Exhibit 10.25

ASSET PURCHASE AGREEMENT

By and Between
AMERICAN REALTY CAPITAL VII, LLC
AS “PURCHASER”
AND
ARCADIAN COVE, LLC
ARCADIAN ASSISTED LIVING, LLC

AS “SELLER”

Property Name and Location:

ARCADIAN COVE – RICHMOND, KENTUCKY

Dated as of
July 6, 2015

        

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TABLE OF CONTENTS
 
 
 
 
 
Page

ARTICLE 1 DEFINITIONS AND CERTAIN RULES OF CONSTRUCTION
 
1

 
 
 
 
 
 
 
SECTION 1.1
 
DEFINED TERMS.
 
1

 
SECTION 1.2
 
CERTAIN DEFINITIONS.
 
4

 
SECTION 1.3
 
RULES OF CONSTRUCTION.
 
4

 
 
 
 
 
 
ARTICLE 2 PURCHASE AND SALE OF THE PURCHASED PROPERTY
 
5

 
 
 
 
 
 
 
SECTION 2.1
 
SALE OF BUSINESS.
 
5

 
SECTION 2.2
 
PURCHASED PROPERTY.
 
5

 
SECTION 2.3
 
EXCLUDED PROPERTY
 
7

 
SECTION 2.4
 
TITLE TO REAL PROPERTY AND SURVEY.
 
8

 
SECTION 2.5
 
ASSUMED LIABILITIES.
 
11

 
SECTION 2.6
 
EXCLUDED LIABILITIES.
 
11

 
 
 
 
 
 
ARTICLE 3 PURCHASE PRICE; PAYMENT OF PURCHASE PRICE; ALLOCATION
 
11

 
 
 
 
 
 
 
SECTION 3.1
 
PURCHASE PRICE AND DEPOSIT.
 
11

 
SECTION 3.2
 
PAYMENT OF PURCHASE PRICE.
 
12

 
SECTION 3.3
 
PRORATIONS.
 
13

 
 
 
 
 
 
ARTICLE 4 CERTAIN OTHER COVENANTS AND AGREEMENTS
 
14

 
 
 
 
 
 
 
SECTION 4.1
 
INSPECTION AND DUE DILIGENCE.
 
14

 
SECTION 4.2
 
CONDUCT OF BUSINESS PRIOR TO THE CLOSING DATE.
 
17

 
SECTION 4.3
 
NOTIFICATION OF CERTAIN MATTERS.
 
18

 
SECTION 4.4
 
EMPLOYEES.
 
18

 
SECTION 4.5
 
CONFIDENTIALITY.
 
19

 
SECTION 4.6
 
EXPENSES AND TAXES.
 
20

 
SECTION 4.7
 
WAIVER OF BULK SALES AND INDEMNIFICATION.
 
21

 
SECTION 4.8
 
EXCLUSIVITY.
 
21

 
SECTION 4.9
 
CONSENTS; COOPERATION.
 
21

 
SECTION 4.10
 
FURTHER ASSURANCES.
 
22

 
SECTION 4.11
 
NON-SOLICITATION OF EMPLOYEES.
 
22

 
SECTION 4.12
 
DELIVERY OF SCHEDULES.
 
22

 
 
 
 
 
 
ARTICLE 5 CLOSING
 
23

 
 
 
 
 
 
 
SECTION 5.1
 
CLOSING.
 
23

 
SECTION 5.2
 
CONDITIONS TO SELLER’S OBLIGATIONS.
 
23

 
SECTION 5.3
 
CONDITIONS TO PURCHASER’S OBLIGATIONS.
 
24

 
SECTION 5.4
 
DELIVERIES BY SELLER.
 
25

 
SECTION 5.5
 
DELIVERIES BY PURCHASER.
 
27

 
SECTION 5.6
 
NON-FULFILLMENT OF CLOSING CONDITIONS.
 
27

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TABLE OF CONTENTS (cont’d)

 
 
 
 
 
Page

 
SECTION 5.7
 
POST-CLOSING ACTIONS.
 
29

 
SECTION 5.8
 
TERMINATION DURING DUE DILIGENCE.
 
29

 
 
 
 
 
 
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER
 
29

 
 
 
 
 
 
 
SECTION 6.1
 
ORGANIZATION AND STANDING.
 
29

 
SECTION 6.2
 
VALID AND BINDING OBLIGATIONS.
 
30

 
SECTION 6.3
 
TITLE; PURCHASED PROPERTY COMPLETE.
 
30

 
SECTION 6.4
 
TAXES AND TAX RETURNS.
 
30

 
SECTION 6.5
 
EXECUTION AND DELIVERY.
 
31

 
SECTION 6.6
 
CONTRACTS AND LEASES.
 
31

 
SECTION 6.7
 
RESIDENCY AGREEMENTS AND RELATED MATTERS.
 
31

 
SECTION 6.8
 
PERMITS AND LICENSES.
 
32

 
SECTION 6.9
 
INSURANCE.
 
32

 
SECTION 6.10
 
EMPLOYEES.
 
32

 
SECTION 6.11
 
SELLER BENEFIT PLANS.
 
33

 
SECTION 6.12
 
LITIGATION.
 
34

 
SECTION 6.13
 
COMPLIANCE WITH LAWS.
 
34

 
SECTION 6.14
 
FINANCIAL STATEMENTS.
 
35

 
SECTION 6.15
 
REAL PROPERTY.
 
35

 
SECTION 6.16
 
ENVIRONMENTAL MATTERS.
 
35

 
SECTION 6.17
 
BROKERS, FINDERS.
 
36

 
SECTION 6.18
 
FIRPTA.
 
36

 
SECTION 6.19
 
SOLVENCY.
 
36

 
SECTION 6.20
 
CONSENT OF THIRD PARTIES.
 
36

 
SECTION 6.21
 
NO GOVERNMENTAL APPROVALS.
 
36

 
SECTION 6.22
 
ASSESSMENTS.
 
36

 
SECTION 6.23
 
TITLE ENCUMBRANCES.
 
36

 
SECTION 6.24
 
AFFORDABLE HOUSING UNITS.
 
37

 
SECTION 6.25
 
LOANS AND DEBTS.
 
37

 
SECTION 6.26
 
NO OTHER WARRANTIES.
 
37

 
 
 
 
 
 
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
37

 
 
 
 
 
 
 
SECTION 7.1
 
ORGANIZATION AND STANDING.
 
37

 
SECTION 7.2
 
EXECUTION AND DELIVERY.
 
37

 
SECTION 7.3
 
SOLVENCY.
 
38

 
SECTION 7.4
 
CONSENT OF THIRD PARTIES.
 
38

 
SECTION 7.5
 
NO GOVERNMENTAL APPROVALS.
 
38

 
SECTION 7.6
 
BROKERS, FINDERS.
 
38

 
 
 
 
 
 
ARTICLE 8 INDEMNIFICATION
 
39

 
 
 
 
 
 
 
SECTION 8.1
 
INDEMNIFICATION BY SELLER.
 
39

 
SECTION 8.2
 
INDEMNIFICATION BY PURCHASER.
 
39

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TABLE OF CONTENTS (cont’d)

 
 
 
 
 
Page

 
SECTION 8.3
 
INDEMNIFICATION LIMITS; SURVIVAL.
 
39

 
SECTION 8.4
 
PROCEDURES REGARDING THIRD PARTY CLAIMS.
 
41

 
SECTION 8.5
 
GENERAL QUALIFICATIONS ON INDEMNIFICATION.
 
42

 
SECTION 8.6
 
EFFECTIVE UPON CLOSING.
 
43

 
 
 
 
 
 
ARTICLE 9 TERMINATION
 
43

 
 
 
 
 
 
ARTICLE 10 MISCELLANEOUS
 
44

 
 
 
 
 
 
 
SECTION 10.1
 
ACCESS TO BOOKS AND RECORDS AFTER CLOSING.
 
44

 
SECTION 10.2
 
NOTICES.
 
44

 
SECTION 10.3
 
GOOD FAITH; COOPERATION.
 
45

 
SECTION 10.4
 
ASSIGNMENT; EXCHANGE COOPERATION; SUCCESSORS IN INTEREST.
 
46

 
SECTION 10.5
 
NO THIRD PARTY BENEFICIARIES.
 
46

 
SECTION 10.6
 
SEVERABILITY.
 
46

 
SECTION 10.7
 
PURCHASER RECORDS RIGHTS.
 
46

 
SECTION 10.8
 
CONTROLLING LAW; INTEGRATION; AMENDMENT; WAIVER.
 
47

 
SECTION 10.9
 
TIME.
 
47

 
SECTION 10.10
 
SURVIVAL.
 
47

 
SECTION 10.11
 
EMINENT DOMAIN ‑ CONDEMNATION.
 
47

 
SECTION 10.12
 
RISK OF LOSS.
 
48

 
SECTION 10.13
 
ATTORNEYS’ FEES.
 
48

 
SECTION 10.14
 
COVENANT NOT TO COMPETE.
 
48

 
SECTION 10.15
 
POST-CLOSING.
 
48

 
SECTION 10.16
 
WAIVER OF JURY TRIAL.
 
49

 
SECTION 10.17
 
CONSTRUCTION.
 
49

 
SECTION 10.18
 
EXECUTION IN COUNTERPARTS.
 
49

Exhibits

Exhibit
Description
Exhibit A
Escrow Agreement
Exhibit B
Post-Closing Escrow Agreement
Exhibit C
Deed
Exhibit D
Bill of Sale and Assignment
Exhibit E
Transition Period Sublease
Exhibit F
Assumption Agreement
Exhibit G
Due Diligence Materials

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Schedules

Schedule
Title
Schedule 1.1(a)
Assumed Contracts and Leases
Schedule 1.1(b)
Legal Description of Purchased Real Property

Schedule 2.2(c)

Prepaids and Deposits
Schedule 2.2(d)
Seller Vehicles
Schedule 2.4(a)
Permitted Title Exceptions
Schedule 2.4(g)
Licenses, Leases Easements and Other Rights Related to Real Property
Schedule 3.3
Purchase Price Allocation
Schedule 5.4(o)
Third Party Consents
Schedule 6.3
Material Assets or Rights Not Included in Purchased Property
Schedule 6.5
Execution and Delivery – No Contravention
Schedule 6.6
Contracts and Leases
Schedule 6.7
Residency Agreements; Refunds and Deposits; Resident Details
Schedule 6.8
Permits and Licenses
Schedule 6.9
Insurance; Three Year Claim History
Schedule 6.10
Employees, etc.
Schedule 6.11
Benefit Plans
Schedule 6.12
Litigation, etc.
Schedule 6.13
Compliance with Laws

Schedule 6.14
Financial Statements
Schedule 6.15
Real Property Compliance
Schedule 6.16
Environmental Matters
Schedule 6.20
Seller Third Party Consents
Schedule 6.21
Seller Government Approvals
Schedule 6.23
Title Encumbrances
Schedule 6.25
Loans and Debts
Schedule 6.20
Purchaser Third Party Consents
Schedule 6.21
Purchaser Government Approvals
Schedule 10.7
Audit Materials

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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into this
6th day of July, 2015 (the “Effective Date”), by and between AMERICAN REALTY
CAPITAL VII, LLC, a Delaware limited liability company (“Purchaser”) and
ARCADIAN COVE, LLC, a Kentucky limited liability company (the “Owner”) and
ARCADIAN ASSISTED LIVING, LLC, a Kentucky limited liability company (“Operator,”
and Owner and Operator are hereinafter sometimes referred to as the “Seller”).

RECITALS:
Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires
to purchase from Seller, substantially all of the assets, properties and
business of Seller, consisting of the Purchased Property described herein.
This Agreement sets forth the terms and conditions to which the parties have
agreed.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the mutual promises set
forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:

        

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ARTICLE 1
DEFINITIONS AND
CERTAIN RULES OF CONSTRUCTION
Section 1.1    Defined Terms. The following capitalized terms shall have the
meanings specified in this section. Other terms are defined in the text of this
Agreement, and throughout this Agreement, those terms shall have the meanings
respectively ascribed to them.
“Assumed Contracts and Leases” are those contracts, leases and agreements listed
on Schedule 1.1(a) attached hereto, to the extent assignable and for which
applicable third party consents have been obtained or waived by Purchaser.
“Assumed Liabilities” are (i) all of Seller’s obligations and liabilities under
the Assumed Contracts and Leases which arise or accrue at any time after 11:59
PM on the date immediately preceding the Closing Date; (ii) the Prepaids and
Deposits described on Schedule 2.2(c); and (iii) Sellers’ obligations with
respect to accrued vacation and other paid time off for Employees (as defined
herein) to the extent of Purchaser’s obligations pursuant to Section 4.4(d)
hereof.
“Business” means all aspects of the operation of the Facility as an assisted
living facility.
“Closing” means the consummation of the transactions contemplated by this
Agreement. Neither party will need to be present at Closing, it being
anticipated that the parties will deliver all Closing documents and deliverables
in escrow to the Escrow Agent (as defined herein) (or if both Purchaser and
Seller agree, to Purchaser’s and/or Seller’s counsel) prior to the date of
Closing.
“Closing Date” shall have the meaning set forth in Section 5.1 hereof.
“Environmental Laws” means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq.,
Hazardous Materials Transportation Act, 49 U.S.C. § 1802, the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Toxic Substance
Control Act of 1976, as amended, 15 U.S.C. § 2601 et seq., or any other federal,
state, local or other governmental legislation, statute, law, code, rule,
regulation or ordinance identified by its terms as pertaining to the protection
of the environment, including laws relating to the treatment, storage or
disposal of Hazardous Substances, in each case as in effect on the Effective
Date.
“Facility” means the assisted living facility known as “Arcadian Cove” and
consisting of forty-nine (49) total assisted living units.
“Government Program” means the federal Medicare program, any state Medicaid
program, and such other similar federal, state, or local reimbursement or
governmental programs for which any Facility is eligible.
“Hazardous Substance” means petroleum, including crude oil or any fraction
thereof, flammable explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, any material containing polychlorinated biphenyls,
and any of the substances defined as “hazardous

2
        
        

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substances” or “toxic substances” or otherwise identified and regulated under
any Environmental Laws.
“Holdback Amount” means an amount equal to four percent (4.0%) of the Purchase
Price paid at Closing for the Facility.
“Improvements” means all buildings, facilities, and other improvements
constructed on the Purchased Property as of the date of Closing.
“Intellectual Property” means all trademarks, trademark applications, service
marks, trade names, copyrights, trade secrets, licenses, domain names, mask
works, patents, patent applications, information and proprietary rights and
processes.
“IRC” means the Internal Revenue Code of 1986, as amended, and any regulations
or guidance issued thereunder.
“Lien” means any mortgage, deed to secure debt, deed of trust, pledge,
hypothecation, title defect, right of first refusal, security or other adverse
interest, encumbrance, claim, option, lien, lease or charge of any kind, whether
voluntarily incurred or arising by operation of law or otherwise, affecting any
assets or property, including any agreement to give or grant any of the
foregoing, any conditional sale or other title retention agreement, and the
filing of or agreement to give any financing statement with respect to any
assets or property under the Uniform Commercial Code or comparable law of any
jurisdiction.
“Material Adverse Change” means
(a)    any occurrence between the Effective Date and the Closing Date which
results in, or is reasonably likely to result in, a material adverse change in
the assets, financial condition, or results of operations of the Facility, taken
as a whole; provided, however, that none of the following shall in any event be
deemed a Material Adverse Change: (i) any change resulting from changes in any
law or regulation following the Effective Date; (ii) any change resulting from
announcement or pendency of the transactions contemplated herein; or (iii) any
change made pursuant to the terms of this Agreement or with Purchaser’s express
written consent; or
(b)     a reduction in the trailing 30 day average occupancy of the available
units within the Facility (the “Average Occupancy”) below forty four (44) out of
forty nine (49) units for any reason; or
(c)    a reduction of ten percent (10%) or more, for any reason, in Net
Operating Income, as such term is defined and measured in the April 2015
Financial Statement set forth on Schedule 6.14. For purposes of this definition,
“Net Operating Income” shall be calculated in accordance with standard
accounting principles on a modified accrual basis consistent with past practices
including those practices used in compiling the April 2015 Financial Statement.

3
        
        

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“Operator” means the current Arcadian Assisted Living, LLC., a Kentucky limited
liability company, the operator of the Business, which operates the Business
pursuant to a lease agreement between Seller and the Operator.
“Permitted Encumbrances” means (i) liens for taxes not yet due or which are
being contested in good faith and by appropriate proceedings and which are
satisfied or discharged of record at or prior to Closing pursuant to Section
2.4(f) below; (ii) carriers’, warehousemen’s, mechanics’, materialmen’s,
repairmen’s or other similar liens arising in the ordinary course of business
which are not overdue for a period of more than thirty (30) days or which are
being contested in good faith and by appropriate proceedings and which are
satisfied or discharged of record at or prior to Closing pursuant to Section
2.4(f) below, and (iii) the Permitted Title Exceptions.
“Plans” shall have the meaning set forth in Section 6.11.
“Purchased Personal Property” is the Purchased Property other than the Real
Property, including intangible Purchased Property.
“Purchased Property” is the property of Seller to be sold to Purchaser pursuant
to this Agreement as set forth in Section 2.2 hereof.
“Real Property” shall mean that certain parcel of real estate located at located
at 532 Cady Dr., Richmond, Kentucky 40475, as more particularly described in
Schedule 1.1(b) attached hereto, together with all the buildings, fixtures,
structures, and improvements thereon, and all easements and rights of way
serving or benefiting such property.
“Residency Agreement” means any agreement between Seller and an individual
contracting for such individual’s residency at the Facility.
“Seller’s Knowledge” means the knowledge of Kimo Von Oelhoffen and Jackie
Sielaff, following reasonable inquiry of and consultation with the Executive
Director of the Facility (the “Executive Director”), and each of the department
heads of the Facility, in connection with the execution of this Agreement and
the preparation of Schedules to this Agreement prior to Closing.
Section 1.2    Certain Definitions. For purposes of this Agreement:
“herein,” “hereunder,” “hereof,” “hereinbefore,” “hereinafter” and other
equivalent words refer to this Agreement in its entirety and not solely to the
particular portion of this Agreement in which such word is used, and references
to “this article,” “this section,” “this paragraph,” “this subparagraph” or
similar references to a specific part of this Agreement shall refer to the
particular article, section, paragraph, subparagraph or specific part in which
such reference appears;
“party” or “parties” means each or all, as appropriate, of the entities who have
executed and delivered this Agreement, each permitted successor or assign of a
party, and when appropriate to effect the binding nature of this Agreement for
the benefit of another party, any other successor or assign of a party;

4
        
        

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“person” means any individual, sole proprietorship, partnership, joint venture,
corporation, estate, trust, unincorporated organization, association, limited
liability company, institution or other entity, including any that is a
governmental authority; and
“business day” is a day which is not a Saturday, Sunday or legal holiday
recognized by the Federal Government.  Furthermore, if any date upon which or by
which action is required under this Agreement is not a business day, then the
date for such action shall be extended to the first day that is after such date
and is a business day.  When calculating the period of time before which, within
which or following which any act is to be done or step taken pursuant to this
Agreement, the date that is the reference date in calculating such period shall
be excluded.  If the last day of such period is a non-business day, the period
in question shall end on the next succeeding business day.
“Seller” means each entity comprising the Seller (as defined above) collectively
and individually.
Section 1.3    Rules of Construction. For purposes of this Agreement:
(a)    “including” and any other words or phrases of inclusion shall not be
construed as terms of limitation, so that references to “included” matters shall
be regarded as non-exclusive, non-characterizing illustrations; “copy” or
“copies” means that the copy or copies of the material to which it relates are
true, correct and complete;
(b)    “shall,” “will,” and “agrees” are mandatory, and “may” is permissive;
(c)    titles and captions of or in this Agreement are inserted only as a matter
of convenience and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any of its provisions;
(d)    whenever the context so requires, the singular includes the plural and
the plural includes the singular, and the gender of any pronoun includes the
other gender;
(e)    each Exhibit and Schedule referred to in this Agreement and each
attachment to any of them or this Agreement is hereby incorporated by reference
into this Agreement and is made a part of this Agreement as if set out in full
in the first place that reference is made to it; and
(f)    every covenant, term and provision of this Agreement shall be construed
simply according to its fair meaning and not strictly for or against any party
hereto, regardless of which party was more responsible for the preparation of
this Agreement.

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ARTICLE 2    
Purchase and Sale of the Purchased Property
Section 2.1    Sale of Business. Subject to the provisions of this Agreement,
Seller shall sell all of the Purchased Property to Purchaser, free and clear of
all Liens and liabilities whatsoever, except for the Assumed Liabilities and the
Permitted Encumbrances.
Section 2.2    Purchased Property. The Purchased Property shall include all of
the assets of Seller used in, arising from or related to the Business as of the
Closing Date other than Excluded Property (as defined herein), including the
following:
(g)    all inventory and supplies on hand at the Facility on the Closing Date
(including food, beverages, office and kitchen supplies);
(h)    all of Seller’s right, title and interest in and to the Assumed Contracts
and Leases, to the extent assignable;
(i)    all pre-paid amounts paid by a resident pursuant to any Residency
Agreement for or attributable to the periods from and after the Closing Date as
well as any security deposits paid to Seller as of the Closing Date under the
Residency Agreements (to the extent such deposits can be transferred in
accordance with applicable law) together with any interest thereon to the extent
such interest is or may be payable to the residents (or their respective
representatives, successors, heirs or assigns) at any time following the Closing
Date each as more particularly described on Schedule 2.2(c) (collectively
“Prepaids and Deposits”);
(j)    all of Seller’s tangible personal property (including without limitation
equipment, furniture, fixtures, signage and vehicles (including, without
limiting this provision, those vehicles described on Schedule 2.2(d)) used in,
arising from or related to the Business as of the Closing Date;
(k)    the Real Property as more particularly described on Schedule 1.1(b)
attached hereto and the Facility described herein;
(l)    subject to applicable laws and regulations, all transferable licenses,
permits, certificates, approvals, and other governmental or regulatory
authorizations necessary for or incident to the ownership or operation of the
Purchased Property in the manner in which they are owned and operated by Seller
as of the Closing Date;
(m)    all original books, records, accounts, files, logs, ledgers, journals,
and other documents and other materials of Seller (or copies thereof) including
any electronic data stored on disc, tape or other electronic format relating to
the ownership, use, operation or management of the Business, to the extent
within the possession or control of Seller (although Seller may

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retain copies thereof for the preparation of tax returns, compliance with
applicable laws, and other business purposes);
(n)    all marketing and promotional materials in Seller’s possession or
control, which relate exclusively to the Business, if any, or the services they
provide, to the extent of Seller’s rights in such materials, including without
limitation brochures, renderings, photographs and signage (although Seller may
retain copies thereof for compliance with applicable laws);
(o)    all warranties and guarantees regarding the installation, application,
manufacture, composition and/or inspection of the Purchased Property, and all
other manufacturer and third-party warranties and guarantees relating to any of
the Purchased Property, to the extent such warranties and guarantees remain in
effect and are assignable by Seller;
(p)    all telephone and facsimile numbers of the Facility, and Seller’s email
addresses;
(q)    all goodwill of the Business as a going concern;
(r)    all rights to the name “Arcadian Cove” and all derivations thereof,
including without limitation all Intellectual Property related to such name and
all derivations thereof, and all other Intellectual Property owned by Seller and
necessary to the conduct of the Business as now conducted by Seller;
(s)    all records of all residents at the Facility, whether or not such
resident was in occupancy prior to or on the Closing Date in the possession or
control of Seller, to the extent transfer to Purchaser is not prohibited, and
subject to Section 10.1;
(t)    all intangible personal property of Seller used in, arising from, or
related to the Business as of the Closing Date, including all registrations,
applications and licenses therefor, that is not specifically included in the
Excluded Property, to the extent assignable and for which any third party
consents required for such assignment have been obtained;
(u)    all rights in and to any claims or causes of action to the extent they
are in the nature of enforcing a guaranty, warranty, or a contract obligation to
complete the Improvements, make repairs, or deliver services to the Purchased
Property other than (i) claims for damages or other monetary loss incurred by
Seller prior to the Closing Date and (ii) claims relating to Excluded
Liabilities or Excluded Property; and

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(v)    any other tangible or intangible assets, property or rights of any kind
or nature not otherwise described above in this Section 2.2 and now owned or
hereafter acquired between the Effective Date and the Closing Date by Seller and
used in connection with the operation of the Business (other than Excluded
Property and rights relating solely to the Excluded Liabilities).
To the extent any of the foregoing Purchased Property is available in electronic
format, Seller shall provide Purchaser with same in such electronic format, in
addition to physical copies of same.
Section 2.3    Excluded Property. “Excluded Property” means the following
categories of properties, which although they may currently form part of the
Business, are excluded from the Purchased Property:
(a)    cash, cash equivalents or other investments (other than the Prepaids and
Deposits);
(b)    Seller’s accounts receivable for rent or services provided prior to 11:59
p.m. on the date immediately preceding the Closing Date;
(c)    Seller’s operating agreement, minute books, membership ledgers and income
tax records;
(d)    any rights of Seller with respect to federal, state or local tax refunds
or credits;
(e)    the Seller Plans (as defined herein), the assets and insurance policies
relating to the Seller Plans, and any records relating thereto;
(f)    all contracts of insurance and claims and interests in any insurance,
insurance claims, escrows, revenues or right to indemnity from third parties or
other rights relating to the Excluded Liabilities;
(g)    Seller’s rights and interests under this Agreement;
(h)    security deposits and utility deposits, to the extent not added to the
Purchase Price at Closing pursuant to Section 3.2.
Section 2.4    Title to Real Property and Survey. At Closing, Owner agrees to
convey marketable and insurable fee simple title to the Real Property to
Purchaser by special warranty deed (the “Deed”), subject only to the Permitted
Encumbrances. The legal description of the Real Property to be contained in the
Deed shall be the same legal description as is attached hereto in the applicable
subsection of Schedule 1.1(b). In the event the legal description as disclosed
by the Survey, as defined in Section 5.4(a), differs from the legal description
in the applicable subsection of Schedule 1.1(b), or the Initial Commitment
reveals any errors or omissions in the legal descriptions, then Seller shall
also provide a quitclaim deed (or other appropriate recordable instrument)
utilizing such Survey legal description.

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(a)    Seller shall promptly order, at Seller’s expense, from Stewart Title
Guaranty Company (the “Title Company”), an ALTA Form 2006 Commitment (or such
other form as is acceptable to Purchaser), with such endorsements as Purchaser
shall reasonably require and with insurance coverage over any “gap” period (the
“Initial Commitment”) for an owner’s title insurance policy (the “Title Policy”)
in an amount no less than the Purchase Price allocated to the Real Property
evidencing that Owner is vested with fee simple title to the Real Property, free
and clear of all liens, encumbrances, exceptions or qualifications whatsoever
save and except for (a) those exceptions specified as permitted exceptions
listed on Schedule 2.4(a) attached hereto (the “Permitted Title Exceptions”),
(b) those exceptions evidenced in writing as being otherwise acceptable to
Purchaser in its sole discretion which shall thereafter be deemed Permitted
Title Exceptions, and (c) those exceptions to title which are to be discharged
by Seller at or before closing. The Initial Commitment shall also evidence that
upon the execution, delivery and recordation of the deeds to be delivered at
Closing and the satisfaction of all requirements specified in Schedule B,
Section I of the Initial Commitment, Purchaser shall acquire fee simple title to
the Real Property, subject only to the Permitted Title Exceptions.
(b)    If Purchaser or its attorneys shall determine that the Initial Commitment
does not meet the requirements specified above, or that title to the Real
Property is unsatisfactory to Purchaser for reasons other than the existence of
Permitted Title Exceptions or exceptions which are to be discharged by Seller at
or before Closing, then Purchaser shall notify Seller by the end of the Due
Diligence Period (as defined herein) of those liens, encumbrances, exceptions or
qualifications to title which either are not Permitted Title Exceptions, are
unsatisfactory to Purchaser or are not contemplated by this Agreement to be
discharged by Seller at or before Closing, and any such liens, encumbrances,
exceptions or qualifications shall be hereinafter referred to as “Title
Defects.”
(c)    Purchaser, at Purchaser’s expense, may order an update to the survey of
the Real Property (the “Survey”) previously provided to Purchaser and Seller
hereby grants Purchaser and Purchaser’s agents the right to access the Real
Property as may be reasonably required to perform such work. The Survey shall be
prepared by a land surveyor duly licensed and registered as such in the state
the Real Property is located, (i) shall be certified by such surveyor to
Purchaser, Seller, each parties’ legal counsel and the Title Company, (ii) shall
reference the Initial Commitment file number, (iii) shall set forth the legal
description of the Real Property precisely as it appears in the Initial
Commitment (or the Initial Commitment must be endorsed so that the insured legal
description mirrors the legal description in the Survey, if applicable), (iv)
shall identify whether or not each matter referenced in the Initial Commitment
applies to the Real Property, (v) shall depict the boundaries of each such item
that is capable of being depicted on the Survey, (v) shall depict any
Improvements located upon the Real Property, (vi) shall show all easements,
rights-of-way, setback lines, encroachments and other matters affecting the use
or development of the Real Property (vii) shall include the original signature
and seal of the surveyor, and (viii) shall be in a form satisfactory to the
Title Company to eliminate the standard survey exceptions from the title
insurance policy to be issued at Closing. Purchaser shall notify Seller in
writing within ten (10) business days after receipt of the Survey of any Title
Defects specifying any matters shown on the Survey which was not set forth on
the survey previously delivered to Purchaser and which adversely affect the
title to the Real Property and the same shall thereupon be deemed to be Title
Defects hereunder.

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(d)    Within five (5) business days of receipt from Purchaser of a written
notice of any Title Defects, together with a copy thereof, Seller shall notify
Purchaser as to whether it will cure such objection, and if it elects to cure
any such objection, it shall in good faith diligently endeavor to satisfy or
correct, at Seller’s expense, such objection on or before the date of Closing to
the satisfaction of Purchaser and the Title Company in such manner to permit the
Title Company to either endorse the Initial Commitment or to issue a replacement
commitment to eliminate the Title Defect therefrom. Failure of Seller to give
such notice within such five (5) business day period shall be deemed to be an
election not to cure such objection. In the event Seller does not elect to
satisfy or cure any objection of which it is notified, then within five (5)
business days after receipt of written notice of Seller’s election, or within
five (5) business days after the expiration of Seller’s five (5) business day
notification period if Seller fails to give any such notice, Purchaser shall by
written notice to Seller elect one of the following:
(i)    to accept Seller’s interest in the Purchased Property subject to such
objections, in which event such title and survey objections shall become part of
the Permitted Title Exceptions, and to close the transaction contemplated hereby
in accordance with the terms of this Agreement; or
(ii)    to terminate this Agreement in its entirety and receive a refund of the
Deposit.
The failure of Purchaser to give written notice of its election to either accept
the Purchased Property subject to such objections or to terminate this Agreement
within the applicable five (5) day period shall be deemed an election to
terminate this Agreement and to receive a refund of the Deposit.
(e)    In the event Seller elects in writing to cure any title or survey
objection and thereafter is unable, after acting diligently and in good faith,
to effect such cure, on or before the date of Closing, then Purchaser shall
have, as its sole remedy, the options described in Section 2.4(d) above. Seller
shall have no obligation under this Section 2.4(e) to expend monies or to
institute litigation to cure Title Defects except those which may be satisfied
solely by the payment of money prior to or at Closing.
(f)    Notwithstanding anything in this Agreement to the contrary, Seller
covenants and agrees that at or prior to Closing, Seller shall (i) pay in full
and cause to be canceled and discharged or otherwise bond and discharge as liens
against the Purchased Property all mechanics’ materialmen’s, repairmen’s,
contractors’ or other similar Liens which encumber the Purchased Property as of
the date hereof created by, through or under Seller or which may be filed
against the Purchased Property after the date hereof created by, through or
under Seller and on or prior to the Closing Date (ii) pay in full all past due
ad valorem taxes and assessments of any kind constituting a lien against the
Purchased Property which are due and payable, and (iii) pay in full or cause to
be canceled and discharged all mortgages, security deeds or other security
instruments encumbering the Purchased Property and all judgments which have
attached to and become a lien against the Purchased Property by, through or
under Seller. In the event Seller fails to cause such liens and encumbrances to
be paid and canceled at or prior to Closing, Purchaser shall be entitled to pay
such reasonable amount to the holder thereof as may be required to pay and
cancel same, and to credit against the Purchase Price the amount so paid.

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(g)    Except as set forth on Schedule 2.4(g), Seller has not granted any
license, lease, easement or other right relating to the use or possession of the
Real Property (except (i) under the Residency Agreements existing as of the
Effective Date and entered into by Seller in the ordinary course of business in
accordance with Section 4.2 hereof; or (ii) as may be set forth in the Title
Commitment), and Seller agrees that, other than as expressly permitted by
Section 4.2 hereof, it shall not grant any such right prior to Closing without
the prior written approval of Purchaser, which may be withheld in Purchaser’s
sole and absolute discretion.
Section 2.5    Assumed Liabilities. Subject to the terms and conditions of this
Agreement, on the Closing Date, Purchaser shall assume and agrees to pay,
perform or discharge only the Assumed Liabilities. Other than the Assumed
Liabilities, Purchaser shall not assume any of Seller’s debts, obligations or
liabilities, of any kind or nature, including without limitation any civil
claims or other legal proceedings or legal or regulatory investigations or
actions arising out of or during Seller’s ownership, use, operation or
management of the Business or any of the Purchased Property or the Excluded
Property, all of which Seller shall pay, perform and discharge when due. Nothing
in this Section 2.5 shall be deemed to preclude either party from contesting any
liability or obligation in good faith through the appropriate process.
Section 2.6    Excluded Liabilities. All of Seller’s debts, obligations and
liabilities, other than the Assumed Liabilities, including any liability,
obligation, claim, action, suit, or proceeding pending as of the Closing Date,
or any subsequent claim, action, suit, or proceeding arising out of or relating
to any such other event occurring prior to the Closing, with respect to the
ownership or operation of its businesses prior to the Closing Date, including,
without limitation, any obligation of Seller for compliance with applicable
federal, state, county, and local tax laws or regulations, including the
obligations under such laws for the payment of taxes and the filing of tax
returns, under Part 6 of Title I of ERISA and Section 4980B of the IRC, as
amended (commonly known as “COBRA”), the Seller Plans, the Fair Labor Standards
Act, Title VII of the Civil Rights Act of 1964, the Occupational Safety and
Health Act, the Age Discrimination in Employment Act of 1967, the Americans With
Disabilities Act, the Family and Medical Leave Act, or state worker’s
compensation and unemployment compensation laws, as now or hereafter amended,
and any liabilities related to any overpayment (regardless of reason for such
overpayment), adjustment of payments received or non-compliance under any
Government Program, are collectively referred to herein as the “Excluded
Liabilities;” provided, however, that actions commenced following the Closing
under the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et. seq.
or similar state law seeking remedial action with regard to the Purchased
Property, shall not be deemed an Excluded Liability and Seller shall have no
liability with respect to any such action.

ARTICLE 3    
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE; ALLOCATION
Section 3.1    Purchase Price and Deposit.
(w)    Purchase Price. Subject to any adjustments and prorations expressly
provided for in this Agreement, including those described in Section 3.3 and
Section 4.4 (collectively, “Adjustments”), the purchase price (the “Purchase
Price”) for the Purchased Property shall be

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a total of Four Million Seven Hundred Seventy-Five Thousand and No/100 U.S.
Dollars ($4,775,000.00).
(x)    Deposit. The parties acknowledge that within three (3) business days
after the Effective Date, if the this Agreement has not been terminated in
accordance with its terms, Purchaser shall deliver to Stewart Title Guaranty
Company (or any other mutually acceptable escrowee) (the “Escrow Agent”) One
Hundred Fifty Thousand and No/100 U.S. Dollars ($150,000) (the “Deposit”). The
Escrow Agent shall hold the Deposit in a non-interest bearing account pursuant
to an escrow agreement in the form attached hereto as Exhibit A.
(y)    The Deposit shall be paid and returned to Purchaser upon the occurrence
of the circumstances described in Section 2.4(d)(ii), Section 5.6(b), Section
5.6(c), Section 5.6(e), Section 5.8, ARTICLE 9(a), ARTICLE 9(b), ARTICLE 9(d),
ARTICLE 9(e), Section 10.11 and Section 10.12 in each instance, upon proper
written demand of Purchaser to Seller and the Escrow Agent stating the reason
for such termination and referencing the section of this Agreement providing
Purchaser with the right to do so. Upon receipt of such written demand by
Seller, Seller and Purchaser shall direct the Escrow Agent, in writing, to pay
and disburse the Deposit immediately to Purchaser (whereupon this Agreement
shall terminate and neither party shall have any further rights or obligations
hereunder, except as otherwise expressly provided herein).
(z)    The Deposit shall be paid to Seller: (i) at the Closing, should the
Closing occur, in partial satisfaction of the Purchase Price as provided in
Section 3.2(b) hereof; or (ii) as liquidated damages (and not as a penalty)
under the circumstances described in Section 5.6(a). In each such instance,
Seller and Purchaser shall direct the Escrow Agent, in writing, to pay and
disburse the Deposit immediately to Seller (whereupon this Agreement shall
terminate and neither party shall have any further right or obligations
hereunder, except as otherwise expressly provided herein).
(aa)    Without limiting Purchaser’s other rights and remedies hereunder,
Purchaser may terminate this Agreement for any reason or for no reason
whatsoever during the Due Diligence Period and upon any such termination the
Deposit shall be returned to Purchaser.
Section 3.2    Payment of Purchase Price. The Purchase Price shall be paid by
Purchaser, at Closing, as follows:
(i)    Four Million Seven Hundred Seventy-Five Thousand and No/100 U.S. Dollars
($4,775,000.00), as adjusted for (i) any Adjustments pursuant to Section 3.1(a),
(ii) the mutually agreed upon value of the accrued vacation and other paid time
off included in the Assumed Liabilities, and (iii) any credits and additions
described in Section 3.2(b) below, shall be paid at Closing by wire transfer in
accordance with wire instructions provided by Seller at least three (3) business
days before Closing.
(j)    Purchaser shall receive a credit against payment of the Purchase Price by
the amount of (i) the Deposit, (ii) the accrued vacation and sick pay amounts
included in the Assumed Liabilities, and (iii) unless otherwise paid by Seller,
the amounts to be paid by Seller under Section 2.4(a) and Section 4.6(b) of this
Agreement. If, at Purchaser’s request, Seller leaves any of Seller’s security
deposits or utility deposits in place following Closing, then the amount of any
such security

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deposit or utility deposit shall be added to the Purchase Price and paid to
Seller pursuant to Section 3.2(a).
(k)    Purchaser shall deposit the Holdback Amount into an interest-bearing
escrow account with the Escrow Agent pursuant to an Escrow Agreement in
substantially the form attached hereto as Exhibit B (the “Post-Closing Escrow
Agreement”). The funds held pursuant to the Post-Closing Escrow Agreement shall
be available according to the terms of the Post-Closing Escrow Agreement to
secure any obligations of Seller to Purchaser pursuant to Section 3.3(d) and
Section 8.1 hereof. The Holdback Amount shall be released to Seller at the end
of the twelfth (12th) calendar month following the Closing Date, less any
amounts claimed by Purchaser prior to such distribution date, which shall be
held in accordance with the terms of the Post-Closing Escrow Agreement until
finally adjudicated.
(l)    Purchaser shall assume the Assumed Liabilities.
(m)    The parties acknowledge that the transactions contemplated hereunder must
be reported in accordance with Section 1060 of the IRC. The parties shall report
the transactions contemplated hereunder for all purposes in accordance with the
purchase price allocation set forth on Schedule 3.3 hereto, which will be
determined prior to the end of the Due Diligence Period. The parties shall share
information and cooperate to the extent necessary to permit the transactions to
be properly, timely, and consistently reported.
Section 3.3    Prorations.
(h)    The following items shall be prorated between Seller and Purchaser as of
11:59 p.m. on the date immediately preceding the Closing Date (the “Proration
Date”); prorations credited to Purchaser shall reduce the Purchase Price and
prorations credited to Seller shall increase the Purchase Price at Closing as
follows:
(i)    city, state, and county ad valorem taxes for the year in which the
Closing occurs based on the ad valorem tax bills for the Purchased Property, if
then available for such year, or if not, then on the basis of the ad valorem tax
bill for the Purchased Property for the immediately preceding year. (If such
proration is based on an ad valorem tax bill for the immediately preceding year
and should such proration prove to be inaccurate on receipt of the ad valorem
tax bill for the Purchased Property for the year of Closing, then either Seller
or Purchaser, as applicable, may demand at any time after Closing a payment from
the other party in an amount sufficient to correct such malapportionment);
(ii)    sanitary sewer taxes and utility charges, if any; provided, however,
that Purchaser may elect, prior to Closing, to require that the meters for all
utility charges be read and terminated as of the end of the last business day
preceding the Closing Date, in which case Seller shall be responsible for and
shall pay for all such charges first accruing or relating to the period prior to
the Closing Date;
(iii)    all payment obligations under the Assumed Contracts and Leases; and

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(iv)    resident rents and other revenues (including Prepaids and Deposits, if
any).
Purchaser and Seller shall prepare a proposed schedule (the “Proration
Schedule”) prior to Closing, including the items listed above and any other
items the parties determine necessary. Such Proration Schedule shall include all
applicable income and expenses with regard to the Purchased Property. Seller and
Purchaser will use all reasonable efforts to finalize and agree upon the
Proration Schedule at least two (2) business days prior to Closing.
(i)    Seller shall receive all income from the Purchased Property attributable
to the period prior to the Proration Date and shall, unless otherwise provided
for in this Agreement, be responsible for all expenses of the Purchased Property
attributable to the period prior to the Proration Date. In the event Purchaser
receives any payment from a resident for rent due for any period prior to the
Proration Date or payment of any other receivable of Seller, Purchaser shall
forward such payment to Seller. Payments received from a resident shall be
allocated first to any current balances due from such resident that have accrued
since the Proration Date and any costs of collection of such amounts incurred by
Purchaser.
(j)    Purchaser shall receive all income from the Purchased Property
attributable to the period from and after the Proration Date and shall, except
as otherwise provided for in this Agreement, be responsible for all expenses of
the Purchased Property attributable to the period from and after the Proration
Date. In the event Seller or Seller’s affiliates receive any payment from a
resident for rent due for any period from and after the Proration Date, Seller
shall forward such payment to Purchaser.
(k)    The parties agree that any amounts that may become due under this Section
3.3 shall be paid at Closing as can best be determined. A post-Closing
reconciliation of prorated items shall be made by the parties within ninety (90)
days after the Closing Date and any amounts due at that time shall be promptly
forwarded to the respective party to whom such amounts are due in a lump sum
payment. Any additional amounts which may become due after such determination
shall be forwarded at the time they are received. Any amounts due under this
Section 3.3 which cannot be determined within ninety (90) days after the Closing
Date (such as, for example, fiscal year-end real estate taxes) shall be
reconciled as soon thereafter as such amounts can be determined. Purchaser and
Seller agree that each shall have the right to audit the records of the other in
connection with any such post-Closing reconciliation. Any payments made pursuant
to this Section 3.3 shall be treated as a purchase price adjustment for income
tax purposes.
ARTICLE 4    
CERTAIN OTHER COVENANTS AND AGREEMENTS
Section 4.1    Inspection and Due Diligence.
(n)    Prior to Closing, Purchaser (including its agents and representatives)
shall be permitted to inspect the Facility and the Purchased Property. The first
thirty-five (35) days following the Effective Date, ending at 5:00 P.M., Eastern
time on the thirty-fifth (35th) day following the Effective Date or, if such day
is not a business day, on the next business day following such day, shall be
known as the “Due Diligence Period” for purposes of this Agreement, but

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Purchaser shall be entitled to continue all such inspections during and after
the Due Diligence Period. Such inspections may include an independent appraisal
and environmental assessments (including Phase I assessments and Phase II
assessments if Seller consents to any such Phase II assessment which consent
shall not be unreasonably withheld, conditioned or delayed), impact study and
detailed architectural and engineering inspections of buildings and mechanical
systems located on the Real Property and any other inspections which may
reasonably be required by potential lenders or investors. Purchaser shall not
conduct any drilling, boring, soil testing or other physically intrusive
inspections without Seller’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, if done in connection with any
Phase II assessment. Seller shall allow Purchaser and its authorized
representatives reasonable access upon prior notice during normal business hours
and until the Closing to Seller’s executive personnel, properties and records,
shall permit examination and testing, and shall furnish Purchaser and its
authorized representatives such information concerning the Purchased Property
and the Facility as Purchaser reasonably requests. Purchaser and its authorized
representatives shall have the right to review and copy all such books,
accounts, records, agreements or other documents as it may reasonably deem
advisable. Seller shall, upon reasonable request by Purchaser, make available to
Purchaser by electronic data room or otherwise, copies of all records, files,
correspondence, invoices, resident lists, supplier lists, blueprints,
specifications, designs, drawings, business records and plans, operating and
financial data, environmental assessments, property reports, permits and
regulatory files and other data associated with or used by Seller in connection
with its operation of the Business or its ownership or operation of the
Purchased Property, including without limitation all of the information
described in Section 4.1(b) below, to the extent Seller has possession and
control of such information, and in the form in which Seller maintains such
information in the ordinary course of its business. Seller shall have no
obligation to prepare any summaries, abstracts, compilations or reports in
connection with Purchaser’s investigation that Seller does not maintain or
compile in the ordinary course of Seller’s business. For purposes of this
Agreement, documents or information shall be deemed to have been “made
available” to Purchaser if copies have been delivered or viewed by Purchaser in
tangible or electronic form, or if such documents or information have been made
available at the Facility or on an internet or electronic data site to which
Seller has granted Purchaser or its representatives access. Purchaser shall
notify Seller in advance of any site visits by Purchaser or its contractors or
representatives. All site visits and contacts with Seller personnel shall be
coordinated through Jackie Sielaff (cell phone number 541-720-9638, e-mail
address jackie@vonoinc.com or Seller’s counsel, and Purchaser shall not contact
any Seller personnel, residents or service providers directly.
(o)    Within five (5) business days of the Effective Date (the “Diligence
Materials Due Date”), Seller shall provide Purchaser with all of the materials
in Seller’s possession or control listed in Exhibit G of this Agreement
(collectively, the “Requested Diligence Materials”). In the event that Seller’s
delivery of any Requested Diligence Materials is delayed beyond the Diligence
Materials Due Date, or in the event Purchaser has provided notice to Seller that
any purported response to the requirements of this Section 4.1(b) is
insufficient in Purchaser’s reasonable discretion, the Due Diligence Period
shall be extended by the total number of days which elapse between the Diligence
Materials Due Date and the date upon which all Requested Diligence Materials
have actually been provided to Purchaser or Purchaser has been advised by Seller
that such Diligence Materials are not available to Seller, or, as applicable,
any insufficient

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response to the requirements of this Section 4.1(b) has been corrected to
Purchaser’s reasonable satisfaction (inclusive of the Diligence Materials Due
Date and the last applicable date of delivery or correction, as applicable).
(p)    In the event that the Due Diligence Materials disclose any matters which
need completion or correction, such matters shall be completed or corrected by
Seller as a condition to Purchaser’s obligation to close the transactions
contemplated hereunder.
(q)    Purchaser shall pay all costs incurred for any such inspections of the
Facility and the Purchased Property initiated by Purchaser. Purchaser shall
indemnify and hold Seller harmless from and against any and all claims for death
of or injury to persons or damage to property to the extent arising out of or as
a result of the negligent or wrongful acts or omissions of Purchaser,
Purchaser’s authorized representatives, or designees of Purchaser pursuant to
the provisions of this Section 4.1. Purchaser, as well as its consultants and
contractors, shall at Seller’s request provide evidence of sufficient insurance
to protect Seller from any losses it might incur as a result of Purchaser’s
activities incurred in connection with such inspections.
(r)    The parties hereto acknowledge that Seller may possess or have access to
certain information subject to the Health Insurance Portability and
Accountability Act of 1996 and any regulations promulgated thereunder (“HIPAA”).
Notwithstanding any other provision of this Agreement, Seller shall have no
obligation under this Agreement to disclose to Purchaser any information which
would violate or put Seller in a position of noncompliance with any city,
county, state or federal privacy or security act, law, or regulation or the
provisions of HIPAA or which would result in Seller breaching any contractual
provisions imposed on Seller with respect to the requirements of HIPAA and/or
any such city, county, state, or federal act, law or regulation.
(s)    Purchaser may perform or cause to be performed a Phase I Environmental
Site Assessment of a portion of the Real Property (the “Phase I ESA”). Purchaser
shall provide Seller with a copy of the Phase I ESAs within five (5) business
days of completion and receipt of each by Purchaser. Any subsequent amendments
thereto will also be provided to Seller within five (5) business days after
completion and receipt by Purchaser thereof.
(t)    If the Phase I ESA, or any update thereof, reveals areas of environmental
concern that, in Purchaser’s sole opinion, warrant further investigation,
Purchaser may, at its discretion, request Seller’s consent to commence a Phase
II Environmental Site Assessment of the applicable portion of the Real Property
(“Phase II ESA”; collectively, the “ESAs”). A Phase II ESA consists of further
investigation of recognized environmental conditions identified in the Phase I
ESA including sampling and analysis of soil and groundwater necessary to
determine whether or not contamination has occurred. Seller’s consent to conduct
a Phase II ESA shall not be unreasonably withheld, conditioned or delayed. If
Seller permits Purchaser to conduct a Phase II ESA, Seller will be provided a
copy of the Phase II ESA within five (5) business days of completion and receipt
by Purchaser. Any subsequent amendments and/or reports relating to the Phase II
ESA shall also be delivered to Seller and Purchaser.
(u)    The costs of the Phase I ESA and the costs of the Phase II ESA and any
updates thereof shall be paid by Purchaser.

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(v)    Seller acknowledges that Purchaser intends to lease the Facility upon
Closing to a third-party that is not affiliated with Purchaser (the “Third-Party
Tenant”). Accordingly, notwithstanding any provision of this Agreement to the
contrary, to the extent that a potential Third-Party Tenant requests or requires
to perform diligence related to the Business and the Facility, Purchaser is
permitted to share with such potential Third-Party Tenant all reports and
information obtained or compiled by Purchaser with respect to the Business
and/or the Facility. Purchaser shall inform Third-Party Tenant of the
requirements of Sections 4.1(a) and 4.1(e) of this Agreement and shall be
responsible for any breach of such provisions by Third-Party Tenant.
Section 4.2    Conduct of Business Prior to the Closing Date. Seller covenants
and agrees with Purchaser that from the Effective Date hereof through the
Closing Date, except as otherwise expressly contemplated in this Agreement,
unless Purchaser otherwise consents in writing (which consent shall not be
unreasonably withheld, conditioned or delayed) Seller shall, and shall cause the
Operator in its capacity as Operator of the Business to:
(l)    Use good faith efforts to operate the Business in all material respects
in the ordinary course of business in a commercially reasonable manner,
including (i) incurring expenses consistent with Seller’s past practices in the
operation of the Business and (ii) using commercially reasonable efforts to
preserve the Business’ present business operations, organization and goodwill
and its relationships with customers, employees, advertisers, suppliers and
other contractors.
(m)    Operate the Business and otherwise conduct business in all material
respects in accordance with the terms or conditions of all applicable licenses
and permits, all applicable rules and regulations of the state where the
Facility is located, and all other rules, regulations, laws, and orders of all
governmental authorities having jurisdiction over any aspect of the operation of
the Business and all applicable insurance requirements; provided, however, that
the foregoing shall not impose on Seller any obligation to make unbudgeted
capital improvements or repairs, or to incur any cost or expense in order to
comply with any of the foregoing to the extent Seller was not in compliance as
of the Effective Date, except to the extent Seller is ordered to do so by a
governmental authority having jurisdiction over Seller.
(n)    Maintain the books, records, and financial statements for the Business
consistent with past practices.
(o)    Timely comply in all material respects with all contracts and agreements
with third parties related to the Facility or the operation of the Business.
(p)    Not sell, lease, grant any rights in or to or otherwise dispose of or
otherwise relinquish control of, or agree to sell, lease or otherwise dispose
of, the Purchased Property in whole or in part except for Residency Agreements
entered into in the ordinary course and dispositions of assets that are in the
ordinary course of business, and if material, are replaced by similar assets of
substantially equal or greater value and utility.
(q)    Take commercially reasonable efforts to maintain the Purchased Property
in the same condition as it exists as of the Effective Date, except for ordinary
wear and tear, in a manner consistent with past practices.

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(r)    Not default on any loans to Seller which are not fully cured or satisfied
at Closing.
(s)    Not enter into any contracts other than contracts which impose no
obligation on Purchaser following the Closing or Residency Agreements in the
ordinary course of business.
(t)    Not make any alterations or improvements to the Real Property or make any
capital expenditure with respect to the Real Property in excess of $10,000 other
than those that are currently budgeted for completion, or are required by law,
necessary to preserve the coverage under or comply with the terms of any
insurance policy with respect to the Business or are in Seller’s business
judgment necessary to address emergency conditions or to maintain the goodwill
and competitive standing of the Business.
(u)    Maintain normal levels of inventory and supplies on hand for the Business
(including food, beverages, office and kitchen supplies), consistent with past
practice.
(v)    Make available to Purchaser copies of all internally generated monthly
financial reports.
(w)    Inform Purchaser promptly regarding the resignation, termination or
hiring of the Executive Director or assistant director (“Assistant Director”),
if any, of the Facility.
Section 4.3    Notification of Certain Matters. Seller shall give prompt written
notice to Purchaser, and Purchaser shall give prompt written notice to Seller,
to the extent either such party becomes aware of (i) the occurrence, or failure
to occur, of any event that would be likely to cause any of their respective
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing Date, and (ii) any failure on their respective parts to comply with or
satisfy, in any material respect, any covenant, condition, or agreement to be
complied with or satisfied by any of them under this Agreement.
Section 4.4    Employees.
(a)    For purposes of this Section 4.4, all references to employment by an
entity include both direct employment by such entity, employment by an affiliate
of such entity, or employment through one or more employee leasing or similar
arrangements that such entity or its affiliate has entered into with a third
party.
(b)    Seller shall be responsible for complying with the continuation health
care coverage requirements of COBRA with respect to any individual who became a
“qualified beneficiary” as of or prior to the Closing Date, including as a
result of this transaction.
(c)    Seller shall pay any severance costs payable with respect to the
termination of employment by Seller (as applicable) of any Employee, including
Employees who are offered post-Closing employment by the Third-Party Tenant,
pursuant to any severance policies or plans or required by law, including the
WARN Act (if applicable). Seller shall be solely responsible for WARN Act
compliance for all Employees.

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(d)    As to any Employee that the Purchaser desires the Third-Party Tenant to
hire for the Business post-Closing (collectively, “Hired Employees”), Seller
shall cause the release of such Hired Employee from any contractual provision
with Seller to the extent that such provision would impair the utility of such
Hired Employee’s services to the Third-Party Tenant in conducting the Business
following the Closing in substantially the same manner it is conducted by Seller
immediately prior to the Closing Date, or to the extent that such provision
would impose upon such Hired Employee any monetary or other obligation to Seller
for violation of restrictive covenants or confidentiality provisions with
respect to the Business (other than any such restrictive covenants or
confidentiality provisions contained in Assumed Contracts and Leases being
transferred to Purchaser or any such covenant mandating the return to Seller of
property not being transferred to Purchaser hereunder). The Third-Party Tenant,
at Purchaser’s expense, shall be responsible for the vacation and other paid
time off for Hired Employees accrued through the Proration Date to the extent of
the credit provided by Sellers to Purchaser for such amounts and reflected in
the closing statement executed by Sellers and Purchaser prior to Closing.
Section 4.5    Confidentiality.
(a)    Confidential Information. Any and all non-public information of any type
or description, including, but not limited to, financial statements and
projections of Seller, proprietary or trade secret information, whether written
or verbal, or any information given to Purchaser by Seller in connection with
the transactions contemplated by this Agreement, is proprietary to Seller and
confidential in nature, and shall be treated as such by Purchaser, except with
the prior written consent of Seller and except to the extent enforcement of its
terms and applicable law require public disclosure. This provision shall not
apply following the Closing to any such information pertaining to the Purchased
Property or the Business, nor to any information that is or becomes publicly
available through no fault of Purchaser. Purchaser shall have the right to
disclose any such information to its professional advisors, lenders, investors
and other third parties who need to know such information for the purposes of
assisting Purchaser with the negotiation and consummation of this Agreement,
provided Purchaser advises such parties of their confidential obligations under
this Agreement, and provided Purchaser remains responsible for any violations by
such parties. After the expiration of the Due Diligence Period Purchaser shall
also have the right to discuss the possibility of future employment with all
active and full-time employees of the Business.
(b)    Confidentiality of Agreement. The terms of this Agreement shall remain
confidential, except with the prior written consent of Seller and Purchaser and
except to the extent that enforcement of its terms or applicable law require
public disclosure. Neither party shall make any public announcement of the
transactions contemplated herein without the express written approval of the
other party, which approval shall not be unreasonably withheld. This provision
will not apply to Purchaser following any Closing. Purchaser shall permit Seller
to review in advance and comment on any public announcement of the Closing of
the transactions contemplated herein.
(c)    Return of Confidential Information. Purchaser agrees that promptly upon
the termination of this Agreement, whether by mutual termination or otherwise
(other than upon

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Closing), Purchaser shall cause all materials and property (originals and
copies) of Seller to be immediately returned to Seller, or, at Purchaser’s
election, destroyed provided Purchaser provides written certification of such
destruction, provided that Purchaser shall be entitled to retain such
information to the extent required in order to comply with applicable law,
regulation, bona fide document retention policy of Purchaser, or any public
disclosure obligations promulgated by the Securities and Exchange Commission any
applicable to Purchaser, or until any litigation between Purchaser and Seller
arising out of the termination of this Agreement has been finally resolved.
(d)    Survival of Confidentiality. This Section 4.5 shall survive the Closing
to the extent provided above and shall survive in the event this Agreement is
terminated prior to Closing.
(e)    Supersedes Previous Agreements. The provisions of this Section 4.5
supersede any prior agreements between the parties relating to confidentiality.
Section 4.6    Expenses and Taxes.
(a)    Each party shall pay its own expenses and costs incurred in connection
with the negotiation and consummation of this Agreement and the transactions
contemplated by this Agreement.
(b)    Notwithstanding the foregoing:
(i)    Seller shall pay fees and costs relating to the transfer of motor
vehicles included in the Purchased Property;
(ii)    Seller shall pay the real estate transfer tax, mansion taxes (if
applicable) costs of recording the Deeds and all other filing and recording
costs; and
(iii)    Seller shall pay the premiums or other costs attributable to the
issuance of the Title Policy.
(iv)    Purchaser shall pay any person who is entitled to any brokerage
commission or finder’s fee in connection with any of the transactions
contemplated by this Agreement by reason of any act or omission of Purchaser,
and shall indemnify Seller and hold Seller harmless against any claims for such
commissions or finder’s fees. Seller shall pay Senturian Senior Housing and Mark
Lee and any other person who is entitled to any brokerage commission or finder’s
fee in connection with any of the transactions contemplated by this Agreement by
reason of any act or omission of Seller, and shall indemnify Purchaser and hold
Purchaser harmless against any claims for such commissions or finder’s fees.
This Section 4.6 shall survive Closing.
Section 4.7    Waiver of Bulk Sales and Indemnification. Purchaser hereby waives
compliance by Seller and Seller hereby waives compliance by Purchaser, with the
requirements of any applicable bulk sales laws and similar laws, if and to the
extent applicable. Seller shall indemnify and hold harmless Purchaser from any
and all claims, liabilities, or costs, including reasonable attorneys’ fees,
arising out of the parties’ failure to comply with any bulk sales

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laws and similar laws applicable to the transactions contemplated hereby as
provided in Section 8.1(d). The foregoing indemnification shall survive the
Closing.
Section 4.8    Exclusivity. During the period from the Effective Date to the
Closing Date or termination of this Agreement according to the terms hereof,
Seller shall not take any action, directly or indirectly, to encourage, initiate
or engage or participate in discussions or negotiations with, or provide any
information to, any party other than Purchaser, concerning a potential
transaction involving the purchase and sale of the Business or any Purchased
Property, the purchase and sale of all or substantially all of the ownership
interest of Seller, or any transaction similar to the foregoing.
Section 4.9    Consents; Cooperation. Seller will use its reasonable best
efforts prior to the Closing to obtain all consents that may be required from
third parties with respect to the Assumed Contracts and Leases and any of the
other Purchased Property and Purchaser shall cooperate therewith. Purchaser
shall, or shall request Third-Party Tenant to, use its reasonable best efforts
to diligently pursue the issuance or transfer of any of the governmental
licenses or permits required for Purchaser or Third-Party Tenant, as applicable,
to operate the Business following the Closing, and Seller agrees to provide
reasonable cooperation and assistance to Purchaser in obtaining such licenses
and permits. Purchaser shall make reasonable efforts to cause Third-Party Tenant
to submit application for issuance of any governmental licenses or permits
within five (5) days of the expiration of the Due Diligence Period, although
Third Party Tenant may, and shall be encouraged to, submit such applications as
soon as possible following the Effective Date. Notwithstanding the foregoing,
(i) neither party will be required to pay or commit to pay any amount to (or
incur any liability or obligation to) a person or entity from whom or which a
consent may be required (other than payment by Seller of past due amounts under
Assumed Contracts and Leases or past due taxes, or payment by Purchaser of any
fees or other costs imposed by governmental authorities with respect to licenses
and permits, or transfer fees, if any, required by the express terms of any
Assumed Contracts and Leases) or otherwise enter into or modify any agreement
with such person or entity that involves any cost, liability or obligation, and
(ii) to the extent Purchaser determines, in its sole discretion, that the
governmental licenses or permits required for the Third-Party Tenant to operate
the Business following the Closing will not be obtained by Third-Party Tenant or
its affiliates prior to Closing, Seller agrees to enter into a Transition Period
Sublease (as defined herein) with Purchaser or Third-Party Tenant for the
continued operation of the Business by Seller or its affiliates, as applicable,
until Third-Party Tenant obtains such licenses and permits. Neither party makes
any representation or warranty to the other regarding the extent to which the
pre-merger filing requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (“HSR Act”) apply to the transactions contemplated under
this Agreement.
Section 4.10    Further Assurances. Each party covenants and agrees that,
following the Closing, it will execute, deliver and acknowledge (or cause to be
executed, delivered and acknowledged), from time to time, at the reasonable
request of the other party and without further consideration, all such further
instruments and take all such further action as may be reasonably necessary or
appropriate to transfer more effectively to Purchaser, or to perfect or record
Purchaser’s title to or interest in the Purchased Property or to enable
Purchaser to use or otherwise

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to confirm or carry out the provisions and intent of this Agreement. This
Section 4.10 shall survive Closing.
Section 4.11    Non-Solicitation of Employees. For a period of one (1) year
following the Closing Date, neither Seller nor any affiliate under the control
of, or commonly controlled with, Seller shall attempt, directly or indirectly,
to solicit any employee of the Business to leave the employ of the Business in
order to take employment with Seller, Seller’s affiliates or any other party.
This Section 4.11 shall survive Closing.
Section 4.12    Delivery of Schedules. Seller shall provide all Schedules
required by this Agreement (other than those required by ARTICLE 7 hereof, which
will be provided by Purchaser on or before the Schedule Due Date) on or before
the date that is within ten (10) calendar days following the Effective Date (the
“Schedule Due Date”). If applicable, the Due Diligence Period shall be extended
by the total number of days which elapse between the Schedule Due Date and the
date upon which all required Schedules have actually been provided to Purchaser,
or, as applicable, any insufficiently completed Schedules have been corrected to
Purchaser’s reasonable satisfaction (inclusive of the Schedule Due Date and the
last applicable date of delivery or correction, as applicable). Any fact or item
disclosed on any Schedule to this Agreement shall be deemed disclosed with
regard to all other representations and warranties to which such fact or item
may reasonably apply to the extent such disclosure would provide notice to a
reasonable person that the information disclosed would also qualify, or
constitute an exception to, such other representations and warranties. Seller
may from time to time supplement and update such Schedules to reflect any
changes since the date of delivery of the original Schedules or any matters of
which Seller’s Knowledge was first acquired following the original delivery date
of such Schedules. Any such updates or supplements shall be deemed to amend the
Schedules for all purposes retroactively to the Effective Date, except that (i)
no amendment to Schedules 1.1(a), 2.2(d), and 2.4(a) may be made without
Purchaser’s written consent, and (ii) any amendments permitted above shall be
disregarded (i) in determining if the conditions to Closing set forth in Section
5.3(a) or Section 5.3(e) below have been satisfied, and (ii) for all purposes
under this Agreement if Seller intentionally omitted such information from the
original Schedules.

ARTICLE 5    
CLOSING
Section 5.1    Closing. The Closing of the transactions contemplated by this
Agreement shall occur remotely, upon the exchange of signatures to the documents
contemplated by this Agreement and the other required deliveries of each party
hereto described below ten (10) business days following Purchaser’s and
Third-Party Tenant’s receipt (or, as applicable, receipt by their respective
affiliates or assignee) of all governmental approvals necessary for Purchaser to
own and for the Third-Party Tenant to manage the Facility, unless extended by
mutual agreement of Purchaser and Seller or pursuant to Section 5.6, Section
10.11, or Section 10.12. Additionally, Purchaser shall be entitled in its sole
discretion to delay the scheduled date of Closing by up to thirty (30) business
days. The date on which the Closing is scheduled to occur (as such date may be
extended from time to time pursuant to this Agreement) shall be the “Scheduled
Closing Date”

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hereunder. The date on which the Closing actually occurs shall be the “Closing
Date” for purposes of this Agreement.
Section 5.2    Conditions to Seller’s Obligations. Subject to Section 5.6(a),
except as may be waived in writing by Seller, Seller’s obligation to make its
deliveries at the Closing and to effect and consummate the transactions
contemplated hereby shall be subject to the following conditions:
(a)    Representations and Warranties True and Correct. Each of Purchaser’s
representations and warranties contained in this Agreement, taken as whole,
shall be true in all material respects as of the Closing Date with the same
effect as though made on such date (except for representations and warranties
made as of a specified date, which shall have been true and correct as of such
date with the same effect as though made on such date), and Purchaser shall have
executed and delivered to Seller at Closing a certificate confirming the
foregoing.
(b)    Agreements Complied With. Each of Purchaser’s covenants and agreements
contained in this Agreement to be performed at or prior to the Closing shall
have been performed in all material respects at or prior to the Closing, and
Purchaser shall have executed and delivered to Seller at Closing a certificate
confirming the foregoing.
(c)    Deliveries Made. Purchaser shall have delivered, and where applicable
shall have duly executed, all the documents, certificates and other instruments
required to be delivered at the Closing in accordance with Section 5.5 or any
other express provision of this Agreement.
Section 5.3    Conditions to Purchaser’s Obligations. Subject to Section 5.6,
except as may be waived in writing by Purchaser, Purchaser’s obligation to make
its deliveries at the Closing and to effect and consummate the transactions
contemplated hereby shall be subject to the following conditions:
(e)    Representations and Warranties True and Correct. Each of Seller’s
representations and warranties contained in this Agreement, taken as a whole,
shall be true in all material respects as of the Closing Date with the same
effect as though made on such date (except for representations and warranties
made as of a specified date, which shall have been true and correct as of such
date), and Seller shall have executed and delivered to Purchaser at Closing a
certificate confirming the foregoing.
(f)    Agreements Complied With. Each of Seller’s covenants and agreements
contained in this Agreement to be performed at or prior to the Closing shall
have been performed in all material respects at or prior to the Closing, and
Seller shall have executed and delivered to Purchaser at the Closing a
certificate confirming the foregoing.

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(g)    Deliveries Made. Seller shall have delivered, and where applicable shall
have duly executed, all the documents, certificates and other instruments
required to be delivered at the Closing in accordance with Section 5.4 or any
other express provision of this Agreement.
(h)    Licenses and Permits. Purchaser and the Third-Party Tenant shall have (i)
obtained all governmental licenses and permits required for Purchaser to own the
Facility, and for the Third-Party Tenant to operate the Business as an assisted
living facility in the same manner in which Seller is currently operating the
Business (ii) or shall have completed diligence reasonably acceptable to
Purchaser indicating that Third-Party Tenant’s submission of applications for
such licenses and permits shall result, post-Closing, in the issuance of
applicable governmental licenses and permits and Purchaser and Seller shall have
entered into a Transition Period Sublease effective as of the Closing Date.
(i)    No Material Adverse Change. No Material Adverse Change shall have
occurred during the period between the Effective Date and the Closing Date.
(j)    Lease Agreement. The Third-Party Tenant and Purchaser (or a subsidiary or
affiliate of Purchaser), shall have entered into a Lease Agreement facilitating
the Third-Party Tenant’s occupancy of the Facility in a form acceptable to
Purchaser.
(k)    Termination of Existing Leases and/or Management Agreements. Any existing
real property leases and/or management agreements, if any, relating to the
Purchased Property which are not Assumed Contracts and Leases or Residency
Agreements shall have been terminated without fee or cost to Purchaser, and
Seller shall have provided Purchaser reasonable evidence of same.
(l)    No Injunctions or Restraints. No temporary restraining order, preliminary
or permanent injunction, or other order issued by any court of competent
jurisdiction, or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect. No
action shall have been taken nor any statute, rule, or regulation shall have
been enacted by any governmental agency that makes the consummation of the
transactions contemplated hereby illegal.
Section 5.4    Deliveries by Seller. Seller shall deliver to Purchaser on or
before the Closing the following:
(f)    Deed. The Deed substantially in the form of Exhibit C attached hereto,
duly executed by Owner. In addition, in the event Purchaser elects to have a new
survey of the applicable Real Property (the “Survey”)

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prepared, Owner agrees to provide a quitclaim deed at closing conveying title to
the applicable Real Property based on the metes and bounds description shown on
the Survey.
(g)    Bill of Sale and Assignment. A bill of sale and assignment with Seller’s
warranty of title in the form of Exhibit D attached hereto (the “Bill of Sale
and Assignment”) with respect to the Purchased Personal Property located at the
Facility, duly executed by Seller.
(h)    Other Instruments. Such further instruments of conveyance and transfer as
Purchaser may reasonably require to consummate the transactions contemplated by
this Agreement to vest all of the Business with respect to the Facility in
Purchaser and to facilitate the transfer of such Business from Seller to
Purchaser, including the assignment of the applicable Assumed Contracts and
Leases, in form and substance reasonably acceptable to Purchaser.
(i)    Owner’s Affidavit. An Owner’s Affidavit in a form acceptable to the Title
Company to the extent required to issue the Title Policy.
(j)    Releases. Documents releasing or nullifying any title exceptions (or
providing reasonable evidence of such release or nullification) (relating to the
applicable Real Property) which Seller is obligated to release or nullify
pursuant to Section 2.4 hereof.
(k)    Resolutions. A certified copy of the company resolutions authorizing
consummation of this Agreement and authorizing Seller’s to execute all documents
necessary for Closing as provided herein.
(l)    Closing Certificate. The certificates required pursuant to Section 5.3(a)
and Section 5.3(b), identifying such changes to the representations and
warranties as shall be necessary to make such representations true, complete and
accurate in all material respects as of the date and time of Closing.
(m)    1099S. A completed Form 1099S, or effective equivalent thereof,
describing the sale of the applicable Purchased Property.
(n)    Withholding Affidavit. If a Withholding Affidavit is required by the
Escrow Agent, Seller shall deliver the Withholding Affidavit to the Escrow Agent
prior to Closing.
(o)    Non-Foreign Status Affidavit. A certificate of non-foreign status
pursuant to Treasury Regulation Section 1.1445-2(b)(2) signed by Seller under
penalties of perjury stating Seller’s name, address and U.S.

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taxpayer identification number and stating that Seller is not a foreign person
as defined by Section 1445(f)(3) of the IRC.
(p)    Good Standing Certificate. A certificate of existence, certified by the
Secretary of State of Kentucky as of a date which is within fifteen (15) days of
Closing, reflecting the Seller’s good standing as a Kentucky limited liability
company.
(q)    Rent Roll. A true, correct, and complete rent roll certified by an
officer of Seller, for the Facility listing each resident as of a date which is
within three (3) business days prior to the Closing Date, the unit, bed or room
number of such resident, and the amount of the monthly fees to be paid by such
resident (including room, meal and other applicable monthly fees), the amount of
security deposit, if any, date of Residency Agreement and the expiration date of
such Residency Agreement, if applicable.
(r)    Transition Period Sublease. The Transition Period Sublease, if
applicable, in form and substance attached as Exhibit E (the “Transition Period
Sublease”).
(s)    Third Party Consents. The third party consents listed on Schedule 5.4(o).
(t)    Opinion of Counsel. An opinion of Seller’s counsel in a form acceptable
to Purchaser in it reasonable discretion.
(u)    Title Commitment. A title commitment in accordance with Section 2.4(a),
subject only to the Permitted Title Exceptions and endorsed by the Title
Company.
(v)    Books and Records. Possession and control of books and records included
as part of the Purchased Property which are not physically located at the Real
Property as of the Closing Date.
(w)    Post-Closing Escrow Agreement. The Post-Closing Escrow Agreement, duly
executed by Seller.
Section 5.5    Deliveries by Purchaser. Purchaser shall deliver to Seller on or
before the Closing the following:
(c)    Payment Items. The items described in Section 3.2 hereof representing
payment of the Purchase Price.
(d)    Assumption Agreement. An instrument of assumption of the Assumed
Liabilities, substantially the form attached as Exhibit F.

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(e)    Post-Closing Escrow Agreement. The Post-Closing Escrow Agreement, duly
executed by Purchaser.
(f)    Transition Period Sublease. The Transition Period Sublease, if
applicable, substantially in the form attached hereto as Exhibit E.
(g)    Closing Certificate. The certificates required pursuant to Section 5.2(a)
and Section 5.2(b).
Section 5.6    Non-Fulfillment of Closing Conditions. Notwithstanding anything
in this Agreement to the contrary, the following shall apply exclusively if any
of the conditions in Section 5.2 and Section 5.3 are not fulfilled as of the
Scheduled Closing Date:
(a)    Except as otherwise provided in the last sentence of this Section 5.6(a),
if any of the conditions set forth in Section 5.2 have not been fulfilled as of
the Scheduled Closing Date, but all the conditions set forth in Section 5.3 have
been fulfilled or expressly waived by Purchaser, Seller may elect (i) to proceed
to Closing and waive such failure for all purposes hereunder; or (ii) terminate
this Agreement, in which case the Deposit shall be disbursed to Seller as
liquidated damages, and Purchaser shall have no further liability to Seller
except with respect to the surviving provisions described in ARTICLE 9. Seller
hereby waives any right to recover the balance of the Purchase Price, or any
part thereof, and the right to pursue any other remedy permitted at law or in
equity against Purchaser. In no event under this Section 5.6 or otherwise shall
Purchaser be liable to Seller for any punitive, speculative or consequential
damages. Notwithstanding the foregoing, if any of the conditions in Section 5.2
or Section 5.3 are not satisfied, then Seller’s rights under this Section 5.6(a)
are subject to Purchaser’s rights under Section 5.6(b)-Section 5.6(e) below.
(b)    If the conditions set forth in Section 5.3(a) have not been fulfilled as
of the Scheduled Closing Date, then Purchaser shall give Seller written notice
of such failure, which notice shall state Purchaser’s election: (i) to proceed
with the Closing and waive any such failure to fulfill one or more of the
requirements of Section 5.3(a) for all purposes hereunder; (ii) to extend the
Scheduled Closing Date for an additional thirty (30) days in order to provide
Seller the opportunity to fulfill such condition and if such condition is not
fulfilled within such thirty (30) day additional period Purchaser may terminate
this Agreement, in which case the Deposit shall be returned to Purchaser and
Seller shall reimburse Purchaser for Purchaser’s actual third party expenses
incurred by Purchaser in connection with its due diligence on the applicable
Purchased Property; provided, however, such reimbursements shall not exceed
Fifty Thousand and No/100 U.S. Dollars ($50,000), and after which Seller shall
have no additional liability to Purchaser for such failure, except for the
surviving provisions described in

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ARTICLE 9; or (iii) exercise any other legal or equitable remedies to which
Purchaser may be entitled.
(c)    If any of the conditions set forth in Section 5.3(b), Section 5.3(c),
Section 5.3(e), Section 5.3(g) or Section 5.3(h) or have not been fulfilled as
of the Scheduled Closing Date, Purchaser may elect (i) to proceed with Closing
and waive such failure for all purposes hereunder; (ii) extend the Scheduled
Closing Date for an additional thirty (30) days in order to allow such
conditions to be fulfilled and if such condition is not fulfilled within such
thirty (30) day additional period, Purchaser may terminate this Agreement, in
which case the Deposit shall be returned to Purchaser and Seller shall reimburse
Purchaser for Purchaser’s actual third party expenses incurred by Purchaser in
connection with its due diligence on the applicable Purchased Property;
provided, however, such reimbursements shall not exceed Fifty Thousand and
No/100 U.S. Dollars ($50,000), and after which Seller shall have no additional
liability to Purchaser for such failure, except for the surviving provisions
described in ARTICLE 9; (iii) enforce specific performance if applicable; or
(iv) exercise any other legal or equitable remedies to which Purchaser may be
entitled.
(d)    If the condition set forth in Section 5.3(d) has not been fulfilled as of
the Scheduled Closing Date (including but not limited to non-fulfillment caused
by unavailability of insurance required to obtain such licenses or permits) and
Purchaser has used diligent good faith efforts to obtain such licenses and
permits, Purchaser may at its election proceed with the Closing on the Scheduled
Closing Date, but simultaneously with the Closing, Purchaser (or its affiliate)
and Seller will enter into the Transition Period Sublease substantially in the
form attached hereto as Exhibit E; provided, however, that if any regulatory
authority having jurisdiction over such licenses and permits raises objections
to the form or substance of the Transition Period Sublease, the parties will
negotiate in good faith to reach an arrangement which is acceptable to such
regulatory authority and most closely follows the essential substance of the
Transition Period Sublease shown as Exhibit E.
(e)    If the Closing Conditions as set forth in ARTICLE 5 have not been
satisfied on or before October 1, 2015, Purchaser shall have the absolute right
to terminate this Agreement, in which case the Deposit shall be returned to
Purchaser and no party shall have no additional liability to the other hereunder
following such termination except for the surviving provisions described in
ARTICLE 9.
Section 5.7    Post-Closing Actions. Seller shall promptly deliver to Purchaser
the original of any mail or other communication received by it after the Closing
Date pertaining to the Purchased Property or the Business, and any payments to
which Purchaser is

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entitled. Purchaser shall promptly deliver to Seller the original of any mail or
other communication received by Purchaser after the Closing Date and addressed
to Seller which does not pertain to the Purchased Property or the Business, or
to any payments to which Seller is entitled. This Section 5.7 shall survive
Closing.
Section 5.8    Termination During Due Diligence. Notwithstanding anything herein
to the contrary, Purchaser shall have the right to terminate this Agreement at
any time during the Due Diligence Period for any reason or for no reason
whatsoever. Upon any such termination, the Deposit shall be returned to
Purchaser, and the parties shall have no further liability or obligation to one
another arising from such termination except for the surviving provisions
described in ARTICLE 9.

ARTICLE 6    
REPRESENTATIONS AND WARRANTIES OF SELLER
The following representations and warranties are given by the Seller. Each
entity comprising the Seller, jointly and severally, hereby represents and
warrants to Purchaser that as of the Effective Date:
Section 6.1    Organization and Standing. Each entity comprising the Seller is a
Kentucky limited liability company duly organized, validly existing, and in good
standing under the laws of the State of Kentucky and has the requisite power and
authority to own, sell, lease and operate its properties and to carry on its
businesses as now being conducted. The Seller has the limited liability company
power and authority to execute and deliver this Agreement and to consummate the
transactions and perform the obligations contemplated by the Agreement.
Section 6.2    Valid and Binding Obligations. The execution, delivery and
performance of this Agreement and all other agreements and instruments to be
executed and delivered by Seller hereunder, and the consummation of the
transactions contemplated by this Agreement, have been duly authorized by all
necessary company action of Seller. This Agreement constitutes, and all
instruments required to be executed and delivered by Seller before or at the
Closing will constitute, the valid and binding obligations of Seller,
enforceable against Seller, in accordance with their respective terms. All
persons who have executed this Agreement on behalf of Seller have been duly
authorized to do so by all necessary company action of Seller and all persons
who execute instruments required to be executed and delivered by Seller before
or at the Closing shall have been duly authorized to do so by all necessary
company action of Seller.
Section 6.3    Title; Purchased Property Complete. Seller has good title to all
of the Purchased Personal Property, and at the Closing, Seller shall transfer
the Purchased Personal Property to Purchaser, free and clear of all liabilities,
liens and, encumbrances except for the Assumed Liabilities and the Permitted
Encumbrances. Seller has the unrestricted right to convey and assign the
Purchased Personal Property. Purchaser acknowledges with respect to the Real
Property, that Purchaser will rely solely upon (i) Seller’s warranties contained
in the Deed and (ii) Purchaser’s owner’s policy of title insurance, and that
Seller gives no other warranty regarding title to real

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property. Except for the Excluded Property or as otherwise set forth in Schedule
6.3, the Purchased Property comprises all material assets, rights or property
used by Seller in the operation of the Business as currently conducted.
Section 6.4    Taxes and Tax Returns. Seller has filed when due or will file
when due in correct form all federal and state income tax returns for all
periods ending on or prior to the Closing Date which are required to be filed by
Seller on or prior to the Closing Date. Other than extensions to file Seller’s
tax returns, there are no agreements by Seller for the extension of time for the
assessment of any tax. All federal, state, county and local taxes due and
payable by Seller on or before the Effective Date have been paid and any taxes
due and payable at any time between the Effective Date through the Closing will
be paid prior to Closing, and there are no federal, state or local tax liens
pending or threatened against Seller or the Purchased Property. There is no open
audit of any of Seller’s federal, state, local income, sales use or property tax
returns pending, and Seller has received no notice of the pendency of any such
audit or examination. Seller does not hold and has not in the past held a
certificate or other authorization issued by any tax collection body for the
purpose of avoiding the payment by Seller of sales and use taxes upon Seller’s
purchases of goods and services, nor has Seller applied for such a certificate
or other authorization.
Section 6.5    Execution and Delivery. Except as set forth in Schedule 6.5,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will:
(f)    violate any provisions of the articles of organization or operating
agreement of Seller;
(g)    violate any contract or agreement relating to borrowed money, or any
judgment, order, injunction, decree or award against, or binding upon Seller or
upon the property or business of Seller, which violation would prevent, delay or
materially hinder consummation of the transactions contemplated by this
Agreement;
(h)    result in the creation of any material lien, charge or encumbrance upon
any of the Purchased Property pursuant to the terms of any agreement or
instrument to which Seller is a party or by or to which Seller or any of the
Purchased Property may be bound, subject or affected;
(i)    violate any judgment, order, injunction, decree or award against, or
binding upon, Seller or upon the Purchased Property or Business of Seller; or
(j)    result in any breach, violation, default or cancellation of any contract,
agreement, mortgage, deed to secure debt, or lease to which Seller is a party or
by which Seller is bound or the Purchased Property is subject that could have a
material adverse effect on the Purchased Property or the operations of the
Business.

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Section 6.6    Contracts and Leases. Schedule 6.6 hereto sets forth all
contracts, leases or agreements, including the Assumed Contracts and Leases, to
which Seller is a party, written or oral, currently in effect that are material
to the operation or management of the Business or the ownership and use of the
Purchased Property, other than the Residency Agreements described in Section
6.7. Each of the Assumed Contracts and Leases is in full force and effect in
accordance with its terms. Seller has made available to Purchaser true and
correct copies of all Assumed Contracts and Leases, including all material
amendments or modifications to same. Seller is not in material breach, default
or violation of any of the Assumed Contracts and Leases and, to Seller’s
Knowledge, no other party to any such contract or lease is in material breach,
default or violation thereof. No event has occurred and no condition exists that
with the passage of time or the giving of notice, or both, would constitute a
material default by Seller or, to Seller’s Knowledge, by any other party to any
Assumed Contracts and Leases.
Section 6.7    Residency Agreements and Related Matters. Schedule 6.7 contains a
list of all of the Residency Agreements currently in effect.
Section 6.8    Permits and Licenses. Schedule 6.8 contains a complete list of
all material governmental permits, licenses, certificates and authorizations
held by Seller that relate to the ownership, use, operation or management of the
Facility, the Purchased Property and/or the Business (the “Permits and
Licenses”).
Section 6.9    Insurance. Schedule 6.9 lists all of Seller’s policies of
property and casualty insurance and liability insurance currently in effect and
covering the Facility, the Business and/or the Purchased Property, copies of
which have been made available for review by Purchaser.
Section 6.10    Employees. Schedule 6.10 contains a complete and correct list of
employees who perform services for the Business or the Facility as of July 1,
2015 (whether as employees of Seller, or any other party), including their
respective positions, pay rates, bonus arrangements (if any), dates of hire
(including the Executive Director and any Assistant Director of the Facility,
and any employees who are currently employed by the Seller for the benefit of
the Business) (collectively, the “Employees”). Except as described on Schedule
6.10, Seller is not a party to any employment contract or other written
agreement with any Employee. Seller has not made any binding promise or
commitment to increase the compensation of any Employee after the Effective
Date, except as otherwise set forth on Schedule 6.10 hereto. Seller has complied
in all material respects with all laws and regulations dealing with employment
of Employees. Schedule 6.10 provides a list and brief description of all
litigation or administrative claims filed by Employees or former employees who
performed services for the Business against Seller during the past three (3)
years, if any. Except as otherwise set forth on Schedule 6.10 (i) Seller is not
a party to any collective bargaining agreement with respect to any employees,
and (ii) to Seller’s Knowledge, there have been no efforts to organize a
collective bargaining agreement or any other type of union activity with respect
to the employees of the Business within the last three (3) years.
Section 6.11    Seller Benefit Plans.

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(a)    Schedule 6.11 sets forth a complete list of each “employee benefit plan,”
as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) regardless of whether such plan is
subject to ERISA, and each bonus, deferred, or incentive compensation, stock
purchase, stock option, severance, and termination pay plan or program, that is
maintained or contributed to by Seller for the benefit of Employees or pursuant
to which Seller has any liability with respect to Employees (each a “Seller
Plan” and collectively, the “Seller Plans”). With respect to each of the Seller
Plans, Seller has or will make available to Purchaser (or will deliver to
Purchaser prior to Closing) correct and complete copies of each of the following
documents: (i) the Seller Plans and related trust or other funding documents
(including all amendments thereto), (ii) the most recent Form 5500 annual
report, including all attachments thereto, filed with the Internal Revenue
Service with respect to each such Seller Plan, (iii) the most recent trust
report, if any, prepared with respect to each such Seller Plan, and (iv) the
summary plan description prepared for each such Seller Plan.
(b)    Each Seller Plan has been administered and operated in material
compliance with its terms and the applicable requirements of ERISA and the IRC,
including the requirement to file an annual report. No Seller Plan is intended
to be qualified under Section 401 of the IRC as a “multiemployer plan” (within
the meaning of Section 3(37) of ERISA) or as a “multiple employer” plan (within
the meaning of Section 4063 or 4064 of ERISA).
(c)    Except as set forth on Schedule 6.11, there are no pending or, to
Seller’s Knowledge, threatened claims of any Employees (or former employees who
provided services to the Business) against or otherwise involving any of the
Seller Plans (other than routine claims for benefits).
(d)    There are no Employees or former employees who provided services to the
Business, who are entitled to (i) any pension benefit that is unfunded, or (ii)
any benefit to be paid after termination of employment other than required by
Section 601 of ERISA, pursuant to a Seller Plan intending to be qualified under
Section 401(a) of the IRC, or identified as providing a benefit described in
this Section 6.11 or Schedule 6.11. Each Seller Plan that is an employee welfare
benefit plan as defined in Section 3(1) of ERISA is either unfunded or funded
through an insurance company contract. There is no liability in the nature of a
retroactive rate adjustment or loss-sharing or similar arrangement with respect
to any such Seller Plan.
(e)    Neither Seller, nor, to Seller’s Knowledge, any other person, including
any fiduciary, has engaged in any “prohibited transaction” as defined in Section
4975 of the IRC or Section 406 of ERISA that could subject

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Seller, or any person whom Seller has an obligation to indemnify to any tax or
penalty imposed under Section 4975 of the IRC or Section 502 of ERISA.
(f)    Seller has not at any time (i) maintained, contributed to, or been
required to contribute or had any liability (that has not been satisfied in
full) to any Seller Plan subject to Title IV of ERISA, (ii) incurred or expected
to incur any liability to the Pension Benefit Guaranty Corporation or otherwise
under Title IV of ERISA, or (z) incurred or expected to incur liability in
connection with an “accumulated funding deficiency” within the meaning of
Section 412 of the IRC, whether or not waived.
Section 6.12    Litigation. Except as described on Schedule 6.12, there is no
litigation, action, suit, or other proceeding currently pending, or to Seller’s
Knowledge, threatened against Seller and/or the Facility, at law or in equity,
or before any federal, state, municipal, local or other governmental or
quasi-governmental authority, or before any arbitrator. To Seller’s Knowledge,
there is no pending investigation of Seller and/or the Facility by any
governmental or quasi-governmental authority. Seller is not subject to any
judgment, injunction, order, writ or decree of any court or other governmental
authority or agency relating specifically to Seller or to the ownership,
operation or management of the Purchased Property, the Facility and/or the
operations of the Business.
Section 6.13    Compliance with Laws. Except as otherwise noted on Schedule
6.13, or in any inspection or survey report of any governmental authority made
available to Purchaser, Seller is in compliance in all material respects with
all applicable laws, rules or regulations in connection with its ownership, use,
operation or management of the Purchased Property, the Facility and the
Business, including without limitation all laws, rules and regulations related
to Government Programs, Seller has not received notice of any violation thereof
which has not been cured as of the Effective Date.
Section 6.14    Financial Statements. Seller’s financial statements pertaining
to the operations of the Business for the period ended December 31, 2014 (the
“2014 Financial Statement”) and for the four months ended April 30, 2015 (the
“April 2015 Financial Statement”) are attached hereto as Schedule 6.14 (the 2014
Financial Statement and the April 2015 Financial Statement collectively, the
“Financial Statements”).
Section 6.15    Real Property. To Seller’s Knowledge, and except as may be
disclosed on Schedule 6.15, Seller’s use of the Real Property complies in all
material respects with applicable zoning and land use laws, rules and
regulations and with all applicable building codes, and Seller has not received
written notice of any zoning, land use or building code violation relative to
the Real Property which has not been cured prior to the date hereof. To Seller’s
Knowledge (unless Seller is a party thereto), there is no pending litigation or
dispute concerning the location of the lines and corners of the Real Property.
Seller has received no written notice of, and has no other Knowledge of,
pending, threatened or contemplated actions by any governmental authority or
agency having the power of eminent domain, which might result in any part of the
Real Property being taken by condemnation or conveyed in lieu thereof. To
Seller’s Knowledge, there is no claim of adverse possession with respect to any
part of the Real Property. Except as may be disclosed on

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Schedule 6.15, there are no ongoing improvements, construction projects or
similar development of the Real Property that is currently in process or
otherwise uncompleted.
Section 6.16    Environmental Matters. Except as disclosed on Schedule 6.16, or
in any environmental audit or inspection report made available by Seller to
Purchaser or the ESAs generated by Purchaser’s environmental consultants, to
Seller’s Knowledge: (a) no areas exist on the Real Property where Hazardous
Substances have been generated, disposed of, released, stored or found in
violation of any Environmental Laws, and Seller has no Knowledge and has
received no notice of the existence of any such areas for the generation,
storage or disposal of any Hazardous Substances on the Real Property in
violation of any Environmental Laws; (b) neither Seller, nor any of their
respective agents, have violated in any material respect any of the applicable
Environmental Laws relating to or affecting the Real Property; (c) the Real
Property is presently in compliance in all material respects with all
Environmental Laws; (d) Seller has obtained all material licenses, permits
and/or other governmental or regulatory approvals necessary to comply with
Environmental Laws relating to its use of the Real Property, and Seller is in
compliance in all material respects with the terms and provisions of all such
licenses, permits and/or other governmental or regulatory approvals; (e) no
underground storage tanks are currently located on the Real Property; (f) the
Real Property has not been previously used as a landfill or as a dump for
garbage or refuse; and (g) no asbestos containing building material or lead
based paint are present in any structures located on the Real Property.
Section 6.17    Brokers, Finders. Other than Senturian Senior Housing and Mark
Lee and its affiliates, whose commissions and other charges shall be the sole
responsibility of Seller, Seller has not retained any broker or finder in
connection with the transactions contemplated hereby so as to give rise to any
claim against Purchaser for any brokerage or finder’s commissions, fee, or
similar compensation.
Section 6.18    FIRPTA. Seller is not a “foreign person” as that term is defined
in the Internal Revenue Code of 1986, as amended, and the regulations
promulgated pursuant thereto, and Purchaser has no obligation under Internal
Revenue Code Section 1445 to withhold and pay over to the Internal Revenue
Service any part of the amount realized by Seller in the transaction
contemplated hereby (as such term is defined in the regulations issued under IRC
Section 1445).
Section 6.19    Solvency. Seller is not now insolvent, and will not be rendered
insolvent by completion of the transactions contemplated herein. For purposes of
the preceding sentence, “insolvent” means, upon completion of the Closing, (i)
that the fair market value of Seller’s assets is less than the sum of Seller’s
debts and other liabilities or (ii) Seller has inadequate cash flow to service
its debts as they come due. Upon the completion of the transactions contemplated
herein, Seller will have adequate capital for the purposes of engaging in any
business or transaction in which Seller is or will engage.
Section 6.20    Consent of Third Parties. Except as otherwise set forth on
Schedule 6.20, no consent of any third party is required as a condition to the
entering into, performance or delivery of this Agreement by Seller, other than
such consents as would not, in any individual case or in the aggregate, have a
material adverse effect upon Purchaser’s ability to

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complete the purchase of the Purchased Property and operate the Business in the
manner in which it is currently being operated by Seller.
Section 6.21    No Governmental Approvals. To Seller’s Knowledge, except as set
forth in on Schedule 6.21, and the requirement for Purchaser to obtain the
licenses and permits described in Section 5.3(d), no order, permission, consent,
approval, license, authorization, registration or validation of, or filing with,
or exemption by, any governmental agency, commission, board or public authority
is required to authorize, or is required in connection with the execution,
delivery and performance by Seller of this Agreement or the taking of any action
contemplated by this Agreement, which has not been obtained. Notwithstanding the
foregoing, Seller makes no representation or warranty regarding applicability of
the HSR Act to the transactions contemplated herein.
Section 6.22    Assessments. To Seller’s Knowledge, there are no (i) special or
other assessments for public improvements or otherwise now affecting any of the
Purchased Property, (ii) any pending or threatened special assessments affecting
the Purchased Property, or (iii) any contemplated improvements affecting any of
the Purchased Property that may result in special assessments affecting any of
the Purchased Property.
Section 6.23    Title Encumbrances. Except as described on Schedule 6.23, Seller
is not in default under any of its material obligations under any recorded
agreement, easement or instrument encumbering title to the Real Property, and to
Seller’s Knowledge, there is no default on the part of any other party thereto.
Section 6.24    Affordable Housing Units. No bedroom or unit at the Facility is
leased or reserved for lease as an affordable housing unit or for low or
moderate income residents. The Facility is not required to lease or reserve any
unit or bedroom as an affordable housing unit or bedroom or for low or moderate
income residents pursuant to a presently existing agreement or requirement of
law.
Section 6.25    Loans and Debts. There are no loans or debts secured by any of
the Purchased Property except for (i) the loans and debts described on Schedule
6.25 or (ii) loans and debts reflected on the Title Policy.
Section 6.26    No Other Warranties. Except for the express representations and
warranties of Seller contained in this ARTICLE 6 or in the Deed or Bill of Sale
and Assignment, Purchaser acknowledges that Seller has not made, and Purchaser
has not relied upon, any other representation or warranty, express or implied,
with respect to Seller, the Business, the Purchased Property or the transactions
contemplated herein.
ARTICLE 7    
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:

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Section 7.1    Organization and Standing. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has the requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Purchaser has the power and authority to execute and deliver this Agreement and
to consummate the transactions and to perform its obligations contemplated by
this Agreement.
Section 7.2    Execution and Delivery. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, have been duly authorized by all necessary action of Purchaser. This
Agreement constitutes, and all instruments required to be executed and delivered
by Purchaser before or at the Closing will constitute, the valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their
respective terms. All persons who have executed this Agreement on behalf of
Purchaser have been duly authorized to do so by all necessary company action of
Purchaser and all persons who execute instruments required to be executed and
delivered by Purchaser before or at the Closing shall have been duly authorized
to do so by all necessary company action of Purchaser. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
by this Agreement will:
(a)    violate any provisions of the articles of organization or operating
agreement of Purchaser;
(b)    violate any contract or agreement relating to borrowed money, or any
judgment, order, injunction, decree or award against, or binding upon Purchaser
or upon the property or business of Purchaser, which violation would prevent,
delay or materially hinder consummation of the transactions contemplated by this
Agreement;
(c)    violate any judgment, order, injunction, decree or award against, or
binding upon, Purchaser; or
(d)    result in any breach, violation, default or cancellation of any contract,
agreement, mortgage, deed to secure debt, or lease to which Purchaser is a party
or by which Seller is bound and that could have a material adverse effect upon
Purchaser’s ability to consummate the transactions described herein.
Section 7.3    Solvency. Purchaser is not now insolvent, and will not be
rendered insolvent by completion of the transactions contemplated herein. For
purposes of the preceding sentence, “insolvent” means, upon completion of the
Closing, (i) that the fair market value of Purchaser’s assets is less than the
sum of Purchaser’s debts and other liabilities or (ii) Purchaser has inadequate
cash flow to service its debts as they come due. Upon the completion of the
transactions contemplated herein, Purchaser will have adequate capital for the
purposes of engaging in the Business and any business or transaction in which
Purchaser is or will engage.

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Section 7.4    Consent of Third Parties. Except as otherwise set forth on
Schedule 7.4, except for the licenses and permits described in Section 5.3(d),
no consent of any third party is required as a condition to the entering into,
performance or delivery of this Agreement by Purchaser, other than such consents
as would not, in any individual case or in the aggregate, have a material
adverse effect upon Purchaser’s ability to consummate the transactions
contemplated by this Agreement.
Section 7.5    No Governmental Approvals. To Purchaser’s knowledge, except as
set forth on Schedule 7.5 and the requirement for Purchaser to obtain the
licenses and permits described in Section 5.3(d), no order, permission, consent,
approval, license, authorization, registration or validation of, or filing with,
or exemption by, any governmental agency, commission, board or public authority
is required to authorize, or is required in connection with the execution,
delivery and performance by Purchaser of this Agreement or the taking of any
action contemplated by this Agreement, which has not been obtained.
Notwithstanding the foregoing, Purchaser makes no representation or warranty
regarding applicability of the HSR Act to the transactions contemplated herein.
Section 7.6    Brokers, Finders. Purchaser has not retained any broker or finder
in connection with the transactions contemplated hereby so as to give rise to
any valid claim against Seller for any brokerage or finder’s commission, fee, or
similar compensation.
ARTICLE 8    
INDEMNIFICATION
Section 8.1    Indemnification by Seller. Following the Closing, the Seller
shall indemnify, hold harmless and defend Purchaser from and against any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including, without limitation, reasonable attorneys’ fees and other legal
costs and expenses) (collectively, “Losses”) which Purchaser may at any time
suffer or incur, or become subject to, as a result of or in connection with:
(e)    any breach or inaccuracy of any of the representations and warranties
made by Seller in this Agreement;
(f)    any failure by Seller to carry out, perform, satisfy and discharge any of
its covenants, agreements, undertakings, liabilities or obligations under this
Agreement;
(g)    the Excluded Liabilities;
(h)    the failure to comply with applicable bulk sales laws; or
(i)    any federal, state, or local income, payroll, sales and use, ad valorem
or other taxes payable by Seller or for which Seller is liable in connection
with any period prior to the Closing Date, and any interest or penalties
thereon.

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Section 8.2    Indemnification by Purchaser. Following the Closing, Purchaser
shall indemnify and hold harmless Seller from and against, and reimburse Seller
for, any and all Losses which Seller may at any time suffer or incur, or become
subject to, as a result of or in connection with:
(a)    any breach or inaccuracy of any representations and warranties made by
Purchaser in or pursuant to this Agreement;
(b)    any failure by Purchaser to carry out, perform, satisfy and discharge any
of its covenants, agreements, undertakings, liabilities or obligations under
this Agreement; or
(c)    the Assumed Liabilities.
Section 8.3    Indemnification Limits; Survival.
(k)    Purchaser Indemnification Limits; Survival. Purchaser shall not be
entitled to any indemnification from Seller under Section 8.1(a) or Section
8.1(b) unless and until the aggregate amount of indemnifiable claims of
Purchaser under this Agreement exceeds Twenty-Five Thousand and No/100 U.S.
Dollars ($25,000) (the “Seller Threshold”), at which point Seller shall be
liable for all indemnifiable claims of Purchaser under Section 8.1(a) and
Section 8.1(b). Seller’s liability for indemnification under Section 8.1(a) and
Section 8.1(b) shall not in any case exceed four percent (4%) of the total
Purchase Price (the “Indemnification Cap”); provided, however, that neither the
Seller Threshold nor the Indemnification Cap shall apply in the case of: (i)
fraud on the part of Seller; (ii) any claims arising under Section 8.1(a) with
respect to the representations and warranties contained in Section 6.1, Section
6.2, Section 6.3, Section 6.5, Section 6.17, or Section 6.18 (which shall be
limited to the Purchase Price); or (iii) any claims arising under Section
8.1(c), Section 8.1(d), or Section 8.1(e). All of Seller’s representations and
warranties under this Agreement shall survive for a period of twenty-four (24)
months following the Closing Date. Purchaser’s right to make any claim for
indemnification against Seller under Section 8.1(a), Section 8.1(b) and Section
8.1(d) shall expire at the end of the twenty-fourth (24th) month following the
Closing; provided, however, that any claim for which Purchaser has given written
notice prior to expiration of such twenty-four (24) month anniversary shall
survive until finally adjudicated; and further provided that Purchaser’s right
to make any claim for indemnification pursuant to Section 8.1(c) shall not
expire and any claim for indemnification pursuant to Section 8.1(e) shall
survive for the applicable statute of limitations period for collection of the
applicable tax.
(l)    Seller Indemnification Limits; Survival. Seller shall not be entitled to
any indemnification from Purchaser under Section 8.2(a) or Section 8.2(b) unless
and until the aggregate amount of indemnifiable claims

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of Seller under this Agreement, exceeds Twenty-Five Thousand and No/100 U.S.
Dollars ($25,000) (the “Purchaser Threshold”), at which point Purchaser shall be
liable for all indemnifiable claims of Seller under Section 8.2(a) and Section
8.2(b). Purchaser’s liability for indemnification under Section 8.2(a) and
Section 8.2(b) shall not in any case exceed four percent (4%) of the total
Purchase Price (the “Purchaser Indemnification Cap”); provided, however, that
neither the Purchaser Threshold nor the Purchaser Indemnification Cap shall
apply in the case of: (i) fraud on the part of Purchaser; (ii) any claims
arising under Section 8.2(a) with respect to the representations and warranties
contained in Section 7.1, Section 7.2, and Section 7.6 (which shall be limited
to the Purchase Price); or (iii) any claims arising under Section 8.2(c). All of
Purchaser’s representations and warranties under this Agreement shall survive
for a period of twenty-four (24) months following the Closing Date.
(m)    For purposes of determining the amount of Losses that are subject to
indemnification hereunder with respect to any events, facts or circumstances,
after determining whether or not such facts, events or circumstances give rise
to a breach of a representation or warranty (after giving full effect to any
qualifications as to materiality or similar standards, or of lack of “material
adverse effect,” contained in such representation and warranty), the
determination of the amount of Losses for such breach of representation and
warranty, as it relates to such facts, events or circumstances, shall be made
without giving effect to any qualifications as to materiality or similar
standards, or the lack of “material adverse effect” contained in such
representation or warranty.
(n)    Any payments made pursuant to ARTICLE 8 of this Agreement shall be
treated as a purchase price adjustment for income tax purposes.
Section 8.4    Procedures Regarding Third Party Claims. The procedures to be
followed by Purchaser and Seller with respect to indemnification hereunder
regarding claims by third parties shall be as follows:
(a)    Promptly after receipt by Purchaser or Seller, as the case may be, of
notice of the commencement of any action or proceeding or the assertion of any
claim by a third person, which the party receiving such notice has reason to
believe may result in a claim by it for indemnity pursuant to this Agreement,
such person (the “Indemnified Party”) shall give notice of such action,
proceeding or claim to the party against whom indemnification is sought (the
“Indemnifying Party”), setting forth in reasonable detail the nature of such
action or claim, including copies of any written correspondence from such third
person to such Indemnified Party.

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(b)    The Indemnifying Party shall be entitled, at its own expense, to assume
and control such defense with counsel chosen by the Indemnifying Party and
approved by the Indemnified Party, which approval shall not be unreasonably
withheld or delayed. The Indemnified Party shall be entitled to participate in
such defense after such assumption at the Indemnified Party’s own expense. Upon
assuming such defense, the Indemnifying Party shall have full rights to enter
into any monetary compromise or settlement which is dispositive of the matters
involved; provided that such settlement is paid in full by the Indemnifying
Party and will not have any continuing material adverse effect upon the
Indemnified Party.
(c)    With respect to any action, proceeding or claim as to which the
Indemnifying Party shall not have exercised its right to assume the defense, the
Indemnified Party may assume and control the defense of and contest such action,
proceeding or claim with counsel chosen by it. The Indemnifying Party shall be
entitled to participate in the defense of such action, the cost of such
participation to be at its own expense. The Indemnifying Party shall be
obligated to pay the reasonable attorneys’ fees and expenses of the Indemnified
Party to the extent that such fees and expenses relate to claims as to which
indemnification is due under Section 8.1 or Section 8.2 hereof, as the case may
be. The Indemnified Party shall have full rights to dispose of such action and
enter into any monetary compromise or settlement; provided, however, in the
event that the Indemnified Party shall settle or compromise any claims involved
in the action insofar as they relate to, or arise out of, the same facts as gave
rise to any claim for which indemnification is due under Section 8.1 or Section
8.2 hereof, as the case may be, it shall act reasonably and in good faith in
doing so.
(d)    Both the Indemnifying Party and the Indemnified Party shall cooperate
fully with one another in connection with the defense, compromise or settlement
of any such claim, proceeding or action, including, without limitation, by
making available to the other all pertinent information and witnesses within its
control.
Section 8.5    General Qualifications on Indemnification. Notwithstanding any
provision to the contrary, the indemnification rights set forth in Section 8.1
and Section 8.2 shall be subject to the following:
(a)    The liability of an Indemnifying Party with respect to any
indemnification claim shall be reduced by the amount of any tax benefit actually
realized or any insurance proceeds received by Indemnified Party as a result of
any damages, upon which such claim is based, and shall include any tax detriment
actually suffered by the Indemnified Party as a result of such damages. The
amount of such tax benefit or detriment shall be

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determined by taking into account the effect, if any, and to the extent
determinable, of timing differences resulting from the acceleration or deferral
of items of gain or loss resulting from such damages.
(b)    Damages shall include actual damages and shall not include any special,
punitive, multiplied or consequential damages, or lost profits, except to the
extent the same are included in a third-party judgment against the Indemnified
Party.
(c)    Upon payment in full of any indemnification claim, the Indemnifying Party
shall be subrogated to the extent of such payment to the rights of the
Indemnified Party against any person or entity with respect to the subject
matter of such indemnification claim.
(d)    An Indemnified Party may not recover for any losses otherwise
indemnifiable under Section 8.1(a), Section 8.1(b), Section 8.2(a) or Section
8.2(b) if such Indemnified Party had actual (and not imputed) knowledge prior to
Closing of the breach, inaccuracy or failure giving rise to such losses.
(e)    An Indemnifying Party shall be relieved of its duty to indemnify an
Indemnified Party hereunder if and to the extent the Indemnified Party fails to
use commercially reasonable efforts in good faith to mitigate its damages,
including, but not limited to, failure to give timely notice to its insurance
carriers and to pursue recovery under applicable policies of insurance.
(f)    Any amounts due to Purchaser from Seller pursuant to this ARTICLE 8 shall
be paid first from the Holdback Amount in accordance with the Post-Closing
Escrow Agreement, until the Holdback Amount has been exhausted or released.
Section 8.6    Effective Upon Closing. The provisions of this ARTICLE 8 shall
become effective upon completion of the Closing, and shall have no force and
effect prior to the Closing or if this Agreement is terminated prior to Closing.
ARTICLE 9    
Termination
This Agreement and the transactions contemplated hereby may be terminated at any
time prior to Closing as follows:
(d)    by mutual agreement of Seller and Purchaser;

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(e)    by Purchaser, as and to the extent permitted pursuant to Section
2.4(d)(ii), Section 5.6(b), Section 5.6(c), Section 5.6(e), Section 5.8, Section
10.11 or Section 10.12;
(f)    by Seller, as and to the extent permitted pursuant to Section 5.6(a);
(g)    if a court of competent jurisdiction or other governmental agency shall
have issued an order, decree, or ruling or taken any other action (which order,
decree or ruling the parties hereto shall use their best efforts to lift), in
each case permanently restraining, enjoining, or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling, or
other action shall have become final and nonappealable; or
(h)    by the Purchaser if the Seller shall have breached any of its
representations, warranties, covenants or agreements contained in this Agreement
(other than the conditions contained in Section 5.2 hereof), which breach cannot
be or has not been cured within five (5) business days after the giving of
written notice by the Purchaser to the Seller specifying such breach.
Upon termination of this Agreement prior to Closing, except as otherwise
expressly provided herein, the parties shall have no further liability hereunder
except that the following provisions shall survive any such termination: Section
4.1(d), Section 4.5 and Section 4.7 In the event of any termination of this
Agreement pursuant to ARTICLE 9(e) above, the Deposit shall be returned to
Purchaser and Purchaser shall be entitled to reimbursement by Seller of all of
its costs and expenses related to the potential acquisition of the Facility,
including without limitation legal fees and fees paid to third parties related
to Purchaser’s due diligence review of the Facility.

ARTICLE 10    
MISCELLANEOUS
Section 10.1    Access to Books and Records after Closing. Following the
Closing, Purchaser shall give Seller or its authorized representatives access,
during normal business hours and upon prior notice, to such books and records
constituting or relating to the Purchased Property as shall be reasonably
requested by Seller in connection with the preparation and filing of the party’s
tax returns, to comply with regulatory requirements, to defend or discharge the
Excluded Liabilities, or for any other valid business purpose, and to make
extracts and copies of such books and records. Purchaser agrees to retain all
books and records included as part of the Purchased Property for at least one
(1) year following the Closing Date.
Section 10.2    Notices. All notices, requests, demands and other communications
under this Agreement and related post-Closing notices, requests, demands, and

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other communications, shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is to be given, (ii) on the day of transmission if (A) sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, or (B) if sent
via electronic mail (e.g. email), (iii) on the day after delivery to FedEx or
similar overnight courier, or (iv) on the tenth (10th) day after mailing, if
mailed to the party to whom notice is to be given, by first-class mail,
registered or certified, return receipt requested, postage prepaid and properly
addressed, to the party as follows:
If to Purchaser:

American Realty Capital VII, LLC
Attn: Thomas D’Arcy
405 Park Avenue, 14th Floor
New York, New York 10022
Email: td’arcy@arlcap.com

With a copy (which will not constitute notice) to:
Jesse Galloway
American Realty Capital VII, LLC
405 Park Avenue, 14th Floor
New York, New York 10022
Email: jgalloway@arlcap.com

With a copy (which will not constitute notice) to:
Foley & Lardner LLP
Attn: Michael A. Okaty
          Taylor C. Pancake
111 North Orange Avenue
Suite 1800
Orlando, Florida 32801
Email: tpancake@foley.com

If to Seller:
Arcadian Cove, LLC
132 Keene Road
Suite 201
Richland, Washington 99352
Attn: Jackie Sielaff
Email: jackie@vonoinc.com

With a copy (which will not constitute notice) to:
Sword, Floyd & Moody, PLLC
Attn: Michael R. Eaves
218 W. Main Street
Richmond, Kentucky 40475
Email: eaves@sfmky.com

,

Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other parties in the manner
herein provided for giving notice.

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Section 10.3    Good Faith; Cooperation. The parties shall in good faith
undertake to perform their obligations in this Agreement, to satisfy all
conditions and to cause the transactions contemplated by this Agreement to be
carried out promptly in accordance with its terms. The parties shall cooperate
fully with each other and their respective representatives in connection with
any actions required to be taken as part of their respective obligations under
this Agreement.
Section 10.4    Assignment; Exchange Cooperation; Successors in Interest.
Neither Purchaser nor Seller may assign any of their respective rights
hereunder, except with the prior written consent of the other (which shall not
be unreasonably withheld or delayed); provided, however, that without additional
consent from Seller (i) prior to the Closing Purchaser may assign its rights, in
whole or in part, to any affiliate or related entity of Purchaser, including
without limitation the Delaware limited liability company ARHC ACRICKY01, LLC,
and (ii) Purchaser may at Purchaser’s election assign any of its rights related
to the Purchased Personal Property to the Third-Party Tenant or its designee.
This Agreement is binding upon the parties and their respective successors or
assigns and inures to the benefit of the parties and their permitted successors
and assigns.
Section 10.5    No Third Party Beneficiaries. The parties do not intend to
confer any benefit under this Agreement on anyone other than the parties, and
nothing contained in this Agreement shall be deemed to confer any such benefit
on any other person, including any current or former employee or agent of Seller
or any dependent or beneficiary of any of them.
Section 10.6    Severability. Any determination by any court of competent
jurisdiction of the invalidity of any provision of this Agreement that is not
essential to accomplishing its purposes shall not affect the validity of any
other provision of this Agreement, which shall remain in full force and effect
and which shall be construed as to be valid under applicable law.
Section 10.7    Purchaser Records Rights.
(g)    Upon Purchaser’s request, for a period of one (1) year after Closing,
Seller shall make the operating statements and any and all books, records,
correspondence, financial data, leases, delinquency reports, including
independent documentation supporting the books and records including but not
limited to invoices, statements, check copies, contracts or other supporting
documentation, and all other documents and matters maintained by Seller or its
agents and relating to receipts and expenditures reasonably necessary to
complete an audit, including a representation letter to the independent audit
firm issuing the audit opinion as to the completeness and accuracy of the
information provided among other representations pertaining to the Purchased
Property for the three (3) most recent full calendar years and the interim
period of the current calendar year (collectively, the “Records”) available to
Purchaser for inspection, copying and audit by Purchaser’s designated
accountants, and at Purchaser’s expense. Seller shall provide Purchaser, but
without expense to Seller, with copies of, or access to, such factual and
financial information as may be reasonably requested by Purchaser or its
designated accountants, and in the possession or control of Seller, to enable
Purchaser to file any filings required by the Securities and Exchange Commission
(the “SEC”) in connection with the purchase of the Purchased Property. Seller
understands and acknowledges that Purchaser is required to file audited
financial statements related to the Purchased Property with the SEC within
seventy-one (71) days of the Closing Date and

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agrees to provide any records on a timely basis to facilitate Purchaser’s timely
submission of such audited financial statements.
(h)    Seller has provided, or to the extent not provided represents to
Purchaser that it has in its possession or is otherwise able to obtain the
materials from Seller’s vendors, banks, lenders, agents, accountants, auditors
and/or counsel, all of the materials listed in Schedule 10.7 to this Agreement.
Seller acknowledges that such materials will be used by Purchaser to make the
filings described in Section 10.7(a) above, and represents and warrants to
Purchaser that all such materials are, or shall be when delivered, true, correct
and complete.
Section 10.8    Controlling Law; Integration; Amendment; Waiver.
(a)    This Agreement shall be governed by and construed in accordance with the
laws and case decisions of the State in which the Real Property is located
applicable to contracts made and to be performed therein.
(b)    This Agreement and the other contracts, documents and instruments to be
delivered pursuant to this Agreement supersede all prior negotiations,
agreements, information memoranda, letters of intent and understandings between
the parties with respect to their subject matter, whether written or oral,
constitute the entire agreement of the parties with respect to their subject
matter, and may not be altered or amended except in writing signed by Purchaser
and Seller. Neither of the parties has made or relied upon any representation,
warranty or assurances in connection with the transactions contemplated
hereunder other than those expressly made herein.
(c)    The failure of any party at any time or times to require performance of
any provision of this Agreement shall in no manner affect its right to enforce
the same, and no waiver by any party of any provision (or of a breach of any
provision) of this Agreement, whether by conduct or otherwise, in any one or
more instances shall be deemed or construed either as a further or continuing
waiver of any such provision or breach or as a waiver of any other provision (or
of a breach of any other provision) of this Agreement.
Section 10.9    Time. Time is of the essence with respect to this Agreement.
Section 10.10     Survival. For the avoidance of doubt and notwithstanding
anything contrary in this Agreement, Section 4.5, Section 4.6, Section 4.7,
Section 4.10, Section 4.11, Section 5.7, ARTICLE 8, and ARTICLE 10 of this
Agreement shall survive the Closing of this Agreement.
Section 10.11     Eminent Domain ‑ Condemnation. If, prior to Closing, all or
portion of Real Property comprising at least five percent (5%) of the Real
Property is subject to an eminent domain or condemnation proceeding which will
result in a loss of such portion of the Real Property by Seller or Purchaser,
Seller, immediately upon learning thereof, shall give written notice to
Purchaser. Thereafter, Purchaser shall have a period of thirty (30) days within
which to elect, by written notice to Seller, to terminate this Agreement. Upon
any such termination the Deposit shall be returned to Purchaser and the
Agreement shall become null and void in its entirety. If no such election is
timely made, Purchaser shall be deemed to have waived its rights under this

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paragraph, except that, if the transaction contemplated hereby closes, Purchaser
shall be entitled to the proceeds or the right to negotiate, settle and collect
the proceeds of such condemnation award, and Seller shall execute and deliver
all documents reasonably requested of Seller in order to effectuate this
section.
Section 10.12     Risk Of Loss. Seller assumes all risks and liability for loss,
damage, destruction or injury by fire, storm, accident or any other casualty to
the Real Property from all causes until the Closing has been consummated. In the
event of any damage or destruction prior to Closing with an estimated repair
cost of greater than Fifty Thousand and No/100 U.S. Dollars ($50,000) for the
Facility, Purchaser shall have the option exercisable by written notice to
Seller within thirty (30) days after Purchaser is notified of such casualty, to
terminate this Agreement by notice thereof to Seller, in which case the parties
shall have no further rights or obligations under the Agreement and the Deposit
shall be returned to Purchaser; or Purchaser may elect to close this transaction
and, in such event Purchaser shall be entitled to receive the full amount of any
proceeds of such insurance payable on account of loss, damage or destruction
after the date hereof and Seller shall be liable for the payment to Purchaser of
all deductibles under applicable insurance policies. Seller covenants to execute
such assignments, drafts and other instruments as may be required to effectuate
this section.
Section 10.13     Attorneys’ Fees. In the event either party brings an action to
enforce or interpret any of the provisions of this Agreement, the “prevailing
party” in such action shall, in addition to any other recovery, be entitled to
its reasonable attorneys’ fees and expenses arising from such action and any
appeal or any bankruptcy action related thereto, whether or not such matter
proceeds to court. For purposes of this Agreement, “prevailing party” shall
mean, in the case of a person asserting a claim, such person is successful in
obtaining substantially all of the relief sought, and in the case of a person
defending against or responding to a claim, such person is successful in denying
substantially all of the relief sought.
Section 10.14     Covenant Not to Compete. For a period of three (3) years
following the Closing, the Seller agrees that neither Seller nor any of its
affiliates or other entities which the Seller or any of its affiliates controls,
is controlled by or is under common control with shall, directly or indirectly,
develop, own, invest in, finance, manage or franchise any facility similar to
the Business within a radius of twenty (20) miles from any portion of the Real
Property. For the avoidance of doubt and without limitation, any facility
operating as a skilled nursing facility, assisted living facility, memory care
facility and/or independent living facility intended for seniors shall be deemed
to be similar to the Business for purposes of this Section 10.14. The provisions
of this Section 10.14 shall survive Closing.
Section 10.15     Post-Closing. Seller will provide reasonable cooperation and
assistance to Purchaser and its assigns in arranging for, at Purchaser’s sole
cost and expense, a transition team to assist Purchaser and its assigns as
reasonably necessary in the orderly establishment and transition of Purchaser
and its assigns as the owner and manager of the Business, including but not
limited to assisting in personnel matters, reimbursement issues, program
development, regulatory compliance and other relevant matters as they arise.
Section 10.16    Waiver of Jury Trial.

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The parties agree that no party to this Agreement shall seek a jury trial in any
lawsuit, proceeding, counterclaim or other litigation based upon, or arising out
of, this Agreement or the dealings or the relationship between them.
Section 10.17    Construction.
This Agreement shall not be construed more strictly against one party than
against the other merely by virtue of the fact that it may have been prepared by
counsel for one of the parties, it being recognized that both Seller and
Purchaser have contributed with the advice of counsel to the preparation of this
Agreement.
Section 10.18     Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original. This
Agreement may be executed by counterpart signatures and all counterpart
signature pages shall constitute a part of this Agreement. Delivery of a
counterpart hereof via facsimile transmission or by electronic mail
transmission, including but not limited to an Adobe file format document (also
known as a PDF file), shall be as effective as delivery of a manually executed
counterpart hereof.
[ Signatures commence on the following page. ]
IN WITNESS WHEREOF, each of the parties hereto has signed and sealed this Asset
Purchase Agreement as of the day and year first above written.
 
 
SELLER:
 
 
 
ARCADIAN COVE, LLC,
 
ARCADIAN ASSISTED LIVING, LLC,
a Kentucky limited liability company
 
a Kentucky limited liability company
 
 
 
By: /s/ Kimo Von Oelhoffen
 
By: /s/ Kimo Von Oelhoffen
Name:    Kimo Von Oelhoffen
 
Name:    Kimo Von Oelhoffen 

Title: Member
 
Title: Member
 
 
 
By: /s/ Jackie Sielaff
 
By: /s/ Jackie Sielaff 

Name:    Jackie Sielaff
 
Name:    Jackie Sielaff 

Title: Member
 
Title: Member
 
 
 
 
 
PURCHASER:
 
 
 
 
 
AMERICAN REALTY CAPITAL VII, LLC, a
 
 
Delaware limited liability company
 
 
 
 
 
By: /s/ William M. Kahane 

 
 
Name:    William M. Kahane
 
 
Title:     Manager

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SIGNATURE PAGE TO
ASSET PURCHASE AGREEMENT

1
        
        

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EXHIBIT A

Escrow Agreement

[ See attached. ]

        

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EXHIBIT B

Post-Closing Escrow Agreement

[ See attached. ]

        

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EXHIBIT C

Deed

[ See attached. ]

        

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EXHIBIT D

Bill of Sale and Assignment

[ See attached. ]

        

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EXHIBIT E

Transition Period Sublease

[ See attached. ]

        

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EXHIBIT F

Assumption Agreement

[ See attached. ]

        

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EXHIBIT G

Due Diligence Materials

1.
A complete copy of all leases affecting the Property and all amendments thereto
and of all material correspondence relating thereto.

2.
A copy of all surveys and site plans of the Property, including, without
limitation, any as-built surveys obtained or delivered to tenants of the
Property in connection with its construction.

3.
A copy of all architectural plans and specifications and construction drawings
for improvements located on the Property.

4.
A copy of Seller's title insurance policies relating to the Property.

5.
A copy of the certificate of occupancy and zoning reports in Seller's possession
for the Property and of all governmental permits and approvals.

6.
A copy of all existing environmental, engineering and physical condition reports
in Seller's possession for the Property.

7.
The operating budgets and operating statements of the Property for the
thirty-six (36) month period immediately preceding the Purchase and Sale
Agreement effective date or such shorter period from the commencement of rent
under the leases.

8.
Copies of the Property's real estate tax bills and all utility bills for the
current and prior two (2) tax years.

9.
All service contracts and insurance policies which affect the Property, if any.

10.
A copy of all inspections of and warranties in Seller's possession relating to
the improvements constructed on the Property and systems serving the Property,
including without limitation any structural slab, roof, electrical, plumbing,
heating, air conditioning and elevator inspections and warranties.

11.
A written inventory of all items of personal property, if any, to be conveyed to
Buyer.

12.
Updated set of financials to be provided through the Closing Date to extent
reasonably available to Seller.

13.
Complete copy of any feasibility study completed by the senior housing operator,
if any.

14.
Operator records of payor-mix for patients/residents at the Property.

15.
A copy of all primary and secondary state licenses or regulatory permits for the
Property.

        

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16.
A copy of any third-party accreditation (i.e. Joint Commission) which affect the
Property, if any.

17.
A list and description of events reportable to an accreditation entity during
the past five (5) years.

18.
A copy of all Medicare and Medicaid provider agreements and provider numbers for
the Property, if applicable.

19.
A copy of all Medicare and Medicaid cost reports for the previous three years,
if applicable.

20.
A copy of any certificate of need documentation for the Property, if any.

21.
A copy of all licensing inspection reports (and related plans of corrections)
from state regulators related to operation of the Property for the past five (5)
years, and a summary of actions taken to correct deficiencies identified in any
such reports.

22.
A copy of all regulatory correspondence relating to enforcement actions imposed
or threatened for the past five (5) years.

23.
A copy of any consent order imposed on the Property.

24.
A copy of all regulatory correspondence relating to any physical plant or life
safety code deficiencies for the Property.

25.
A copy of any documents relating to a waiver of life safety code or physical
plant requirements for the Property.

26.
Summary of all capital expenditures for the thirty-six (36) month period
immediately preceding the Purchase and Sale Agreement effective date.

27.
All pest control inspection reports of the Property for the preceding thirty-six
(36) months.

28.
Copy of any ADA Survey report for the Property in the possession of Seller.

29.
Copies of all maintenance and service reports in the possession of Seller for
the Property for the preceding thirty-six (36) months.

30.
List and description of all pending, threatened and concluded claim, litigation,
arbitration, mediation and administrative proceedings that relate to the
applicability of, or compliance with applicable laws, regulations, rules or
ordinances that is or was pending, threatened or resolved within the last five
(5) years.

31.
Correspondence with any governmental entity relating to the applicability of, or
compliance with applicable laws, regulations, rules or ordinances.

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32.
Documents and a description of all investigations, inquiries or allegations of
any governmental entity pending or threatened prior to the date hereof.

33.
Copy of all compliance plans, policies and procedures thereto (including,
without limitation, policies and procedures for reviewing employees for
inclusion on a state or federal list of excluded providers), and all updates and
amendments thereto.

34.
A list of all complaints or inquiries made under any compliance reporting
process during the past three (3) years.

35.
Copy of all policies and procedures, training manuals, reports, memoranda
analyzing applicability of the Health Insurance Portability Act of 1996, P.L.
104-191 (“HIPAA”) rules to a particular business practice, and other documents
pertaining to compliance with HIPAA.

36.
A list and description of any reportable HIPAA security breach during the past
two (2) years.

37.
Provider number applications, certification documents and other documents that
relate to eligibility to participate in state and federal health care programs
(including, without limitation, CMS 855A forms filed in the last five (5)
years).

38.
Copies of all contracts pertaining to the operation of the facility , including
but not limited to - third party payor, medical director, physicians, nurses,
ambulance, laboratory, optometry, ophthalmology, hospice, infusion therapy,
respite care, nutrition, dental, pharmacy, x-ray, psychology, psychiatrist,
physical, speech, occupational and respiratory therapy, dialysis, oxygen,
podiatrist, audiology, and durable medical equipment.

39.
Copies of any Corporate Integrity Agreements or any other agreements restricting
the business from doing business or competing in any manner in any business or
geographical area.

40.
Any and all agreements, arrangements or understandings with individuals or
entities who have or may refer patients/clients to the business.

3
        
        

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SCHEDULE 10.7

3-05 Audit Materials

1.
Detailed general ledger that ties to the financial statements

2.
Trial balances with account numbers or other identifier as to classification of
account as asset, liability, equity, income or expense

3.
Internal control narratives

4.
Accounts receivable, accounts payable and fixed asset subledgers

5.
Rent rolls

6.
Occupancy reports

7.
Accounts receivable aging report

8.
Account reconciliations of all balance sheet and income statement accounts

9.
Schedule of intercompany balances as of each balance sheet date

10.
Schedule of restricted deposits

11.
Accounts payable aging

12.
Payroll registers

13.
Copies of invoices to support all general ledger entries for all balance sheet,
equity and income statement accounts

14.
Copies of monthly bank statements

15.
Copies of contracts with residents

16.
Copies of checks received from tenants/residents

17.
Copies of all management agreements and vendor contracts

18.
Copies of all vendor invoices

19.
Copies of checks to support the payment of vendor invoices

20.
Copies of checks supporting contributions and distributions to the entities to
support equity

21.
Real estate tax invoices

22.
Copies of insurance contracts

23.
Mortgage or other debt agreements specifying the terms of the debt arrangements

24.
Mortgage statements

25.
Bank and mortgage confirmations directly with the lenders

26.
Cash account confirmations

27.
Note statements and confirmations directly with the lenders, partners, etc.

28.
Mortgage settlement statements

29.
Purchase and sale agreements and appraisals

30.
Contactor development agreements

31.
Support for historical cost of fixed assets (land, building, fixtures)
including, settlement statements, invoices, check copies, progress payment
support or other support.

32.
Detail depreciation schedules

33.
HUD forms

34.
Confirmation from legal counsel of pending or outstanding claims

35.
Copies of tax returns

36.
Articles of incorporation, partnership/corporate agreements

37.
Representation letter to the accounting firm performing the audit as to the
completeness and accuracy of the books and records provided, among other routine
audit representations

        

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