Exhibit 10.1

PURCHASE AND SALE AGREEMENT

between

The parties designated on Exhibit “A-1”,

as Sellers,

and

CHP PARTNERS, LP

as Purchaser

Dated as of October 7, 2013

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TABLE OF CONTENTS

 

              Page   I.  

DEFINITIONS

     1    II.  

SALE AND PURCHASE OF PROPERTY

     10     

2.1

  

Purchase of Property

     10     

2.2

  

Purchase Price and Terms of Payment

     11     

2.3

  

Due Diligence Period

     11     

2.4

  

Assumption of the Leases and Contracts

     11     

2.5

  

Assumption of the Resident Agreements

     12     

2.6

  

Assumed Liabilities

     12     

2.7

  

Allocation of Purchase Price

     12     

2.8

  

Discharge of Liens

     13     

2.9

  

Negotiation and Execution of Management Documents

     13     

2.10

  

Negotiation and Execution of Development Framework Agreement

     13     

2.11

  

General Contractor

     13     

2.12

  

Assumption of Mansfield IL Loan

     14    III.  

ESCROW

     16     

3.1

  

Escrow

     16     

3.2

  

Deposit of Funds

     16    IV.  

TITLE AND SURVEY

     16     

4.1

  

Title Examination; Commitment for Title Insurance

     16     

4.2

  

Survey

     16     

4.3

  

Title Objections; Cure of Title Objections

     16     

4.4

  

Conveyance of Title

     18    V.  

INSPECTIONS

     18     

5.1

  

Purchaser’s Independent Inspection

     18     

5.2

  

Access

     19     

5.3

  

Confidential Nature of Due Diligence Materials

     20     

5.4

  

Continuing Nature of Purchaser’s Obligations

     20    VI.  

PROPERTY

     21     

6.1

  

Condition of Property

     21     

6.2

  

Survival of Article VI

     23   

 

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TABLE OF CONTENTS

(continued)

 

              Page   VII.  

CLOSING

     23     

7.1

  

Closing Date

     23     

7.2

  

Action Prior to the Closing Date by Seller

     23     

7.3

  

Action Prior to the Closing Date by Purchaser

     26     

7.4

  

Recording of Deeds

     27     

7.5

  

Prorations

     27     

7.6

  

Closing Costs

     30     

7.7

  

Possession

     31     

7.8

  

Post-Closing Audit

     31    VIII.  

ADDITIONAL COVENANTS AND INDEMNITIES

     31     

8.1

  

Purchaser’s Covenants

     31     

8.2

  

Seller Covenants

     32     

8.3

  

Employee Matters

     34     

8.4

  

Extension to Obtain Licenses

     36     

8.5

  

Additional Extension Right

     36    IX.  

REPRESENTATIONS AND WARRANTIES

     37     

9.1

  

Purchaser’s Representations and Warranties

     37     

9.2

  

Sellers’ Representations and Warranties

     38     

9.3

  

Seller’s Knowledge

     41     

9.4

  

Failure of Condition But No Seller Breach

     41     

9.5

  

Survival Period

     41    X.  

CONDITIONS PRECEDENT TO CLOSING

     42     

10.1

  

Conditions to Sellers’ Obligations

     42     

10.2

  

Conditions to Purchaser’s Obligations

     42     

10.3

  

Failure of Conditions to Closing

     43     

10.4

  

Purchase of all Facilities

     43    XI.  

REMEDIES FOR PRE-CLOSING AND POST-CLOSING DEFAULTS ; LIQUIDATED DAMAGES

     44     

11.1

  

Default by Purchaser Prior to Closing

     44     

11.2

  

Default by Sellers Prior to Closing

     44     

11.3

  

Limitations of Purchaser’s Post-Closing Claims

     45   

 

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TABLE OF CONTENTS

(continued)

 

              Page    

11.4

  

Survival of Purchaser’s Claims

     46     

11.5

  

Limitations on Liability

     46     

11.6

  

Survival

     46    XII.  

FINANCIAL ADVISOR

     47    XIII.  

NOTICES

     47    XIV.  

MISCELLANEOUS

     49     

14.1

  

Governing Law

     49     

14.2

  

Exhibits and Schedules a Part of This Agreement

     49     

14.3

  

Executed Counterparts

     49     

14.4

  

Assignment

     49     

14.5

  

IRS - Form 1099-S

     49     

14.6

  

Successors and Assigns

     50     

14.7

  

Time is of the Essence

     50     

14.8

  

Entire Agreement

     50     

14.9

  

Further Assurances

     50     

14.10

  

Waiver

     50     

14.11

  

Headings

     50     

14.12

  

Risk of Loss

     50     

14.13

  

Construction of Agreement

     52     

14.14

  

No Public Disclosure

     52     

14.15

  

Covenants, Representations and Warranties

     53     

14.16

  

Confidentiality

     53     

14.17

  

No Third-Party Beneficiaries

     54     

14.18

  

Electronic Signatures

     54     

14.19

  

Severability

     54     

14.20

  

Cumulative Remedies

     54     

14.21

  

WAIVER OF JURY TRIAL

     54   

 

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PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is dated as of this 7th day
of October, 2013 (the “Effective Date”), and is made by and between each of the
parties named on Exhibit “A-1” hereto (each, individually, a “Seller” and,
collectively, “Sellers”), and CHP Partners, LP, a Delaware limited partnership
(“Purchaser”).

RECITALS

A. Sellers, collectively, are the owners of all of the Properties (as
hereinafter defined), with the specific Seller of each Property being the party
specified as the owner of such Property on Exhibit “A-1”.

B. Purchaser desires to purchase all of the Properties and to acquire all of
Sellers’ respective right, title and interest in and to the Properties, on the
terms and conditions set forth in this Agreement.

C. Sellers desire to sell to Purchaser all of the Properties and to convey to
Purchaser all of their respective right, title and interest in the Properties,
on the terms and conditions set forth in this Agreement.

D. All capitalized terms used in this Agreement and not otherwise defined shall
have the meanings ascribed to such terms in Article I.

AGREEMENT

NOW, THEREFORE, for valuable consideration, including the promises, covenants,
representations and warranties hereinafter set forth, the receipt and adequacy
of which are hereby acknowledged, the parties, intending to be legally and
equitably bound, agree as follows.

I.

DEFINITIONS

As used in this Agreement, the following terms have the meanings ascribed to
them in this Article I:

“Accounts Receivable.” With respect to each Property, all accounts receivable
and other sums owing to the applicable Seller in connection with the operation
of its Facility existing prior to the Cut-Off Time.

“Additional Deposit.” As set forth in Section 2.2(a) hereof.

“Affiliate.” With respect to any person or entity, (i) all persons or entities
that, directly or indirectly, control, are controlled by, or under common
control with, such person or entity; or (ii) all persons or entities that,
directly or indirectly, own, are owned by or under common ownership with, such
person or entity.

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“Agreement.” As set forth in the preamble hereof.

“Allocated Purchase Price.” As set forth in Section 2.7 hereof.

“Allocated Deposit Amount.” With respect to any Property, two percent (2%) of
the Allocated Purchase Price.

“Assignment and Assumption of Leases and Contracts.” As set forth in
Section 7.2(d) hereof.

“Assignment and Assumption of Intangible Property.” As set forth in
Section 7.2(c) hereof.

“Assignment and Assumption of Resident Agreements.” As set forth in
Section 7.2(e) hereof.

“Assumed Contracts.” As set forth in Section 2.4 hereof.

“Assumption Documents.” As set forth in Section 2.12(c) hereof.

“Bill of Sale.” As set forth in Section 7.2(b) hereof.

“Books and Records.” With respect to each Property, all documentation, third
party reports and studies, land surveys, land use applications, land use permits
and approvals, operating permits and other documents in printed or electronic
form (but with respect to items in electronic format, excluding software which
is proprietary to Seller, its Affiliates or any third party, or is licensed from
third parties by Seller or its Affiliates) that is in the possession or under
the control of Seller or its Affiliates and that pertains to the use, operation,
ownership or condition of the Property, including (i) all correspondence,
billing, and other files, (ii) all structural reviews, environmental assessments
or audits, architectural drawings and engineering, geophysical, soils, seismic,
geologic, environmental (including with respect to the impact of materials used
in the construction or renovation of the Improvements) and architectural
reports, studies and certificates pertaining to the Property, and (iii) all
financial statements and other accounting, tax, financial, and other books and
records relating to the use, maintenance, and operation of the Property, but
excluding (x) any Excluded Documents and (y) those items that are consolidated
with items from other facilities owned, leased or managed by Seller or its
Affiliates and not being conveyed to Purchaser, if any.

“Business Agreements.” With respect to each Property, any Lease, rental
agreement, loan agreement, mortgage, easement, covenant, restriction or other
agreement or instrument affecting all or a portion of the Property other than a
Contract.

“Cap Amount.” As set forth in Section 11.3(a) hereof.

“Casualty.” As set forth in Section 14.12(a) hereof.

“Casualty Notice.” As set forth in Section 14.12(a) hereof.

 

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“Casualty Renovation Cost.” As set forth in Section 14.12(a) hereof.

“Claims.” Collectively, damages, claims (including without limitation, any claim
for damage to property of others or injury to or death of any persons),
penalties, obligations, liabilities, fines, losses, causes of action, fees,
injuries, liens, encumbrance, proceedings, judgments, actions, rights, demands,
costs and expenses (including without limitation, reasonable attorneys’ fees
whether or not legal proceedings are instituted and court and litigation costs).

“Claim Notice.” As set forth in Section 11.3(b) hereof.

“CLIA Numbers” means license, registration and waiver identification numbers
assigned pursuant to the Clinical Laboratory Improvement Amendments (CLIA) of
1988.

“Closing.” The sale and assignment of the Properties to Purchaser on the Closing
Date and the performance by each party of the obligations on its part then to be
performed under and in accordance with this Agreement.

“Closing Date.” As set forth in Section 7.1 hereof.

“Closing Documents.” As set forth in Section 11.3 hereof.

“Closing Payment.” As set forth in Section 2.2(b) hereof.

“Closing Statement.” As set forth in Section 7.2(k) hereof.

“Contracts.” With respect to each Property, all leases of furniture, fixtures
and equipment, all contracts (excluding Resident Agreements), all third party
payor provider agreements (excluding Governmental Entity third party payor
provider agreements) and all other agreements relating to the ownership and/or
operation of the Facility and/or the Property, together with all related written
warranties and guaranties, but excluding (a) any National Contracts (which shall
be amended or terminated at Seller’s expense such that they no longer apply to
any Property as of the Closing Date, unless such contract, pursuant to a right
to do so under the terms of such contract, can be de-coupled from the national
contract and made site-specific, in which case the same shall be included in
this definition), (b) any leases of furniture, fixtures and equipment,
contracts, or agreements that are with an Affiliate of the applicable Seller
(which shall be terminated as of the Closing Date at the applicable Seller’s
sole cost and expense), (c) any property management agreement (which shall be
terminated as of the Closing Date at the applicable Seller’s sole cost and
expense), (d) any leases of furniture, fixtures and equipment, contracts, or
agreements entered into in violation of Section 8.2 and (e) any Leases.

“Current Month.” As set forth in Section 7.5(j) hereof.

“Cut-Off Time.” As set forth in Section 7.5(c) hereof.

“Deeds.” As set forth in Section 7.2(a) hereof.

“Deposit.” As set forth in Section 2.2(a) hereof.

 

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“Developer.” As set forth in Section 2.10 hereof.

“Development Documents.” As set forth in Section 2.10 hereof.

“Due Diligence Materials.” All of the documents and other materials delivered to
or otherwise made available for inspection (including in a website data room) by
Purchaser and its representatives during the Due Diligence Period.

“Due Diligence Period.” The period commencing on the Effective Date and ending
at 5:00 p.m. (Eastern Time) on the date which is forty-five (45) days from the
Effective Date.

“Eastern Time.” Eastern Standard Time or Eastern Daylight Time, as applicable.

“Effective Date.” As set forth in the preamble hereof.

“Environmental Damages.” All claims, judgments, damages, losses, penalties,
fines, liabilities (including strict liability), encumbrances, liens, costs, and
expenses of investigation and defense of any claim, whether or not such claim is
ultimately defeated, and of any good faith settlement of judgment, of whatever
kind or nature, contingent or otherwise matured or unmatured, foreseeable or
unforeseeable, including without limitation reasonable attorneys’ fees and
disbursements and consultants’ fees, any of which are incurred at any time as a
result of the existence of Hazardous Materials upon, about or beneath any Real
Property or migrating to or from any Real Property, or the existence of a
violation of Environmental Requirements pertaining to any Real Property,
regardless of whether the existence of such Hazardous Materials or the violation
of Environmental Requirements arose prior to the present ownership or operation
of such Real Property.

“Environmental Requirements” All applicable present and future statutes,
regulations, rules, ordinances, codes, licenses, permits, orders, approvals,
plans, authorizations, concessions, franchises, and similar items, of all
governmental agencies, departments, commissions, boards, bureaus, or
instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial, administrative, and regulatory decrees,
judgments, and orders relating to Hazardous Materials.

“Escrow.” As set forth in Section 3.1 hereof.

“Escrow Agent.” Fidelity National Title Insurance Company, 1900 West Loop South,
Suite 200, Houston, TX 77027, Attention: Selina I. Parelskin,
sparelskin@fnf.com, Phone: (310) 701-7813.

“Escrow Agreement.” As set forth in Section 3.1 hereof.

“Excluded Assets.” With respect to each Property, the Excluded Documents, the
Excluded Intellectual Property Rights, cash, cash equivalents, checks and other
funds, including, without limitation, the Accounts Receivable (other than the
proration of rent for the Current Month as set forth in Section 7.5(i) below and
payments received from third-party payors in connection with the Licensed
Facilities, as set forth in Section 7.5(i) below), and balances on deposit to
the credit of Seller with banking institutions, all of which shall be retained
by Seller.

 

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“Excluded Documents.” With respect to each Property, all (a) casualty,
liability, and life insurance policies owned or obtained by Seller on behalf or
in connection with Seller’s business at the Facility, (b) the corporate minute
books and stock registers of Seller, (c) internal memoranda, correspondence,
analyses, documents or reports prepared by or for Seller or its Affiliates in
connection with the sale of the Property, including, without limitation, tax
returns or financial statements of Seller (exclusive of operating statements and
the general ledger of the Facility and any supporting information which shall be
available for review by Purchaser) for or in connection with its ownership or
operation of the Property, (d) communications between Seller or any Affiliate
and their respective attorneys, (e) employee personnel files of Seller,
(f) appraisals, assessments or other valuations of the Property in the
possession or control of Seller, (g) original bills, invoices, receipts and
checks relating to expenses incurred prior to the Cut-Off Time (provided that
Purchaser shall be entitled to copies of such items and to retain copies of all
of the other Due Diligence Materials after Closing, which right shall survive
the Closing), and (h) any confidential or proprietary information of Seller or
any confidential information of a resident (unless the transfer of such
confidential information of a resident is made in compliance with all Legal
Requirements), in each case however embodied.

“Excluded Intellectual Property Rights.” As set forth on Schedule “1” attached
hereto.

“Existing Borrower Parties.” As set forth in Section 2.12(c).

“Existing Liens.” As set forth in Section 2.8 hereof.

“Extended Closing Date Property” or “Extended Closing Date Properties.” As set
forth in Section 8.5 hereof.

“Extension Notice.” As set forth in Section 8.5 hereof.

“Facility.” With respect to each Property, the senior living community located
on the Real Property.

“Financial Advisor.” As set forth in Article XII hereof.

“Financial Statements.” The statements of income and expenses for calendar years
2011 and 2012 and year-to-date monthly statements of income and expenses for
2013, including any such subsequent statements issued prior to Closing.

“General Contractor.” As set forth in Section 2.11 hereof.

“Good Funds.” A deposit of cashier’s check, certified funds, or confirmed wire
transfer of funds.

“Hazardous Materials.” Any substance (i) the presence of which requires
investigation or remediation under any federal, state or local statute,
regulation, ordinance or policy; or (ii) which is defined as a “hazardous waste”
or “hazardous substance” under any federal, state or local statute, regulation
or ordinance, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and
amendments thereto and

 

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regulations promulgated thereunder; or (iii) which is toxic, explosive,
corrosive, infectious or otherwise hazardous or is regulated by any federal,
state or local governmental authority; or (iv) without limitation which contains
polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde other than
cleaning supplies, solvents and other substances typically used at the
Properties and other comparable properties held and used in commercially
reasonable amounts and methods and in accordance with Environmental
Requirements.

“Healthcare Permits.” With respect to each Facility, a license, certification,
permit, Medicare or Medicaid provider agreement, Medicare or Medicaid provider
number, CLIA Numbers, authorization, registrations or similar document or
authority issued or required under Healthcare Requirements applicable to the
ownership, leasing and/or operation of the Facility.

“Healthcare Requirements” All applicable Legal Requirements relating to the
operation of senior housing nursing, assisted living, memory and/or dementia
care facilities for senior citizens.

“Improvements.” With respect to each Property, the buildings, structures,
fixtures, and other permanent improvements located on the Land, including,
without limitation, the Facility, electrical distribution systems, HVAC systems,
walkways, driveways, parking lots, plumbing, lighting, and mechanical equipment
and fixtures installed thereon, and all rights, benefits and privileges
appurtenant thereto.

“Initial Deposit.” As set forth in Section 2.2(a) hereof.

“Intangible Property.” With respect to each Property, all (a) Intellectual
Property Rights, (b) local telephone and facsimile exchange numbers identified
exclusively with the Facility, (c) certificates (including the Certificate of
Occupancy for the Real Property), licenses, permits (including the Permits) and
warranties now in effect with respect to the Property permitted to be
transferred pursuant to the applicable Legal Requirements and at no cost to
Seller, (d) all general intangibles relating to design, development, operation
and use of a Property, all rights and work product under construction, service,
consulting, engineering, architectural, design and construction agreements
(including any warranties contained therein) and other Assumed Contracts, plans
and specifications of any portion of the Property, and all development rights
and goodwill related to any portion of the Property, and (e) all other
intangible property used by Seller exclusively in connection with the ownership
and operation of the Property, but excluding the Excluded Assets.

“Intellectual Property Rights.” With respect to each Property, subject to the
last sentence of this paragraph, all patents, copyrights, trade secrets,
trademarks, trade names, service marks, and other know-how owned by Seller,
including but not limited to (a) Seller’s rights to the names “Legacy Ranch” and
“The Park at Plainfield, (b) the exclusive right and license to use the names
“Isle at Cedar Ridge”, “Isle at Watercrest – Bryan”, “Isle at Watercrest –
Mansfield”, “Watercrest at Bryan”, “Watercrest at Mansfield”, and “The Springs”,
in connection with the operation of the applicable Facilities, but no other
right or license to use the name “Isle”, “The Springs”, the “W” logo, or the
name “Watercrest” except in connection with the operation of the applicable
Facilities, (c) marketing and management intangibles, (d) computer software
developed and owned by Seller or its Affiliates and used in the operation of the
Facilities, and (e)

 

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manuals, instructions, policies, procedures and directives issued by Seller or
its Affiliates to its employees at the Facility that relate solely to the
operation of the Facility. The term “Intellectual Property Rights” includes the
Proprietary Marks and the specific data and information stored or maintained on
the Intellectual Property Rights that uniquely pertains to the Facility or those
served at the Facility (unless such data and information is confidential or
proprietary to Seller). The term “Proprietary Marks” means all trademarks,
service marks, trade names, trade dress, symbols, logos, slogans, designs,
insignia, emblems, devices, domain names, distinctive designs of signs, or any
other source identifying feature, or combinations thereof, which are used to
identify Seller’s or its Affiliates’ services at the Facility, or which are used
in connection with the operation of the Facility by Seller or its Affiliates
except the rights to the names “Isle at Cedar Ridge”, “Isle at Watercrest –
Bryan”, “Isle at Watercrest – Mansfield”, “The Springs”, “Watercrest at Bryan”,
and “Watercrest at Mansfield”, which are being transferred only to the extent
expressly provided in this paragraph. The Intellectual Property Rights shall
exclude the Excluded Assets.

“Inventory.” With respect to each Property, all inventories, materials and
supplies used in connection with the operation of the Property and located
thereat.

“Land.” With respect to each Property, the land, as more particularly described
on Exhibit “A-2” attached hereto and upon which the Improvements are located,
including all easements, rights-of-way, rights of ingress and egress, strips,
zones, licenses, transferable hereditaments, privileges, tenements and
appurtenances in any way belonging to or appertaining to the same or the
Improvements, and any right or interest in any open or proposed highways,
streets, roads, avenues, alleys, easements, strips, gores and rights-of-way in,
across, in front of, contiguous to, abutting or adjoining the Land, and other
rights and benefits running with the Land and/or the owner of the Land.

“Leases.” With respect to each Facility, all leases, subleases, licenses,
service agreements, concessions or other agreements granting an interest to any
Person for the use and occupancy of a portion of such Facility, which are in
effect or executed as of the date of this Agreement or which become effective or
executed between the date of this Agreement and the Closing Date, together with
all security deposits thereunder, if any, but excluding (i) Resident Agreements
and (ii) if the Facility has a skilled nursing component, any operating lease
entered into by Seller and an Affiliate of Seller (which shall be terminated as
of the Closing Date at Seller’s sole cost and expense).

“Legal Requirement.” Any applicable federal, state, local or municipal
constitution, law, ordinance, rule, order, regulation or statute of any
governmental authority bearing on the construction, alteration, rehabilitation,
maintenance, use, operation, sale, transfer or any other aspect of all or any
portion of a Property, including the Environmental Requirements and the
Healthcare Requirements.

“Licensed Facilities.” Collectively, the Facilities that have an assisted
living, an Alzheimer’s care or a skilled nursing component.

“Licensing Date.” As set forth in Section 2.9 hereof.

 

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“Manager” shall mean the manager of the applicable Property as listed on Exhibit
“A-1” attached hereto.

“Management Documents.” As set forth in Section 2.9 hereof.

“Mansfield IL Deposit.” As set forth in Section 2.12(f).

“Mansfield IL Loan.” That certain loan in the original principal amount of
$27,700,000 from KeyCorp Real Estate Capital Markets, Inc. (and assigned to the
Mansfield IL Lender) secured by the Mansfield IL Property.

“Mansfield IL Lender.” Federal Home Loan Mortgage Corporation, a corporation
organized and existing under the laws of the United States. Where the context so
requires, the Mansfield IL Lender shall include its servicer, KeyBank Real
Estate Capital Markets, Inc.

“Mansfield IL Loan Documents.” Any and all documents evidencing, securing,
governing or otherwise pertaining to the Mansfield IL Loan.

“Mansfield IL Property.” That certain Property located at 250 East Debbie Lane,
Tarant County, Texas.

“Mansfield IL Seller.” Waterview at Mansfield Investors, L.P., a Texas limited
partnership.

“Material Contract.” Any Contract that has a value, or involves payment by (or
to) Sellers or their respective Affiliates, of at least Five Thousand and NO/100
Dollars ($5,000.00) during any twelve (12) month period.

“National Contracts.” With respect to each Property, all leases of furniture,
fixtures and equipment, service contracts, third party payor provider agreements
or other agreements that apply to both the Property and to properties other than
the Properties.

“New Borrower Parties.” As set forth in Section 2.12(c) hereof.

“Non-Foreign Affidavit.” As set forth in Section 7.2(f) hereof.

“Notices to Residents.” As set forth in Section 7.2(o) hereof.

“Notice.” As set forth in Article XIII hereof.

“Official Records.” The office of the recorder of deeds and other real estate
records in the jurisdiction in which a Property is located.

“Other Permits.” With respect to each Property, the licenses and permits,
approvals, entitlements, and other governmental authorizations issued by a
governmental or administrative agency or authority (whether federal, state or
local) in Seller’s possession or control in connection with the ownership,
operation, planning, development, constructions, use, or maintenance of the
Property, including certificates of occupancy, but excluding the Healthcare
Permits.

 

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“Pending Claim.” As set forth in Section 11.4 hereof.

“Permits.” Collectively, the Healthcare Permits and the Other Permits.

“Permitted Exceptions.” As set forth in Section 4.4 hereof.

“Personal Property.” With respect to each Property, all (a) keys and
combinations to all doors, cabinets, enclosures and other locks on or about the
Real Property, (b) furniture, equipment, televisions, telephone systems;
mechanical systems, fixtures and equipment; electrical systems, fixtures and
equipment; heating fixtures, systems, and equipment; air conditioning fixtures,
systems and equipment; plumbing fixtures, systems, and equipment; security
systems and equipment; carpets, drapes, artwork and other furnishings;
refrigerators, microwaves, ovens, stoves, and all other appliances; vehicles,
office equipment, furniture and fixtures not considered improvements, spare
parts, supplies and other physical assets, machinery, tools, trade fixtures,
utensils, china, glassware, and other personal property owned by Seller, which
are used exclusively in connection with the maintenance and operation of the
Facility and/or the Real Property, (c) copies of files maintained or generated
by Seller in the course of the operation of the Property (excluding the Excluded
Documents) which are located on the Real Property, (d) the Inventory, (e) the
Books and Records, and (h) all other personal property which Seller is the owner
thereof and which is used by Seller exclusively in connection with the
ownership, maintenance, and operation of the Facility and/or the Real Property;
but excluding, however, (i) the Excluded Assets, (ii) the personal property
owned by any resident or employee, and (iii) all tax and utilities and other
deposits.

“Post-Closing Escrow Agreement.” As set forth in Section 11.3(a) hereof.

“Post-Closing Liability Escrow.” As set forth in Section 11.3(a) hereof.

“Property.” As set forth in Recital A, with each Property comprised of the Land,
the Improvements, the Facility, the Personal Property, the Leases, the
Contracts, and the Intangible Property owned or entered into, as applicable, by
each Seller or SNF Subsidiary, as applicable.

“Proprietary Information.” As set forth in Section 14.16 hereof.

“Purchaser.” As set forth in the preamble hereof.

“Purchase Price.” As set forth in Section 2.2 hereof.

“Purchaser Permits.” As set forth in Section 8.1(b) hereof.

“Real Property.” With respect to each Property, the Land and the Improvements.

“Rejected Contracts.” As set forth in Section 2.4 hereof.

“Rent Roll.” As set forth in Section 9.2(n) hereof

 

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“Required Deletion Items.” As set forth in Section 4.3 hereof.

“Resident Agreements.” With respect to each Facility, those leases, occupancy,
residency, and similar written agreements entered into with residents of the
Facility, and all amendments, modifications, supplements, renewals, and
extensions thereof.

“Retained Liabilities.” As set forth in Section 2.6 hereof.

“Section 8.5 Extension Right.” As set forth in Section 8.5 hereof.

“Seller” or “Sellers.” As set forth in the preamble hereof.

“SNF Subsidiaries.” Collectively, Bryan SNF, LLC, a Delaware limited liability
company, and Cedar Park SNF, LLC, a Delaware limited liability company.
Individually, any one of the SNF Subsidiaries shall be a “SNF Subsidiary.”

“Survey.” As set forth in Section 4.2 hereof.

“Survival Date.” As set forth in Section 11.4 hereof.

“Termination Notice.” As set forth in Section 2.3 hereof.

“Threshold Amount.” As set forth in Section 11.3(a) hereof.

“Title Commitment.” As set forth in Section 4.1 hereof.

“Title Objection Date.” As set forth in Section 4.3 hereof.

“Utility Deposits.” With respect to each Property, all deposits made by Seller
in connection with providing water, sewer, gas, electricity, telephone and other
public utilities to the Real Property.

“WARN Act.” As set forth in Section 8.3(b) hereof.

II.

SALE AND PURCHASE OF PROPERTY

2.1 Purchase of Property. On the Closing Date, and subject to the terms and
conditions of this Agreement, each Seller shall (or, as the case may, cause the
applicable SNF Subsidiary to) sell, assign, convey, transfer and deliver to
Purchaser, and Purchaser shall purchase and acquire from each Seller (or, as the
case may be, the applicable SNF Subsidiary) such Seller’s (or SNF Subsidiary’s)
right, title, and interest in and to the Land and Improvements, good and
marketable title in the Personal Property, and all of such Seller’s right, title
and interest in and to the Leases, Assumed Contracts, the Resident Agreements
and the Intangible Property, free and clear of all monetary liens and
encumbrances (other than the Leases, the Assumed Contracts, the Resident
Agreements, and the Permitted Exceptions), as further described in Section 2.7
hereof, at the purchase price provided in Section 2.2 hereof.

 

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2.2 Purchase Price and Terms of Payment. The aggregate purchase price for the
Properties (“Purchase Price”) shall be One Hundred Eighty Seven Million Two
Hundred Thousand and NO/100 Dollars ($187,200,000.00), allocated among the
Properties as indicated on Exhibit “A-3”, and shall consist of and be payable as
follows:

(a) Within one (1) business day after the Effective Date, Purchaser shall
deliver to Escrow Agent, in Good Funds, the sum of Nine Hundred Thirty Five
Thousand and NO/100 Dollars ($935,000.00) (together with all interest accrued
thereon, the “Initial Deposit”). If this Agreement is not terminated pursuant to
Section 2.3, within one (1) business day after the expiration of the Due
Diligence Period, Purchaser shall deliver to Escrow Agent, in Good Funds, as an
additional deposit, the sum of Nine Hundred Thirty Five Thousand and NO/100
Dollars ($935,000.00) (together with all interest accrued thereon, the
“Additional Deposit”; the Initial Deposit together with the Additional Deposit
shall hereinafter individually and collectively be referred to as the
“Deposit”). The Deposit shall be non-refundable to Purchaser, except (i) if a
condition precedent to Purchaser’s obligations as set forth in Section 10.2
below is not satisfied or cured as of the Closing Date and such failure is not
due to a default by Purchaser, or (ii) as specifically provided in Section 2.3,
Section 4.3, Section 9.4, Section 10.3 or Section 11.2 below, and in any such
event Purchaser’s right to such refund will survive any termination of this
Agreement. The Deposit shall be applied to the Purchase Price on the Closing
Date.

(b) Not later than 1:00 p.m. (Eastern Time) on the Closing Date, Purchaser shall
deposit with Escrow Agent, in Good Funds, the balance of the Purchase Price,
reduced or increased by such amounts as are required to take into account any
prorations, credits, costs or other adjustments which are required by this
Agreement and which can be computed and determined as of the time for the
required deposit hereunder. The amount to be paid under this Section 2.2(b) is
referred to in this Agreement as the “Closing Payment.”

At the closing of the Mansfield IL Property, Purchaser shall receive a credit
against the Purchase Price equal to the amount of the outstanding principal
balance and accrued interest on the Mansfield IL Loan as of the date that
Purchaser’s applicable designee assumes the obligations of the Mansfield IL
Seller under the Mansfield IL Loan Documents.

2.3 Due Diligence Period. At any time prior to the expiration of the Due
Diligence Period, Purchaser shall be free, in its sole and absolute discretion,
and for any or no reason whatsoever to terminate this Agreement by written
notice to Sellers (the “Termination Notice”) delivered on or prior to the
expiration of the Due Diligence Period. Upon delivery of the Termination Notice
prior to the expiration of the Due Diligence Period, Purchaser shall receive a
return of the Deposit (to the extent previously deposited) and the parties shall
equally share the cancellation charges, if any, of Escrow Agent. If the
Termination Notice is not delivered on or prior to the expiration of the Due
Diligence Period, Purchaser shall be deemed to have waived its right to
terminate this Agreement pursuant to this Section 2.3.

2.4 Assumption of the Leases and Contracts. As additional consideration,
Purchaser shall, on and as of the Closing Date, at its sole cost and expense,
assume and agree to pay all

 

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sums and perform, fulfill and comply with all other covenants and obligations
which are to be paid, performed and complied with by Sellers (or, as applicable,
the SNF Subsidiaries) under the Leases and Assumed Contracts which first arise
or accrue on and after the Closing Date. Prior to the expiration of the Due
Diligence Period, Purchaser shall notify Seller in writing of the identity of
all Material Contracts that Purchaser elects to terminate (collectively, the
“Rejected Contracts”). Any Material Contracts existing as of the Effective Date
that Purchaser does not notify Seller that Purchaser elects to terminate prior
to the expiration of the Due Diligence Period, together with those Contracts
that do not meet the definition of “Material Contracts” but are terminable
without fee or penalty upon no more than sixty (60) days’ notice shall be
“Assumed Contracts.” Notwithstanding anything to the contrary set forth herein,
Purchaser shall be responsible for payment of (i) all fees due for the period
after Closing through the termination date of each Rejected Contract and
(ii) all termination fees associated with the termination of each Rejected
Contract.

2.5 Assumption of the Resident Agreements. As additional consideration,
Purchaser shall on and as of the Closing Date, at its sole cost and expense,
assume and agree to perform, fulfill and comply with all covenants and
obligations which are to be performed and complied with by Sellers (and, as
applicable, the SNF Subsidiaries) under the Resident Agreements in effect at
such Facility which first arise or accrue on and after the Closing Date.

2.6 Assumed Liabilities. Except as expressly set forth herein, Purchaser shall
not assume, in connection with the transactions contemplated hereby, any
liability or obligation of any Seller (or any SNF Subsidiary) whatsoever, and,
to this end, each Seller (and SNF Subsidiary) shall retain responsibility for
all liabilities and obligations accrued or incurred from its operations prior to
Closing and all liabilities and obligations arising from its operations prior to
Closing, whether or not accrued and whether or not disclosed (the “Retained
Liabilities”). The terms of this Section 2.6 shall survive Closing.

2.7 Allocation of Purchase Price.

(a) The Purchase Price is allocated among the Properties (the portion of the
Purchase Price allocated to each Property is referred to herein as the
“Allocated Purchase Price”) as provided in Exhibit “A-3” attached hereto. Each
party agrees to file federal, state and local tax returns consistent with the
allocations set forth on Exhibit “A-3”.

(b) Within five (5) days before the end of the Due Diligence Period, the parties
shall use their commercially reasonable efforts to agree on an allocation of the
Allocated Purchase Price for each Property among each Property’s Real Property
and the various items of Personal Property and Intangible Property. Each party
agrees to file federal, state and local tax returns consistent with such
allocations agreed upon between the parties. If Sellers and Purchaser do not
agree on how a Property’s Allocated Purchase Price shall be allocated among each
Property’s Real Property and the various items of Personal Property and
Intangible Property, each party shall file federal, state and local tax returns
based on each party’s own determination of the proper allocations, each bearing
its own consequences of any discrepancies.

 

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2.8 Discharge of Liens. Each Seller shall cause all bond financing, mortgages,
deeds of trust, and monetary liens (including liens for delinquent taxes and
mechanics’ and judgment liens properly charged to any of Sellers) affecting its
respective Property and all indebtedness secured thereby other than the
Mansfield IL Loan (the “Existing Liens”) to be fully satisfied, released, and
discharged of record on the Closing Date, so that Purchaser shall take title to
each Property free of the same. All costs related to the discharge of the
Existing Liens at a Property shall be borne by the applicable Seller with the
use of its pro rata share of the Closing Payment or other funds of such
applicable Seller. Each Seller acknowledges that such satisfaction, release, and
discharge may involve prepayment penalties or premiums and other costs or
expenses, all of which shall be paid by such Seller at its sole cost and expense
in connection with the Closing (and its pro rata share of the Closing Payment
shall be used for such purpose).

2.9 Negotiation and Execution of Management Documents. On or before the
Effective Date, and continuing through the date that is thirty (30) days
following the Effective Date (the “Licensing Date”), Purchaser shall negotiate
in good faith to enter into definitive, binding documents with respect to the
management of the Properties following Closing (collectively, the “Management
Documents”) with the applicable Manager of each Property.

2.10 Negotiation and Execution of Development Framework Agreement. On or before
the Effective Date, and continuing throughout the Due Diligence Period,
Purchaser and South Bay Partners, Ltd. (“Developer”) and/or their Affiliates
shall negotiate in good faith to enter into definitive, binding documents with
respect to the development of multiple senior housing projects, including a
Development Framework Agreement, a Development Agreement, a Joint Venture
Agreement, and other related ancillary documents (collectively, the “Development
Documents”). The terms of the Development Documents shall be substantially in
accordance with the terms set forth in that certain letter of intent dated
September 11, 2013, among Sellers, Developer and CNL Healthcare Corp., with such
other terms as the parties thereto may negotiate. If the parties thereto have
not entered into the Development Documents by the date of expiration of the Due
Diligence Period, then either Sellers or Purchaser shall have the right to
terminate this Agreement by giving written notice to the other, by not later
than three (3) business days after the expiration of the Due Diligence Period.
Upon any such termination, Purchaser shall receive a return of the Deposit (to
the extent previously deposited) and the parties shall equally share the
cancellation charges, if any, of Escrow Agent.

2.11 General Contractor. Notwithstanding anything in this Agreement to the
contrary, Purchaser acknowledges that (i) the general contractor for the
development of the Property known as “The Springs” was RES ICD, LP, dba
Integrated Construction and Development, LP, and the general contractor for the
development of the remainder of the Properties (other than the Property known as
“The Park at Plainfield”), was RES ICC, LLC, dba Integrated Construction
Concepts, LLC (collectively, the “General Contractor”), (ii) the General
Contractor is an affiliate of Sellers, (iii) the Contracts with the General
Contractor have been fully performed by the General Contractor, and (iv) in any
case no Contracts with or related rights against the General Contractor are
being assigned hereunder. Purchaser acknowledges and agrees that it does not
have contractual privity with the General Contractor, and in any event Purchaser
shall have no right to make warranty (whether arising under contract, statute,
common law or otherwise) or other contract claims against General
Contractor. For the avoidance of doubt, any warranties assigned under the
Assignment and Assumption of Intangible Property or any other Closing

 

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Document are assigned only to the extent given by third parties other than the
General Contractor. Purchaser may therefore only make any warranty claims
against any such third parties (to the extent any warranties remain in effect
from such third parties), and the General Contractor shall bear no liability
arising from or related to any such warranty claim. Notwithstanding the
foregoing, Purchaser is not waiving any claims arising as a result of General
Contractor’s gross negligence or willful misconduct which Purchaser may have
against General Contractor by statute or under common law.

2.12 Assumption of Mansfield IL Loan.

(a) The Mansfield IL Property is currently subject to a mortgage lien that
secures the Mansfield IL Loan. Subject to and in accordance with the provisions
of the Mansfield IL Loan Documents and this Agreement, Purchaser’s applicable
designee will assume the obligations of the Mansfield IL Seller under the
Mansfield IL Loan Documents. As such, Purchaser shall (i) use its commercially
reasonable efforts to obtain the written consent of the Mansfield IL Lender to
the sale of the Mansfield IL Property to Purchaser’s applicable designee and the
assumption by Purchaser’s applicable designee of the Mansfield IL Loan and
(ii) endeavor diligently and in good faith to complete the assumption of the
Mansfield IL Loan.

(b) Without limiting the generality of the foregoing, Purchaser shall:
(i) within five (5) days after the Effective Date, submit to the Mansfield IL
Lender a complete loan assumption application in the form required by the
Mansfield IL Lender, (ii) submit all other information with respect to
Purchaser, Purchaser’s applicable designee and their respective representatives
and Affiliates, as the Mansfield IL Lender may request, (iii) provide such legal
opinions as the Mansfield IL Lender may require, from counsel acceptable to the
Mansfield IL Lender and in form and substance acceptable to the Mansfield IL
Lender, (iv) satisfy the Mansfield IL Lender’s requirements with respect to the
single purpose and/or single asset entity and bankruptcy remote structure of
ownership of Purchaser’s applicable designee; (v) deposit with the Mansfield IL
Lender such funds as may be required in accordance with the terms of the
Mansfield IL Loan Documents to replace all existing required reserve or escrow
accounts so that all funds or other security held by or for the benefit of the
Mansfield IL Lender under the existing reserve or escrow accounts may be
returned to the Mansfield IL Seller or, alternatively, credit the Mansfield IL
Seller in an amount equal to the amount of funds or other security held by or
for the benefit of the Mansfield IL Lender under such reserve or escrow
accounts; (vi) comply with any other conditions to the transfer that may be
imposed by the Mansfield IL Lender; and (vii) take such other actions as may be
required to comply with the transfer provisions of the Mansfield IL Loan
Documents.

(c) It is understood and agreed that the assumption by Purchaser’s applicable
designee of the Mansfield IL Loan will be pursuant to one or more written
agreements to be entered into among, inter alia, the Mansfield IL Lender, the
Mansfield IL Seller and Purchaser or Purchaser’s applicable designee
(collectively, the “Assumption Documents”). The Assumption Documents will be on
the standard forms of the Mansfield IL Lender, but shall include the following
as conditions of Closing under Sections 10.1(d) and Section 10.2(d) below:
(i) the Mansfield IL Lender’s consent to Purchaser’s applicable designee’s
purchase of the Mansfield IL Property; (ii) the Mansfield IL Lender’s consent to
the assumption by (A) Purchaser’s applicable designee of the obligations of the
Mansfield IL Seller under the Mansfield IL Loan Documents,

 

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and (B) an Affiliate of Purchaser (together with Purchaser, the “New Borrower
Parties”) of the obligations of Richard E. Simmons (together with the Mansfield
IL Seller, the “Existing Borrower Parties”) under the Mansfield IL Loan
Documents; and (iii) a release of the Existing Borrower Parties from liability
under the Mansfield IL Loan Documents as provided for in the Mansfield IL
Lender’s standard form of Reaffirmation Agreement, utilizing the second version
of each of Sections 2 and 3, releasing the Existing Borrower Parties from
liability arising from “Post-Transfer Environmental Conditions” (as described in
the Mansfield IL Lender’s form of Reaffirmation Agreement) provided that the
Mansfield IL Seller delivers a clean Phase I environmental report with respect
to the Mansfield IL Property to the Mansfield IL Lender.

(d) Notwithstanding anything to the contrary contained herein, in no event shall
the New Borrower Parties be obligated to enter into any agreements with the
Mansfield IL Lender that would modify the economic terms of the Mansfield IL
Loan, increase the obligations of the borrower beyond those of the Mansfield IL
Seller or increase the obligations of any guarantors and indemnitors beyond
those of the current guarantors and indemnitors under the Mansfield IL Loan
Documents.

(e) Purchaser shall pay any and all loan assumption fees, expenses and other
costs charged or incurred by the Mansfield IL Lender, and required to be
reimbursed by the Mansfield IL Lender, in connection with the parties’ obtaining
or seeking to obtain the Mansfield IL Lender’s execution and delivery of the
Assumption Documents, including the cost of any title insurance or endorsement
required by the Mansfield IL Lender, any application fees, assumption fees,
review fees or processing fees charged by the Mansfield IL Lender, and any legal
fees of the Mansfield IL Lender. Purchaser shall be responsible for all fees
charged or incurred by the Mansfield IL Lender regardless of whether or not
Closing occurs. The provisions of this subsection (e) shall survive the
expiration or termination of this Agreement.

(f) If the Mansfield IL Lender has not finally approved the Assumption Documents
in accordance with the provisions of this Section 2.12 on the Closing Date, then
Seller or Purchaser may extend the Closing Date for up to fifteen (15) days;
provided, however, if the Mansfield IL Lender still has not finally approved the
Assumption Documents in accordance with the provisions of this Section 2.12 as
of the date that is fifteen (15) days after the Closing Date, then, Seller and
Purchaser shall proceed to Closing with respect to all Properties other than the
Mansfield IL Property, this Agreement shall survive with respect to the
Mansfield IL Property, and Escrow Agent shall continue to hold Four Hundred
Forty-Eight Thousand Eight Hundred Dollars ($448,800) under the Escrow Agreement
(the “Mansfield IL Deposit”). The Mansfield IL Deposit shall constitute a
Deposit hereunder for all purposes. On the date that is sixty (60) days after
the Closing Date, if the Mansfield IL Property has not been sold subject to the
Mansfield IL Loan to Purchaser’s applicable designee in accordance with the
provisions of this Section 2.12, then either Seller or Purchaser shall have the
right to terminate this Agreement solely as the same relates to the Mansfield IL
Property by giving notice to the other party prior to the date that the
Mansfield IL Property is sold in accordance with the provisions of this
Section 2.12. Subject to the rights of the parties set forth in this Agreement
with respect to defaults, in the event of the termination of this Agreement
solely as it relates to the Mansfield IL Property by either party, the Mansfield
IL Deposit shall be returned to Purchaser, and neither party shall have any
further obligation to the other under this Agreement with respect to the
Mansfield IL Property, except for obligations that may survive any termination
hereof as expressly provided herein.

 

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III.

ESCROW

3.1 Escrow. Purchaser and Sellers have established or will establish an escrow
(“Escrow”) with Escrow Agent by depositing with Escrow Agent the Deposit and
having three (3) copies of the Escrow Agreement in the form attached hereto as
Exhibit “B” duly executed (in counterparts or otherwise) by Sellers, Purchaser
and Escrow Agent (the “Escrow Agreement”). The Deposit shall be held by Escrow
Agent in accordance with the terms of the Escrow Agreement. In the event of any
conflict between this Agreement and the Escrow Agreement, the terms of this
Agreement shall control.

3.2 Deposit of Funds. Except as otherwise provided in this Agreement, all funds
deposited into the Escrow by Purchaser shall be immediately deposited by Escrow
Agent into an interest bearing account, subject to the control of Escrow Agent
in a bank or savings and loan association, or such other institution approved by
Purchaser, or such other investment as may be approved by Purchaser; provided,
however, that such funds must be readily available as necessary to comply with
the terms of this Agreement and the Escrow Agreement, and for the Escrow to
close within the time specified in Section 7.1 of this Agreement. Except as may
be otherwise specifically provided herein, interest on amounts placed by Escrow
Agent in any such investments or interest bearing accounts shall accrue to the
benefit of Purchaser, and Purchaser shall promptly provide to Escrow Agent
Purchaser’s Tax Identification Number.

IV.

TITLE AND SURVEY

4.1 Title Examination; Commitment for Title Insurance. Prior to or on the
Effective Date, each Seller has obtained from Escrow Agent and delivered to
Purchaser, at Seller’s sole cost and expense, a current commitment for an
A.L.T.A. Owner’s Policy of Title Insurance 2006 Form (or if not available, the
local equivalent) (the “Title Commitment”) covering such Real Property and a
copy of each document referenced in the Title Commitment as an exception to
title.

4.2 Survey. Prior to or on the Effective Date, each Seller has delivered to
Purchaser, at Seller’s sole cost and expense, the existing survey for its Real
Property (the “Survey”), to the extent in its possession or control. In the
event that Purchaser elects to have a new or updated Survey of any Real Property
performed, it shall deliver a copy thereof to Sellers within five (5) days of
receipt of any such Survey.

4.3 Title Objections; Cure of Title Objections. Purchaser shall have until
fifteen (15) days prior to the expiration of the Due Diligence Period (the
“Title Objection Date”) to provide Notice to Sellers, in writing, of such
objections as Purchaser may have to any item contained in any Title Commitment
and any matter shown on any Survey (or any update thereto received

 

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prior to the Title Objection Date). Any item contained in any Title Commitment
or any matter shown on any Survey to which Purchaser does not object prior to
the Title Objection Date shall be deemed a Permitted Exception. In the event
Purchaser provides Notice to Sellers of objections to any items contained in any
Title Commitment or any matters shown on any Survey prior to the Title Objection
Date, Sellers shall have the right, but not the obligation (except as otherwise
provided below), to cure such objections. Within five (5) days after receipt of
Purchaser’s notice of objections, Sellers shall notify Purchaser in writing as
to whether Sellers elect to attempt to cure such objections. Any failure by
Sellers to respond within five (5) days after receipt of Purchaser’s notice of
objections shall be deemed a refusal by Sellers to cure any objections to which
a response was not delivered. If Purchaser does not terminate this Agreement
prior to the expiration of the Due Diligence Period pursuant to Section 2.3, all
items contained in the Title Commitments or matters shown on the Surveys, other
than the Required Deletion Items and those items or matters with respect to
which Purchaser has objected and Sellers have affirmatively elected to cure,
shall be deemed Permitted Exceptions. The Permitted Exceptions shall, inter
alia, include (and Purchaser shall not be permitted to object to) any exceptions
relating to interests and rights of parties in possession under any Leases or
Resident Agreements, liens for all real estate taxes and assessments, water
rates, water meter charges, sewer rates, sewer charges and similar matters
imposed by any governmental authority and not yet due and payable as of the
Closing Date, including special assessments and special improvement district or
local improvement district bonds, any and all present and future laws,
ordinances, restrictions, requirements, resolutions, orders, rules and
regulations of any governmental authority, as now or hereafter existing or
enforced (including those related to zoning and land use), and any exceptions
caused by Purchaser, its agents, representatives or employees. If Sellers elect
to attempt to cure, and provided that Purchaser shall not have terminated this
Agreement in accordance with Section 2.3 hereof, Sellers shall have until the
Closing Date to attempt to remove, satisfy or cure the same and for this purpose
Sellers shall be entitled to a reasonable adjournment of the Closing if
additional time is required, but in no event shall the adjournment exceed thirty
(30) days after the Closing Date. If Sellers are unable to effect a cure prior
to the Closing Date (or any date to which the Closing has been adjourned) then
Purchaser shall have the option, in its sole discretion, to (a) accept a
conveyance of the Real Property subject to the Permitted Exceptions and any
matter objected to by Purchaser that Sellers are unable to cure, and without
reduction of the Purchase Price or (b) terminate this Agreement by sending
written notice thereof to Seller, and upon delivery of such notice of
termination, this Agreement shall terminate and the Deposit shall be returned to
Purchaser. Following any termination of this Agreement in accordance with
subsection (b) of the previous sentence, neither party hereto shall have any
further rights, obligations or liabilities hereunder except to the extent that
any right, obligation or liability set forth herein expressly survives
termination of this Agreement. Except as provided in the next sentence, Sellers
shall have no obligation to bring any action or proceeding or otherwise to incur
any expense to correct, discharge or otherwise remove title exceptions or
defects with respect to any Property or to remove, remedy or comply with any
other grounds for Purchaser’s refusing to approve title. Each Seller shall,
however, be obligated to remove or discharge, or otherwise cause the Escrow
Agent to omit as an exception to title or to insure against collection thereof
from or against its respective Property, (y) any Existing Liens and (z) any
liens and encumbrances created by through or under such Seller after the
Effective Date, that are not Permitted Exceptions (collectively, the “Required
Deletion Items”). If, on the Closing Date, there are any Required Deletion
Items, the applicable Seller

 

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may use any portion of its pro rata share of the Closing Payment to satisfy
same, provided the Escrow Agent shall omit such lien or encumbrance as an
exception to title. If the applicable Seller shall fail to authorize the Escrow
Agent to use its pro rata share of the Closing Payment to satisfy a Required
Deletion Item, and such Required Deletion Item therefore is not omitted as an
exception to title, such failure shall be deemed to be a default by Sellers, and
Purchaser shall have the remedies set forth in Section 11.2.

4.4 Conveyance of Title. At the Closing, Sellers shall deliver to Purchaser, in
escrow through Escrow Agent, the Deeds, each subject to no exceptions other than
the Permitted Exceptions.

The acceptance by Purchaser of the Deeds shall be deemed to be a full
performance and discharge of every obligation on the part of Sellers to be
performed under this Agreement with respect to the Property, other than those
that are specifically stated herein or in any Closing Document to survive the
Closing.

V.

INSPECTIONS

5.1 Purchaser’s Independent Inspection.

(a) Sellers shall provide Purchaser the full opportunity during the Due
Diligence Period to inspect and investigate each and every aspect of each
Property, either independently or through agents, representatives or experts of
Purchaser’s choosing, as Purchaser considers necessary or appropriate. Such
independent investigation by Purchaser may include (but is not limited to):

(i) all matters relating to title to each Property;

(ii) all matters relating to Legal Requirements with respect to each Property,
such as taxes, assessments, zoning, use permit requirements and building codes;

(iii) all zoning, land use, building, environmental and other statutes, rules,
or regulations applicable to each Real Property;

(iv) the physical condition of each Real Property, including the interior, the
exterior, the square footage of the Improvements, the structure, the roof, the
paving, the utilities, and all other physical, structural and functional aspects
of such Real Property;

(v) reports, studies, assessments, investigations and other materials related to
the presence of Hazardous Materials at, on or under each Real Property and the
compliance of such Real Property with all Environmental Requirements, including
environmental assessment reports;

(vi) any easements and/or access rights affecting such Real Property;

 

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(vii) the form of Resident Agreement with respect to each Real Property;

(viii) the Material Contracts and Leases affecting each Property;

(ix) all matters that would be revealed by a Survey, a physical inspection or an
environmental site assessment of each Real Property; and

(x) all matters relating to the income and operating or capital expenses of each
Property and all other financial matters.

(b) Except as expressly provided herein or in any Closing Documents, Sellers
make no representations or warranties as to the truth, accuracy or completeness
of any materials, data or other information, if any, supplied to Purchaser in
connection with Purchaser’s inspection of the Property (e.g., that such
materials are complete, accurate or the final version thereof, or that all such
materials are in Sellers’ possession). Except for Purchaser’s reliance on any
representation and warranties expressly provided herein, it is the parties’
express understanding and agreement that any such materials are to be provided
only for Purchaser’s convenience in making its own examination and determination
as to whether it wishes to purchase the Properties, and, in doing so, Purchaser
shall rely exclusively on its own independent investigation and evaluation of
every aspect of each Property and not on any materials supplied by Sellers.
Except for Purchaser’s reliance on any representation and warranties expressly
provided herein or in any Closing Documents with respect to any such materials,
Purchaser expressly disclaims any intent to rely on any such materials provided
to it by Sellers in connection with its inspection and agrees that it shall rely
solely on its own independently developed or verified information.

(c) Purchaser acknowledges and agrees that (i) on or prior to the expiration of
the Due Diligence Period it will have completed its independent inspection and
investigation of the Property and the Due Diligence Materials and (ii) it shall
have no right after the expiration of the Due Diligence Period to terminate this
Agreement based on any further investigations of the Property or the Due
Diligence Materials. The failure of Purchaser to send a Termination Notice prior
to the expiration of the Due Diligence Period shall conclusively constitute
Purchaser’s approval of each and every aspect of the Property, subject to the
terms and conditions of this Agreement.

5.2 Access.

(a) Sellers shall cooperate and provide Purchaser with reasonable access to each
Real Property upon commercially reasonable Notice to Sellers for the purpose of
Purchaser’s inspection (provided, however, that Purchaser shall not perform any
invasive testing of any Real Property without Sellers’ prior written consent in
each instance, which may be granted or withheld in Sellers’ sole and absolute
discretion). Neither Purchaser nor any of its employees, agents or
representatives shall contact or otherwise discuss this transaction and/or the
operation of the Facilities with any on-site employees of the Facilities without
Sellers’ prior written consent; provided, however, that Purchaser may

 

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meet with any Facility’s Executive Director upon commercially reasonable Notice
to Sellers but, if required by Sellers, only in the presence of Sellers’
representative. Each Seller shall have the right to have a representative of
such Seller present during all inspections or examinations of the applicable
Real Property by Purchaser. Prior to any entry by Purchaser or any of
Purchaser’s designees onto any Property, Purchaser shall: (i) if Purchaser does
not then have such a policy in force, procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Sellers,
covering all Purchaser’s activities, with a single limit of liability (per
occurrence and aggregate) of not less than Two Million and NO/100 Dollars
($2,000,000.00); and (ii) deliver to Sellers a Certificate of Insurance,
evidencing that such insurance is in force and effect, and evidencing that
Sellers have been named as an additional insured thereunder with respect to any
Purchaser’s activities. Such insurance shall be written on an “occurrence”
basis, and shall be maintained in force until the earlier of (x) the termination
of this Agreement and the conclusion of all of Purchaser’s activities on the
Property, or (y) the Closing Date.

(b) Purchaser, at all times, will conduct all inspections and reviews in
compliance with all Legal Requirements, and in a manner so as to not cause
damage, loss, cost or expense to Sellers, any Property or the residents of any
Property, and without unreasonably interfering with or disturbing any employee
or resident at the Facilities. Prior to Closing, the results of or any other
information acquired pursuant to Purchaser’s inspections shall be subject to the
terms and conditions of Section 14.16 below. Purchaser will promptly restore any
damage to any Property caused by Purchaser’s inspection to substantially the
same condition immediately preceding such inspections and examinations and will
keep the Properties free and clear of any mechanic’s liens or materialmen’s
liens caused by Purchaser or its representatives in connection with such
inspections and examinations.

(c) The cost of the inspections and tests undertaken pursuant to this
Section 5.2 shall be borne solely by Purchaser.

5.3 Confidential Nature of Due Diligence Materials. Purchaser covenants and
agrees that, until the Closing Date, all information and materials disclosed
and/or delivered to it by Sellers, or Sellers’ agents, employees and
representatives (including without limitation, the Due Diligence Materials), are
confidential and proprietary information, and that Purchaser shall hold the same
in accordance with the terms and conditions of Section 14.16 below. Purchaser
also agrees that, in the event the transactions contemplated in this Agreement
are not consummated as provided herein, Purchaser shall promptly return to
Sellers or notify Seller in writing that Purchaser has destroyed all such
information and documentation and all copies thereof other than any copies
required to be retained to comply with Purchaser’s internal records retention
policy, which copies shall continue to be subject to the terms of Section 14.16.

5.4 Continuing Nature of Purchaser’s Obligations. The obligations of Purchaser
under this Article V (including its indemnification obligations under
Section 8.1(a)) shall survive Closing or the termination of this Agreement.

 

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VI.

PROPERTY

6.1 Condition of Property. THE FOLLOWING PROVISIONS IN THIS SECTION 6.1 ARE
SUBJECT TO THE EXPRESS REPRESENTATIONS, WARRANTIES, COVENANTS, AGREEMENTS, AND
OTHER PROVISIONS OF THIS AGREEMENT (INCLUDING WITHOUT LIMITATION THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 9.2) AND THE CLOSING
DOCUMENTS:

(a) BY ENTERING INTO THIS AGREEMENT, PURCHASER HAS AGREED TO, AND WILL, PERFORM
(AND PURCHASER REPRESENTS AND WARRANTS TO SELLERS THAT PURCHASER IS CAPABLE OF
PERFORMING) AN INDEPENDENT INVESTIGATION, ANALYSIS AND EVALUATION OF THE
PROPERTIES. PURCHASER WILL CONDUCT ITS OWN THOROUGH AND INDEPENDENT INSPECTION,
INVESTIGATION, ANALYSIS AND EVALUATION OF ALL INSTRUMENTS, RECORDS AND DOCUMENTS
WHICH PURCHASER DETERMINES TO BE APPROPRIATE OR ADVISABLE TO REVIEW IN
CONNECTION WITH PURCHASER’S ACQUISITION OF THE PROPERTY AND THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.

(b) PURCHASER FURTHER ACKNOWLEDGES THAT PURCHASER HAS SUBSTANTIAL EXPERIENCE
WITH REAL PROPERTY AND SENIOR LIVING FACILITIES AND THEIR OPERATIONS, AND THAT
PURCHASER WILL ACQUIRE THE PROPERTIES IN “AS IS, WHERE IS, WITH ALL FAULTS”
CONDITION, AND SOLELY IN RELIANCE ON PURCHASER’S OWN INSPECTION AND EXAMINATION
AND SELLERS’ REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED HEREIN OR IN ANY
CLOSING DOCUMENTS.

(c) EXCEPT AS TO THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
THIS AGREEMENT AND THE CLOSING DOCUMENTS, IT IS EXPRESSLY UNDERSTOOD AND AGREED
THAT SELLERS MAKE NO REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND,
NATURE OR SORT, EXPRESS OR IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION,
PAST, PRESENT OR FUTURE OPERATION AND/OR PERFORMANCE, OR VALUE, OF ANY PROPERTY
AND THAT SELLERS CONVEY THE PROPERTIES TO PURCHASER “AS IS AND WHERE IS, WITH
ALL FAULTS,” AND PURCHASER ACKNOWLEDGES THAT SELLERS MAKE NO REPRESENTATIONS,
GUARANTIES OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE QUALITY,
CHARACTER, EXTENT, PERFORMANCE, CONDITION OR SUITABILITY OF THE PROPERTIES FOR
ANY PURPOSE.

(d) PURCHASER’S INSPECTION, INVESTIGATION AND SURVEY OF THE PROPERTIES SHALL BE
IN LIEU OF ANY NOTICE OR DISCLOSURE REQUIRED BY ANY APPLICABLE HEALTH AND SAFETY
CODE, OR BY ANY

 

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OTHER PROVISION OF APPLICABLE LAW, RULE OR REGULATION, INCLUDING, WITHOUT
LIMITATION, LAWS REQUIRING DISCLOSURE BY SELLER OF FLOOD, FIRE, MOLD, SEISMIC
HAZARDS, LEAD PAINT, LANDSLIDE AND LIQUEFACTION, OTHER GEOLOGICAL HAZARDS,
RAILROAD AND OTHER UTILITY ACCESS, SOIL CONDITIONS AND OTHER CONDITIONS WHICH
MAY AFFECT THE USE OF THE REAL PROPERTY, AND PURCHASER HEREBY WAIVES ANY
REQUIREMENT FOR A NOTICE PURSUANT TO THOSE PROVISIONS AND HEREBY ACKNOWLEDGES
AND AGREES THAT IT WILL CONDUCT ITS OWN INSPECTIONS AND REVIEWS WITH RESPECT TO
ALL MATTERS COVERED THEREBY, AND HEREBY RELEASES SELLERS FROM LIABILITY IN
CONNECTION WITH ANY SUCH MATTERS THAT ARE NOT THE SUBJECT OF ANY OF SELLERS’
COVENANTS REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN OR ANY CLOSING
DOCUMENTS.

(e) PURCHASER ALSO ACKNOWLEDGES AND AGREES THAT, ALTHOUGH SELLERS HAVE PROVIDED
TO PURCHASER THE DUE DILIGENCE MATERIALS AND THE BOOKS AND RECORDS, SELLERS HAVE
NOT VERIFIED THE ACCURACY THEREOF AND MAKE NO REPRESENTATIONS OR WARRANTIES
REGARDING THE MATTERS SET FORTH THEREIN EXCEPT AS MAY BE EXPRESSLY SET FORTH
HEREIN OR ANY CLOSING DOCUMENTS, IT BEING THE RESPONSIBILITY OF PURCHASER TO
VERIFY THE ACCURACY OF SUCH MATERIALS.

(f) FURTHERMORE, EXCEPT AS TO THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET
FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS, PURCHASER ACKNOWLEDGES THAT
SELLERS HAVE NOT AND DO NOT MAKE ANY REPRESENTATIONS OR WARRANTIES IN CONNECTION
WITH THE PRESENCE OR INTEGRATION OF HAZARDOUS MATERIALS UPON OR WITHIN ANY REAL
PROPERTY. IN THAT REGARD, PURCHASER WILL CONDUCT ITS OWN INVESTIGATIONS TO
DETERMINE IF ANY REAL PROPERTY CONTAINS ANY HAZARDOUS MATERIALS OR TOXIC WASTE,
MATERIALS, DISCHARGE, DUMPING OR CONTAMINATION, WHETHER SOIL, GROUNDWATER OR
OTHERWISE, WHICH VIOLATES ANY FEDERAL, STATE, LOCAL OR OTHER GOVERNMENTAL LAW,
REGULATION OR ORDER OR REQUIRES REPORTING TO ANY GOVERNMENTAL AUTHORITY.

(g) THE PROVISIONS HEREOF SHALL EXTEND TO THE BENEFIT OF THE GENERAL CONTRACTOR
AS WELL AS SELLERS EXCEPT THAT, WITH RESPECT TO THE GENERAL CONTRACTOR, THE
PROVISIONS OF THIS SECTION 6.1 SHALL BE SUBJECT TO THE LAST SENTENCE OF SECTION
2.11.

 

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BY INITIALING THIS CLAUSE BELOW, PURCHASER ACKNOWLEDGES THAT THIS ARTICLE HAS
BEEN READ AND FULLY UNDERSTOOD, AND THAT PURCHASER HAS HAD THE CHANCE TO ASK
QUESTIONS OF ITS COUNSEL ABOUT ITS MEANING AND SIGNIFICANCE.

 

 

 

    PURCHASER’S INITIALS  

6.2 Survival of Article VI. THE PROVISIONS OF THIS ARTICLE VI SHALL SURVIVE
CLOSING.

VII.

CLOSING

7.1 Closing Date. The “Closing Date” for purposes of this Agreement shall be the
date which is fifteen (15) days after the expiration of the Due Diligence
Period, or such earlier date as may be agreed upon, in writing, by Sellers and
Purchaser; provided, however, that Seller shall have the right, at its option,
to extend the Closing Date as set forth in Section 4.3 and Section 9.4 herein,
Purchaser shall have the right, at its option, to extend the Closing Date as set
forth in Section 8.5 herein, and either Sellers or Purchaser shall have the
right, at their option, to extend the Closing Date as set forth in Section 2.12
and Section 8.4 herein. Notwithstanding any language to the contrary herein, in
no event shall the aggregate of all extensions of the Closing Date hereunder
result in the Closing Date occurring after February 28, 2014.

7.2 Action Prior to the Closing Date by Seller. Sellers agree that, provided
Purchaser has complied with its obligations under Section 7.3 hereof, on or
before 1:00 p.m. (Eastern Time) on the Closing Date, Sellers will deposit with
Escrow Agent such items and instruments (executed and acknowledged, if
appropriate) as may be necessary in order for Escrow Agent to comply with this
Agreement, including, without limitation, the following:

(a) For the Property located in Illinois, a special warranty deed in the form
and content attached hereto as Exhibit “C-1” and for all of the Properties
located in Texas, a single special warranty deed substantially in the form and
content attached hereto as Exhibit “C-2”, prepared and executed by the
applicable Sellers and acknowledged before a Notary Public in the manner
provided under the laws of the state in which the particular Property is
located, reflecting the sale and transfer to Purchaser of the Real Property and
the Improvements owned by such Sellers (collectively, the “Deeds”), subject only
to those Permitted Exceptions applicable to such Property.

(b) For each Property, two (2) duplicate originals of a Bill of Sale, in the
form and content attached hereto as Exhibit “D”, prepared and executed by the
applicable Seller (and, as the case may be, the applicable SNF Subsidiary)
assigning, conveying and transferring to Purchaser the Personal Property owned
by such Seller (and, as the case may be, the applicable SNF Subsidiary) (“Bill
of Sale”);

(c) For each Property, two (2) duplicate originals of an Assignment and
Assumption of Intangible Property, in the form and content attached hereto as
Exhibit “E”,

 

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prepared and executed by the applicable Seller (and, as the case may be, the
applicable SNF Subsidiary) assigning and conveying to Purchaser, at no cost or
expense to such Seller (or, as the case may be, the applicable SNF Subsidiary)
and without representation or warranty (other than as expressly set forth
herein), all of such Seller’s (and, as the case may be, the applicable SNF
Subsidiary’s) right, title and interest in the Intangible Property owned by such
Seller (and, as the case may be, the applicable SNF Subsidiary) (“Assignment and
Assumption of Intangible Property”);

(d) For each Property, two (2) duplicate originals of an Assignment and
Assumption of Leases and Contracts, in the form and content attached hereto as
Exhibit “F”, prepared and executed by the applicable Seller (and, as the case
may be, the applicable SNF Subsidiary), assigning and conveying to Purchaser, at
no cost or expense to such Seller (or, as the case may be, the applicable SNF
Subsidiary), and without representation or warranty (other than as expressly set
forth herein), all of such Seller’s (and, as the case may be, the applicable SNF
Subsidiary’s) right, title and interest under the Leases and Assumed Contracts
relating to the Property owned by such Seller (“Assignment and Assumption of
Leases and Contracts”);

(e) For each Property, two (2) duplicate originals of an Assignment and
Assumption of Resident Agreements, in the form and content attached hereto as
Exhibit “G”, prepared and executed by the applicable Seller (or, as the case may
be, the applicable SNF Subsidiary), assigning and conveying to Purchaser, at no
cost or expense to such Seller (or, as the case may be, the applicable SNF
Subsidiary), and without representation or warranty (other than as expressly set
forth herein), all of such Seller’s (or, as the case may be, the applicable SNF
Subsidiary’s) right, title and interest under the Resident Agreements (including
any pre-paid rents attributable to the time period on and after the Closing Date
and/or refundable security deposits thereunder) relating to the Facility owned
by such Seller (“Assignment and Assumption of Resident Agreements”);

(f) For each Seller, a non-foreign affidavit, in the form and content attached
hereto as Exhibit “H”, prepared and executed by such Seller (“Non-Foreign
Affidavit”), any state tax withholding affidavits as applicable, and an IRS Form
1099;

(g) For each Seller, a Bringdown Certificate executed by a duly authorized
officer of such Seller certifying to Purchaser that, as of the Closing Date, the
representations and warranties made by such Seller set forth in Section 9.2 of
the Agreement remain true and correct in all material respects.

(h) All transfer tax and other tax returns, if any, which any Seller is required
by law to execute and acknowledge and to deliver, either individually or
together with Purchaser, to any governmental authority as a result of the sale,
if and to the extent the same are available as of the Closing Date;

(i) All of the plans (including “as built” plans), drawings, blueprints and
specifications relating to the Properties where available, which are in any
Sellers’ possession or control;

 

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(j) All written warranties of manufacturers, suppliers and contractors, if any,
in possession or control of each Seller and in effect on the Closing Date;

(k) All keys to the Properties which are in the possession or control of any
Seller (which will be available at each respective Facility);

(l) A closing statement prepared by Escrow Agent and reasonably approved by
Sellers and Purchaser setting forth, among other things, all payments to and
from Escrow in connection with the purchase and sale of the Properties (the
“Closing Statement”);

(m) For each Property, one (1) original of the owner’s affidavit (including a
gap indemnity), in the form attached hereto as Exhibit “I”, prepared and
executed by the applicable Seller.

(n) All other documents consistent with the express provisions of this Agreement
and reasonably required by Escrow Agent (including without limitation, evidence
reasonably satisfactory to Escrow Agent that all necessary authorizations of the
transaction contemplated hereby have been obtained by each Seller), each in form
and substance reasonably acceptable to Sellers;

(o) For each Property, a form Notice to Residents, in the form and content
attached hereto as Exhibit “J”, prepared and executed by the applicable Seller
(or, as the case may be, the applicable SNF Subsidiary) (collectively, the
“Notices to Residents”);

(p) Any documents or certificates necessary to transfer title to, or leasehold
interests in, any motor vehicles being conveyed in connection herewith, each of
which will be located at a Property;

(q) To the extent not previously delivered to Purchaser and within the
possession or control of Sellers or their Affiliates, originals (or copies, if
originals are not available) of all items within the Due Diligence Materials
(including, to the extent available, originals of all Resident Agreements,
Assumed Contracts, and Permits and copies of all resident correspondence and
billing files and records), which need not be deposited with Escrow Agent but
instead may be left at the applicable Facility;

(r) Any releases necessary to extinguish the Existing Liens, as required hereby;

(s) For each Property, a termination of property management agreement executed
by the applicable Seller (or, as the case may be, the applicable SNF Subsidiary)
and Manager;

(t) With respect to the Licensed Facilities known as “Isle at Watercrest –
Bryan” and “Isle at Cedar Ridge”, a termination of the Lease entered into by and
between the Seller of each such Licensed Facility and the applicable SNF
Subsidiary;

 

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(u) Evidence that Seller (or, as the case may be, the applicable SNF Subsidiary)
has sent termination notices with respect to any Rejected Contracts relating to
the Facility owned by such Seller, as applicable;

(v) The Assumption Documents executed by the Existing Borrower Parties; and

(w) Such other instruments or documents as may be reasonably necessary to effect
or carry out the covenants and obligations to be performed by Sellers pursuant
to this Agreement.

7.3 Action Prior to the Closing Date by Purchaser. Purchaser agrees that on or
before 1:00 p.m. (Eastern Time) on the Closing Date, Purchaser will deposit with
Escrow Agent the Closing Payment and all documents (executed and acknowledged,
if appropriate) necessary to comply with the terms of this Agreement, including
without limitation:

(a) To the extent that applicable law requires that the Deeds, transfer tax or
other tax forms, or recording forms be executed by the grantee, such instruments
shall be executed by Purchaser and acknowledged in the presence of a Notary
Public in accordance with the laws of the state in which the particular Property
is located;

(b) If applicable, pursuant to Section 14.4 below, for each Property, two
(2) fully executed duplicate originals of the Assignment of Purchase Contract to
Applicable Property executed by Purchaser and its assignee in the form and
content attached hereto as Exhibit “K”;

(c) For each Property, two (2) duplicate originals of the Assignment and
Assumption of Intangible Property, executed by Purchaser;

(d) For each Property, two (2) duplicate originals of the Assignment and
Assumption of Leases and Contracts executed by Purchaser;

(e) For each Property, two (2) duplicate originals of the Assignment and
Assumption of Resident Agreements executed by Purchaser;

(f) A Bringdown Certificate executed by a duly authorized officer of Purchaser
certifying to each Seller that, as of the Closing Date, the representations and
warranties made by Purchaser set forth in Section 9.1 of the Agreement remain
true and correct in all material respects.

(g) The Assumption Documents executed by the New Borrower Parties;

(h) An executed Closing Statement; and

(i) Such other funds, instruments or documents as may be reasonably necessary to
effect or carry out the covenants and obligations to be performed by Purchaser
pursuant to this Agreement.

 

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7.4 Recording of Deeds. Subject to Section 10.3 below, Escrow Agent will cause
the Deeds to be dated as of the Closing Date and thereafter promptly recorded in
the Official Records, and all other conveyance documents deposited with Escrow
Agent to be dated as of the Closing Date, when (but in no event after the
Closing Date) Escrow Agent (i) is prepared to issue the title insurance policies
to be issued to Purchaser as contemplated in this Agreement, and (ii) holds for
the account of Sellers and Purchaser all items and funds (if any) to be
delivered to Sellers and Purchaser through the Escrow, after payment of costs,
expenses, disbursements and prorations chargeable to Sellers or Purchaser
pursuant to the provisions of this Agreement.

7.5 Prorations.

(a) With respect to each Property, all non-delinquent real estate and personal
property general and special taxes and assessments for the Property and the Land
for the current assessment year of the applicable taxing authority in which the
Closing Date occurs shall be prorated as of the Closing Date. It is acknowledged
and agreed that the tax assessment year in Illinois is one year behind the
current calendar year and therefore, assuming a 2013 Closing for the Properties,
non-delinquent real estate taxes for the Property in Illinois will be prorated
between the parties for the 2012 tax year only. If the exact amount of taxes is
not known at Closing, the proration will be based on an amount equal to one
hundred five percent (105%) of the prior assessment year’s taxes and shall be
adjusted directly between the applicable Seller and Purchaser once actual
figures become available after Closing. Notwithstanding anything to the contrary
in this Agreement, (i) each Seller shall retain all right, title and interest in
and to any and all property tax (both real property and personal property)
refunds and claims for refunds with respect to the its respective Property for
any period prior to the Closing Date, and (ii) each Seller is responsible for
all taxes due and payable prior to the Closing Date in connection with its
respective Property. Purchaser shall assume all obligations accruing from and
after the Closing Date with respect to any agreements relating to the appealing
of real estate taxes or real estate tax assessments, including the obligation to
pay portions of amounts of real estate tax savings and costs and expenses
related thereto. With respect to each Property, Seller shall be responsible for
all sales, use and other transfer taxes imposed in connection with the sale and
transfer of the Personal Property and the Intangible Property.

(b) With respect to each Property, the applicable Seller shall request each
utility company providing utility service to the applicable Real Property to
cause all utility billings to be closed and billed as of the Closing Date in
order that utility charges may be separately billed for the period prior to the
Closing Date and the period on and after the Closing Date. In the event any such
utility charges are not separately billed, the same shall be prorated. In
connection with any such proration, it shall be presumed that utility charges
were uniformly incurred during the billing period in which the Closing Date
occurs. Each Seller shall receive a credit at Closing for any Utility Deposits
with respect to its respective Facility that are transferred or made available
to Purchaser. Purchaser shall arrange for placing all utility services and bills
in its own name as of the Closing Date.

 

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(c) With respect to each Property, all revenues from Facility operations
accruing or relating to the period up to and including 11:59 p.m. in the
jurisdiction in which the Properties are located on the day immediately
preceding the Closing Date (“Cut-Off Time”) shall belong to the applicable
Seller. All revenues from Facility operations accruing or relating to the period
after the Cut-Off Time shall belong to Purchaser. Without limiting the
foregoing, it is the agreement and intent of the parties that all revenues shall
be prorated as of the Closing Date.

(d) With respect to each Property, all obligations and liabilities and accounts
payable for the Facility and the Real Property owing as of the Closing Date for
merchandise, equipment, supplies and other materials and services paid, incurred
or ordered shall be prorated between the applicable Seller and Purchaser as of
the Closing Date based on whether the merchandise, equipment, supplies and other
materials remain in inventory as of the Closing Date and when the services were,
or are, be rendered, i.e., prior to, or on or after the Closing Date.

(e) Except as covered by the terms of Section 7.5(a) above, with respect to each
Property, all water and sewer charges, taxes (other than ad valorem property
taxes), and any unpaid taxes payable in arrears, shall be prorated as of the
Closing Date. Each Seller will be credited for that portion of taxes and fees
paid by such Seller allocable to the period after the Closing Date.

(f) With respect to each Property, all payments and receipts, as applicable,
under the Assumed Contracts shall be prorated between Purchaser and the
applicable Seller as of the Closing Date. The applicable Seller shall receive a
credit for all prepayments and deposits thereunder which are transferred to
Purchaser. In consideration for Purchaser’s agreement to honor (i) any written
policy currently in place at a Facility with respect to waitlist deposits or
(ii) the terms of those Assumed Contracts entered into by and between a Seller
and a prospective resident (i.e., to admit the prospective resident as a
resident of the applicable Facility on the same terms and conditions as such
prospective resident would have been admitted to the applicable Facility had
Seller still owned the Facility), Purchaser shall receive a credit for all
waitlist deposits made by prospective residents.

(g) With respect to each Property, all other income derived by the applicable
Seller from the Property accruing or relating to the period up to and including
the Cut-Off-Time shall be paid to such Seller. All other income derived by such
Seller from the Property accruing or relating to the period on and after the
Cut-Off-Time shall be paid to Purchaser.

(h) Subject to Section 7.5(i) below, with respect to each Property, the Accounts
Receivable shall be and remain the property of the applicable Seller subsequent
to the Closing of the transaction contemplated hereby. At the Closing, each
Seller shall prepare a list of its outstanding Accounts Receivable as of the
Cut-Off Time, specifying the name of each account and the amount due to it.
Purchaser shall hold in trust for each Seller any funds which are received by
Purchaser as payment of such Seller’s Accounts Receivable, i.e., if Purchaser
actually collects any such amounts, Purchaser shall pay the

 

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monies collected in respect thereof (net of actual collection costs) to such
Seller promptly following the end of the calendar month in which such amounts
are collected, accompanied by a statement showing the amount collected on each
such account. Other than the foregoing, Purchaser shall have no obligation with
respect to any such account, and Purchaser shall not be required to take any
legal proceeding or action to effect collection on behalf of any Seller. It is
the intention of Purchaser and Sellers that although the Accounts Receivable
shall be and remain the property of Sellers, still, if any such accounts are
paid to Purchaser, then Purchaser shall collect same and remit to the applicable
Seller in the manner above provided. Nothing herein contained shall be deemed to
preclude Sellers from enforcing collection of the Accounts Receivable which are
owed to Sellers; provided, in no event shall Seller be entitled to commence
termination or eviction proceedings with respect to any Lease or Resident
Agreement. The provisions of this Section shall survive Closing.

(i) With respect to each Property, all rentals and other resident charges,
including any community fees and reimbursements, in respect to the month in
which the Closing Date occurs (the “Current Month”) shall be prorated as of the
Cut-Off Time, whether or not actually received prior to the Closing Date. All
rentals and other charges received by Purchaser from a resident under a Resident
Agreement or a tenant under Lease after the Closing Date that are not Sellers’
Accounts Receivable shall be applied first to collection costs and then to the
most recently accrued obligation of such resident or tenant, as applicable.
After application as set forth above, Purchaser shall promptly remit to the
applicable Seller that portion of rentals and other resident charges received
after the Closing Date attributable to periods prior to the Cut-Off Time.
Notwithstanding any language to the contrary herein, (i) to the extent that any
Seller receives any payment with respect to the Licensed Facility that was owned
by such Seller after the Cut-Off Time from a third-party payor (such as the
Medicare program) that relates to periods after the Cut-Off Time, Seller shall
hold in trust for Purchaser such funds and pay such funds to Purchaser promptly
following the end of the calendar month in which such funds are collected and
(ii) to the extent that Purchaser receives any payment with respect to a
Licensed Facility after the Cut-Off Time from a third-party payor (such as the
Medicare program) that relates to periods before the Cut-Off Time, Purchaser
shall hold in trust for the applicable Seller such funds and pay such funds to
the applicable Seller at the end of the calendar month in which such funds are
collected. Each Seller shall retain, with respect to its respective Property,
the right to pursue directly collection of amounts due on account of the period
prior to the Cut-Off Time, provided, in no event shall Seller be entitled to
commence termination or eviction proceedings with respect to any Lease or
Resident Agreement.

(j) Purchaser shall receive a credit for (a) prepaid rents and other resident
charges, including any community fees, applicable to periods after the Cut-Off
Time, and (b) any refundable security deposits (and if Legal Requirements or any
agreements require a landlord to be accountable for interest on such refundable
security deposits, any accrued interest owed thereon), and (c) any other funds
which are held by a Seller or SNF Subsidiary in trust for the benefit of a
Facility resident (which, as of the Effective Date, consist only of funds in the
amount of approximately $2,500 held by the Seller of the Facility known as the
“Isle at Cedar Ridge” or its applicable SNF Subsidiary) which credit shall be
applied against the Allocated Purchase Price for the Property at which there
exist prepaid rents and other resident charges or refundable security deposits.

 

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(k) Except as otherwise expressly provided in this Agreement, all apportionments
and adjustments shall be made in accordance with generally accepted accounting
principles. The computation of the adjustments shall be jointly prepared by
Sellers and Purchaser. In the event any prorations or apportionments made under
this Section 7.5 shall prove to be incorrect for any reason, then any party
shall be entitled to an adjustment to correct the same in accordance with the
remaining terms of this Section 7.5(k). To the extent the exact amount of any
adjustment item provided for in this Section 7.5 cannot be precisely determined
on the Closing Date, such prorations and apportionments shall be tentatively
prorated on the basis of the best data then available and re-prorated when the
information is available. Notwithstanding the foregoing, any adjustment or
re-proration pursuant to the two immediately preceding sentences shall be made,
if at all, within one hundred eighty (180) days after the Closing Date (except
with respect to taxes and assessments, in which case such re-proration shall be
made within sixty (60) days after the information necessary to perform such
re-proration is available). All payments to be made as a result of the final
results of the adjustments shall be paid to the party entitled to the same
within thirty (30) days after the final determination thereof. Sellers and
Purchaser agree that none of the insurance policies relating to any Property
will be assigned to Purchaser (and each Seller shall pay any cancellation fees
or minimum earned premiums resulting from the termination of the policies
relating to its respective Property) and Purchaser shall be responsible for
arranging for its own insurance as of the Closing Date.

(l) With respect to the Mansfield IL Property, any amounts prepaid with respect
to the Mansfield IL Loan which would otherwise be owing for periods following
the Closing Date shall be credited to the account of the Mansfield IL Seller.
Any funds or other security held by or for the benefit of the Mansfield IL
Lender under any reserve or escrow accounts shall be replaced by the Purchaser
so that such funds or other security may be released to the Mansfield IL Seller
or, alternatively, an amount equal to the amount of funds or other security held
by or for the benefit of the Mansfield IL Lender under any reserve or escrow
accounts shall be credited to the account of the Mansfield IL Seller, all in
accordance with the provisions of Section 2.12(b)(v).

(m) To the extent that any item of income, expense or obligation referred to
under the provisions of this Section 7.5 is income attributable to, or the cost
or expense of, a SNF Subsidiary (rather than a Seller), for the purpose of this
Section 7.5, such item of income, expense or obligation shall be allocated as
between the Seller of the Facility at which the SNF Subsidiary serves as
operator and Purchaser in accordance with the provisions of this Section 7.5.
The provisions of this Section 7.5 shall survive Closing.

7.6 Closing Costs. With respect to the title insurance policy insuring
Purchaser’s title to the Properties, Seller shall bear the cost of the premium
for the base property title insurance policy but Purchaser shall bear the cost
of any and all endorsements to the title insurance policy requested by Purchaser
or its lender. Purchaser shall bear the cost of any update to the Survey
obtained by Purchaser, and one-half of all escrow and closing fees relating to
the sale of the

 

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Property imposed by Escrow Agent. Sellers shall pay any compensation due to
Financial Advisor, the state and municipal transfer taxes for the Property
located in Illinois (it being acknowledged and agreed there are no state or
municipal transfer taxes in Texas), the per page recording fees for each Deed,
and one-half (1/2) of all escrow and closing fees relating to the sale of such
Properties (but, in each case, not in connection with any financing by
Purchaser, which shall be paid solely by Purchaser). Each party shall pay its
own attorneys’ fees pertaining to the sale of the Properties. Purchaser shall be
responsible for the payment of any mortgage taxes or recording fees for the
mortgage securing Purchaser’s loan. All other costs pertaining to the sale of
each Property shall be allocated as is customary for real estate transactions
where the applicable Property is located; provided that any such closing costs
that are to be paid by Sellers shall be allocated among Sellers so that each
Seller shall be responsible solely for that portion of such closing costs
associated with the sale of Seller’s Property.

7.7 Possession. Purchaser shall be entitled to sole possession of each Property
on the Closing Date, subject to the possessory rights of any resident of the
Facility and the terms of the Leases and Assumed Contracts.

7.8 Post-Closing Audit. Sellers acknowledge and agree to assist the Purchaser in
conducting, no later than seventy-four (74) days following the Closing Date, an
audit of property-level financials for each Property as specified by Rule 3-05
of Regulation S-X of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, provided such audit shall be at the sole cost
and expense of Purchaser. In connection therewith, Sellers agree to obtain and
provide to the auditors, at no cost to Sellers, any and all data and financial
information, except for information constituting Excluded Assets, in the
possession of Sellers that are necessary or required by the auditors in
connection with their preparation and conducting of the foregoing audit. The
rights and obligations of Purchaser and Sellers under this Section 7.8 shall
survive Closing.

VIII.

ADDITIONAL COVENANTS AND INDEMNITIES

8.1 Purchaser’s Covenants.

(a) Purchaser covenants and agrees to defend, indemnify, protect, defend, and
hold harmless Sellers, and their respective affiliates, owners, members,
partners, employees, lenders, agents and representatives, from and against any
and all Claims (i) arising from the acts and omissions of Purchaser and its
agents, employees and contractors occurring in connection with or as a result
of, any inspections, tests or examinations of or to the Properties prior to the
Closing Date, and (b) caused by or arising out of any material misrepresentation
by Purchaser in connection with this Agreement. This indemnity shall survive
Closing for the Survival Period.

(b) Prior to Closing, Purchaser shall use its commercially reasonable efforts to
apply for and diligently pursue all required licenses and approvals necessary to
permit Purchaser to operate the Licensed Facilities as assisted living,
Alzheimer’s care or skilled nursing facilities, as applicable, and to
participate in Medicare and Medicaid, as

 

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applicable, under Purchaser’s name or the name of Purchaser’s assignee
(“Purchaser Permits”). In furtherance of the preceding sentence, Purchaser shall
use commercially reasonable efforts to file all applications and other documents
required by the applicable governmental or administrative agency or authority
for all such required Purchaser Permits as soon as reasonably practical and, in
all events, on or prior to the Licensing Date.

(c) Purchaser shall deliver to the Mansfield IL Seller its Phase I environmental
report with respect to the Mansfield IL Property promptly upon Purchaser’s
receipt of such report.

8.2 Seller Covenants. Each Seller (but solely for itself and its own Property,
and not for any other Seller or any other Property) covenants to Purchaser as
follows:

(a) Subject to the terms of this Agreement, Seller, during the term of this
Agreement, shall (or, as the case may be, shall cause the applicable SNF
Subsidiary to) carry on the business and operations of its Facility in
substantially the same manner as heretofore carried on by it including incurring
operating expenses consistent with past practices. Seller shall, during the term
of this Agreement, use commercially reasonable efforts to comply in all material
respects with all Legal Requirements affecting its respective Property and all
terms, covenants and conditions of any Assumed Contracts, Leases, Resident
Agreements or Business Agreements affecting its respective Property. Prior to
the Closing Date, Seller shall maintain (or replace with policies of like
amounts) all existing insurance policies insuring its Property and the operation
of its Facility. Seller shall maintain its Inventory consistent with its past
practices and shall replenish the same consistent with its past practices.
Seller may extend, amend, modify or terminate any of the Contracts relating to
its Property as it deems appropriate to operate, service and maintain its
Property consistent with normal business practices, and may enter into new
Contracts; provided, however, that so long as Purchaser is not in default of any
of its obligations under this Agreement beyond the expiration of any applicable
notice or cure period, then Seller shall not (or, as the case may be, shall
cause the applicable SNF Subsidiary not to) without the written consent of
Purchaser (which consent shall not be unreasonably withheld, conditioned or
delayed), enter into (i) any new Contract or amend or modify any existing
Contract that would be binding on Purchaser or the Real Property following the
Closing other than those involving payments of less than Five Thousand and
NO/100 Dollars ($5,000.00) per annum or which are terminable with not more than
sixty (60) days’ notice without penalty except to the extent such amendment or
modification is required under the Legal Requirements, or (ii) any additional
Business Agreements or Resident Agreements or amend or modify any existing
Business Agreement or Resident Agreement affecting its Property that would be
binding on Purchaser following Closing (other than new Resident Agreements,
renewals or modifications of existing Resident Agreements and Leases entered
into in the ordinary course of business at its Property, which, in the case of
Resident Agreements, shall be on the standard form of resident lease for such
Facility, and at rental rates, promotional allowances, concessions, length of
term and on other terms and conditions consistent in all material respects with
past practices), except to the extent such amendment or modification is required
under the Legal Requirements. Other than in the ordinary course

 

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of business at its Property, no part of Seller’s (or, as the case may be, the
applicable SNF Subsidiary’s) Property, or any interest therein, will be sold or
otherwise transferred or encumbered without Purchaser’s prior written consent,
which approval shall not be unreasonably withheld or delayed.

(b) To the extent that it owns Real Property on which a Licensed Facility is
located, Seller shall (or shall cause the applicable SNF Subsidiary or use
commercially reasonable efforts to cause the Manager to) cooperate with
Purchaser in all commercially reasonable respects, including by executing and/or
delivering necessary or desirable applications and other information and
documents, to facilitate the issuance and/or transfer of the Purchaser Permits
(as defined in Section 8.1(b) above). Without limiting the foregoing, if
applicable, Seller shall request Manager to provide such information and
documents as may be required of Manager in connection with Purchaser’s
application for the Purchaser Permits. If Purchaser requests Seller to advance
(or otherwise consents to the advancement of) any governmental or other
administrative agency fees in connection with such cooperation, Purchaser shall
promptly reimburse Seller for any such fees so advanced on behalf of Purchaser.

(c) Seller shall promptly notify Purchaser to the extent Seller receives written
notice from a third party or otherwise acquires knowledge of any event or
occurrence that could be reasonably anticipated to have a material adverse
effect on the operation, leasing, or condition of its respective Property,
including fire or other casualty loss, or receipt of notice of condemnation or
violation of any Legal Requirement or order, including without limitation, any
Legal Requirement relating to health, safety, fire, environmental or zoning that
could be reasonably anticipated to have a material adverse effect on the
operation, leasing, or condition of its respective Property.

(d) Until such time as this Agreement terminates, Sellers shall not solicit or
initiate any inquiries or proposals from, negotiate with, or consider the merits
of any inquiries or proposals from, any person relating to any sale of the
Properties.

(e) Seller 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
Seller’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 Seller shall provide Purchaser or
Purchaser’s manager with a copy thereof no later than three (3) days prior to
the date on which the same are required to be filed; provided, however, Seller
shall have no obligation to accept any suggestions or requests that may be made
by Purchaser with respect to changes to be made to such cost reports.

(f) On the Closing Date Seller shall assign to Purchaser its Medicare provider
agreements in accordance with and as permitted by any and all applicable laws
and orders, rules, requirements and regulations of the Centers for Medicare and
Medicaid

 

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Services (“CMS”), subject to any and all other applicable federal or state
statutes and regulations regarding the same. All liability under Seller’s
Medicare and Medicaid provider agreements for (i) actions and events arising
prior to the Closing Date and (ii) for reimbursement payments made to Seller
with respect to periods prior to the Cut-Off Time which the applicable federal
or state regulators contend were excessive and must be repaid, will be the
responsibility of Seller. All rights to payment for services rendered prior to
the Closing Date will be and remain the property of Seller. Purchaser and Seller
acknowledge and agree that Purchaser is not expected to have received its “tie
in” notice from CMS with respect to the Medicare provider agreement or a new
Medicaid provider agreement as of the Closing Date. Accordingly, in
consideration for, and as a material inducement to, Seller’s and Purchaser’s
agreement to consummate the transaction provided for herein prior to Purchaser’s
receipt thereof, Purchaser will have the right to bill under Seller’s Medicare
(but not Medicaid) provider numbers for a period commencing on the Closing Date
and ending on the earlier to occur of ninety (90) days after the Closing Date or
the date on which Purchaser’s Medicare tie in notices are issued.

(g) The Mansfield IL Seller shall, using its commercially reasonable efforts,
diligently and in good faith, cooperate (at no cost, expense or liability to
Seller) with Purchaser’s efforts to obtain the Mansfield IL Lender’s consent to
the sale of the Mansfield IL Property to, and the assumption of the Mansfield IL
Loan by, Purchaser’s applicable designee. Without limiting the foregoing, the
Mansfield IL Seller shall submit to the Mansfield IL Lender within five (5) days
after written request therefor, in writing, with a copy to Purchaser, all
information required of the Mansfield IL Seller with respect to the assumption
of the Mansfield IL Loan. From the Effective Date to the date that Purchaser’s
applicable designee assumes the obligations of the Mansfield IL Seller under the
Mansfield IL Loan Documents, the Mansfield IL Seller shall use its commercially
reasonable efforts to comply in all material respects with all terms, covenants
and conditions of the Mansfield IL Loan Documents.

8.3 Employee Matters. With respect to each Property:

(a) On the Closing Date, the applicable Seller shall pay the applicable
employees or (at Purchaser’s election) credit Purchaser with all employee
salaries, wages, and other compensation (including accrued vacation days but not
including sick leave), including any applicable federal, state and local taxes,
for any employees of its respective Facility that have accrued up to the Cut-Off
Time and remain unpaid. Subject to the provisions of Sections 8.3(b), Seller
(solely with respect to its respective Property and not for any other Seller or
any other Property) shall indemnify, defend and hold harmless Purchaser against
any and all labor or employment claims, liabilities or obligations (including,
without limitation, reasonable attorneys’ fees and costs) that arise or accrue
before, or arise out of events occurring before, the Closing Date, which
indemnity shall survive Closing. Purchaser shall be responsible for any
severance pay due to any employees who accept employment with Purchaser or
Manager as of Closing and who Purchaser later elects to terminate on or after
the Closing Date. Sellers shall cooperate with Manager to effectuate the
transition of the employment of the employees of the Facilities to Manager upon
Closing.

 

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(b) On or before the day that is five (5) days after the end of the Due
Diligence Period, each Seller shall provide Purchaser with a list of all
employees at its respective Property and, to the extent permitted under the
applicable Legal Requirements, access to other pertinent information as
reasonably requested by Purchaser (including, to the extent permitted under the
applicable Legal Requirements, access to review the employee file and
information on the terms of employment of each employee). After the expiration
of the Due Diligence Period, except with respect to any Facility’s Executive
Director (access to whom is governed by the terms of Section 5.2), each Seller
shall afford Purchaser with opportunities to meet with any employees of such
Seller or Manager who are involved in the operation of each Facility and each
Property. Such meetings shall be at such times as mutually agreed to by the
applicable Seller and Purchaser and such Seller shall be entitled to have a
representative present at any such meetings with the employees at its Property.
As of the Closing Date, Purchaser shall instruct Manager to offer employment to
a sufficient number of the then-current employees of each Facility (and to hire
those employees who accept such offers) such that no notices shall be required
or due to any person or entity under the federal Worker Adjustment and
Retraining Notification Act (the “WARN Act”) or any other comparable state law.
Nothing in this Section 8.3(b) shall, however, create any rights in favor of any
person not a party to this Agreement, including employees of any Facility, or
constitute an employment agreement or condition of employment for any employee
of any Seller (or its property manager) or any affiliate of any Seller (or its
property manager) who is hired by Purchaser. Purchaser shall indemnify, defend
and hold harmless each Seller, and its respective Affiliates, owners and
employees from and against (i) any and all claims, penalties, damages,
liabilities, actions, costs and expenses (including reasonable attorneys’ fees)
under the WARN Act or any comparable state law, to the extent that such claims,
penalties, damages and expenses arise in connection with Purchaser’s failure to
comply with the provisions of this Section 8.3(b) and (ii) any and all labor or
employment claims, liabilities and obligations (including, without limitation,
reasonable attorneys’ fees and costs) that arise or accrue from or after, or
arise out of events occurring from or after the Closing Date, including, without
limitation, all claims arising as a result of the termination by Purchaser of
any Facility employee or personnel performing services at or for a Facility. The
foregoing indemnity shall survive Closing.

(c) Seller (solely with respect to its respective Property and not for any other
Seller or any other Property) shall and hereby agrees to indemnify and save
Purchaser, and its Affiliates and property managers, harmless from and against
any liability for wages, salaries, bonuses, and accrued vacation days to be paid
to employees on account of services rendered prior to Closing, except to the
extent the same is credited to Purchaser pursuant to Section 8.3(a) above for
any employees retained by Purchaser or Manager following Closing.
Notwithstanding anything to the contrary herein contained, there shall be no
apportionment or proration of medical, pension, welfare benefits, other employee
benefits or other fringe benefits (hereinafter collectively referred to as
“benefits”) and Seller (solely with respect to its respective Property, and not
for any other Seller or any other Property) shall remain liable for and hereby
indemnify and save Purchaser, and its affiliates, harmless from and against all
benefits due to employees under plans in which employees participate prior to
Closing, and all payments due on the plans providing such benefits. Sellers
agree to give all affected employees written notice

 

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of termination of participation of employees working at any Property in any
applicable 401(K) or other pension or retirement plan affecting the employees.
The obligations of Sellers and Purchaser set forth in this Section 8.3 shall
survive Closing.

8.4 Extension to Obtain Licenses. In the event that Purchaser has not received
either written or verbal confirmation from, as applicable, the Texas Department
of Aging and Disability Services and/or the Illinois Department of Public Health
that the parties can consummate the transactions contemplated by this Agreement
with respect to any Licensed Facility prior to the Closing Date, Purchaser and
Sellers shall each have the right to extend the Closing Date for up to two
(2) periods of thirty (30) days each by written notice to the other party.

8.5 Additional Extension Right. Purchaser shall have the right (the “Section 8.5
Extension Right”) to extend the Closing Date with respect to any or all of the
Properties provided that (a) Purchaser delivers written notice to Seller within
five (5) business days prior to the then scheduled Closing Date, which notice
(the “Extension Notice”) shall include (i) a list of those Properties for which
Purchaser desires to extend the Closing Date (each, an “Extended Closing Date
Property” and, collectively, the “Extended Closing Date Properties”) and
(ii) the date on which Purchaser will proceed to Closing with respect to the
Extended Closing Date Properties (which, in accordance with the terms of this
Section 8.5, shall be no later than February 28, 2014), (b) the Closing Date
with respect to any Extended Closing Date Property occurs on or prior to
February 28, 2014 and (c) concurrently with its delivery of its initial
Extension Notice to Seller, Purchaser deposits with Escrow Agent an additional
deposit in the amount equal to one percent (1%) of the sum of the Allocated
Purchase Prices for each of the Extended Closing Date Properties. Assuming that
Purchaser exercises its right under this Section 8.5 with respect to some but
not all Properties, Purchaser and Seller shall (x) proceed to Closing on the
then scheduled Closing Date with respect to any Property that is not an Extended
Closing Date Property, (y) instruct Escrow Agent to retain in escrow the
Allocated Deposit Amount for any Extended Closing Date Property and (z) exclude
any Extended Closing Date Property from the proration requirements of
Section 7.5 until the Closing with respect to such Extended Closing Date
Property occurs. The Allocated Purchase Price for any Extended Closing Date
Property will be increased (but not decreased) on a Property by Property basis
to account for any increases (but not decreases) in an Extended Closing Date
Property’s performance in accordance with the terms of Exhibit “N”. If the
Closing Date for any Extended Closing Date Property occurs on or after
January 1, 2014 and, on the Closing Date for such Extended Closing Date
Property, capital gain tax rates have increased from their level on December 31,
2013, then the Allocated Purchase Price (as adjusted in accordance with Exhibit
“N”) for such Extended Closing Date Property will be increased by the product of
One Million Five Hundred Thousand Dollars ($1,500,000) and the quotient of the
Allocated Purchase Price for such Extended Closing Date Property divided by the
Purchase Price. Furthermore, if any Properties located in Texas constitute
Extended Closing Date Properties and such Properties close on different Closing
Dates, Purchaser shall, notwithstanding the provisions of Section 7.6, pay the
difference between the premium for the base title insurance policy(ies) for
Properties closing on more than one Closing Date and the premium for the base
title insurance policy if such Properties closed on a single Closing Date.
Purchaser may exercise its Section 8.5 Extension Right on more than one
(1) occasion with respect to any Property included in Purchaser’s initial
Extension Notice so long as Purchaser complies with the terms of this
Section 8.5 on each occasion that it exercises its

 

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Section 8.5 Extension Right. If any Extended Closing Date Property has not
closed on or prior to February 28, 2014, then either Seller or Purchaser shall
have the right to terminate this Agreement solely as it relates to any such
Extended Closing Date Property by giving notice to the other party. Subject to
the rights of Purchaser set forth in this Agreement with respect to a Seller
default (in which case the provisions of Section 11.2 shall be applicable) and
subject to the rights of both parties with respect to the failure of a condition
precedent (in which case the provisions of Section 10.3 shall be applicable), in
the event of the termination of this Agreement solely as it relates to any such
Extended Closing Date Property by either party, the Allocated Deposit Amount for
such Extended Closing Date Property shall be delivered to Seller and the
provisions of Section 11.1 shall apply.

IX.

REPRESENTATIONS AND WARRANTIES

9.1 Purchaser’s Representations and Warranties. Purchaser represents and
warrants to Sellers that as of the date hereof and as of the Closing Date:

(a) Purchaser (i) is a limited partnership, duly formed, validly existing, and
in good standing under the laws of the State of Delaware (and any assignee of
Purchaser will be a limited liability company, duly formed, validly existing and
in good standing under the laws of the State of Delaware as of the Closing
Date), (ii) is, or on the Closing Date will be, duly qualified to do business in
each state where such qualification is necessary with respect to the Properties,
and (iii) has the full power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby to be carried out by it.

(b) Subject only to the approval of its Board of Directors, which approval will
be deemed to have been obtained prior to the end of the Due Diligence Period if
Purchaser does not terminate this Agreement pursuant to Section 2.3, the
performance of this Agreement and the transactions contemplated hereunder by
Purchaser have been duly authorized by all necessary action on the part of
Purchaser, and this Agreement is binding on and enforceable against Purchaser in
accordance with its terms. Purchaser shall, on or prior to the Closing Date,
furnish Sellers with certified resolutions evidencing that Purchaser has been
duly authorized to enter into and perform this Agreement and the transactions
contemplated hereunder. No further consent of any shareholder, creditor, board
of directors, governmental authority or other party to such execution, delivery
and performance hereunder is required. The person(s) signing this Agreement, and
any document pursuant hereto on behalf of Purchaser, has full power and
authority to bind Purchaser.

(c) Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will violate any restriction, court order,
judgment, law, regulation, charter, bylaw, instrument or agreement to which
Purchaser is subject.

(d) Purchaser has not (i) made any general assignment for the benefit of
creditors, (ii) filed any voluntary petition in bankruptcy or suffered the
filing of an

 

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involuntary petition in bankruptcy by Purchaser’s creditors, (iii) suffered the
appointment of a receiver to take possession of all, or substantially all, of
Purchaser’s assets, or (iv) suffered the attachment or other judicial seizure of
all, or substantially all, of Purchaser’s assets, (v) admitted in writing its
inability to pay its debts as they come due, and has no current plans to do or
undertake, any of the foregoing.

9.2 Sellers’ Representations and Warranties. Subject to the provisions of
Section 9.5, Section 11.3, Section 11.4, and Section 14.15, each Seller
represents and warrants (but solely for itself and its own Property, and not for
any other Seller or any other Property) to Purchaser that as of the date hereof
and as of the Closing Date:

(a) Seller is a limited partnership, as reflected on Exhibit “A-1” to this
Agreement, duly organized under the laws of the state of its formation, validly
existing, and in good standing under the laws of such state, qualified or
registered to do business in the state where its Property is located, and has
the full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby to be carried out by it.

(b) The performance of this Agreement and the transactions contemplated
hereunder by Seller have been duly authorized by all necessary action on the
part of Seller, and this Agreement is binding on and enforceable against Seller
in accordance with its terms. Seller shall, on or prior to the Closing Date,
furnish Purchaser with certified resolutions evidencing that Seller has been
duly authorized to enter into and perform this Agreement and the transactions
contemplated hereunder. No further consent of any member, manager, creditor,
governmental authority or other party to such execution, delivery and
performance hereunder is required. The person(s) signing this Agreement, and any
document pursuant hereto on behalf of Seller, has full power and authority to
bind Seller.

(c) Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will violate any restriction, court order,
judgment, law, regulation, charter, bylaw, instrument, or agreement to which
Seller or its respective Property (or any portion thereof) are subject.

(d) Seller is not a foreign seller as defined in the “Foreign Investment in Real
Property Tax Act.”

(e) There are no demands, complaints, actions, suits or arbitrations pending or,
to Seller’s actual knowledge, threatened nor, to Seller’s actual knowledge, are
there any governmental investigations or other proceedings pending or threatened
against or affecting such Seller and its respective Property (or any portion
thereof) except demands, complaints, actions, suits, arbitrations, governmental
investigations or other proceedings that (i) are fully covered by insurance
policies (subject to customary deductibles) or (ii) are listed on Schedule
“9.2(e)” attached hereto.

(f) Neither Seller nor any general partner of Seller has (i) made any general
assignment for the benefit of creditors, (ii) filed any voluntary petition in
bankruptcy or

 

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suffered the filing of an involuntary petition in bankruptcy by such Seller’s or
such general partner’s creditors, (iii) suffered the appointment of a receiver
to take possession of all, or substantially all, of such Seller’s or such
general partner’s assets, (iv) suffered the attachment or other judicial seizure
of all, or substantially all, of such Seller’s or such general partner’s assets,
or (v) admitted in writing its inability to pay its debts as they come due and
has no current plans to do or undertake any of the foregoing.

(g) Attached hereto as Schedule “9.2(g)” is a true and complete, in all material
respects, list of all Material Contracts as of the Effective Date, and, to
Seller’s knowledge, is inclusive of all Contracts as of the Effective Date.
Attached hereto as Schedule “2” is a true and complete, in all material
respects, list of all National Contracts as of the Effective Date. Except as set
forth on Schedule “9.2(g)” attached hereto, as of the Effective Date, neither
Seller nor the applicable SNF Subsidiary (as the case may be) has received
written notice from any party to the Material Contracts related to Seller’s
respective Facility of the occurrence of a material default by Seller or the
applicable SNF Subsidiary (as the case may be) in the performance of any of its
material obligations under the Material Contracts related to Seller’s respective
Facility that remains uncured as of the Effective Date. To Seller’s knowledge,
except as set forth on Schedule “9.2(g),” Seller (and, as the case may be, the
applicable SNF Subsidiary) has performed in all material respects all of its
obligations under each Material Contract to which it is a party and, to Seller’s
knowledge, no fact or circumstance has occurred, which by itself or with the
passage of time or the giving of notice or both would constitute a default by
Seller (or, as the case may be, the applicable SNF Subsidiary) under any such
Material Contract. Further, to Seller’s knowledge, as of the Effective Date,
except as set forth on Schedule “9.2(g),” all other parties to such Material
Contracts have performed all of their obligations thereunder in all material
respects and are not in default thereunder.

(h) Except as set forth on Schedule “9.2(h)”, as of the Effective Date, Seller
has not received any written notice from any governmental authority nor does
Seller possess any actual knowledge that all or any portion of its respective
Facility is or was at any time within the one-year period immediately prior to
the Effective Date in material violation of any of the Legal Requirements, which
material violation has not been cured.

(i) Seller is not and 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 named by 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 Legal Requirement 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.

(j) Attached hereto as Schedule “9.2(j)” is a true and complete, in all material
respects, list of all material Healthcare Permits. To the knowledge of Seller,
all of the

 

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Permits necessary for the operation of Seller’s respective Facility as it is
currently being operated are valid, in good standing and in full force and
effect and, to Seller’s knowledge, none of Seller, the applicable SNF
Subsidiary, as the case may be, or the Facility’s existing property manager have
received written notice of any default or violation of any Permit which if
unremedied would have a material adverse effect on the operation, leasing, or
condition of its Facility. To the knowledge of Seller, no governmental authority
is considering suspending or revoking any Permit.

(k) Attached hereto as Schedule “9.2(k)” is a true and complete, in all material
respects, list of all Leases as of the Effective Date. Each Lease in place at
Seller’s respective Facility is in full force and effect as of the Effective
Date in accordance with the terms thereof. To the knowledge of Seller, as of the
Effective Date, neither Seller nor any Affiliate of Seller has given or received
any notice claiming the existence of any default under any Lease in place at
Seller’s respective Facility, which default remains uncured.

(l) Seller has delivered to Purchaser copies of all final environmental reports
or studies prepared for Seller by third party consultants in Seller’s possession
or control relating to its respective Real Property, which reports are listed on
Schedule “9.2(l)” attached hereto. To Seller’s actual knowledge and except for
any matters which are disclosed in the reports listed on Schedule “9.2(l)” ,
Seller is not aware that its respective Real Property is not in compliance with
any Environmental Requirement. Seller has not received any written notice of any
pending action or proceeding arising out of the environmental condition of its
respective Real Property, Hazardous Materials located on its respective Real
Property, or any alleged violation of Environmental Requirements, which either
(i) has not been remediated or otherwise addressed in all material respects or
(ii) would reasonably be expected to be material to the operation of the
Facility.

(m) The Financial Statements for each Property are the operating statements used
in each Seller’s ordinary course of business and, to each of Seller’s knowledge,
are in accordance with the books and records of each Seller and, to each of
Seller’s knowledge, do not contain any material inaccuracies.

(n) To Seller’s knowledge, Schedule “9.2(n)” sets forth a true and correct, in
all material respects, “rent roll” for Seller’s respective Facility (the “Rent
Roll”) as of the date identified on each such Rent Roll. True and correct, in
all material respects, copies of the form(s) of Resident Agreements used by
Seller in the ordinary course of business has/have been made available to
Purchaser as part of the Due Diligence Materials.

(o) There are no surviving representations and warranties under the contract
with the General Contractor to develop the Properties.

(p) All amounts owing under the Mansfield IL Loan are paid current. As of the
Effective Date, no event of default has occurred under the Mansfield IL Loan and
to Seller’s knowledge, there exists no event which, with the passage of time,
would result in any default or event of default under the Mansfield IL Loan.

 

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9.3 Seller’s Knowledge. Wherever the phrase “to Seller’s actual knowledge” or
any similar phrase stating or implying a limitation on the basis of knowledge
appears in this Agreement, unless specifically otherwise qualified or except as
otherwise provided herein, such phrase shall mean (i) with respect to the
Property located in Mansfield, Texas and known as “Watercrest at Mansfield”,
only the present actual knowledge of Richard E. Simmons, (ii) with respect to
the Property located in Plainfield, Illinois and known as “The Park at
Plainfield”, only the present actual knowledge of Craig W. Spaulding and Patrick
McGonigle, and (iii) with respect to the remaining Properties, only the present
actual knowledge of Craig W. Spaulding and Richard E. Simmons, each after
inquiry of the Executive Director for each Facility but otherwise without any
other duty of inquiry, any imputation of the knowledge of another, or
independent investigation of the relevant matter by any individual(s), and
without any personal liability. Wherever the phrase “in Seller’s possession”,
“in the possession of Seller” or similar phrase appears in this Agreement, such
phrase shall be deemed to mean only to the extent the material or other item
referred to by such phrase is located at a Property or in Seller’s offices in
Dallas, Texas.

9.4 Failure of Condition But No Seller Breach. Notwithstanding any provision of
this Agreement to the contrary (including Section 11.1 below), should any of the
representations and warranties of any Seller become false or inaccurate prior to
the Closing Date or if any Seller discovers that any representations and
warranties are false or inaccurate and informs Purchaser in writing prior to the
Closing Date, then Purchaser’s sole recourse shall be to either (i) to terminate
this Agreement and cancel the Escrow, in which case the Deposit shall be
returned to Purchaser and neither Sellers nor Purchaser will have any further
liability or obligation under this Agreement (except for those obligations which
survive in accordance with their terms), or (ii) proceed with the closing,
without reservation, in which case Purchaser shall be deemed to have waived all
Claims against such Seller(s) with respect to such false or inaccurate
representation and warranty. Notwithstanding the foregoing or any other
provision of this Agreement to the contrary, in the event of any right by
Purchaser to terminate this Agreement (including without limitation, pursuant to
Sections 10.3 and 11.2 below), Sellers shall first have the right, at their sole
option by written Notice to Purchaser within two (2) business days of the date
of Sellers’ receipt of such Notice of termination by Purchaser, to elect to cure
any failure of a covenant, condition or inaccurate representation or warranty,
by the payment of money or otherwise (but, in all events, in a manner reasonably
acceptable to Purchaser), in which case, (a) the Closing Date will be extended
at Sellers’ option for a period of time not to exceed ten (10) days for Sellers
to effectuate such cure, and (b) Purchaser and Sellers shall each act reasonably
and in good faith to agree on the sufficiency of such cure. If Sellers are
unable to cure any such failure, inaccuracy, misrepresentation, failed covenant
or obligation or other condition, then Purchaser’s sole recourse shall be to
either (i) to terminate this Agreement and cancel the Escrow, in which case the
Deposit shall be returned to Purchaser and neither Sellers nor Purchaser will
have any further liability or obligation under this Agreement (except for those
obligations which survive in accordance with their terms), or (ii) proceed with
the closing, without reservation, in which case Purchaser shall be deemed to
have waived all Claims against such Seller(s) with respect to such false or
inaccurate representation and warranty.

9.5 Survival Period. Subject to Section 11.5 below, the representations and
warranties of each Seller and Purchaser set forth in this Agreement shall
survive until the Survival Date (as hereinafter defined), at which time such
representations and warranties shall terminate.

 

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X.

CONDITIONS PRECEDENT TO CLOSING

10.1 Conditions to Sellers’ Obligations. The obligation of Sellers to close the
transaction contemplated hereunder shall be subject to the satisfaction or
Notice of its waiver (delivered to Purchaser and Escrow Agent), in whole or in
part, by Sellers of each of the following conditions precedent:

(a) Except by reason of a default by Sellers, Escrow Agent is in a position to
and will deliver to Sellers the instruments and funds accruing to Sellers
pursuant to the provisions of this Agreement and the Escrow Agreement;

(b) There is no existing uncured material breach of any of the covenants,
representations, warranties or obligations of Purchaser set forth in this
Agreement that has not been waived by Sellers;

(c) Purchaser shall have obtained confirmation (as determined in accordance with
customary practices in Texas or Illinois, as applicable) from the Texas
Department of Aging and Disability Services and the Illinois Department of
Public Health, as applicable, that Purchaser may consummate the transactions
contemplated by this Agreement; and

(d) As to the Mansfield IL Property, the Mansfield IL Lender shall have executed
and delivered the Assumption Documents in the form required by Section 2.12.

The foregoing conditions contained in this Section 10.1 are intended solely for
the benefit of Sellers. Sellers shall at all times have the right to waive any
condition precedent, provided that such waiver is in writing and delivered to
Purchaser and Escrow Agent.

10.2 Conditions to Purchaser’s Obligations. The obligations of Purchaser to
close the transaction contemplated hereunder shall be subject to the
satisfaction or Notice of its waiver (delivered to Sellers and Escrow Agent), in
whole or in part, by Purchaser of each of the following conditions precedent,
and Purchaser shall have no right to terminate this Agreement or delay the
Closing for any other reason:

(a) Except by reason of a default by Purchaser, Escrow Agent is in a position to
and will deliver to Purchaser the instruments and funds, if any, accruing to
Purchaser pursuant to the provisions of this Agreement;

(b) There is no existing uncured material breach of any of the covenants,
representations, warranties or obligations of any Seller set forth in this
Agreement that has not been waived by Purchaser, and each Seller’s
representations and warranties contained in or made pursuant to this Agreement
shall be true and correct in all material respects as if made again on the
Closing Date, but subject to Sellers’ right to cure any of the same pursuant to
Section 9.4 above;

 

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(c) Purchaser shall have obtained confirmation (as determined in accordance with
customary practices in Texas or Illinois, as applicable) from the Texas
Department of Aging and Disability Services and the Illinois Department of
Public Health, as applicable, that Purchaser may consummate the transactions
contemplated by this Agreement; and

(d) As to the Mansfield IL Property, the Mansfield IL Lender shall have executed
and delivered the Assumption Documents in the form required by Section 2.12.

The foregoing conditions contained in this Section 10.2 are intended solely for
the benefit of Purchaser. Purchaser shall at all times have the right to waive
any condition precedent, provided that such waiver is in writing and delivered
to Sellers and Escrow Agent.

10.3 Failure of Conditions to Closing. Escrow Agent shall be responsible for
confirming, on or before the Closing Date, that the conditions to Closing set
forth in Sections 10.1 and 10.2 hereof, and as set forth elsewhere in this
Agreement, have been satisfied. Purchaser and Sellers hereby agree to deliver
their Notices to Escrow Agent, on or before the Closing Date, of the
satisfaction or waiver of all conditions to Closing hereunder, and, in the event
that both Purchaser and Sellers specifically notify and instruct Escrow Agent,
in writing, to proceed to Closing hereunder, all such conditions to Closing
hereunder that are not otherwise satisfied shall be deemed to have been waived
by both Purchaser and Sellers. Escrow Agent shall not proceed to Closing
hereunder unless both Purchaser and Sellers specifically notify and instruct
Escrow Agent to do so. Sellers and Purchaser shall use commercially reasonable
efforts to satisfy the closing conditions set forth herein. Each party shall at
any time and from time to time after the Closing execute, acknowledge where
required, and deliver such further instruments and documents, and take such
other action as may be reasonably requested by the other party in order to carry
out the purposes of this Agreement. Except as otherwise expressly provided
herein (including pursuant to Section 2.12, which shall govern as to matters in
connection with the Mansfield IL Property), in the event any of the conditions
to closing set forth in this Agreement are not satisfied (other than as the
result of a default by Purchaser or Sellers under the terms of this Agreement)
or waived by the applicable party by the Closing Date, then either Sellers or
Purchaser (as applicable) shall have the right at its option to declare this
Agreement terminated and null and void, in which case the Deposit shall be
immediately returned to Purchaser (and such right shall survive any termination
of this Agreement) and each of the parties shall be relieved from further
liability to the other.

10.4 Purchase of all Facilities. Purchaser hereby acknowledges and agrees that
this Agreement is for the purchase and sale of all of the Facilities and that
Purchaser shall not under any circumstances purchase less than all of the
Facilities, except as expressly permitted, at Purchaser’s option, in accordance
with Section 14.12 herein.

 

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XI.

REMEDIES FOR PRE-CLOSING AND POST-CLOSING DEFAULTS ; LIQUIDATED DAMAGES

11.1 Default by Purchaser Prior to Closing. IN THE EVENT THE CLOSING AND THE
CONSUMMATION OF THE TRANSACTION HEREIN CONTEMPLATED DOES NOT OCCUR AS HEREIN
PROVIDED BY REASON OF ANY MATERIAL DEFAULT OF PURCHASER, PURCHASER AND SELLERS
AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE
DAMAGES WHICH SELLERS MAY SUFFER. THEREFORE, PURCHASER AND SELLERS DO HEREBY
AGREE THAT, IN THE EVENT OF SUCH DEFAULT, A REASONABLE ESTIMATE OF THE TOTAL
DAMAGES THAT SELLERS WOULD SUFFER IN THE EVENT THAT PURCHASER DEFAULTS AND FAILS
TO COMPLETE THE PURCHASE OF THE PROPERTY IS AND SHALL BE, AS SELLERS’ SOLE AND
EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY), AN AMOUNT EQUAL TO THE DEPOSIT.
SAID AMOUNT SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE FAILURE OF
PURCHASER TO CLOSE AND CONSUMMATE THE TRANSACTIONS HEREIN CONTEMPLATED. ALL
OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES IN CONNECTION WITH PURCHASER’S FAILURE
TO CLOSE AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREIN ARE EXPRESSLY
WAIVED BY SELLERS. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT
INTENDED AS A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED
DAMAGES TO SELLERS. UPON SUCH DEFAULT BY PURCHASER THAT REMAINS UNCURED AFTER
THE EXPIRATION OF ANY APPLICABLE CURE PERIOD, THIS AGREEMENT SHALL BE TERMINATED
AND NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH
TO THE OTHER, EXCEPT ANY INDEMNIFICATION OBLIGATIONS, THE RIGHTS OF SELLERS AND
PURCHASER THAT SHALL SURVIVE AS PROVIDED HEREIN, AND FOR THE RIGHT OF SELLERS TO
COLLECT SUCH LIQUIDATED DAMAGES FROM PURCHASER AND ESCROW AGENT. EXCEPT AS
EXPRESSLY PROVIDED IN THIS SECTION 11.1, NOTHING HEREIN SHALL LIMIT SELLERS’
RECOVERY IN CONNECTION WITH ANY EXPRESS INDEMNITY BY PURCHASER PROVIDED IN THIS
AGREEMENT.

 

 

/s/

    

/s/

     SELLERS’ INITIALS      PURCHASER’S INITIALS   

11.2 Default by Sellers Prior to Closing. IN THE EVENT THE CLOSING AND THE
CONSUMMATION OF THE TRANSACTION HEREIN CONTEMPLATED DOES NOT OCCUR AS HEREIN
PROVIDED BY REASON OF ANY DEFAULT OF SELLERS, PURCHASER AND SELLERS AGREE THAT
IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH
PURCHASER MAY SUFFER. THEREFORE, PURCHASER AND SELLERS DO HEREBY AGREE THAT, IN
THE EVENT OF SUCH DEFAULT, PURCHASER MAY, AS ITS SOLE RECOURSE AND REMEDY (AT
LAW OR IN EQUITY), EITHER: (a) PURSUE AN ACTION AGAINST SELLERS FOR SPECIFIC
PERFORMANCE, PROVIDED THAT SUCH ACTION IS

 

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INITIATED WITHIN NINETY (90) DAYS FOLLOWING THE CLOSING DATE SET FORTH HEREIN;
OR (b) TERMINATE THIS AGREEMENT AND RECEIVE THE RETURN OF THE DEPOSIT PLUS
DAMAGES FROM SELLER IN AN AMOUNT EQUAL TO PURCHASER’S THIRD-PARTY EXPENSES
ACTUALLY INCURRED IN CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREIN,
INCLUDING WITHOUT LIMITATION THE NEGOTIATION OF THIS AGREEMENT, WHICH DAMAGES
(NOT INCLUDING THE RETURN OF THE DEPOSIT) SHALL NOT EXCEED FIVE HUNDRED THOUSAND
DOLLARS ($500,000.00). ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES IN
CONNECTION WITH SELLERS’ FAILURE TO CLOSE AND CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREIN (OTHER THAN AS SPECIFIED IN (a) AND (b) HEREOF) ARE
EXPRESSLY WAIVED BY PURCHASER. UPON DEFAULT BY SELLERS, IF THIS AGREEMENT IS
TERMINATED BY PURCHASER, NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR
OBLIGATIONS HEREUNDER, EACH TO THE OTHER, EXCEPT ANY INDEMNIFICATION
OBLIGATIONS, AND THE RIGHTS OF SELLERS AND PURCHASER THAT SHALL SURVIVE AS
PROVIDED HEREIN.

 

 

/s/

    

/s/

     SELLERS’ INITIALS      PURCHASER’S INITIALS   

11.3 Limitations of Purchaser’s Post-Closing Claims.

(a) Notwithstanding any provision to the contrary herein or in any document or
instrument (including any deeds, bill of sale or assignments) executed by any
Seller and delivered to Purchaser at or in connection with the Closing,
(collectively, “Closing Documents”), no Seller shall have (and each Seller is
exculpated and released from any) liability whatsoever with respect to any
Claims under, and Purchaser shall be forever barred from making or bringing any
Claims with respect to, any of the representations and warranties, covenants and
indemnities contained in this Agreement or in any Closing Document, except to
the extent (and only to the extent) that the aggregate amount of all Claims for
breach of any Seller’s representations and warranties, covenants and indemnities
exceed One Hundred Thousand and NO/100 Dollars ($100,000.00) (the “Threshold
Amount”) (but if any such Claims are valid and are finally determined (or
settled) to be in excess of the Threshold Amount, then Seller’s liability shall
extend to the “first dollar” of Purchaser’s Claims); provided, however,
notwithstanding any provision to the contrary herein or in any Closing Document,
the total liability of a Seller for any or all Claims with respect to its
respective Property may not exceed the amount listed opposite such Seller’s name
in Column 3 of Exhibit “L” (each such amount, the “Cap Amount”). The Cap Amount
shall be placed in escrow with the Post-Closing Escrow Agent at Closing out of
funds that would otherwise be payable to Sellers (the “Post-Closing Liability
Escrow”), pursuant to the terms and conditions of Post-Closing Escrow Agreement,
in form and content as attached hereto as Exhibit “M” (the “Post-Closing Escrow
Agreement”). As provided in more detail in the Post-Closing Escrow Agreement, on
the date which is six (6) months after the Closing Date, the Post-Closing Escrow
Agent shall refund to Sellers fifty percent (50%) of the Cap Amount unless there
exists a Pending Claim, as hereinafter provided, and on the Survival Date, the
Post-Closing Escrow Agent shall refund to Sellers any remaining balance of the
Post-Closing

 

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Liability Escrow (including any interest earned thereon), in each case unless
there is a Pending Claim, in which event the Post-Closing Liability Escrow shall
remain in place until the Pending Claim is definitively resolved by agreement of
the parties or final court order but all funds in the Post-Closing Liability
Escrow, other than those funds that are to be retained by the Post-Closing
Escrow Agent in accordance with the terms of the Escrow Agreement, shall be
released to Sellers as of the Survival Date. If any amount remains in the
Post-Closing Liability Escrow following the definitive resolution of the Pending
Claim by agreement of the parties or final court order, such amount should be
released to Sellers. For purposes of clarification, the terms of this
Section 11.3 shall not apply to any liability of Sellers to any third parties
unaffiliated with Purchaser regarding the Retained Liabilities.

(b) Purchaser shall not make any Claim with respect to a Property or deliver any
notice of a Claim with respect to a Property (a “Claim Notice”) unless in good
faith, it believes the Claim or all of the Claims with respect to a Property in
the aggregate would exceed the applicable Threshold Amount.

11.4 Survival of Purchaser’s Claims. Except as otherwise specifically set forth
in this Agreement, the representations and warranties, covenants and indemnities
of each Seller contained herein or in any Closing Document shall survive only
until the date that is nine (9) months after the Closing Date (the “Survival
Date”). Any Claim that Purchaser may have at any time against any Seller for
breach of any such representation, warranty, covenant or indemnity, whether
known or unknown, with respect to which a Claim Notice has not been delivered to
such Seller on or prior to the Survival Date, shall not be valid or effective
and the party against whom such Claim is asserted shall have no liability with
respect thereto. Any Claim that Purchaser may have at any time against a Seller
for a breach of any such representation or warranty, or its covenants and
indemnities whether known or unknown, with respect to which a Claim Notice has
been delivered to such Seller on or prior to the Survival Date (a “Pending
Claim”) may be the subject of subsequent litigation brought by Purchaser against
such Seller. For avoidance of doubt, on the Survival Date, each Seller shall be
fully discharged and released (without the need for separate releases or other
documentation) from any liability or obligation to Purchaser and/or its
successors and assigns with respect to any Claims or other matters relating to
this Agreement or any Closing Document, except solely for those matters that are
then the subject of a Claim Notice delivered by Purchaser to such Seller on or
prior to the Survival Date that is still pending on the Survival Date.

11.5 Limitations on Liability. To the maximum extent permitted by applicable
law, no shareholder, director, officer or employee of any party to this
Agreement shall have any personal liability with respect to the liabilities or
obligations of such party under this Agreement or any document executed by such
party pursuant to this Agreement.

11.6 Survival. Article XI shall survive the Closing.

 

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XII.

FINANCIAL ADVISOR

Sellers represent and warrant to Purchaser, and Purchaser represents and
warrants to Sellers, that except for KeyBanc Capital Markets Inc. (“Financial
Advisor”), no financial advisor, broker or commission agent has been engaged by
it or their affiliates, respectively, in connection with the transaction
contemplated by this Agreement or to its knowledge is in any way connected with
this transaction. Purchaser shall be responsible for the payment of any
commission, finder’s fee or other sum initiated by any financial advisor,
broker, commission agent or other person engaged or retained by Purchaser in
connection with the transaction contemplated by this Agreement. Sellers shall be
responsible for the payment of any compensation, commission, finder’s fee or
other sum initiated by any financial advisor, broker, commission agent or other
person engaged or retained by Sellers in connection with the transaction
contemplated by this Agreement, including without limitation, Financial Advisor.
Sellers and Purchaser (except with respect to the compensation which shall be
paid by Sellers to Financial Advisor) each agree to indemnify, protect, defend
and hold the other harmless from and against any claims, actions, suits or
demands for payment of any compensation, commission, finder’s fee or other sum
initiated by any financial advisor, broker, commission agent or other person
which such party or its representatives has engaged or retained or with which it
has had discussions concerning or which shall be based upon any statement or
agreement alleged to have been made by such party, in connection with the
transaction contemplated by this Agreement or the sale of the Properties by
Sellers. The provisions of this Article XII shall survive the Closing.

XIII.

NOTICES

Except as otherwise expressly provided in this Agreement, all notices, requests,
demands and other communications hereunder (“Notice”) shall be in writing and
shall be deemed delivered by (i) hand delivery upon receipt, (ii) registered
mail or certified mail, return receipt requested, postage prepaid, upon delivery
to the address indicated in the Notice, (iii) by confirmed telecopy or facsimile
transmission when sent, and (iv) overnight courier (next business day delivery)
on the next business day at 12:00 noon, whichever shall occur first, as follows:

If to Sellers:

c/o South Bay Partners, Ltd.

5307 E Mockingbird Lane, Ste.1010

Dallas, TX 75206

Attn: Craig W. Spaulding

Telephone:   (214) 370-2600 Facsimile:   (214) 370-2699

 

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and

c/o Integrated Real Estate Group

3110 W. Southlake Blvd., Suite 120

Southlake, Texas 76092

Attn: Richard E. Simmons

Telephone:   (817) 742-1851 x 12 Facsimile:   (817) 741-6959

With a copy to:

Arent Fox LLP

1717 K Street, N.W.

Washington, D.C. 20036-5339

Attention: Kenneth S. Jacob, Esq.

Telephone: (202) 775-5750

Facsimile: (202) 857-6395

If to Purchaser:

CHP Partners, LP

c/o CNL Healthcare Properties, Inc.

450 South Orange Avenue, Suite 1200

Orlando, FL 32801-3336

Attention: Tracey B. Bracco, Esq.

Telephone:   (407) 540-7500 Facsimile:   (407) 540-2544

Email: tracey.bracco@cnl.com

With a copy to:

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

215 North Eola Drive

Orlando, Florida 32801

Attention: William T. Dymond, Jr., Esq.

Telephone:   (407) 843-4600 Facsimile:   (407) 843-4444

Email: william.dymond@lowndes-law.com

Any correctly addressed Notice that is refused, unclaimed or undelivered because
of an act or omission of the party to be notified shall be considered to be
effective as of the first day that the Notice was refused, unclaimed or
considered undeliverable by the postal authorities, messenger or overnight
delivery service. The parties hereto shall have the right from time to time, and
at any time, to change their respective addresses and each shall have the right
to specify as its address any other address within the United States of America,
by giving to the other party at least five (5) days prior Notice thereof, in the
manner prescribed herein; provided, however, that to be effective, any such
change of address must be actually received (as evidenced by a return

 

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receipt). Telephone numbers and email addresses, if listed, are listed for
convenience purposes only and not for the purposes of giving Notice pursuant to
this Agreement. Any Notice that is required or permitted to be given by either
party to the other under this Agreement may be given by such party or its legal
counsel, who are hereby authorized to do so on the party’s behalf.

XIV.

MISCELLANEOUS

14.1 Governing Law. This Agreement (but not the Closing Documents, the forms of
which are attached hereto as Exhibits) shall be governed by and construed in
accordance with the laws of the State of Texas. If any legal action is necessary
to enforce the terms and conditions of this Agreement, the parties hereby agree
that the courts in the State of Texas shall be the sole jurisdiction and venue
for the bringing of the action.

14.2 Exhibits and Schedules a Part of This Agreement. The Exhibits and Schedules
attached hereto are incorporated in this Agreement by reference and are hereby
made a part hereof.

14.3 Executed Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Agreement shall become effective upon the due execution
and delivery of this Agreement to the parties hereto.

14.4 Assignment. Purchaser may not assign, convey and otherwise transfer all or
any part of its interest or rights herein without the prior written consent of
Sellers, which consent may be withheld in Sellers’ sole discretion.
Notwithstanding the foregoing, however, Purchaser may (without Sellers’ consent
but with advance written notice to Sellers), by not later than one (1) business
day prior to Closing, assign and transfer in whole or in part all of its rights
and obligations under this Agreement to one (1) or more wholly owned
subsidiary(ies) thereof, or to a one hundred percent (100%) owned affiliate(s)
thereof, or to any entity controlled (directly or indirectly, through voting or
equity ownership) by Purchaser in the form of the Assignment of Purchase
Agreement attached hereto as Exhibit “K”; provided, however, that Purchaser
shall not be released of its obligations under this Agreement as a result of any
such assignment. No transfer or assignment in violation of the provisions hereof
shall be valid or enforceable.

14.5 IRS - Form 1099-S. For purposes of complying with Section 6045 of the
Internal Revenue Code of 1986, as amended, Escrow Agent shall be deemed the
“person responsible for closing the transaction” and shall be responsible for
obtaining the information necessary to file with the Internal Revenue Service
Form 1099-S, “Statement for Recipients of Proceeds from Real Estate, Broker and
Barter Exchange Transactions.”

 

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14.6 Successors and Assigns. Subject to the provisions of Section 14.4 hereof,
this Agreement shall be binding upon and inure to the benefit of the parties’
respective successors and permitted assigns.

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

14.8 Entire Agreement. This Agreement, and Exhibits and Schedules and other
documents and instruments attached to or referenced herein, contain the entire
understanding and agreement between the parties hereto with respect to the
purchase and sale of the Property, and all prior and contemporaneous
understandings, letters of intent, agreements and representations, whether oral
or written, are entirely superseded. Except for any of the following expressly
contained in this Agreement, Sellers and Purchaser each expressly disclaim any
reliance on any oral or written representations, warranties, comments,
statements or assurances made by Sellers, Purchaser, and any of their respective
affiliates, and their respective agents, employees, representatives, attorneys,
financial advisors or brokers, as an inducement or otherwise, to Purchaser’s and
Sellers’ respective execution hereof. No amendment of this Agreement shall be
binding unless in writing and executed by the parties hereto.

14.9 Further Assurances. Whenever and so often as requested by a party, the
other party will promptly execute and deliver or cause to be executed and
delivered all such other and further instruments, documents or assurances, and
promptly do or cause to be done all such other and further things as may be
necessary and reasonably required in order to further and more fully vest in
such requesting party all rights, interests, powers, benefits privileges and
advantages conferred or intended to be conferred upon it by this Agreement, or
to effectuate the termination of this Agreement and cancellation of the Escrow
(if otherwise permitted hereunder). The terms of this Section shall survive
Closing and/or termination of this Agreement.

14.10 Waiver. Failure or delay by either party to insist on the strict
performance of any covenant, term, provision or condition hereunder, or to
exercise any option herein contained, or to pursue any claim or right arising
herefrom, shall not constitute or be construed as a waiver of such covenant,
term, provision, condition, option, claim or right (except that if a party
proceeds to Closing, notwithstanding the failure of a condition to its
obligation to close, then such condition shall be deemed waived by virtue of the
Closing). Any waiver by either party shall be effective only if in a writing
delivered to the other party hereto and setting forth, with specificity, the
covenant, term, provision or condition so waived. Any such waiver shall not
constitute or be construed as a continuing waiver of any subsequent default.

14.11 Headings. The headings of this Agreement are for purposes of convenience
only and shall not limit or define the meaning of the provisions of this
Agreement.

14.12 Risk of Loss. With respect to each Property, the risk of loss shall be as
follows:

(a) Until the Closing Date, Seller shall bear the risk of loss should there be
damage to any of the Property by fire or other casualty (collectively
“Casualty”). If, prior to the Closing Date, any of the Properties shall be
damaged by any Casualty, Seller shall promptly deliver to Purchaser a Notice
(“Casualty Notice”) of such event. Upon Purchaser’s receipt of a Casualty
Notice, Seller and Purchaser shall meet promptly to

 

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estimate the cost to repair and restore the Improvements to good condition and
to replace the damaged Personal Property (“Casualty Renovation Cost”). If the
parties are unable to agree on the cost of restoration, the matter will be
submitted to an engineer designated by Seller and an engineer designated by
Purchaser, each licensed to practice in the state in which the Land is located,
and the engineers shall resolve the dispute. Each party hereto shall bear the
costs and expenses of its own engineer.

(b) If the Casualty Renovation Cost for any single Property exceeds Five Hundred
Thousand and NO/100 Dollars ($500,000.00), then Purchaser may, at its option,
elect to terminate this Agreement with respect to the impacted Property by
Notice to Sellers within ten (10) business days after the date that the Casualty
Renovation Cost is determined (and if necessary the Closing Date will be
extended to accommodate such ten (10) business day period). If the Casualty
Renovation Costs for any one or more of the Properties individually or in the
aggregate exceed Two Million and NO/100 Dollars ($2,000,000.00), then, Purchaser
may, at its option, elect to terminate this entire Agreement by Notice to
Sellers within ten (10) business days after the date that the Casualty
Renovation Cost is determined. In the event of a termination hereof with respect
solely to the impacted Property, the Purchase Price shall be reduced by the
Allocated Purchase Price of the impacted Property. If Purchaser does not elect
to terminate this Agreement with respect to the impacted Property (or, as
applicable, all Properties), then the Closing shall take place as provided
herein without reduction of the Purchase Price and the applicable Seller shall
assign the insurance proceeds to Purchaser in the event the Casualty is insured
against and shall pay to Purchaser the amount of any deductible not already
otherwise paid by such Seller under applicable insurance policies, or have the
Allocated Purchase Price for the Property that was damaged by the Casualty
reduced by the Casualty Renovation Cost in the event the Casualty is not fully
insured against (subject to further adjustment for actual restoration costs).

(c) If the Casualty Renovation Cost is Five Hundred Thousand and NO/100 Dollars
($500,000.00) or less, then, in any such event, neither party hereto shall have
any right to terminate this Agreement, the Closing shall take place as provided
herein without reduction of the Purchase Price, and the applicable Seller shall
assign the insurance proceeds to Purchaser in the event the Casualty is insured
against and shall pay to Purchaser the amount of any deductible, under
applicable insurance policies, or have the Allocated Purchase Price for the
Property that was damaged by the Casualty reduced by the Casualty Renovation
Cost in the event the Casualty is not fully insured against (subject to further
adjustment for actual restoration costs).

(d) If, prior to the Closing Date, a Seller receives notice that a material
portion of a Property (or access or other material rights in connection
therewith) as would materially adversely affect the operation of the Facility or
uses of the Property is, or has been threatened in writing by a governmental
authority of competent jurisdiction, to be taken by condemnation or eminent
domain, Seller shall promptly notify Purchaser, and at the election of Purchaser
this Agreement shall, upon the giving of Notice of such event or of the
condemning authorities’ intention so to take the Property, either (i) to the
extent that the taking or condemnation is reasonably anticipated to materially
adversely affect the operation of a Facility or uses of the Property, Purchaser
may terminate this

 

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Agreement with respect only to the impacted Property, but the Closing shall
proceed with respect to the remaining Properties (with the Purchase Price
reduced by the Allocated Purchase Price of that Property) or, (ii) to the extent
that the taking or condemnation would result in a condemnation aware reasonably
estimated to exceed Two Million and NO/100 Dollars ($2,000,000.00), terminate
this Agreement in its entirety. If Purchaser does not elect to terminate this
Agreement with respect to the impacted Property (or, as applicable, all
Properties), prior to the Closing Date, on the Closing Date all of the proceeds
of any award or payment made or to be made by reason of such taking shall be
assigned by the applicable Seller to Purchaser, and any money theretofore
received by the applicable Seller in connection with such taking shall be paid
over to Purchaser, whereupon Purchaser shall pay the Purchase Price without
abatement by reason of such taking. No Seller shall settle, agree to, or accept
any award or payment in connection with a taking of less than all of the
Property without obtaining Purchaser’s prior written consent in each case, which
consent shall not be unreasonably withheld or delayed.

(e) In the event of any termination of this Agreement in its entirety by
Purchaser pursuant to this Section 14.12, the Deposit shall be returned to
Purchaser and neither party shall have any further liability with respect to
this Agreement, except to the extent of such provisions which expressly survive
such transaction.

14.13 Construction of Agreement. The parties hereto have negotiated this
Agreement at length, and have had the opportunity to consult with, and be
represented by, their own competent counsel. This Agreement is, therefore,
deemed to have been jointly prepared. In determining the meaning of, or
resolving any ambiguity with respect to, any word, phrase or provision of this
Agreement, no uncertainty or ambiguity shall be construed or resolved against
any party under any rule of construction, including the party primarily
responsible for the drafting and preparation of this Agreement. The words
“herein,” “hereof,” “hereunder” and words of similar reference shall mean this
Agreement. The words “this Agreement” include the exhibits, schedules addenda
and any future written modifications, unless otherwise indicated by the context.
All words in this Agreement shall be deemed to include any number or gender as
the context or sense of the Agreement requires. The words “will,” “shall” and
“must” in this Agreement indicate a mandatory obligation. The use of the words
“include,” “includes” and “including” followed by one or more examples is
intended to be illustrative and is not a limitation on the scope of the
description or term for which the examples are provided. All dollar amounts set
forth in this Agreement are stated in United States Dollars, unless otherwise
specified. The words “day” and “days” refer to calendar days unless otherwise
stated. The words “business day” refers to a day other than a Saturday, Sunday
or Legal Holiday (hereinafter defined). The words “month” and “months” refer to
calendar months unless otherwise stated. The words “year” and “years” refer to
calendar years unless otherwise stated. If any date herein set forth for the
performance of any obligations by Seller or Purchaser or for the delivery of any
instrument or notice as herein provided should fall on a Saturday, Sunday or
Legal Holiday, the compliance with such obligations or delivery will be deemed
acceptable on the next business day following such Saturday, Sunday or Legal
Holiday. As used herein, the term “Legal Holiday” will mean any local or federal
holiday on which post offices are closed in the State of Texas.

14.14 No Public Disclosure. The parties agree that no party shall, with respect
to this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with

 

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public officials, make any public pronouncements, issue press releases or
otherwise furnish information regarding this Agreement or the transactions
contemplated hereby to any third party without the consent of the other party,
which consent shall not be unreasonably withheld, conditioned or delayed, except
as may be required by law or securities regulations or as may be reasonably
necessary, on a confidential basis, to inform any rating agencies, potential
sources of financing, financial analysts, or to entities involved with a sale of
a controlling interest in Seller, Purchaser or any of their Affiliates or to
receive legal, accounting and/or tax advice; provided, however, that, if such
information is required to be disclosed by law, the party so disclosing the
information will use reasonable efforts to give notice to the other parties as
soon as such party learns that it must make such disclosure. Notwithstanding the
foregoing, if such information is required to be disclosed to any governmental
authority to facilitate the issuance of Permits or obtain zoning information,
the disclosing party may disclose such information without the consent of the
other parties and shall promptly give written notice to the other parties of
such information which was disclosed. This Section 14.14 shall be subject to the
terms of the confidentiality provisions of Section 14.16.

14.15 Covenants, Representations and Warranties. By proceeding with the closing
of the sale transaction, Sellers and Purchaser shall be deemed to have waived,
and so covenant to waive, any claims of defaults or breaches by the other party
existing on or as of the Closing Date whether under this Agreement or any other
document or instrument executed by the other party in connection with this
transaction, of which the waiving party was made aware by Notice from the
defaulting or breaching party (and, if applicable, which is described on Sellers
certification of representations and warranties to be delivered at Closing)
prior to the Closing Date for which the other party shall have no liability.

14.16 Confidentiality. Other than as required or permitted by the terms of this
Agreement or required by any Legal Requirements (including without limitation,
any disclosures required or advisable by Sellers or Purchaser under any
applicable securities laws or practices), no party hereto shall release or cause
or permit to be released any press notices or releases or publicity (oral or
written) or advertising promotion relating to, or otherwise announce or disclose
or cause or permit to be announced or disclosed, in any manner whatsoever, the
terms and conditions of the purchase and sale transaction for the Properties,
nor shall Purchaser or its agents or representatives disclose, in any manner
whatsoever, (a) the information provided to Purchaser by any Seller or its
representatives, or (b) any analyses, compilations, studies or other documents
or records prepared by or on behalf of Purchaser, in connection with Purchaser’s
investigation of the Properties, without first obtaining the written consent of
Sellers (collectively, “Proprietary Information”). Proprietary Information shall
not include (i) publicly available information or (ii) information that becomes
publicly available for reasons other than a breach of this section by Purchaser.
The foregoing shall not preclude Purchaser (i) from discussing the Proprietary
Information with any person who is employed by Purchaser or who, on behalf of
Purchaser, is actively and directly participating in the purchase and sale of
the Properties, including, without limitation, to Purchaser’s shareholders,
partners, members, existing or prospective lenders, attorneys, accountants and
other consultants and advisors, or (ii) from complying with all laws, rules,
regulations and court orders, including, without limitation, governmental
regulatory, disclosure, tax and reporting requirements; provided, however, that
if Purchaser is required by applicable law or legal process to disclose any
Proprietary Information, Purchaser agrees to use its commercially reasonable
efforts to obtain assurance that, if possible,

 

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confidential treatment will be accorded to the Proprietary Information.
Purchaser shall inform its respective representatives of the confidential nature
of the Proprietary Information and shall direct them to be bound by the terms of
this Section. In addition to any other remedies available to Sellers, Sellers
shall have the right to seek equitable relief, including, without limitation,
injunctive relief or specific performance, against Purchaser in order to enforce
the provisions of this Section. The provisions of such confidentiality agreement
shall survive any termination of this Agreement.

14.17 No Third-Party Beneficiaries. Except as otherwise expressly provided
herein, Sellers and Purchaser agree that there are no third parties who are
intended to benefit from or who are entitled to rely on any of the provisions of
this Agreement. No third party shall be entitled to assert any claims or to
enforce any rights whatsoever pursuant to this Agreement. Except as otherwise
expressly provided herein, the covenants and agreements provided in this
Agreement are solely for the benefit of Sellers and Purchaser and their
permitted successors and assigns respectively.

14.18 Electronic Signatures. The execution of this Agreement and all Notices
given hereunder and all amendments hereto, may be effected by portable document
format (“.pdf”) signatures, all of which shall be treated as originals;
provided, however, that the party receiving a document with a .pdf signature
may, by Notice to the other, require the prompt delivery of an original
signature to evidence and confirm the delivery of the .pdf signature. Purchaser
and Sellers each intend to be bound by its respective .pdf transmitted
signature, and is aware that the other party will rely thereon, and each party
waives any defenses to the enforcement of the Agreement, and documents, and any
Notices delivered by .pdf transmission.

14.19 Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
such term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.

14.20 Cumulative Remedies. No remedy conferred upon a party in this Agreement is
intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law, in equity or by
statute (except as otherwise expressly herein provided).

14.21 WAIVER OF JURY TRIAL. THE PARTIES HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Purchase and Sale
Agreement to be executed effective as of the Effective Date.

 

SELLERS:

MIDLAND CARE GROUP, LP,

a Texas limited partnership

By:   Midland Care Group GP, LLC,   a Texas limited liability company,   its
general partner By:  

/s/ Craig W. Spaulding

  Craig W. Spaulding   Manager

BRYAN AL INVESTORS, LP,

a Texas limited partnership

By:   Bryan AL Investors GP, LLC,   a Texas limited liability company,   its
general partner By:  

/s/ Craig W. Spaulding

  Craig W. Spaulding   Manager

BRYAN SENIOR INVESTORS, LP,

a Texas limited partnership

By:   Bryan Senior Investors GP, LLC,   a Texas limited liability company,   its
general partner   By:  

/s/ Craig W. Spaulding

    Craig W. Spaulding     Manager

[Signatures continue on the next page]

 

S-1

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

MANSFIELD AL GROUP, LP, a Texas limited partnership By:   Mansfield AL Group GP,
LLC,   a Texas limited liability company,   its general partner   By:  

/s/ Craig W. Spaulding

    Craig W. Spaulding     Manager

CEDAR PARK AL GROUP, LP,

a Texas limited partnership

By:   Cedar Park AL Group GP, LLC   a Texas limited liability company,   its
general partner   By:  

/s/ Craig W. Spaulding

    Craig W. Spaulding     Manager WATERVIEW AT MANSFIELD INVESTORS, L.P., a
Texas limited partnership By:   Waterview at Mansfield GenPar, LLC,   a Texas
limited liability company,   its general partner   By:  

/s/ Richard E. Simmons

    Richard E. Simmons     Manager

PLAINFIELD CARE GROUP, LLC,

a Delaware limited liability company

By:  

/s/ Craig W. Spaulding

  Craig W. Spaulding   Manager

[Signatures continue on the next page]

 

S-2

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SAN ANGELO CARE GROUP, LP, a Texas limited partnership By:   San Angelo Care
Group GP, LLC,   a Texas limited liability company,   its general partner   By:
 

/s/ Craig W. Spaulding

    Craig W. Spaulding     Manager

[PURCHASER’S SIGNATURE FOLLOWS]

 

S-3

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

PURCHASER: CHP PARTNERS, LP, a Delaware limited partnership By:   CHP GP, LLC, a
Delaware limited liability   company, its general partner   By:   CNL Healthcare
Properties, Inc., a Maryland corporation, its sole member     By:  

/s/ Tracey B. Bracco

    Name:   Tracey B. Bracco     Title:   Vice President

 

S-4

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LIST OF EXHIBITS TO PURCHASE AGREEMENT

 

Exhibit “A-1”    Properties and Sellers Exhibit “A-2”    Legal Descriptions of
Properties Exhibit “A-3”    Allocated Purchase Prices Exhibit “B”    Form of
Escrow Agreement for Earnest Money Deposit Exhibit “C-1”    Form of Illinois
Deed Exhibit “C-2”    Form of Texas Deed Exhibit “D”    Form of Bill of Sale
Exhibit “E”    Form of Assignment and Assumption of Intangible Property Exhibit
“F”    Form of Assignment and Assumption of Leases and Contracts Exhibit “G”   
Form of Assignment and Assumption of Resident Agreements Exhibit “H”    Form of
FIRPTA Certificate Exhibit “I”    Form of Owner’s Affidavit Exhibit “J”    Form
of Notice to Residents Exhibit “K”    Form of Assignment of Purchase Contract to
Applicable Property Exhibit “L”    Cap Amounts Exhibit “M”    Post-Closing
Escrow Agreement Exhibit “N”    NOI Purchase Price Increase Calculation for
Extended Closing Date Properties

LIST OF SCHEDULES TO PURCHASE AGREEMENT

 

Schedule 1    Excluded Intellectual Property Rights Schedule 2    National
Contracts Schedule “9.2(e)”    Litigation Schedule “9.2(g)”    Material
Contracts Schedule “9.2(h)”    Notice of Material Violation of Legal
Requirements Schedule “9.2(j)”    Material Healthcare Permits Schedule “9.2(k)”
   Leases Schedule “9.2(l)”    Environmental Reports Schedule “9.2(n)”    Rent
Roll

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

EXHIBIT “A-1”

PROPERTIES AND SELLERS

 

    

Property

  

Owner/Seller

1   

Legacy Ranch

4800 Briarwood Avenue

Midland, TX 79707

(ALZ)

  

Midland Care Group, LP,

a Texas limited partnership

2   

Isle at Cedar Ridge

2200 S. Lakeline Boulevard

Cedar Park, TX 78613

(AL/SNF)*

  

Cedar Park AL Group, LP,

a Texas limited partnership

3   

Isle at Watercrest – Bryan

4091 Eastchester Drive

Bryan, TX 77802

(AL/SNF)*

  

Bryan AL Investors, LP,

a Texas limited partnership

4   

Watercrest at Bryan

3801 E Crest Drive

Bryan, TX 77802

(IL)

  

Bryan Senior Investors, LP

a Texas limited partnership

5   

Isle at Watercrest – Mansfield

200 East Debbie Lane

Mansfield, TX 76063

(AL/ALZ)

  

Mansfield AL Group, LP,

a Texas limited partnership

6   

Watercrest at Mansfield

250 East Debbie Lane

Mansfield, TX 76063

(IL)

  

Waterview at Mansfield Investors, L.P.,

a Texas limited partnership

7   

The Park at Plainfield

12446 S. Van Dyke Road

Plainfield, IL 60585

(AL/ALZ)

  

Plainfield Care Group, LLC,

a Delaware limited liability company

8   

The Springs

6102 Grand Court Road

San Angelo, TX 76901

(ALZ)

  

San Angelo Care Group, LP,

a Texas limited partnership

 

* The SNF component of the Isle at Watercrest – Bryan and the Isle at Cedar
Ridge participate in Medicare and Medicaid.

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

EXHIBIT “A-2”

LEGAL DESCRIPTIONS OF PROPERTIES

(as described in the applicable vesting deed)

Legacy Ranch (Midland, TX)

[Intentionally Omitted]

EXHIBIT “A-3”

ALLOCATED PURCHASE PRICES

 

Facility

   Allocated
Purchase
Price  

Legacy Ranch

   $ 11,500,000   

Isle at Cedar Ridge

   $ 21,000,000   

Isle at Watercrest – Bryan

   $ 21,000,000   

Watercrest at Bryan

   $ 26,700,000   

Isle at Watercrest – Mansfield

   $ 25,000,000   

Watercrest at Mansfield

   $ 45,000,000   

The Park at Plainfield

   $ 26,500,000   

The Springs

   $ 10,500,000      

 

 

 

Total

   $ 187,200,000      

 

 

 

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

EXHIBIT “B”

FORM OF ESCROW AGREEMENT FOR

EARNEST MONEY DEPOSIT

[Intentionally Omitted]

EXHIBIT “C-1”

FORM OF ILLINOIS DEED

[Intentionally Omitted]

EXHIBIT “C-2”

FORM OF TEXAS DEED

[Intentionally Omitted]

EXHIBIT “D”

FORM OF BILL OF SALE

[Intentionally Omitted]

EXHIBIT “E”

FORM OF ASSIGNMENT AND ASSUMPTION OF INTANGIBLE PROPERTY

[Intentionally Omitted]

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

EXHIBIT “F”

FORM OF ASSIGNMENT AND ASSUMPTION OF LEASES AND CONTRACTS

[Intentionally Omitted]

EXHIBIT “G”

FORM OF ASSIGNMENT AND ASSUMPTION OF RESIDENT AGREEMENTS

[Intentionally Omitted]

EXHIBIT “H”

FORM OF FIRPTA CERTIFICATE

[Intentionally Omitted]

EXHIBIT “I”

FORM OF OWNER’S AFFIDAVIT

[Intentionally Omitted]

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

EXHIBIT “J”

FORM OF NOTICE TO RESIDENTS

[Intentionally Omitted]

EXHIBIT “K”

FORM OF ASSIGNMENT OF PURCHASE CONTRACT

TO APPLICABLE PROPERTY

[Intentionally Omitted]

EXHIBIT “L”

CAP AMOUNTS

[Intentionally Omitted]

EXHIBIT “M”

FORM OF POST-CLOSING ESCROW AGREEMENT

[Intentionally Omitted]

EXHIBIT “N”

NOI PURCHASE PRICE INCREASE CALCULATION FOR EXTENDED CLOSING DATE PROPERTIES

[Intentionally Omitted]

SCHEDULE “1”

EXCLUDED INTELLECTUAL PROPERTY RIGHTS

[Intentionally Omitted]

SCHEDULE “2”

NATIONAL CONTRACTS

[Intentionally Omitted]

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

SCHEDULE “9.2(e)”

LITIGATION

[Intentionally Omitted]

SCHEDULE “9.2(g)”

MATERIAL CONTRACTS

[Intentionally Omitted]

SCHEDULE “9.2(h)”

NOTICE OF MATERIAL VIOLATION OF LEGAL REQUIREMENTS

[Intentionally Omitted]

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

SCHEDULE “9.2(j)”

MATERIAL HEALTHCARE PERMITS

[Intentionally Omitted]

SCHEDULE “9.2(k)”

LEASES

[Intentionally Omitted]

SCHEDULE “9.2(l)”

ENVIRONMENTAL REPORTS

[Intentionally Omitted]

SCHEDULE “9.2(n)”

RENT ROLL

[Intentionally Omitted]