
Exception #17: Property Owners Association Agreement.

 
Legal Description Corrections
 
The legal descriptions for the following Properties are to be corrected by
Seller to address the issues identified below, which shall be deemed Required
Removal Exceptions until such time as Purchaser has reviewed and approved
revised Title Reports for each of these Properties.
 
1.  
Canterbury Gardens (TX)

 
a.  
The legal descriptions appearing in the Title Report and vesting deed for this
Property except a 0.027 acre tract of land, more or less, conveyed in Special
Warranty Deed dated December 15, 2006, filed July 2, 2007, executed by Camelot
Retirement Community, L.P. to Camelot Garden Homes, L.L.C., recorded in Volume
14015, page 119, Official Public Records of Cameron County, Texas.

 
2.  
Peridot (AZ)

 
a.  
The legal description appearing in the vesting deed for this property contains
an incorrect direction in the fourth line from the ending “TRUE POINT OF
BEGINNING,” which line reads “thence North 90°00’00” West, 125.75 feet” and
should instead read thence North 90°00’00” East, 125.75 feet.”

 
3.  
Sweetwater Springs (GA)

 
a.  
The legal descriptions appearing in the Title Report and vesting deed for this
Property excepts a certain disputed tract of land conveyed by quit claim deed,
dated April 14, 1997, recorded April 29, 1997, in Book 1701, Page 525, as more
particularly described in such Title Report and vesting deed.

 

 
Title Company Confirmation Pending
 
The Title Company is in the process of confirming whether exceptions 10-30,
32-37, 39, and 41-42 listed in the Title Report for Manchester House/Statesman
Club (OK) affect such Property. Such exceptions shall be deemed Required Removal
Exceptions pending the delivery of a revised Title Report for such Property.
 

 
18

--------------------------------------------------------------------------------

 

EXHIBIT M-4
REQUIRED AFFIRMATIVE INSURANCE

1.  
With respect to all of the Properties, affirmative insurance against forced
removal of existing improvements with respect to (i) any encroachments noted on
a survey and (ii) any encroachments over or violations of easements or
covenants, conditions or restrictions

 
2.  
With respect to all of the Properties, affirmative insurance against forfeiture
and reversion of interest with respect to violations of easements or covenants,
conditions and restrictions

 
3.  
Affirmative insurance against forced removal of existing improvements with
respect to the following exceptions:

 
a.  
Carriage Inn (TX)

 
i.  
Exception 10(r): Warranty Deed by Jennie Hunt Hester, et al to El Paso
Development Company

 
b.  
Rosemont at Clearlake (TX)

 
i.  
Exception 10(j): General Warranty Deed, dated October 15, 1962, between Humble
Oil & Refining Company and Friendswood Development Company

 
4.  
Affirmative insurance against forfeiture and reversion of interest with respect
to the following exceptions:

 
a.  
Briarwood (OR)

 
i.  
Exception #14: Improvement Agreement, dated November 9, 1998 and recorded on
November 10, 1998

 
b.  
Court at Orchard Park/Quaker’s Landing (NY)

 
i.  
Exception #8: Declaration of Restrictive Covenants, dated 3/12/96 and recorded
3/19/96

 
c.  
Chesterley Court (WA)

 
i.  
Exception #10: Ordinance No. 93-90, recorded 11/29/93

 
d.  
Lake Springs Cottages (GA)

 
i.  
Exception #4: Limited Warranty Deed from Brickton Properties, Inc. to Georgia
District Council of the Assemblies of God, Inc., dated 12/19/85

 
e.  
Moses Lake (WA)

 
i.  
Exception #8: Covenants as to Improvements, recorded on 8/22/03

 
ii.  
Exception #9: Covenants as to Improvements, recoded on 1/11/08

 
f.  
Orchard Park (CA)

 
i.  
Exception #8: Agreement for Deferred Completion of Improvement Work and Lien of
Conditions for Use Permit Number UP-02-99, dated 5/01 and recorded on 6/21/01

 
g.  
Rosemont at Clearlake (TX)

 

 
19

--------------------------------------------------------------------------------

 

i.  
Exception 10(j): General Warranty Deed, dated October 15, 1962, between Humble
Oil & Refining Company and Friendswood Development Company

 
h.  
Sellwood Landing (OR)

 
i.  
Exception #23: Covenant Limiting Occupancy of Structures, recorded on 7/18/02

 
i.  
Spring Creek Gardens (TX)

 
i.  
Exception 10(e): Development Agreement, dated 1/26/96 and recorded on 3/4/96

 
j.  
Spring Pointe (OR)

 
i.  
Exception #13: Deferred Development Agreement and Waiver of Remonstrance,
recorded on 3/10/00

 
ii.  
Exception #14:A Letter of Commitment Agreement, recorded on 3/15/00

 
k.  
Windfield Village (OR)

 
i.  
Exception #15: Home Investment Partnerships Program Declaration of Land Use
Restrictions between Link Community Development Corporation and Clackamas County
Community Development Division, recorded on 6/8/95

 
ii.  
Exception #17: Project Use Agreement between Link CDC, Inc. and Oregon Housing
and Community Services Department, recorded on 5/29/97

 
l.  
Woodside Village (OR)

 
i.  
Exception #14: Improvement Agreement, dated 11/9/98 and recorded on 11/10/98

 

 
20

--------------------------------------------------------------------------------

 

EXHIBIT M-5
REQUIRED TITLE CONSENT PROPERTIES
 
Cordova Estates is subject to a Land Use Restriction Agreement with The Health,
Educational and Housing Facility Board of the County of Shelby, Tennessee (the
"Board"), and J.P. Morgan Trust Company, National Association (the "Trustee"),
which was entered into in connection with a loan to a prior owner that was
financed by the proceeds of a bond offering by the Board. The sale of the
property is subject to the prior written consent of the Board and the Trustee,
which consent will not be unreasonably withheld and will be given if certain
conditions are satisfied, including, assumption of the agreement by the
purchaser, the provision of satisfactory evidence as to the purchaser's
experience in the operation of rental housing projects and the delivery of
certain additional information (e.g. a Certificate of Continuing Program
Compliance).
 
Remington House is subject to a Deed Restriction and Regulatory Agreement
relating to a bond issuance by The Health and Educational Facilities Board of
the County of Sullivan, Tennessee, the proceeds of which were at one time used
to finance the construction of the property. The written consent of Sentinel
Trust Company, as trustee under the agreement, is required for a transfer of the
property. The agreement expires on the later of the first date on which the
bonds are no longer outstanding and the full satisfaction of the loan made with
the proceeds of the bonds. Based on the loan documents we have been provided
with, the loan is no longer outstanding, but we are not able to determine
whether or not the bonds are still outstanding.
 
River Road (ground leased) is subject to a Regulatory Agreement and Declaration
of Restrictive Covenants, dated 11/25/1998, with Oregon Housing and Community
Services Department, which was assumed by the ground lessee. The sale of the
property or any interest therein is subject to the written consent of the Oregon
Housing and Community Services Department.

 
21

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EXHIBIT M-6
REQUIRED TITLE NOTICE PROPERTIES
 
The sale of Hawthorne Inn at Hilton Head is subject to the requirement that
notice must be provided to the developer and the property owners' association of
the intended transfer and the name and address of the purchaser.
 
The property owner of Montclair Park must provide written notice from the
purchaser stating that the purchaser understands and will comply with the
owner's obligations under a declaration of restrictive covenants with the City
of Poulsbo. A copy of the notice must be provided to the City of Poulsbo no
later than 10 days prior to the closing.
 
The sale of Palm Meadows Court is subject to the requirement that notice of the
transfer and the name and address of the transferee must be provided to property
owners' association.
 
The sale of Palm Meadows Village is subject to the requirement that notice of
the transfer and the name and address of the transferee must be provided to
property owners' association.
 
The sale of The Palms is subject to the requirement that notice of any transfer
must be given to the City of Roseville (California) and such notice must include
the legal names and mailing address of the transferee.
 
The sale of Windfield Village is subject to the requirement that written notice
be provided to the Clackamas County Community Development Division (Oregon)
 

 
22

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EXHIBIT M-7
REQUIRED TITLE OPTION PROPERTIES
 
Canterbury Court and Canterbury Gardens are subject to a Supplemental Camelot
Declaration of Covenants and Restrictions dated 8/5/82, as amended by Amendment
to Supplemental Camelot Declaration of Covenants and Restrictions dated
11/13/85, pursuant to which the developer (or its successor) has "the absolute
obligation and duty to purchase" the lot of an owner, and the owner has "the
absolute obligation and duty to sell" the lot to the developer, "upon notice to
[the developer] that the owner is desirous of selling his [lot]." If this
obligation to purchase/sell arises at any times after 2 years following the
filing of the vesting deed (which is applicable in this case), the purchase/sale
price is 65% of the fair market value of the unit at the closing, reduced to
reflect unpaid assessments, the developer's costs and expenses and any damage to
the unit incurred beyond normal and reasonable wear and tear. If the developer
fails to purchase a lot within 120 days (subject to increase if the developer
does not close the purchase due to causes not within its total control) after
receiving notice of the lot owner's desire to sell, the owner may proceed with
the sale upon such terms and conditions as the owner may elect.
 

 
23

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EXHIBIT M-8
Missing Survey Properties
Alpine Springs, OR
Azalea Gardens, MS
Cambridge Place, MT
Carriage Inn, TX
Cedar Ridge, OK
Chehalem Springs, OR
Cougar Springs, OR
Dry Creek, WA
Eldorado Heights, OR
Hermiston Terrace, OR
Hillside, OR
Moses Lake, WA
Oakridge, WI
Osprey Court, OR
Parkway Village, WA
River Road, OR
Rose Valley, OR
Sweetwater Springs, GA
Villa del Rey, NM
Village at Greece, NY
Windfield Village, OR

 
24

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EXHIBIT N
Utility Company Deposits

[see attached]

 
25

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EXHIBIT O-1
Modification Schedule

A.           Real Property.  Stayton and Purchaser agree that, effective at or
prior to Closing, the terms applicable to Existing Real Property Loans shall be
modified to reflect the following terms, terms more favorable to the borrower,
or terms otherwise agreed by Purchaser in writing:
(1)  
The dollar-weighted interest rate applicable to all Assumed Real Property Loans
(excluding the CS-20 Loan, CS-27 Loan and GE Loans) taken together shall be no
greater than the following annual interest rates (the "Underwritten Rate"):

Year 1 – 5.25%
Year 2 – 5.42%
Year 3 – 5.60%
Year 4 – 6.37%
Year 5 – 6.95%
(2)  
The interest rate for each individual Assumed Real Property Loan (excluding the
CS-20 Loan, CS-27 Loan and GE Loans) shall not exceed the per annum interest
rates set forth on Exhibit O-2 applicable to such loan by more than 50 basis
points during any loan year.

(3)  
The principal balance of the applicable Existing Real Property Loan shall not be
increased above the amounts set forth on Exhibit O-9, other than with respect to
the capitalization of (i) accrued interest and (ii) expenses incurred by the
lenders.

(4)  
Except as set forth on Exhibit O-10, each loan shall be interest only for one
year following the applicable Closing Date and thereafter shall amortize based
on a 25 year standard amortization schedule (i.e. not “straightline”
amortization).

(5)  
Collateral to remain unchanged from pre-receivership status (other than (i) the
removal of properties which are not Properties from the collateral of the
Assumed Real Property Loans and any equity pledges made by principals of the
Sunwest borrower (e.g. pledges by Jon Harder) and (ii) the addition of certain
personal property located at the Property owned by Stayton).  Except as set
forth on Exhibit O-10, no Existing Real Property Loan shall be modified to be
cross-collateralized or cross-defaulted with any other Existing Real Property
Loan.

(6)  
Each loan comprising the Assumed Real Property Loans to have a new term of at
least (i) five years or (ii) three years with two one-year extension options and
except as set forth on Exhibit O-10, such extension options shall not be subject
to any extension fees, financial covenants or other conditions to extension
(other than no continuing event of default).

(7)  
Existing guarantees to be terminated and any existing guarantors to be released,
other than any existing customary recourse carve-out guarantees.  Purchaser
(including, if applicable, any Successful Bidder at the Auction) to provide
customary recourse carve-out guarantees, if required.

(8)  
Due on sale and transfer provisions to be nullified to the extent they would be
triggered by the Transaction.

(9)  
Existing defaults to be waived and any unpaid interest accrued (other than
default rate interest) will be capitalized.

 
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(10)  
There shall be no debt yield tests, loan-to-value tests, minimum revenue/income
requirements, limitations on income derived from Medicare or any other financial
covenants.

(11)  
The only financial covenant which may be included in the Assumed Real Property
Loan Documents is a debt service coverage ratio for the Properties securing such
loan ("DSCR Test"), provided that such DSCR Test shall not (i) exceed the
applicable ratios set forth on Exhibit O-8 and (ii) be required to be tested
during some or all of the years of the term for the loans, as more particularly
set forth on Exhibit O-8.  The loans shall provide that in the event that the
DSCR Test is not satisfied, the only consequence shall be a cash trap which
shall be subject to cure (i.e. the failure to satisfy the DSCR Test shall not
constitute a default under the loan and shall not result in any mandatory
prepayment of the loan).

(12)  
No Assumed Real Property Loan shall provide for a reserve (i) for capital
expenditures in excess of $350 per bed / per year (and any such reserve shall
only be required to be funded from cash flow on a monthly basis) or (ii) for
deferred maintenance items.

(13)  
The loans shall provide for only customary and reasonable reporting covenants.

(14)  
There shall be no covenants related to the maintenance of a minimum occupancy at
the Property.

(15)  
The loan shall be prepayable in whole or in part at any time without payment of
any prepayment fee, exit fee, yield maintenance or other fee.  There shall be no
other fees required to be paid to Lender in connection with the Closing (other
than assumption, modification or similar fees which are the responsibility of
Sellers pursuant to Section 14.13) or at any time during the term of the loan.

(16)  
Except as set forth on Exhibit O-10, there shall be no defaults which are tied
to the occurrence of a "material adverse effect" or a determination by lender
that it is not fully secured.

(17)  
The existing manager/operator of the Property shall be permitted to be replaced
with Emeritus or an Affiliate.

The modification terms described above shall not be applicable to the CS-20
Loan, CS-27 Loan or GE Loans,, which shall be modified only (i) as contemplated
by the term sheets attached as Exhibits O-4, O-5 and O-6 or (ii) as mutually
agreed to by the parties hereto.  The applicable interest rates under the GE
Loans, CS-20 Loan and CS-27 Loan shall not be taken into account when
determining whether the Underwritten Rate for all of the Assumed Real Property
Loans has been satisfied.
B.           Personal Property.  Existing Personal Property Loans to be
reinstated in accordance with the existing contractual terms applicable to such
loans, with the following exceptions:
·  
Any existing guarantees to be terminated and any existing guarantors to be
released, other than existing customary recourse guarantees; Purchaser to
provide customary recourse carve-out guarantees.

·  
Due on sale and transfer provisions to be (i) nullified to the extent they would
be triggered by the Transaction and (ii) modified to reflect the owner of the
applicable Property must be a Qualified Owner and the operator of each Property
must be a Qualified Operator.

 
27

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·  
All existing defaults to be waived and any unpaid interest accrued at a rate
higher than the contract interest rate (including any default interest) to be
forgiven.

·  
Any unpaid installments and any accrued and unpaid interest to be paid in
monthly installments in the amount provided in the applicable agreement, which
installments to be added to end of the contract term and to continue until paid
in full.

·  
Holders of such Assumed Personal Property Debt to have no unsecured claims
against Sellers.

 
28

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EXHIBIT O-2
Underwritten Rate Calculation

[see attached]

 
29

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EXHIBIT O-3
Form Modification Documents

[see attached]

 
30

--------------------------------------------------------------------------------

 

EXHIBIT O-4
CS-20 Term Sheet

[see attached]

 
31

--------------------------------------------------------------------------------

 

EXHIBIT O-5
CS-27 Term Sheet

[see attached]

 
32

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EXHIBIT O-6
GE Term Sheet

[see attached]

 
33

--------------------------------------------------------------------------------

 

EXHIBIT O-7
Forward Curve

[see attached]

 
34

--------------------------------------------------------------------------------

 

EXHIBIT O-8
DSCR Test Modifications

[see attached]

 
35

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EXHIBIT O-9
Underwritten Assumed Real Property Loan Balance (allocated by the applicable
Existing Real Property Loans)

[see attached]

 
36

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EXHIBIT O-10
Permitted Discrepancies*
 
1.  
Default Discrepancies:  The Existing Real Property Loan Documents related to the
following loans contain default provisions (i.e. defaults, which are tied to the
occurrence of a “material adverse effect” or a determination by the lender that
it is not fully secured) which do not comply with the standard set forth in
Exhibit O-1, but which are acceptable to Purchaser:

 
a.  
Marathon Structured Finance Fund, L.P.

 
 
(The Cottages; Mountain View Ashland; Chris Ridge; Legacy Crossings)

 
b.  
Wells Fargo Bank, National Association

 
 
(Absaroka; Churchill; Oswego Springs; Sellwood Landing; Sugarland Ridge)

 
c.  
Bay Bank

 
 
(Necanicum Village)

 
d.  
Community Bank

 
 
(Parkway Village)

 
e.  
FirsTier Bank

 
 
(Sunrise Creek)

 
f.  
The National Bank

 
 
(Grayson View-Sellinsgrove)

 
g.  
Police and Fire Retirement System of The City of Detroit

 
 
(Orchard Park; Palm Meadows Village)

 
h.  
Tennessee Commerce Bank

 
 
(Brookside)

 
i.  
Plainscapital Bank

 
 
(Cottage Village)

 
j.  
Tennessee Commerce Bank

 
 
(Culpepper Place)

 
k.  
Vestin Originations, Inc.

 
 
(Meadowlark – junior loan)

 
l.  
Tennessee Commerce Bank

 
 
(Terrace at Woodstock)

 
m.  
Green Bank

 
 
(Waterford in Bellevue)

 
2.  
Amortization Discrepancies:  The Existing Real Property Loan Documents (or the
loan modification term sheets related thereto which have been negotiated by
Stayton as of the date hereof) contain amortization provisions which do not
comply with the standard set forth in Exhibit O-1, but which are acceptable to
Purchaser as specifically identified below:

 
a.  
HUD

 
 
(Mountain Laurel)

 

 
37

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i.  
Existing amortization schedule in place based on applicable Existing Real
Property Loan Documents (and loan will not be modified in connection with the
assumption by Purchaser).

 
b.  
HUD

 
 
(El Dorado Heights)

 
i.  
Existing amortization schedule in place based on applicable Existing Real
Property Loan Documents (and loan will not be modified in connection with the
assumption by Purchaser).

 
c.  
HUD

 
 
(Woodside Village)

 
i.  
Existing amortization schedule in place based on applicable Existing Real
Property Loan Documents (and loan will not be modified in connection with the
assumption by Purchaser).

 
d.  
Capmark Finance Bank

 
 
(Spring Arbor)

 
i.  
Existing amortization schedule in place based on applicable Existing Real
Property Loan Documents (and loan will not be modified in connection with the
assumption by Purchaser).

 
e.  
Capmark Finance Bank

 
 
(Alpine Springs)

 
i.  
Existing amortization schedule in place based on applicable Existing Real
Property Loan Documents (and loan will not be modified in connection with the
assumption by Purchaser).

 
f.  
Capmark Finance Bank

 
 
(Heron Pointe)

 
i.  
Existing amortization schedule in place based on applicable Existing Real
Property Loan Documents (and loan will not be modified in connection with the
assumption by Purchaser).

 
g.  
First National Bank of Waupaca

 
 
(Canterbury Gardens and Magnolia Gardens)

 
i.  
Beginning 1/1/10, the loan amortizes on a 30-year amortization schedule.

 
h.  
Charter Bank

 
 
(Moses Lake)

 
i.  
The loan is interest-only during the first year and amortizes on a 25-year
amortization schedule thereafter, but during the first year the borrower must
make additional principal payments of $5,000 per month to be applied to the
lender’s costs and fees.

 
i.  
Police and Fire Retirement System of The City of Detroit

 
 
(Orchard Park; Palm Meadows Village)

 
i.  
The loan is interest-only through 12/14/10 and thereafter amortizes on a 25-year
amortization schedule.

 

 
38

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j.  
NebraskaLand National Bank (NBL 5 Loan Pool)

 
 
(Emerald Estates; Georgian Place; Laurel Gardens; Lexington Gardens; Remington
House)

 
i.  
If the lender makes an additional advance of $500,000 at the closing into the
Deferred Maintenance/Cap Ex Reserve Account, the loan will amortize on a 25 year
amortization schedule.  If the lender does not make the additional advance, the
loan will be interest-only for the first year and will thereafter amortize on a
25 year amortization schedule.

 
k.  
First National Bank & Trust of Mcalester, OH

 
 
(Heritage Place)

 
i.  
Amortization will commence on 1/1/10 on a 25 year amortization schedule.

 
l.  
First Citizens Bank

 
 
(Dry Creek)

 
i.  
Commencing February 2010 (or the confirmation of the Reorganization Plan), the
loan will amortize on a 30-year amortization schedule.

 
m.  
Red Mortgage Capital / Fannie Mae

 
 
(Rose Valley)

 
i.  
The loan is interest-only during the first 28 months and will amortize on a
25-year amortization schedule thereafter.

 
n.  
Red Mortgage Capital / Fannie Mae

 
 
(Spring Village)

 
i.  
The loan is interest-only during the first 42 months and will amortize on a
25-year amortization schedule thereafter.

 
o.  
NebraskaLand National Bank (NBL 2 Loan Pool)

 
 
(The Heritage; Maplewood)

 
i.  
The loan amortizes on a 25-year amortization schedule.

 
p.  
First Sound Bank

 
 
(Chehalem Springs)

 
i.  
Note A: The note is interest-only for 6 months if the borrower chooses a 5%
interest rate for the initial term or interest-only for the first year if the
borrower chooses a 5.5% interest rate for the initial term. Thereafter, the loan
amortizes on a 25-year amortization schedule.

 
ii.  
Note B: The note is interest-only for the first year and thereafter amortizes on
a 15-year amortization schedule.

 
3.  
Extension Fee Discrepancies:

 
a.  
First National Bank of Waupaca

 
 
(Canterbury Gardens; Magnolia Gardens)

 
i.  
Fee of 25 bps (to be capitalized).

 
b.  
NebraskaLand National Bank (NBL 5 Loan Pool)

 
 
(Emerald Estates; Georgian Place; Laurel Gardens; Lexington Gardens; Remington
House)

 

 
39

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i.  
Fee of 25 bps.

 
c.  
NebraskaLand National Bank (NBL 2 Loan Pool)

 
 
(The Heritage; Maplewood)

 
i.  
Fee of 25 bps.

 
d.  
The National Bank

 
 
(Grayson View-Selinsgrove)

 
i.  
Fee of 25 bps.

 
e.  
The National Bank

 
 
(Minnetonka)

 
i.  
Fee of 25 bps.

 
4.  
Cross Collateralization:  The following loans shall be permitted to be
cross-collateralized as described below:

 
a.  
The National Bank:  The loans secured by Minnetonka and Grayson View-Selinsgrove
may be cross-collateralized.

 
b.  
Tutera Investments Inc:  The loans secured by Chandler Place and Terrace at
Riverstone may be cross-collateralized.

 
c.  
Tennessee Commerce Bank:  The loans secured by Brookside, Culpepper Place and
Terrace at Woodstock may be cross collateralized.

 
d.  
Stillwater National Bank:  The loans secured by Carriage Inn and Cedar Ridge may
be cross collateralized.

 
e.  
Wells Fargo:  The loans secured by Absaroka, Churchill, Oswego Springs, Sellwood
Landing and Sugarland Ridge may be cross-collateralized.

 
*  The discrepancies to the modifications required by the Modification Schedule
identified on this Exhibit O-10 are acceptable to Purchaser, solely as it
relates to the specifically identified Existing Real Property Loan (and not any
other).  Nothing contained herein shall limit Stayton’s obligation to use
commercially reasonable efforts to modify the Existing Real Property Loan
Documents to eliminate or modify any discrepancy noted on this Exhibit O-10 in a
manner reasonably acceptable to Purchaser in accordance with Section 5.1(i).
 

 
40

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EXHIBIT P
Motor Vehicles

[see attached]

 
41

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EXHIBIT Q
Reorganization Plan

[see attached]

 
42

--------------------------------------------------------------------------------

 

EXHIBIT R
[Intentionally Omitted]

 
43

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EXHIBIT S
Form of Interim Operating Agreement

INTERIM LEASE AND SERVICES AGREEMENT

THIS INTERIM LEASE AND SERVICES AGREEMENT (this “Agreement”) is made and entered
into effective as of the ____ day of ________, 20___ (the “Effective Date”) by
and among ______________, a Delaware limited liability company (“Landlord”),
__________, a ______________________ (“Tenant”) and [Emeritus Corporation, a
Washington corporation/EmeriCare, Inc., a Delaware corporation]
(“Emeritus/EmeriCare”).

RECITALS

A.           Landlord is the owner of certain real property located in
__________________ (the “State”) and the improvements thereon that comprise that
[skilled nursing/assisted living] facility which is known as _______________ and
located at _____________________ and the furniture, fixtures and equipment
located therein (the "Facility").

B.           In connection with the purchase and sale of the Facility, Landlord
has entered into a Management Agreement with [Emeritus/EmeriCare] with respect
to the day-to-day operation of the Facility.

C.           [Emeritus/EmeriCare/Landlord] has applied to the __________________
(the “Department”) for a license to operate the Facility (the “License”).

D.           Pending issuance of the License, Landlord has agreed to lease the
Facility to Tenant and Tenant has agreed to engage [Emeritus/EmeriCare] to
provide certain administrative and financial services to the Facility.

E.           Landlord, Tenant and [Emeritus/EmeriCare] are interested in
documenting the terms and conditions of such interim arrangements.

  NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:

1.           The Lease. Landlord does hereby lease to Tenant and Tenant does
hereby lease from Landlord the Facility. Throughout the Lease Term (as defined
below) the Facility shall be used solely as a licensed [skilled nursing/assisted
living] facility.

2.           The Administrative and Financial Services and Tenant Reimbursement.

(a)           Tenant hereby engages [Emeritus/EmeriCare] to provide the
administrative and financial services to the Facility during the Lease Term that
are described in Exhibit A hereto (the “Services”). [Emeritus/EmeriCare] accepts
the engagement and agrees to provide the

 
44

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Services. All costs incurred by [Emeritus/EmeriCare] in providing the Services
shall be deemed to be Facility Expenses (as hereinafter defined) and shall be
paid from the funds deposited in the Facility Bank Account (as defined in
Exhibit A).

(b)           In consideration for the provision of the Services,
[Emeritus/EmeriCare] shall be entitled to receive a fee (the “Services Fee”) in
an amount equal to [five] percent [5%] of the Gross Operating Revenues (as
hereinafter defined) of the Facility. The Services Fee shall be due and payable
in arrears on the twenty-fifth (25th) day of each month and may be paid by
[Emeritus/EmeriCare] to itself from the funds deposited into the Facility Bank
Account.

(c)           By entering into this Agreement, Tenant does not delegate to
[Emeritus/EmeriCare] any authority, powers, duties or responsibilities that it
is prohibited by law from delegating and, notwithstanding anything to the
contrary set forth herein, Tenant, as the licensed operator of the Facility,
shall, subject to Landlord's financial obligations under Section 3(b), retain
ultimate responsibility for the compliance of the Facility with applicable law
and for the organization, management and operations of, and financial and
administrative control over, the Facility.

(d)           Landlord shall reimburse Tenant for all reasonable administrative
costs and expenses (excluding overhead costs) actually incurred by Tenant in
connection with performing its obligations under this Agreement, including,
maintaining the effectiveness of the licenses from the State necessary to
operate the Facility as a [skilled nursing/assisted living] facility.  Any such
request for reimbursement shall be accompanied by reasonably detailed supporting
documentation of the costs and expenses incurred by Tenant and the reason
therefore.

(e)           For purposes hereof, the following definitions shall apply:

(i)           “Gross Operating Revenues” shall include all payments received in
connection with Occupancy Agreements or other payments for the use or occupancy
of space in the Facility (whether by residents, licensees, concessionaires,
permissive use arrangement, or otherwise), including, without limitation, any
such payments received pursuant to any sublease or assignment of Occupancy
Agreements, any lease, license, concession, or other permissive use arrangement;
all payments made by any third-party payors under any third-party payor program
(including, without limitation, to the extent applicable to the Facility,
Medicare, Medicaid (however denominated under State law), CHAMPUS, Blue Cross
and/or Blue Shield, managed care plans, or other private insurance plans or
employee assistance programs), parking revenues, income from vending machines,
photocopy machines, and other such devices, late charges, interest on past due
rentals, payments under any licenses, concessions, or other agreements for
advertising signs, telecommunications services, antennas, or disks, all lease
modification, amendment, surrender, or cancellation payments, all proceeds in
lieu of rental revenues from any business interruption insurance policies; all
escalation payments; and all payments made by residents, or other

 
45

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users of the Facility for extra services, including, without limitation, the use
of any personal property used in connection with the Facility and the provision
of any healthcare or other personal services.  For the avoidance of doubt, the
parties acknowledge and agree that the “Gross Operating Revenues” of the
Facility shall not include income derived from interest on investments or
otherwise (except for business interruption insurance proceeds as set forth
above), proceeds of claims on account of insurance policies, abatement of taxes
awards arising out of takings by eminent domain, discounts and dividends on
insurance policies, sale or refinancing proceeds, monies paid for capital
expenditures, all purchase discounts, and security deposits.

(ii)           “Facility Expenses” shall include all expenses incurred in the
course of the operation of the Facility during the Lease Term including, but not
limited to, the Service Fee, the salaries, bonuses, commissions, state and
federal payroll and social security tax obligations and benefits paid to or on
behalf of the employees of the Facility, any out of pocket costs incurred by
[Emeritus/EmeriCare] in preparing the Facility tax returns and any taxes due
thereunder and any penalties or interest related to the payment thereof; the
cost of all Facility supplies, utilities and equipment; any expenses incurred by
[Emeritus/EmeriCare] in billing for services rendered at the Facility and/or in
collecting or attempting to collect the accounts receivable of the Facility; and
the cost of all insurance premiums due with respect to any insurance policies or
programs which provide coverage for the Facility and any deductible, retention
amounts or security payments related to claims or potential claims made under
such insurance policies.

3.           The Rent/Working Capital.

(a)           During the Lease Term the rent shall be equal to the net profits
of the Facility (after payment of all Facility Expenses, including, without
limitation, the Services Fee), determined in accordance with generally accepted
accounting principles, it being understood and agreed that it is the intent of
the parties that during the Lease Term all of the benefits and burdens of the
ownership of the Facility shall inure to the Landlord.

(b)           In consideration for the payment of the Rent, Landlord shall
provide to [Emeritus/EmeriCare] by way of deposit in the Facility Bank Account
within ten (10) days after receipt of a written request with respect thereto
setting forth in reasonable detail the amount of funding needed and the reason
why such funding is needed, such working capital and other funding as may be
needed to operate the Facility and maintain any reserves required by
governmental regulatory agencies having jurisdiction over the Facility in the
event the Gross Operating Revenues of the Facility are not sufficient to pay all
of the Facility Expenses.

4.           Certain Covenants.

 
46

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(a)           The parties acknowledge and agree that the Facility is currently
secured by the loan and loan documents described in Exhibit B (the "Facility
Loan Documents").

(b)           Tenant further acknowledges and agrees that throughout the Lease
Term, Tenant shall use commercially reasonable efforts to comply, and shall
cause [Emeritus/EmeriCare] in the course of providing the Services to comply,
with all of the requirements, obligations and limitations imposed under the
Facility Loan Documents on Landlord and/or on any entity leasing the Facility
from Landlord with respect to the Facility including, but not limited to, if and
to the extent applicable, (i) the obligation to maintain the Facility in good,
orderly, clean, safe, sanitary and sightly condition and to apply any insurance
proceeds in accordance with the terms of the Facility Loan Documents, (ii) the
limitations imposed with respect to the remodeling, reconstruction, addition to,
or demolition of all or any part of the Facility, (iii) the obligation to, at
all times, maintain in full force and effect a license from the State to operate
the Facility as a [skilled nursing/assisted living] facility, (iv) the
prohibition on operating  the Facility as anything other than as a [skilled
nursing/assisted living] facility, (v) the limitations on assignment and
subletting, (vi) the limitations on the reduction in, or expansion of, the
licensed bed capacity of the Facility, (vii) the requirements with respect to
the maintenance and inspection of the Facility’s books and records, (viii) the
obligation to comply with any applicable prohibitions contained therein on
discrimination in admissions to the Facility, (ix) the obligation to deposit the
operating income from the Facility in an account established in the name of the
Facility at a financial institution whose deposits are insured by an agency of
the federal government, (x) the obligation to ensure that the Facility is at all
times properly equipped to operate as a [skilled nursing/assisted living]
facility and (xi) the prohibition against paying amounts for services, supplies
or materials which are in excess of the amount ordinarily paid for such
services, supplies or materials in the are where the services are rendered or
the supplies or materials are furnished.  Notwithstanding the previous sentence,
Tenant does not undertake, and shall not be obligated to perform, any
contractual covenant or financial obligation under the Facility Loan Documents.
 
5.           Indemnity.
 
(a)           The parties hereby acknowledge and agree that Tenant is entering
into this Agreement solely as an accommodation to Landlord and
[Emeritus/EmeriCare].  Accordingly, as between Landlord and
[Emeritus/EmeriCare], on the one hand, and Tenant, on the other hand, (i)
Landlord shall bear sole responsibility for (a) any non-performance under this
Agreement and (b) any liabilities, claims, demands or causes of action arising
or asserted against Tenant or any of Tenant's officers, directors,
agent,  employees, affiliates and insurers, including, without limitation,
Tenant's Chief Restructuring Officer and Receiver (collectively, " Tenant
Indemnified Parties") by Landlord, [Emeritus/EmeriCare] or any other person or
entity as a result of the leasing of the Facility by Tenant pursuant to this
Agreement and/or the operation of the Facility during the Lease Term; and (ii)
Landlord and/or [Emeritus/EmeriCare] shall jointly and severally indemnify,
defend and hold harmless Tenant and Tenant's Indemnified Parties from and
against against (a) any and all damages, losses, costs and expenses arising from
any breach of this Agreement and (b) any liabilities, claims, demands, causes of
action, losses, costs and expenses

 
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(including reasonable attorneys fees)  arising or asserted against Tenant or
Tenant's Indemnified Parties during or following the Lease Term as a result of
the leasing of the Facility by Tenant pursuant to this Agreement, the operation
of the Facility during the Lease Term of this Agreement and/or the provision of
the Services by [Emeritus/EmeriCare] pursuant to this Agreement (collectively,
the “Losses”). Notwithstanding the foregoing, the indemnity provided for herein
shall not apply (a) with respect to Losses proximately caused by the gross
negligence or willful misconduct of Tenant or any of the Tenant Indemnified
Parties or (b) to any liabilities, claims, demands or causes of action arising
or asserted against Tenant, any of the Tenant Indemnified Parties, Landlord or
[Emeritus/EmeriCare] with respect to the leasing or operation of the Facility
prior to the Effective Date or (c) limit any rights which Landlord may have to
seek indemnity from [Emeritus/EmeriCare] or which [Emeritus/EmeriCare] may have
to seek indemnity from Landlord with respect to any of the matters described in
this Section 5(a).
 
(b)           Tenant shall promptly notify Landlord and [Emeritus/EmeriCare] in
writing of any claim or demand which Tenant has received or determines could
give rise to a right of indemnification under this Section 5 (an “Indemnity
Notice”). Subject to the right of Landlord and/or [Emeritus/EmeriCare] to defend
in good faith third party claims as hereinafter provided, Landlord and/or
[Emeritus/EmeriCare] shall satisfy its obligations under this Section 5 within
thirty (30) days after the receipt of an Indemnity Notice from Tenant, it being
agreed that neither Landlord nor [Emeritus/EmeriCare] shall be required to
satisfy such obligations during any period in which Landlord or
[Emeritus/EmeriCare] is defending in good faith the applicable third party claim
in the manner described below.
 
(c)           If Tenant shall deliver an Indemnity Notice to Landlord and
[Emeritus/EmeriCare] pursuant to Section 5(b), and if Indemnity Notice relates
to a claim or demand asserted by a third party against Tenant, the following
provisions shall apply:
 
(i)           Landlord and/or [Emeritus/EmeriCare] shall have the right, in its
reasonable discretion, to either (x) pay such claim or demand or (y) employ
counsel reasonably acceptable to Tenant to defend any such claim or demand
asserted against Tenant.
 
(ii)           Tenant shall have the right to participate in the defense of any
such claim or demand at its own expense unless there is a conflict between the
interests of Tenant, on the one hand, and Landlord and/or [Emeritus/EmeriCare],
on the other hand, in which case Tenant shall have the right, subject to the
consent of [Emeritus/EmeriCare], which consent shall not be unreasonably
withheld, to retain a single attorney or law firm to serve as its separate
counsel at the cost and expense of the Facility.
 
(iii)           Landlord or [Emeritus/EmeriCare] shall notify Tenant in writing,
as promptly as possible, but in any case by the later of (i) fifteen (15) days
before the due date for the answer or response to a claim or ten (10) days after
receipt of the Indemnity Notice (the “Answer Period”) of its election to defend
in good faith

 
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any such third party claim or demand or to pay such claim or demand, the failure
of Landlord or [Emeritus/EmeriCare] to give notice of an election to defend
within such time period being deemed to be an election to pay such claim or
demand, which payment shall be made within ten (10) business days after the end
of the Answer Period.
 
(iv)           So long as Landlord or [Emeritus/EmeriCare] is defending in good
faith any such claim or demand asserted by a third party against Tenant, Tenant
shall not settle or compromise such claim or demand, it being understood and
agreed that Landlord or [Emeritus/EmeriCare], acting on behalf of Landlord,
shall have the sole right to settle or compromise such claim or demand;
provided, however, that the consent of Tenant, which consent may be withheld in
its sole discretion, shall be required for any settlement or disposition of any
claim or demand which results in any liability (which is not fully and promptly
paid by Landlord or [Emeritus/EmeriCare] at the time of settlement) to, or the
imposition of equitable relief, administrative sanctions or any other limitation
on the operating authority of, Tenant. If neither Landlord nor
[Emeritus/EmeriCare] elects to defend any such third party claim or demand and
does not timely pay such claim or demand in accordance with this Section 5, then
Tenant shall have the right to contest, compromise or settle such claim or
demand and the cost of defense and settlement shall be an expense of operating
the Facility in accordance with the terms hereof.
 
(v)           Each of Tenant, Landlord and [Emeritus/EmeriCare] and their
respective agents shall make available to the other all records and other
materials in their possession reasonably required by the other for use in
contesting any third party claim or demand.
 
(vi)           As security for its obligations under this Section 5, on the
Effective Date, [Emeritus/EmeriCare] shall provide Tenant with a certificate
evidencing that Tenant has been named as an additional insured on any general
and professional liability insurance policies then in effect with respect to the
Facility and such coverage shall remain in effect and updated certificates shall
be provided for the applicable period in which any claims which are the subject
of this Section 5 may be brought against Tenant.
 
(vii)           The obligations of Landlord and [Emeritus/EmeriCare] under this
Section 5 shall survive the expiration or earlier termination of the Lease Term.

6.           Term.  The term of this Agreement shall commence on the Effective
Date and shall continue until the earlier to occur of (i) the issuance of the
License, (ii) from and after the first anniversary of the Effective Date, ninety
(90) days after Landlord gives notice of termination to Tenant and
[Emeritus/EmeriCare], (iii) the sale or other transfer by Landlord of its
interest in the Facility, or the direct or indirect sale of all of the
membership interests in Landlord

 
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to a third party or (iv) at the election of Tenant, upon not less than 60 days'
prior written notice to Landlord and [Emeritus/EmeriCare], as of December 31,
2010 (the "Lease Term"). In the event that the License has not been issued as of
the end of the Lease Term, then [Emeritus/EmeriCare] and/or Landlord shall be
required to take such action, at their sole cost and expense, as may be
necessary prior to the expiration of the Lease Term to either close the Facility
and discharge the residents from the Facility in compliance with applicable
local, state and/or federal law or to identify and hire a third party acceptable
to the Department and to which the Department is prepared to issue a  license to
operate the Facility effective as of the end of the Lease Term.

7.           Entirety.  This Agreement, including the exhibits hereto,
represents the entire and final agreement of the parties hereto with respect to
the subject matter hereof and may not be amended or modified except by written
instrument signed by the parties hereto.  This Agreement shall not be amended or
modified without the consent of any lender is and to the extent such consent is
required by the terms of the Facility Loan Documents.  Neither Landlord nor
[Emeritus/EmeriCare] shall have any actual, implied or apparent authority to
contractually or otherwise bind Tenant to any contractual or other obligation to
any other person and Tenant shall not have any actual, implied or apparent
authority to contractually or otherwise bind Landlord or [Emeritus/EmeriCare] to
any contractual or other obligation to any other person.

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

9.           Successors and Assigns.  Tenant shall have no right to assign its
rights or obligations under this Lease.  Landlord and [Emeritus/EmeriCare] shall
have the right to assign their rights and obligations under this Agreement
subject to securing any necessary third party consents, including the consent of
any lender which may be required under the terms of the Facility Loan Documents;
provided that no such assignment shall relieve Landlord or [Emeritus/EmeriCare]
from any of its obligations to Tenant hereunder.

10.           Relationship to Facility Loan Documents. This Agreement and all
estates, rights, options, liens and charges therein contained or created under
this Agreement are and shall be subject and subordinate to the lien and effect
of the Facility Loan Documents. Accordingly, in the event of any conflict
between the terms and provisions of this Agreement and the terms of the Facility
Loan Documents, the terms and provisions of the Facility Loan Documents shall
control in all respects.

11.           Attorneys Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party shall be entitled to collect from the other its reasonable
costs and attorneys fees, for services prior to trial or hearing, on trial or
hearing and in any appeal therefrom.

12.           Construction. In the event of a dispute between the parties hereto
with respect to the interpretation or enforcement of the terms hereof, no
provision shall be construed so as to favor or disfavor either party hereto.

 
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13.           Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute but one and the same instrument.

14.           Notices.  All notices required to be given under the terms of this
Agreement shall be in writing, shall be sent to the parties at the addresses set
forth below their signatures and shall be sent by hand delivery, facsimile
transmission (with a hard copy to follow by mail) or overnight delivery using a
nationally recognized overnight delivery courier service and shall be deemed
received upon the actual confirmed receipt or refusal of receipt thereof.

15.           Covenants Regarding License.
 
(a)           [Emeritus/EmeriCare] hereby covenants and agrees to proceed with
all due diligence to secure the License. Further, [Emeritus/EmeriCare] agrees to
provide to Tenant, upon request, with written status reports regarding the
status of the License application (the “Application”).
 
  (b)           Tenant further covenants and agrees that in the event, during
the Lease Term, Landlord or [Emeritus/EmeriCare] should provide Tenant with
documentation reasonably  required to be signed by Tenant in order to maintain
in effect the license issued to Tenant in connection with its operation of the
Facility, Tenant shall execute and return the same to or as directed by Landlord
no later than the date specified by Landlord.
 
16.           Further Assurances. Each of the parties hereto agrees to execute
and deliver any and all further agreements, documents or instruments necessary
to effectuate this and the transactions referred to herein or contemplated
hereby or reasonably requested by the other party to perfect or evidence their
rights hereunder.

 
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IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day and
year first set forth above.

LANDLORD:

By:           _______________________________
Its:           _______________________________

TENANT:

By:           _______________________________
Its:           _______________________________

[EMERITUS/EMERICARE]:
[EMERITUS CORPORATION/EMERICARE, INC.]

By:           _______________________________
Its:           _______________________________

 
 

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EXHIBIT A
THE SERVICES

Set forth below is a description of the Services to be provided by
[Emeritus/EmeriCare] pursuant to the terms of that Interim Lease and Services
Agreement dated as of _________, 20__ (the “Agreement”). Capitalized terms used
herein and not otherwise defined will have the meaning ascribed to them in the
Agreement.

1.           Operational Policies and Forms.  [Emeritus/EmeriCare] shall consult
with Tenant with respect to the development and implementation of such
operational policies and procedures as may be appropriate for the effective
operation of the Facility, including but not limited to all policies and
procedures necessary to ensure the ongoing licensure of the Facility and
compliance with the terms of residency agreements, all of which shall be subject
to the final review and approval of Tenant. [Emeritus/EmeriCare] shall also
consult with Tenant with respect to all such policies which deal with risk
management and personnel matters.

2.           Charges.  [Emeritus/EmeriCare] shall consult with Tenant with
respect to the establishment of the schedules of recommended charges, including
all special charges for services rendered to the residents at the Facility.

3.           Information and Publicity.  [Emeritus/EmeriCare] shall consult with
Tenant with respect to the development of any informational material, mass media
releases, and other related publicity materials, which are necessary or
appropriate for the operation of the Facility.  Neither Landlord nor
[Emeritus/EmeriCare] shall use the name, logotype, trade dress or other
identification of Tenant in any advertising or promotional material without
Tenant's prior written consent, which consent may be granted or withheld in
Tenant's sole and unfettered discretion; provided, however, nothing herein shall
be construed as limiting the rights granted to Landlord and [Emeritus/EmeriCare]
under the terms of Section 9.10 of the Agreement of Purchase and Sale dated
January 15, 2010 entered into by and between Landlord and Stayton SW Assisted
Living, LLC with respect to the Facility and certain other facilities described
therein.

4.           Regulatory Compliance. [Emeritus/EmeriCare] shall provide all
necessary and appropriate assistance to Tenant in its efforts to obtain and
maintain all licenses, permits, qualifications and approvals from any applicable
governmental or regulatory authority that are necessary for the operation of the
Facility in compliance with all applicable laws and regulations and in
accordance with all licenses, permits, qualifications and approvals including
consulting with Tenant on the development of appeals and plans of correction
with respect to any deficiencies which may be cited or civil monetary or other
penalties which may be proposed to be imposed, by the applicable governmental
authority during the Lease Term. Within 48 hours of receipt thereof, Tenant
shall provide [Emeritus/EmeriCare] with copies by fax, overnight mail, email or
other comparable means of expedited transmission of any written notice regarding
the licensure, occupancy or operation of the Facility which it receives from any
governmental authority having jurisdiction over the Facility.

 
 

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           5.Capital Repairs, Replacements and
Improvements.  [Emeritus/EmeriCare] shall consult with Landlord with respect to
the need for, and to the extent agreed upon by Landlord shall undertake, at
Landlord's sole expense, all capital repairs, replacements and improvements
which may be necessary for the efficient and effective operation of the Facility
and its compliance with law.  In performing the foregoing repairs, replacements
and improvements [Emeritus/EmeriCare] shall use the applicable Facility’s on
site maintenance personnel as and where possible and shall otherwise contract
with qualified third parties to provide the necessary services and shall
undertake the same or cause the same to be undertaken in a workman like and lien
free manner and without interfering with operations of the Facility.

           6.Legal Proceedings.  [Emeritus/EmeriCare], in consultation with
Tenant but through legal counsel engaged by [Emeritus/EmeriCare], shall
coordinate all legal matters and proceedings related to the Facility and shall
take any and all steps deemed appropriate by [Emeritus/EmeriCare], after
consultation with Tenant, to protect and/or litigate to a final decision in an
appropriate court or forum any violation, order, rule or regulation affecting
the Facility and its operations or any claim, loss, violation or cause of action
relating to the Facility. Tenant promptly notify [Emeritus/EmeriCare] in writing
of any written demand letters received by Tenant which threaten litigation
related to the Facility or any legal or administrative proceedings that are
filed involving the Facility. Tenant shall have the right to approve any legal
counsel engaged by [Emeritus/EmeriCare] if and to the extent such litigation
involves a claim against Tenant or the Tenant Indemnified Parties for which
indemnity is being sought under Section 5 of the Agreement.

7.           Personnel. The Administrator/Executive Director of the Facility
shall have responsibility and authority for the day-to-day operations of the
Facility, shall be accountable to the governing board of Tenant and shall carry
out the policies of Tenant as developed by the governing board of Tenant. The
Administrator/Executive Director, as well as the other on-site personnel of the
Facility, including the business office manager, wellness director and
department heads shall be the employees of [Emeritus/EmeriCare] which shall have
sole responsibility for all compensation, benefits and conditions of employment
of such employees. [Emeritus/EmeriCare] shall make available to such employees
health insurance and workers compensation insurance on terms consistent with
that offered to other [Emeritus/EmeriCare] employees. [Emeritus/EmeriCare]
shall, in consultation with Tenant, coordinate matters pertaining to the
employment, supervision, compensation, promotion and discharge of such employees
but, to the extent required by applicable law, the ultimate authority for making
all personnel decisions, including decisions related to the
Administrator/Executive Director, shall remain with Tenant. Any personnel
decisions made by [Emeritus/EmeriCare] after consultation with Tenant shall
comply with all federal, state, county, municipal and other governmental laws,
ordinances, regulations and orders having to do with anti-discrimination,
workmen’s compensation, employer’s liability insurance, social security,
unemployment insurance, hours of labor, wages, working conditions, immigration
and all other employer-employee related subjects and neither
[Emeritus/EmeriCare] nor Tenant shall do any act, nor knowingly permit any act
to be done that would constitute a violation of any or all of such laws,
ordinances, regulations or orders.

 
 

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8.           Accounting. [Emeritus/EmeriCare] shall provide all necessary and
appropriate accounting support to the Facility. All accounting procedures and
systems utilized in providing said support shall be in accordance with the
operating capital and cash programs developed by [Emeritus/EmeriCare], which
programs shall conform to generally accepted accounting principles (“GAAP”)
except with respect to the treatment of resident move in fees and shall not
materially distort income or loss.  [Emeritus/EmeriCare] shall prepare timely
and file or cause to be prepared and filed timely all payroll tax returns, sales
and use tax returns, real and personal property tax returns and local or state
gross receipts and/or business and occupation tax returns and any other tax
returns, but specifically excluding Tenant’s local, state or federal income or
informational tax returns and state corporate franchise tax returns, which shall
be and remain the responsibility of Tenant, and [Emeritus/EmeriCare] shall cause
to be paid timely all of the taxes reflected as being due on the returns
prepared by [Emeritus/EmeriCare].  Nothing herein shall preclude
[Emeritus/EmeriCare] from delegating to a third party a portion of the
accounting duties provided for in this Section; provided, that such delegation
shall not relieve [Emeritus/EmeriCare] from ultimate liability for the timely
and complete performance of the obligations provided for herein or for the
expense thereof.

9.           Budgets. The Facility shall be operated on a fiscal year of
January 1 through December 31.  The Facility shall be operated in accordance
with the terms of the capital expenditure budget (the “Capital Budget”) and
operating budget (the “Operating Budget” and together with the Capital Budget,
the “Initial Budgets”) prepared by [Emeritus/EmeriCare] and approved by
Landlord, it being understood and agreed that Landlord agrees to fund any needed
working capital in the event the Gross Operating Revenues of the Facility are
not sufficient to cover the Facility Expenses. The Initial Budgets shall cover
the period from the Commencement Date to December 31 of the year in which the
Commencement Date occurs. Thereafter, prior to the start of each fiscal year,
[Emeritus/EmeriCare] shall prepare and submit to Landlord for its review and
approval, an annual Operating Budget and an annual Capital Budget (the
“Budgets”). In the event the Budgets have not been agreed upon by the beginning
of the fiscal year, the Budgets in effect for the prior fiscal year shall
continue in effect until the new Budgets are agreed upon. Except as otherwise
provided herein, [Emeritus/EmeriCare] shall ensure that no expenditures will be
made during a fiscal year on a basis inconsistent with then approved Budgets
without Landlord’s prior approval. Notwithstanding the foregoing, Landlord’s
prior approval shall not be required for the following expenditures in excess of
the amounts set forth in the Budgets: (a) [Emeritus/EmeriCare], in its
reasonable judgment, deems there to be an emergency requiring it to incur
unbudgeted expenditures to effectuate immediate action necessary for the
protection of the assets of the Facility or to avoid property damage or personal
injury or to preserve the well being of residents in the Facility or to avoid
impairment of the Facility’s operating licenses, (b) expenditures which would
not cause the aggregate amount of the Facility Expenses (excluding the Facility
Expenses described in clause (c)) to exceed the Facility Expenses reflected in
the Budgets by more than 5% or (c) expenditures for real and personal property
taxes and assessments and utilities.  [Emeritus/EmeriCare] and the Tenant shall
each use diligent efforts to keep the Landlord fully informed regarding all
material matters relating to the Facility and its operations and assets (and
such other specific matters as the Landlord may reasonably request from time to
time) and shall so consult on a monthly basis and at all reasonable times
requested by the Landlord.  In addition, [Emeritus/EmeriCare]  and the Tenant
and each shall, and each shall cause any party retained by it or its affiliates
to implement

 
 

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the matters set forth in the Initial Budget or  Budget, as the case may be, to
periodically consult with the Landlord regarding the implementation of the
Initial Budget or Budget, as the case may be.

10.           Reports.  [Emeritus/EmeriCare] shall deliver or cause to be
delivered to Landlord statements and information as follows (all costs and
expenses incurred in connection with the preparation of any statements,
schedules, computations and other reports required under this Section 10(a) and
10(b) shall be borne by Manager:

(a)           Annual financial statements (balance sheet and income statement)
in a format acceptable to Landlord within ninety (90) days of the end of the
calendar year, audited by the “Facility’s Accountants” (i.e., KPMG or another
independent nationally recognized accounting firm approved by Landlord).  Such
audit by the Facility’s Accountants may be conducted at a level that
consolidates the Facility with other similar properties managed by
[Emeritus/EmeriCare] and owned by affiliates of Landlord.

(b)           A monthly report for each calendar month, certified to be true,
accurate and complete in all material respects, and submitted to Landlord within
thirty (30) days of the end of each such calendar month (the “Periodic
Report“).  Each Periodic Report shall be in accordance with GAAP.

(c)           In addition, [Emeritus/EmeriCare] shall prepare and provide to
Landlord any reasonable financial information with respect to the Facility which
may from time to time be specifically requested by Landlord or required by the
terms of the Facility Loan Documents including, but not limited to, within
thirty (30) days after the end of each calendar month, [Emeritus/EmeriCare]
shall provide Landlord with an unaudited balance sheet for the Facility, dated
the last day of such month, and an unaudited statement of income and expenses
for such month and for the fiscal year to date relating to the operation of the
Facility showing trends, the variance between the actual and budgeted operating
results of the Facility for said month and with a rent roll and census report
for the month indicating the number of units occupied and the number of units
vacant. To the extent in their possession or under their control, Landlord and
Tenant shall be required to provide [Emeritus/EmeriCare] with such information
with respect to the operations of the Facility as [Emeritus/EmeriCare] may
reasonably request in order to prepare the foregoing financial statements. Such
monthly reports shall also show summary and itemization of accounts receivable
for the Facility and report of collection action(s) taken and status of any
collection action(s). The financial statements prepared by [Emeritus/EmeriCare]
shall be prepared in accordance with GAAP, consistently applied, except with
respect to the treatment of resident move in fees, this Agreement, and the
procedures and practices provided for in this Agreement.  Notwithstanding any
other provision of this Agreement, and without prejudice to the other rights
provided to Landlord under this Agreement [Emeritus/EmeriCare] and Tenant each
agree to periodically (at least quarterly) provide Landlord with information and
reports regarding [Emeritus/EmeriCare]’s and/or the Tenant’s operation and
management of the Facility and the performance of its duties under this
Agreement and with respect to renovations, alterations, general maintenance,
repairs and development activities that [Emeritus/EmeriCare] and/or Tenant has
engaged in or intends to engage in with respect to the Facility and its
surroundings as set forth in this Agreement.

 
 

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11.           Bank Accounts.  [Emeritus/EmeriCare] shall deposit all money
received by [Emeritus/EmeriCare] during the Lease Term in the course of
consulting with Tenant with respect to the operation of the Facility into one or
more depository accounts established by [Emeritus/EmeriCare] in the name of the
Facility (the “Facility Bank Account”).  In order to enable [Emeritus/EmeriCare]
to provide the accounting services contemplated by this Agreement,
[Emeritus/EmeriCare] shall thereafter sweep such funds in accordance with its
corporate cash management practices into a corporate cash consolidation account
from which [Emeritus/EmeriCare] shall pay the Facility Expenses.

12.           Supplies and Equipment.  [Emeritus/EmeriCare] shall consult with
Tenant with respect to the need for, and to the extent agreed upon by
[Emeritus/EmeriCare] and Tenant shall purchase, such supplies and equipment
which may be necessary for the efficient and effective operation of the Facility
and its compliance with law.

13.           Collection of Accounts.  On behalf and in the name of Tenant,
[Emeritus/EmeriCare] shall issue bills and collect accounts and monies owed for
goods and services furnished by the Facility during the Lease Term, including,
but not limited to, enforcing the rights of Tenant and the Facility as the
creditor under any contract or in connection with the rendering of any services.

14.           Contracts.  If requested by Tenant,  [Emeritus/EmeriCare] shall
assist Tenant in its efforts to negotiate and enter into contracts to which
Tenant may not currently be a party and which [Emeritus/EmeriCare], in
consultation with Tenant, determines are necessary in connection with the
day-to-day operation of the Facility, including, but not limited to, contracts
for water, electricity, natural gas, telephone, sewer, cleaning, trash removal,
pest control and extermination, cable, elevator and boiler maintenance, pharmacy
services, therapy services and other appropriate ancillary services and
contracts for the provision of various services which are designed to identify
potential cost savings to the Facility, such as utility and tax bill review
services.
 
 
15.           Insurance.  If requested by Tenant or Landlord,
[Emeritus/EmeriCare] shall arrange for and maintain all necessary and proper
hazard insurance covering the Facility, the furniture, fixtures, and equipment
situated thereon and all necessary and proper malpractice and public liability
insurance for the protection of Landlord, Tenant, [Emeritus/EmeriCare] and their
officers, directors, agents,  employees, affiliates and insurers, including,
without limitation, the Tenant Indemnified Parties, it being understood and
agreed that [Emeritus/EmeriCare] shall have the right to provide such
malpractice and public liability insurance through a captive insurance company
and to include the Facility in the [Emeritus/EmeriCare] Pooled Self Insurance
Program. Any insurance coverage arranged for by [Emeritus/EmeriCare] shall be
consistent with the coverage provided by [Emeritus/EmeriCare] to other [assisted
living facilities/skilled nursing facilities] which are owned or leased by
[Emeritus/EmeriCare] and shall otherwise comply with the requirements of the
Facility Loan Documents.  Landlord and Tenant shall be listed as an additional
insured under all policies provided by [Emeritus/EmeriCare] pursuant to this
Section and each shall be provided with a certificate of insurance confirming
the same. Neither Tenant nor any of the Tenant Indemnified Parties shall have
any rights to the proceeds of any insurance

 
 

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maintained pursuant to this Section 15 except to the extent the same are used by
Landlord and [Emeritus/EmeriCare] to fulfill their indemnity obligations under
Section 5 of the Agreement.  Landlord and [Emeritus/EmeriCare] shall be jointly
and severally liable for any deductible, self-insured retention, co-insurance
payment or excess loss or expense over and above available insurance proceeds.

16.           Cost Reports.  [Emeritus/EmeriCare] shall prepare any cost reports
which may be required under Medicare, Medicaid or any other third party payor
program in which the Facility may participate and, to the extent any applicable
provider agreement is in the name of Tenant, shall submit the same to Tenant to
be reviewed, approved, signed and filed by Tenant as and when due.

17. Data Processing.  [Emeritus/EmeriCare] shall, at its own expense, directly
or through an affiliate, provide the data processing required to maintain the
financial, payroll, and accounting records of the Facility.

18. Reporting to Tenant.  [Emeritus/EmeriCare] shall, upon written request from
Tenant, provide Tenant with copies of any statements or information reasonably
necessary for Tenant to perform its obligations under the Agreement, including,
without limitation, maintaining the effectiveness of the licenses from the State
to operate the Facility as a [skilled nursing/assisted living] facility and
reporting to any governmental or taxing authority having jurisdiction over
Tenant.

With respect to any obligation imposed on Emeritus/EmeriCare under the foregoing
provisions to consult with Tenant or to secure the approval of the Tenant or
words of similar import, such obligation shall, whether or not stated above,
only apply if and to the extent that Landlord or [Emeritus/EmeriCare] reasonably
determine that such consultation, approval or other Tenant involvement is
required to ensure that the operation of the Facility pursuant to the terms of
this Agreement complies with applicable law, including the laws of the
Department taking into account the fact that the Tenant will be the licensee of
the Facility during the Lease Term.

 
 

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EXHIBIT B
FACILITY LOAN DOCUMENTS

 
 

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EXHIBIT T
Blackstone Venture LLC Agreement

[see attached]

 
 

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EXHIBIT U
Resident Agreement Brokers

 
The Operating Contracts disclosed in Section 4.1(m) that are denoted as
providing for a brokerage commission by an "x" in the applicable column of the
spreadsheet attached to Section 4.1(m) are incorporated into this Exhibit U by
this reference.

 
 

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EXHIBIT V
Facility Managers

[see attached]

 
 

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EXHIBIT W

Form of Ground Lease Estoppel

ESTOPPEL CERTIFICATE
 
THIS ESTOPPEL CERTIFICATE is given as of the _____ day of ________, 2010 by
____________________ ("Landlord"), at the request of Stayton SW Assisted Living,
L.L.C., an Oregon limited liability company (the Consolidated Sunwest Related
Entities) ("Stayton") and successor in interest to ___________, an Oregon
limited liability company ("Tenant"), pursuant to the Order Granting the Joint
Motion of Debtor, the Tenants-in-Common Committee and the Unsecured Creditor
Committee for Substantive Consolidation of Assets and Liabilities of Sunwest
Related Entities dated December 22, 2009 (the “Consolidation Order”), for the
benefit of BRE/SW Portfolio LLC, a Delaware limited liability company or its
assigns ("Purchaser").
 
 
RECITALS

 
A. Pursuant to that certain lease described in Exhibit A hereto (“Lease”),
Tenant leases certain premises located in the City of ________, County of
________, and State of ________, as more particularly described in the Lease
("Premises").
 
B. Stayton has represented to Landlord as follows:
 
1. Prior to December 30, 2008, Tenant was part of Sunwest Management, Inc.
("Sunwest"), a group of related entities involved in acquisition, development,
design, construction, financing, insuring and operating senior living and other
properties, assets and operations (the "Sunwest Enterprise").  Each
Sunwest-affiliated property had separate ownership, often involving multiple
investors.
 
2. In 2008, several of the entities owning or operating Sunwest senior living
facilities commenced bankruptcy cases.  On or about December 30, 2008, Sunwest's
founder also filed an individual voluntary petition for bankruptcy relief in the
United States Bankruptcy Court for the District of Oregon.
 
3. The United States District Court for the District of Oregon ("Court") has
withdrawn the reference of the bankruptcy cases commenced in Oregon and most of
the bankruptcy cases commenced in other state(s) have been transferred to the
Court.
 
4. On March 2, 2009 the United States Securities and Exchange Commission ("SEC")
commenced an SEC enforcement action against Sunwest.  In this action, SEC
alleged that the Sunwest Enterprise was a unitary enterprise.
 
5. On October 2, 2009, the Court in the SEC enforcement action entered its
Approval Order, which designated Stayton as the Unitary Sunwest Enterprise and
authorized Stayton to sell the interests of co-owners of the Sunwest Enterprise
properties, including the Premises ("Sunwest Order").  Thus, pursuant to the
Sunwest Order and the Consolidation Order, Stayton has acquired Tenant's
interest in the Premises.
 

 
 

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6. Stayton seeks to sell its interest in the Premises to Purchaser and Purchaser
seeks to acquire Stayton's interest in the Premises.
 
C. All capitalized terms used in this Estoppel Certificate but not defined
herein shall have the meanings specified in the Lease.
 
Landlord hereby confirms, certifies and represents to Purchaser and Stayton
that:
 
1. The Lease commenced on ______________.
 
2. The Lease is in full force and effect and has not been amended, modified or
revised [except as set forth on Exhibit A].
 
3. The Lease will expire on ___________, unless extended.   The holder of the
tenant's interest has the following further rights to extend or renew the Lease
term:
 
[If none, state NONE]
 
4. The initial monthly rent was $_______ per month.  The monthly rent presently
payable pursuant to the Lease is $_______ per month through ________, 20___.
 
5. Tenant has paid rent through and including ________________.  Tenant has not
prepaid any rent or other charges more than 30 days in advance of the dates on
which that rent or those charges have become due under the terms of the Lease
[except as follows: ______].
 
6. The holder of the tenant's interest under the Lease has no right of first
refusal, option or other right to purchase the Premises or any portion thereof
[except as follows: ________.
 
7. Landlord has consented to Stayton's transfer and assignment of Stayton's
interest in the Lease to Purchaser for all purposes under the Lease.
 
8. Landlord has no claims, counterclaims, credits, defenses or set-offs against
Tenant or Stayton in connection with the tenancy created by the Lease.
 
9. Landlord owns the fee interest in the Premises and such interest is not
subject to any mortgage or other material encumbrance, except as follows:
 
[If none, state NONE]
 
10. Neither Tenant nor Stayton is in default in respect of any of its
obligations and, to Landlord’s knowledge, no event has occurred, and no
condition exists, with the passage of time, the giving of notice or both that
would permit Landlord to terminate the Lease or assert a breach or default of
the Lease by Tenant or Stayton.
 
11. Landlord is not in default in respect of any of its obligations and, to
Landlord’s knowledge, no event has occurred, and no condition exists, with the
passage of time, the giving of notice or both that would permit Tenant or
Stayton to terminate the Lease or assert a breach or default of the Lease by
Landlord.
 

 
 

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12. This Estoppel Certificate is given to Purchaser and Stayton on the
understanding that Purchaser and Stayton will be relying upon this Estoppel
Certificate in connection with the acquisition of the Stayton's interest in the
Lease.  This Estoppel Certificate shall be binding on Landlord and its
successors and assigns and will inure to the benefit of Purchaser, Stayton, any
lenders of Purchaser or Stayton, and their respective successors and assigns.
 
[signatures on following page]
 

 
 

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IN WITNESS WHEREOF, Landlord has executed this Estoppel Certificate on the
______ day of ____________, 2010.
 
LANDLORD:

_______________________________________

By:                                                      

Its:                                                      

 
 

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Exhibit A
Documents Comprising the Lease

[describe]
 

 
 

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