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EXHIBIT 10.7

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ASSET PURCHASE AGREEMENT

by and among

WESTPORT HOLDINGS BRADENTON, LIMITED PARTNERSHIP,
a Delaware limited partnership,

WESTPORT NURSING BRADENTON, L.L.C.,
a Florida limited liability company,

ARC BRADENTON MANAGEMENT, INC.,
a Tennessee corporation,

ARC BRADENTON LLC,
a Tennessee limited liability company,

and

SENIOR HOUSING PARTNERS III, L.P.,
a Delaware limited partnership

Dated as of March 17, 2006
 
 

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TABLE OF CONTENTS
 

 
Page
ARTICLE I DEFINITIONS
1
Section 1.1 Certain Defined Terms
2
Section 1.2 Other Defined Terms
5
   
ARTICLE II PURCHASE AND SALE OF ASSETS
8
Section 2.1 Purchased and Excluded Assets
8
Section 2.2 Assumption of Liabilities
11
Section 2.3 Excluded Liabilities
12
Section 2.4 Purchase Price
13
Section 2.5 Investigation Period
14
Section 2.6 Closing Adjustments
16
Section 2.7 Security, Waiting List and Sale Deposits
18
Section 2.8 Transfer Taxes
18
Section 2.9 Transferred Contracts
18
Section 2.10 Third Party Consents for Transferred Contracts
18
   
ARTICLE III CLOSING
19
Section 3.1 Closing
19
Section 3.2 Deliveries at Closing
19
   
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS
20
Section 4.1 Organization
21
Section 4.2 Authority; Execution and Delivery; Enforceability
21
Section 4.3 No Conflicts or Violations; No Consents or Approvals Required
21
Section 4.4 No Conflicts
21
Section 4.5 Compliance with Laws
21
Section 4.6 Litigation
22
Section 4.7 Real Property
22
Section 4.8 Facility Residents and Patients
22
Section 4.9 Environmental
23
Section 4.10 Contracts
24
Section 4.11 Title to Assets
24
Section 4.12 Permits
24
Section 4.13 Taxes
24
Section 4.14 Employees
25
Section 4.15 Financial Statements
25
Section 4.16 No Brokers
25
Section 4.17 Employee Benefit Plans
25
Section 4.18 Insurance
26
Section 4.19 Affiliated Transactions
26

 
 
 
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Section 4.20 Insolvency
26
Section 4.21 Absence of Changes
26
Section 4.22 Trademarks, Etc
26
Section 4.23 Health Center Financial Statements
27
Section 4.24 Condition of the Facility
27
   
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
28
Section 5.1 Organization of the Buyer
28
Section 5.2 Authority; Execution and Delivery; Enforceability
28
Section 5.3 No Conflict or Violations, No Consents or Approvals Required
28
Section 5.4 Proceedings
28
Section 5.5 No Brokers
29
Section 5.6 Solvency
29
Section 5.7 Disclosure
29
Section 5.8 No Knowledge of Misrepresentations or Omissions
30
   
ARTICLE VI COVENANTS OF THE SELLERS AND THE BUYER
30
Section 6.1 Covenants Relating to Conduct of the Facility
31
Section 6.2 Access to Information
33
Section 6.3 Confidentiality
34
Section 6.4 Best Efforts
34
Section 6.5 Employment Matters
35
Section 6.6 Notice of Breach
35
Section 6.7 Updating Schedules
36
Section 6.8 HIPAA Cooperation
36
Section 6.9 Non-Solicitation Agreement
36
Section 6.10 ERISA Certifications
37
Section 6.11 Office of Insurance Regulation Approval
37
Section 6.12 Health Center Notification
37
   
ARTICLE VII CONDITIONS TO CLOSING
38
Section 7.1 Conditions to Each Party’s Obligation
38
Section 7.2 Conditions to Obligation of the Buyer
39
Section 7.3 Conditions to Obligation of the Sellers
41
Section 7.4 Frustration of Closing Conditions
42
Section 7.5 Effect of Certain Waivers of Closing Conditions
42
   
ARTICLE VIII TERMINATION; EFFECT OF TERMINATION
42
Section 8.1 Termination
42
Section 8.2 The Sellers’ Remedies Exclusive
44
Section 8.3 Obligations upon Termination
44
Section 8.4 Effect of Termination
44
Section 8.5 Time of the Essence
44

 
 
 
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ARTICLE IX RISK OF LOSS
44
Section 9.1 Risk of Loss
45
Section 9.2 Condemnation
45
Section 9.3 Fire or Other Casualty
45
   
ARTICLE X ACTIONS BY THE SELLER AND THE BUYER
46
Section 10.1 Accounts Receivable
46
Section 10.2 Books and Records; Tax Matters
46
Section 10.3 Further Assurances
48
   
ARTICLE XI INDEMNIFICATION
48
Section 11.1 Survival
48
Section 11.2 Indemnification by the Sellers
48
Section 11.3 Indemnification by the Buyer
49
Section 11.4 Indemnification Procedures
50
Section 11.5 Limitations on Indemnification
51
Section 11.6 Calculation of Indemnity Payments
52
Section 11.7 Time Limits for Indemnification
52
Section 11.8 Tax Treatment of Indemnification
52
   
ARTICLE XII MISCELLANEOUS
53
Section 12.1 Publicity
53
Section 12.2 Post-Closing Information
53
Section 12.3 Refunds and Remittances
53
Section 12.4 Assignment
54
Section 12.5 No Third-Party Beneficiaries
54
Section 12.6 Expenses
54
Section 12.7 Notices
54
Section 12.8 Headings
56
Section 12.9 Counterparts
56
Section 12.10 Integrated Contract; Exhibits and Schedules
57
Section 12.11 Governing Law
57
Section 12.12 Jurisdiction
57
Section 12.13 Waiver of Jury Trial
57
Section 12.14 Amendments and Waivers
57
Section 12.15 Pre-Closing Negligent or Tortious Acts
58

 
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ASSET PURCHASE AGREEMENT

Asset Purchase Agreement dated as of March 17, 2005 (this “Agreement”) by and
between Westport Holdings Bradenton, Limited Partnership, a Delaware limited
partnership (“Westport Holdings”), Westport Nursing Bradenton, L.L.C., a Florida
limited liability company (“Westport Nursing,” and together with Westport
Holdings, each, a “Seller” and collectively, the “Sellers”), ARC Bradenton
Management, Inc., a Tennessee corporation (the “Buyer’s Manager”), ARC Bradenton
LLC, a Tennessee limited liability company (“ARC Bradenton”), and Senior Housing
Partners III, L.P., a Delaware limited partnership (“SHP,” and together with ARC
Bradenton and their permitted assigns, the “Buyer”).

RECITALS

WHEREAS, Westport Holdings is the owner of a retirement campus consisting of 501
units (including 6 guest suites) located in Manatee County, Florida (the
“Retirement Center”);

WHEREAS, Westport Nursing is the owner of a skilled nursing facility licensed
for 120 beds and an assisted living facility licensed for a minimum of 140 beds
located adjacent to the Retirement Center (the “Health Center,” and together
with the Retirement Center, the “Facility”);

WHEREAS, pursuant to a Lease, dated as of May 1, 2003, and subsequently amended
by letter agreement dated May 20, 2005 (the “Health Center Lease”), among
Westport Nursing, BR & SNF, Inc. and BALF, Inc. (together with BR & SNF, Inc.,
the “Health Center Operator”), and other agreements entered into concurrently
with the Health Center Lease, the Health Center is leased and operated by the
Health Center Operator;

WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer wishes to
purchase from the Sellers, certain assets relating to the Facility, upon the
terms and conditions set forth herein;

WHEREAS, the Sellers desire to transfer to the Buyer, and the Buyer is willing
to assume from the Sellers, certain liabilities, upon the terms and conditions
set forth herein; and

WHEREAS, the Buyer has entered, or will enter, into a management agreement with
the Buyer’s Manager to operate the Facility;

NOW, THEREFORE, in consideration of the foregoing premises, the respective
covenants, representations and warranties and agreements hereinafter contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:

ARTICLE I
 
DEFINITIONS
 
 
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Section 1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
 
“Affiliate” of any party means any person or entity controlling, controlled by
or under common control with such party.
 
“AHCA Assurances” means Buyer’s receipt of commercially reasonable assurances
that the Florida Agency for Health Care Administration will issue the Skilled
Nursing Facility License (Standard) and the Assisted Living Facility License
(Standard) in the name of Buyer (or any lessee, manager or other operator, as
deemed appropriate by Buyer) in due course following the Closing, which licenses
will be effective as of the Closing Date.
 
“Business Day” shall refer to a day, other than a Saturday or a Sunday, on which
commercial banks are not required or authorized to close in New York City.
 
“Buyer Regulatory Approvals” means, to the extent deemed reasonably necessary by
Buyer for the acquisition of the Purchased Assets by the Buyer or its designees
(which may be any lessee, manager or other operator, as deemed appropriate by
Buyer) and the operation of the Retirement Center or the Health Center by the
Buyer (or any such designees) in substantially the same manner as currently
operated, approval for participation in Medicaid, V.A. and Medicare and any
approvals required by the Florida Agency for Health Care Administration and the
Florida Office of Insurance Regulation, including the AHCA Assurances.
 
“Contracts” means all agreements, contracts, leases, subleases, purchase orders,
commitments, contractual licenses and instruments to which either of the Sellers
or the Health Center Operator is a party or by which any of them is bound and
which relate to the Facility or the Purchased Assets (other than Life Care
Contracts), including other contracts with residents (other than Life Care
Contracts); all utilities, maintenance and other service agreements; all leases
or other occupancy agreements with respect to the Real Property; all leases of
personal property; and the Collective Bargaining Agreements.
 
“Collective Bargaining Agreements” means collectively the Westport Senior Living
SEIU Collective Bargaining Contract, dated as of June 1, 2004 and The Inn &
Nursing Center at Freedom Village SEIU Collective Bargaining Contract, dated as
of June 1, 2004.
 
“Entrance Fee Deferred Revenue” means the aggregate amount of deferred revenue
outstanding as of the date immediately preceding the Closing Date and
attributable to the Life Care Contracts (other than Life Care Contracts with
grantors under the Freedom Village Master Trusts), all as determined by
generally accepted accounting principles, which aggregate deferred revenue was
$17,853,482 at June 30, 2005, as set forth on the Interim Balance Sheet.
 
“Entrance Fee Receivables” means any entrance fees that are unpaid or due to the
Sellers and outstanding as of the Closing Date.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Excess Liabilities” means, the amount by which (A) the aggregate amount of
Master Trust Debt, Refundable Entrance Fee Liabilities and Entrance Fee Deferred
Revenue, in each
 
 
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case determined in accordance with generally accepted accounting principles,
exceeds (B) the Excess Liabilities Cap. For purposes of the calculation in
clause (A) above, Master Trust Debt shall be included only to the extent, if
any, that it is not otherwise included in Refundable Entrance Fee Liabilities.
 
“Excess Liabilities Cap” means the greater of (i) $50,000,000 or (ii) if the
Closing has not occurred before May 1, 2006, other than solely as a result of a
material breach by the Sellers’ of their obligations under this Agreement,
$50,500,000. For purposes of this definition of “Excess Liabilities Cap,” the
Sellers’ failure to complete the Remediation shall not constitute a material
breach of their obligations under this Agreement, provided that the Sellers’
were otherwise in compliance with their obligations under Section 6.13.
Notwithstanding the foregoing, the Excess Liabilities Cap shall be increased to
$51,000,000 upon the later of (i) July 1, 2006 and (ii) the tenth day following
the Remediation Completion Date (the “Second Increase Date”).
 
The Excess Liabilities Cap shall be further increased by another $500,000 for
each 30-day period following the Second Increase Date that occurs prior to the
Closing.
 
“Excluded Contracts” means all contracts and agreements of Seller(s) and the
Health Center Operator, and all contracts and agreements that affect, encumber
or bind the Facility in any manner, that are not Transferred Contracts.
 
“Freedom Village Master Trusts” means the Freedom Village Master Trusts
described on Schedule 4.10.
 
A.)  “Health Center Assets” means collectively the Related Assets as defined and
described in Section 7 of the Health Center Lease; all replacement equipment and
furniture as described in Section 7 of the Health Center Lease; any other
equipment or furniture in use at the Health Center that does not constitute
replacement equipment or furniture as described in Section 7 of the Health
Center Lease; and any other assets used in the operation of the Health Center
that are included within the definition of Purchased Assets (excluding, however,
any accounts receivable of the Health Center Operator existing on the Closing
Date). The Health Center Assets comprise a portion of the Purchased Assets.
 
A.)  “HIPAA” means the Health Insurance Portability and Accountability Act of
1996.
 
“Life Care Contracts” means all executory life-care residency and care
contracts, all residency and care agreements, and any addendums thereto related
to the Facility.
 
“Master Trust Debt” means (i) the aggregate amount of debt of the Sellers
secured by liens granted in connection with the Freedom Village Master Trusts,
which aggregate amount of debt was $3,525,726 at June 30, 2005, as set forth on
the Interim Balance Sheet, less (ii) the deferred entrance fees attributable to
the Freedom Village Master Trusts, the amount of which was $512,695 at June 30,
2005, as set forth on the Interim Balance Sheet.
 
“Material Adverse Effect” means a material adverse effect on the assets,
physical condition, financial condition or operations of the Facility, taken as
a whole; provided however, a Material Adverse Effect shall not include an
adverse effect, directly or indirectly, arising out of or resulting from an
event or series of events or circumstances generally affecting (i) the senior
 
 
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living industry generally, (ii) the United States economy or the Florida economy
in general; (iii) national or international political or social conditions,
including, without limitation, the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence of any military or terrorist attack upon the United
States or any of its territories, possessions, diplomatic or consular offices,
or upon any military installation, equipments or personnel of the United States;
or (iv) changes in generally accepted accounting principles.
 
“Person” means any individual, firm, corporation, partnership, limited liability
company, trust, joint venture, Governmental Entity or other entity.
 
“Pre-Closing Tax Period” means all taxable periods ending on or before the
Closing Date and the portion ending on the Closing Date of any taxable period
that includes, but does not end on the Closing Date.
 
“Real Property” means the Land, Buildings, Improvements and other rights,
interests and assets described in paragraphs (i) through (iv) of Section 2.1(a).
 
“Refundable Entrance Fee Liabilities” means the aggregate amount of refundable
entrance fees outstanding as of the date immediately preceding the Closing Date
under the Life Care Contracts (other than Life Care Contracts related to the
Freedom Village Master Trusts), as determined in accordance with generally
accepted accounting principles, which aggregate refundable entrance fees were
$25,657,669 at June 30, 2005, as set forth on the Interim Balance Sheet.
 
“Remediation Completion Date” the date that is the later of (i) the date of the
Sellers’ delivery of the CIH Certificate; or (ii) in the event that PSI delivers
a Remediation Deficiency Notice pursuant to Section 6.13 within four (4)
Business Days following the delivery of the CIH Certificate, the date when the
deficiencies contained in the Remediation Deficiency Notice have been cured.
 
“Straddle Entrance Fee Refunds” means the aggregate amount of unpaid entrance
fee refunds as of the date immediately preceding the Closing Date owing to prior
residents of the Facility whose Life Care Contracts have been terminated, but
are not then due to such prior residents as a result of any applicable grace
period set forth in such terminated Life Care Contracts. Straddle Entrance Fee
Refunds shall not include any entrance fee refunds that are overdue beyond the
expiration of any applicable payment grace period.
 
“Subsidiary” of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person
or by another subsidiary of such first person.
 
“Tax Return” means any report, return, document, declaration or other
information or filing required to be supplied to any Taxing Authority with
respect to Taxes, including any amendment made with respect thereto.
 
 
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“Tax” or “Taxes” means all forms of taxation imposed by any Federal, state,
local or other Taxing Authority, including income, franchise, property, sales,
use, excise, employment, unemployment, payroll, social security, estimated,
value added, ad valorem, transfer, recapture, withholding, health and other
taxes of any kind, including any interest, penalties and additions thereto.
 
“Taxing Authority” means any Federal, state or local government, any
subdivision, agency, commission or authority thereof or any domestic
quasi-governmental body exercising tax regulatory authority.
 
“Transfer Taxes” means all sales, use, transfer, registration, recording, ad
valorem, privilege, documentary, gross receipts, registration, conveyance,
excise, license, stamp or similar Taxes and fees arising out of, in connection
with or attributable to the transactions effected pursuant to this Agreement,
and any deficiency, interest or penalty asserted with respect thereto.
 
“Transferred Contracts” means (i) the Life Care Contracts that are specifically
identified on Schedule 4.8 (as updated through the Closing Date to include Life
Care Contracts entered into by Sellers after August 17, 2005 in accordance with
the terms of this Agreement); (ii) all Contracts set forth on Schedule 4.10 (as
updated through the Closing Date to include Contracts entered into by the
Sellers after August 17, 2005 in accordance with the terms of this Agreement) to
the extent that such Contracts may be (a) assigned to the Buyer without consent
(or for which the consent to such assignment is obtained prior to Closing), and
(b) terminated by the Sellers or the Health Center Operator, and by Buyer after
the Closing Date, without cause upon not more than 30 days’ notice and without
the payment of any penalty, fee or other payment resulting from the termination
thereof (but not any other Contracts on Schedule 4.10); and (iii) any other
Contracts specifically identified on Schedule 2.9. Notwithstanding anything
herein to the contrary, the Transferred Contracts shall not include the
Collective Bargaining Agreements, the Multiemployer Pension Plans or the Medical
Director Agreement between Freedom Village Nursing Center and Werther R.
Marciales.
 
Section 1.2 Other Defined Terms. The following terms have the meanings defined
for such terms in the Sections set forth below:
 
Term
 
Section
Accounts Receivable
 
Section 2.1(a)(xiv)
Acquisition
 
Section 3.1
Additional Earnest Money Deposit
 
Section 2.4(a)
Agreement
 
Preamble
Ancillary Agreements
 
Section 4.2
Application Completion Notice
 
Section 6.4(b)
Application Date
 
Section 6.4(b)
Approval Date
 
Section 6.4(b)
Approved CIH
 
Section 6.13
ARC
 
Section 6.5(d)
Assignment and Assumption Agreement
 
Section 3.2(b)(ii)
Assumed Liabilities
 
Section 2.2

 
 
 
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Term
 
Section

Audited Financial Statements
 
Section 4.15(a)
breaching party
 
Section 7.5
Buildings
 
Section 2.1(a)(ii)
Buyer
 
Preamble
Buyer Indemnitees
 
Section 11.2
Buyer Material Adverse Effect
 
Section 5.3
Buyer’s Manager
 
Preamble
CBA Employees
 
Section 6.5(a)
Chapter 651 Application Completion Date
 
Section 6.4(b)
CIH Certificate
 
Section 6.13
Closing
 
Section 3.1
Closing Date
 
Section 3.1
Closing Escrow Agreement
 
Section 2.4(a)
COBRA
 
Section 2.3(j)
Code
 
Section 2.4(c)
Confidentiality Agreement
 
Section 6.3
Consent
 
Section 4.3
Covenant Claim
 
Section 11.7
Deed
 
Section 3.2(a)(i)
Earnest Money Deposit
 
Section 2.4(a)
Earnest Money Deposit Escrow Agreement
 
Section 2.4(a)
Effective Time
 
Section 3.1
Eligible Employees
 
Section 6.5(a)
Employees
 
Section 4.14
Escrow Agent
 
Section 2.4(a)
Excluded Assets
 
Section 2.1(b)
Excluded Liability
 
Section 2.3
Facility
 
Recitals
Financial Statements
 
Section 4.15(a)
Financing
 
Section 5.6(a)
Fund
 
Section 11.3
Governmental Entity
 
Section 4.3
Hazardous Substances
 
Section 4.9
HC Occupancy Agreements
 
Section 4.8(a)
Health Center
 
Recitals
Health Center Agreement Indemnities
 
Section 2.1(a)(xvii)
Health Center Agreements
 
Section 2.1(b)(iv)
Health Center Assignee
 
Section 12.4
Health Center Audited Financial Statements
 
Section 4.23(a)
Health Center Interim Balance Sheet
 
Section 4.23(a)
Health Center Interim Financial Statements
 
Section 4.23(a)
Health Center Lease
 
Recitals
Health Center Operator
 
Recitals
Holdback Amount
 
Section 2.4(a)

 
 
 
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Term
 
Section

ID Number
 
Section 4.8(a)
Improvements
 
Section 2.1(a)(iii)
Indemnified Party
 
Section 11.4(a)
Indemnifying Party
 
Section 11.4(a)
Initial Earnest Money Deposit
 
Section 2.4(a)
Interim Balance Sheet
 
Section 4.15(a)
Interim Financial Statements
 
Section 4.15(a)
Investigation Period
 
Section 2.5(a)
Key
 
Section 4.8(g)
Land
 
Section 2.1(a)(i)
Leases
 
Section 4.7(c)
Liens
 
Section 4.7(b)
Losses
 
Section 11.2
Monetary Liens
 
Section 7.2(d)
Multiemployer Pension Plan
 
Section 6.5(c)
New CBA
 
Section 6.5(a)
Non-CBA Employees
 
Section 6.5(a)
Notice of Material Breach
 
Section 7.5
Objection Notice
 
Section 7.2(d)
Permitted Exceptions
 
Section 7.2(d)
Permitted Liens
 
Section 4.7(b)
PHI
 
Section 6.8
PIM
 
Section 12.1
PIPP
 
Section 2.2(ii)
Plans
 
Section 4.17(b)
Prudential
 
Section 4.25
PSI
 
Section 6.13
PTE 84-14
 
Section 4.25
Purchase Price
 
Section 2.4(a)
Purchased Assets
 
Section 2.1(a)
QPAM
 
Section 5.9(b)
Receiving Party
 
Section 7.5
Release
 
Section 4.9
Remaining Payment
 
Section 2.4(a)
Remediation
 
Section 6.13
Remediation Deficiency Notice
 
Section 6.13
Remediation Plan
 
Section 6.13
Report
 
Section 6.13
Representation Claim
 
Section 11.7
Required Consent
 
Section 2.10(c)
Resident List
 
Section 4.8(a)
Response Notice
 
Section 7.2(d)
Retirement Center
 
Recitals
Security, Waiting List and Sale Deposits
 
Section 2.1(a)(x)

 
 
 
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Term
 
Section

SEIU
 
Section 6.5(a)
Seller
 
Preamble
Sellers
 
Preamble
Sellers Indemnitees
 
Section 11.3
Sellers Insurance Policies
 
Section 4.18
Surety Period
 
Section 6.5(c)
Survey
 
Section 7.2(d)
Taking
 
Section 9.2(c)
Third Party Claim
 
Section 11.4(a)
Title Commitment
 
Section 7.2(d)
Title Company
 
Section 7.2(d)
Transferred Employee
 
Section 6.5(a)
Transferred Permits
 
Section 2.1(a)(xiii)
Westport Holdings
 
Preamble
Westport Nursing
 
Preamble

ARTICLE II
 
PURCHASE AND SALE OF ASSETS
 
Section 2.1 Purchased and Excluded Assets. 
 
(a)    Transfer of Purchased Assets. At the Closing the Sellers shall sell,
transfer, assign and deliver to the Buyer, and the Buyer shall purchase, acquire
and accept from the Sellers, all of the right, title and interest of the Sellers
in, to and under the following assets related to the Facility (collectively, the
“Purchased Assets”):
 
(i)    subject to the Permitted Exceptions, fee simple title to all of those
certain parcels of land located in Bradenton, Florida and more particularly
described in Schedule 2.1(a)(i) (the “Land”);
 
(ii)    subject to the Permitted Exceptions, fee title to all improvements
presently erected on the Land (the “Buildings”);
 
(iii)    subject to the Permitted Exceptions, fee title to all fixtures attached
to the Buildings which are owned by the Sellers, including, but not limited to,
the heating, plumbing, electrical, lighting, air conditioning and pool systems
(the “Improvements”);
 
(iv)    all estates, rights, privileges, easements, agreements, appurtenances,
development rights, sewer and utility rights, and any other governmental
entitlements belonging or in anywise appertaining to the Land and Buildings;
 
(v)    all furniture, fixtures, machinery, equipment and other chattels which
are used in the day to day operations of the Facility, including, but not
limited to: beds,
 
 
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furniture and furnishings, medical equipment, linens, window furnishings,
carpets and floor coverings, appliances, televisions, wheelchairs, canes,
walkers, kitchen equipment, dining room furniture, pool equipment, beauty parlor
equipment, exercise equipment, etc., including the fixed assets set forth on
Schedule 2.1(a)(v);
 
(vi)    all supplies and inventory at the Facility including all foodstuffs,
pharmaceuticals, cleaning and maintenance supplies and spare parts;
 
(vii)    all cars, trucks, buses, vans and other motor vehicles owned by the
Sellers and used in connection with the operation of the Facility as set forth
on Schedule 2.1(a)(vii);
 
(viii)    all trademarks, trade names, including “Freedom Village,” trademark
registrations, signs, logos or other intangible property rights used in the
operation of the Facility, if any, including all goodwill connected with or
symbolized by the use thereof and all licenses, to the extent transferable;
 
(ix)    all Transferred Contracts;
 
(x)    all security deposits paid to the Sellers by residents, tenants and
patients and all waiting list or sale deposits of any type, kind or nature
(including any deposit that will be credited against the entrance fee) (the
“Security, Waiting List and Sale Deposits”);
 
(xi)    all rights that accrue to the Facility due to prepaid expenses
(excluding prepaid insurance premiums);
 
(xii)    subject to such confidentiality restrictions as may be imposed by
applicable law or to which the Sellers are contractually bound, all books of
account, and general, financial, accounting and personnel records, and, to the
extent transferable by the Sellers, medical records of residents or patients at
the Facility (past or present);
 
(xiii)    only to the extent assignable, all permits, consents, approvals,
franchises or authorizations from any Governmental Entity (collectively, the
“Transferred Permits”);
 
(xiv)    all accounts receivable of the Sellers for services rendered or
products supplied prior to the Closing Date (excluding Entrance Fee Receivables
and any and all receivables relating to the operations of the Health Center as
of the Closing Date) (“Accounts Receivable “);
 
(xv)    to the extent transferable, all warranties and guarantees associated
with the Buildings, Improvements, furniture, fixtures, equipment and other
personal property;
 
(xvi)    all property and casualty insurance benefits (whether self-insured or
insured by a third party), including rights and proceeds, arising from or
relating to the Facility prior to the Closing Date, except to the extent
expended in accordance with this Agreement or necessary to reimburse Sellers for
costs actually paid by Sellers, to the extent applicable in accordance with this
Agreement, prior to Closing to repair or restore, to the extent applicable in
 
 
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accordance with this Agreement, any of the Purchased Assets damaged as a result
of a casualty event;
 
(xvii)    all indemnities granted to Sellers by the Health Center Operator
pursuant to the Health Center Agreements, except to the extent they relate to
Excluded Liabilities (the “Health Center Agreement Indemnities”);
 
(xviii)    all Entrance Fee Receivables;
 
(xix)    all computer hardware, software, programs and operating systems used
for the keeping of records and the operation of the Facility except any
proprietary software developed and owned exclusively by Seller; and
 
(xx)    any other tangible or intangible asset of any kind or nature primarily
used in connection with the ownership or operation of the Facility that is not
specifically identified as an Excluded Asset.
 
(b)    Excluded Assets. Notwithstanding anything to the contrary contained in
this Agreement, the Purchased Assets shall expressly exclude the following, and
only the following, assets and rights of the Sellers (collectively, the
“Excluded Assets”), which shall not be sold, transferred, assigned or delivered
to the Buyer:
 
(i)    all cash, cash equivalents, certificates of deposit, bank deposits and
marketable securities whether on hand or in accounts (other than the Security,
Waiting List and Sale Deposits);
 
(ii)    the “Minimum Liquid Reserve” accounts owned or created by the Sellers
pursuant to Chapter 651, Florida Statutes;
 
(iii)    insurance policies and any prepaid insurance premiums, self-funded
insurance programs and the assets or proceeds thereof (except to the extent
described in Section 2.1(a)(xvi));

(iv)    the Health Center Lease, the Credit Agreement with the Health Center
Operator, including the right to receive repayment of borrowings thereunder, and
the service agreements with the Health Center Operator (other than the Health
Center Agreement Indemnities described in Section 2.1(a)(xvii)) (collectively,
the “Health Center Agreements”);
 
(v)    all Excluded Contracts, including, without limitation, the Collective
Bargaining Agreements, the Multiemployer Pension Plan and the Medical Director
Agreement between Freedom Village Nursing Center and Werther R. Marciales and
all assets, properties and rights derived therefrom;
 
(vi)    any security deposits, claims for security deposits or rights to receive
security deposits paid by the Sellers with respect to the operation of the
Facility;
 
(vii)    any deposits, escrows, or reserves for real estate taxes, insurance,
furniture, fixtures and equipment or otherwise made to any lender of the
Sellers;
 
 
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(viii)    any licenses, certificates of need, and other similar items, the
transfer of which to the Buyer is prohibited by an applicable governmental rule
or regulation;
 
(ix)    letters of credit or deposits provided to utility companies or those
provided for any other purpose;
 
(x)    any refunds or credits, claims for refunds or credits, or rights to
receive refunds or credits with respect to the Facility paid or to be paid to
the Sellers or any of their respective Affiliates (other than those arising
under the Transferred Contracts);
 
(xi)    any records (including accounting records) related to Taxes paid or
payable by the Sellers or any of their Affiliates and all financial and Tax
records that form part of the Sellers’ or any of their Affiliate’s general
ledger;
 
(xii)    all documents, drafts and records received or prepared in connection
with the planning and sale of the Purchased Assets, including bids received from
third parties and analyses relating to the Facility;
 
(xiii)    all employee benefit plans;
 
(xiv)    the organizational documents and other company and partnership records
and documents having to do with the organization or operation of each of the
Sellers;
 
(xv)    all claims, causes of action, choses in action, rights of recovery and
rights of set-off of any kind, pertaining to, arising out of, and inuring to the
benefit of the Sellers relating to matters arising prior to the Closing Date;
 
(xvi)    all indemnities granted to Sellers by the Health Center Operator
pursuant to the Health Center Agreements to the extent they relate to Excluded
Liabilities; and
 
(xvii)    the rights that accrue or will accrue to the Sellers under this
Agreement and any other agreements, certificates and instruments relating to the
sale of the Purchased Assets or otherwise delivered in connection with this
Agreement.
 
Section 2.2 Assumption of Liabilities. In partial payment of the Purchase Price,
the Buyer shall assume, and hereby covenants and agrees to timely perform, pay
or discharge, only the following obligations, liabilities and commitments, and
no other obligations, liabilities or commitments whatsoever (collectively, the
“Assumed Liabilities”):
 
(i)    all of the obligations, liabilities and commitments of the Sellers and
the Health Center Operator under the Transferred Contracts, but only to the
extent that such obligations, liabilities and commitments relate to the period
from and after the Closing Date or to the extent that Buyer receives a credit
therefor against the Purchase Price pursuant to Section 2.6, and specifically
excluding any liability arising thereunder for a breach thereof that occurred
prior to the Closing Date;
 
(ii)    all of the obligations, liabilities and commitments of the Sellers
arising under the Sellers’ Personal Income Protection Plan (“PIPP”), but in the
case of PIPP
 
 
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deposit liabilities, only to the extent set forth on Schedule 4.8(d) (as updated
through the Closing Date);
 
(iii)    all of the obligations, liabilities and commitments of the Sellers
related to or otherwise in respect of the Freedom Village Master Trusts, but in
the case of refund liabilities secured by the Freedom Village Master Trusts,
only to the extent set forth on Schedules 4.8(a) (as updated through the Closing
Date);
 
(iv)    all of the obligations, liabilities and commitments of the Sellers to
refund the entrance fees or deposits under the Life Care Contracts that are
listed on Schedule 4.8 (as updated through the Closing Date) that are terminated
on or after the Closing Date;
 
(v)    all Straddle Entrance Fee Refunds;
 
(vi)    all liability for the amount of all accrued (vested or unvested)
vacation, personal time, time off, holiday or sick leave as of the Closing Date
for Transferred Employees (which shall be assumed by Buyer’s manager or lessee),
but only to the extent that Buyer receives a credit therefor against the
Purchase Price pursuant to Section 2.6(b); and
 
(vii)    to the extent not otherwise described in clauses (i) through (vi) of
this Section 2.2, any specifically identified payment obligation(s) of the
Sellers or the Health Center Operator for which the Buyer receives a
corresponding credit(s) against the Purchase Price pursuant to Section 2.6.
 
Section 2.3 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, except for the Assumed Liabilities, Buyer shall not
assume, or become responsible in any way for, any other liabilities or
obligations of either of the Sellers or the Health Center Operator, or any other
liabilities or obligations that relate in any way to the Purchased Assets or the
ownership or operation of all or any portion of the Facility prior to the
Closing Date (each, an “Excluded Liability”) which shall include, without
limitation, the following:
 
(a)    all Taxes arising out of, relating to or in respect of the Facility
imposed upon the Sellers for all taxable periods before the Closing, and all
Taxes arising from the transactions contemplated hereby (except for Transfer
Taxes as set forth in Section 2.8);
 
(b)    all obligations, liabilities and commitments of the Sellers to the extent
arising out of, relating to or in respect of the Excluded Assets;
 
(c)    any liability or obligation that arises or relates to the breach of, or
default under, any contract, agreement or obligation prior to the Closing Date;
 
(d)    any liability arising out of any lawsuit, legal or regulatory proceeding,
of any type, kind or nature pending as of the Closing Date or relating to the
operation of the Facility prior to the Closing Date;
 
(e)    any liability arising or resulting from the non-compliance of the
Facility or its operations with laws, rules or regulations, or any order of any
Governmental Entity prior to
 
 
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the Closing Date, other than any noncompliance, if any, that relates solely to
the physical condition of the Real Property as of the Closing Date (subject to
the representations and warranties specifically set forth in Article IV);
 
(f)    any obligations, liabilities or commitments to pay any entrance fee or
deposit refunds under Life Care Contracts that are not specifically set forth on
Schedule 4.8 (as updated through the Closing Date to include Life Care Contracts
entered into by the Sellers after the August 17, 2005 in accordance with the
terms of this Agreement);
 
(g)    any PIPP deposit refund liability that is not specifically identified on
Schedule 4.8(d) (as updated through the Closing Date);
 
(h)    any Master Trust Debt not specifically identified on Schedule 4.8(a) (as
updated through the Closing Date);
 
(i)    any liability or obligation relating to the termination of the Health
Center Agreements;
 
(j)    other than accrued vacation, personal time, time off, holiday, and sick
leave time described in Section 2.2(vi) above, any liability, obligation or
covenant owed to any employee (past or current) to the extent arising prior to,
or accruing before, the Closing Date, including, without limitation, any
liabilities or obligations under Section 4980B of the Code and Sections 601
through 608, inclusive, of ERISA (collectively, “COBRA”), whether arising before
or after the Closing Date;
 
(k)    any liability or obligation in respect of periods prior to the Closing
Date arising under the terms of the Medicare, Medicaid, Veterans Administration,
or any other third-party payor program, including without limitation any
retroactive denial of claims or monetary penalties.
 
The Sellers shall remain solely responsible for the Excluded Liabilities, and
shall pay, discharge, or satisfy the Excluded Liabilities as the same come due.

Section 2.4 Purchase Price. 
 
(a)    In addition to the Buyer’s assumption of the Assumed Liabilities, the
aggregate purchase price (the “Purchase Price”) for the Purchased Assets shall
be the payment of $95,000,000 in cash as follows: (w) $2,000,000 (the “Initial
Earnest Money Deposit”) has been paid by the Buyer ($1,000,000 on August 17,
2005 and $1,000,000 on October 3, 2005) by wire transfer of immediately
available funds to an account designated by the Title Company, as escrow agent
(the “Escrow Agent”) and is being held by the Escrow Agent pursuant to the terms
of the escrow agreement (the “Earnest Money Deposit Escrow Agreement”) attached
hereto as Exhibit A; (x) $1,000,000 (the “Additional Earnest Money Deposit,” and
together with the Initial Earnest Money Deposit, the “Earnest Money Deposit”)
shall be paid by the Buyer to Sellers by wire transfer of immediately available
funds to the Escrow Agent to be held pursuant to the terms of the Earnest Money
Deposit Escrow Agreement upon the expiration of the Investigation Period if
Buyer has not elected to terminate the Agreement in accordance with Section 2.5,
(y) $5,000,000 (the “Holdback Amount”) shall be paid to the Escrow Agent at
Closing pursuant to
 
 
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the terms of the escrow agreement attached hereto as Exhibit B (the “Closing
Escrow Agreement”) as security for Sellers’ obligations and liabilities under
this Agreement and the Ancillary Agreements; and (z) $87,000,000, subject to
adjustment pursuant to Sections 2.4(b) and 2.6 (the “Remaining Payment”), shall
be paid by the Buyer to the Sellers at the Closing by wire transfer of
immediately available funds to an account or accounts designated by the Sellers.
All funds deposited with the Escrow Agent shall be held and disbursed in
accordance with the terms of the Earnest Money Deposit Escrow Agreement or the
Closing Escrow Agreement, as the case may be.
 
(b)    The Remaining Payment to be paid by the Buyer to the Sellers at Closing
shall be reduced by the following:
 
(i)    an amount, if any, equal to the amount by which the total amount of PIPP
deposit liabilities as of the date immediately preceding the Closing Date
exceeds $7,500,000;
 
(ii)    an amount equal to the Excess Liabilities;
 
(iii)    an amount equal to the Straddle Entrance Fee Refunds owed to prior
residents of the Facility that have terminated their Life Care Contracts and
whose dwelling units have been resold prior to the Closing Date (which resale
has actually closed and for which there is no corresponding Entrance Fee Deposit
Receivable); and
 
(iv)    an amount equal to amounts remaining in the reserve accounts established
under the Health Center Agreements, if any, to the extent that such accounts
have been transferred by the Health Center Operator to the Sellers.
 
(c)    In the event that (i) the Remediation Completion Date occurs on or before
May 15, 2006 and (ii) the Closing occurs on or after June 1, 2006, in addition
to the adjustments set forth in Section 2.4(b), the Remaining Payment to be paid
by the Buyer to the Sellers at Closing shall be increased by $200,000, provided
that the failure to close prior to June 1, 2006 is not caused by the Sellers’
failure to act in good faith or use their reasonable efforts to cause the
Closing to occur, as required by Section 6.4.
 
(d)    The Buyer and the Sellers shall agree upon an allocation of the Purchase
Price (and all other capitalized costs) and the amount of the Assumed
Liabilities among the Purchased Assets consistent with Section 1060 of the
Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury
Regulations promulgated thereunder prior to Closing, which allocation shall be
attached hereto as Schedule 2.4(d). Each of the Buyer and the Sellers agree to
file Internal Revenue Service Form 8594, and all federal, state and local Tax
Returns (as hereinafter defined), in accordance with any such agreed allocation
as adjusted as provided herein. Each of the Buyer and the Sellers shall report
the transactions contemplated by this Agreement for Tax purposes in a manner
consistent with the allocation determined pursuant to this Section 2.4(d).
Except as required by applicable law, the Buyer and the Sellers shall not take
any position in any Tax Return, Tax proceeding or audit that is inconsistent
with such allocation.
 
Section 2.5 Investigation Period.
 
 
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(a)    The Sellers shall give the Buyer full access to the Facility, upon
reasonable prior notice during normal business hours, in order for the Buyer to
timely conduct its due diligence investigation of the Facility, the Purchased
Assets and the operations and financial affairs of the Facility, including, but
not limited to, detailed site visits to be conducted by the Buyer or its
representatives, and the right of the Buyer or its representatives to conduct
building and physical plant inspections, Real Property surveys, environmental
and engineering tests, investigations of the books and records and financial
information of the Sellers, employee interviews, inspections of all licensing
reports and information, inspections of medical records to the extent allowed
under applicable law, and other due diligence inspections and investigations.
The Sellers shall have the right to have a representative present during any
employee interviews conducted by the Buyer. The Sellers shall deliver to Buyer
copies of all Life Care Contracts as of the date hereof and all of the
agreements, licenses or other documents listed on the disclosure schedules
attached hereto within five (5) business days after the execution of this
Agreement. The Buyer shall have until the later of (i) March 30, 2006 and (ii)
the date that is four Business Days following the Sellers’ delivery to the Buyer
of the disclosure schedules called for by this Agreement updated as of December
31, 2005 or a subsequent date (the “Investigation Period”) to conduct its
investigation. On or before expiration of the Investigation Period, the Buyer,
in its sole and absolute discretion, for any reason whatsoever, by notice to the
Sellers on or before expiration of the Investigation Period, shall have the
right, at its option, to terminate this Agreement on or before such date in
which event the Earnest Money Deposit will be refunded to the Buyer upon
delivery of the documents referred to below and neither party shall have further
liability to the other on account of this Agreement, provided however, that the
Buyer shall within ten (10) days of such termination, return to the Sellers, or
certify to Sellers Buyer’s destruction of, all documents and materials delivered
to the Buyer by the Sellers pursuant to this Agreement. The provisions of this
Section 2.5(a) shall survive the termination of this Agreement.
 
(b)    The Buyer shall indemnify, hold harmless and defend the Sellers from and
against any loss, damage, liability or claim for personal injury or property
damage and any other loss, damage, liability, claim or lien to the extent
arising from the acts at or upon the Real Property by the Buyer or any of its
agents, contractors, auditors, engineers, attorneys, employees, consultants and
other representatives. The Buyer understands and agrees that any on-site
inspections of the Real Property shall occur at reasonable times agreed upon by
the Sellers and the Buyer after not less than two (2) Business Days prior notice
to the Sellers and shall be conducted so as not to interfere unreasonably with
the operation of the Facility. The Sellers shall have the right to have a
representative present during any such inspections. If the Buyer desires to do
any invasive testing of the Real Property, the Buyer shall do so only after
notifying the Sellers and obtaining the Sellers’ prior written consent thereto,
which may be subject to reasonable terms and conditions as may be proposed by
the Sellers. The Buyer shall not permit any liens to attach to any portion of
the Real Property prior to the Closing Date. The Buyer shall (i) restore the
Real Property, at its own expense, to the same condition which existed prior to
any inspections or other activities of the Buyer thereon; and (ii) be
responsible for and pay any and all liens by contractors, subcontractors,
materialmen, or laborers performing the inspections or any other work pursuant
to the Buyer’s investigation of the Facility. All contractors and others
performing any tests and studies on the Real Property shall first present to the
Sellers reasonably satisfactory evidence that such party is adequately insured
in order to reasonably protect the Sellers from any loss, liability, or damage
arising out of the performance of such tests or studies.
 
 
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The provisions of this Section 2.5(b) shall survive any termination of this
Agreement and a closing of the transaction contemplated hereby.
 
Section 2.6 Closing Adjustments.
 
(a)    Except as otherwise set forth in this Section 2.6, all revenues and
expenses of the Facility applicable to the period of time before and after the
Closing shall be allocated between the Sellers and the Buyer as provided herein.
Pursuant to such allocation, the Sellers shall be entitled to all revenue (other
than Accounts Receivable, Entrance Fee Receivables and receivables of the Health
Center Operator) and shall be responsible for all expenses for the period of
time up to but not including the Closing Date, and the Buyer shall be entitled
to all revenue and shall be responsible for all expenses for the period of time
from, after and including the Closing Date. Such allocations and adjustments
shall be shown on the closing statement to be executed by the parties on the
Closing Date (with such supporting documentation as the parties hereto may
reasonably require being attached as exhibits to the closing statement) and
shall increase or decrease (as the case may be) the cash amount payable by the
Buyer to the Sellers at Closing. All prorations shall be made on the basis of
the actual number of days in the year and month in which the Closing occurs or
in the period of computation. No prorations or allocations shall be made with
respect to Entrance Fee Receivables, Accounts Receivable or receivables of the
Health Center Operator, except to the extent specifically set forth in Section
2.6(c) of this Agreement.
 
(i)    Without limiting the generality of the foregoing, the following items of
revenue and expense shall be allocated and prorated at Closing: utility charges;
water and sewer charges; real estate taxes and all other public and governmental
taxes, charges and assessments; charges for oil and heating services; charges
under the Transferred Contracts; and assessments against the Real Property or
the Facility or its operations. Notwithstanding the foregoing, the Buyer shall
be responsible for establishing new utility accounts with its vendors to be
effective on the Closing Date.
 
(ii)    The Sellers shall be responsible for payments owing on deliveries made
prior to the Closing Date. The Buyer shall be responsible for payments owing on
deliveries made on or after the Closing Date.
 
(iii)    The Sellers shall receive a credit for any prepaid expenses in
connection with any Assumed Liabilities on or after the Closing Date. The Buyer
shall receive a credit for that portion of any monthly fees paid to the Sellers
or the Health Center Operator prior to the Closing Date under the Life Care
Contracts, the HC Occupancy Agreements, or other contracts with residents that
relate to periods from and after the Closing Date.
 
(b)    The Buyer shall receive a credit against the Purchase Price for the
amount of all accrued (vested or unvested) vacation, personal time, time off,
holiday or sick leave for the Transferred Employees on the Closing Date. To the
extent that any Transferred Employee is terminated by the Buyer (or its manager
or lessee) as a result of the Buyer (or its manager or lessee) not receiving a
satisfactory post-closing background check, drug test or license verification
for such Transferred Employee, then the Buyer (or Buyer’s manager, lessee or
other designee) shall promptly following such termination pay to the Sellers an
amount equal to the
 
 
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closing credit for accrued (vested or unvested) vacation, personal time, time
off, holiday or sick leave attributable to such terminated Transferred Employee
to the extent Sellers have the legal obligation to pay such terminated
Transferred Employee such amount.
 
(c)    The Purchase Price due to Sellers shall be increased by an amount equal
to the product obtained by multiplying the amount of Accounts Receivable
transferred to Buyer at Closing that is less than 90 days outstanding by .95.
Notwithstanding anything herein to the contrary, for purposes of this Section
2.6(c), Accounts Receivable shall not include any deferred entrance fees
deducted from Master Trust Debt pursuant to clause (ii) of the definition
thereof.
 
(d)    If the parties ascertain any error in any adjustment following Closing or
if certain adjustments are approximated to facilitate Closing, the parties
covenant and agree to promptly readjust such items when the correct information
becomes available.
 
(e)    Buyer shall receive a credit against the Purchase Price for the amount,
if any, required to complete the items designated on Schedule 6.1(b)(viii) as
“Ongoing” or “Planned” (i.e., all items not designated on such Schedule as being
“Completed”) that are not actually completed as of the Closing Date, provided,
however, that the credit, if any, for the final three items set forth on such
schedule (Kitchen A/C Repairs, Veranda Dining Room Remodeling and Paint Ext. of
Landings) shall be equal to the lesser of the cost to complete such items or the
bid price for such items set forth on such Schedule.
 
(f)    If Buyer, in its sole discretion, elects to proceed with the Closing even
though the Remediation has not been completed, Buyer shall receive a credit
against the Purchase Price, in an amount reasonably agreed upon by the Sellers
and Buyer at that time, in the amount required to complete the Remediation that
is not actually completed as of the Closing Date.
 
(g)    If accurate allocations cannot be made at Closing because current bills
are not obtainable (as, for example, in the case of utility bills and/or real
estate or personal property taxes), the parties shall allocate such revenue or
expenses at Closing on the best available information, subject to adjustment
upon receipt of the final bill or other evidence of the applicable revenue or
expense. The obligation to make the adjustment shall survive the Closing of the
transaction contemplated by this Agreement. Any revenue received or expense
incurred by the Sellers, the Buyer or Health Center Operator with respect to the
Facility after the date of Closing shall be promptly allocated in the manner
described herein and the parties shall promptly pay or reimburse any amount due.
If the Buyer and the Sellers are unable to agree on the closing statement
allocations on the Closing Date, the Closing shall occur and a preliminary
closing statement shall be signed with respect to such amounts and issues that
are agreed upon by the Buyer and the Sellers. With respect to any closing
statement amounts or issues that are not agreed upon at Closing, the Sellers and
the Buyer shall thereafter work in good faith to resolve, allocate or prorate
such amounts or issues; provided that if such amounts or issues are not fully
agreed upon and paid within ninety (90) days after the Closing, then, in such
event, such amounts or issues shall be submitted to an independent certified
public accountant reasonably acceptable to the Buyer and the Sellers for final
resolution and the Buyer and the Sellers agree to be bound by the determination
of such accountant. The costs and expenses incurred in connection with the
services of such accountant shall be borne and paid equally by the Sellers,
 
 
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on the one hand and the Buyer, on the other hand. The provisions of all of
Section 2.6 shall survive the Closing.
 
Section 2.7 Security, Waiting List and Sale Deposits. From and after the
Closing, the Sellers shall be relieved of any and all responsibility in
connection with Security, Waiting List and Sale Deposits held by the Sellers on
behalf of residents, tenants or patients and any other funds of the residents,
to the extent that such Security, Waiting List and Sale Deposits and funds are
actually delivered to the Buyer or Buyer receives a credit therefor against the
Purchase Price and are included in the Assumed Liabilities, and, to that extent,
the Buyer shall indemnify the Sellers and their Affiliates and hold them
harmless from and against any claim, liability, cost or expense (including
reasonable attorneys’ fees) incurred by them with respect thereto. The
provisions of this Section 2.7 shall survive the Closing.
 
Section 2.8 Transfer Taxes. The Buyer shall pay all Transfer Taxes; provided,
however, that the Sellers shall use reasonable efforts to avail themselves of
any available exemptions from any such Transfer Taxes and shall reasonably
cooperate with Buyer to reduce such Transfer Taxes to the extent legally
permissible. Each of the Sellers, the Buyer and their respective Affiliates
shall execute and deliver all instruments and certificates as are necessary to
enable such other parties to comply with any filing requirements relating to any
such Transfer Taxes. 
 
Section 2.9 Transferred Contracts. On or before the expiration of the
Investigation Period, the Buyer shall determine, in its sole and absolute
discretion, which Contracts that are not already included in clauses (i) through
(iii) of the definition of Transferred Contracts will be assumed by Buyer, and
will provide Sellers with a Schedule 2.9 specifically identifying such
additional Contracts to be included as Transferred Contracts. 
 
Section 2.10 Third Party Consents for Transferred Contracts. 
 
(a)    Sellers shall use commercially reasonable efforts to obtain all Consents
reasonably requested by the Buyer and required for the transfer of the
Transferred Contracts to Buyer. Notwithstanding anything to the contrary in this
Agreement, this Agreement shall not constitute an agreement to assign any
Transferred Contract or any claim, right or any benefit arising under or
resulting from such Transferred Contract if an attempted assignment thereof,
without the Consent of a third party, would constitute a breach, default or
violation of such Transferred Contract. If any transfer or assignment by the
Sellers or any of their Affiliates to, or any assumption by the Buyer of, any
interest in, or obligation, liability or commitment under, any Transferred
Contract requires the Consent of a third party, then such transfer, assignment
or assumption shall be made subject to such Consent being obtained.
 
(b)    If any such Consent is not obtained prior to the Closing Date, the
Closing shall nonetheless take place on the terms set forth herein. In which
event, the Buyer may, with respect to each Transferred Contract for which a
Consent has not been so obtained, cause the Sellers to provide or cause to be
provided all commercially reasonable assistance to the Buyer (not including the
payment of any consideration) reasonably requested by the Buyer to secure such
Consent after the Closing and cooperate with the Buyer (at the Buyer’s expense)
in any lawful and commercially reasonable arrangement reasonably proposed by the
Buyer under which
 
 
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(x)    the Buyer shall obtain (without infringing upon the legal rights of such
third party or violating any applicable law) the economic claims, rights and
benefits under the subject Transferred Contract(s), and (y) the Buyer shall
assume any related economic burden (including the amount of any related Tax
costs imposed on the Sellers or any of their Affiliates) with respect to the
subject Transferred Contract and the claims, rights or benefits arising under or
resulting from the subject Transferred Contract(s) agreement.
 
(c)    Notwithstanding Section 2.10(b) to the contrary, with respect to any
Consent that is identified by Buyer on or before the end of the Investigation
Period as a required Consent (“Required Consent”), Buyer may elect with respect
to each Transferred Contract for which the Required Consent has not been
obtained, to either cause Sellers to comply with Section 2.10(b) or elect to
have the Sellers retain the subject Transferred Contract(s) and all liabilities
and obligations associated therewith (in which event, such Transferred
Contract(s) shall be considered to be an Excluded Contract(s) and all such
liabilities and obligations shall be included in Excluded Liabilities).
 
ARTICLE III
 
CLOSING
 
Section 3.1 Closing. Unless the Sellers and Buyer otherwise agree, the closing
(“Closing”) of the sale and purchase of the Purchased Assets and the assumption
of the Assumed Liabilities contemplated hereby (collectively, the “Acquisition”)
shall take place at the offices of Herrick, Feinstein LLP, 2 Park Avenue, New
York, New York, on the later of (a) April 15, 2006, (b) within fifteen (15) days
following the receipt of the Buyer Regulatory Approvals (subject to Buyer’s
right in its sole and absolute discretion to waive the Buyer Regulatory
Approvals that do not constitute AHCA Assurances) and (c) the satisfaction of
the condition to closing set forth in Section 7.2(j). The date on which the
Closing occurs is hereinafter referred to in this Agreement as the “Closing
Date.” The Closing shall be deemed to be effective as of 12:01 a.m., Eastern
time, on the Closing Date (the “Effective Time”).
 
Section 3.2 Deliveries at Closing.
 
(a)    Deliveries by the Sellers. At the Closing, the Sellers shall cause to be
delivered to the Buyer the following:
 
(i)    a special warranty deed in the name of the Buyer, which deed shall convey
fee simple title to the Real Property in accordance with Section 7.2(d) (the
“Deed”);
 
(ii)    all such bills of sale and assignments and other instruments and
documents reasonably requested by the Buyer, and in form and substance
reasonably satisfactory to the Sellers, as may be necessary to evidence the sale
of the Purchased Assets to the Buyer; it being understood that such bills of
sale and other instruments and documents shall not require the Sellers to make
any additional representations, warranties or covenants, express or implied, not
expressly contained in this Agreement;
 
(iii)    the Closing Escrow Agreement, duly executed by Sellers;
 
 
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(iv)    a non-foreign certification (in form and substance reasonably
satisfactory to the Buyer) that satisfies the requirements of Treasury
Regulation Section 1.1445-2(b)(2);
 
(v)    a certificate of recent date as to the good standing of Sellers in their
respective jurisdictions of organization and in the State of Florida;
 
(vi)    a certified copy of the minutes of a meeting of the general partner or
member of the Sellers, as the case may be, approving the transactions
contemplated herein and authorizing the Sellers to enter into this Agreement and
the Ancillary Agreements and to perform their obligations hereunder and
thereunder, in a form satisfactory to Buyer and the Title Company;
 
(vii)    a certificate reconfirming that Sellers’ representations under Section
4.25 are true and correct in all material respects; and
 
(viii)    such other documents as Buyer may reasonably request for the purpose
of facilitating the consummation of the Acquisition.
 
(b)    Deliveries by the Buyer. At the Closing, the Buyer shall cause to be
delivered to the Sellers the following:
 
(i)    immediately available funds in an amount equal to the Remaining Payment,
subject to the prorations, adjustments and credits set forth in this Agreement,
in the manner set forth in Section 2.4(a);
 
(ii)    the Assignment and Assumption Agreement in the form of Exhibit C annexed
hereto (the “Assignment and Assumption Agreement”), dated the Closing Date, and
all other instruments of assumption and other documents reasonably requested by
the Sellers to confirm the Buyer’s obligation to duly assume and timely pay,
perform and discharge the Assumed Liabilities;
 
(iii)    the Closing Escrow Agreement, duly executed by Buyer;
 
(iv)    a certified copy of the minutes of a meeting of the board of directors
of the Buyer approving the transactions contemplated herein and resolving to
enter into this Agreement and the Ancillary Agreements; and
 
(v)    such other documents as Sellers may reasonably request for the purpose of
facilitating the consummation of the Acquisition.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
 
The Sellers make the following representations and warranties to the Buyer as of
August 17, 2005 subject to and qualified by any fact or facts disclosed in the
Schedules hereto that are provided to the Buyer as required in this Agreement.
 
 
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Section 4.1 Organization. Each of the Sellers has been duly organized, is
validly existing and in good standing under the laws of the state of its
formation. Westport Holdings is duly qualified to do business as a foreign
limited partnership and is in good standing under the laws of the State of
Florida.
 
Section 4.2 Authority; Execution and Delivery; Enforceability. Each of the
Sellers has full limited partnership power or limited liability company power,
as the case may be, and authority to execute this Agreement and the other
agreements and instruments to be executed and delivered in connection with this
Agreement (the “Ancillary Agreements”) to which it is a party and to consummate
the transactions contemplated to be consummated by it by this Agreement and such
Ancillary Agreements. Each of the Sellers has taken all limited partnership or
limited liability company action, as the case may be, required by its relevant
organizational documents to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party and to authorize
the consummation of the Acquisition and the other transactions contemplated
hereby and thereby. Each of the Sellers has duly executed and delivered this
Agreement and prior to the Closing will have duly executed and delivered each
Ancillary Agreement to which it is a party, and this Agreement constitutes, and
each Ancillary Agreement to which either of them is a party will after the
Closing constitute, its legal, valid and binding obligation, enforceable against
it in accordance with its terms subject, as to enforcement, to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
creditors’ rights generally and to general equitable principles (whether
considered in an action at law or in equity).
 
Section 4.3 No Conflicts or Violations; No Consents or Approvals Required. No
consent, approval, authorization or similar type of action (“Consent”) of, or
registration, declaration or filing with, any Federal, state or local court of
competent jurisdiction, governmental agency, authority, instrumentality or
regulatory body (“Governmental Entity”), is required to be obtained or made by
or with respect to the Sellers in connection with the execution, delivery and
performance of this Agreement, the Ancillary Agreements to which one or more of
them is a party or the consummation of the Acquisition, other than the Buyer
Regulatory Approvals.
 
Section 4.4 No Conflicts. The execution and delivery by each of the Sellers of
this Agreement does not, and each Ancillary Agreement to which it is a party
will not, and the consummation of the transactions contemplated to be
consummated by the Sellers in this Agreement and such Ancillary Agreements will
not, conflict with, or result in any breach of or constitute a default under, or
result in the creation of any Lien (as hereinafter defined) (other than
Permitted Liens (as hereinafter defined) or Liens caused by the Buyer) upon any
of the Purchased Assets under, any provision of (x) such Sellers’ organizational
documents; (y) any Contract to which a Seller is a party or by which any of the
Purchased Assets are bound; or (z) any judgment, order or decree, or statute,
law, ordinance, rule or regulation applicable to the Sellers or any of the
Purchased Assets. 
 
Section 4.5 Compliance with Laws. Except as set forth on Schedule 4.5, the
Retirement Center and, to the knowledge of the Sellers after reasonable inquiry
to the Health Center Operator, the Health Center, has been operated in
compliance with all laws, rules and regulations applicable to the conduct of its
business as currently conducted by the Sellers and the
 
 
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Health Center Operator, respectively. Except as set forth on Schedule 4.5, the
Facility is fully licensed by the State of Florida and the Health Center is in
good standing as a health care provider under the Medicare and Medicaid program
as administered by the federal government and the State of Florida. No notice or
communication has been received by any of the Sellers or, to the knowledge of
Sellers after reasonable inquiry to the Health Center Operator, by the Health
Center Operator from any Governmental Entity that there exists with respect to
the Facility any condition which violates any law, rule or regulation which
condition has not been rectified. 
 
Section 4.6 Litigation. There is no litigation or proceeding pending, or, to the
Sellers’ knowledge, threatened against any of the Sellers with respect to the
Facility or, to the Sellers’ knowledge, otherwise relating to the Facility,
except as set forth in Schedule 4.6.
 
Section 4.7 Real Property. 
 
(a)    The Sellers have not received any notice of a taking, condemnation,
assessment or eminent domain proceeding, actual or proposed, with respect to the
Real Property.
 
(b)    The Sellers own the Real Property in fee simple, free and clear of all
mortgages, liens, security interests, charges, claims, pledges or other
encumbrances of any kind (collectively, “Liens”), except (i) such Liens as are
set forth on Schedule 4.7; (ii) mechanics’, carriers’, workmen’s repairmen’s or
other like Liens arising or incurred in the ordinary course of business; (iii)
Liens for ad valorem Taxes and other governmental charges that are not due and
payable or that may thereafter be paid without penalty; and (iv) other title or
survey matters which become Permitted Exceptions pursuant to Section 7.2(d)
(subject to the provisions of Section 7.2(d) regarding the payment of Monetary
Liens at Closing, the Liens described in clauses (i), (ii), (iii) and (iv) above
are referred to collectively as “Permitted Liens”).
 
(c)    Set forth on Schedule 4.7 is a list of all leases in effect with respect
to the Facility under which any Persons (other than residents under Life Care
Contracts) lease space at the Facility from the Sellers (the “Leases”), and
other than the Leases and Life Care Contracts, Sellers have not entered into nor
do they have any knowledge of any other agreement giving any party the right to
use or occupy any part of the Facility.
 
Section 4.8 Facility Residents and Patients. 
 
(a)    Set forth on Schedule 4.8(a) are lists (the “Resident List”) setting
forth for each of the residents of the Retirement Center and for each
resident/patient of the Health Center as of June 30, 2005; (i) a unique number
(“ID Number”) assigned by Sellers for each resident(s) or patient(s); (ii) the
type of apartment or unit occupied by such resident(s) or patient(s); (iii) the
type of Life Care Contract or the residency or admission agreement (“HC
Occupancy Agreement”) executed by such resident(s) or patient(s); (iv) the
amount of the entrance fee paid by such resident(s) that is refundable; (v) the
move in date for each Life Care Contract resident; (vi) the monthly service fees
payable by such resident(s); (vii) the sex of the resident(s) or patient(s) with
regard to each Life Care Contract resident or patient; (viii) the amount of
Master Trust Debt, if any, attributable to such resident(s) as of June 30, 2005;
and (ix) the amount of deferred revenue recorded by the Sellers for the
applicable Life Care Contract as of June 30, 2005 and the amount of annual
amortization of earned income applicable to such Life Care
 
 
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Contract. Each such Life Care Contract and HC Occupancy Agreement is assignable
to Buyer without the consent of the subject resident(s).
 
(b)    Intentionally left blank
 
(c)    Set forth on Schedule 4.8(c), delineated by ID Number, is a list of all
Security, Waiting List and Sale Deposits paid by a resident or potential
resident to the Sellers or the Health Center Operator.
 
(d)    Set forth on Schedule 4.8(d), delineated by ID Number, is a list of PIPP
deposit liabilities as of the date of the Interim Balance Sheet.
 
(e)    Except as set forth on Schedule 4.8(e), utilizing the ID Number, the
Sellers have not received any notice of, and are not aware of, any material
default or breach of their obligations under any of the Life Care Contracts
which default or breach has not been cured.
 
(f)    Except as set forth on Schedule 4.8(f), utilizing the ID Number, none of
the patients, tenants or residents of the Facility have been given any
concessions or considerations for the rental or use of any patient rooms or
apartments by the Sellers.
 
(g)    A true, correct and complete list (the “Key”) setting forth the ID Number
of each resident, tenant or patient and each resident’s, tenant’s and patient’s
name and date of birth, formatted to permit Buyer to use the Key to identify
each individual resident, patient and tenant to which the information on
Schedule 4.8(a), Schedule 4.8(c), Schedule 4.8(d), Schedule 4.8(e) and Schedule
4.8(f) relates, has been provided to Buyer. As used in this Section 4.8, the ID
Number shall not be the resident(s)’ or patient(s)’ social security number or
any other number or identifier set forth at 45 CFR § 164.514(b).
 
Section 4.9 Environmental. The Sellers have not caused or permitted the Facility
to be used to generate, manufacture or refine, transport, treat, store, handle,
dispose, transfer, produce or process Hazardous Substances (as hereinafter
defined) or other dangerous or toxic substances, or solid waste, except in
compliance with all applicable federal, state and local laws or regulations, and
have not caused or permitted the Release (as hereinafter defined) of any
Hazardous Substances affecting the Facility, and to Seller’s knowledge, there
are no Hazardous Substances at the Facility in any amount that would violate
applicable laws. Any above ground storage tank that is located, or has been
located, on the Land has been maintained and operated in accordance with all
applicable laws. As used herein, (a) “Hazardous Substances” includes any
pollutants, dangerous substances, toxic substances, hazardous wastes, hazardous
materials, or hazardous substances as defined in or pursuant to the Resource,
Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.) as amended, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601, et seq.) as amended, the Clean Water Act (33 U.S.C. Section 1251,
et seq.) as amended, or any other federal, state or local environmental law,
ordinance, rule or regulation and (b) “Release” means releasing, spilling,
leaking, pumping and pouring, admitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping.
 
 
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Section 4.10 Contracts. 
 
(a)    Schedule 4.10 sets forth a complete list of all Contracts, which
constitute all of the contracts that are material to the business and operations
of the Facility or that have terms that will continue following the Closing. At
or prior to Closing, Sellers will deliver to the Buyer a true, correct and
complete copy of each Contract, including any modifications thereto.
 
(b)    Except as set forth in Schedule 4.10(b), the Sellers are not in material
breach of, or default under, any Contract and, to the knowledge of the Sellers,
no event has occurred that, with notice or lapse of time would constitute such a
breach or default or permit termination under such Contract.
 
(c)    Except as set forth in Schedule 4.10(c), to the knowledge of the Sellers,
no other party to any Contract is in material breach thereof or default
thereunder and, to the knowledge of the Sellers, no event has occurred that,
with notice or lapse of time would constitute such a breach or default or permit
termination, modification or acceleration under such Contract.
 
Section 4.11 Title to Assets. Except as set forth on Schedule 4.11, the Sellers
have good and valid title to the Purchased Assets (other than the Health Center
Assets). The Purchased Assets, including the Health Center Assets, are free and
clear of all Liens, other than Permitted Liens.
 
Section 4.12 Permits. All permits, consents, licenses, certificates of need,
approvals and authorizations from any Governmental Entity relating to the
operation of the Facility are described in Schedule 4.12, and to Seller’s
knowledge, such permits, consents, licenses, certificates of need, approvals and
authorizations are sufficient to allow the Facility to be operated in its
current fashion. Except as set forth on Schedule 4.12, (i) the Sellers are in
compliance with the terms and conditions of any permit, consent, license,
certificate of need, approval or authorization relating to the operation of the
Retirement Center; (ii) to the knowledge of the Sellers after reasonable inquiry
to the Health Center Operator, the Health Center Operator is in compliance with
the terms and conditions of any permit, consent, license, certificate of need,
approval or authorization relating to the operation of the Health Center; and
(iii) during the past twelve (12) months, the Sellers have not (and, to the
knowledge of Sellers after reasonable inquiry to the Health Center Operator, the
Health Center Operator has not) received written notice of any violation of any
permit, consent, license, certificate of need, approval or authorization
relating to the operation of the Facility that remains uncured.
 
Section 4.13 Taxes. 
 
(a)    Except as set forth on Schedule 4.13, (i) all Tax Returns required to be
filed by the Code or by applicable state or local Tax laws with respect to the
Purchased Assets for Pre-Closing Tax Periods have been timely filed or will be
timely filed; and (ii) all Taxes due with respect to such Tax Returns have been
paid in full or will be paid in full by the due date thereof.
 
(b)    The Sellers are not “foreign persons” within the meaning of Section 1445
of the Code.
 
 
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Section 4.14 Employees. Schedule 4.14 sets forth the name, title and total
compensation of each person employed at or leased to the Facility (the
“Employees”), including all accrued (whether vested or unvested) vacation,
personal time, time off, holiday or sick leave for such Employees; date of hire;
wage rate; and benefits received by such Employees or pension or benefit plans
in which such Employees participate. Except as set forth on Schedule 4.14, none
of the Sellers is a party to any employment contract with any of the Employees.
 
Section 4.15 Financial Statements. 
 
(a)    The Sellers have made available to the Buyer (i) the audited consolidated
balance sheets of the Sellers at December 31, 2003 and December 31, 2004 and the
related audited consolidated statements of income and cash flows for the fiscal
years then ended (the “Audited Financial Statements”), and (ii) the Sellers’
unaudited consolidated balance sheet at June 30, 2005 (the “Interim Balance
Sheet”) and the related unaudited statement of income for the six-month period
then ended (the “Interim Financial Statements,” and together with the Audited
Financial Statements, the “Financial Statements”). The Financial Statements, (i)
present fairly the financial condition and results of operations of the Sellers
as of the dates thereof or for the periods covered thereby, and (ii) have been
prepared in accordance with generally accepted accounting principles
consistently applied, except (x) as set forth on Schedule 4.15 and (y) that the
Interim Financial Statements are subject to normal recurring year-end
adjustments (which will not be material in the aggregate) and do not contain all
footnotes required under generally accepted accounting principles.
 
(b)    To the knowledge of Sellers, except as set forth on Schedule 4.15, there
are no liabilities relating to the Retirement Center or the Purchased Assets,
(other than the Health Center Assets) of a type required to be set forth on a
balance sheet prepared in accordance with generally accepted accounting
principles, except for liabilities accurately reflected or reserved against in
the Interim Balance Sheet or the Health Center Interim Balance Sheet and
liabilities incurred in the ordinary course of business of Sellers and the
Health Center Operator since the date of the Interim Balance Sheet.
 
Section 4.16 No Brokers. Except for Rockwood Realty Associates, L.L.C. (whose
fees and expenses will be the sole responsibility of the Sellers), no broker,
finder, agent or similar intermediary has acted for or on behalf of the Sellers
or any of their Affiliates in connection with this Agreement or the transactions
contemplated by this Agreement, and no broker, finder, agent or similar
intermediary is entitled to any broker’s, finder’s or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with the Sellers or any of their Affiliates, or any action taken
by the Sellers or any of their Affiliates.
 
Section 4.17 Employee Benefit Plans. 
 
(a)    Except as set forth on Schedule 4.17, on or prior to the date hereof,
Sellers and the Health Center Operator (including any entity required to be
aggregated with Sellers or the Health Center Operator under Section 414 of the
Code) have not sponsored, or participated in, a defined benefit pension plan (as
defined in Section 3(35) of ERISA), nor have Sellers or the Health Center
Operator (including any entity required to be aggregated with Sellers under
 
 
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Section 414 of the Code) ever contributed to, or participated in, a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA).
 
(b)    Except as set forth on Schedule 4.17, with respect to the Facility’s
Employees, neither Sellers or the Health Center Operator maintain, contribute
to, or participate in, any benefit agreement, plan, arrangement or practice
including any employee benefit plan as defined in Section 3(3) of ERISA (the
“Plans”).
 
(c)    Except as set forth on Schedule 4.17, all of the Plans are in material
compliance with all applicable laws, including the Code and ERISA.
 
Section 4.18 Insurance. Schedule 4.18 contains a true and complete list of all
policies of property, fire, casualty, liability (general and professional),
life, workers’ compensation, libel and slander, and other forms of insurance of
any kind (except title insurance policies) relating to the Purchased Assets
(other than the Excluded Assets) or the business and operations of the Facility
and owned or held by Sellers as of August 17, 2005 (the “Sellers Insurance
Policies”). All such policies are: (a) in full force and effect; and (b) valid,
outstanding, and enforceable policies, and the policy holder is not in default
in any material respect thereunder.
 
Section 4.19 Affiliated Transactions. Except as set forth on Schedule 4.19, (a)
none of the Transferred Contracts has as a party thereto an Affiliate of
Sellers, and (b) there are no and, during the immediately preceding two (2)
years, there have been no other transactions or arrangements between Sellers and
their Affiliates that were not entered into on arm’s length terms.
 
Section 4.20 Insolvency. Neither Seller is insolvent and each Seller has the
ability to pay all of its debts as they come due, and further is not involved
in, and is not contemplating, any bankruptcy, reorganization or insolvency
proceeding of any kind.
 
Section 4.21 Absence of Changes. 
 
(a)    Except as described on Schedule 4.21, since the date of the Interim
Balance Sheet and the Health Center Interim Balance Sheet, as applicable,
Sellers have, and, to Sellers’ knowledge after reasonable inquiry of the Health
Center Operator, the Health Center Operator has, conducted the business and
operations of the Facility in the ordinary course of business.
 
(b)    Since the date of the Interim Balance Sheet and the Health Center Interim
Balance Sheet, as applicable, no event has occurred that could reasonably be
deemed a Material Adverse Effect.
 
(c)    Except as described on Schedule 4.21, since August 17, 2005, the Sellers
have not (i) taken any of the actions enumerated in Section 6.1(b) or (ii)
failed to take any of the actions set forth in Section 6.1(c), other than the
actions described in Sections 6.1(c)(vi) and (c)(vii).
 
Section 4.22 Trademarks, Etc. To Sellers’ knowledge, with respect to the conduct
of the business of Sellers conducted at the Facility, except for the Masterpiece
Living trademark
 
 
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and as set forth on Schedule 4.22, Sellers do not own or use any trademarks,
trade names, copyrights or service marks, and with respect thereto, Sellers have
not received any notice or claim of conflict with the asserted rights of others.
To Sellers’ knowledge, except for payments required to be made pursuant to the
Confidentiality and License Agreement, dated as of April 2, 2005, between
Masterpiece Alliance Foundation, Inc. and Westport Holdings, Sellers are not
required to pay any royalty, license fee or similar type of compensation in
connection with the conduct of the business at the Facility.
 
Section 4.23 Health Center Financial Statements. 
 
(a)    The Sellers have provided to the Buyer (i) the audited consolidated
balance sheets of the Health Center Operator at December 31, 2003 and December
31, 2004 and the related audited consolidated statements of income and cash
flows for the fiscal years then ended (the “Health Center Audited Financial
Statements”), and (ii) the Health Center Operators’ unaudited consolidated
balance sheet at December 31, 2005 (the “Health Center Interim Balance Sheet”)
and the related unaudited statement of income for the twelve-month period then
ended (the “Health Center Interim Financial Statements,” and together with the
Audited Financial Statements, the “Health Center Financial Statements”). To the
Sellers’ knowledge, the Health Center Financial Statements do not contain a
misstatement or omission of financial information required to be set forth on a
balance sheet or income statement prepared in accordance with generally accepted
accounting principles consistently applied, except (x) as set forth on Schedule
4.23 and (y) that the Health Center Interim Financial Statements are subject to
normal recurring year-end adjustments (which will not be material in the
aggregate) and do not contain all footnotes required under generally accepted
accounting principles. To the Sellers’ Knowledge, the Health Center Financial
Statements have been prepared in accordance with the applicable provisions of
the Health Center Agreements.
 
(b)    To the knowledge of Sellers after reasonable inquiry to the Health Center
Operator, except as set forth on Schedule 4.23, there are no liabilities
relating to the Health Center or the Purchased Assets relating to the Health
Center of a type required to be set forth on a balance sheet prepared in
accordance with generally accepted accounting principles, except for (i)
liabilities accurately reflected or reserved against in the Health Center
Interim Balance Sheet; and (ii) liabilities incurred in the ordinary course of
business of the Health Center Operator since the date of the Health Center
Interim Balance Sheet.
 
Section 4.24 Condition of the Facility. Sellers do not have any actual knowledge
of any material defects to the physical structure of the Facility, ordinary wear
and tear excepted.
 
 
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ARTICLE V
 
REPRESENTATIONS AND WARRANTIES OF BUYER
 
The Buyer hereby represents and warrants to the Sellers as follows:
 
Section 5.1 Organization of the Buyer. The Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
 
Section 5.2 Authority; Execution and Delivery; Enforceability. The Buyer has
full limited liability company power and authority to execute this Agreement and
the Ancillary Agreements to which it is a party and to consummate the
transactions contemplated by this Agreement and the other transactions
contemplated hereby and thereby. The Buyer has taken all limited liability
company action required by its organizational documents to authorize the
execution and delivery of this Agreement and the Ancillary Agreements to which
it is a party and to authorize the consummation of the transactions contemplated
by this Agreement and the other transactions contemplated hereby and thereby.
The Buyer has duly executed and delivered this Agreement and prior to the
Closing will have duly executed and delivered each Ancillary Agreement to which
it is a party, and this Agreement constitutes, and each Ancillary Agreement to
which it is a party will after the Closing constitute, its legal, valid and
binding obligation, enforceable against it in accordance with its terms subject,
as to enforcement, to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors’ rights generally and to
general equitable principles (whether considered in an action at law or in
equity).
 
Section 5.3 No Conflict or Violations, No Consents or Approvals Required. No
Consent of, or registration, declaration or filing with any Governmental Entity
is required to be obtained or made by or with respect to the Buyer in connection
with the execution, delivery and performance of this Agreement, the Ancillary
Agreements to which it is a party or the consummation of the transactions
contemplated by this Agreement, other than the Buyer Regulatory Approvals. The
execution and delivery by the Buyer of this Agreement do not, and each Ancillary
Agreement to which it is a party will not, and the consummation of the
transactions contemplated by this Agreement and such Ancillary Agreements will
not, conflict with, or result in any breach of or constitute a default under, or
result in the creation of any Lien upon any of the properties or assets of the
Buyer under, or require Consent under any provision of (x) the Buyer’s
organizational documents, as amended to date; (y) any contract to which the
Buyer is a party or by which any of its properties or assets is bound; or (z)
any judgment, order or decree, or statute, law, ordinance, rule or regulation
applicable to the Buyer or any of its properties or assets, other than, in the
case of clauses (y) and (z) above, any such items that would not reasonably be
expected to have a material adverse effect on the ability of the Buyer to
consummate the transactions contemplated by this Agreement (a “Buyer Material
Adverse Effect”).
 
Section 5.4 Proceedings. There is not any (i) outstanding judgment, order or
decree against the Buyer or any of its subsidiaries; (ii) suit, action or
proceeding pending, or to the knowledge of the Buyer, threatened against the
Buyer or any of its subsidiaries; or (iii) investigations by any Governmental
Entity that are pending or threatened against the Buyer or
 
 
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any of its subsidiaries that, in any such case, would reasonably be expected to
have a Buyer Material Adverse Effect.
 
Section 5.5 No Brokers. No broker, finder, agent or similar intermediary has
acted for or on behalf of the Buyer in connection with this Agreement or the
transactions contemplated by this Agreement, and no broker, finder, agent or
similar intermediary is entitled to any broker’s, finder’s or similar fee or
commission in connection therewith based on any agreement, arrangement or
understanding with the Buyer or any action taken by the Buyer.
 
Section 5.6 Solvency. 
 
(a)    The Buyer has preliminary non-binding financing arrangements that it
believes will be sufficient to enable it to consummate the transactions
contemplated by this Agreement. The financing required to consummate the
transactions contemplated by this Agreement is referred to in this Agreement
collectively as the “Financing.” The Buyer does not have any reason to believe
that the Financing will not be available to the Buyer on a timely basis to
consummate the transactions contemplated by this Agreement.
 
(b)    As of the Closing and immediately after consummating the transactions
contemplated by this Agreement, the Buyer will not (i) be insolvent (either
because its financial condition is such that the sum of its debts is greater
than the fair value of its assets or because the present fair salable value of
its assets will be less than the amount required to pay its probable liability
on its debts as they become absolute and matured); (ii) have unreasonably small
capital with which to engage in its business, including the operation of the
Facility; or (iii) have incurred, or plan to incur, debts beyond its ability to
repay such debts as they become absolute and matured.
 
Section 5.7 Disclosure. 
 
(a)    The Buyer is an “accredited investor” as defined in Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended. The Buyer has such knowledge and experience in business and
financial matters, and in particular retirement communities similar to the
Facility, that it is able to evaluate the merits and risks of investment in the
Facility and has sufficient income and net worth so that it is able to bear the
economic risk of loss of its entire investment. The Buyer further acknowledges
that it has had the opportunity to ask questions of the Sellers and their
management and to examine such supplemental documentation as it deemed necessary
to make an informed decision concerning its investment in the Facility. The
Buyer has relied solely upon its own independent investigation and the Sellers’
representations in making its decision to acquire the Purchased Assets and the
Assumed Liabilities.
 
(b)    Except for the representations and warranties specifically set forth in
Article IV and except as otherwise provided herein, the Buyer acknowledges and
agrees that any purchase of the Purchased Assets hereunder shall be “AS IS”,
“WHERE IS”, and “WITH ALL FAULTS”. The Buyer further acknowledges that except
for representations and warranties made by the Sellers in this Agreement, no
representations or warranties have or will be made by the Sellers, their
employees, agents or representatives, or relied upon by the Buyer as to the
physical
 
 
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condition of the Real Property. The Buyer, at its sole cost and expense, will,
prior to the expiration of the Investigation Period, make all such tests,
investigations and studies as are necessary or desirable to determine the
suitability of the Facility for the Buyer’s intended purpose. Following the
expiration of the Investigation Period, the Buyer will be deemed to have
satisfied itself with respect to the Real Property and accepted the Real
Property in its “AS IS”, “WHERE IS”, condition, and “WITH ALL FAULTS” except for
the representations and warranties specifically set forth in Article IV. For the
purposes of this Agreement the “physical condition of the Real Property” shall
mean the quality, nature and adequacy of the physical condition of the Real
Property, including, without limitation, the quality of the design, labor and
materials used to construct the Improvements included in the Real Property; the
condition of structural elements, foundations, roofs, glass, mechanical,
plumbing, electrical, HVAC, sewage, boilers, and utilities; the geology, flora
fauna, soils, subsurface conditions, groundwater, landscaping, drainage and
irrigation of or with respect to the Real Property; the location of the Real
Property in or near any special taxing district, flood hazard zone, wetlands
areas, protected habitat, geological fault or subsidence zone, hazardous waste
disposal or clean-up site, or other special area; the existence, location or
condition of ingress, egress, access, and parking; the condition of the personal
property and any fixtures; and the presence of any asbestos or other Hazardous
Substances, dangerous or toxic substance, material or waste in, on, or under or
about the Real Property and the Improvements located thereon; or as to whether
the physical condition of the Real Property complies with applicable zoning,
building, health, safety, structural, mechanical and environmental and all other
laws, codes and regulations.
 
(c)    The Buyer further acknowledges and agrees that, (i) other than the
representations and warranties of the Sellers specifically contained in Article
IV of this Agreement or in the Deed or the Ancillary Agreements, none of the
Sellers, any of their Affiliates or any other person has made any representation
or warranty (including, without limitation, as to merchantability, suitability
or fitness for a particular purpose, or quality as to the Purchased Assets or as
to the condition or workmanship thereof, or the absence of any defects therein,
whether latent or patent) either expressed or implied (A) with respect to the
Facility, Purchased Assets, Assumed Liabilities or transactions contemplated
hereby, or (B) as to the accuracy or completeness of any information regarding
the Facility, Purchased Assets, Assumed Liabilities or transactions contemplated
hereby furnished or made available to the Buyer and its representatives. Without
limiting the generality of the foregoing, the Buyer acknowledges and agrees that
the Sellers do not make any representations or warranties relating to the
maintenance, repair, condition, design, performance or marketability of any
Purchased Asset, including merchantability or fitness for a particular purpose.
 
Section 5.8 No Knowledge of Misrepresentations or Omissions. The Buyer does not
have any knowledge that any of the representations and warranties of the Sellers
made in this Agreement are not true and correct in all material respects. The
Buyer does not have any knowledge of any material errors in, or material
omissions from, any Schedule to this Agreement.
 
ARTICLE VI
 
COVENANTS OF THE SELLERS AND THE BUYER
 
 
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Section 6.1 Covenants Relating to Conduct of the Facility. 
 
(a)    Ordinary Course of Business. Except for matters (i) expressly consented
to by the Buyer after the date hereof in writing with specific reference to this
Section 6.1 (which consent will not be unreasonably withheld or delayed), or
(ii) otherwise specifically contemplated by the terms of this Agreement, from
the date of this Agreement to the Closing Date, the Sellers shall (x) operate
the Retirement Center in the ordinary course in a manner consistent with past
practice and (y) exercise their respective rights under the Health Center
Agreements in the ordinary course in a manner consistent with past practice.
 
(b)    Negative Covenants of Sellers. From the date hereof to the Closing Date,
Sellers shall not, without the prior written consent of the Buyer with specific
reference to this Section 6.1 (which consent shall be given or refused in
Buyer’s sole and absolute discretion, provided that the Buyer’s failure to grant
or withhold consent within five Business Days following the Sellers’ written
request for consent shall be deemed a grant of consent by the Buyer):
 
(i)    sell, assign, lease or transfer any of the Purchased Assets, or remove
any item of personal property from the Facility, except, in each case, for the
purpose of repair or replacement or as otherwise in the ordinary course of
business;
 
(ii)    enter into any new Lease or Contract (other than Life Care Contracts) or
amend any existing Contract, except in the ordinary course of business, and if
such new Lease or Contract or amendment shall have an individual value in excess
of $25,000, it shall be terminable upon less than 90 days’ prior notice without
cause and without payment of any fee or penalty;
 
(iii)    enter into any Life Care Contracts, except in the forms of Life Care
Contracts approved by Buyer (as set forth on Schedule 6.1(b)(iii) and in
accordance with the range of selling prices, entrance fee refunds and service
fees set forth on Schedule 6.1(b)(iii) attached hereto);
 
(iv)    create, assume or permit to exist any Lien upon any of the Purchased
Assets, except for Permitted Liens and Liens existing as of the date of this
Agreement that will be discharged prior to or on the Closing Date;
 
(v)    waive any material right relating to the Facility or the Purchased
Assets, except in the ordinary course of business;
 
(vi)    allow the levels of inventories, supplies and materials to vary
materially from those customarily maintained, or defer delivery of any
inventories, supplies or materials outside the ordinary course of business;
 
(vii)    intentionally omitted;
 
(viii)    defer any regularly scheduled maintenance or capital replacement
items, including without limitation failing to use reasonable efforts to
complete prior to the
 
 
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Closing Date all of those items set forth on Schedule 6.1(b)(viii), or fail to
repair or replace any emergency repair item; or
 
(ix)    waive or amend, or consent to the Health Center Operator’s failure to
perform, any of the Health Center Operator’s obligations under the Health Center
Agreements.
 
(c)    Affirmative Covenants of Sellers. From and after the date of this
Agreement until the Closing Date, the Sellers shall:
 
(i)    use their respective commercially reasonable efforts to keep, or to cause
to be kept, all Sellers Insurance Policies, or suitable replacements therefor,
in full force and effect;
 
(ii)    preserve their existence and keep their business organization intact;
maintain existing franchises and licenses relating to the Retirement Center and
the operation thereof in accordance with this Agreement; pay when due all
obligations and liabilities arising under the Transferred Contracts to which
they are a party; and use commercially reasonable efforts to preserve for Buyer
the relationships of the Retirement Center with suppliers, employees, residents
and others with whom the Retirement Center has business relationships;
 
(iii)    maintain the Purchased Assets in a manner that is in compliance with
all legal requirements and that is consistent with the Facility’s ordinary
course of business;
 
(iv)    pay all of their liabilities as they come due;
 
(v)    pay and perform, in the ordinary course of business, obligations under
the Transferred Contracts to which either of the Sellers is a party in
accordance with the respective terms and conditions of such Transferred
Contracts;
 
(vi)    within thirty (30) days following the end of each calendar month prior
to the Closing Date, deliver to Buyer true and complete copies of the unaudited
balance sheets and related unaudited statements of income of, or relating to,
the Facility for the month then ended, together with the notes, if any, related
thereto, which shall have been prepared from and in accordance with the books
and records of the Facility in a manner consistent with the Interim Financial
Statements and the Interim Health Center Financial Statements, and which shall
fairly present the financial position and results of operations of the Facility
as of the date and for the period indicated. All liabilities of the Sellers, the
Health Center Operator or the Facility will be accurately reflected or reserved
against in such monthly balance sheets, except for liabilities incurred in the
ordinary course of business of the Facility and in accordance with the
provisions of this Agreement since the date of such financial statements. In
connection with the delivery of such financial statements, Seller also shall
deliver true and complete copies of the adjusted trial balances used to prepare
such financial statements;
 
(vii)    within thirty (30) days following the end of each calendar month prior
to the Closing Date, and as of the Closing Date, deliver to Buyer updated
Schedules 2.1(a)(v), 4.8(a), 4.8(c) and 4.8(d);
 
 
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(viii)    promptly notify the Buyer of any fact or condition that (i) causes or
constitutes a breach of Sellers’ representations, warranties or covenants under
this Agreement; or (ii) would reasonably be likely to cause such a breach; and
 
(ix)    cause to be removed, at or prior to the Closing Date, those Liens on the
Purchased Assets that do not constitute Permitted Exceptions.
 
(x)    UST Closure Documentation. The Sellers shall use their reasonable best
efforts to provide to the Buyer prior to the Closing documentation satisfactory
to Buyer confirming the appropriate closure in accordance with applicable law
relating to the removal of two underground storage tanks from the Land in 1993.
 
(d)    Notwithstanding anything to the contrary contained in this Article VI,
the obligations of the Sellers with respect to the operations of the Health
Center and the Purchased Assets that relate to the Health Center shall be
limited to the enforcement of its rights under the Health Center Agreements. Any
action or omission by the Health Center Operator that is inconsistent with the
provisions of this Article VI shall promptly be disclosed to Buyer, but shall
not constitute a breach or default of the Sellers’ obligations under this
Article VI unless the Sellers allowed, permitted, approved or consented to such
action or omission.
 
(e)    Notwithstanding anything to the contrary contained in this Article VI,
the Sellers may terminate or fail to renew, in accordance with its terms, any
contract identified by Buyer as requiring a Required Consent if Sellers have
used commercially reasonably efforts to obtain the Required Consent and have not
received the Required Consent within thirty (30) days following the Sellers’
request.
 
Section 6.2 Access to Information. The Sellers shall, and shall cause their
Affiliates to, afford to the Buyer and its accountants, counsel and other
representatives full access, upon reasonable prior notice during normal business
hours during the period prior to the Closing, to the personnel, properties,
books, Contracts, commitments and records relating to the Facility (other than
the Excluded Assets); provided, however, that such access does not unreasonably
disrupt the normal operations of the Sellers or any of their Affiliates relating
to the Facility. Sellers shall notify the Buyer in writing of any material
adverse change in the financial position or earnings of the Facility after the
date hereof and prior to the Closing Date and any unexpected emergency or other
unanticipated material adverse change in the business of the Facility and of any
governmental complaints, investigations, inspections or adjudicatory proceedings
(or communications indicating that the same may be contemplated) (including
providing copies of such complaints or reports of investigations, inspections or
proceedings), and shall keep Buyer fully informed of such events and permit
Buyer’s representatives to participate in all discussions relating thereto.
 
In addition, within five (5) days prior to Closing, Sellers shall complete an
inventory of all items of furniture, fixtures, equipment and other assets
described in Section 2.1(a)(v) (excluding those that are insignificant), which
shall be in form and scope reasonably satisfactory to Buyer.
 
 
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In addition, Sellers shall use their commercially reasonable best efforts to
cause the Health Center Operator to reasonably cooperate with Buyer during the
period prior to the Closing and to provide Buyer with copies of all documents
that the Health Center Operator is required to provide to Sellers (or any of
Sellers’ lenders) pursuant to the terms of the Health Center Agreements and any
other information reasonably requested by the Buyer with respect to the
operation of the Health Center or the Health Center Assets. Nothing contained in
this Section 6.2 shall obligate the Sellers to breach any duty of
confidentiality owed to any person whether such duty arises contractually,
statutorily or otherwise.
 
Section 6.3 Confidentiality. The Buyer acknowledges and confirms that the
information being provided to it in connection with the transactions
contemplated by this Agreement is subject to the terms of a confidentiality
agreement between the Buyer and Rockwood Realty Associates, L.L.C. (the
“Confidentiality Agreement”), the terms of which are incorporated herein by
reference. Effective upon, and only upon, the Closing, the Confidentiality
Agreement shall terminate with respect to information relating solely to the
Facility; provided, however, that Buyer further acknowledges and confirms that
any and all other information provided to it by the Sellers or their
representatives concerning the Sellers and their Affiliates shall remain subject
to the terms and conditions of the Confidentiality Agreement after the Closing
Date.
 
Section 6.4 Best Efforts. 
 
(a)    On the terms and subject to the conditions of this Agreement, each of the
Sellers and the Buyer shall use its reasonable best efforts to cause the Closing
to occur, including taking all reasonable actions necessary to comply promptly
with all legal requirements that may be imposed on it or any of their Affiliates
with respect to the Closing.
 
(b)    Without limiting the generality of the foregoing, the Buyer agrees: (i)
to prepare and submit applications required to obtain the Buyer Regulatory
Approvals to the applicable Governmental Entities within ten (10) days after the
date of this Agreement (the “Application Date”), (ii) to use its good faith
efforts (not including the payment of any money other than routine application
fees and the like) to receive confirmation from the Florida Office of Insurance
Regulation that the Buyer’s application (or the application of Buyer’s manager,
lessee or other designee) pursuant to Chapter 651, Florida Statutes is complete
(the “Application Completion Notice”) no later than April 30, 2006 (the “Chapter
651 Application Completion Date”), and (iii) to use its good faith efforts (not
including the payment of any money other than routine application fees and the
like) to obtain the Buyer Regulatory Approvals by July 1, 2006 (the “Approval
Date”). To the extent there is any existing violation at the Facility that must
be corrected in order for Buyer to obtain the Buyer Regulatory Approvals,
Sellers must make any such corrections at their sole cost and expense, provided
that the Sellers shall have the right to terminate the Agreement in the event
that the estimated costs and expenses to correct any such violations exceed more
than $250,000 and the Buyer does not agree to pay the amount in excess of
$250,000. The Buyer has no knowledge of any pending or threatened governmental
actions which would prohibit or delay it from obtaining such approvals. The
Buyer shall promptly notify the Sellers upon the receipt or delay in receipt of
any Buyer Regulatory Approvals.
 
 
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Section 6.5 Employment Matters. 
 
(a)    Offers of Employment. The Buyer’s Manager shall extend offers of
employment to all of the employees of the Sellers, the Health Center Operator or
any of their Affiliates that are working at the Facility and that are subject to
the Collective Bargaining Agreements (“CBA Employees”) pursuant to the terms and
provisions of the new collective bargaining agreement attached hereto as Exhibit
D (the “New CBA”). The Buyer’s Manager shall extend offers of employment to
substantially all of the employees of the Sellers, the Health Center Operator or
any of their Affiliates that are working at or leased to the Facility and that
are not subject to the Collective Bargaining Agreements (the “Non-CBA
Employees”, and together with the CBA Employees, the “Eligible Employees”) which
offers shall be subject to post-closing background checks, pre-closing drug
testing, license verifications and, in the case of Non-CBA Employees, customary
and reasonable employment policies. Buyer’s Manager shall extend offers of
employment to and retain at least that number of employees as shall be necessary
for Sellers to avoid liability under the WARN Act. All such offers made to
Non-CBA Employees will be on an “at will” basis, and at substantially the same
salary or wage level, bonus opportunity, benefits and conditions of employment.
The Sellers shall terminate the employment of all Eligible Employees who accept
the Buyer’s Manager offer of employment (each Eligible Employee accepting the
Buyer’s manager and/or lessee’s offer of employment being hereinafter referred
to as a “Transferred Employee”) immediately prior to the Closing Date, and
Sellers shall pay all compensation due to the Transferred Employees prior to the
Closing Date, including all salaries, wages, unemployment taxes, FICA taxes and
withholding taxes, but excluding all accrued (vested or unvested) vacation,
personal time, time-off, holiday or sick leave for the Transferred Employees to
the extent that Buyer has received a credit therefor against the Purchase Price
pursuant to Section 2.6(b). Sellers shall be responsible for all severance
liability, if any, for those employees that are not Transferred Employees and
those Transferred Employees that fail, or do not receive satisfactory,
post-closing background checks, drug tests or license verifications.
 
(b)    Multiemployer Pension Plans. Intentionally omitted.
 
(c)    Buyer’s Manager or Lessee. All of the parties hereto hereby acknowledge
that Buyer shall not assume any responsibility for, or any obligations or
liabilities relating to, the Transferred Employees, or under any employment
agreements or arrangements, and, except as specifically provided in Section
2.2(vi), such obligations and liabilities shall not be deemed to be part of the
Assumed Liabilities. All obligations to the Transferred Employees after the
Closing Date, including any obligations included as part of the Assumed
Liabilities under Section 2.2(vi) and any obligations under Section 6.5(a),
shall be assigned to, and assumed and subject to indemnification by Buyer’s
Manager. American Retirement Corporation (“ARC”) has guaranteed the obligations
of ARC Bradenton Management, Inc., ARC’s wholly-owned subsidiary, under this
Agreement, pursuant to a Guaranty attached hereto as Exhibit E. To the extent
that the obligations under Section 6.5(a) and the Assumed Liabilities under
2.2(vi) have been so assumed by Buyer’s Manager and guaranteed by ARC, the Buyer
shall have no responsibility, liability or obligation therefor.
 
Section 6.6 Notice of Breach. From the date hereof through the Closing Date, if
any party obtains knowledge of any material fact that causes such party to
reasonably believe that
 
 
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any of the representations, warranties or covenants of the other party(ies) set
forth in this Agreement are untrue or inaccurate in any respect, then such party
shall inform the other party(ies) of such fact promptly after obtaining
knowledge thereof. Notwithstanding the foregoing, the failure by any party to
provide any such notice shall not relieve the other party(ies) from, or serve as
the basis of a defense in respect of, the breach of the representation, warranty
or covenant at issue.
 
Section 6.7 Updating Schedules. Sellers will promptly supplement or amend the
various Schedules to this Agreement to reflect any fact or condition that causes
or constitutes a breach of any of Sellers’ representations, warranties and
covenants in this Agreement. In addition, within ten (10) days (or the
applicable time period set forth in Section 6.1) following the end of each
calendar month prior to the Closing Date and as of the Closing Date, Sellers
will deliver to Buyer supplements or amendments to the Schedules to this
Agreement to reflect events and circumstances that occur between the date of
this Agreement and Closing in compliance with the terms and provisions of this
Agreement, which, if existing, occurring or known on the date of this Agreement,
would have been required to be set forth or described in such Schedules or which
are necessary to correct any information in such Schedules which has been
rendered inaccurate by such events and circumstances. Any such supplement or
amendment to the Schedules to this Agreement shall not affect any rights of
Buyer under Articles VII, VIII or XI (except to the extent specifically set
forth in Section 7.5). 
 
Section 6.8 HIPAA Cooperation. Each party agrees to cooperate with the other so
as to allow compliance with the applicable sections of HIPAA in responding to
individuals regarding their rights under HIPAA, including, but not limited to,
responding to individuals’ requests for (i) access to protected health
information (“PHI”) under 45 C.F.R. § 164.524; (ii) amendments to PHI under 45
C.F.R. § 164.526; and (iii) accountings of disclosures of PHI under 45 C.F.R. §
164.528.
 
Section 6.9 Non-Solicitation Agreement. From and after the date of execution and
delivery of this Agreement by Sellers until the earlier of the termination of
this Agreement or July 1, 2006, Sellers will not (and will not permit any
Affiliate or any other person acting for or on behalf of Sellers or of any
Affiliate thereof), without the prior written consent of Buyer: (i) offer for
sale the Facility or the Purchased Assets (or any portion thereof) or any
ownership interest of any entity owning any of the Facility or the Purchased
Assets; (ii) solicit offers to buy all or any portion of the Facility or the
Purchased Assets or any ownership interest of any entity owning any of the
Facility or the Purchased Assets; (iii) hold discussions with any party (other
than Buyer) looking toward such an offer or solicitation or looking toward a
merger, business combination or consolidation of any entity owning any of the
Facility or the Purchased Assets; (iv) enter into any agreement with any party
(other than Buyer) with respect to the sale or other disposition of the Facility
or the Purchased Assets (or any portion thereof) or any ownership interest in
any entity owning any of the Facility or the Purchased Assets or with respect to
any merger, consolidation, business combination or similar transaction involving
any entity owning any of the Facility or the Purchased Assets; or (v) furnish or
cause to be furnished any information with respect to Sellers, the Facility or
the Purchased Assets to any Person that Sellers or such Affiliate or any such
Person acting for or on their behalf knows or has reason to believe is in the
process of considering any such acquisition, merger, consolidation, combination,
reorganization or similar transaction. If Sellers or any such Affiliate or any
such Person acting on
 
 
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their behalf receives from any Person (other than Buyer or a representative
thereof) any offer, inquiry or information request referred to above, it will
promptly advise such Person, in writing, of the terms of this Section 6.9.
 
Section 6.10 ERISA Certifications. Sellers will execute certifications or add
other provisions to the documents necessary for Prudential and the Buyer to
determine that Prudential and the Buyer’s ownership will not cause a violation
of ERISA requirements, to the extent provided below. On or before the date which
is ten (10) Business Days prior to Closing, Buyer will provide to Sellers the
form (or forms) of ERISA certifications and/or provisions which Buyer and
Prudential will require Sellers to execute and deliver, at Closing, as a
condition to Closing. On or before seven (7) Business Days prior to Closing,
Sellers will notify Buyer, in writing, of any objections Sellers may have to the
form(s) of the certifications and/or provisions submitted; provided, however,
that Sellers will not object to any such form(s) to the extent they merely
require Sellers to make truthful factual representations. To the extent Sellers
do not make valid objections to the submitted form(s) by the required date,
Sellers will be obligated, as a condition to Closing, to execute and deliver, at
Closing, any or all of the submitted ERISA certifications or provisions required
by Buyer. If Sellers make valid objections to the submitted form(s), Sellers
will be obligated, as a condition to Closing, to execute and deliver the
submitted certifications or provisions, modified appropriately to meet Sellers
valid objections. The parties hereto hereby acknowledge that the Sellers shall
have no liability whatsoever to Prudential or the Buyer in the event of any
violation of ERISA by Prudential or the Buyer, except to the extent that the
violation arises out of the facts contained in any false statement made by
Sellers in such ERISA certifications.
 
Section 6.11 Office of Insurance Regulation Approval. In the event that Buyer
and Sellers mutually agree to proceed with the Closing (or Buyer elects in its
sole discretion to proceed with Closing as set forth in the second sentence of
this Section 6.11) prior to Buyer obtaining a certificate of authority from the
Florida Office of Insurance Regulation to operate the Facility as a life care
facility, Sellers and Buyer both hereby acknowledge and agree that the
Acquisition will not become “final” until such time as Buyer is actually issued
such a certificate of authority. If the Florida Office of Insurance Regulation
ultimately refuses to issue the certificate of authority to Buyer, the Health
Center Assignee shall continue to operate the Health Center pursuant to
agreements mutually satisfactory to Sellers and the Health Center Assignee for
such interim period of time beginning as of the date of such refusal and
continuing for so long as may be reasonably necessary for Sellers to find a
replacement operator for the Health Center. The Health Center Assignee shall
receive no compensation for such interim services, but shall not be required to
pay or incur any cost or expense relating to the operation of the Health Center
for such interim period. The Health Center Assignee shall remit to Sellers all
revenues (net of expenses of operation) relating to the operation of the Health
Center during such interim period.
 
Section 6.12 Health Center Notification. Within five (5) days of signing this
Agreement, Sellers shall give notice to the Health Center Operator that Sellers
are terminating the Health Center Lease to be effective as of the Closing Date.
Prior to the end of the Investigation Period, the Sellers shall provide the
Buyer with a copy of a proposed agreement to be entered into between the Sellers
and the Health Center Operator providing for the termination of the Health
Center Agreements. The Sellers shall permit the Buyer a reasonable opportunity
to
 
 
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review and comment on such materials prior to the Sellers’ circulation of the
same to the Health Center Operator. The Sellers will act reasonably in
considering any comments that may be timely provided by the Buyer and its
counsel with respect to such agreement prior to the Sellers’ circulation of the
same to the Health Center Operator. Prior to the Closing, the Sellers shall use
their reasonable best efforts to obtain estoppel certifications from (i) the
trustee(s) of the Freedom Village Master Trusts and (ii) the Health Center
Operator, both in form, scope and substance reasonably acceptable to the Buyer.
 
Section 6.13 CIH Remediation. The Sellers have retained Environmental Safety
Consultants, Inc., as a Certified Industrial Hygienist (the “Approved CIH”) to
develop a comprehensive mold remediation protocol for the Facility. Such mold
remediation protocol, as amended by an addendum delivered to the Buyer prior to
the date hereof, is referred to herein as the “Remediation Plan.” The Sellers
shall use their reasonable best efforts, at their sole cost and expense, to
continue to (i) remediate any mold contamination in accordance with the
Remediation Plan; (ii) repair or replace any ceiling tile, sheetrock, wallboard
or similar building material as may be necessary to restore a remediated area of
the Facility to its condition prior to such remediation; and (iii) clean certain
components of the HVAC system in accordance with the Remediation Plan
(collectively, the “Remediation”), all prior to the date that is sixty (60) days
after the date hereof. In addition, the Sellers shall use their reasonable
commercial efforts to continue to remediate any reasonably obvious or known
source of water intrusion at the Facility which caused, or may have caused, any
mold colonization requiring the aforementioned remediation. Notwithstanding the
foregoing, the Sellers shall not be required to repair, replace or upgrade any
HVAC systems. At least five (5) business days prior to Closing, Sellers shall
provide a written certification (the “CIH Certificate”) from the Approved CIH
that the Mold Remediation work has been completed in accordance with the
Remediation Plan. Sellers agree to permit Professional Service Industries
(“PSI”) and Buyer to monitor the course of the Remediation and periodically
perform additional testing procedures. Within four (4) Business Days following
delivery of the CIH Certificate, PSI shall reasonably and in good faith either
(i) confirm in writing its agreement with the CIH Certificate or (ii) provide a
written report setting forth in reasonable detail the ways in which the
Remediation has not been completed in accordance with the Remediation Plan (such
report, a “Remediation Deficiency Notice”). In the event that the Sellers timely
receive a Remediation Deficiency Notice, the Sellers shall use their reasonable
best efforts to cure such deficiency in a timely manner.
 
ARTICLE VII
 
CONDITIONS TO CLOSING
 
Section 7.1 Conditions to Each Party’s Obligation. The obligation of the Buyer
to purchase and pay for the Purchased Assets and the obligation of the Sellers
to sell, transfer, assign and deliver the Purchased Assets to the Buyer is
subject to the satisfaction (or waiver by the Buyer and the Sellers) on or prior
to the Closing Date of the following conditions:
 
(a)    Master Trust Consent. The Sellers and the Buyer shall have such consents
as are required pursuant to or under the Freedom Village Master Trust Agreement,
as amended to date, for the transactions contemplated by this Agreement,
including, but not limited to, an
 
 
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estoppel certificate executed by the trustee(s) of the Freedom Village Master
Trusts, in form and substance reasonably acceptable to Buyer.
 
(b)    Certain Buyer Regulatory Approvals. The Buyer shall have received the
AHCA Assurances.
 
(c)    No Injunctions or Restraints. No applicable law, ordinance, rule,
regulation or injunction enacted, entered, promulgated, enforced or issued by
any Governmental Entity or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Agreement shall be in
effect.
 
Section 7.2 Conditions to Obligation of the Buyer. The obligation of the Buyer
to purchase and pay for the Purchased Assets is subject to the satisfaction (or
waiver by the Buyer) on or prior to the Closing Date of the following additional
conditions: 
 
(a)    Representations and Warranties (No Materiality Qualification). The
representations and warranties of the Sellers in this Agreement that do not
contain a materiality qualification of any kind shall be true and correct in all
material respects as of August 17, 2005 and as of the Closing Date as though
made on the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all material
respects, on and as of such earlier date, and as of the Closing Date), subject
to any matters that are permitted to occur pursuant to the provisions of this
Agreement.
 
(b)    Representations and Warranties (Materiality). The representations and
warranties of the Sellers in this Agreement that contain a materiality
qualification of any kind shall be true and correct in all respects as of August
17, 2005 and as of the Closing Date as though made on the Closing Date, except
to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct in all respects, on and as of such earlier date, and as of the Closing
Date), subject to any matters that are permitted to occur pursuant to the
provisions of this Agreement.
 
(c)    Performance of Obligations of the Sellers. The Sellers shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by the
Sellers by the time of the Closing.
 
(d)    Title Insurance. The Buyer shall have received a title insurance
commitment (the “Title Commitment”) from the title company (the “Title Company”)
chosen by Sellers and reasonably acceptable to Buyer committing to issue to the
Buyer, at Closing, an Owner’s Title Policy (on the latest standard ALTA Form B)
in an amount equal to the amount allocated to the Real Property pursuant to
Section 2.4(d), at promulgated rates and without additional premium, insuring
that the Buyer has good and marketable title to the Real Property in fee simple,
free and clear of Liens, except for Permitted Exceptions (as described below).
Sellers shall cause the Title Commitment, together with legible copies of all
documents referred to therein, to be provided to Buyer on or before ten (10)
days after the date of this Agreement. Buyer shall obtain, at Buyer’s expense, a
current and accurate survey (“Survey”) of the Real Property (Sellers will
deliver to Buyer, as part of the due diligence materials, Sellers’ most recent
 
 
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survey of the Real Property). If the Title Commitment notes, or the Survey
shows, any Lien or encumbrance which the Buyer in its sole discretion is not
willing to waive, the Buyer shall give notice of such fact in writing to the
Sellers not later than five (5) Business Days prior to the end of the
Investigation Period (“Objection Notice”). Upon receipt of the Objection Notice,
Sellers shall notify Buyer, in writing (“Response Notice”), which of the matters
set forth in Buyer’s Objection Notice will be cured by Sellers at or prior to
Closing. Sellers shall be obligated to cure any Lien which is a mortgage,
security interest or other lien which can be satisfied with the payment of money
and which was created by the act or omission of Sellers (“Monetary Liens”),
other than mortgages, security interests or other liens relating to the Freedom
Village Master Trusts that are of public record or previously provided to Buyer.
Otherwise, Sellers shall not be obligated to cure any matters set forth in
Buyer’s Objection Notice. However, if Sellers’ Response Notice informs Buyer
that Sellers will cure and remove certain matters described in Buyer’s Objection
Notice then, as a condition to Closing, Sellers shall be obligated to cure the
matters described in Sellers’ Response Notice, as well as any Monetary Liens.
All matters shown in the Title Commitment and on the Survey to which Buyer does
not object in Buyer’s Objection Notice or to which Buyer does object in its
Objection Notice but which Sellers are not obligated to and elect not to cure
are referred to collectively herein as the “Permitted Exceptions”. At Closing,
if Sellers are not able to cure all Monetary Liens and any matters which
Sellers, in the Response Notice, agree to cure, Buyer may elect either (i) to
terminate this Agreement and receive a full refund of the Earnest Money Deposit,
or (ii) to proceed with the Closing and receive a credit against the Purchase
Price in the amount necessary to cure and remove all Monetary Liens and all
matters which, in the Response Notice, Sellers agree to cure. Notwithstanding
anything to the contrary contained in this Agreement, nothing herein shall be
deemed to be a waiver by the Buyer of any title objections which appear
subsequent to the effective date of Buyer’s Title Commitment, so long as the
Sellers are given notice of such subsequent objections within ten (10) days
after the Buyer is made aware of them, and the Buyer shall have the same
obligations with respect to any such new objections as provided above in this
Section 7.2(d). Upon receipt of notice from Buyer of any such new title
objections, Sellers must again provide a Response Notice within two (2) business
days thereafter and Sellers shall be obligated, as a condition to Closing, to
cure any Monetary Liens and any such new objections which Sellers commit to cure
in the new Response Notice. If there are any such new matters which Sellers, in
their new Response Notice, do not commit to cure, Buyer may elect to terminate
this Agreement within two (2) Business Days of the new Response Notice and
receive a full refund of the Earnest Money Deposit. If Buyer does not elect to
terminate, the newly discovered title objections which Sellers are not obligated
cure, and do not elect to cure, shall become Permitted Exceptions. It shall be a
condition to Buyer’s obligation to proceed with the Closing that Sellers’ shall
have cured all Monetary Liens and all other matters which Sellers’ have
committed to cure in any Response Notice.
 
(e)    Buyer Regulatory Approvals. The Buyer shall have received the Buyer
Regulatory Approvals.
 
(f)    No Material Adverse Effect. No Material Adverse Effect (other than a
condemnation, fire or other casualty event described in Article IX) shall have
occurred following the date hereof and no event that would reasonably be
expected to result in a Material Adverse Effect shall have occurred following
the date hereof.
 
 
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(g)    Termination of Health Center Agreements; Acquisition of Health Center
Assets.
 
(i)    The Health Center Agreements shall have been terminated in their entirety
pursuant to a written instrument executed by the Health Center Operator
effective as of the Closing Date, except for the Health Center Agreement
Indemnities which shall survive in accordance with their terms.
 
(ii)    The Buyer (or, if applicable, the Health Center Assignee) shall have
acquired the Health Center Assets pursuant to the provisions of Section 8.5 of
the Health Center Lease, and the Sellers shall have assigned to the Buyer (or,
if applicable, the Health Center Assignee), directly or indirectly, all of the
Sellers’ rights (but not their obligations) under said Section 8.5 of the Health
Center Lease, all without the payment of any consideration of any type, kind or
nature payable by the Buyer (including without limitation any consideration
payable to the Health Center Operator under said Section 8.5 or Section 33.2 of
the Health Center Lease).
 
(h)    ERISA. Prudential and the Buyer shall be satisfied that their ownership
interests in the Property, in the agreed form, will not cause a violation of
ERISA requirements and Sellers shall have executed and delivered certifications
and documents, in the forms submitted by Buyer in accordance with the provisions
of Section 6.10 above.
 
(i)    Management Agreements. All management agreements of the Sellers or the
Health Center Operator in effect at the Facility shall be terminated as of the
Closing Date.
 
(j)    Mold Remediation. The Remediation Completion Date shall have occurred.
 
Section 7.3 Conditions to Obligation of the Sellers. The obligation of the
Sellers to sell, transfer, assign and deliver the Purchased Assets is subject to
the satisfaction (or waiver by the Sellers) on or prior to the Closing Date of
the following additional conditions:
 
(a)    Representations and Warranties. The representations and warranties of the
Buyer made in this Agreement shall be true and correct in all material respects,
as of the date hereof and as of the Closing Date as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct in all material respects, on and as of such earlier date).
 
(b)    Performance of Obligations of the Buyer. The Buyer shall have performed
or complied in all material respects with all obligations and covenants required
by this Agreement to be performed or complied with by the Buyer by the time of
the Closing.
 
(c)    ARC Guaranty. ARC shall have executed and delivered to the Sellers the
ARC Guaranty.
 
(d)    Buyer’s Manager Assumption Agreement. The Buyer’s Manager shall have
executed and delivered to the Sellers an assumption agreement reasonably
satisfactory to
 
 
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the Sellers with respect to the employee matters being assumed by the Buyer’s
Manager pursuant to Section 6.5.
 
Section 7.4 Frustration of Closing Conditions. Neither the Buyer nor the Sellers
may rely on the failure of any condition set forth in this Article VII to be
satisfied if such failure was caused by such party’s failure to act in good
faith or to use reasonable efforts to cause the Closing to occur, as required by
Section 6.4. 
 
Section 7.5 Effect of Certain Waivers of Closing Conditions. If prior to the
Closing any party (the “receiving party”) receives a Notice of Material Breach
(as hereinafter defined), then such receiving party may either (i) waive in
writing any condition in Article VII applicable to the breach specified in such
Notice of Material Breach and elect in its discretion to proceed with the
Closing, or (ii) exercise its rights under the applicable provisions of Article
VIII of this Agreement. In the event that the receiving party elects in its
discretion to waive the applicable condition and proceed with the Closing as
specified in clause (i) above, and if the breach so specified in the Notice of
Material Breach was not, directly or indirectly, the result of any violation of
any covenant in this Agreement by the breaching party, then the receiving party
and its Affiliates shall not be entitled following the Closing to be indemnified
pursuant to Article XI, to sue for damages or to assert any other right or
remedy for any losses arising from the breach specifically identified in such
Notice of Material Breach. As used herein, “Notice of Material Breach” shall
mean a written notice from any party (the “breaching party”) to the other
party(ies) hereto that the breaching party has breached a representation or
warranty in this Agreement as a result of matters, facts, or circumstances first
arising after the date of this Agreement, which notice shall specify in detail
the nature, scope, extent, circumstances and facts underlying such material
breach, and shall expressly acknowledge that such material breach has caused one
or more of the conditions set forth in Article VII not to be satisfied.
 
ARTICLE VIII
 
TERMINATION; EFFECT OF TERMINATION
 
Section 8.1 Termination. 
 
(a)    Notwithstanding anything to the contrary in this Agreement, this
Agreement may be terminated and the transactions contemplated by this Agreement
and the other transactions contemplated by this Agreement abandoned at any time
prior to the Closing:
 
(i)    by mutual written consent of the Sellers and the Buyer;
 
(ii)    by the Sellers, upon written notice to the Buyer, upon a material breach
of this Agreement by the Buyer (subject to the right of the Buyer to cure the
breach of any of its covenants, as opposed to its representations or warranties,
as provided in Section 8.1(b) hereof);
 
(iii)    by the Buyer, upon written notice to the Sellers, upon a material
breach of this Agreement by the Sellers (subject to the right of the Sellers to
cure the breach of any of their covenants, as opposed to their representations
or warranties, as provided in Section 8.1(b) hereof);
 
 
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(iv)    by the Sellers or the Buyer, if any suit, action or proceeding is
commenced or threatened by any Governmental Entity or other person directed
against the consummation of the Closing or any other material transaction
contemplated under this Agreement and either the Sellers or the Buyer, as the
case may be, reasonably and in good faith deems it impractical or inadvisable to
proceed in view of such suit, action, proceeding or threat thereof;
 
(v)    by the Sellers, if the Buyer has not submitted applications required to
obtain the Buyer Regulatory Approvals to the applicable Governmental Entities on
or before the Application Date;
 
(vi)    by the Buyers or the Sellers, if the Buyer has not obtained the Buyer
Regulatory Approvals by the Approval Date (provided that Buyer may, in its sole
and absolute discretion, on or before the Approval Date, waive the condition set
forth in Section 7.2(e), except to the extent that it applies to the AHCA
Assurances, in which event Sellers shall have no right of termination pursuant
to this Section 8.1(vi));
 
(vii)    by the Buyer or the Sellers, if the Closing Date has not occurred by
August 1, 2006; or
 
(viii)    pursuant to the terms of Sections 2.5 (Investigation Period), 6.4(b)
(Best Efforts), 7.2(d) (Title Insurance) or Article IX (Risk of Loss);
 
provided, however, that the party seeking termination pursuant to clauses (ii),
(iii), (iv) or (vii) is not then in material breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
 
(b)    If either party believes the other to be in default of any of its
covenants hereunder, the non-defaulting party shall provide the defaulting party
with notice specifying in reasonable detail the nature of such default. Subject
to the provisions of this Agreement, if such default has not been cured by the
earlier of: (a) the Closing Date, or (b) thirty (30) days after delivery of such
notice, then the party giving such notice may (x) terminate this Agreement or
(y) extend the Closing Date for a period not to exceed 90 days.
 
(c)    If this Agreement is terminated in accordance with this Section 8.1,
other than pursuant to Section 8.1(a)(ii), the Buyer and the Sellers shall
instruct the Escrow Agent to disburse all amounts held by the Escrow Agent,
subject to and in accordance with, the terms of the Earnest Money Deposit Escrow
Agreement, including any interest or other proceeds from the investment of funds
held by the Escrow Agent, to the Buyer. Notwithstanding anything in this Section
8.1 to the contrary, if Buyer has performed or is in a position to and is
willing to tender performance of all of its obligations under this Agreement and
Sellers have breached any of the covenants or agreements to be performed by them
under this Agreement, Buyer may elect (i) if such covenants and agreements are
capable of being performed by Sellers, instead of terminating this Agreement
pursuant to this Section 8.1, to sue Sellers for specific performance and cause
this Agreement to remain in effect, or (ii) if Buyer has the right to terminate
this Agreement pursuant to this Section 8.1 as a consequence of Sellers’ breach,
to terminate this Agreement, receive a refund of the Earnest Money Deposit and
all interest or other proceeds from the
 
 
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investment of funds held by the Escrow Agent and to sue the Sellers for damages
arising from the Sellers’ breach.
 
(d)    If this Agreement is terminated by the Sellers pursuant to
Section 8.1(a)(ii), then the Sellers and the Buyer shall instruct the Escrow
Agent to disburse all amounts held by the Escrow Agent, subject to and in
accordance with, the terms of the Earnest Money Deposit Escrow Agreement,
including any interest or other proceeds from the investment of funds held by
the Escrow Agent, to the Sellers.
 
Section 8.2 The Sellers’ Remedies Exclusive. If this Agreement is terminated by
the Sellers and Section 8.1(d) applies, then the payment to the Sellers pursuant
to Section 8.1(d) shall constitute liquidated damages and shall constitute full
payment and the exclusive remedy for any damages suffered by the Sellers. The
Sellers and the Buyer agree in advance that actual damages would be difficult to
ascertain and that the amount of the payment to be made to the Sellers pursuant
to Section 8.1(d) is a fair and equitable amount to reimburse the Sellers for
damages sustained due to the Buyer’s breach of this Agreement.
 
Section 8.3 Obligations upon Termination. 
 
(a)    If the transactions contemplated by this Agreement are terminated as
provided herein:
 
(i)    the Buyer shall, and shall cause each of its directors, officers,
employees, agents, representatives and advisors to, return to the Sellers, or
certify the destruction of, all documents and other material received from the
Sellers or any of their Affiliates relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof; and
 
(ii)    all confidential information received by the Buyer, its directors,
officers, employees, agents, representatives or advisors with respect to the
Facility shall be treated in accordance with the terms of the Confidentiality
Agreement, which shall remain in full force and effect notwithstanding the
termination of this Agreement.
 
Section 8.4 Effect of Termination. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in Section 8.1, this
Agreement shall become null and void and of no further force and effect, except
for the provisions of (a) Section 6.3 relating to the obligation of the Buyer to
keep confidential certain information and data obtained by it from the Sellers
or the Sellers’ representatives; (b) Article VIII; and (c) Article XII.
 
Section 8.5 Time of the Essence. Time shall be of the essence in this Agreement.
 
ARTICLE IX
 
RISK OF LOSS
 
 
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Section 9.1 Risk of Loss. Subject to the provisions of this Article IX, the
Sellers shall bear the risk of loss with respect to the Purchased Assets until
the Closing. Risk of Loss shall pass to the Buyer as of 12:01 a.m. on the
Closing Date.
 
Section 9.2 Condemnation. 
 
(a)    If all or any portion of the Facility shall be subject to a “Taking” (as
that phrase is defined below) between the date of this Agreement and the Closing
Date, the rights of the parties shall be as follows:
 
(i)    If such Taking will in Buyer’s reasonable judgment be expected to have a
Material Adverse Effect, the Buyer may terminate its obligations under this
Agreement to purchase the Purchased Assets by written notice to the Sellers
within ten (10) days after the Sellers have given the Buyer notice of such
Taking, or on the Closing Date, whichever is earlier. If the Buyer exercises its
option to terminate its obligations to purchase the Purchased Assets pursuant to
this Section 9.2(a)(i), the Earnest Money Deposit shall be promptly returned to
the Buyer and the parties hereto shall be released from all further obligations
hereunder, except those which expressly survive a termination of this Agreement.
 
(ii)    If such Taking will not in Buyer’s reasonable judgment be expected to
have a Material Adverse Effect or the Buyer does not elect to terminate its
obligations to purchase the Facility, the Buyer shall take an assignment of the
Sellers’ interest in any condemnation award which may be payable to the Sellers
on account of such Taking and shall close without reduction in the Purchase
Price or change in any other term of this Agreement.
 
(b)    The Sellers agree to promptly furnish the Buyer with written notice of
any Taking or proposed Taking.
 
(c)    “Taking” is hereby defined to mean a taking or acquisition by a
Governmental Entity for any public or quasi-public use, reason or purpose under
any power of eminent domain or condemnation.
 
Section 9.3 Fire or Other Casualty. 
 
(a)    In the event of damage to the Facility by fire or other casualty between
the date of this Agreement and the date of Closing reasonably expected to cost
more than $1,000,000 to repair, the rights of the parties shall be as follows:
 
(i)    The Buyer may terminate its obligations under this Agreement to purchase
the Facility by written notice to the Sellers within ten (10) days after the
Sellers have given the Buyer notice of such fire or casualty event, or on the
Closing Date, whichever is earlier. If the Buyer exercises its option to
terminate its obligations to purchase the Facility pursuant to this Section
9.3(a)(i), the Earnest Money Deposit shall be promptly returned to the Buyer and
the parties hereto shall be released from all further obligations hereunder,
except those which expressly survive a termination of this Agreement.
 
 
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(ii)    In the event that the Buyer does not elect to terminate its obligation
to purchase the Facility, the Closing shall take place without abatement of the
Purchase Price, but the Sellers shall assign to the Buyer at the Closing all of
their respective interest in any insurance proceeds (except use and occupancy
insurance, rent loss and business interruption insurance, and any similar
insurance for the period preceding the Closing Date) that may be payable to the
Sellers on account of any such fire or other casualty and provide Buyer a credit
against the Purchase Price in the amount of Sellers’ deductible.
 
(b)    In the event that the damage caused by such fire or other casualty would
reasonably be expected to cost less than $1,000,000 to repair, failure by the
Sellers to repair such damage shall not constitute a breach or default under
this Agreement and such damage shall have no effect on the obligations of the
parties to close the transactions contemplated by this Agreement. The Sellers
shall assign to the Buyer at the Closing all of their respective interest in any
insurance proceeds (except use and occupancy insurance, rent loss and business
interruption insurance, and any similar insurance for the period preceding the
Closing Date) that may be payable to the Sellers on account of any such fire or
other casualty and provide Buyer a credit against the Purchase Price in the
amount of Sellers’ deductible.
 
(c)    The Sellers agree to promptly furnish the Buyer with written notice of
any fire or casualty event at the Facility.
 
ARTICLE X
ACTIONS BY THE SELLER AND THE BUYER
AFTER THE CLOSING
 
Section 10.1 Accounts Receivable.
 
(a)    If Sellers receive payment of any Accounts Receivable or Entrance Fee
Receivables assigned to Buyer, Sellers shall remit such payment to Buyer within
five Business Days of Sellers’ receipt. If the Buyer (or any of its assignees)
receives payment of any receivables relating to the Facility, other than
Accounts Receivable or Entrance Fee Receivables assigned to Buyer, the Buyer
shall remit such payment to the Sellers within five Business Days of the Buyer’s
receipt. The Buyer shall reasonably cooperate with the Sellers in the Sellers’
efforts to collect on any receivables not assigned to the Buyer hereunder,
including the Retained Receivables (as defined below).
 
(b)    For a period of 180 days following the Closing Date (the “Collection
Period”) the Buyer, on behalf of the Sellers, will collect any receivables
arising out of the operation of the Health Center prior to Closing, including
that portion of any receivables generated after the Closing Date that relate to
services provided at the Health Center prior to Closing (the “Retained
Receivables”), in the same manner and with the same diligence the Buyer uses to
collect its own accounts receivable. In its collection efforts, the Buyer shall
not be liable to the Sellers except for willful misconduct or gross negligence.
During the Collection Period, the Buyer shall provide the Sellers, or its
designee with any information requested by the Seller or such designee regarding
the status of any of the Retained Receivables or related collection efforts. For
purposes of this Agreement, the term “Retained Receivables” shall not include
fees
 
 
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payable to the Health Center Operator under (i) the Assisted Living Facility
Service Agreement, dated May 1, 2003, between Westport Holdings and the Health
Center Operator or (ii) the Skilled Nursing Facility Service Agreement dated as
of May 1, 2003, between Westport Holdings and the Health Center Operator.
 
(c)    The Buyer shall promptly deposit (but in no event more than five (5)
business days after receipt), without offset or deduction, all collections
received by the Buyer on account of the Retained Receivables into a bank account
designated by the Sellers, and the Buyer shall deliver a monthly accounting of
such collections and deposits to the Sellers. All amounts received by the Buyer
from account debtors included among the Retained Receivables that fail to
designate the period to which they relate will first be applied first to such
Retained Receivables. The Buyer shall not settle or adjust the amount of any
Retained Receivables without the prior written authorization of the Sellers.
 
(d)    Upon the written request of the Sellers, the Buyer shall permit the
Sellers to have reasonable access to the records of the Buyer and its Affiliates
as may be reasonably necessary to audit the accountings required to be delivered
by the Buyer hereunder in connection with its collection of the Retained
Receivables. The costs and expenses of such audit shall be paid by the Sellers.
 
(e)    The Buyer’s obligation to collect the Retained Receivables shall cease
(i) with respect to all Retained Receivables, at the conclusion of the
Collection Period; and (ii) with respect to an individual Retained Receivable,
when such receivable becomes aged by more than 180 days; provided however, that,
in each case, the Buyer shall continue to reasonably cooperate with the Sellers
in the Sellers’ efforts to collect on any receivables not assigned to the Buyer
hereunder, including the Retained Receivables.
 
(f)    The Buyer may delegate its responsibilities under this Section to the
Buyer’s lessee of the Health Center; provided that no such delegation by the
Buyer shall release the Buyer from liability for a breach of this Section 10.1
by the Buyer or the Buyer’s lessee.
 
Section 10.2 Books and Records; Tax Matters. 
 
(a)    Each party agrees that it will cooperate with and make available to the
other party, during normal business hours, all books and records, information
and employees (without substantial disruption of employment) retained and
remaining in existence after the Closing which are necessary or useful in
connection with any Tax inquiry, audit, investigation or dispute, any litigation
or investigation or any other matter requiring any such books and records,
information or employees for any reasonable business purpose. The party
requesting any such books and records, information or employees shall bear all
of the out-of-pocket costs and expenses (including, without limitation,
attorneys’ fees, but excluding reimbursement for salaries and employee benefits)
reasonably incurred in connection with providing such books and records,
information or employees.
 
(b)    The Buyer agrees to retain all records relating to the finances and Taxes
of the Purchased Assets for all pre-Closing Tax periods until the expiration of
the statutes of limitation (including any extensions thereof) for the taxable
period or periods to which such
 
 
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records relate. The Buyer and the Sellers agree to provide each other with such
information and assistance as is reasonably necessary, including access to
records and personnel, for the preparation of any Tax Returns or for the defense
of any Tax claim or assessment, whether in connection with an audit or
otherwise.
 
Section 10.3 Further Assurances. On the terms and subject to the conditions
contained herein, the Buyer and the Sellers shall after the Closing, (a) use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements; (b) execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the transactions contemplated hereunder or thereunder; and (c)
cooperate with each other in connection with the foregoing. 
 
ARTICLE XI
 
INDEMNIFICATION
 
Section 11.1 Survival. The representations and warranties of the Sellers and the
Buyer contained in this Agreement shall survive the Closing until the second
anniversary of the Closing Date; provided, however, that insofar as any claim is
made by the Buyer for the breach of any representation or warranty of the
Sellers contained in Sections 4.13 (Taxes) or 4.17 (Employee Benefits Plans)
herein, such representations and warranties shall, for purposes of such claim by
the Buyer survive the Closing until the expiration of the applicable statute of
limitations governing such claims. To the extent that any covenant in this
Agreement is to be performed after the Closing, such covenant and a party’s
right to recover damages resulting from a breach of such covenant shall survive
the Closing.
 
Section 11.2 Indemnification by the Sellers. Subject to the limitations set
forth in Section 11.6, from and after the Closing, the Sellers shall, jointly
and severally, indemnify, defend and hold harmless the Buyer, its Affiliates,
the Health Center Assignee and Buyer’s manager, and each of their respective
officers, directors, employees, stockholders, members, agents and
representatives (collectively, the “Buyer Indemnitees”) from and against any and
all claims, losses, damages, liabilities, obligations or expenses, including
reasonable legal fees and expenses (collectively, “Losses”), to the extent
relating, arising or resulting, directly or indirectly, from any of the
following:
 
(i)    any breach of any representation or warranty of the Sellers contained in
this Agreement, the Schedules hereto, any certificate delivered by Sellers, or
the Ancillary Agreements, without giving effect to any supplements to the
schedules hereto after the date hereof (but subject to the provisions of Section
7.5);
 
(ii)    any breach of any covenant of the Sellers contained in this Agreement or
the Ancillary Agreements;
 
(iii)    any Excluded Asset or Excluded Liability;
 
 
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(iv)    any fees, expenses or other payments incurred or owed by the Sellers to
any agent, broker, investment banker or other firm or person retained or
employed by them in connection with the transactions contemplated by this
Agreement; and
 
(v)    all liabilities relating to the ownership of the Purchased Assets or
conduct or operation of the Facility, including both the Retirement Center and
the Health Center, prior to the Closing Date, other than the Assumed
Liabilities.
 
Section 11.3 Fund Indemnification. In the event that with respect to any period
commencing on the Closing Date and ending the day preceding the fifth
anniversary of the Closing Date, any Buyer Indemnitee is assessed any withdrawal
liability under Section 4201 of ERISA from the SEIU National Industry Pension
Fund (the “Fund”) on account of all, or any portion of, the Facility, or the
Fund makes any claim or demand against any Buyer Indemnitee asserting any such
withdrawal liability, then the Sellers shall, jointly and severally, indemnify,
defend and hold harmless the Buyer Indemnitees from and against such withdrawal
liability and any claims or demands with respect thereto, including reasonable
legal fees and expenses. Notwithstanding the foregoing, the Sellers shall have
no indemnification obligation under this Section 11.3 to the extent that the
Buyer Indemnitees are not entitled to the benefit of the Fund’s five-year free
look period on account of: (i) contributions to the Fund by the Buyer’s manager
(including any entity required to be aggregated with the Buyer’s manager under
Section 414 of the Code) that equal or exceed two percent (2%) of the sum of all
employer contributions made to the Fund; (ii) an intentional waiver by the Buyer
Indemnitees of the benefits of the Fund’s five-year free look period; or (iii) a
statutory change in Section 4210 of ERISA that results in an elimination or
reduction in the Fund’s five-year free look period as it applies to the Buyer
Indemnitees.
 
Section 11.4 Indemnification by the Buyer. From and after the Closing, the Buyer
shall indemnify, defend and hold harmless the Sellers and each of their
Affiliates and each of their respective officers, directors, employees,
stockholders, agents and representatives (the “Sellers Indemnitees”) from and
against any and all Losses, to the extent relating, arising or resulting,
directly or indirectly, from any of the following:
 
(i)    any breach of any representation or warranty of the Buyer contained in
this Agreement, the Ancillary Agreements, or any certificate of Buyer (but
subject to Section 7.5);
 
(ii)    any breach of any covenant of the Buyer contained in this Agreement;
 
(iii)    any Assumed Liability;
 
(iv)    any fees, expenses or other payments incurred or owed by the Buyer or
its Affiliates to any agent, broker, investment banker or other firm or person
retained or employed by it in connection with the transactions contemplated by
this Agreement; or
 
(v)    the ownership of the Purchased Assets or conduct or operation of the
Facility from and after the Closing Date.
 
 
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Section 11.5 Indemnification Procedures. 
 
(a)    Procedures Relating to Indemnification of Third Party Claims. If any
party (the “Indemnified Party”) receives written notice of the commencement of
any action or proceeding or the assertion of any claim by a third party or the
imposition of any penalty or assessment for which indemnity may be sought under
Sections 11.2, 11.3 or 11.4 (a “Third Party Claim”), and such Indemnified Party
intends to seek indemnity pursuant to this Article XI, the Indemnified Party
shall promptly provide the other party (the “Indemnifying Party”) with written
notice of such Third Party Claim, stating the nature, basis and the amount
thereof, to the extent known, along with copies of the relevant documents
evidencing such Third Party Claim and the basis for indemnification sought.
Failure of the Indemnified Party to give such notice will not relieve the
Indemnifying Party from liability on account of this indemnification, except if
and to the extent that the Indemnifying Party is actually prejudiced thereby.
The Indemnifying Party will have thirty (30) days from receipt of any such
notice of a Third Party Claim to give notice to assume the defense thereof. If
notice to the effect set forth in the immediately preceding sentence is given by
the Indemnifying Party, the Indemnifying Party will have the right to assume the
defense of the Indemnified Party against the Third Party Claim with counsel of
its choice that is reasonably acceptable to the Indemnified Party. So long as
the Indemnifying Party has assumed the defense of the Third Party Claim in
accordance herewith, (i) the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the Third Party
Claim, and (ii) the Indemnified Party will not file any papers or consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying Party. The
parties will use commercially reasonable efforts to minimize Losses from Third
Party Claims and will act in good faith in responding to, defending against,
settling or otherwise dealing with such claims. The parties will also cooperate
in any such defense and give each other reasonable access to all information
relevant thereto. Whether or not the Indemnifying Party has assumed the defense,
such Indemnifying Party will not be obligated to indemnify the Indemnified Party
hereunder for any settlement entered into or any judgment that was consented to
without the Indemnifying Party’s prior written consent. In addition, the
Indemnifying Party shall not, without the approval of the Indemnified Party
(which approval shall not be unreasonably withheld or delayed), compromise a
Third Party Claim defended by the Indemnifying Party which would require the
Indemnified Party to perform or take any action, or to refrain from performing
or taking any action, or to pay any additional Persons in the future.
 
(b)    Procedures for Non-Third Party Claims. The Indemnified Party will notify
the Indemnifying Party in writing promptly of its discovery of any matter that
does not involve a Third Party Claim being asserted against or sought to be
collected from the Indemnified Party, giving rise to the claim of indemnity
pursuant hereto. The Indemnifying Party will have thirty (30) days from receipt
of any such notice to give notice of dispute of the claim to the Indemnified
Party. The Indemnified Party will reasonably cooperate and assist the
Indemnifying Party in determining the validity of any claim for indemnity by the
Indemnified Party and in otherwise resolving such matters. Such assistance and
cooperation will include providing reasonable access to and copies of
information, records and documents relating to such matters, furnishing
employees to assist in the investigation, defense and resolution of such matters
and providing legal and business assistance with respect to such matters.
 
 
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(c)    In connection with any notice from any Buyer Indemnitee pursuant to
Sections 11.5(a) or (b) above, such Buyer Indemnitee may give notice of a claim
under the Closing Escrow Agreement. Neither the giving of, or the failure to
give, a notice of a claim under the Closing Escrow Agreement will constitute an
election of remedies or limit Buyer in any manner in enforcement of any other
remedies that may be available to Buyer under this Agreement.
 
Section 11.6 Limitations on Indemnification. 
 
(a)    Notwithstanding the foregoing provisions of Section 11.2, except in the
event of fraud, intentional misrepresentation or intentional wrongdoing by
either of the Sellers, (i) the Sellers shall not be liable, pursuant to Section
11.2(i) or (ii) for any Losses suffered by any Buyer Indemnitee until the
aggregate of all Losses claimed by the Buyer Indemnitees thereunder exceeds, on
a cumulative basis, an amount equal to $500,000, and then only to the extent of
any such excess; (ii) the Sellers shall not be liable pursuant to Section
11.2(i) for individual items relating to a breach of a representation or
warranty in Sections 4.5 or 4.12 where the Loss relating thereto is less than
$5,000, and the aggregate of all such Losses is less than $20,000; (iii) the
aggregate liability of the Sellers pursuant to Section 11.2 (but not pursuant to
Section 11.3) for Losses suffered by the Buyer Indemnitees shall in no event
exceed $5,000,000; and (iv) without limiting the limitation set forth in the
preceding clause (iii), the aggregate liability of the Sellers pursuant to
Section 11.2 (but not pursuant to Section 11.3) for Losses suffered by the Buyer
Indemnitees with respect to matters or claims of which Sellers first receive
notice pursuant to Section 11.5 after the eighteen (18) month anniversary of the
Closing Date shall in no event exceed $3,000,000 in the aggregate. The
limitation set forth in the preceding clause (iv) shall not apply to any matter
or claim that, directly or indirectly, relates to or arises out of or in
connection with, or results from, any matter(s) or claim(s) of which Sellers
have been notified pursuant to Section 11.5 before the eighteen (18) month
anniversary of the Closing Date.
 
(b)    Neither party hereto shall be liable to any indemnitee for punitive
damages or such other party’s lost profits claimed by such other party resulting
from such first party’s breach of its representations, warranties or covenants
hereunder.
 
(c)    The Buyer acknowledges and agrees that, should the Closing occur, its
sole and exclusive remedy with respect to any and all claims relating to this
Agreement, the Facility, the Purchased Assets, the Excluded Assets, the Assumed
Liabilities or the transactions contemplated hereby (other than claims of, or
causes of action arising from, fraud, intentional misrepresentation or
intentional wrongdoing by either Seller) shall be pursuant to the
indemnification provisions set forth in this Article XI, and that amounts held
by the Escrow Agent pursuant to the Closing Escrow Agreement shall constitute
(i) the sole and exclusive source of recourse for the Buyer Indemnitees in
connection with any claims made pursuant to Section 11.2 (other than claims of,
or causes of action arising from, fraud, intentional misrepresentation or
intentional wrongdoing by either Seller) and (ii) a non-exclusive source of
recourse for the Buyer Indemnitees in connection with any claims made pursuant
to Section 11.3. In furtherance of the foregoing, the Buyer hereby waives, from
and after the Closing, any and all rights, claims and causes of action (other
than claims of, or causes of action arising from, fraud, intentional
misrepresentation or intentional wrongdoing by either Seller) the Buyer or any
other Buyer Indemnitee may have against the Sellers or any of their Affiliates
or any of their
 
 
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respective directors, officers and employees arising under or based upon any
Federal, state or local statute, law, ordinance, rule or regulation or otherwise
(except pursuant to the indemnification provisions set forth in this Article
XI).
 
Section 11.7 Calculation of Indemnity Payments. The amount of any Loss for which
indemnification is provided under this Article XI shall be net of any amounts
recovered by the Indemnified Party under insurance policies with respect to such
Loss. Such amount shall be (y) increased to take account of any net Tax cost
actually incurred by the Indemnified Party arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (z) reduced to take
account of any net Tax benefit actually realized by the Indemnified Party
arising from the incurrence or payment of any such indemnified amount. In
computing the amount of any such Tax cost or Tax benefit, the Indemnified Party
shall be deemed to recognize all other items of income, gain, loss, deduction or
credit before recognizing any item arising from the receipt of any indemnity
payment hereunder or the incurrence or payment of any indemnified amount.
 
Section 11.8 Time Limits for Indemnification. Any indemnification claim (a
“Representation Claim”) made pursuant to Section 11.2(i) or Section 11.4(i)
shall be forever barred unless the applicable Buyer Indemnitee or Sellers
Indemnitee, respectively, delivers a written notice of the Representation Claim
to the Sellers or Buyer, respectively, in accordance with the procedures set
forth in Section 11.5 prior to expiration of the survival period with respect to
the applicable representation and warranty set forth in Section 11.1. Any
indemnification claim (a “Covenant Claim”) made pursuant to Section 11.2(ii) or
Section 11.4(ii) shall be forever barred unless the applicable Buyer Indemnitee
or Sellers Indemnitee, respectively, delivers a written notice of the Covenant
Claim to the Sellers or Buyer, respectively, in accordance with the procedures
set forth in Section 11.5 prior to the second anniversary of the Closing Date.
The time limits set forth in this Section 11.8 shall not apply to any claims
under Section 11.3 or any claims based on fraud, intentional misrepresentation
or intentional wrongdoing, which claims may be made any time prior to the
expiration of the applicable statute of limitations governing those claims.
 
Section 11.9 Tax Treatment of Indemnification. For all Tax purposes, the Buyer
and the Sellers agree to treat (and shall cause each of their respective
Affiliates to treat) any indemnity payment under this Agreement as an adjustment
to the Purchase Price unless a final determination (which shall include the
execution of an IRS Form 870-AD or successor form) provides otherwise.
 
 
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ARTICLE XII
 
MISCELLANEOUS
 
Section 12.1 Prior Diligence. The Buyer acknowledges that any concerns raised in
connection with the diligence investigation of the Facility conducted by PIM
Bradenton LLC (“PIM”) that have been expressed in writing to the Sellers prior
the date of this Agreement have been accepted or resolved to the Buyer’s
satisfaction or are otherwise addressed by the terms of this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, the Buyer
agrees that the existence of any facts or circumstances specifically noted in
PIM’s October 14, 2005 letter to the Seller regarding such diligence
investigation shall not give rise to (i) any claims by the Buyer or any Buyer
Indemnitee pursuant to the Agreement or (ii) a failure by the Sellers to satisfy
any conditions to the closing of the transactions contemplated by this
Agreement. Notwithstanding the foregoing, nothing contained in this Section 12.1
shall limit the rights of the Buyer with respect to a breach by the Sellers of
their obligations under Section 6.1(b)(viii) or Section 6.13.
 
Section 12.2 Publicity. From the date hereof through the Closing Date, except as
otherwise required by law, no public release or announcement concerning the
transactions contemplated hereby shall be issued by any party without the prior
consent of the other parties (which consent shall not be unreasonably withheld
or delayed); provided, however, that each of the parties may make internal
announcements to their respective employees that are consistent with the
parties’ prior public disclosures regarding the transactions contemplated
hereby.
 
Section 12.3 Post-Closing Information. Following the Closing, upon reasonable
written notice to the Buyer, the Buyer shall afford or cause to be afforded to
the Sellers and their affiliates reasonable access to the personnel, properties,
books, Contracts, commitments and records relating to the Facility for any
reasonable business purpose, including in respect of litigation, insurance
matters and financial reporting of the Sellers and their Affiliates.
 
Section 12.4 Refunds and Remittances. After the Closing, if the Sellers or any
of their Affiliates receive any refund or other amount which is a Purchased
Asset or is otherwise properly due and owing to the Buyer or any of its
Affiliates in accordance with the terms of this Agreement, the Sellers promptly
shall remit, or shall cause to be remitted, such amount to the Buyer at the
address set forth in Section 12.8. After the Closing, if the Buyer or any of its
Affiliates or their respective assigns receive any refund or other amount which
is an Excluded Asset or is otherwise properly due and owing to the Sellers, the
Health Center Operator or any of their respective Affiliates in accordance with
the terms of this Agreement, the Buyer promptly shall remit, or shall cause to
be remitted, such amount to the Sellers at the address set forth in Section
12.8, or to the Health Center Operator, as the case may be. After the Closing,
if the Buyer, its assignees or any of their respective Affiliates receive any
refund or other amount which is related to claims (including workers’
compensation), litigation, insurance or other matters for which the Sellers are
responsible hereunder, and which amount is not a Purchased Asset, or is
otherwise properly due and owing to the Sellers or the Health Center Operator in
accordance with the terms of this Agreement, the Buyer promptly shall remit, or
cause to be remitted, such amount to the Sellers at the address set forth in
Section 12.8. After the Closing, if the Sellers or any of their Affiliates
receive any refund or other amount which is related to claims
 
 
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(including worker’s compensation), litigation, insurance or other matters for
which the Buyer is responsible hereunder, and which amount is not an Excluded
Asset, or is otherwise properly due and owing to the Buyer in accordance with
the terms of this Agreement, the Sellers promptly shall remit, or cause to be
remitted, such amount to the Buyer at the address set forth in Section 12.8.
 
Section 12.5 Assignment. Neither this Agreement nor any of the rights and
obligations of the parties hereunder may be assigned by any of the parties
hereto without the prior written consent of the other party hereto; provided,
however, that Buyer may assign this Agreement to any joint venture, limited
liability company or partnership in which Buyer or its Affiliates, and ARC or
its Affiliates, are members or partners. Notwithstanding the foregoing, and
subject to compliance with the provisions thereof, no such assignment by the
Buyer shall release Buyer from liability for a breach of this Agreement by the
Buyer or its assignee. Subject to the first sentence of this Section 12.5, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns and no other person shall have any
right, obligation or benefit hereunder. Any attempted assignment or transfer in
violation of this Section 12.5 shall be void.
 
Section 12.6 No Third-Party Beneficiaries. Except as provided in Article XII,
this Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give or be construed to
give to any person, other than the parties hereto and such assigns, any legal or
equitable rights hereunder.
 
Section 12.7 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, except as otherwise expressly provided herein, each
of the parties hereto shall be responsible for the payment of its own respective
costs and expenses incurred in connection with the negotiations leading up to
and the performance of its respective obligations pursuant to this Agreement and
the Ancillary Agreements including the fees of any attorneys, accountants,
brokers or advisors employed or retained by or on behalf of such party.
Notwithstanding the foregoing, the Sellers shall pay the expenses of Title
Commitment and title insurance premiums at promulgated rates based upon the
amount stated in Section 7.2(d). The Buyer shall obtain and pay the cost of an
updated Survey of the Real Property. Costs of preparation of Closing documents
and all other similar costs, fees and expenses of the Closing (except for
Sellers’ attorney’s fees) shall be paid by the Buyer. 
 
The substantially prevailing party in any litigation or proceeding to enforce
this Agreement or any of the Ancillary Agreements shall be entitled to recover
from the non-substantially prevailing party, in addition to any other amounts
that the substantially prevailing party may recover under this Agreement or the
Ancillary Agreements, all reasonable expenses that the substantially prevailing
party may have incurred in connection with such litigation or proceeding,
including accounting fees, expert fees and attorneys’ fees.

Section 12.8 Notices. All notices, requests, permissions, waivers, claims,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given (i) five (5) business days following sending by
registered or certified mail, postage prepaid, (ii) when sent, if sent by
facsimile; provided that the facsimile transmission is promptly confirmed by
telephone, (iii) when delivered, if delivered personally to the intended
recipient and (iv) one
 
 
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(1) business day after sending by overnight delivery via a national courier
service that provides proof of delivery and, in each case, addressed to a party
at the following address for such party:
 
If to the Sellers, addressed to:
 
Westport Advisors, Ltd.
3801 PGA Boulevard, Suite 805
Palm Beach, FL 33410
Attention: Larry Landry
Facsimile Number: (561) 624-8037

With a copy to:
 
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attention: Irwin A. Kishner
Facsimile Number: (212) 545-3400

Rockwood Realty Associates, LLC
555 Fifth Avenue
5th Floor
New York, NY 10017-2416
Attention: Brian Dowd
Facsimile Number: (212) 286-5555

If to the Buyer, addressed to:
 
Prudential Investment Management
Two Ravinia Drive, Suite 400
Atlanta, Georgia 30346-2110
Attn: John W. Dark
Facsimile Number: (770) 395-8454
 
With copies to:
 
American Retirement Corporation
111 Westwood Place, Suite 200
Brentwood, TN 37027
Attention: Chief Executive Officer
Facsimile Number: (615) 221-2269

Bass, Berry & Sims PLC
315 Deaderick Street, Suite 2700
Nashville, Tennessee 37238-3001
Attn: T. Andrew Smith
 
 
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Facsimile Number: (615) 742-2766
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Mark C. Rusche
Facsimile Number: (404) 881-7777
 
and
 
The Prudential Insurance Company of America
PREI Law Department
Arbor Circle South
8 Campus Drive, 4th Floor
Parsippany, New Jersey 07054
Attn: Joan N. Hayden, Vice President, Corporate Counsel
Facsimile Number: (973) 683-1788
 
If to Buyer’s Manager:
 
American Retirement Corporation
111 Westwood Place, Suite 200
Brentwood, TN 37027
Attention: Chief Executive Officer
Facsimile Number: (615) 221-2269

With copies to:
 
Bass, Berry & Sims PLC
315 Deaderick Street, Suite 2700
Nashville, Tennessee 37238-3001
Attn: T. Andrew Smith
Facsimile Number: (615) 742-2766
 
or to such other address(es) as shall be furnished in writing by any such party
to the other party hereto in accordance with the provisions of this Section
12.8.
 
Section 12.9 Headings. The descriptive headings of the several Articles and
Sections of this Agreement and the Schedules to this Agreement and the Table of
Contents to this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to “Articles”,
“Sections”, “Exhibits” or “Schedules” shall be deemed to be references to
Articles or Sections hereof or Exhibits or Schedules hereto unless otherwise
indicated.
 
Section 12.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and
 
 
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delivered, in person or by telecopier, receipt acknowledged, to the other party
hereto. This Agreement may be executed and delivered by the parties hereto via
telecopier machine or other means of electronic delivery, which shall be deemed
for all purposes as an original.
 
Section 12.11 Integrated Contract; Exhibits and Schedules. (a) This Agreement,
including the Schedules and Exhibits hereto, any written amendments to the
foregoing satisfying the requirements of Section 12.15 hereof and the Ancillary
Agreements, including the schedules and exhibits thereto, constitute the entire
agreement among the parties with respect to the subject matter hereof and
thereof and supersede any previous agreements and understandings between the
parties with respect to such matters. All Exhibits and Schedules annexed hereto
or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in any
Schedule or Exhibit but not otherwise defined therein shall be defined as set
forth in this Agreement.
 
Notwithstanding anything herein to the contrary, any disclosures in the
Schedules shall be deemed adequate to disclose an exception to a representation
or warranty made in this Agreement to the extent that such representation or
warranty is specifically identified in such Schedule.
 
(b)    The Sellers, the Buyer’s Manager and the Buyer, on behalf of itself and
PIM, agree that this Agreement supersedes and replaces the Asset Purchase
Agreement dated as of August 17, 2005 (the “Prior Agreement”), between the
Sellers and PIM Bradenton, which Prior Agreement has been terminated and is of
no force or effect.

Section 12.12 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida, without reference to its
conflicts of law principles.
 
Section 12.13 Jurisdiction. Each party irrevocably agrees that any legal action,
suit or proceeding against them arising out of or in connection with this
Agreement or the transactions contemplated hereby shall be brought exclusively
in the United States District Court in which the Real Property is located, or,
if such court does not have subject matter jurisdiction, the state courts of
Florida for such area, and hereby irrevocably accepts and submits to the
exclusive jurisdiction and venue of the aforesaid courts in person, with respect
to any such action, suit or proceeding.
 
Section 12.14 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
DISPUTES RELATING HERETO.
 
Section 12.15 Amendments and Waivers. This Agreement may be amended, modified,
superseded or canceled and any of the terms, covenants, representations,
warranties or conditions hereof may be waived only by an instrument in writing
signed by each of the parties hereto or, in the case of a waiver, by or on
behalf of the party waiving compliance. No delay on the part of
 
 
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any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
 
Section 12.16 Pre-Closing Negligent or Tortious Acts. Nothing in this Agreement
shall be construed or interpreted to impose any responsibility or liability on
Buyer to any third parties, whether as a successor to Sellers or under any other
legal or equitable principle, for any negligent or tortious acts or omissions of
Sellers, their lessees, managers, operators or employees, prior to the Closing
Date. Sellers shall retain all liability and responsibility under the terms of
this Agreement to third parties for their negligent and tortious acts or
omissions prior to the Closing Date.
 
[Signature page follows]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized, all as of the
day and year first set forth above.
 
WESTPORT HOLDINGS BRADENTON, LIMITED PARTNERSHIP

By:  Westport Holdings Freedom Village, LLC,
its General Partner
 
By: _______________________________
Name: Larry Landry
Title: President
 
WESTPORT NURSING BRADENTON, L.L.C.
 
 
By:______________________________________
Name: Larry Landry
Title: President
 

 
ARC BRADENTON LLC
 
 
By:______________________________________
Name:
Title:
 
ARC BRADENTON MANANGEMENT, INC.
 
 
By:______________________________________
Name:
Title:
 
SENIOR HOUSING PARTNERS III, L.P.
 
 
By:______________________________________
Name:
Title:
 

[SIGNATURE PAGE TO FREEDOM VILLAGE ASSET PURCHASE AGREEMENT]
 
 
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EXHIBIT A
EARNEST MONEY DEPOSIT ESCROW AGREEMENT
 
 
 
 
A-1

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EXHIBIT B
CLOSING ESCROW AGREEMENT
 
 
 
 
 
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EXHIBIT C
ASSIGNMENT AND ASSUMPTION AGREEMENT
 
 
 
 
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EXHIBIT D
NEW COLLECTIVE BARGAINING AGREEMENTS
 
 
 
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EXHIBIT E
ARC GUARANTY
 
 
 
 
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