Exhibit 10.1

Execution Version

TRANSFER AGREEMENT

by and among

SUNRISE SENIOR LIVING INVESTMENTS, INC.,

a Virginia corporation,

and

CHT PARTNERS, LP,

a Delaware limited partnership

and

SUNRISE SENIOR LIVING MANAGEMENT, INC.,

a Virginia corporation

June 4, 2012

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TABLE OF CONTENTS

 

Article I.

 

INTERPRETATION

     4   

Section 1.01

 

Defined Terms

     4   

Section 1.02

 

Additional Defined Terms

     8   

Section 1.03

 

Exhibits

     11   

Article II.

 

AGREEMENT TO TRANSFER TRANSFEROR’S INTEREST

     11   

Section 2.01

 

Transfer of Transferor’s Interest

     11   

Section 2.02

 

Owned Assets

     11   

Section 2.03

 

Operating Cash

     13   

Section 2.04

 

Down Payment

     13   

Article III.

 

DUE DILIGENCE

     14   

Section 3.01

 

Investigation of Facilities

     14   

Section 3.02

 

Title

     16   

Section 3.03

 

Satisfaction of Conditions Precedent

     16   

Article IV.

 

REPRESENTATIONS AND WARRANTIES OF TRANSFEREE

     17   

Section 4.01

 

Organization, Good Standing and Entity Authority

     17   

Section 4.02

 

Authorization and Binding Effect of Documents

     17   

Section 4.03

 

ERISA

     17   

Section 4.04

 

Absence of Conflicts

     17   

Section 4.05

 

Consents

     18   

Section 4.06

 

Broker’s or Finder’s Fees

     18   

Section 4.07

 

No Judgments

     18   

Section 4.08

 

No Insolvency

     18   

Section 4.09

 

Specially Designated National or Blocked Person

     18   

Section 4.10

 

Transferee Financials

     19   

Article V.

 

INTENTIONALLY OMITTED

     19   

Article VI.

 

INTENTIONALLY OMITTED

     19   

Article VII.

 

REPRESENTATIONS AND WARRANTIES OF TRANSFEROR

     19   

Section 7.01

 

Organization, Good Standing, Entity Authority and Qualification

     19   

Section 7.02

 

Authorization and Binding Effect of Documents

     19   

Section 7.03

 

Absence of Conflicts

     20   

Section 7.04

 

Consents

     20   

Section 7.05

 

Broker’s or Finder’s Fees

     20   

 

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Section 7.06

 

ERISA

     21   

Section 7.07

 

Ownership of Transferor’s Interest

     21   

Section 7.08

 

No Judgments

     21   

Section 7.09

 

No Governmental Approvals

     21   

Section 7.10

 

No Insolvency

     22   

Article VIII.

 

BUSINESS REPRESENTATIONS

     22   

Section 8.01

 

Financial Statements; No Undisclosed Liabilities; Absence of Certain Changes

     22   

Section 8.02

 

Books and Records; Internal Controls

     23   

Section 8.03

 

Obligations

     24   

Section 8.04

 

Medicare; Medicaid

     24   

Section 8.05

 

No Possessory Rights

     24   

Section 8.06

 

Employees

     24   

Section 8.07

 

Licenses

     24   

Section 8.08

 

Litigation

     25   

Section 8.09

 

Environmental Matters

     25   

Section 8.10

 

Intentionally Omitted

     25   

Section 8.11

 

Compliance with Laws

     25   

Section 8.12

 

Residence Agreements

     25   

Section 8.13

 

Taxes

     26   

Section 8.14

 

Personal Property

     26   

Section 8.15

 

Title

     26   

Section 8.16

 

Intentionally Omitted

     26   

Section 8.17

 

Contracts

     26   

Section 8.18

 

Insurance

     27   

Section 8.19

 

Condemnation

     27   

Section 8.20

 

Purchase Rights

     27   

Section 8.21

 

Compliance with Permitted Exceptions

     27   

Section 8.22

 

Utilities

     27   

Section 8.23

 

Existing Owner Financing Documents

     28   

Section 8.24

 

Management Documents

     28   

Article IX.

 

COVENANTS

     28   

Section 9.01

 

Publicity

     28   

Section 9.02

 

Commercially Reasonable Efforts

     28   

Section 9.03

 

No Recordation

     28   

Section 9.04

 

Licenses

     29   

Section 9.05

 

Casualty

     29   

Section 9.06

 

Condemnation

     29   

Section 9.07

 

Operation of Business

     29   

Article X.

 

CONDITIONS PRECEDENT TO THE OBLIGATION OF TRANSFEREE AND TRANSFEROR TO CLOSE

     30   

 

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Section 10.01

 

Conditions to Transferee’s Obligation to Close

     30   

Section 10.02

 

Intentionally Omitted

     30   

Section 10.03

 

Conditions to Transferor’s Obligation to Close

     30   

Article XI.

 

CLOSING

     31   

Section 11.01

 

Time and Place

     31   

Section 11.02

 

Delivery of Documents at Closing

     31   

Article XII.

 

INDEMNITY; DEFAULT; DAMAGES

     33   

Section 12.01

 

Survival

     33   

Section 12.02

 

Intentionally Omitted

     33   

Section 12.03

 

Transferee’s Remedies for Transferor’s Defaults

     33   

Section 12.04

 

Transferor’s Remedies for Transferee’s Defaults

     33   

Section 12.05

 

Limitation on Liability for Business Representations

     34   

Section 12.06

 

Intentionally Omitted

     34   

Section 12.07

 

Indemnification by Transferee

     34   

Section 12.08

 

Intentionally Omitted

     34   

Section 12.09

 

Indemnification by Transferor

     34   

Section 12.10

 

Intentionally Omitted

     34   

Section 12.11

 

Administration of Indemnification

     34   

Section 12.12

 

Exclusivity

     35   

Article XIII.

 

DOWN PAYMENT AND ESCROW

     35   

Section 13.01

 

Investment of Down Payment

     35   

Section 13.02

 

Disbursement of Down Payment

     36   

Section 13.03

 

Disputes

     38   

Section 13.04

 

Compensation

     38   

Section 13.05

 

Liability of Escrow Agent

     38   

Article XIV.

 

JOINT VENTURE AND FACILITY DOCUMENTS

     38   

Section 14.01

 

Formation of Joint Venture

     38   

Section 14.02

 

Termination of Existing Facility Documents

     40   

Section 14.03

 

New Facility Documents

     40   

Section 14.04

 

Other Documents

     41   

Section 14.05

 

Escrow

     41   

Article XV.

 

FEES AND EXPENSES

     42   

Section 15.01

 

Fees and Expenses

     42   

Section 15.02

 

Title Costs

     43   

Section 15.03

 

Transfer Taxes

     43   

Section 15.04

 

Other Closing Costs

     43   

Section 15.05

 

Transferee Mezz Financing Cost Reimbursement

     43   

Section 15.06

 

Intentionally Omitted

     44   

 

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Section 15.07

 

Other Transferee Mezz Financing Costs

     44   

Section 15.08

 

Transferee Closing Cost Amount

     44   

Article XVI.

 

REFINANCING

     44   

Section 16.01

 

Cooperation

     44   

Section 16.02

 

Financing Fees

     45   

Section 16.03

 

Refinancing Closing

     45   

Article XVII.

 

REPRESENTATIONS AND WARRANTIES OF MANAGER

     45   

Section 17.01

 

Manager Representations

     45   

Article XVIII.  

MISCELLANEOUS

     46   

Section 18.01

 

Further Actions

     46   

Section 18.02

 

Intentionally Omitted

     46   

Section 18.03

 

Notices

     46   

Section 18.04

 

Entire Agreement

     47   

Section 18.05

 

Not Construed Against Drafter

     47   

Section 18.06

 

Binding Effect; Benefits

     47   

Section 18.07

 

Assignment

     47   

Section 18.08

 

Governing Law

     48   

Section 18.09

 

Amendments and Waivers

     48   

Section 18.10

 

Severability

     48   

Section 18.11

 

Headings

     48   

Section 18.12

 

Counterparts

     48   

Section 18.13

 

References

     48   

Section 18.14

 

Exhibits

     48   

Section 18.15

 

Attorneys’ Fees

     48   

Section 18.16

 

Waiver of Jury Trial

     49   

Section 18.17

 

Facsimile and PDF Signatures

     49   

Section 18.18

 

Informational Meetings

     49   

SCHEDULES

 

1. Example of Methodology for Calculating the Quarterly Interest Rate
Differential Amount

EXHIBITS

 

A Facilities; Facility Owners

 

B. Refinancing Term Sheet

 

C. Prior Management Agreements and Prior Owner Agreements

 

D. Form of Assignment and Assumption of Interest Agreement

 

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E. Intentionally Omitted

 

F. Transferor’s Non-Imputation Affidavit

 

G. Intentionally Omitted

 

H. Non-Foreign Status Affidavit

 

I. Form of JV Agreement

 

J. Form of Management Termination

 

K. Form of Owner Agreement Termination

 

L. Form of Pooling Agreement Termination

 

M. Form of Operating Lease

 

N Form of New Management Agreement

 

O. Form of Management Agreement Guaranty

 

P. Form of Manager Pooling Agreement

 

Q. Form of Delegation Agreement

 

R. Form of Contribution and Indemnification Agreement

 

S. Form of Mezz Loan Recognition Agreement

 

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TRANSFER AGREEMENT

THIS TRANSFER AGREEMENT (this “Agreement”) is dated as of the 4th day of June,
2012, by and among SUNRISE SENIOR LIVING INVESTMENTS, INC., a Virginia
corporation (“Transferor”), CHT PARTNERS, LP, a Delaware limited partnership
(“Transferee”), and SUNRISE SENIOR LIVING MANAGEMENT, INC., a Virginia
corporation (“Manager”). Certain capitalized terms used herein are defined in
Section 1.01.

RECITALS:

A. Transferor is the sole member of CHTSUN PARTNERS IV, LLC, a Delaware limited
liability company (“Newco”)

B. Transferor is the sole member of the Sun IV LLC, a Delaware limited liability
company (the “Company”). Transferor’s interest in the Company is referred to
herein as “Transferor’s Interest.”

C. The Company is the sole member of (i) MetSun Three Pool One, LLC, a Delaware
limited liability company (the “Pool One Company”), and (ii) MetSun Two Pool
Two, LLC, a Delaware limited liability company (the “Pool Two Company” and
collectively with the Pool One Company, the “Pool Companies”).

D. The Pool One Company is the sole member of each of the entities identified as
a “Pool One Owner” on Exhibit A attached hereto and the Pool Two Company is the
sole member of each of the entities identified as a “Pool Two Owner” on Exhibit
A attached hereto. The Pool One Owners and the Pool Two Owners are referred to
herein as the “MetSun Facility Owners” (and for purposes of clarification,
MetSun Three Dublin OH Senior Living (the “Dublin Property Owner”) is not a
MetSun Facility Owner).

E. Each MetSun Facility Owner owns the fee simple interest in one of the five
(5) senior living facilities described across from such MetSun Facility Owner’s
name on Exhibit A attached hereto (the “MetSun Facilities”) and the Dublin
Property Owner owns the fee simple interest in the development property located
at 4175 Stoneridge Lane, Dublin, OH (the “Dublin Property”).

F. Transferor is the sole member of Sunrise Connecticut Avenue Assisted Living,
LLC, a Virginia limited liability company ( “Conn. Ave. Facility Owner”). Conn.
Ave. Facility Owner owns, directly, the fee simple interest in the assisted
living facility known as Sunrise of Connecticut Avenue (the “Conn. Ave.
Facility”).

G. Transferor is the sole member of Santa Monica AL, LLC, a Delaware limited
liability company (“Santa Monica LP”). Santa Monica LP is the sole member of
Santa Monica GP, LLC, a Delaware limited liability company (“Santa Monica GP”),
and the sole limited partner (owning a 99% limited partnership interest) of AL
Santa Monica Senior Housing LP, a Delaware limited partnership (“Santa Monica
Facility Owner” and together with the Conn. Ave. Facility Owner and the MetSun
Facility Owners, the “Facility Owners” ). Santa Monica GP is the sole general
partner (owning a 1% general partnership interest) of Santa Monica Facility
Owner. Santa Monica Facility Owner owns the fee simple interest in the assisted
living facility known as Sunrise of Santa Monica (the “Santa Monica Facility”
and together with the Conn. Ave. Facility and the MetSun Facilities, the
“Facilities” and each a “Facility”).

 

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H. Pursuant to a separate management agreement and related documents for each
Facility, each of the Facilities is managed by Manager, an Affiliate of
Transferor.

I. Transferor and Transferee are pursuing (i) a refinancing of the MetSun
Facilities with the Prudential Insurance Company of America (“Lender”) and
(ii) a modification of the existing financing in effect in favor of Lender
secured by the Conn. Ave Facility and the Santa Monica Facility, each to be
entered into at Closing by Newco and/or its subsidiaries on the terms set forth
on Exhibit B attached hereto (the “Refinancing Term Sheet”) and such other terms
and conditions as are reasonably satisfactory to both Transferor and Transferee
(collectively, the “Refinancing”).

J. Transferor shall cause the Company to form, prior to Closing, a new Delaware
“C” corporation wholly owned by the Company (“TRS”).

K. Transferor shall cause the Company, prior to Closing, to form the following
seven (7) new Delaware entities, which immediately following the Restructuring
and Closing, shall be wholly owned by the Company: (i) Metaire LA Senior Living
Owner, LLC, a Delaware limited liability company, (ii) Baton Rouge LA Senior
Living Owner, LLC, a Delaware limited liability company, (iii) Gilbert AZ Senior
Living Owner, LLC, a Delaware limited liability company , (iv) Lombard IL Senior
Living Owner, LLC, a Delaware limited liability company, (v) Louisville KY
Senior Living Owner, LLC, a Delaware limited liability company, (vi) Connecticut
Avenue Assisted Living Owner, LLC, a Delaware limited liability company, and
(vii) Santa Monica Assisted Living Owner, LLC, a Delaware limited liability
company (each a “New Facility Owner” and collectively the “New Facility
Owners”).

L. At Closing, Transferor intends to assign to the Company (a) 100% of its
ownership interest in Conn. Ave. Facility Owner and (b) 100% of its ownership
interest in Santa Monica LP (the “Conn. Ave/Santa Monica Assignment”).

M. At Closing, immediately after the contribution of Transferor’s Interest to
Newco, Transferor and Transferee intend to cause the Facility Owners to transfer
and convey to the applicable New Facility Owners, by Special Warranty Deed, fee
simple title in and to the Real Property (the “Real Property Conveyance”).

N. At Closing, immediately after the Real Property Conveyance, Transferor and
Transferee intend to cause the Company to assign 100% of its interests in the
Pool Companies, Conn. Ave. Facility Owner and Santa Monica LP to TRS.

O. At Closing, in return for an approximately fifty five percent
(55%) membership interest in Newco (subject to adjustment as set forth herein
provided that in no event shall the membership interest of Transferee in Newco
be less than 51%), Transferee intends to contribute to Newco an amount equal to
(i) Fifty Six Million, Eight Hundred Thousand Dollars ($56,800,000.00) (the
“Transferee Cash Contribution Amount”), plus (ii) Transferee’s pro-rata share of
Shared Expenses (as hereinafter defined) (collectively, the “Transferee
Contribution”).

 

2

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P. At Closing, immediately after the Conn. Ave/Santa Monica Assignment,
Transferor intends to contribute 100% of Transferor’s Interest to Newco plus
Transferor’s pro-rata share of the Shared Expenses (collectively, the
“Transferor Contribution”) upon which Transferor will retain an approximately
forty-five percent (45%) membership interest in Newco (subject to adjustment as
set forth herein).

Q. A portion of the Transferee Contribution in an amount equal to approximately
Forty Nine Million, Six Hundred and Sixty Seven Thousand, Five Hundred and Fifty
Five Dollars ($49,667,555.67) (the “Existing Financing Payoff Amount”) shall be
utilized at Closing to prepay in full the existing financing encumbering the
MetLife Facilities and the Dublin Property.

R. That portion of the Transferee Contribution remaining after payment of the
Existing Financing Payoff Amount, any Transferee Closing Cost Amount and the
Transferee’s Shared Expenses, if any, shall be used by Newco for working capital
purposes.

S. A portion of the cash held by the Company immediately after Closing in the
amount of Five Million Dollars ($5,000,000.00) (the “Initial Distribution”)
shall be distributed to Transferor immediately after Closing in accordance with
the terms and conditions of the JV Agreement (as hereinafter defined).

T. The steps described in the foregoing Recitals J-P to form a new joint venture
for the purpose of owning and operating the Facilities, as well as any other
structuring required pursuant to the Refinancing and agreed to by Transferor and
Transferee in their reasonable discretion, shall hereinafter be referred to as
the “Restructuring.”

U. On the occurrence of the Closing, Transferor and Manager intend to terminate
or cause to be terminated (a) the Management Agreements listed and described on
Exhibit C attached hereto (individually, a “Prior Management Agreement” and
collectively, the “Prior Management Agreements”), (b) the Owner Agreements
listed and described on Exhibit C attached hereto (individually, a “Prior Owner
Agreement” and collectively the “Prior Owner Agreements”), (c) that certain
Manager Pooling Agreement (MetLife Three Transaction Pool One) dated as of
September 23, 2008, among certain Facility Owners, the Company (as successor in
interest to Master MetSun Three, LP) and Manager (as amended, the “Prior Pool
One Pooling Agreement”) and (d) that certain Manager Pooling Agreement dated as
of March 20, 2012, among certain Facility Owners, the Company and Manager (as
amended, the “Prior Pool Two Pooling Agreement” and together with the Prior Pool
One Pooling Agreement, the “Prior Pooling Agreements”).

V. At Closing, immediately after the termination of the Prior Management
Agreements, Prior Owner Agreements and the Prior Pooling Agreements, Transferor
and Transferee intend to cause the Facility Owners and Facility Lessees to
execute and deliver the Operating Leases, New Management Agreements and Manager
Pooling Agreement (each as hereinafter defined) and Manager intends to execute
and deliver such New Management Agreements and Manager Pooling Agreement and
Transferee intends to execute and deliver the Management Agreement Guaranties.

 

3

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

Article I.

INTERPRETATION

Section 1.01 Defined Terms. As used herein, the following terms shall have the
meanings indicated:

Affiliate: With respect to any specified Person that is not an individual,
another Person which, directly or indirectly, controls, is controlled by, or is
under common control with, the specified Person.

Assignment and Assumption of Interest Agreement: Assignment and Assumption
Agreement substantially in the form of Exhibit D.

Business Day: Any day, other than a Saturday, a Sunday or a day on which banks
in New York City are required or authorized to close.

Charter Documents: (i) with respect to any Person which is a corporation, the
certificate of incorporation an bylaws of such Person, (ii) with respect to any
Person which is a limited liability company, the certificate of formation and
operating or limited liability company agreement of such Person, and (iii) with
respect to any Person which is a limited partnership, the certificate of limited
partnership and partnership agreement of such Person.

Code: The United States Internal Revenue Code of 1986, as amended.

Contract Date: The date of this Agreement, set forth in the introductory
paragraph.

Disclosure Statement: The Disclosure Statement prepared by Transferor and
delivered to Transferee as of the date hereof.

Documents: This Agreement and all Exhibits hereto, and each other agreement,
certificate or instrument delivered pursuant to this Agreement.

Down Payment: The sum of Five Hundred Thousand Dollars ($500,000.00).

Due Diligence Period: A period ending at 5:00pm EST on the date that is
forty-five (45) days following the date of this Agreement, as the same may be
extended by the mutual written consent of the parties hereto.

Environmental Claims: All claims for reimbursement, remediation, abatement,
removal, clean up, contribution, personal injury, property damage, damage to
natural resources or violations of Environmental Laws, made by any Governmental
Entity or other Person arising from or in connection with the (i) spill, leak,
emission, discharge or release of any Hazardous Materials over, on, in, under or
from the Real Property, or (ii) violation of any Environmental Laws with respect
to the Real Property.

 

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Environmental Laws: Any federal, state or local law, statute, rule, regulation,
order, ordinance, decree, injunction, judgment, governmental restriction or any
other requirement of law (including common law) regulating Hazardous Materials
or relating to the protection of human health and safety from Hazardous
Materials or relating to the protection of natural resources or the environment
and applicable to the Owned Assets.

Environmental Liabilities: All Liabilities under any Environmental Laws arising
from or in connection with the Real Property, including, without limitation, any
obligations to manage, control, contain, remove, remedy, respond to, clean up or
abate any spill, leak, emission, discharge or release of any Hazardous
Materials, pollution, contamination or radiation into any water, soil, sediment,
air or other environmental media.

ERISA: The Employee Retirement Income Security Act of 1974, as amended.

Escrow Agent: First American Title Insurance Company, National Commercial
Services Office in Orlando, Florida.

Existing Owner Financing: The existing mortgage financing obtained by the
Facility Owners with respect to the Facilities.

GAAP: United States generally accepted accounting principles, consistently
applied.

Governmental Entity: Any governmental authority, agency, commission, board or
public authority.

Hazardous Materials: Any material that: (i) is or contains asbestos, urea
formaldehyde insulation, polychlorinated biphenyls, petroleum or petroleum
products, radon gas, or microbiological contamination, (ii) the presence of
which in the environment requires remediation or abatement pursuant to any
Environmental Law, or is defined, listed or identified pursuant to any
Environmental Law as a “hazardous waste,” “hazardous substance,” “toxic
substance” or words of similar import, or (iii) is regulated under any
Environmental Law; provided, however, that Hazardous Material shall not include
(a) cleaning material, pre-packaged supplies, and petroleum products customarily
used in the operation and maintenance of comparable properties, (b) cleaning
materials, personal grooming items, and other items sold in pre-packaged
containers for consumer use and used by tenants and residents in the Facilities,
(c) any pharmaceuticals, vaccines or medical products or devices, or medical
waste or biological waste, including those materials defined as “medical waste”
or “biological waste” under Environmental Laws, and (d) petroleum products used
in the operation and maintenance of motor vehicles from time to time located on
the Facilities’ parking areas and equipment, so long as, to the extent required,
all applicable Licenses for the use of any of the foregoing have been obtained
and are in full force and effect and so long as all the foregoing are used,
stored, handled, transported and disposed of, and otherwise managed in
quantities and types appropriate for such activities and in compliance with all
Environmental Laws.

Healthcare Permits: All licenses, permits, certifications or approvals issued by
Governmental Entities necessary for Facility Owners and Manager to provide
healthcare and other assisted living services to Residents as are provided or
offered by Facility Owners or Manager as of the Contract Date.

 

5

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Liabilities: Liabilities, obligations, commitments or responsibilities of any
nature whatsoever, whether direct or indirect, matured or unmatured, fixed or
unfixed, known or unknown, accrued, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured, absolute, contingent or
otherwise, including any direct or indirect indebtedness, guaranty, endorsement,
claim, Loss, Taxes, damage, deficiency, cost or expense, but excluding, with
respect to the relationships among the parties to this Agreement created
hereunder, consequential damages.

Licenses: All certificates, licenses, and permits issued by Governmental
Entities in connection with the ownership, leasing, use, occupancy, operation,
and maintenance of the Facilities, including the Healthcare Permits.

Lien: Any mortgage, deed of trust, pledge, hypothecation, title defect, right of
first refusal, security or other adverse interest, voting trust agreement,
community property 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.

Loss: With respect to any Person, any and all costs, obligations, liabilities,
demands, claims, settlement payments, awards, judgments, fines, penalties,
damages, and reasonable out-of-pocket expenses, including court costs and
reasonable attorneys’ fees, whether or not arising out of a third party claim,
but excluding consequential damages.

Material Adverse Effect: Any change, event, development or effect that
individually or in the aggregate has a material adverse effect on (a) the
assets, business, operations, capitalization, financial condition (including
Liabilities) or results of operations of Newco, the Company, the Pool Companies,
Santa Monica GP, Santa Monica LP, the Facility Owners, the New Facility Owners,
the Facilities, or the Real Property in the aggregate or (b) the ability of the
parties to consummate the transactions contemplated by this Agreement.

Medicaid/Medicare Contracts: Any contracts with any Governmental Entity or other
Person, which are necessary for the Facility Owners or Manager to be reimbursed,
paid or otherwise compensated for the care of elderly, disabled or low income
individuals at the Facilities, pursuant to Title XVIII or Title XIX of the
Social Security Act, Title 42 United States Code, Chapter 7, as amended from
time to time, or any similar state law governing the care of elderly, disabled
or low income individuals. For purposes of this definition, the term ‘care’
includes any acute health care, long term care, preventive care or other type of
health care, or any goods or services provided in connection with the provision
of such care.

Newco Subsidiaries: From and after Closing, the Company, the Pool Companies,
TRS, the Facility Owners, the New Facility Owners, Santa Monica GP, Santa Monica
LP (and their direct and indirect subsidiaries).

Permitted Exceptions: (i) The Lien of real estate taxes and assessments and
other charges by Governmental Entities that are not yet delinquent, (ii) the
rights of Residents under the

 

6

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Residence Agreements, (iii) such matters as are shown on the Pro Forma Title
Policies, (iv) the lien of any equipment lease or financing or purchase money
Lien, in each case incurred in the ordinary course of business consistent with
past practice, (v) Liens set out in Section 1.01 of the Disclosure Statement and
(vi) such other matters as are approved by Transferee in writing (such approval
to be deemed given upon completion of the Closing after written disclosure to
Transferee of such other matters) or that are permitted pursuant to the terms of
this Agreement.

Person: Any individual, partnership, corporation, limited liability company,
trust or other legal entity.

Pro-Forma Title Policies: The Pro-Forma Title Policies prepared and delivered by
the Escrow Agent to Transferee on or before the expiration of the Due Diligence
Period, with respect to the issuance by the Escrow Agent of an owner’s policy of
title insurance insuring each Facility Owner’s title to the applicable Real
Property, effective as of the acquisition by Transferee of the ownership of
Transferor’s Interest as provided herein.

Real Property: The Land and all buildings, structures, fixtures and other
improvements located thereon, as more fully described in Exhibit A, including
all permits, easements, Licenses, rights-of-way, rights and related
appurtenances.

Resident: Each individual resident at the Facilities in his/her capacity as
such.

Resident Deposits: All deposits or advances of any kind or nature from any
Resident.

Resident Pre-paid Rent: All rental amounts paid in advance of the date when such
payment is due by any Resident.

Specially Designated National or Blocked Person: (i) A person or entity
designated by the U.S. Department of the Treasury’s Office of Foreign Assets
Control from time to time as a “specially designated national or blocked person”
or similar status, (ii) a person or entity described in Section 1 of U.S.
Executive Order 13224, issued on September 23, 2001 (the “Executive Order”), or
(iii) a person or entity otherwise identified by Governmental Entity or legal
authority as a person with whom a United States Person is prohibited from
transacting business. As of the date hereof, a list of such designations and the
text of the Executive Order are published under the internet website address
www.ustreas.gov/offices/enforcement/ofac.

SSLI: Sunrise Senior Living, Inc., a Delaware corporation, which is the sole
owner of Transferor.

Taxes: All federal, state, local and foreign taxes including, without
limitation, income, gains, transfer, unemployment, withholding, payroll, social
security, real property, personal property, excise, sales, use and franchise
taxes, levies, assessments, imposts, duties, licenses and registration fees and
charges of any nature whatsoever, including interest, penalties and additions
with respect thereto and any interest in respect of such additions or penalties,
but excluding impact fees or other similar exactions levied or payable in
connection with the development or operation of any of the Facilities and
excluding special assessments.

 

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Tax Return: Any return, filing, report, declaration, questionnaire or other
document required to be filed for any period with any taxing authority (whether
domestic or foreign) in connection with any Taxes (whether or not payment is
required to be made with respect to such document).

Title Commitment: A current commitment for title insurance for each of the
Facilities.

Title Policy: An owner’s policy of title insurance insuring each Facility
Owner’s title to the applicable Real Property, effective as of the acquisition
by Transferee of the ownership of the Transferor Interests as provided herein.

Transferee Mezz Borrower. CHT SL IV Holding, LLC, a Delaware limited liability
company or such other Affiliate of Transferee, in Transferee’s sole discretion.

Transferee Mezz Financing. Certain mezzanine financing to be obtained by
Transferee Mezz Borrower from Transferee Mezz Lender, to finance Transferee’s
payment of the Transferee Contribution.

Transferee Mezz Lender. RCG LV Debt IV Non-REIT Assets Holdings, LLC, a Delaware
limited liability company, or an Affiliate thereof, and its successors and/or
assigns.

Transferee Closing Cost Amount: An amount equal to Two Million, One Hundred and
Thirty Two Thousand, Four Hundred and Forty Four Dollars ($2,132,444.33).

United States Person: (i) Any individual or business entity, regardless of
location, that is a resident of the United States; (ii) any individual or
business entity physically located within the United States; (iii) any business
entity organized under the laws of the United States or of any state, territory,
possession, or district thereof; and (iv) any business entity, wheresoever
organized or doing business, which is owned or controlled by an individual or
business entity specified in (i) or (iii) above.

Section 1.02 Additional Defined Terms. As used herein, the following terms shall
have the meanings defined in the recitals or sections indicated below:

 

Access Indemnified Parties    Section 3.01(b) Agreement    Preamble Business
Representations    Introductory paragraph to Article VIII Business
Representations Damage Cap    Section 12.05 Closing    Section 11.01 Closing
Date    Section 3.03 Closing Statement    Section 11.02(a)(v) Company    Recital
B Conn. Ave. Facility    Recital F Conn. Ave. Facility Owner    Recital F Conn.
Ave/Santa Monica Assignment    Recital L Contracts    Section 8.17 Contribution
and Indemnification Agreement    Section 14.04(b) Deed Transfers    Section
14.03(a)

 

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Delegation Agreement    Section 14.04(a) Documents    Section 15.01(a) Dublin
Property    Recital E Dublin Property Owner    Recital D Due Diligence Materials
   Section 3.01(f) Environmental Reports    Section 8.09 Enterprise Valuation   
Section 2.01(c) Executive Order   

Section 1.01, definition of Specially Designated National or Blocked Person

Existing Financing Payoff Amount    Recital Q Facility Agreements    Section
2.02(c) Facility/Facilities    Recital G Facility Owners    Recital G Failure of
Condition Notice    Section 13.02(e) Financials    Section 8.01(a) Guarantors   
Section 14.04(b) Improvements    Section 2.02(a)(i) Indemnified Party    Section
12.11(a) Indemnifying Party    Section 12.11(a) Initial Distribution    Recital
S JV Agreement    Section 14.01(a) Land    Section 2.02(a)(i) Lender    Recital
I Loan    Section 14.04(b) Local Counsel Costs    Section 15.01(a) Management
Agreement Guaranty    Section 14.03(d) Management Termination(s)    Section
14.02(a) Manager    Preamble Manager Pooling Agreement    Section 14.03(e)
MetSun Facilities    Recital E MetSun Facility Owners    Recital D Mezz Loan
Recognition/Comfort Letter    Section 15.05 New Facility Owner(s)    Recital K
New Management Agreement    Section 14.03(c) Newco    Recital A Non-Imputation
Affidavit    Section 3.02(a) Operating Cash Infusion    Section 2.03 Operating
Lease    Section 14.03(b) Other Refinancing Fees and Expenses    Section 16.02
Other Shared Closing Costs    Section 15.04 Owned Assets    Section 2.02 Owner
Agreement Termination(s)    Section 14.02(b) Personal Property    Section
2.02(b)(v) Pool Companies    Recital C Pool One Company    Recital C Pool One
Owner    Recital D

 

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Pool Two Company    Recital C Pool Two Owner    Recital D Pooling Agreement
Termination    Section 14.02(c) Prior Management Agreement(s)    Recital U Prior
Owner Agreement(s)    Recital U Prior Pool One Pooling Agreement    Recital U
Prior Pool Two Pooling Agreement    Recital U Prior Pooling Agreements   
Recital U Real Property Conveyance    Recital M Refinancing    Recital I
Refinancing Fee    Section 16.02 Refinancing Term Sheet    Recital I Refinancing
Third-Party Costs    Section 15.01(b) Rent Rolls    Section 8.12 Residence
Agreements    Section 2.02(c) Restructuring    Recital T Restructuring Documents
   Section 14.05 Santa Monica Facility    Recital G Santa Monica Facility owner
   Recital G Santa Monica GP    Recital G Santa Monica LP    Recital G Shared
Expenses    Section 15.08 Survey    Section 3.02(a) Third-Party Costs    Section
15.01(b) Title Insurance Costs    Section 15.02 Transfer Taxes    Section 15.03
Transferee    Preamble Transferee Cash Contribution Amount    Recital O
Transferee Contribution    Recital O Transferee Default Notice    Section
13.02(d)

Transferee Notice of Objection to Transferor Reimbursable Transaction Costs

   Section 13.02(e) Transferee’s Objection Notice    Section 13.02(d) Transferor
   Preamble Transferor Board Consent    Section 7.02(a) Transferor Contribution
   Recital P Transferor Default Notice    Section 13.02(c) Transferor
Reimbursable Transaction Costs    Section 15.05 Transferor’s Failure of
Condition Objection Notice    Section 13.02(e) Transferor’s Interest    Recital
B Transferor’s Non-Imputation Affidavit    Section 3.02(a)(i) Transferor’s
Objection Notice    Section 13.02(c) TRS    Recital J

 

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Section 1.03 Exhibits. The inclusion of any information on any one exhibit will
constitute disclosure of such information for all purposes hereunder, and
information need not be repeated on multiple exhibits.

Article II.

AGREEMENT TO TRANSFER TRANSFEROR’S INTEREST

Section 2.01 Transfer of Transferor’s Interest.

(a) Upon and subject to the terms and conditions provided herein, at the
Closing, Transferee will pay the Transferee Contribution as follows: Transferee
shall contribute to Newco an amount equal to the Transferee Contribution less
the Down Payment, which shall be credited and paid to Newco pursuant to Article
XIII.

(b) On the Closing Date, Transferor shall cause the Transferor Interests to be
transferred to Newco, free and clear of any Lien, and Newco shall assume the
Transferor Interests in accordance with the terms of this Agreement.

(c) The parties agree that the Transferee Contribution has been calculated based
upon an enterprise valuation for the Company, the Conn. Ave. Facility Owner and
Santa Monica Facility Owner (and their respective direct and indirect
subsidiaries and interests in the Facilities) of Two Hundred and Twenty Six
Million and Eight Six Thousand Dollars ($226,086,000.00) (the “Enterprise
Valuation”).

Section 2.02 Owned Assets. As of the Closing, Transferor shall take such steps
as may be necessary so that all tangible and intangible assets, excluding any
assets leased or licensed from a third party, used in, and material to, the
operation of the Facilities as they are currently being operated by the Facility
Owners (as further described below, the “Owned Assets”) will be owned by Newco
or the Newco Subsidiaries (as the case may be) free of all Liens, other than
Permitted Exceptions. The Owned Assets include the following:

(a) Real Property.

(i) The Real Property, including, but not limited to, a fee simple interest in
those certain real properties consisting of land (“Land”) and all buildings,
structures, fixtures and other improvements located thereon (“Improvements”),
such Land and Improvements being more particularly described in Exhibit A.

(ii) All right, title and interest of the Facility Owners as landlord (whether
named as such therein, or by assignment or otherwise), including, but not
limited to, in any leases and subleases (including Residence Agreements), if
any, regarding the Real Property now existing or in effect at the Closing, and
all amendments, modifications, supplements, renewals and extensions thereof,
together with any security deposits made by the lessees or Residents thereunder.

 

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(b) Personal Property.

(i) Any and all furniture, fixtures, furnishings, inventory, machinery and
equipment used in connection with the Facilities, and all other personal
property used in connection with the Real Property and located upon the Real
Property now or as of the Closing. In no event shall the Personal Property
include any property owned by any Resident or Manager, notwithstanding Manager’s
use of such property in connection with its management and administration of the
Facilities.

(ii) Goodwill and going concern value.

(iii) All existing warranties and guaranties (express or implied) issued to the
Facility Owners (or any prior owner or lessee of the Facilities, to the extent
any Facility Owner has an interest therein) in connection with the Improvements
or the Personal Property described in paragraph (b)(i) above.

(iv) All petty cash, all unrecognized community fees and all rights to hold
Resident Deposits or other tenant security deposits received or held in
connection with each Facility.

(v) The tangible and intangible property described in Sections 2.02(b)(i)
through 2.02(b)(iv) shall be referred to herein as the “Personal Property.”

(c) Facility Agreements and Residence Agreements. All rights of Facility Owners
in, to and under all contracts, leases, subleases, agreements, commitments and
other arrangements, and any amendments or modifications thereof, used or useful
in the operation of the Facilities as of the date hereof or made or entered into
by the Facility Owners or Manager between the date hereof and the Closing Date
in compliance with this Agreement (the “Facility Agreements”), and all
occupancy, residency, tenancy and similar written agreements entered into in the
ordinary course of business with Residents, and all amendments, modifications,
supplements, renewals, and extensions thereof (“Residence Agreements”).

(d) Records. True and complete copies of all of the books, records, accounts,
files, logs, ledgers and journals pertaining to or used in the operation of the
Facilities, including, but not limited to, any electronic data stored on
computer disks or tapes, and originals of any of the foregoing that relate to
the Facilities, together with the basic corporate, partnership or limited
liability company documents and records of the Company, the Pool Companies,
Santa Monica GP, Santa Monica LP and the Facility Owners.

(e) Licenses. Any and all Licenses now held in the name of Transferor, Manager,
the Company, the Pool Companies, Santa Monica GP, Santa Monica LP and the
Facility Owners, or any of their Affiliates and used or useful in the operation
of the Facilities, and any renewals, extensions, amendments or modifications
thereof, except to the extent not transferable or assignable under applicable
law.

(f) Miscellaneous Assets. Any other tangible or intangible assets, properties or
rights of any kind or nature not otherwise described above in this Section 2.02
and now or hereafter owned by Newco, the Company, the Pool Companies, Santa
Monica GP, Santa Monica LP, or the Facility Owners and used in connection with
the operation of the Facilities, including, without limitation, any and all
rights of Newco, the Company, the Pool Companies, Santa

 

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Monica GP, Santa Monica LP or the Facility Owners in and to (i) all web sites,
URLs, domain names, trade names, trademarks, service marks, logos and all
copyrights used exclusively in connection with the Facilities, (ii) phone
numbers and phone listings for the Facilities, (iii) all deposits in connection
with any Facility Agreement or utility service, (iv) all deposits, letters of
credit and guarantees of future performance from third parties held by the
Newco, the Company, the Pool Companies, Santa Monica GP, Santa Monica LP and the
Facility Owners and (v) all software, video tapes, films, brochures, marketing
packages and other advertising and promotional materials used solely in
connection with the Facilities.

(g) Excluded Assets. At Closing, the following assets shall not be considered
Owned Assets: (i) all assets owned solely by Manager, Transferor or SSLI,
including, without limitation, all web sites, URLs, domain names, trade names,
trademarks, service marks, logos and copyrights, (ii) all assets owned by
tenants or licensees and (iii) all assets owned by Residents.

Section 2.03 Operating Cash. All cash held by the Company, Santa Monica LP,
Santa Monica GP, the Pool Companies, and the Facility Owners as of the Closing
Date shall be distributed to Transferor at Closing. At Closing, after such
distribution, Transferor shall fund in to the operating account of the TRS an
amount equal to One Million, Five Hundred Thousand Dollars ($1,500,000.00) in
the aggregate for purposes of working capital (the “Operating Cash
Infusion”). In no event shall any portion or all of the Operating Cash Infusion
be deemed to be part of the Transferor Contribution nor shall Transferor receive
any capital account credit for such Operating Cash Infusion under the JV
Agreement. Transferee acknowledges and agrees that from and after the Closing
Date, to the extent not prohibited by the documents evidencing the Refinancing,
(a) working capital will be held in operating accounts owned by the TRS and the
Company and (b) FF&E reserves will be held in operating accounts owned by the
Company. Transferor and Transferee agree that any such operating accounts may
held at Keybank or such other bank or financial institution agreed to by
Transferor and Transferee.

Section 2.04 Down Payment.

(a) Not later than three (3) Business Days after the Contract Date, Transferee
shall deposit with Escrow Agent the Down Payment. The parties acknowledge that,
except as otherwise provided herein, the Down Payment shall be applied at
Closing toward the Transferee Contribution. The failure of the Down Payment to
be timely deposited in accordance with this Section 2.04(a) shall render this
Agreement immediately terminable at any time thereafter by Transferor upon
written notice to Escrow Agent, unless prior to such termination Transferee
makes the delinquent Down Payment and receives written acceptance thereof from
Transferor.

(b) If Transferee shall have deposited the Down Payment with the Escrow Agent in
accordance with Section 2.04(a), then, upon the expiration of the Due Diligence
Period the Down Payment shall become non-refundable to Transferee, except as
otherwise provided herein.

(c) The Down Payment shall be held, invested and, along with all amounts earned
thereon, credited and disbursed in accordance with the provisions of Article
XIII.

 

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Article III.

DUE DILIGENCE

Section 3.01 Investigation of Facilities. Transferor shall provide Transferee
with the following rights of access for purposes of conducting due diligence
with respect to the Facilities, Newco, the Company, Santa Monica LP, Santa
Monica GP, the Pool Companies and the Facility Owners, subject to the terms and
conditions of this Section 3.01.

(a) To the extent not already delivered, Transferor shall deliver, or direct
Manager to deliver, to Transferee accurate and complete copies of all due
diligence materials reasonably requested by Transferee that are in Transferor’s,
the Company’s Santa Monica LP’s, Santa Monica GP’s, the Pool Companies’,
Facility Owners’ or Manager’s possession or under Transferor’s, the Company’s,
Santa Monica LP’s, Santa Monica GP’s, the Pool Companies’, Facility Owners’ or
Manager’s direct or indirect control.

(b) Subject to the rights of the Residents under the Residence Agreements,
Transferee, and its agents, contractors and representatives, shall have the
right to enter onto the Facilities prior to Closing for purposes of conducting
property surveys, environmental studies, engineering tests and such similar
property-related tests, studies and/or investigations as Transferee deems
necessary or desirable to evaluate the Facilities. All such tests, studies and
investigations shall be conducted at Transferee’s sole risk and expense.
Transferee shall give Transferor reasonable prior notice of Transferee’s entry
onto the Facilities for purposes of conducting such tests, studies and
investigations, and Manager shall have the right to accompany Transferee or its
agents, employees, contractors and representatives during any such tests,
studies and investigations. In performing its diligence activities, Transferee
shall use reasonable efforts to minimize any interference with the activities of
Residents and to take such measures as Transferor may reasonably request in
order to minimize, to the extent reasonably practicable, any disruption to the
operation of the Facilities and the occupancy of its Residents. Transferee and
its agents, contractors and representatives shall not perform any soil,
groundwater, or other environmental sampling, drilling, coring or other invasive
sampling or testing without Transferor’s consent, which consent shall not be
unreasonably withheld. Transferee shall at all relevant times have liability
insurance coverages in amounts reasonably acceptable to Transferor to cover the
activities undertaken by Transferee and its agents, employees, contractors and
representatives pursuant to this Section 3.01(b). Transferee shall indemnify,
defend and hold Transferor, the Pool Companies, Santa Monica LP, Santa Monica
GP, the Facility Owners and Manager and their respective direct and indirect
Affiliates (the “Access Indemnified Parties” harmless from and against any Loss,
for damage to property and injury to persons, arising out of the entry by
Transferee or its agents, employees, contractors or representatives onto the
Facilities, and their activities thereon, such indemnification to survive the
Closing or termination of this Agreement. Notwithstanding anything to the
contrary herein, the Access Indemnified Parties agree that in connection with
any loss, liability, damage or claim incurred by the Access Indemnified Parties
and for which the Access Indemnified Parties are indemnified hereunder, the
Access Indemnified Parties shall first seek recovery against any insurance
provided by Transferee covering such loss, liability, damage or claim before
seeking recovery against Transferee; provided that to the extent the Access
Indemnified Parties have not made such recovery within ninety (90) days after
the occurrence of any such loss, liability, damage or claim, the Access
Indemnified Parties may seek recovery against Transferee. Transferee represents
and warrants that to its knowledge, as of the date hereof, no event has occurred
which could be the basis for a claim under the indemnity contained in this
Section 3.01(b).

 

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(c) In the event that Transferee is not satisfied, in its sole and absolute
discretion, with the proposed acquisition, ownership, financing (including,
without limitation, the Transferee’s Mezz Financing) or operation of the Owned
Assets or of the Transferor’s Interest, then Transferee shall have the absolute
right to terminate this Agreement at any time on or prior to the end of the Due
Diligence Period. Such right to terminate shall be exercised by Transferee
giving written notice to Transferor in accordance with Section 13.02(a) and
Section 18.03 hereof, which written notice must be received by Transferor prior
to the end of the Due Diligence Period.

(d) Upon a termination of this Agreement by Transferee in accordance with
Section 3.01(c), Transferee shall be entitled to receive a disbursement of the
Down Payment in accordance with the provisions hereof, and Transferor and
Transferee shall be released from any and all further liabilities and
obligations under this Agreement, except to the extent otherwise expressly
provided in this Agreement.

(e) If this Agreement shall not have been terminated in accordance with
Section 3.01(c), then this Agreement shall continue in full force in accordance
with its terms and the Down Payment shall become non-refundable to Transferee,
except as may otherwise be provided in this Agreement.

(f) Upon any termination of this Agreement (whether pursuant to this
Section 3.01 or otherwise), Transferee shall (i) return all original due
diligence materials provided by Manager or Transferor and destroy all other due
diligence materials prepared by Transferee (collectively, the “Due Diligence
Materials”), (ii) use its commercially reasonable efforts to cause all persons
to whom Transferee has provided any original Due Diligence Materials to return
such materials and to destroy all other Due Diligence Materials, and
(iii) certify to Manager and Transferor that, to Transferee’s knowledge, all
original Due Diligence Materials have been returned to Manager or Transferor and
all other Due Diligence Materials have been destroyed. The provisions of this
Section 3.01(f) shall survive the termination of this Agreement.

(g) Transferor and Manager acknowledge and agree to conduct and complete, no
later than seventy-four (74) days following the Closing Date, an audit of
property-level financials for the Owned Assets as specified by Rule 3-05 of
Regulation S-X of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, provided such audit shall be at the sole cost
and expense of Transferee. In connection therewith, Transferor and Manager agree
to obtain and provide to the auditors any and all data and financial information
in the possession of Transferor, the Company, the Pool Companies, Santa Monica
GP, Santa Monica LP or the Facility Owners which are necessary or required by
the auditors in connection with their preparation and completion of the
foregoing audit. The rights and obligations of Transferor, Manager and
Transferee under this Section 3.01(g) shall survive the Closing.

 

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Section 3.02 Title.

(a) Transferee shall obtain a Title Commitment and a survey (“Survey”) for each
Facility. The costs of such Title Commitment, each Title Policy, any
endorsements to the Title Policies and a Survey for each Facility shall be paid
in accordance with Article XV below. To the extent required by the Title
Company, Transferor or any Newco Subsidiary, as applicable, shall execute a
non-imputation Affidavit in the form attached hereto as Exhibit F (the
“Non-Imputation Affidavit”) as required to cause a non-imputation endorsement to
be issued with each Title Policy and shall cause each Facility Owner to execute
any and all affidavits, indemnification agreements or other agreements necessary
and reasonably requested by Escrow Agent for the issuance of said endorsement,
each Title Policy and all other endorsements to each Title Policy, at the time
of Closing

(b) Notwithstanding any other provision of this Section 3.02, Transferor shall
cause to be released at or prior to Closing all Liens encumbering Transferor’s
Interest, Newco, the Company, the Pool Companies, Santa Monica LP and Santa
Monica GP and the Facility Owners, other than Permitted Exceptions.

(c) Neither Transferor nor any Facility Owner shall cause any change in the
status of title to the Facilities prior to Closing which would reasonably be
anticipated to have a Material Adverse Effect.

Section 3.03 Satisfaction of Conditions Precedent. Transferor and Transferee
will endeavor diligently and in good faith to satisfy as promptly as practical
all conditions precedent set forth in this Agreement to the respective
obligations of Transferor and Transferee hereunder. The Closing shall take
place, as provided in Section 11.01, on or before the date that is ten (10) days
following the expiration of the Due Diligence Period (such date, the “Closing
Date”). If all conditions precedent have not been satisfied or waived on or
prior to the Closing Date, then the party in whose favor such condition
precedent runs may terminate this Agreement and all other Documents (except for
those provisions of this Agreement and such other Documents that by their terms
survive such termination), whereupon the parties hereto shall have no further
obligations to each other in relation to this Agreement, such other Documents or
the transactions contemplated hereunder or thereunder (except for those
obligations set forth in provisions of this Agreement and such other Documents
that by their terms survive such termination), and provided that the provisions
of Article XIII shall control the disposition of the Down Payment; provided,
however, notwithstanding the foregoing, (i) provided that Transferor is not in
default under any material term of this Agreement, in the event that any of the
closing conditions set forth in Section 10.03(d) or (e) are not satisfied or
waived by Transferor on or prior to the Closing Date, Transferor shall be
permitted to extend the Closing Date by not more than sixty (60) days, by
delivering written notice to Transferee specifying the extended Closing Date and
(ii) provided that Transferee is not in default under any material term of this
Agreement, in the event that any of the closing conditions set forth in
Section 10.01(d) or (e) are not satisfied or waived by Transferee on or prior to
the Closing Date, Transferee shall be permitted to extend the Closing Date by
not more than sixty (60) days, by delivering written notice to Transferor
specifying the extended Closing Date.

 

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Article IV.

REPRESENTATIONS AND WARRANTIES OF TRANSFEREE

Transferee represents and warrants to Transferor as follows:

Section 4.01 Organization, Good Standing and Entity Authority. Transferee is a
limited partnership, duly organized, validly existing and in good standing under
the laws of Delaware, and has all requisite corporate power to own and operate
its properties and carry on its business.

Section 4.02 Authorization and Binding Effect of Documents. Transferee (and any
applicable Affiliate) has all requisite power and authority to enter into this
Agreement and, at Closing, shall have all requisite power and authority to enter
into the other Documents to which Transferee is to be a party and to consummate
the transactions contemplated by this Agreement and such other Documents. The
execution and delivery of this Agreement by Transferee and the consummation by
Transferee of the transactions contemplated hereby, on the terms and subject to
the conditions herein shall be, on or before the expiration of the Due Diligence
Period, duly authorized by all necessary action on the part of Transferee and
Transferee’s board of directors. This Agreement has been, and each of the other
Documents to which Transferee is to be a party will be, duly executed and
delivered by Transferee at or prior to Closing. This Agreement constitutes (and
each of the other Documents to which Transferee is to be a party, when executed
and delivered, will constitute) the valid and binding obligation of Transferee
enforceable against Transferee in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity, whether applied by a
court of law or of equity.

Section 4.03 ERISA.

(a) Transferee is not an employee pension benefit plan subject to the provisions
of Title IV of ERISA or subject to the minimum funding standards under Part 3,
Subtitle B, Title I of ERISA or Section 412 of the Code or Section 302 of ERISA,
and none of its assets constitutes assets of any such employee benefit plan
subject to Part 4, Subtitle B, Title I of ERISA.

(b) Transferee is not a “governmental plan” within the meaning of Section 3(32)
of ERISA and the funds used by Transferee to acquire the Facilities are not
assets of any such governmental plan and are not subject to state statutes
regulating investments of and fiduciary obligations with respect to governmental
plans. The consummation of the transactions contemplated by this Agreement will
not violate such statutes.

Section 4.04 Absence of Conflicts. The execution, delivery and performance by
Transferee of this Agreement and the other Documents to which Transferee is to
be a party, and consummation by Transferee of the transactions contemplated
hereby and thereby, do not and will not (i) conflict with or result in any
breach of any of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in a violation of, or (iv) give any third party the
right to modify, terminate or accelerate any obligation under the provisions of
any certificate or articles of incorporation, bylaws, operating or partnership
agreement or other charter documents of

 

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Transferee (or its Affiliates), any law, regulation, judgment, rule, order or
decree to which Transferee (or its Affiliates) is subject, or any indenture,
mortgage, lease, loan agreement or other agreement or instrument to which
Transferee (or its Affiliates) is subject.

Section 4.05 Consents. Except for such reports and filings that an Affiliate of
Transferee may be required to make with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended, the execution,
delivery and performance by Transferee of this Agreement and the other Documents
to which Transferee is to be a party do not require any order, permission,
consent, approval, authorization, registration or validation of, or exemption,
clearance or other action by, or notice or declaration to, or filing with, any
Governmental Entity, or, except for the consent of Transferee’s board of
directors which shall be obtained prior to the expiration of the Due Diligence
Period, the consent, waiver or approval of any other Person which has not been
obtained and is currently in full force and effect.

Section 4.06 Broker’s or Finder’s Fees. No agent, broker, investment banker or
other person or firm acting on behalf of or under the authority of Transferee
(or any of its Affiliates) is or will be entitled to any broker’s or finder’s
fee or any other commission or similar fee, directly or indirectly, from
Transferor in connection with the transactions contemplated by this Agreement.
Transferee agrees to indemnify and hold Transferor harmless from any Loss
resulting from a breach of this representation and warranty. Notwithstanding the
provisions of Section 12.01 below, such agreement to indemnify shall survive the
Closing without time limitation.

Section 4.07 No Judgments. Except as set forth in Section 4.07 of the Disclosure
Statement, there are no judgments presently outstanding and unsatisfied directly
against Transferee, and Transferee is not involved in any litigation at law or
in equity, or in any proceeding before any court, or by or before any
Governmental Entity, which judgment, litigation or proceeding could reasonably
be anticipated to have a Material Adverse Effect and which is not fully covered
by insurance and, to Transferee’s knowledge, (i) no such judgment, litigation or
proceeding is threatened against Transferee which could reasonably be
anticipated to have a Material Adverse Effect and (ii) no investigation looking
toward such a proceeding has begun or is contemplated.

Section 4.08 No Insolvency. Transferee has not committed an act of bankruptcy,
proposed a compromise or arrangement to its creditors generally, had any
petition for a receiving order in bankruptcy filed against it, instituted any
proceeding with respect to a compromise or arrangement, instituted any
proceeding to have itself declared bankrupt or wound-up, instituted any
proceeding to have a receiver appointed in connection with any of its assets,
had any encumbrancer take possession of any of its assets, or had any execution
or distress become enforceable or become levied upon any of its assets.

Section 4.09 Specially Designated National or Blocked Person. Neither Transferee
(including, without limitation, any and all of its partners, directors and
officers), nor any of its Affiliates is a Specially Designated National or
Blocked Person. Neither Transferee nor any of its Affiliates is directly or
indirectly owned or controlled by the government of any country that is subject
to an embargo by the United States government. Neither Transferee nor any of its
Affiliates is acting on behalf of a government of any country that is subject to
such an embargo.

 

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Section 4.10 Transferee Financials. The audited and unaudited financial
statements of Transferee for the period ending April 30, 2012, copies of which
have been provided to Transferor, fairly present in all material respects the
financial condition and the results of operations of Transferee as at the
respective dates and for the periods covered by such financial statements, all
in accordance with GAAP, consistently applied, subject, in the case of unaudited
financial statements, to normal recurring year-end adjustments, and the absence
of notes.

As used in this Agreement, the phrase “to Transferee’s knowledge” and similar
phrases shall mean the current, actual (not constructive, imputed, or implied)
knowledge, after due inquiry, of Stephen H. Mauldin and Joseph T. Johnson, who
Transferee represents are the persons most knowledgeable about Transferee’s
overall business and affairs. Notwithstanding anything herein to the contrary,
Transferee shall have no Liability to Transferor for a breach of any
representation or warranty hereunder, if the breach in question is based on a
condition, state of facts or other matter which was currently and actually known
(and not constructively, by imputation or by implication) by the party claiming
such breach, or disclosed in writing to the party claiming such breach, on or
prior to the date hereof.

Article V.

INTENTIONALLY OMITTED

Article VI.

INTENTIONALLY OMITTED

Article VII.

REPRESENTATIONS AND WARRANTIES OF TRANSFEROR

Transferor represents and warrants to Transferee as follows:

Section 7.01 Organization, Good Standing, Entity Authority and Qualification.
Transferor is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia. Transferor has all
requisite company power to own, operate and lease its properties and carry on
its business. Each of Newco, the Company, the Pool Companies, Santa Monica GP,
Santa Monica LP and the Facility Owners are limited liability companies or
limited partnerships, as the case may be, duly organized, validly existing and
in good standing under the laws of their respective jurisdictions of
organization, have all requisite company power to own and operate their
properties and carry on their businesses, and are qualified to do business in
each of the jurisdictions in which the nature of their business or the ownership
of their properties make such qualification necessary.

Section 7.02 Authorization and Binding Effect of Documents.

(a) Transferor (and any applicable Affiliate) has all requisite power and
authority to enter into this Agreement and, at Closing, shall have all requisite
power and authority to enter into the other Documents to which it is a party and
to consummate the transactions contemplated by this Agreement and such other
Documents. Subject to Section 7.02(b) below, the execution and delivery of this
Agreement by Transferor and the consummation by Transferor of the transactions
contemplated hereby, on the terms and subject to the conditions herein shall be,
on or before seven (7) Business Days following the date of this

 

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Agreement, duly authorized by all necessary action on the part of Transferor and
Transferor’s shareholders, members and board of directors (the “Transferor Board
Consent”). This Agreement has been, and each of the other Documents to which
Transferor is to be a party will be, duly executed and delivered by Transferor
at or prior to Closing. This Agreement constitutes (and each of the other
Documents to which Transferor is to be a party, when executed and delivered,
will constitute) the valid and binding obligation of Transferor enforceable
against Transferor in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity, whether applied by a
court of law or of equity.

(b) In the event that Transferor has not received the Transferor Board Consent
on or before the date that is seven (7) Business Days following the date of this
Agreement, then Transferor shall have the absolute right to terminate this
Agreement at any time on or prior to the date that is eight (8) Business Days
following the date of this Agreement. Such right to terminate shall be exercised
by Transferor giving written notice to Transferee in accordance with
Section 13.02(a) and Section 18.03 hereof, which written notice must be received
by Transferor prior to the date that is eight (8) Business Days following the
date of this Agreement. If Transferor terminates this Agreement in accordance
with this Section 7.02(b), the Down Payment shall be returned to Transferee.

Section 7.03 Absence of Conflicts. The execution, delivery and performance by
Transferor of this Agreement and the other Documents to which Transferor is to
be a party, and consummation by Transferor of the transactions contemplated
hereby and thereby, do not and will not (i) conflict with or result in any
breach of any of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in a violation of, or (iv) give any third party the
right to modify, terminate or accelerate any obligation under, the provisions of
the certificate or articles of incorporation, bylaws, operating or partnership
agreement or other charter documents of Transferor, Newco, the Company, the Pool
Companies, Santa Monica GP, Santa Monica LP, the Facility Owners or any of their
Affiliates, any indenture, mortgage, lease, loan agreement or other agreement or
instrument by which Transferor, Newco, the Company, the Pool Companies, Santa
Monica GP, Santa Monica LP, the Facility Owners or any of their Affiliates is
bound or affected, or any law, regulation, rule, judgment, order or decree to
which Transferor, Newco, the Company, the Pool Companies, Santa Monica GP, Santa
Monica LP, the Facility Owners or any of their Affiliates is subject.

Section 7.04 Consents. Except as set forth in Section 7.04 of the Disclosure
Statement, the execution, delivery and performance by Transferor of this
Agreement and the other Documents to which it is a party, and consummation by
Transferor of the transactions contemplated hereby and thereby, do not and will
not require the authorization, consent, approval, exemption, clearance or other
action by or notice or declaration to, or filing with, any court or Governmental
Entity, or, except for the Transferor Board Consent which shall be obtained
pursuant to Section 7.02 above, the consent, waiver or approval of any other
Person.

Section 7.05 Broker’s or Finder’s Fees. No agent, broker, investment banker, or
other Person acting on behalf of Transferor (or any Affiliate of Transferor) or
under its authority is or will be entitled to any broker’s or finder’s fee or
any other commission or similar fee, directly or

 

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indirectly, from Transferor or Transferee in connection with the transactions
contemplated by this Agreement. Transferor agrees to indemnify and hold
Transferee and its Affiliates harmless from any Loss resulting from a breach of
this representation and warranty. Notwithstanding the provisions of
Section 12.01 below, such agreement to indemnify shall survive the Closing
without time limitation.

Section 7.06 ERISA.

(a) Transferor is not an employee pension benefit plan subject to the provisions
of Title IV of ERISA or subject to the minimum funding standards under Part 3,
Subtitle B, Title I of ERISA or Section 412 of the Code or Section 302 of ERISA,
and none of its assets constitute assets of any such employee benefit plan
subject to Part 4, Subtitle B, Title I of ERISA.

(b) Transferor is not a “governmental plan” within the meaning of Section 3(32)
of ERISA and no funds received by Transferor in this transaction are assets of
any such governmental plan and are not subject to state statutes regulating
investments of and fiduciary obligations with respect to governmental plans. The
consummation of the transactions contemplated by this Agreement will not violate
such statutes.

Section 7.07 Ownership of Transferor’s Interest. Transferor is the sole legal
and beneficial owner of Transferor’s Interest. Transferor’s Interest is free and
clear of all Liens encumbering Transferor’s Interest, and Transferor has good
and marketable title to Transferor’s Interest. Transferor’s Interest is validly
issued, fully paid and non-assessable. There is no restriction or limitation on
Transferor’s right to sell Transferor’s Interest as contemplated by this
Agreement. At Closing, Transferor will transfer to Transferee good and
marketable title to Transferor’s Interest, free and clear of all Liens.

Section 7.08 No Judgments. Except as set forth in Section 7.08 of the Disclosure
Statement, there are no judgments presently outstanding and unsatisfied against
Transferor, Newco, the Company, the Pool Companies, Santa Monica LP, Santa
Monica GP or any of the Facility Owners, and, to Transferor’s knowledge, none of
Transferor, Newco, the Company, the Pool Companies, Santa Monica LP, Santa
Monica GP or any of the Facility Owners is involved in any litigation at law or
in equity, or in any proceeding before any court, or by or before any
governmental or administrative agency, which judgment, litigation or proceeding
would reasonably be anticipated to have a Material Adverse Effect and which is
not fully covered by insurance and, to Transferor’s knowledge, no such judgment,
litigation or proceeding is threatened against Transferor, Newco, the Company,
the Pool Companies, Santa Monica LP, Santa Monica GP or any of the Facility
Owners.

Section 7.09 No Governmental Approvals. Except as set forth in Section 7.09 of
the Disclosure Statement, no order, permission, consent, approval, license,
authorization, registration or validation of, or filing with, or exemption by,
any Governmental Entity is required to authorize, or is required in connection
with the execution, delivery and performance by Transferor of this Agreement,
any Document to which Transferor is a party or Transferor’s taking of any action
thereby contemplated, which has not been (or as of the Closing will not have
been) obtained and is (or as of Closing will be) in full force and effect.

 

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Section 7.10 No Insolvency. None of Newco, the Company, the Pool Companies,
Santa Monica LP, Santa Monica GP or the Facility Owners has committed an act of
bankruptcy, proposed a compromise or arrangement to its creditors generally, had
any petition for a receiving order in bankruptcy filed against it, taken any
proceeding with respect to a compromise or arrangement, taken any proceeding to
have itself declared bankrupt or wound-up, taken any proceeding to have a
receiver appointed in connection with its interest in any Facility, had any
encumbrancer take possession of its interest in any Facility, or had any
execution or distress become enforceable or become levied upon its interest in
any Facility. Transferor has not committed an act of bankruptcy, had any
petition for a receiving order in bankruptcy filed against it, filed in any
court in lieu of bankruptcy any legal proceeding with respect to a compromise or
arrangement, filed any legal proceeding to have itself declared bankrupt or
wound-up, taken any proceeding to have a receiver appointed in connection with
its interest in any Facility, had any encumbrancer take possession of its
interest in any Facility, or had any execution or distress become enforceable or
become levied upon its interest in any Facility.

As used in this Agreement, the phrase “to Transferor’s knowledge” and similar
phrases shall mean the current, actual (not constructive, imputed, or implied)
knowledge, after due inquiry, of Greg Neeb, Philip Kroskin, Edward Burnett and
Jerry Liang, who Transferor represents are the persons most knowledgeable about
Transferor’s overall business and affairs. Notwithstanding anything herein to
the contrary, Transferor shall have no Liability to Transferee for a breach of
any representation or warranty hereunder, if the breach in question is based on
a condition, state of facts or other matter which was currently and actually
known (and not constructively, by imputation or by implication) by the party
claiming such breach, or disclosed in writing to the party claiming such breach,
on or prior to the date hereof.

Article VIII.

BUSINESS REPRESENTATIONS

Transferor represents and warrants to Transferee as follows (the following
representations, the “Business Representations”):

Section 8.01 Financial Statements; No Undisclosed Liabilities; Absence of
Certain Changes.

(a) The unaudited financial statements of each of the Facility Owners as
identified in Section 8.01 of the Disclosure Statement (the “Financials”),
copies of which have been provided to Transferee, fairly present in all material
respects the financial condition and the results of operations of the Facility
Owners as of the respective dates and for the periods covered by such financial
statements, all in accordance with GAAP, consistently applied, subject to normal
recurring year-end adjustments, and the absence of notes.

(b) Except as set forth in the Financials, there are no material Liabilities of
the Facility Owners of any kind whatsoever of the type required to be reflected
on a balance sheet prepared in accordance with GAAP, other than:

(i) contingent Liabilities, which, in accordance with GAAP, are not required to
be reflected on a balance sheet;

 

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(ii) any Liabilities incurred since April 30, 2012 in the ordinary course of
business of the Facility Owners consistent with past practice or in connection
with this Agreement or the other Documents; and

(iii) in the case of unaudited financial statements, normal recurring year-end
adjustments and the absence of notes.

(c) Except as set forth in Section 8.01(c) of the Disclosure Statement, since
April 30, 2012, the Facility Owners have conducted their respective businesses
in the ordinary course of business consistent with past practice and there has
not been:

(i) any event, occurrence or development of a state of circumstances or facts
which, individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect;

(ii) other than dividends and distributions paid in the ordinary course of
business of the Facility Owners consistent with past practice, any declaration,
setting aside or payment of any dividend or other distribution with respect to
any equity interest of the Facility Owners (other than dividends or
distributions in cash in an amount consistent with the requirements of this
Agreement), or any split, combination or reclassification of any equity interest
of the Facility Owners;

(iii) any amendment of any term of any outstanding equity interest of the
Facility Owners;

(iv) any incurrence, assumption or guarantee by the Facility Owners of any
indebtedness that would have a Material Adverse Effect;

(v) as of the expiration of the Due Diligence Period, any creation or assumption
by the Facility Owners of any Lien on any asset that would have a Material
Adverse Effect, except for Permitted Exceptions;

(vi) any (i) transaction or commitment made, or any Contract entered into, by
the Facility Owners relating to its assets or business (including the
acquisition or disposition of any assets) that involved the acquisition or
disposition of assets other than for fair value or that involved an amount in
excess of One Hundred Thousand Dollars ($100,000), or (ii) relinquishment by the
Facility Owners of any material Contract or other right outside of the ordinary
course of business consistent with past practice that would have Material
Adverse Effect; and

(vii) any change in any method of accounting or accounting practice not required
by GAAP by the Facility Owners or any election for Taxes.

Section 8.02 Books and Records; Internal Controls. All records relating to
Newco, the Company, the Pool Companies, Santa Monica LP, Santa Monica GP and the
Facility Owners (including books and records, contract documents, accounts
receivable data, financial statements and other similar records) are maintained,
in all material respects, to the extent applicable, in accordance with GAAP and
the internal controls on financial reporting of Newco, the Company, the Pool
Companies, Santa Monica LP, Santa Monica GP and the Facility Owners.

 

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Section 8.03 Obligations. Except (a) to the extent reflected or reserved against
in the Financials, (b) normal trade creditors payable in the ordinary and normal
course of business since the dates of such Financials and (c) the Existing Owner
Financing, none of Newco, the Company, the Pool Companies, Santa Monica LP,
Santa Monica GP or the Facility Owners have any material outstanding
Liabilities, which in each case would reasonably be anticipated to have a
Material Adverse Effect.

Section 8.04 Medicare; Medicaid. Except as set forth in Section 8.04 of the
Disclosure Statement, none of Transferor, Newco, the Company, the Pool
Companies, Santa Monica LP, Santa Monica GP or any Facility Owners are party to
any Medicaid/Medicare Contracts with respect to the provision of services at the
Facilities. Except as set forth in Section 8.04 of the Disclosure Statement, no
action, proceeding, or investigation in connection with Medicare, Medicaid or
other public or private third-party payor or other programs is pending or, to
Transferor’s knowledge, threatened against any of Transferor, Newco, the
Company, the Pool Companies, Santa Monica LP, Santa Monica GP, Manager or any
Facility Owner in connection with the Facilities which would reasonably be
anticipated to have a Material Adverse Effect. To Transferor’s knowledge, none
of Transferor, Newco, the Company, the Pool Companies, Santa Monica LP, Santa
Monica GP, Manager or any Facility Owner has received written notice of any
threatened or pending investigation in connection with the Facilities relating
to (i) any fraud, false statement or false claim applicable to its business or
(ii) any patient care, patient rights or other law applicable to its business,
in each case which would reasonably be anticipated to have a Material Adverse
Effect.

Section 8.05 No Possessory Rights. Except for any parties in possession pursuant
to, and any rights of possession granted under, the Residence Agreements, and
except as shown in the Title Commitments or as set forth in Section 8.05 of the
Disclosure Statement, there are no parties in possession of any part of the
Facilities, and there are no other rights of possession which have been granted
by Transferor, Newco, the Company, the Pool Companies, Santa Monica LP, Santa
Monica GP or any Facility Owners to any third party or parties, except for
licenses to use space which are cancelable by Transferor, Newco, the Company the
Pool Companies, Santa Monica LP, Santa Monica GP or any Facility Owners on
ninety (90) days or less notice.

Section 8.06 Employees. None of Newco, the Company, the Pool Companies, Santa
Monica LP, Santa Monica GP or the Facility Owners has any employees. All
personnel employed at the Facilities are employees of Manager.

Section 8.07 Licenses. Except as set forth in Section 8.07 of the Disclosure
Statement, the Company, the Pool Companies, Santa Monica LP, Santa Monica GP,
Manager and the Facility Owners have all material Licenses necessary to the
conduct of their business as presently conducted and all such Licenses are valid
and in full force and effect. Except with respect to the Healthcare Permits, no
consent is required from any issuer of a License, where the failure to obtain
such consent would reasonably be expected to have a Material Adverse Effect.
There is no pending or, to Transferor’s knowledge, threatened action,
investigation or proceeding with

 

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respect to revocation, cancellation, suspension or non-renewal of any License
for any Facility which would reasonably be anticipated to have a Material
Adverse Effect, and except as set forth in Section 8.07 of the Disclosure
Statement, no notice has been received by Transferor, Newco, the Company, the
Pool Companies, Santa Monica LP, Santa Monica GP, the Facility Owners or Manager
from any Governmental Entity currently asserting the violation of the terms of
any Licenses or currently threatening to revoke, cancel, suspend or not renew
the terms of any such existing License, which would reasonably be anticipated to
have a Material Adverse Effect.

Section 8.08 Litigation. A true and correct listing and summary of all
litigation with respect to the Real Property, Facilities, Newco, the Company,
the Pool Companies, Santa Monica GP, Santa Monica LP, the Facility Owners or
(with respect to the Facilities) Manager which is not fully covered by insurance
in place (subject to applicable deductibles) with respect to each of the
Facilities and which would reasonably be anticipated to have a Material Adverse
Effect which is pending or, to Transferor’s knowledge, threatened in writing
against any of Transferor (as to the Facilities), the Real Property, the
Facility Owners, Newco, the Company, the Pool Companies, Santa Monica GP, Santa
Monica LP or the Manager (as to the Facilities) is included as Section 8.08 of
the Disclosure Statement.

Section 8.09 Environmental Matters. Transferor has provided Transferee with
access to or copies of all environmental reports and documentation related to
the environmental reports in the possession of Transferor, the Company, the Pool
Companies, Santa Monica LP, Santa Monica GP, the Facility Owners or Manager with
respect to the Real Property and the Facilities (the “Environmental Reports”).
Except as set forth on Section 8.09 of the Disclosure Statement, no written
notice has been received by Transferor, the Facility Owners, Manager, Newco, the
Company, the Pool Companies, Santa Monica LP or Santa Monica GP that the Real
Property or Facilities are in violation of Environmental Laws. Except as
disclosed in the Environmental Reports and in any additional environmental
reports received by Transferee prior to the Closing Date, to Transferor’s
knowledge (a) there are no underground storage tanks on the Real Property and
(b) the Facilities do not contain any Hazardous Substances other than to a de
minimus extent and in any event in compliance with Environmental Laws. Except as
set forth on Section 8.09 of the Disclosure Statement or in any additional
environmental reports and documentation received by Transferee prior to the
Closing Date, to Transferor’s knowledge there are no Environmental Claims and no
Environmental Liabilities other than to a de minimus extent and in any event in
compliance with Environmental Laws.

Section 8.10 Intentionally Omitted.

Section 8.11 Compliance with Laws. Except as would not reasonably be anticipated
to have a Material Adverse Effect and except as set forth in Section 8.11 of the
Disclosure Statement or in any zoning letters provided to Transferee prior to
the end of the Due Diligence Period, no written notice has been received by
Transferor, the Facility Owners, Manager, Newco, the Company, the Pool
Companies, Santa Monica GP or Santa Monica LP, nor does Transferor have
knowledge, that the Facilities are in violation of any applicable statute, law,
regulation, rule, ordinance, order, License or permit.

Section 8.12 Residence Agreements. Transferee has been supplied with true and
correct copies of the forms (on a state-by-state basis) of the Residence
Agreement currently in

 

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use for new admissions at the Facilities. No Facility Owner is in default, and,
to Transferee’s knowledge, no Resident is in default, under any of its
obligations under any Residence Agreement which default could reasonably be
anticipated to have a Material Adverse Effect. The Residence Agreements
identified on the Rent Rolls were in full force and effect as of the date of the
applicable Rent Roll, except as would not reasonably be anticipated to have a
Material Adverse Effect. The Rent Rolls are true and correct in all respects
except as would not reasonably be anticipated to have a Material Adverse Effect,
subject to the information on the then-current aged receivables report. As used
in this Section 8.12, the term “Rent Rolls” means the schedules of Residents at
the Facilities attached as Section 8.12 of the Disclosure Statement.

Section 8.13 Taxes. To Transferor’s knowledge, each of Transferor (with respect
to the Facilities), Newco, the Company, the Pool Companies, Santa Monica GP,
Santa Monica LP and the Facility Owners has prepared and duly and timely filed
(or has filed as part of a consolidated tax filing) all tax reports and returns
required to be filed by it and all such returns are accurate in all material
respects. In addition, except as set forth in Section 8.13 of the Disclosure
Statement, to Transferor’s knowledge, whether or not shown on such returns or
reports to be due, of Transferor, Newco, the Company, the Pool Companies, Santa
Monica GP, Santa Monica LP and the Facility Owners each has duly paid or
provided for the payment of all taxes and other charges due or claimed to be due
from it by federal, state, local or foreign taxing authorities (including,
without limitation, those due in respect of the Real Property and the
Facilities, and the income, franchises, licenses, sales, usages or payrolls
associated therewith). There are no tax liens upon any property or assets of
Transferor (with respect to the Facilities), the Company, Newco, the Pool
Companies, Santa Monica GP, Santa Monica LP and the Facility Owners, except
liens for current taxes not yet delinquent.

Section 8.14 Personal Property. As of the expiration of the Due Diligence
Period, each Facility Owner shall own or lease all of the Personal Property that
is currently used in the operations of the applicable Facility as it is
currently conducted, free and clear of all Liens other than Permitted
Exceptions. There are no assets necessary or material to the operation of the
Facilities as currently operated that are not Owned Assets, other than Excluded
Assets.

Section 8.15 Title. To Transferor’s knowledge and subject to easements,
covenants, conditions and restrictions of record as of the date hereof and to
Permitted Exceptions in place on or prior to the expiration of the Due Diligence
Period, (a) each Facility Owner is the owner of a fee simple interest in the
Land and Improvements set forth across from such Facility Owner’s name as
described on Exhibit A attached hereto and (b) the Facility Owner is, or will be
at Closing, the owner of all of the remaining property constituting the Personal
Property with respect to the Facility owned by such Facility Owner, free and
clear of all Liens, except for Permitted Exceptions and as otherwise expressly
disclosed in this Agreement (including Section 1.01 of the Disclosure
Statement).

Section 8.16 Intentionally Omitted.

Section 8.17 Contracts. Except as would not be reasonably anticipated to have
Material Adverse Effect, (a) all service, maintenance, purchase order and other
contracts, agreements and equipment leases as are needed with respect to the
ownership, maintenance, operation, provisioning or equipping of the Facilities
as presently conducted (the “Contracts”) are in full

 

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force and effect and (b) none of Transferor, Manager or any Facility Owner, or,
to Transferor’s knowledge, any other party to the Contracts, is in breach or
default under any obligation thereunder or any provisions thereof, and no
condition exists that, with notice or the passage of time, or both, will
constitute a breach or default under any obligation thereunder or any provisions
thereof. Section 8.17 of the Disclosure Statement sets forth a true, correct and
complete list of those Contracts which were entered into pursuant to a master or
other agreement pertaining to each Facility.

Section 8.18 Insurance. Neither Newco, the Company, the Pool Companies, Santa
Monica GP, Santa Monica LP, Facility Owners, or Manager has received written
notice from any insurance carrier of defects or inadequacies in the Real
Property or Facilities, which, if uncorrected, would result in a termination of
insurance coverage or a material increase in the premiums charged therefor.
Section 8.18 of the Disclosure Statement attached hereto sets forth a correct
and complete list of each insurance policy maintained with respect to the Real
Property and or Facilities. With respect to each insurance policy shown on
Section 8.18 of the Disclosure Statement: (i) the policy is legal, valid,
binding, enforceable and in full force and effect, (ii) neither Newco, the
Company, the Pooled Companies, Santa Monica LP, Santa Monica GP, Facility Owners
or Manager, nor to Transferor’s knowledge, any other party to the policy, is in
material breach or default thereunder, and to Transferor’s knowledge, no event
has occurred which, with notice or the lapse of time, would constitute such a
material breach or default, or permit termination or modification under such
policy against any insured party.

Section 8.19 Condemnation. Neither Transferor, Newco, the Company, the Pool
Companies, Santa Monica GP, Santa Monica LP, the Facility Owners or Manager has
received any written notice of, nor, to Transferor’s Knowledge, is there any
pending or contemplated condemnation, eminent domain or similar proceeding with
respect to all or any portion of the Owned Asset.

Section 8.20 Purchase Rights. There are no unrecorded purchase contracts,
options or other agreements of any kind, whereby any Person other than the
Transferee has or will have any right to acquire title to (a) all or any portion
of the Real Property or (b) all or any portion of the Personal Property.

Section 8.21 Compliance with Permitted Exceptions. Neither Transferor, Newco,
the Company, the Pool Companies, Santa Monica GP, Santa Monica LP, Manager or
any Facility Owner has received or given any written notice of any violation of
any Permitted Exception which has not been cured or dismissed.

Section 8.22 Utilities. All public utilities including, without limitation,
sewer, water, electric, gas, and telephone, required for the operation of the
Facilities as currently operated are installed and lawfully operating, and all
installation and connection charges therefor have been paid in full, except as
would not reasonably be anticipated to have a Material Adverse Effect. Neither
Transferor, Newco, the Company, the Pool Companies, Santa Monica GP, Santa
Monica LP, the Manager nor any Facility Owner has received any notice stating
that the provision of utilities violates any public or private easement.

 

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Section 8.23 Existing Owner Financing Documents. Section 8.23 of the Disclosure
Statement sets forth a true, correct and complete list of all notes, mortgages,
deeds of trust, security agreements, and other material instruments, documents
and agreements relating to the Existing Owner Financing.

Section 8.24 Management Documents. The Prior Management Agreements, Prior Owner
Agreements and the Prior Pooling Agreements comprise all agreements and
contracts existing as of the date hereof which relate to the provision of
property management services at the Facilities by Manager. Transferor represents
and warrants to Transferee that except for the Prior Management Agreements,
Prior Owner Agreements and the Prior Pooling Agreement, as of the date hereof,
there exists no other agreements, contracts or license agreement with respect to
the provision of property management services at the Facilities.

Article IX.

COVENANTS

Section 9.01 Publicity. The parties agree that, prior to the Closing, no public
release or announcement concerning the transactions contemplated hereby shall be
issued by any party without the prior written consent of the other parties,
except as required by law or applicable regulations. The parties may disclose
this Transfer Agreement and matters relating to the subject matter hereof to
(i) their professional advisers (including legal and financial advisers) or
(ii) to any prospective or existing lenders, provided that in each case any such
party informs the recipient of the confidentiality obligations of such party
hereunder. The parties understand and agree that if required by law, or if
required by applicable disclosure requirements under applicable securities laws
or other laws, one or more of the parties may (i) disclose certain information
concerning the transaction, (ii) issue one (1) or more press releases concerning
the execution of this Agreement and/or the transfer of the Transferor’s
Interest, provided that with respect to (a) any press release by Transferee or
its Affiliates which identifies Transferor or its Affiliates, Transferee shall
use its reasonable best efforts to seek the prior approval of the Transferor,
such approval not to be unreasonably delayed or withheld and (b) any press
release by Transferor or its Affiliates which identifies Transferee or its
Affiliates, Transferor shall use its reasonable best efforts to seek the prior
approval of the Transferor, such approval not to be unreasonably delayed or
withheld and, in each case, such requirement to seek prior approval not to
preclude any party or its Affiliate from complying with applicable disclosure
obligations under law, and (iii) file a copy of this Agreement with the
Securities and Exchange Commission.

Section 9.02 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each party will use its commercially reasonable
efforts to take all action and to do all things necessary, proper or advisable
to satisfy any condition hereunder in its power to satisfy and for which it is
responsible for the satisfaction of, and to consummate and make effective as
soon as practicable the transactions contemplated by this Agreement. In
furtherance of the foregoing, each party will use its commercially reasonable
efforts to cause a First Mortgage Loan Application to be finalized, executed and
delivered to Lender by the applicable parties thereto on or before the date that
is seven (7) days after the date hereof.

Section 9.03 No Recordation. Transferor and Transferee each agrees that neither
this Agreement nor any memorandum or notice hereof shall be recorded and
Transferee agrees (i) not

 

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to file any notice of pendency or other instrument (other than a judgment)
against the Facilities or any interest therein in connection herewith and
(ii) to indemnify Transferor against all Losses or Liabilities incurred by
either of them by reason of the filing by Transferee, as applicable, of such
notice of pendency or other instrument.

Section 9.04 Licenses. During the Due Diligence Period, Transferor will cause
Manager and the Facility Owners to apply for and diligently pursue issuance of
the Licenses. Without limiting the generality of the foregoing, Transferor shall
promptly provide to Transferee such information in its possession and control
concerning the Company, Newco, the Pool Companies, Santa Monica LP, Santa Monica
GP, Manager, the Facility Owners, the New Facility Owners and the Facilities as
may be requested by any Governmental Entity in connection with the issuance of
the Licenses and, if requested by such Governmental Entity, Transferor shall
allow, or cause the Company, the Pool Companies, Santa Monica LP, Santa Monica
GP, Manager or the Facility Owners to allow, representatives of the Governmental
Entity to inspect the Facilities in connection with the application for any
Licenses.

Section 9.05 Casualty. In the event that all or any portion of the Facilities is
damaged or destroyed by fire or other casualty prior to Closing and the cost of
repair for all such damaged or destroyed Facilities in the aggregate is less
than $15,000,000.00, subject to the terms of the Existing Lease Financing,
Transferor shall promptly cause the applicable Facility Owner to undertake such
repair and complete the same. Closing will not be extended to permit the
Facility Owner to complete the same, but subject to the terms of the Existing
Owner Financing, the insurance proceeds will be escrowed to pay the costs of
restoration. In the event the cost of repair thereof is equal to or greater than
$15,000,000.00, Transferee, in its sole discretion, shall either (i) proceed to
Closing, in which event all insurance proceeds attributable to such damage or
destruction shall be retained by the Facility Owner at Closing and the amount of
any deductible with respect to such damage or destruction shall be paid by
Transferor and Transferee in accordance with Article XV below or (ii) as
Transferee’s sole and exclusive remedy in such event, terminate this Agreement,
in which event the Down Payment shall be promptly returned to Transferee, and
Transferor and Transferee shall be released from any and all further liabilities
or obligations under this Agreement, except those liabilities or obligations
that expressly survive such termination.

Section 9.06 Condemnation. In the event there is any permanent or temporary
actual or threatened taking or condemnation of any material portion of any
Facility, Transferor shall notify Transferee of the same as promptly as
commercially practicable, and Transferee shall have the right, at its sole
option, (i) to proceed to Closing in which event any and all proceeds of such
taking or condemnation shall be delivered or assigned to the Facility Owner at
Closing, or (ii) as Transferee’s sole and exclusive remedy in such event,
terminate this Agreement, in which event the Down Payment shall be promptly
returned to Transferee, and Transferor and Transferee shall be released from any
and all further liabilities or obligations under this Agreement, except those
liabilities or obligations that expressly survive such termination.

Section 9.07 Operation of Business. Through the Closing Date, Transferor shall
cause Manager to continue to manage and operate the Facilities, taken as a
whole, in the ordinary course of business in the manner it has previously
managed and operated the Facilities prior to the date of this Agreement.

 

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Article X.

CONDITIONS PRECEDENT TO THE OBLIGATION

OF TRANSFEREE AND TRANSFEROR TO CLOSE

Section 10.01 Conditions to Transferee’s Obligation to Close. The obligation of
Transferee to proceed to Closing is subject to the satisfaction of each of the
following conditions, any of which may be waived, in whole or in part, in
writing by Transferee at or prior to Closing:

(a) Transferor shall have performed in all material respects all their
respective obligations under this Agreement which are required to be performed
at or prior to Closing.

(b) All representations and warranties of Transferor set forth in Article VII
and Article VIII of this Agreement shall have been true and correct as of the
Contract Date and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date.

(c) Transferor shall have executed and/or delivered all of the documents
required to be delivered at Closing pursuant to Section 11.02 (a).

(d) The Licenses shall have been issued and shall be in full force and effect,
it being understood that this condition shall be deemed satisfied if any License
has been issued, but such license is subject to revocation, cancellation,
suspension or non-renewal in the event that post-licensure requirements that
have not been satisfied as of Closing are not completed subsequent to Closing.

(e) The Refinancing shall have closed simultaneously with the closing of the
transactions contemplated in this Agreement, on substantially the terms and
conditions set forth in the Refinancing Term Sheet and such other terms as are
customary for similar mortgage financing or otherwise reasonably acceptable to
Transferee.

(f) Transferee shall have obtained the Transferee Mezz Financing, subject to
terms and conditions satisfactory to Transferee in its sole and absolute
discretion and subject to the terms and conditions of Section 15.05 below.

Section 10.02 Intentionally Omitted.

Section 10.03 Conditions to Transferor’s Obligation to Close. The obligation of
Transferor to proceed to Closing is subject to the satisfaction of each of the
following conditions, any of which may be waived, in whole or in part, in
writing by Transferor at or prior to Closing:

(a) Transferee shall have performed in all material respects its obligations
under this Agreement which are required to be performed at or prior to Closing.

(b) All representations and warranties of Transferee set forth in Article IV and
Section 3.01(b) of this Agreement shall be true and correct as of the Contract
Date and as of Closing with the same force and effect as though made on and as
of the Closing Date.

 

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(c) Transferee shall have executed and delivered all of the documents required
to be delivered at Closing pursuant to Sections 11.02 (b).

(d) Provided that Transferor is not in breach of its obligations under
Section 9.04, the Licenses shall have been issued and shall be in full force and
effect, it being understood that this condition shall be deemed satisfied if any
License has been issued, but such license is subject to revocation,
cancellation, suspension or non-renewal in the event that post-licensure
requirements that have not been satisfied as of Closing are not completed
subsequent to Closing.

(e) The Refinancing shall have closed simultaneously with the closing of the
transactions contemplated in this Agreement, on substantially the terms and
conditions set forth in the Refinancing Term Sheet and such other terms as are
customary for similar mortgage financing or otherwise reasonably acceptable to
Transferor.

Article XI.

CLOSING

Section 11.01 Time and Place. Closing of Transferor’s assignment of Transferor’s
Interest pursuant to this Agreement (the “Closing”) shall take place at the
offices of Willkie Farr & Gallagher LLP in New York City (or at such other place
as Transferee and Transferor mutually agree) on the Closing Date or such other
date as is mutually agreed upon by Transferor and Transferee.

Section 11.02 Delivery of Documents at Closing.

(a) At Closing, Transferor shall:

(i) Execute and deliver to Transferee (or its designee) the Assignment and
Assumption of Interest Agreement.

(ii) Execute, acknowledge and deliver a certificate to Transferee confirming the
matters set forth in Sections 10.01 (a) and (b) with respect to Transferor, as
of the Closing Date, such certificates to be signed by an officer of Transferor.

(iii) Provide to Transferee (A) a copy of the Charter Documents of Transferor
certified by a duly authorized officer of Transferor, (B) a copy of resolutions
or other actions of the board of directors and shareholders of Transferor
certified by a duly authorized officer of Transferor, and (C) such other
evidence of the power and authority of Transferor to consummate the transactions
described in this Agreement as Transferee may reasonably require.

(iv) Execute, cause to be acknowledged as appropriate and deliver to Transferee
such additional documents as may be reasonably necessary or customary to
consummate the transactions contemplated by this Agreement.

(v) Execute, cause to be acknowledged as appropriate and deliver to Transferee a
closing statement or memorandum in a form reasonably acceptable to Transferee
and Transferee (the “Closing Statement”).

 

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(vi) Execute, cause to be acknowledged and deliver to Transferee a non-foreign
status affidavit in the form of Exhibit H, as required by Section 1445 of the
Code.

(vii) Execute or cause to be executed, and cause to be acknowledged and filed,
as applicable, any and all transfer tax forms, or signature pages to transfer
tax forms, required by applicable law or advisable, in the reasonable opinion of
Transferee, in connection with the transfer of Transferor’s Interests or the
indirect interests in the Facility Owners to Transferee (or its designee) as
contemplated hereunder.

(viii) Pay and fully satisfy all obligations which are evidenced by any Lien
encumbering Transferor’s Interest which are not permitted hereunder.

(ix) Execute and deliver, or cause to be executed and delivered, all
Restructuring Documents to be executed by Transferor, Newco, the Company, the
Pool Companies, Santa Monica GP, Santa Monica LP, the Facility Owners or
Manager.

(x) Execute, cause to be acknowledged and deliver to the Escrow Holder one or
more Transferor’s Non-Imputation Affidavits.

(xi) If a search of the title to the Transferor’s Interests discloses judgments,
penalties or other returns against other Persons having names the same as or
similar to that of Transferor, Transferor will, on request, execute and deliver
to Transferee (or cause to be delivered to Transferee) an affidavit from
Transferor to the effect that such judgments, penalties or other returns are not
against Transferor.

(xii) Execute and deliver the Mezz Loan Recognition/Comfort Letter.

(b) At Closing, Transferee shall:

(i) Execute, acknowledge and deliver the Assignment and Assumption of Interest
Agreement.

(ii) Execute, acknowledge and deliver a certificate to Transferor confirming the
matters set forth in Sections 10.03(a) and (b) with respect to Transferee, as of
the Closing Date, such certificates to be signed by an officer of Transferee.

(iii) Provide to Transferor (A) a copy of the Charter Documents of Transferee
certified by a duly authorized officer or partner of Transferee, (B) a copy of
resolutions or other actions of the partners of Transferee certified by a duly
authorized officer or partner of Transferee, and (C) such other evidence of the
power and authority of Transferee to consummate the transactions described in
this Agreement as Transferor may reasonably require.

(iv) Execute, cause to be acknowledged as appropriate and deliver such
additional documents as may be reasonably necessary or customary to consummate
the transactions contemplated by this Agreement.

 

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(v) Execute and deliver, or cause to be executed and delivered, all
Restructuring Documents to be executed by Transferee, Newco, the Company, the
Pool Companies, Santa Monica GP, Santa Monica LP or the Facility Owners.

(vi) Execute, cause to be acknowledged as appropriate and deliver the Closing
Statement.

(vii) Execute, and cause to be notarized and filed, as applicable, any and all
transfer tax forms, or signature pages to transfer tax forms, required by
applicable law or advisable, in the reasonable opinion of Transferee, in
connection with the transfer of the Transferor’s Interest or the indirect
interests in the Facility Companies to Transferee (or its designee), as
contemplated hereunder.

Article XII.

INDEMNITY; DEFAULT; DAMAGES

Section 12.01 Survival. Except for those representations, warranties, covenants
or agreements contained in this Agreement the obligations in relation to which
are expressly stated to survive the Closing beyond the below-referenced twelve
(12) month period or without time limitation, all claims for any breach by a
party of any representation, warranty, covenant or agreement made by it in this
Agreement or in any other Document must be set forth in reasonable detail in a
written notice received by such party not later than the date that is twelve
(12) months following the Closing Date and any litigation with respect to such
claim shall be commenced on or prior to the date that is sixty (60) days after
the expiration of such twelve (12) month period. The following representations
and warranties shall survive without time limit: (a) Transferee’s
representations and warranties contained in Sections 4.01 through 4.09 and
(b) Transferor’s representations and warranties contained in Sections 7.01
through 7.10.

Section 12.02 Intentionally Omitted.

Section 12.03 Transferee’s Remedies for Transferor’s Defaults. If Transferor
breaches any of its representations or warranties hereunder, or defaults on any
of its obligations hereunder in any material respect, and such default continues
for ten (10) Business Days after written notice thereof from Transferee
specifying such default, Transferee may, as its sole remedy hereunder, by
delivering notice in writing to Transferor in the manner provided in this
Agreement, either, (i) terminate this Agreement and the other Documents and
declare it and them null and void (except for those Liabilities that expressly
survive such termination) in which event Transferee shall receive a disbursement
of the Down Payment, (ii) seek enforcement of this Agreement by a decree of
specific performance or injunctive relief requiring Transferor to fulfill its
obligations under this Agreement, including but not limited to the transfer of
Transferor’s Interest or (iii) waive any such conditions or defaults and
consummate the transactions contemplated by this Agreement and the Documents in
the same manner as if there had been no conditions or defaults.

Section 12.04 Transferor’s Remedies for Transferee’s Defaults. If Transferee
breaches any of its representations or warranties hereunder, or defaults on any
of its obligations hereunder in any material respect, and such default continues
for ten (10) Business Days after written notice thereof from Transferor
specifying such default, Transferor may, as its sole remedy hereunder, by

 

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delivering notice in writing to Transferee in the manner provided in this
Agreement, either, (i) terminate this Agreement and the other Documents and
declare it and them null and void (except for those Liabilities that expressly
survive such termination), in which event Transferor shall retain the Down
Payment as liquidated damages as the sole legal or equitable remedy, the parties
hereby acknowledging and agreeing that the damages which Transferor would suffer
as a result of such default and termination would be difficult, if not
impossible, to determine and that the liquidated damages provided for herein are
a fair and reasonable estimation of such damages or (ii) waive any such
conditions or defaults and consummate the transactions contemplated by this
Agreement and the Documents in the same manner as if there had been no
conditions or defaults; it being expressly understood and agreed that Transferor
shall not have any right or remedy to seek specific performance or injunctive
relief with respect to any default by Transferee.

Section 12.05 Limitation on Liability for Business Representations.
Notwithstanding anything to the contrary contained herein or in any other
Document, if the Closing of the transactions hereunder shall have occurred,
Transferor shall have no Liability to Transferee for the breach of the Business
Representations in excess of, individually or in the aggregate, $4,000,000.00
(the “Business Representations Damage Cap”). Transferee shall not enter any
judgment or collect an amount hereunder in excess of the Business
Representations Damage Cap.

Section 12.06 Intentionally Omitted.

Section 12.07 Indemnification by Transferee. Transferee shall, during the
applicable survival period, indemnify, defend, and hold harmless Transferor and
its members, officers, directors, employees, Affiliates, successors and assigns
from and against, and pay or reimburse each of them for and with respect to, any
Loss relating to, arising out of or resulting from any breach by Transferee of
any of its representations, warranties, covenants or agreements in this
Agreement or any other Document.

Section 12.08 Intentionally Omitted.

Section 12.09 Indemnification by Transferor. Transferor shall, during the
applicable survival period, indemnify, defend, and hold harmless Transferee and
its respective members, officers, directors, employees, Affiliates, successors
and assigns from and against, and pay or reimburse each of them for and with
respect to, any Loss relating to, arising out of, or resulting from any breach
by Transferor of any of its representations, warranties, covenants or agreements
in this Agreement or any other Document, subject to the Business Representations
Damage Cap with respect to breaches of the Business Representations.

Section 12.10 Intentionally Omitted.

Section 12.11 Administration of Indemnification. For purposes of administering
the indemnification provisions set forth in Sections 12.07 and 12.09, the
following procedure shall apply:

(a) Whenever a claim shall arise for indemnification under this Article, the
party entitled to indemnification (the “Indemnified Party”) shall promptly give
written notice to the party from whom indemnification is sought (the
“Indemnifying Party”) setting forth in

 

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reasonable detail, to the extent then available, the facts concerning the nature
of such claim and the basis upon which the Indemnified Party believes that it is
entitled to indemnification hereunder.

(b) In the event of any claim for indemnification resulting from or in
connection with any claim by a third party, the Indemnifying Party shall be
entitled, at its sole expense, either (i) to participate in defending against
such claim or (ii) to assume the entire defense with counsel which is selected
by it and which is reasonably satisfactory to the Indemnified Party provided
that (A) the Indemnifying Party agrees in writing that it does not and will not
contest its responsibility for indemnifying the Indemnified Party in respect of
such claim or proceeding and (B) no settlement shall be made and no judgment
consented to without the prior written consent of the Indemnified Party which
shall not be unreasonably withheld. If, however, (i) the claim, action, suit or
proceeding would, if successful, result in the imposition of damages for which
the Indemnifying Party would not be solely responsible, or (ii) representation
of both parties by the same counsel would otherwise be inappropriate due to
actual or potential differing interests between them, then the Indemnifying
Party shall not be entitled to assume the entire defense and each party shall be
entitled to retain counsel who shall cooperate with one another in defending
against such claim. In the case of clause (i) of the immediately preceding
sentence, the Indemnifying Party shall be obligated to bear only that portion of
the expense of the Indemnified Party’s counsel that is in proportion to the
damages indemnifiable by the Indemnifying Party compared to the total amount of
the third-party claim against the Indemnified Party.

(c) If the Indemnifying Party does not choose to defend against a claim by a
third party, the Indemnified Party may defend in such manner as it deems
appropriate or settle the claim (after giving notice thereof to the Indemnifying
Party) on such terms as the Indemnified Party may deem appropriate, and the
Indemnified Party shall be entitled to periodic reimbursement of defense
expenses incurred and prompt indemnification from the Indemnifying Party in
accordance with this Article.

(d) Failure or delay by an Indemnified Party to give prompt notice of any claim
(if given prior to expiration of any applicable survival period) shall not
release, waive or otherwise affect an Indemnifying Party’s obligations with
respect to the claim, except to the extent that the Indemnifying Party can
demonstrate actual loss or prejudice as a result of such failure or delay.

Section 12.12 Exclusivity. The rights and remedies set forth in this Article XII
shall be exclusive of all other rights to monetary damages that any party (or
any party’s successors or assigns) would otherwise have at law or in equity in
connection with the transactions contemplated by this Agreement or any other
Document, other than with respect to claims based on common law fraud or rights
which by law cannot be waived or limited.

Article XIII.

DOWN PAYMENT AND ESCROW

Section 13.01 Investment of Down Payment. Escrow Agent shall deposit the Down
Payment in an escrow account in the name of Escrow Agent in a commercial bank
designated by

 

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Transferee, provided that Transferee approves Wells Fargo, Bank of America, or
JP Morgan Chase as such commercial bank. Escrow Agent shall invest the Down
Payment in an insured interest bearing account, or in interest bearing
investments backed by securities issued by the U.S. federal government, as
Transferee may from time to time direct.

Section 13.02 Disbursement of Down Payment. Escrow Agent shall hold the Down
Payment in escrow and release the same as follows:

(a) If at any time prior to expiration of the Due Diligence Period, Escrow Agent
shall receive written notice from Transferee stating that (i) Transferee is
terminating this Agreement, and (ii) Transferee is simultaneously giving
Transferor a copy of such notice, Escrow Agent shall promptly disburse the Down
Payment to Transferee without the need for further instructions from or
approvals by any other party to this Agreement. If at any time on or prior to
the date that is eight (8) Business Days after the date of this Agreement,
Escrow Agent shall receive written notice from Transferor stating that
(i) Transferor is terminating this Agreement due to the failure to receive the
Transferor Board Consent and (ii) Transferor is simultaneously giving Transferee
a copy of such notice, Escrow Agent shall promptly disburse the Down Payment to
Transferee without the need for further instructions from or approvals by any
other party to this Agreement.

(b) If at any time after the expiration of the Due Diligence Period, but prior
to Closing, Escrow Agent shall receive written notice from Transferee stating
that (i) Transferee is terminating this Agreement for a reason other than a
Transferor default or another reason which would permit Transferee to receive
the Down Payment, and (ii) Transferee is simultaneously giving Transferor a copy
of such notice, Escrow Agent shall promptly disburse the Down Payment to
Transferor, without the need for further instructions from or approvals by any
other party to this Agreement.

(c) Except as provided in Section 13.02(e), if Escrow Agent shall receive
written notice from Transferee (“Transferor Default Notice”) stating that
(i) Transferor has failed to complete Closing in accordance with the terms of
this Agreement, or has defaulted in any other manner under this Agreement,
(ii) Transferor has not cured such failure or default in accordance with
Section 12.02, and (iii) Transferee is demanding the return of the Down Payment,
then Escrow Agent shall immediately and simultaneously deliver a copy of the
Transferor Default Notice to Transferor. If on or before the date which is five
(5) Business Days following Transferor’s receipt of the Transferor Default
Notice, Transferor shall object in writing (“Transferor’s Objection Notice”) to
the return of the Down Payment to Transferee, then Escrow Agent shall not return
the Down Payment to Transferee. If Transferor shall not deliver a Transferor’s
Objection Notice to Escrow Agent on or before the date which is five
(5) Business Days following Transferor’s receipt of the Transferor Default
Notice, then Escrow Agent shall promptly return the Down Payment to Transferee
without the need for further instructions from or approvals by any other party
to this Agreement.

(d) Except as provided in Section 13.02(e), if Escrow Agent shall receive
written notice from Transferor (“Transferee Default Notice”) stating that
(i) Transferee has failed to complete Closing in accordance with the terms of
this Agreement, or has defaulted in any other manner under this Agreement,
(ii) Transferee has not cured such failure or default in

 

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accordance with Section 12.03, and (iii) Transferor is demanding the return of
the Down Payment, then Escrow Agent shall immediately and simultaneously deliver
a copy of the Transferee Default Notice to Transferor. If on or before the date
which is five (5) Business Days following Transferee’s receipt of the Transferee
Default Notice, Transferee shall object in writing (“Transferee’s Objection
Notice”) to the return of the Down Payment to Transferor, then Escrow Agent
shall not return the Down Payment to Transferor. If Transferee shall not deliver
a Transferee’s Objection Notice to Escrow Agent on or before the date which is
five (5) Business Days following Transferee’s receipt of the Transferee Default
Notice, then Escrow Agent shall promptly return the Down Payment to Transferor
without the need for further instructions from or approvals by any other party
to this Agreement.

(e) Subject to Section 15.05 below, if Escrow Agent shall receive written notice
from Transferee (“Failure of Condition Notice”) stating that Transferee is
demanding the return of the Down Payment because either (i) Transferee has
failed to complete Closing in accordance with the terms of this Agreement solely
due to a failure of the conditions set forth in Section 10.01(d), (e) or (f) or
(ii) Transferor has failed to complete Closing in accordance with the terms of
this Agreement solely due to a failure of the conditions set forth in
Section 10.03(d) or (e) and confirming that Transferor is not in breach of its
obligations under Section 9.04, then Escrow Agent shall immediately deliver a
copy of the Failure of Condition Notice to Transferor. If on or before the date
which is five (5) Business Days following Transferor’s receipt of the Failure of
Transferee Condition Notice, Transferor shall object in writing to the return of
the Down Payment to Transferee because (x) Transferor objects to Transferee’s
statement in the Failure of Condition Notice regarding failure of any conditions
specified in subsections (i) or (ii) above or (y) Transferor is demanding
payment of any Transferor Reimbursable Transaction Costs from the Down Payment
(“Transferor’s Failure of Condition Objection Notice”), then Escrow Agent shall
not return the Down Payment to Transferee. If Transferor shall not deliver a
Transferor’s Failure of Condition Notice to Escrow Agent on or before the date
which is five (5) Business Days following Transferor’s receipt of the Failure of
Condition Notice, then Escrow Agent shall promptly return the Down Payment to
Transferee, without the need for further instructions from or approvals by any
other party to this Agreement. If Transferor’s Failure of Condition Notice
specifies that Transferor is demanding payment of any Transferor Reimbursable
Transaction Costs from the Down Payment, then Escrow Agent shall immediately and
simultaneously deliver a copy of the Transferor Failure of Condition Objection
Notice to Transferee and on or before the date which is five (5) Business Days
following Transferee’s receipt of the Transferor’s Failure of Condition
Objection Notice, Escrow Agent shall receive written notice from Transferee
stating that Transferee is objecting to the amount of Transferor Reimbursable
Transaction Costs which Transferor is demanding be paid to Transferor (the
“Transferee Notice of Objection to Transferor Reimbursable Transaction Costs”),
then Escrow Agent shall not disburse any portion of the Down Payment to
Transferor or Transferee. If Transferee shall not deliver a Transferee’s Notice
of Objection to Transferor Reimbursable Transaction Costs on or before the date
which is five (5) Business Days following Transferee’s receipt of the
Transferor’s Failure of Condition Objection Notice, then Escrow Agent shall
promptly disburse to Transferor from the Down Payment, an amount equal to the
Transferor Reimbursable Transaction Costs demanded in the Transferor’s Failure
of Condition Objection Notice and return to Transferee any remaining portion of
the Down Payment, without the need for further instructions from or approvals by
any other party to this Agreement.

 

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(f) Unless the Down Payment shall have been previously released by Escrow Agent
pursuant to this Section 13.02, at Closing, Escrow Agent shall deliver the Down
Payment to Newco as part of the Transferee Contribution.

Section 13.03 Disputes. In the event of any dispute between Transferor and
Transferee regarding the disbursement of the Down Payment pursuant to Sections
13.02(c), (d) or (e), or in the event Escrow Agent shall receive conflicting
demands or instructions with respect to the disbursement of the Down Payment,
Escrow Agent shall withhold disbursement of the Down Payment until it receives
either (i) joint written instructions from Transferor and Transferee with
respect to the disbursement of the Down Payment or (ii) an order binding upon it
from a court of competent jurisdiction with respect to the disbursement of the
Down Payment. Notwithstanding the foregoing, in the event of any such dispute or
conflicting demands or instructions, Escrow Agent shall have the right to
deliver the Down Payment into the registry of any court of competent
jurisdiction, and Escrow Agent shall thereupon be released from any further
liabilities or obligations with respect to the Down Payment.

Section 13.04 Compensation. Escrow Agent shall receive no compensation for its
services performed pursuant to this Agreement except for reasonable attorneys’
fees and costs incurred as a result of any dispute between the parties hereto.
Such fees and costs shall be borne by the party adjudged by a court of competent
jurisdiction to have been at fault.

Section 13.05 Liability of Escrow Agent. The parties covenant and agree that in
performing any of its duties under this Agreement, Escrow Agent shall not be
liable for any Loss which it may incur as a result of serving as Escrow Agent
hereunder, except for any Loss arising out of its willful default or gross
negligence. Accordingly, Escrow Agent shall not incur any liability with respect
to (i) any action taken or omitted to be taken in good faith upon advice of its
counsel given with respect to any questions relating to its duties and
responsibilities (ii) to any action taken or omitted to be taken in reliance
upon any document, not only as to its due execution and the validity and
effectiveness of its provisions, but also to the truth and accuracy of any
information contained therein, which Escrow Agent shall in good faith believe to
be genuine, to have been signed or presented by a proper person or persons and
to conform with the provisions of this Agreement or (iii) failure, insolvency,
or inability of the depositary to pay said funds upon demand for withdrawal; or
(iv) levies by taxing authorities based upon the taxpayer identification number
used to establish this interest bearing account. Transferor and Transferee,
hereby agree, jointly and severally, to indemnify and hold harmless Escrow Agent
against any and all Losses which may be imposed upon or incurred by Escrow Agent
in connection with its serving as Escrow Agent hereunder, except for any Loss
arising out of its willful default or gross negligence.

Article XIV.

JOINT VENTURE AND FACILITY DOCUMENTS

Section 14.01 Formation of Joint Venture.

(a) Upon the occurrence of the Closing, Transferor and Transferee shall take
such steps as may be necessary to consummate the Restructuring. Transferee shall
contribute the Transferee Contribution to Newco and Transferor shall contribute
the Transferor Contribution to

 

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Newco. In connection with the Restructuring, on the Closing Date, Transferor and
Transferee covenant and agree to enter into the amended and restated limited
liability company agreement of Newco in the form attached hereto as Exhibit I
(the “JV Agreement”), subject to changes requested by the Lender and approved by
Transferor and Transferee in their reasonable discretion, which shall amend and
restate the existing limited liability company agreement of Newco and create a
joint venture that will, upon the Closing and immediately following the
Restructuring, directly or indirectly own the Company, the Pool Companies, Santa
Monica LP, Santa Monica GP, the TRS, the Facility Owners and the New Facility
Owners.

(b) Simultaneously with the Closing, Newco shall distribute the Initial
Distribution to Transferor in accordance with the terms and condition of the JV
Agreement.

(c) At Closing, in the event that (a) the Closing has occurred and Transferee
has obtained the Transferee Mezz Financing and (b) the Stated Rate (as defined
below) payable under the refinancing of the MetSun Facilities is a rate that is
less than or equal to 5.25% ), the parties shall calculate the schedule of
“Quarterly Interest Rate Differential Amounts” (as defined in the JV Agreement)
to be attached to the JV Agreement as Schedule 1.2 in accordance with the
following methodology: the Quarterly Interest Rate Differential Amount shall be
an amount, calculated on a quarterly basis, equal to the difference between
(a) the debt service payment that is actually payable under the refinancing of
the MetSun Facilities over the term of the Refinancing (i.e., based on an
interest rate of 5.25%) minus (b) debt service payment that would have been
payable under the refinancing of the MetSun Facilities over the term of the
Refinancing assuming the Stated Rate. The foregoing methodology (as set forth
and described on Schedule 1) assumes that following the closing of the
Refinancing, (i) there is no reduction to the actual interest rate payable under
the refinancing of the MetSun Facilities and (ii) there are no partial
prepayments of any outstanding principal under the refinancing of the MetSun
Facilities. Transferor and Transferee acknowledge and agree that in the event
following the closing of the Refinancing, either (i) the actual interest rate
payable under the refinancing of the MetSun Facilities is reduced such that the
same is less than 5.25% or (ii) there is a partial prepayment of principal made
by the borrower thereunder, the Quarterly Interest Rate Differential Amounts
shall be adjusted accordingly such that the same shall be calculated based upon
the reduced interest rate and/or then outstanding principal balance of the loan
evidenced by the refinancing of the MetSun Facilities, as applicable; it being
understood and agreed that in the event of a reduction in the actual interest
rate payable under the refinancing of the MetSun Facilities following Closing,
the interest rate differential for purposes of recalculating the Quarterly
Interest Rate Differential Amounts shall be the new reduced interest rate and
the Stated Rate. By way of example only, assuming a Stated Rate of 5.10%, in the
event the actual interest rate payable under the refinancing of the MetSun
Facilities is reduced following the Closing to a rate that is equal to or less
than 5.10%, no Quarterly Interest Rate Differential Amounts would be due and
payable thereafter. The “Stated Rate” shall mean the actual rate quoted by
Lender as of the “rate lock” date but in no event shall the Stated Rate, for
purposes of this Section 14.01(c) and calculation of the Quarterly Interest Rate
Differential Amount, be less than 4.95%. An example of the methodology described
in this Section 14.01(c) is attached hereto as Schedule 1 assuming a Stated Rate
of 5.10% per annum for the refinancing of the MetSun Facilities.

 

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Section 14.02 Termination of Existing Facility Documents.

(a) On or prior to the occurrence of the Closing, Manager shall, and Transferor
shall cause each Facility Owner to, terminate the Prior Management Agreements
pursuant to a Termination of Management Agreement substantially in the form
attached hereto as Exhibit J (individually, a “Management Termination” and
collectively, the “Management Terminations”).

(b) On or prior to the occurrence of the Closing, Manager shall, and Transferor
shall cause the Company, the applicable Pool Company, and each applicable
Facility Owners to, terminate the Prior Owner Agreements pursuant to a
Termination of Owner Agreement substantially in the form attached hereto as
Exhibit K (individually, a “Owner Agreement Termination” and collectively, the
“Owner Agreement Terminations”).

(c) On or prior to the occurrence of the Closing, Manager shall, and Transferor
shall cause the Company, the applicable Pool Company and the applicable Facility
Owners to, terminate the Prior Pooling Agreements pursuant to one or more
Terminations of Manager Pooling Agreement, substantially in the form attached
hereto as Exhibit L (the “Pooling Agreement Termination”).

Section 14.03 New Facility Documents.

(a) Deed Conveyance of Real Property. Upon the occurrence of the Closing and
immediately prior to the transfer of the Pool Companies, Conn. Ave. Facility
Owner and Santa Monica LP. from the Company to TRS, Transferor and Transferee
shall cause the Facility Owners to transfer and convey to the New Facility
Owner, fee simple title in and to the Real Property (the “Deed Transfers”). The
Deed Transfers shall be made by special warranty deed in form customary for the
jurisdiction in which the applicable Real Property is located and reasonably
approved by Transferor and Transferee, subject to changes requested by Lender
and approved by Transferor and Transferee in their reasonable discretion. Each
Facility Owner shall further assign, transfer and convey to the applicable New
Facility Owner, all right, title and interest of such Facility Owner in and to
any and all tangible and intangible personal property relating directly or
indirectly to the applicable Real Property and/or Facility. Such assignment,
transfer and conveyance of personal property shall be made by bill of sale in
form reasonably approved by Transferor and Transferee, subject to changes
requested by Lender and approved by Transferor and Transferee in their
reasonable discretion.

(b) Operating Lease. Upon the occurrence of the Closing, Transferor and
Transferee shall cause each New Facility Owner and Facility Lessee (as
hereinafter defined) to enter into a Lease substantially in the form attached
hereto as Exhibit M (each, an “Operating Lease”), subject to changes requested
by Lender and approved by Transferor and Transferee in their reasonable
discretion and to changes agreed to by Transferor and Transferee in their
reasonable discretion as necessary to conform to local law. Any and all
references to “Facility Lessee” or “Facility Lessees” herein shall mean the
applicable Facility Owner in its capacity as the lessee under the Operating
Lease.

(c) Management Agreement. Upon the occurrence of the Closing, Manager shall, and
Transferor and Transferee shall cause each Facility Lessee to, enter into a
Management Agreement for the management and marketing services of the Facilities
substantially in the form

 

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attached hereto as Exhibit N (each, a “New Management Agreement”), subject to
changes requested by the Lender and approved by Transferor and Transferee in
their reasonable discretion.

(d) Management Agreement Guaranty. Upon the occurrence of the Closing,
Transferor and Transferee shall cause Newco to enter into a Guaranty in favor of
Manager substantially in the form attached hereto as Exhibit O (each, a
“Management Agreement Guaranty) with respect to each New Management Agreement,
subject to changes requested by the Lender and approved by Transferor and
Transferee in their reasonable discretion

(e) Manager Pooling Agreement. Upon the occurrence of the Closing, Manager
shall, and Transferor and Transferee shall cause Newco and each of the Facility
Lessees, to enter into the Manager Pooling Agreement substantially in the form
attached hereto as Exhibit P (the “Manager Pooling Agreement”), subject to
changes requested by the Lender and approved by Transferor and Transferee in
their reasonable discretion, to pool revenues and expenses of the Facilities
leased by such Facility Lessee for purposes of, among other things, netting such
revenues at one Facility against expenses at the other Facilities leased by such
Facility Lessee.

Section 14.04 Other Documents.

(a) Delegation Agreement. At Closing and in connection with the execution of the
JV Agreement, Transferor and Transferee shall cause the Transferor and
Transferee entities that are parties to the JV Agreement, respectively, to
execute a Delegation Agreement in the form attached hereto as Exhibit Q (the
“Delegation Agreement”) pursuant to which the applicable Transferee party to the
JV Agreement shall delegate to the applicable Transferor party to the JV
Agreement, certain responsibilities and obligations of the managing member under
the JV Agreement.

(b) Contribution and Indemnification Agreement. At Closing and in connection
with the closing of the Refinancing, Transferor and Transferee shall cause the
Transferee and Transferor guarantors of the loan (the “Loan”) evidenced by the
Refinancing (together, the “Guarantors”), respectively, and Newco, to execute a
Contribution and Indemnification Agreement in the form attached hereto as
Exhibit R (the “Contribution and Indemnification Agreement”), subject to
(i) changes required to conform to the documents evidencing the Refinancing and
(ii) changes requested by the Lender and approved by Transferor and Transferee
in their reasonable discretion, pursuant to which Transferee and the Guarantors
set forth the rights of Guarantors against Transferee if Guarantors make
payments under any guarantees of the Loan and Guarantor set forth their
understanding concerning the manner in which they will share liability between
themselves if either pays more than their proportionate share of any obligation
under any guarantees of the Loan.

Section 14.05 Escrow. Transferee, Transferor and Manager shall cause their
respective executed counterparts to the JV Agreement, Management Terminations,
Owner Agreement Terminations, Pooling Agreement Termination, Operating Leases,
New Management Agreements, Management Agreement Guaranties, Manager Pooling
Agreement, Delegation Agreement, Contribution and Indemnification Agreement,
together with any other agreements,

 

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leases, certificates or other documents reasonably necessary to effectuate the
Restructuring and otherwise in form and substance reasonably acceptable to
Transferor, Transferee and Manger and any additional documents required by
Lender to implement the Refinancing and agreed to by Transferor and Transferee
in their reasonable discretion (collectively, the “Restructuring Documents”), to
be deposited into escrow with Escrow Agent prior to Closing pursuant to an
escrow agreement and instruction letter mutually satisfactory to Transferor and
Transferee which shall provide that such documents shall be released from escrow
and made effective upon the consummation of the Closing.

Article XV.

FEES AND EXPENSES

Section 15.01 Fees and Expenses.

(a) Except as otherwise specifically provided in this Agreement, Transferor and
Transferee shall each pay the fees and expenses of their own attorneys,
accountants, financial advisors, investment bankers and employees in connection
with the preparation and negotiation of this Agreement, all documents prepared
and negotiated pursuant to this Agreement, and the Restructuring Documents
(collectively, the “Documents”), and such amounts shall not count against the
Transferee Closing Cost Amount; provided, that, the fees and expenses of local
counsel engaged to represent Newco in connection with the Restructuring (“Local
Counsel Costs”) shall be borne in accordance with Section 15.08 below.

(b) Subject to Section 15.05 below, any Third-Party Costs incurred by Transferee
or its Affiliates shall be paid solely by Transferee without contribution from
Transferor and shall not be counted against the Transferee Closing Cost Amount
under Section 15.08 below, unless such costs were required to be incurred in
connection with the Refinancing (collectively, the “Refinancing Third-Party
Costs”), in which event such Refinancing Third Party Costs shall be borne in
accordance with Section 15.08 below and shall be counted against the Transferee
Closing Cost Amount under Section 15.08 below. Subject to Section 15.05 below,
any Third-Party Costs incurred by Transferor or its Affiliates shall be paid
solely by Transferor without contribution from Transferee, unless such costs are
Refinancing Third-Party Costs, in which event such costs and expenses, shall be
borne in accordance with Section 15.08 below. It is understood, acknowledged and
agreed by Transferor and Transferee that, subject to Section 15.05 below, any
Refinancing Third-Party Costs incurred in connection with the Refinancing shall
be borne in accordance with Section 15.08 below regardless of whether any such
Refinancing Third-Party Costs would have been incurred by Transferee or its
Affiliates had there been no Refinancing and such Refinancing Third Party Costs
shall be counted against the Transferee Closing Cost Amount. Any Third-Party
Costs incurred by Transferee which are not also Refinancing Third-Party Costs,
shall be paid solely by Transferee (and shall not be counted against the
Transferee Closing Cost Amount) and any Third-Party Costs incurred by Transferor
which are not also Refinancing Third-Party Costs, shall be paid solely by
Transferor. As used herein, the term “Third-Party Costs” shall mean all third
party, out-of-pocket due diligence costs incurred in connection with the
evaluation of the Real Property, the Facilities, Newco, the Company, the Pool
Companies, Santa Monica LP, Santa Monica GP and the Facility Owners, including,
without limitation, surveys, soil tests, engineering tests or other tests,
environmental studies, market studies, other studies, reports, and property
appraisals. Subject to Section 15.05

 

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below, to the extent that the Refinancing Third-Party Costs incurred by
Transferee or its Affiliate are known and have or shall be paid on or prior to
the Closing Date by Transferee or its Affiliate, Transferor shall reimburse
Transferee for Transferor’s allocated share of such costs in accordance
Section 15.08 below in immediately available funds. Subject to Section 15.05
below, to the extent that the Refinancing Third-Party Costs incurred by
Transferor or its Affiliate are known and have or shall be paid on or prior to
the Closing Date by Transferor or its Affiliate, Transferee shall reimburse
Transferor for Transferee’s allocated share of such costs in accordance with
Section 15.08 below in immediately available funds.

Section 15.02 Title Costs. Subject to Section 15.05 below, the cost of the Title
Commitments and the Title Policies (including any non-imputation endorsements
and other customary endorsements thereto) and any escrow costs and other fees
associated therewith (collectively, the “Title Insurance Costs”) shall be borne
by Section 15.08 below.

Section 15.03 Transfer Taxes. Any real estate transfer taxes, fees or similar
charges incurred in connection with the Restructuring (collectively, the
“Transfer Taxes”) will be borne in accordance with Section 15.08 below.

Section 15.04 Other Closing Costs. Except as explicitly set forth herein, all
other costs, expenses and legal fees incurred by Transferee or Transferor in
connection with the Closing, including, without limitation, costs, expenses and
legal fees incurred in connection with (i) the Refinancing, and (ii) the
issuance of the Licenses to Newco, the Company, the Facility Lessees, the
Facility Owners and/or Manager (collectively, the “Other Shared Closing Costs”),
shall be borne in accordance with Section 15.08 below.

Section 15.05 Transferee Mezz Financing Cost Reimbursement. Notwithstanding
anything to the contrary contained herein, in the event that Transferee is
unable to obtain the Transferee Mezz Financing on terms satisfactory to
Transferee and the Closing does not occur for any reason, then Transferee shall
reimburse Transferor promptly upon demand, accompanied by reasonable detailed
backup information, for all reasonable out of pocket costs and expenses incurred
by Transferor solely in connection with this transaction, the proposed
Restructuring and the proposed Refinancing, including, without limitation,
attorneys fees, expenses and disbursements, Local Counsel Costs, Third Party
Costs, Title Insurance Costs, Other Shared Closing Costs, Refinancing Fees,
Other Refinancing Fees and Expenses (collectively, the “Transferor Reimbursable
Transaction Costs”); provided, however, (a) the Transferor Reimbursable
Transaction Costs payable to Transferor shall not exceed in the aggregate, an
amount equal to Four Million and No/100 Dollars ($4,000,000.00) less any
Transferor Reimbursable Transaction Costs which Transferee has previously paid
on Transferor’s behalf and (b) if (x) Transferee is unable to obtain the
Transferee Mezz Financing, (y) the Closing does not occur for a reason other
than Transferee’s inability to obtain the Transferee Mezz Financing and (z) but
for such reason Transferee would have been able to obtain the Transferee Mezz
Financing, then Transferor shall not be entitled to any Transferor Reimbursable
Transaction Costs under this Section 15.05. Transferee agree that in the event
Transferor Reimbursable Transaction Costs are due from Transferee to Transferor
hereunder, Transferor may (but is not obligated to and any failure to do so
shall not waive Transferor’s right to reimbursement of the Transferor
Reimbursable Transaction Costs), subject to Section 13.02(e) hereof, instruct
Escrow Agent in its Transferor’s Failure of Condition Objection Notice to, at
Transferor’s option, make

 

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such reimbursement to Transferor from the Down Payment, it being understood that
if Transferor elects to take reimbursement from the Down Payment, then to the
extent the Transferor Reimbursable Transaction Costs exceed the Down Payment,
Transferee shall remain obligated to reimburse Transferor an amount to such
excess in accordance with the terms of this Section 15.05 and to the extent the
Transferor Reimbursable Transaction Costs do not exceed the Down Payment, the
difference between the Down Payment and the Transferor Reimbursable Transaction
Costs shall be delivered to the Transferee. In connection with the closing of
the Transferee Mezz Financing, Transferor acknowledges and agrees to execute and
deliver to the Transferee Mezz Lender, at Closing, a recognition/comfort letter
in the form attached hereto as Exhibit S (the “Mezz Loan Recognition
Agreement”). In no event shall Transferor be entitled to any Transferor
Reimbursable Transaction Costs if the Closing does not occur because Transferor
fails or otherwise refuses to execute and deliver the Mezz Loan Recognition
Agreement at Closing.

Section 15.06 Intentionally Omitted.

Section 15.07 Other Transferee Mezz Financing Costs. Notwithstanding anything to
the contrary contained herein, Transferee shall pay the fees and expenses of its
own attorneys, accountants, financial advisors, investment bankers and employees
in connection with the preparation and negotiation of the Transferee Mezz
Financing, including, without limitation, any fees, costs and expenses payable
to Lender in connection with the Transferee Mezz Financing. In no event shall
any such costs be counted against the Transferee Closing Cost Amount or entitle
Transferee to capital account credit under the JV Agreement.

Section 15.08 Transferee Closing Cost Amount. Transferee shall bear the costs of
any Refinancing Third-Party Closing Costs, Local Counsel Costs, Title Insurance
Costs, Transfer Taxes, Other Shared Closing Costs (other than costs of
preparation and negotiation of the Documents which shall be borne by Transferor
and Transferee as set forth in Section 15.01 above), Refinancing Fee or Other
Refinancing Fees and Expenses to the extent that such costs are equal to or less
than the Transferee Closing Cost Amount. To the extent that any Refinancing
Third-Party Closing Costs, Local Counsel Costs, Title Insurance Costs, Transfer
Taxes, Other Shared Closing Costs (other than costs of preparation and
negotiation of the Documents which shall be borne by Transferor and Transferee
as set forth in Section 15.01 above), Refinancing Fee or Other Refinancing Fees
and Expenses are greater than the Transferee Closing Cost Amount (such greater
costs, the “Shared Expenses”), then such greater costs will be borne by
Transferor and Transferee in accordance with their respective percentage
interests in Newco following the Restructuring. Any payments by Transferor or
Transferee in respect of any Shared Expenses shall be deemed capital
contributions of Transferor and Transferee, as applicable, under the JV
Agreement. Transferor and Transferee hereby acknowledge and agree that amount of
the Transferee Closing Cost Amount due and payable by Transferee pursuant to
this Section 15.08 shall be netted and paid from the Transferee Cash
Contribution Amount.

Article XVI.

REFINANCING

Section 16.01 Cooperation. Transferor and Transferee will cooperate and use
commercially reasonable efforts to secure the Refinancing. The proceeds of the
Refinancing shall be utilized at Closing to repay in full the Existing Owner
Financing encumbering the MetSun Facilities.

 

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Section 16.02 Financing Fees. Subject to Section 15.06 above, any (a) financing
fee, extension fee, rate lock fee, interest rate breakage costs or other similar
fee in connection with the Refinancing (a “Refinancing Fee”) required to be paid
prior to the Closing, (b) Refinancing Third-Party Costs and (c) any other fees
and expenses incurred in connection with the Refinancing (including, without
limitation, any legal fees of a lender, any mortgage recordation or similar fees
and any due diligence costs incurred by a lender) (collectively, the “Other
Refinancing Fees and Expenses”) shall be shall be borne in accordance with
Section 15.08 above.

Section 16.03 Refinancing Closing. The closing of the Refinancing and the
Closing hereunder shall occur simultaneously. At the Closing, Transferor and
Transferee shall deliver, and shall cause Newco and its subsidiaries to deliver,
those documents, instruments and other deliveries as are required to be
delivered to consummate the Refinancing, including, without limitation, any
guaranties, to the extent reasonably acceptable to Transferor and Transferee,
and any such documents shall constitute Restructuring Documents hereunder.

Article XVII.

REPRESENTATIONS AND WARRANTIES OF MANAGER

Section 17.01 Manager Representations. Manager hereby represents and warrants to
Transferee as follows:

(a) Manager is a Virginia corporation duly formed and validly existing under the
laws of the state of its organization, with all requisite power and authority to
carry on its business as now being conducted. Manager has all requisite power
and authority to enter into this Agreement and, at Closing, shall have all
requisite power and authority to enter into the other agreements contemplated to
be entered into by it in connection herewith and to carry out the transactions
contemplated hereby and thereby.

(b) The execution and delivery of this Agreement and the other agreements to be
entered into by it in connection herewith and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of Manager. This Agreement has been, and such other
agreements to be entered into by Manager will be, executed and delivered by a
duly authorized officer of Manager and upon execution of same shall constitute
the valid and binding obligations of Manager, enforceable against Manager in
accordance with the terms hereof and thereof, subject as to enforcement to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors rights and to general principles of equity.

(c) The execution, delivery and performance of this Agreement and all other
agreements contemplated hereby by Manager do not: (i) to Manager’s knowledge
violate any decree or judgment of any court or governmental authority that may
be applicable to Manager; (ii) to Manager’s knowledge violate any law (or
regulation promulgated under any law); (iii) violate or conflict with, or result
in a breach of, or constitute a default under (or an event

 

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with or without notice or lapse of time or both would constitute a
default) under, any contract or agreement to which Manager is a party; or
(iv) violate or conflict with any provision of the organizational documents of
Manager.

Article XVIII.

MISCELLANEOUS

Section 18.01 Further Actions. From time to time before, at and after the
Closing, each party, at its expense and without further consideration, will
execute and deliver such documents as reasonably requested by any other party in
order more effectively to consummate the transactions contemplated hereby.

Section 18.02 Intentionally Omitted.

Section 18.03 Notices. All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered by
courier (including overnight delivery service) or sent by registered or
certified mail, first class, postage prepaid, or by electronic mail or facsimile
(provided that an additional copy is delivered by one of the foregoing methods),
addressed as follows:

(a) If to Transferor:

c/o Sunrise Senior Living, Inc.

7900 Westpark Drive, Suite T-900

McLean, Virginia 22102

Attn.: General Counsel

Telecopy No.: (703) 744-1990

Telephone No.: (703) 854-0334

with a copy to:

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York 10019

Attn.: Eugene A. Pinover, Esq.

Telecopy No.: (212) 728-9254

Telephone No.: (212) 728-8254

(b) If to Transferee, to:

CHT Partners, LP

CNL Center at City Commons

450 South Orange Ave.

Orlando, Florida 32801

Attn.:    Joseph T. Johnson, SVP and CFO and    Holly Greer, SVP and General
Counsel

Telecopy No.: 407-540- 2544 Telephone No.:    407-540-7618 (Johnson)   
407-540-7546 (Greer)

 

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with a copy to:

Lowndes, Drosdick, Doster, Kantor & Reed, PA

215 North Eola Drive

Orlando, Florida 32801

Attn.: Peter Luis Lopez, Esq.

Telecopy No.: 407-843-4444

Telephone No.: 407-418-6277

or such other address as a party may from time to time notify the other party in
writing (as provided above). Any such notice, demand or communication shall be
deemed to have been given (i) if so mailed, as of the close of the fifth
Business Day following the date so mailed, (ii) if delivered by courier, on the
date received and (iii) if sent by facsimile, on the date transmitted if during
normal business hours of the recipient, and otherwise on the next Business Day
of the recipient, in each case as evidenced by receipt by the sending party of
electronic confirmation of successful transmission form the receiving party’s
facsimile machine.

Section 18.04 Entire Agreement. This Agreement, the Exhibits and the other
Documents contain the entire understanding among the parties with respect to the
subject matter hereof and are intended to be a full integration of all prior or
contemporaneous agreements, conditions or undertakings among the parties hereto.
There are no promises, agreements, conditions, undertakings, warranties or
representations, oral or written, express or implied, among the parties with
respect to the subject matter hereof other than as set forth in this Agreement
and the Exhibits and other Documents.

Section 18.05 Not Construed Against Drafter. This Agreement has been negotiated
and prepared by the parties and their respective counsel, and should any
provision of this Agreement require judicial interpretation, the court
interpreting or construing the provision shall not apply the rule of
construction that a document is to be construed more strictly against one party.

Section 18.06 Binding Effect; Benefits. Except as otherwise provided herein,
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors or permitted assigns. Except to the
extent specified herein, nothing in this Agreement, express or implied, shall
confer on any person other than the parties hereto and their respective
successors or permitted assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.

Section 18.07 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by any party without the
prior written consent of the other parties, provided that Transferor or
Transferee may assign all of their respective rights under this Agreement to an
Affiliate, provided further that (i) the respective representations and
warranties of Transferor or Transferee hereunder shall be true and correct in
all material respects as applied to the applicable assignee, (ii) both
Transferee or Transferee, as applicable, and the assignee shall execute and
deliver to the other parties hereto a written instrument in form and substance
satisfactory to such parties, in their reasonable discretion, in which
Transferee or Transferee, as applicable, and the assignee agree to be jointly
and severally liable for

 

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performance of all of the applicable assignee’s obligations under this
Agreement, (iii) Transferee or Transferor, as applicable, and the assignee shall
deliver such other documents and instruments as reasonably requested by the
other parties hereto, including appropriate certified resolutions of the members
or boards of directors of Transferee or Transferor, as applicable, and the
assignee and (iv) Transferor or Transferee, as applicable, shall remain fully
liable for its obligations under this Agreement.

Section 18.08 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Delaware without
regard to its principles of conflicts of laws.

Section 18.09 Amendments and Waivers. No term or provision of this Agreement may
be amended, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against whom the enforcement of such amendment,
waiver, discharge or termination is sought. Any waiver shall be effective only
in accordance with its express terms and conditions.

Section 18.10 Severability. Any provision of this Agreement which is
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such unenforceability without invalidating the remaining
provisions hereof, and any such unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by applicable law, the parties hereto hereby waive any
provision of law now or hereafter in effect which renders any provision hereof
unenforceable in any respect.

Section 18.11 Headings. The captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.

Section 18.12 Counterparts. This Agreement may be executed in any number of
counterparts, and by any party on separate counterparts, each of which shall be
an original, and all of which together shall constitute one and the same
instrument.

Section 18.13 References. All references in this Agreement to Articles and
Sections are to Articles and Sections contained in this Agreement unless a
different document is expressly specified.

Section 18.14 Exhibits. Unless otherwise specified herein, each Exhibit referred
to in this Agreement is attached hereto, and each such Exhibit (other than
Exhibits that are to be separately executed and delivered as Documents) is
hereby incorporated by reference and made a part hereof as if fully set forth
herein.

Section 18.15 Attorneys’ Fees. In the event any 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.

 

48

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Section 18.16 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN
ANY PROCEEDINGS BROUGHT BY ANY OTHER PARTY IN CONNECTION WITH ANY MATTER ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THE TRANSACTION, THIS AGREEMENT, SELLER’S
INTEREST, THE FACILITIES OR THE RELATIONSHIP OF THE PARTIES HEREUNDER. THE
PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING (AND NOT BE MERGED THEREIN)
OR ANY EARLIER TERMINATION OF THIS AGREEMENT.

Section 18.17 Facsimile and PDF Signatures. Signatures to this Agreement
transmitted by telecopy or by electronic mail in PDF format shall be valid and
effective to bind the party so signing. Each party agrees to promptly deliver an
execution original to this Agreement with its actual signature to the other
parties, but a failure to do so shall not affect the enforceability of this
Agreement, it being expressly agreed that each party to this Agreement shall be
bound by its own telecopied signature or signature transmitted by electronic
mail in PDF format and shall accept the telecopied signature or signature
transmitted by electronic mail in PDF format of each other party to this
Agreement.

Section 18.18 Informational Meetings. Transferor and Transferee each agree to
hold meetings with the other party at reasonable times and upon reasonable
notice to review and discuss the status of this Agreement and the Refinancing.
Such meetings shall be held at the corporate headquarters of Transferor or
Transferee or by telephone, as agreed to by the parties.

[SIGNATURES FOLLOW ON NEXT PAGE]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first written above.

 

TRANSFEROR: SUNRISE SENIOR LIVING INVESTMENTS, INC., a Virginia corporation By:
 

/s/ Edward W. Burnett

Name:  

Edward W. Burnett

Title:  

Vice President

TRANSFEREE:

CHT PARTNERS, LP, a

Delaware limited partnership

By:   CHT GP, LLC, a   Delaware limited liability company,   its general partner
By:   CNL Healthcare Trust, Inc., a   Maryland corporation, managing   member of
general partner By:  

/s/ Holly Greer

  Name:   Holly Greer   Title:   Senior Vice President MANAGER SUNRISE SENIOR
LIVING MANAGEMENT, INC., a Virginia corporation By:  

/s/ Edward W. Burnett

Name:  

Edward W. Burnett

Title:  

Vice President

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Executed for the purpose of acknowledging and agreeing

to the obligations of the Escrow Agent hereunder:

ESCROW AGENT

 

FIRST AMERICAN TITLE INSURANCE COMPANY

By:

 

/s/ Kara M. Grassi

Name:

 

Kara M. Grassi

Title:

 

V.P. and NCS-FL Underwriting Mgr

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Schedule 1

Example Calculation of Quarterly Rate Differential

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Exhibit A

Facilities; Facility Owners

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Exhibit B

Refinancing Term Sheet

(See attached.)

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Exhibit C

Prior Management Agreements and Prior Owner Agreements

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Exhibit D

Form of Assignment and Assumption of Interest Agreement

(See attached.)

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Exhibit E

Intentionally Omitted

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Exhibit F

Transferor’s Non-Imputation Affidavit

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Exhibit G

Intentionally Omitted

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Exhibit H

Non-Foreign Status Affidavit

(See attached.)

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Exhibit I

Form of JV Agreement

(See attached.)

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Exhibit J

Form of Management Termination

(See attached.)

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Exhibit K

Form of Owner Agreement Termination

(See attached.)

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Exhibit L

Form of Termination of Manager Pooling Agreement

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Exhibit M

Form of Operating Lease

(See attached.)

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Exhibit N

Form of New Management Agreement

(See attached.)

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Exhibit O

Form of Management Agreement Guaranty

(See attached.)

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Exhibit P

Form of Manager Pooling Agreement

(See attached.)

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Exhibit Q

Form of Delegation Agreement

(See attached.)

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Exhibit R

Form of Contribution and Indemnification Agreement

(See attached.)

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Exhibit S

Form of Mezz Loan Recognition/Comfort Letter

(See attached.)