PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into as of
this 28th day of January, 2013 (the “Effective Date”), by and among ALEDO SENIOR
HOUSING LLC, an Illinois limited liability company (“Seller”) and CORNERSTONE
HEATHCARE REAL ESTATE FUND, INC., a Maryland corporation, or its assignee
(“Buyer”).

 

1.                  Purchase and Sale. On the terms and conditions set forth
herein, Seller shall sell, assign, transfer, convey and deliver to Buyer and
Buyer shall purchase from Seller its interest in the following, which are
hereinafter referred to collectively as the “Property”:

 

(a)                The improvements located on the Real Property, consisting of
one (1) skilled nursing facility as described in Schedule 1(a) attached hereto
(“Facility”), owned by Seller, and all right, title and interest of Seller in
and to the items described in (a) through (f) herein;

 

(b)               All of the real estate on which the Facility is situated,
together with all tenements, easements, appurtenances, privileges, rights of
way, and other rights incident thereto, all building and improvements and any
parking lot to the Facility located thereon situated in the State of Illinois
(the “State”), which is described in Exhibit A attached hereto and made a part
hereof by this reference (collectively, the “Real Property”);

 

(c)                All of the tangible personal property, inventory, equipment,
machinery, supplies including drugs and other supplies, spare parts, furniture,
furnishings, warranty claims, contracts, including but not limited to supply
contracts, contracts rights, intellectual property, including but not limited to
patents, trade secrets, and all rights and title to the names under which the
Facility operate, mailing lists, customer lists, vendor lists, resident files,
books and records owned by the Seller, who may retain copies of same, and shall
have reasonable access to such books and records after the Closing as required
for paying taxes and responding to legal inquiry, as such personal property is
described in Schedule 1(c) attached hereto (collectively, the “Personal
Property”);

 

(d)               All transferable licenses, permits, certifications, assignable
guaranties and warranties in favor of Seller, approvals or authorizations and
all assignable intangible property not enumerated herein which is used by the
Seller in connection with the Facility, and all other assets whether tangible or
intangible; provided, that Seller shall retain all licenses required to be
retained by Seller in order to operate the current business within the Facility;

 

(e)                Except for the names and marks described on Schedule 1(e),
all trade names or other names commonly used to identify the Facility and all
goodwill associated therewith. The intent of the parties is to transfer to Buyer
only such names and goodwill associated with the Facility itself and not with
Seller or any affiliate of Seller, so as to avoid any interference with the
unrelated business activities of Seller; and

 

(f)                All telephone numbers used in connection with the operation
of the Facility, and to the extent not described above, all goodwill of Seller
associated with the Facility (the items described in clauses (e) and (f) above
are collectively referred to as “Intangibles”).

 

 

 

 

2.                  Excluded Assets. Seller’s cash, investment securities, bank
account(s) and accounts receivable, restricted reserves and deposits
attributable and relating to the operation of Seller’s Facility, and Seller’s
corporate minute books and corporate tax returns, partnership records, and other
corporate and partnership records shall be excluded from the Facility sold by
Seller to Buyer hereunder as well as Seller’s real property not identified in
Schedule 1(a) (the “Excluded Assets”).

 

3.                  Purchase Price; Deposits. The following shall apply with
respect to the Purchase Price of the Property:

 

(a)                The purchase price (the “Purchase Price”) payable by Buyer to
Seller for the Facility is Eight Million Seven Hundred Seventy-Five Thousand and
00/100 Dollars ($8,775,000.00).

 

(b)               Prior to the Closing, Seller and Buyer shall work in good
faith to determine the allocation of the Purchase Price among the assets being
sold by Seller under this Agreement. If the parties are unable to reach
agreement on such allocation prior to the Closing, then each party shall be
allowed to separately decide how the Purchase Price shall be allocated among the
assets being sold by Seller under this Agreement; provided such allocation shall
not be binding on the other party.

 

(c)                Within three (3) business days after this Agreement is fully
executed by the parties, Buyer shall deposit the sum of Fifty Thousand and
00/100 Dollars ($50,000.00) as an earnest money deposit (“Initial Deposit”) with
Stewart Title Company at its office at 2010 Main Street, #250, Irvine,
California 92614, Attention: Carol Wright, (“Title Company” or “Escrow Agent”)
and Escrow Agent will deposit it into an interest-bearing account with the
interest for the benefit of Buyer. In addition, if Buyer has not terminated this
Agreement on or before the expiration of the Due Diligence Period (defined
below), then Buyer shall deposit with Escrow Agent an additional One Hundred
Thousand and 00/100 Dollars ($100,000.00) (“Additional Deposit”) within three
(3) business days following the expiration of the Due Diligence Period (the
Initial Deposit and Additional Deposit are collectively referred to as the
“Deposit”). Interest earned on the Deposit shall be paid to the party entitled
to such amount as provided in this Agreement.

 

(d)               At Closing, the Deposit shall be credited against the Purchase
Price and Buyer shall deposit the balance of the Purchase Price in Cash to the
Escrow Agent.

 

(e)                At Closing, Buyer and Seller agree that the amount of One
Hundred Fifty Thousand and 00/100 Dollars ($150,000.000) (the “Property Tax
Holdback Proceeds”) shall be held back in Escrow until the earlier of (i) three
(3) days after Seller provides written notice to Buyer that the property tax
bill appeal with respect to the property tax bill for the Property for the 2011
and 2012 tax years has settled for an amount at or below One Hundred Thousand
and 00/100 Dollars ($100,000.00) (the “Property Tax Threshold Amount”), which
notice shall include written evidence from the tax assessor for the County of
Mercer or other governmental agency responsible for the assessment of real
property taxes against the Property, or (ii) November 30, 2013. If the property
tax bill appeal is settled at or below the Property Tax Threshold Amount and
Seller provides Buyer with notice that all prior property taxes have been paid
and the back-up documentation as provided above, Buyer and Seller shall direct
Escrow Agent to release the Property Tax Holdback Proceeds to Seller. If the
property tax bill appeal does not settle below the Property Tax Threshold Amount
by November 30, 2013, Buyer and Seller shall direct Escrow Agent to release the
Property Tax Holdback Proceeds to Buyer. The Property Tax Holdback Proceeds
shall be held in an interest bearing account. The provisions of this Section
3(e) shall survive Closing.

 

 

 

 

(f)                Buyer shall not assume or pay, and Seller shall continue to
be responsible for, any and all debts, obligations and liabilities of any kind
or nature, fixed or contingent, known or unknown, of Seller not expressly
assumed by Buyer in this Agreement. Specifically, without limiting the
foregoing, Buyer shall not assume any obligation, liability, cost, expense,
claim, action, suit or proceeding pending as of the Closing, nor shall Buyer
assume or be responsible for any subsequent claim, action, suit or proceeding
arising out of or relating to any such other event occurring, with respect to
the manner in which Seller conducted its business at the Facility, on or prior
to the date of the Closing Date. In addition, Buyer shall not assume successor
liability obligations to Medicare, Medicaid, HMO or any other third party payer
programs or be responsible for recoupment’s, fines, or penalties required to be
paid to such parties as a result of the operation of the Facility prior to the
Closing Date by Seller or Seller’s operating entity (“Operator”)

 

4.                  Closing. The closing of the purchase and sale transactions
pursuant to this Agreement (“Closing”) shall occur no later than thirty (30)
days after the expiration of the Due Diligence Period (“Closing Date”). The
Closing shall take place through Seller’s delivery of a special warranty deed
and Buyer’s delivery of cash or immediately available funds through an escrow
agreement (the “Escrow”) to be established with the Escrow Agent pursuant to
form escrow instructions which shall be modified to be consistent with the terms
and provisions of this Agreement, and which shall be mutually agreed upon by the
parties hereto.

 

5.                  Conveyance. Title to the Facility shall be conveyed to Buyer
by a special warranty deed in the form attached hereto as Exhibit E (the
“Deed”), and bill of sale in form attached hereto as Exhibit F (“Bill of Sale”).
Fee simple indefeasible title to the Real Property, and marketable title to the
Personal Property, shall be conveyed from Seller to Buyer or Buyer’s nominee in
“AS-IS, WHERE-IS” condition, free and clear of all liens, charges, easements and
encumbrances of any kind, other than:

 

(a)                Liens for real estate taxes or assessments not yet due and
payable;

 

(b)               The standard printed exceptions included in the Title
Commitment, as defined in Section 14(a) herein; unless objected to in writing by
Buyer during the Due Diligence Period;

 

(c)                Such exceptions that appear in the Title Commitment and that
are either waived or approved by Buyer in writing pursuant to Section 14(b)
herein;

 

(d)               Liens or encumbrances caused by the actions of Buyer but not
those caused by the actions of Seller; and

 

The items described in this Section 5 are sometimes collectively referred to as
the “Permitted Exceptions.”

 

 

 

 

6.                  Buyer’s Due Diligence.

 

(a)                Buyer shall have seventy-five (75) days from the period
commencing from the date Buyer notifies Seller that it has received the
requested Due Diligence material required to complete Buyers Due Diligence (the
“Due Diligence Period”), Seller shall permit the officers, employees, directors,
agents, consultants, attorneys, accountants, lenders, appraisers, architects,
investors and engineers designated by Buyer and representatives of Buyer
(collectively, the “Buyer’s Consultants”) access to, and entry upon the Real
Property and the Facility to perform its normal and customary due diligence,
including, without limitation, the following (collectively, the “Due Diligence
Items”):

 

(i)                 Review of vendor contracts (“Contracts”) and leases
(“Leases”) to which the Facility (or the Seller, on behalf of the Facility) are
a party, as set forth on Schedule 8.6 attached hereto;

 

(ii)               Conduct environmental investigations (including a Phase 1
Environmental Audit);

 

(iii)             Inspection of the physical structure of the Facility;

 

(iv)             Review of current Title Commitment, as defined in Section 14
herein, and underlying documents referenced therein;

 

(v)               Review of ALTA Surveys, as defined in Section 14 herein, for
the Facility;

 

(vi)             Inspection of the books and records of the Facility and that
portion of the Seller’s books and records which pertain to the Facility;

 

(vii)           Review of the Due Diligence Items, as described in
Schedule 6(a)(vii) attached hereto, to be provided by Seller within five (5)
business days following the Effective Date;

 

(viii)         Conduct such other inspections or investigations as Buyer may
reasonably require relating to the ownership, operation or maintenance of the
Facility;

 

(ix)             Review of resident files, agreements, and any other
documentation regarding the residents of the Facility, which review shall in all
events be subject to all applicable laws, rules and regulations concerning the
review of medical records and other types of patient records; and

 

(x)               Review of files maintained by the State relating to the
Facility; and

 

(xi)             Review of all drawings, plans and specifications and all
engineering reports for the Facility in the possession of or readily available
to Seller; and

 

 

 

 

(xii)           Seller will furnish copies of all environmental reports,
property condition reports, appraisals, title reports and ALTA Surveys (or
surveys) that it currently has in its possession.

 

(xiii)         Review copies of currently effective written employment manuals
or written employment policies and/or procedures have been provided to or for
employees.

 

Notwithstanding the foregoing provisions of this Subsection, in the event Seller
fails to deliver all Due Diligence Items listed in Schedule 6(a)(vii) on or
before the time set forth in Subsection (a)(vii) above, then the Due Diligence
Period shall be deemed extended on a day-to-day basis until Seller completes
such delivery of the Due Diligence Items to Buyer.

 

(b)               Buyer agrees and acknowledges that: (i) Buyer will not
disclose the Due Diligence Items or any other materials received from Seller
pursuant to this Agreement (the “Property Information”) or any of the
provisions, terms or conditions thereof, or any information disclosed therein or
thereby, to any party outside of Buyer’s organization, other than Buyer’s
Consultants; (ii) the Property Information is delivered to Buyer solely as an
accommodation to Buyer; (iii) Seller has not undertaken any independent
investigation as to the truth, accuracy or completeness of any matters set out
in or disclosed by the Property Information; and(iv) except as expressly
contained in this Agreement, Seller has not made and does not make any
warranties or representations of any kind or nature regarding the truth,
accuracy or completeness of the information set out in or disclosed by the
Property Information.

 

(c)                All due diligence activities of Buyer at the Facility shall
be scheduled with Seller upon two (2) business days prior notice. Reviews,
inspections and investigations at the Facility shall be conducted by Buyer in
such manner so as not to disrupt the operation of the Facility.

 

(d)               Buyer may, at its sole cost, obtain third party engineering
and physical condition reports and Phase I Environmental Audits covering the
Facility, certified to Buyer, prepared by an engineering and/or environmental
consultants acceptable to Buyer; provided, no inspection by Buyer’s Consultants
shall involve the taking of samples or other physically invasive procedures
(such as a Phase II environmental audit) without the prior written consent of
Seller, which consent shall not be unreasonably withheld or delayed.
Notwithstanding anything to the contrary contained in this Agreement, Buyer
shall indemnify, defend (with counsel acceptable to Seller) and hold Seller and
its employees and agents, and each of them, harmless from and against any and
all losses, claims, damages and liabilities, without limitation, attorneys’ fees
incurred in connection therewith) arising out of or resulting from Buyer’ or
Buyer’s Consultant’s exercise of its right of inspection as provided for in this
Section 6; provided, however, such indemnification shall not extend to matters
merely discovered by Buyer and/ or the acts or omissions of Seller or any third
party. The indemnification obligation of Buyer under this Section 6 shall
survive the termination of this Agreement for a period of twelve (12) months.
Following any audit or inspection as provided for herein, Buyer shall return the
Real Property and Facility to the condition in which they existed immediately
prior to such audit or inspection.

 

(e)                If the results of the foregoing inspections and audits are
not acceptable to Buyer in its sole and absolute discretion, Buyer may, upon
notice to Seller given on or before 5:00 p.m. (Pacific Time) on the last day of
the Due Diligence Period, terminate this Agreement and receive a refund of the
Deposit, and in such event, neither party shall have any further rights and
obligations under this Agreement, except for obligations which expressly survive
the termination of this Agreement. Failure of Buyer to deliver written notice of
approval prior to 5:00 p.m. (Pacific Time) on the last day of the Due Diligence
Period shall be deemed to constitute Buyer’s disapproval of the matters
described in this Section 6(a). If this Agreement shall be terminated prior to
Closing, upon Seller’s request, Buyer shall promptly return or destroy all
copies of the Due Diligence Items.

 

 

 

 

(f)                During the Due Diligence Period, Buyer shall obtain, at
Buyer’s election, a third party inspection report with respect to the Facility
(the “Inspection Report”). If the Inspection Report recommends any critical
repairs (the “Critical Repairs”) be made to the Facility, Buyer shall provide
Seller with written notice of the same prior to the expiration of the Due
Diligence Period, and the Critical Repairs shall be listed on a new Schedule
6(f) to be attached to the Agreement. Seller shall make all Critical Repairs
listed in the Inspection Report to the Facility at least ten (10) business days
prior to the Closing, at Seller’s sole cost and expense. Upon completion of the
Critical Repairs, Seller shall deliver to Buyer a completion letter or similar
notice documenting the completion of the Critical Repairs (the “Critical Repair
Completion Notice”) executed by Seller and Seller’s contractor and/or architect
who performed and/or supervised the construction of the Critical Repairs.

 

7.                  Prorations; Closing Costs; Possession; Post Closing
Assistance.

 

(a)                There will be no prorations at the Closing since Tenant, an
affiliate of Seller, shall remain responsible for all taxes, costs and expenses
relating to the Facility following the Closing pursuant to the Post Closing
Lease (as defined in Section 12(a)(v)). Seller and Tenant will make whatever
prorations are needed outside of the Escrow and the Closing.

 

(b)               Seller shall pay any state, county and local transfer taxes
arising out of the transfer of the Real Property.

 

(c)                Seller shall pay the cost of the owner’s title insurance
policy (including any premium attributable to extended coverage), as described
in this Agreement (excluding any survey exception or deletion of coverage).
Buyer shall pay the cost of any lender’s policy for Buyer’s lender, any title
endorsements requested by Buyer and its lender and the cost of updating or
obtaining new Surveys. Seller and Buyer shall equally share all fees of Escrow
Agent. All other costs associated with title and survey matters shall be paid in
accordance with Mercer County (and local) custom and practice.

 

(d)               Buyer and Seller shall each pay their own attorney’s fees.
Buyer shall pay for all costs of review of the Due Diligence Items and its
additional due diligence inspection costs including, without limitation, the
cost of any environmental reports.

 

(e)                On the Closing Date, Tenant shall take possession of the
Facility from Seller, subject to the terms and conditions of the Post Closing
Lease.

 

8.                  Representations and Warranties of Seller. Seller hereby
represents and warrants to Buyer that:

 

 

 

 

(a)                Legality.

 

(i)                 Organization, Corporate Powers, Etc. Seller is duly
organized, validly existing and in good standing under the laws of the State of
Illinois. Seller has full power, authority and legal right (A) to execute and
deliver, and perform and observe the provisions of this Agreement and each
Transaction Document, as defined herein, to which it is a party, (B) to transfer
good, indefeasible title to the Property to Buyer free and clear of all liens,
claims and encumbrances except for Permitted Exceptions (as defined in Section 5
hereof), and (C) to carry out the transactions contemplated hereby and by such
other instruments to be carried out by such party.

 

(ii)               Due Authorization, Etc. This Agreement and the Closing
Documents (collectively the “Transaction Documents”) have been, and each
instrument provided for herein or therein to which Seller is a party will be,
when executed and delivered as contemplated hereby authorized, executed and
delivered by Seller and the Transaction Documents constitute, and each such
instrument will constitute, when executed and delivered as contemplated hereby,
legal, valid and binding obligations of Seller and enforceable in accordance
with their terms.

 

(iii)             Governmental Approvals. To the best of Seller’s knowledge, no
consent, approval or other authorization (other than corporate or other
organizational consents which have been obtained), or registration, declaration
or filing with, any court or governmental agency or commission is required for
the due execution and delivery of any of the Transaction Documents to which
Seller is a party or for the validity or enforceability thereof against such
party other than the recording or filing for recordation of the Deed, which
recording shall be accomplished at Closing.

 

(iv)             Other Rights. No right of first refusal, option or preferential
purchase or other similar rights are held by any person with respect to any
portion of the Property.

 

(v)               No Litigation. Except as set forth on Schedule 8(a)(v)
attached hereto, neither Seller nor its registered agent for service of process
has been served with summons with respect to any actions or proceedings pending
or, to Seller’s actual knowledge, no such actions or proceedings are threatened,
against Seller before or by any court, arbitrator, administrative agency or
other governmental authority, which (A) individually or in the aggregate, are
expected, in the reasonable judgment of Seller, to materially and adversely
affect Seller’s ability to carry out any of the transactions contemplated by any
of the Transaction Documents or (B) otherwise involve any portion of the
Property including, without limitation, the Facility.

 

(vi)             No Conflicts. Neither the execution and delivery of the
Transaction Documents to which Seller is a party, compliance with the provisions
thereof, nor the carrying out of the transactions contemplated thereby to be
carried out by such party will result in (A) a breach or violation of (1) any
material law or governmental rule or regulation applicable to Seller now in
effect, (2) any provision of any of Seller’s organizational documents, (3) any
material judgment, settlement agreement, order or decree of any court,
arbitrator, administrative agency or other governmental authority binding upon
Seller, or (4) any material agreement or instrument to which Seller is a party
or by which Seller or its respective properties are bound; (B) the acceleration
of any obligations of Seller; or (C) the creation of any lien, claim or
encumbrance upon any properties or assets of Seller.

 

 

 

 

(b)               Property.

 

As of the Effective Date and the Closing Date, except as set forth on
Schedule 8(b):

 

(i)                 Seller has no actual knowledge of and has not received any
notice of outstanding deficiencies or work orders of any authority having
jurisdiction over any portion of the Property;

 

(ii)               Seller has no actual knowledge of and has not received any
notice of any claim, requirement or demand of any licensing or certifying agency
supervising or having authority over the Facility to rework or redesign it in
any material respect or to provide additional furniture, fixtures, equipment or
inventory so as to conform to or comply with any law which has not been fully
satisfied;

 

(iii)             Seller has not received any notice from any governmental
authority of any material violation of any law applicable to any portion of the
Real Property or to the Facility;

 

(c)                Condemnation. There is no pending or, to the actual knowledge
of Seller, threatened condemnation or similar proceeding or assessment affecting
the Real Property, nor, to the actual knowledge of Seller, is any such
proceeding or assessment contemplated by any governmental authority.

 

(d)               Hazardous Substances. Except as disclosed on Schedule 8(d), to
Seller’s actual knowledge, there has been no production, storage, manufacture,
voluntary or involuntary transmission, use, generation, treatment, handling,
transport, release, dumping, discharge, spillage, leakage or disposal at, on,
in, under or about the Real Property of any Hazardous Substances by Seller, or
any affiliate or agent thereof, except in strict compliance with all applicable
Laws. To Seller’s actual knowledge there are no Hazardous Substances at, on, in,
under or about the Real Property in violation of any Law, and to Seller’s actual
knowledge, there is no proceeding or inquiry by any federal, state or local
governmental agency with respect thereto. For purposes of this Agreement,
“Hazardous Substances” shall mean any hazardous or toxic substances, materials
or wastes, including, without limitation, those substances, materials and wastes
listed in the United States Department of Transportation Table (49 CFR 172.1 01)
or by the Environmental Protection Agency as hazardous substances (40 CFR Part
302 and amendments thereto) or such substances, materials and wastes which are
or become regulated under any applicable local, state or federal law
(collectively, “Laws”), including, without limitation, any material, waste or
substance which is (i) a hazardous waste as defined in the Resource Conservation
and Recovery Act of 1976, as amended (42 U.S.C. § 6901 et seq.); (ii) a
pollutant or contaminant or hazardous substance as defined in the Comprehensive
Environmental Response. Compensation and Liability Act of 1980, as amended (42
U.S.C. § 9601 et seq.); (iii) a hazardous substance pursuant to § 311 of the
Clean Water Act (33 U.S.C. § 1251, et seq., 33 U.S.C. § 1321) or otherwise
listed pursuant to § 307 of the Clean Water Act (33 U.S.C. § 1317); (iv) a
hazardous waste pursuant to § 1004 of the Resource Conservation and Recovery Act
(42 U.S.C. § 6901 et seq.); (v) polychlorinated biphenyls (PCBs) as defined in
the Federal Toxic Substance Control Act, as amended (15 U.S.C. § 2501 et seq.);
(vi) hydrocarbons, petroleum and petroleum products; (vii) asbestos; (viii)
formaldehyde or medical or biohazardous waste; (ix) radioactive substances; (x)
flammables and explosives; (xi) any state statutory counterparts to those
federal statutes listed herein; or (vii) any other substance, waste or material
which could presently or at any time in the future require remediation at the
behest of any governmental agency. Any reference in this definition to Laws
shall include all rules and regulations which have been promulgated with respect
to such Laws.

 

 

 

 

(e)                Brokers. Other than Heavenrich & Company, Inc. (“Seller’s
Broker”), whom represents Seller, each party represents and warrants to the
other party that it has not dealt with any other broker, salesman, finder or
consultant with respect to this Agreement or the transactions contemplated
hereby. Seller shall be responsible for any commission and/or fees payable to
Seller’s Broker. Each party agrees to indemnify, protect, defend, protect and
hold the other party harmless from and against all claims, losses, damages,
liabilities, costs, expenses (including reasonable attorneys’ fees and
disbursements) and charges resulting from such indemnifying party’s breach of
the foregoing representation. The provisions of this Section 8(e) shall survive
the Closing or earlier termination of this Agreement for a period of twelve (12)
months.

 

(f)                Leases and Contracts. Schedule 8(f) is a list of all Leases
and Contracts relating to the Facility to which Seller is a party or by which
Seller may be bound. Seller has made or will promptly make available to Buyer
true, complete and accurate copies of all Leases and Contracts including,
without limitation, any modifications thereto. All of the Leases and Contracts
are in full force and effect without claim of material default there under, and,
except as may be set forth on Schedule 8(f).

 

(g)               Financial Statements. Schedule 8(g) contains (i) the balance
sheets of the Operator for the last three (3) fiscal years ending prior to the
date of this Agreement (audited if available and unaudited to the extent audited
statements are not available) and the unaudited balance sheets for each of the
past three (3) fiscal quarters completed prior to the date of this Agreement and
(ii) the related consolidated statements of income, results of operations,
changes in members’ equity and changes in financial position with respect to
each such period as compared with the immediately prior period (collectively,
the “Financial Statements”). The Financial Statements taken as a whole (A)
fairly present the financial condition and results of operation of the Operators
for the periods indicated, (B) are true, accurate, correct and complete in all
material respects, and (C) except as stated in Schedule 8(g) (or in the notes to
the Financial Statements) have been prepared in accordance with the Operator’s
tax basis reporting, as consistently applied. Except as disclosed in
Schedule 8(g), or otherwise disclosed in writing to Buyer, to Seller’s actual
knowledge neither Seller, as to the Facility, nor the Facility is obligated for
or subject to any material liabilities, contingent or absolute, and whether or
not such liabilities would be disclosed in accordance with tax basis reporting,
and Schedule 8(g) sets forth all notes payable, other long term indebtedness
and, to Seller’s actual knowledge, all other liabilities to which the Facility
and the Real Property are or at Closing (and following Closing) will be subject,
other than new indebtedness obtained by Buyer in connection with its purchase of
the Property. Seller has received no notice of default under any such
instrument.

 

 

 

 

(h)               Interests in Competitors, Suppliers and Customers. Other than
the Operator entities and except as set forth on Schedule 8(h), or in
Schedule 1(a) as constituting a part of the Facility, neither Seller nor any of
its members has any interest in any property used in the operation of, or holds
an interest in, any competitor, supplier or customer of Seller or the Facility.

 

(i)                 No Foreign Persons. Neither Seller nor its members is a
foreign person within the meaning of Sections 897 or 1445 of the Code, nor is
Seller a U.S. Real Property Holding Company within the meaning of Section 897 of
the Code.

 

(j)                 Licensure. As of the date hereof, except as set forth on
Schedule 8(j) attached hereto, there is no action pending or, to the actual
knowledge of Seller, recommended by the appropriate state or federal agency to
revoke, withdraw or suspend any license to operate the Facility, or
certification of the Facility, or any material action of any other type with
regard to licensure or certification. The Facility is operating and functioning
as a supportive living facility without any waivers from a governmental agency
affecting the Facility except as set forth in Schedule 8(j), and is fully
licensed for a supportive living facility, as applicable, by the State for the
number of beds and licensure category set forth in Schedule 1(a) hereto.
Schedule 8(j) attached hereto contains a complete and accurate list of all life
safety code waivers or other waivers affecting the Facility.

 

(k)               Regulatory Compliance.

 

(i)                 Seller or the Operator has duly and timely filed all reports
and other items required to be filed (collectively, the “Reports”) with respect
to any cost based or other form of reimbursement program or any other third
party payor (including without limitation, Medicare, Medicaid, medically
indigent assistance, Blue Cross, Blue Shield, any health maintenance, preferred
provider, independent practice or other healthcare related organizations, peer
review organizations, or other healthcare providers or payors) (collectively,
“Payors”) and have timely paid all amounts shown to be due thereon. At the time
of filing, to Seller’s actual knowledge, each Report was true, accurate and
complete. To Seller’s actual knowledge, all rights and obligations of the
Facility or Seller under such Reports are accurately reflected or provided for
in the Financial Statements.

 

(ii)               Except as set forth in Schedule 8(k) attached hereto and
Section 3(e) above, (A) neither Seller nor, to Seller’s actual knowledge, the
Operator is delinquent in the payment of any amount due under any of the Reports
for the Facility, (B) there are no written or threatened proposals by any Payors
for collection of amounts for which Seller or the Facility could be liable, (D)
there are no current or pending claims, assessments, notice, proposal to assess
or audits of Seller or Operator or the Facility with respect to any of the
Reports, and, to Seller’s actual knowledge, no such claims, assessments,
notices, or proposals to assess or audit are threatened, and (D) neither Seller
nor Operator has executed any presently effective waiver or extension of the
statute of limitations for the collection or assessment of any amount due under
or in connection with any of the Reports with respect to the Facility.

 

 

 

 

(iii)             Except as set forth in Schedule 8(k) attached hereto, neither
Seller nor the Operator has received notice of failure to comply with all
applicable Laws, settlement agreements, and other agreements with any state or
federal governmental body relating to or regarding the Facility (including all
applicable environmental, health and safety requirements), and Seller or the
Operator has and maintains all permits, licenses, authorizations, registrations,
approvals and consents of governmental authorities and all health facility
licenses, accreditations, Medicaid, Medicare and other Payor certifications
necessary for its activities and business including the operation of the
Facility as currently conducted. Each health facility license, Medicaid and
Medicare and other Payor certifications, Medicaid provider agreement and other
agreements with any Payors is in full force and effect without any waivers of
any kind (except as disclosed in Schedule 8(k)) and has not been amended or
otherwise modified, rescinded or revoked or assigned nor, to Seller’s actual
knowledge, (A) is there any threatened termination, modification, recession,
revocation or assignment thereof, (B) no condition exists nor has any event
occurred which, in itself or with the giving of notice, lapse of time or both
would result in the suspension, revocation, termination, impairment, forfeiture,
or non-renewal of any governmental consent applicable to Seller or to the
Facility or of any participation or eligibility to participate in any Medicare,
Medicaid, or other Payor program and (C) there is no claim that any such
governmental consent, participation or contract is not in full force and effect.

 

(l)                 Regulatory Surveys. Seller shall deliver to Buyer, in the
manner required pursuant to the terms of this Agreement, complete and accurate
copies of the survey or inspection reports made by any governmental authority
with respect to the Facility during the calendar years 2009, 2010, 2011 and
year-to-date 2012. To the best of Seller’s knowledge, after diligent
investigation, and except as shown on Schedule 8(l), all exceptions,
deficiencies, violations, plans of correction or other indications of lack of
compliance in such reports have been fully corrected and there are no bans or
limitations in effect, pending or threatened with respect to admissions to the
Facility nor any licensure curtailments in effect, pending or threatened with
respect to the Facility. Seller shall continue to deliver all such surveys,
inspection reports as and when same are received and/or filed as the case may be
prior to the Closing.

 

(m)             Licensed Bed/Current Rate Schedule. As of the Effective Date,
Schedule 8(m) sets forth (i) the number of licensed beds and the number of
operating beds in the Facility, (ii) the current standard private rates charged
by the Facility to all of its residents, and (iii) the number of beds or units
presently occupied in, and the occupancy percentage at, the Facility, including
the current rates charged by the Facility for each such occupied bed or unit.
Neither Seller nor any Operator has any life care arrangement in effect with any
current or future resident.

 

(n)               Operations. The Facility is reasonably and adequately equipped
and the Facility includes sufficient and adequate numbers of furniture,
furnishings, equipment, consumable inventory, and supplies to operate such
Facility as each is presently operated by Seller. Personal Property used to
operate Facility and to be conveyed to Buyer is free and clear of liens,
security interests, encumbrances, leases and restrictions of every kind and
description, except for Permitted Encumbrances and any liens, security interests
and encumbrances to be released at Closing.

 

 

 

 

(o)               No Misstatements, Etc. To the best of Seller’s knowledge,
neither the representations and warranties of Seller stated in this Agreement,
including the Exhibits and the Schedules attached hereto, nor the Due Diligence
Items or any certificate or instrument furnished or to be furnished to Buyer by
Seller in connection with the transactions contemplated hereby, contains or will
contain any untrue or misleading statement of a material fact.

 

(p)               Supplementation of Schedules; Change in Representations and
Warranties. Seller shall have the continuing right and obligation to supplement
and amend the Schedules herein on a regular basis including, without limitation,
Schedule 8(g), and Seller’s warranties and representations required hereunder,
as necessary or appropriate (i) in order to make any representation or warranty
not misleading due to events, circumstances or the passage of time or (ii) with
respect to any matter hereafter arising or discovered up to and including the
Closing Date, but Buyer shall not be deemed to have approved such supplemental
Schedules unless Buyer expressly acknowledges approval of same in writing. In
the event Seller amends any such Schedules, or Buyer or Seller gains actual
knowledge prior to the Closing that any representation or warranty made by the
other party contained in this Section 8 is otherwise untrue or inaccurate, such
party shall, within five (5) days after gaining such actual knowledge but in any
event prior to the Closing, provide the other party with written notice of such
inaccuracy, whereupon the noticed party shall promptly commence, and use its
best efforts to prosecute to completion, the cure of such matter, to the extent
any such matter is curable. If any such matter is not curable within reason and
is material, in Buyer’s reasonable business judgment, Buyer shall have the right
to terminate this Agreement upon written notice to Seller within five (5)
business days of receipt or delivery of such notice, as applicable, on the same
basis as set forth in Section 13(a) if during the Due Diligence Period and in
Section 13(b)(i)(i) herein if after expiration of the Due Diligence Period.

 

(q)               Survival of Representations and Warranties; Updates. The
representations and warranties of Seller in this Agreement shall not be merged
with the Deeds at the Closing and shall survive the Closing for the period of
three (3) years.

 

For purposes of this Agreement, the phrase “to Seller’s actual knowledge” or
words of similar import shall mean the actual knowledge of the general partner
or President, as applicable, of the entity comprising Seller.

 

9.                  Representations and Warranties of Buyer. Buyer hereby
warrants and represents to Seller that:

 

(a)                Organization, Corporate Powers, Etc. Buyer is a limited
liability company, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified and in good standing in each other state
or jurisdiction in which the nature of its business requires the same except
where a failure to be so qualified does not have a material adverse effect on
the business, properties, condition (financial or otherwise) or operations of
that person. Buyer has full power, authority and legal right (i) to execute and
deliver, and perform and observe the provisions of this Agreement and each
Transaction Document to which it is a party, and (ii) to carry out the
transactions contemplated hereby and by such other instruments to be carried out
by Buyer pursuant to the Transaction Documents.

 

 

 

 

(b)               Due Authorization, Etc. The Transaction Documents have been,
and each instrument provided for herein or therein to which Buyer is a party
will be, when executed and delivered as contemplated hereby, duly authorized,
executed and delivered by Buyer and the Transaction Documents constitute, and
each such instrument will constitute, when executed and delivered as
contemplated hereby, legal, valid and binding obligations of the Buyer
enforceable in accordance with their terms.

 

(c)                Governmental Approvals. To Buyer’s actual knowledge, no
consent, approval or other authorization (other than corporate or other
organizational consents which have been obtained), or registration, declaration
or filing with, any court or governmental agency or commission is required for
the due execution and delivery of any of the Transaction Documents to which
Buyer is a party or for the validity or enforceability thereof against such
party.

 

(d)               No Litigation. Except as set forth on Schedule 9(a)(iv)
attached hereto, neither Buyer nor its registered agent for service of process
has been served with summons with respect to any actions or proceedings pending
or, to Buyer’s actual knowledge, no such actions or proceedings are threatened,
against Buyer before or by any court, arbitrator, administrative agency or other
governmental authority, which individually or in the aggregate, are expected, in
the reasonable judgment of Buyer, to materially and adversely affect Buyer’s
ability to carry out any of the transactions contemplated by any of the
Transaction Documents.

 

(e)                No Conflicts. Neither the execution and delivery of the
Transaction Documents to which Buyer is a party, compliance with the provisions
thereof, nor the carrying out of the transactions contemplated thereby to be
carried out by such party will result in (i) a breach or violation of (A) any
material law or governmental rule or regulation applicable to Buyer now in
effect, (B) any provision of any Buyer’s organizational documents, (C) any
material judgment, settlement agreement, order or decree of any court,
arbitrator, administrative agency or other governmental authority binding upon
Buyer, or (D) any material agreement or instrument to which Buyer is a party or
by which Buyer or its respective properties are bound; (ii) the acceleration of
any obligations of Buyer; or (iii) the creation of any lien, claim or
encumbrance upon any properties or assets of Buyer.

 

(f)                No Misstatements, Etc. To the best of Buyer’s knowledge,
neither the representations and warranties of Buyer stated in this Agreement,
including the Exhibits and the Schedules attached hereto, nor any certificate or
instrument furnished or to be furnished to Seller by Buyer in connection with
the transactions contemplated hereby, contains or will contain any untrue or
misleading statement of a material fact.

 

(g)               Survival of Representations and Warranties; Updates. The
representations and warranties of Buyer in this Agreement shall not be merged
with the Deeds at the Closing and shall survive the Closing for the period of
three (3) years.

 

10.              Covenants of Seller. Seller covenants with respect to the
Facility as follows:

 

(a)                Pre-Closing. Except as otherwise set forth below, between the
date of this Agreement and the Closing Date, except as contemplated by this
Agreement or with the prior written consent of Buyer, which shall not be
unreasonably withheld, conditioned or delayed:

 

 

 

 

(i)                 Seller shall use its best efforts to cause the Operator to
operate the Facility diligently, in accordance with the Operator’s obligations
under its lease or other arrangement with Seller, and only in the ordinary
course of business.

 

(ii)               Seller shall use its best efforts to prevent the Operator
from making any material change in the operation of the Facility, and shall
prevent the Operator from selling or agreeing to sell any items of machinery,
equipment or other assets of the Facility, or otherwise entering into any
agreement affecting the Facility, except in the ordinary course of business;

 

(iii)             If Buyer approves the feasibility of the Property on or prior
to the expiration of the Due Diligence Period, from and after the expiration of
the Due Diligence Period, Seller shall use its best efforts to prevent the
Operator from entering into any Lease or Contract or commitment affecting the
Facility, except for Leases or Contracts entered into in the ordinary course of
business;

 

(iv)             During normal business hours and consistent with Section 6(c)
herein, Seller shall provide Buyer or its designated representative with access
to the Facility upon prior notification and coordination with Seller and the
Operator; provided, Buyer shall not materially interfere with the operation of
the Facility. At such times Seller and the Operator shall permit Buyer to
inspect the books and records of the Facility;

 

(v)               Within five (5) business days following the execution of this
Agreement by the parties, Seller shall deliver to Buyer the due diligence items
described on the Due Diligence List attached hereto as Schedule 6(a)(vii) (the
“Due Diligence Items”); provided, in the event certain Due Diligence Items
(“Unavailable Items”) are not readily accessible to Seller, Seller may identify
the Unavailable Items by written notice to Buyer within such five (5) business
day period and shall use its best efforts to deliver all Unavailable Items to
Buyer as promptly as possible, but in no event more than ten (10) business days
following the execution of this Agreement. If Buyer requests additional items
not included on Schedule 6(a)(vii), it will do so by written request delivered
by Seller and Seller will use its best efforts to provide such information
within five (5) business days within receipt of the request; and, provided
further, Seller shall continue to cause Operator to deliver to Buyer, following
the expiration of the Due Diligence Period, financial reports showing, among
other things, the EBITDAR (defined below) for the Facility for the trailing six
(6) month annualized operations for any given period. The term “EBITDAR” means
“earnings before interest, taxes, depreciation, amortization and rent and
reserves (reserves meaning additions to capital reserves).”

 

(vi)             Seller shall use its best efforts to prevent the Operator from
moving residents from the Facility, except (a) to any other Facility which is
owned by Seller and constitutes part of the Property as defined herein, (b) for
health treatment purposes or otherwise at the request of the resident, family
member or other guardian or (c) upon court order or the request of any
governmental authority having jurisdiction over the Facility;

 

(vii)           Seller shall use commercially reasonable efforts to cause the
Operator to retain the services and goodwill of the employees of the Operator
until the Closing;

 

(viii)         Seller shall maintain in force, or shall cause the Operator to
maintain in force, the existing hazard and liability insurance policies, or
comparable coverage, for the Facility as are in effect as of the date of this
Agreement;

 

 

 

 

(ix)             Seller shall, and shall cause the Operator, to file all
returns, reports and filings of any kind or nature, including but not limited
to, cost reports referred to in this Agreement, required to be filed by Seller
or the Operator on a timely basis and shall timely pay all taxes or other
obligations and liabilities or recoupments which are due and payable with
respect to the Facility in the ordinary course of business with respect to the
periods Seller or Operator operated the Facility;

 

(x)               Seller shall cause the Operator (a) to maintain all required
operating licenses in good standing, (b) to operate the Facility in accordance
with its current business practices and (c) to promptly notify Buyer in writing
of any notices of material violations or investigations received from any
applicable governmental authority;

 

(xi)             Seller shall use commercially reasonable efforts to cause the
Operator to make all customary repairs, maintenance and replacements required to
maintain the Facility in substantially the same condition as on the date of
Buyer’s inspection thereof, ordinary wear and tear excepted;

 

(xii)           Seller shall promptly notify Buyer in writing of any Material
Adverse Change, as defined herein, of which Seller becomes aware in the
condition or prospects of the Facility including, without limitation, sending
Buyer copies of all surveys and inspection reports of all governmental agencies
received after the date hereof and prior to Closing, promptly following receipt
thereof by the Operator. For purposes of this Agreement, a “Material Adverse
Change” shall mean: (i) a decrease in the adjusted rolling six (6) month EBITDAR
to less than Seven Hundred Sixty-Six Thousand and 00/100 Dollars ($766,000.00),
or (ii) loss of licensure, or (iii) loss of Medicaid or Medicare participation,
or (iv) any adverse action by a governmental agency which, with the passage of
time, would reasonably be expected to materially affect in a negative manner
licensure at the Facility, or any adverse action in the Facility which would
reasonably be expected to materially affect in a negative manner such Facility’s
participation or eligibility to participate in any Medicaid or other Payor
program, unless appropriate corrective action has been taken by the Operator, in
the ordinary course of business, or (v) failure to settle with the appropriate
governmental authority, or to satisfy on or before the Closing (either directly
with such governmental authority or by funds escrowed by Seller for such
purposes) all claims for reimbursements, recoupments, taxes, fines or penalties
which may be due to any governmental authority having jurisdiction over the
Facility, or (vi) the occurrence of a title or survey defect occurring after the
date of this Agreement which would reasonably be expected to adversely affect
the ability of Buyer to operate the skilled nursing home/assisted living
facility at its respective Facility or to obtain financing for such Facility, or
(vii) the commencement of any third party litigation which interferes with
Seller’s ability to close the transactions contemplated by this Agreement, or
(viii) any damage, destruction or condemnation affecting the Facility in which
the estimate of damage exceeds $100,000 per Facility and such damage or
destruction has not been repaired, or Buyer as not otherwise waived such
condition prior to Closing. In the event of any occurrence described in clause
(iv) above, Operator shall deliver a copy of the Plan of Correction or otherwise
notify Buyer in writing of the planned action, and such Plan of Correction or
other corrective action which has been approved by the applicable regulatory
agency or agencies.

 

 

 

 

(xiii)         If Buyer approves the feasibility of the Property on or prior to
the expiration of the Due Diligence Period, from and after the expiration of the
Due Diligence Period, Seller agrees to cause the Operator to remedy any
compliance deficiency cited in any written notice from, or in any settlement
agreement or other Plan of Correction or other agreement with, any state or
federal governmental body, or in the event of state or federal proceedings
against Operator or the Facility, or receipt by the Operator of such notice
prior to the Closing Date, of any condition which would affect the truth or
accuracy of any representations or warranties set forth in this Agreement by
Seller; provided, however, in the event a physical plant deficiency is cited
which Seller has insufficient time to remedy before the Closing Date, in
accordance with the approval of the appropriate state or federal agency, then
the same shall be deemed remedied when the costs of correcting said deficiency
(based upon reasonable estimates from established vendors selected by Seller and
Buyer and approved by Seller and by Buyer, in its sole and absolute discretion)
shall be held back in the Escrow at the Closing and not released to Seller until
such deficiency is corrected by Seller; and, provided further, a non-physical
plant deficiency which cannot be remedied prior to the Closing, in accordance
with the approval of the appropriate state or federal agency, will be deemed to
be remedied for purposes of this Section if Operator develops a Plan of
Correction addressing the deficiency(ies) and such Plan of Correction is
approved by the applicable State agency. Seller shall use its best efforts to
remedy any such deficiency subsequent to the Closing which is to be remedied as
a result of a Plan of Correction filed by Seller or Operator prior to the
Closing, and Buyer shall cooperate with such efforts by Seller; provided, Seller
shall bear all costs associated with such remedy. In the event any such Plan of
Correction agreed to by Seller and Operator prior to the Closing is not approved
by the applicable State agency subsequent to Closing, Seller shall promptly use
its best efforts, and shall cause Operator to use its best efforts, to amend the
Plan of Correction in such a manner that is necessary to obtain acceptance by
the State of the amended Plan of Correction as soon as practicable after
submittal. Notwithstanding any other provision of this Agreement, the obligation
of Seller pursuant to this Subsection 10(a)(xiii) shall survive the Closing for
such period of time as is necessary to remedy such deficiency.

 

(xiv)         Seller shall, at its cost and on or before Closing, obtain
releases of financing statements and tax and judgment liens affecting or
relating to the Facility which have been filed or recorded in the State with the
Office of the Secretary of State and the appropriate County Recorder’s Office.

 

(xv)           Seller shall promptly comply with any notices of violations
received relating to the Facility and shall deliver to Buyer a copy of any such
notice received and evidence of compliance with such notice.

 

(xvi)         Seller shall complete the Critical Repairs in accordance with
Section 6(f) of this Agreement.

 

(b)               Closing. On or before the Closing Date, Seller shall deliver
the following documents to Escrow Agent relating to the Facility (“Closing
Documents”):

 

(i)                 One (1) original executed Deed for the Facility, in
recordable form;

 

 

 

 

(ii)               Two (2) original executed counterparts of the Post Closing
Lease executed by Tenant;

 

(iii)             Two (2) original executed counterparts of the Bill of Sale, an
assignment of Seller’s interest in the Contracts and Leases (“Assignment of
Contracts and Leases”), and other instruments of transfer and conveyance in form
and substance to be agreed upon prior to the expiration of the Due Diligence
Period transferring and assigning to Buyer the Real Property, Personal Property
and the Intangibles to be transferred as provided herein with respect to the
Facility (“Instruments of Assignment”);

 

(iv)             One (1) original of the executed Critical Repair Completion
Notice, to the extent not previously delivered to Buyer.

 

(v)               One (1) original executed certificate executed by Seller
confirming that Seller’s representations and warranties continue to be true and
correct in all material respects, or stating how such representations and
warranties are no longer true and correct (“Seller’s Confirmation”);

 

(vi)             All contractor’s and manufacturer’s guaranties and warranties,
if any, in Seller’s possession relating to the Facility (collectively, the
“Warranties”), which delivery will be made by leaving such materials at the
Facility; and

 

(vii)           Two (2) original executed counterparts of each of the FIRPTA
Certificate, the Illinois Transfer Tax Declaration (the “TT Declaration”),
escrow agreements and other documents required by the Title Company in
connection with the transactions contemplated by this Agreement (collectively,
the “Title Company Documents”).

 

11.              Covenants of Buyer. Buyer hereby covenants as follows:

 

(a)                Pre-Closing. Between the date hereof and the Closing Date,
except as contemplated by this Agreement or with the consent of Seller, Buyer
agrees that Buyer shall not take any action inconsistent with its obligations
under this Agreement or which could hinder or delay the consummation of the
transaction contemplated by this Agreement. Between the date hereof and the
Closing Date, Buyer agrees that Buyer shall not (i) make any commitments to any
governmental authority, (ii) enter into any agreement or contract with any
governmental authority or third parties, or (iii) alter, amend, terminate or
purport to terminate in any way any governmental approval or permit affecting
the Real Property, Personal Property or Facility, which would be binding upon
Seller, any Real Property Owner, the Facility or Personal Property after any
termination of this Agreement.

 

(b)               Closing. On or before the Closing Date, Buyer shall deposit
the following with Escrow Agent:

 

(i)                 The Purchase Price in accordance with the requirements of
this Agreement;

 

 

 

 

(ii)               Two (2) original executed counterparts of the Post Closing
Lease;

 

(iii)             Two (2) original executed counterparts of each of the
Instruments of Assignment requiring Buyer’s signature;

 

(iv)             One (1) original executed certificate executed by Buyer
confirming that Buyer’s representations and warranties continue to be true and
correct in all material respects, or stating how such representations and
warranties are no longer true and correct (“Buyer’s Confirmation”); and

 

(v)               Two (2) original executed counterparts of the TT Declaration
and each of the Title Company Documents requiring Buyer’s signature.

 

12.              Conditions to Closing.

 

(a)                Conditions to Buyer’s Obligations. All obligations of Buyer
under this Agreement are subject to the reasonable satisfaction and fulfillment,
prior to the Closing Date, of each of the following conditions. Anyone or more
of such conditions may be waived in writing by Buyer.

 

(i)                 Seller’s Representations, Warranties and Covenants. Seller’s
representations, warranties and covenants contained in this Agreement or in any
certificate or document delivered in connection with this Agreement or the
transactions contemplated herein, shall be true at the date hereof and as of the
Closing Date as though such representations, warranties and covenants were then
again made, except to the extent that Buyer has discovered, or Seller has
provided Buyer with written notice (the “Supplemental Notice”) prior to Closing
that Seller has just become aware, that a representation is untrue or
inaccurate, and Buyer nevertheless elects not to terminate this Agreement at the
expiration of the Due Diligence Period, or, if the Supplemental Notice is
delivered after the Due Diligence Period, Buyer elects to proceed with closing
the transaction despite such inaccuracy, whereupon Buyer will be deemed to have
waived any right of recourse or damages against Seller resulting from such
inaccuracy disclosed in the Supplemental Notice. Upon receipt of a Supplemental
Notice from Seller after the expiration of the Due Diligence Period, Buyer shall
have the right to (a) terminate this Agreement upon written notice to Seller
within five (5) days after receipt of the Supplemental Notice, or (b) elect to
proceed with closing the transaction as set forth in this Agreement. If Seller
provides Buyer with a Supplemental Notice within ten (10) business days of
Closing, then Buyer shall have the right, at its option and upon written notice
to Seller, to extend the Closing Date for up to ten (10) business days in order
to analyze and review the issues disclosed in the Supplemental Notice.

 

(ii)               Seller’s Performance. Seller shall have performed all of its
obligations and covenants under this Agreement that are to be performed prior to
or at Closing.

 

(iii)             Damage and Condemnation. Prior to the Closing Date, no portion
of the Facility shall have been damaged or destroyed by fire or other casualty
where the estimate of damage to such Facility exceeds 10% of the Purchase Price
allocated to such Facility, or proceedings be commenced or threatened to take or
condemn any material part of the Real Property or improvements comprising a
Facility by any public or quasi-public authority under the power of eminent
domain. A proceeding shall be deemed to be “material” if such condemnation or
taking (i) relates to the material taking or closing of any right of access to
any Real Property or Facility, (ii) cause the Real Property or Facility to
become non-conforming with then current legal requirements governing such Real
Property or Facility, (iii) results in the loss of parking that is material to
the operation of such Facility, or (iv) result in the loss of value in excess of
10% of the Purchase Price allocated to such Facility, in Buyer’s reasonable
judgment. If such Facility shall have been so damaged or destroyed, Seller shall
deliver prompt written notice of such condemnation, damage or destruction to
Buyer. In the event Buyer waives this condition, by written notice to Seller
within fifteen (15) business days of receipt of notice of such proceeding, and
the Closing occurs, Seller shall assign to Buyer all its right to any insurance
proceeds in connection therewith. If proceedings shall be so commenced or
threatened to take or condemn the Real Property or the Facility or portion
thereof prior to Closing, and if Buyer waives this condition and the Closing
occurs, Seller shall pay or assign to Buyer all Seller’s right to the proceeds
of any condemnation award in connection thereof.

 

 

 

 

(iv)             Absence of Litigation. No action or proceeding shall have been
instituted, threatened or, in the reasonable opinion of Buyer, is likely to be
instituted before any court or governmental body or authority the result of
which could prevent or make illegal the acquisition by Buyer of the Facility, or
the consummation of the transaction contemplated hereby, or which could
materially and adversely affect the Facility or the business or prospects of the
Facility.

 

(v)               Form of Post Closing Lease. Prior to the expiration of the Due
Diligence Period, an affiliate of Seller (“Tenant”) and Buyer shall have agreed
upon the form of the post closing lease (the “Post Closing Lease”) between
Buyer, as landlord, and Tenant, as tenant, in which Tenant will lease back the
Facility for an initial term of at least fifteen (15) years.

 

(vi)             No Material Adverse Change. No Material Adverse Change shall
have occurred in the Facility.

 

(vii)           Removal of Personal Property Liens. Seller shall have removed
(or shall have sufficient payoff or other documents to remove such liens at
Closing) all personal property liens which are related to the Facility and the
Facility at Closing shall be free and clear of all liens, claims and
encumbrances other than Permitted Exceptions.

 

(viii)         Title Insurance Policies. Title Company shall be prepared to
issue the (i) Owners Title Insurance Policy for the Facility as of the Closing
Date, with coverage in the amount of the allocable portion of the Purchase Price
for the Facility, insuring Buyer as owner of the Facility subject only to the
Permitted Exceptions, and (ii) ALTA Title Insurance Policy for each of the
Facility as of the Closing Date, with coverage in the amount of the allocable
portion of Buyer’s loan from Buyer’s lender (“Lender”), insuring Lender’s lien
against the Facility subject only to such exceptions as may be approved by
Lender, and with such endorsements as may be required by Lender.

 

(b)               Conditions to Seller’s Obligations. All obligations of Seller
under this Agreement are subject to the fulfillment, prior to the Closing Date,
of each of the following conditions. Anyone or more of such conditions may be
waived by Seller in writing.

 

 

 

 

(i)                 Buyer’s Representations, Warranties and Covenants. Buyer’s
representations, warranties and covenants contained in this Agreement or in any
certificate or document delivered in connection with this Agreement or the
transactions contemplated herein shall be true at the date hereof and as of the
Closing Date as though such representations, warranties and covenants were then
again made.

 

(ii)               Buyer’s Performance. Buyer shall have performed its
obligations and covenants under this Agreement that are to be performed prior to
or at Closing.

 

(iii)             Absence of Litigation. No action or proceeding shall have been
instituted, threatened or, in the reasonable opinion of Seller, is likely to be
instituted before any court or governmental body or authority the result of
which could prevent or make illegal the acquisition by Buyer of the Facility, or
the consummation of the transaction contemplated hereby, or which could
materially and adversely affect the Facility or the business or prospects of the
Facility.

 

(iv)             No Actions. There shall be no action pending or recommended by
the appropriate state or federal agency to revoke, withdraw or suspend any
license to operate the Facility or the certification of the Facility, or any
action of any other type with regard to licensure or certification or with
respect to Medicare and Medicaid provider billing agreements necessary to
operate the Facility.

 

(v)               Form of Post Closing Lease. Prior to the expiration of the Due
Diligence Period, Tenant and Buyer shall have agreed upon the form of the Post
Closing Lease.

 

13.              Termination; Defaults.

 

(a)                Termination For Failure of Condition. Either party may
terminate this Agreement for non-satisfaction or failure of a condition to the
obligation of either party to consummate the transaction contemplated by this
Agreement (including, without limitation, Buyer’s election to disapprove the
condition of the title or Surveys pursuant to Section 14 herein), unless such
matter has been satisfied or waived by the date specified in this Agreement or
by the Closing Date (as same may be extended by the parties to allow the parties
to satisfy or waive conditions to close in the manner provided in this
Agreement). In the event of such a termination, Escrow Agent shall promptly
return (i) to Buyer, all funds of Buyer in its possession, including the Deposit
and all interest accrued thereon, and (ii) to Seller and Buyer, all documents
deposited by them respectively, which are then held by Escrow Agent. Thereafter,
neither party shall have any continuing obligation or liability to the other
party except for any such matters that expressly survive the Closing or
termination of this Agreement, as provided herein. The provisions of this
Section 13(a) are intended to apply only in the event of a failure of condition,
as set forth herein, which is not the result of a default by either party, but
which shall not apply in the event the non-terminating party is in default of
its obligations under this Agreement.

 

 

 

 

(b)               Termination For Cause.

 

(i)                 If the Agreement is terminated by Seller because Buyer fails
to consummate the Closing as a result of a default by Buyer under this
Agreement, Seller’s sole and exclusive remedy prior to the Closing Date shall be
to terminate this Agreement by giving written notice of termination to Buyer and
Escrow Agent, whereupon (A) Escrow Agent shall promptly release to Seller the
Deposit, and all interest accrued thereon, (B) Escrow Agent shall return to
Buyer and Seller all documents deposited by them respectively, which are then
held by Escrow Agent, (C) the parties shall be released and relieved of all
obligations to each other under this Agreement, except for provisions that
expressly survive termination as provided herein, (D) Buyer shall return to
Seller all documents received by it during the course of its Due Diligence and
(E) Buyer shall have no further right to purchase the Property or legal or
equitable claims against Seller (except for any breach by Seller of provisions
that survive termination) and/or the Property. Buyer shall have no liability to
Seller under any circumstances for any speculative, consequential or punitive
damages. Without limiting the other provisions of this Agreement, Buyer
acknowledges that the provisions of this Subsection are a material part of the
consideration being given to Seller for entering into this Agreement and that
Seller would be unwilling to enter into this Agreement in the absence of the
provisions of this Subsection. The provisions of this Subsection shall survive
any termination of this Agreement. With respect to any action by Seller against
Buyer or by Buyer against Seller commenced after the Closing Date, Seller and
Buyer expressly waive any right to any speculative, consequential, punitive or
special damages including, without limitation, lost profits. The parties
acknowledge and agree that Seller’s actual damages as a result of Buyer’s
default would be difficult or impossible to ascertain and that the deliveries
and payments provided for in clause (A) herein constitute reasonable
compensation for its actual damages. Seller and Buyer acknowledge that they have
read and understand the provisions of this Section 13(b)(i) and by their
initials below agree to be bound by its terms.

 

/s/ RHS   /S/ TGR Seller’s Initials   Buyer’s Initials      

(ii)               If this Agreement is terminated by Buyer because Seller has
defaulted in the performance of its obligations under this Agreement, Buyer’s
sole and exclusive remedies prior to the Closing Date shall be either: (A) to
terminate this Agreement by giving written notice of termination to Seller and
Escrow Agent and pursue any and all remedies for Buyer’s out-of-pocket costs
(including attorneys’ fees and court costs), attributable to the termination of
this Agreement, excluding any speculative or punitive damages, whereupon
(i) Escrow Agent shall promptly return to Buyer the Deposit, and all interest
accrued thereon, and (ii) Escrow Agent shall return to Seller and Buyer all
documents deposited by them respectively, which are then held by Escrow Agent,
or (B) to pursue the remedy of specific performance of Seller’s obligation to
perform its obligations under this Agreement. Seller shall have no liability to
Buyer under any circumstances for any speculative, consequential or punitive
damages. Without limiting the other provisions of this Agreement, Seller
acknowledges that the provisions of this Subsection are a material part of the
consideration being given to Buyer for entering into this Agreement and that
Buyer would be unwilling to enter into this Agreement in the absence of the
provisions of this Subsection. The provisions of this Subsection shall survive
any termination of this Agreement. With respect to any action by Buyer against
Seller or by Seller against Buyer commenced after the Closing Date, Buyer and
Seller expressly waive any right to any speculative, consequential, punitive or
special damages including, without limitation, lost profits. Seller and Buyer
acknowledge that they have read and understand the provisions of this
Section 13.2(b) and by their initials below agree to be bound by its terms.

 

 

 

 

/s/ RHS   /s/ TGR Seller’s Initials   Buyer’s Initials      

(c)                General. In the event a party elects to terminate this
Agreement such party shall deliver a notice of termination to the other party.

 

14.              Surveys and Title Commitment.

 

(a)                Within 30 days following the date of this Agreement, Buyer
shall use commercially reasonable efforts to obtain a preliminary title report
(the “Title Commitment”) covering the Real Property and the Facility dated to
the date of this Agreement, together with legible copies of any and all
instruments referred to in the Title Commitment as constituting exceptions to
title of the Real Property (the “Title Documents”).

 

(b)               Seller shall have delivered to Buyer a copy of the existing
surveys, if any, in Seller’s possession for the Facility (“Surveys”) in
accordance with Section 10(a)(v) herein. Buyer shall be responsible for
obtaining an update of the Surveys or new Surveys, at Buyer’s sole cost (“New
Surveys”). On or before ten (10) business days prior to the expiration of the
Due Diligence Period, Buyer shall notify Seller and the Title Company (“Buyer’s
Title Notice”) of any objections which Buyer may have to the Title Commitment
and/or Surveys. If Buyer objects to any matters (other than the Permitted
Exceptions, as defined herein) which, in Buyer’s determination, might adversely
affect the ability of Buyer to operate any of the Facility, Seller shall use its
reasonable business efforts to cure same, but shall not be obligated to cure
matters other than to obtain the release (at Closing) of the existing mortgage
and other monetary liens caused by Seller which may be released by payment of
the mortgage payoff or lien amount from Seller’s Closing proceeds (collectively,
“Monetary Liens”). If Seller delivers written notice to Buyer (“Seller’s Title
Notice”), on or before the expiration of the Due Diligence Period that Seller is
willing to remove any exceptions objected to by Buyer, then Seller shall be
obligated to remove such exceptions on or prior to the Closing and such
exceptions shall not be Permitted Exceptions. If Seller does not provide Buyer
with Seller’s Title Notice or Seller’s Title Notice does not provide for
Seller’s agreement to remove all exceptions objected to by Buyer, then Buyer
shall have the right to terminate this Agreement prior to the expiration of the
Due Diligence Period or waive Buyer’s objection to any exceptions Seller has not
agreed to remove with such exceptions becoming Permitted Exceptions upon Buyer
waiving its due diligence contingency. Buyer shall, promptly following the
execution of this Agreement, commence to use its best efforts to obtain the New
Surveys as soon as practicable. Notwithstanding the foregoing provisions of this
Subsection (b), Buyer shall have the right to object, promptly upon learning of
any such new matters during the Due Diligence Period, to any matters raised in
the New Surveys which were not addressed in the Surveys, and the parties shall
cooperate with the Title Company, during the Due Diligence Period and as
promptly as possible following the delivery of Buyer’s objections to such new
matters in the New Surveys, to resolve any such matters to Buyer’s satisfaction.
The Due Diligence Period shall not be extended for resolution of any such
matters in the New Surveys.

 

 

 

 

15.              Cooperation. Following the execution of this Agreement, Buyer
and Seller agree that if any event should occur, either within or without the
knowledge or control of Buyer or Seller, which would prevent fulfillment of the
conditions to the obligations of any party hereto to consummate the transaction
contemplated by this Agreement, each such party shall use reasonably commercial
efforts to cure or to cause the cure of the same as expeditiously as possible.
In addition, each party shall cooperate fully with each other in preparing,
filing, prosecuting, and taking any other actions with respect to, any
applications, requests, or actions which are or may be reasonable and necessary
to obtain the consent of any governmental instrumentality or any third party or
to accomplish the transaction contemplated by this Agreement.

 

16.              Indemnification.

 

(a)                Indemnification Provisions.

 

(i)                 Subject to the limitation on damages contained in
Section 13(b)(ii) hereof, Seller hereby agrees to indemnify, protect, defend and
hold harmless Buyer and its officers, directors members shareholders tenants,
successors and assigns harmless from and against any and all claims, demands,
obligations, losses, liabilities, damages, recoveries and deficiencies
(including interest, penalties and reasonable attorneys’ fees, costs and
expenses) which any of them may suffer as a result of: (A) any breach of or
inaccuracy in the representations and warranties, or breach, non-fulfillment or
default in the performance of any of the conditions, covenants and agreements,
of Seller contained in this Agreement or in any certificate or document
delivered by Seller pursuant to any of the provisions of this Agreement, unless
Seller cures such matter in the manner provided in Section 8(p) herein or (B)
the failure to discharge any federal, state or local tax liability, or to pay
any other assessments, recoupments, claims, fines, penalties or other amounts or
liabilities accrued or payable with respect to any activities of Seller prior to
the Closing Date (whether brought before or after the Closing Date), or (C) any
obligation which is expressly the responsibility of Seller under this Agreement,
or (D) any amounts required to cure citation violations issued by any state or
federal health or human services authority on the Facility relating to any
period prior to the Closing Date (whether brought before or after the Closing
Dates), or (E) any claim by any employee of Seller relating to any period of
employment prior to the Closing Date (whether brought before or after the
Closing Date), or (F) the existence against the Real Property of any mechanic’s
or materialmen’s claims resulting from the action or inaction of Seller or
anyone acting under authority of Seller, or (G) any other cost, claim or
liability arising out of or relating to events (other than as a result of the
actions of Buyer or Buyer’s Consultants) or Seller’s ownership, operation or use
of the Facility prior to the Closing Date. Any amount due under the aforesaid
indemnity shall be due and payable by Seller within 30 days after demand
thereof. Seller shall have the right to contest any such claims, liabilities or
obligations as provided herein.

 

(ii)               Subject to the limitation on damages contained in
Section 13(b)(i) hereof, Buyer hereby agrees to indemnify, protect, defend and
hold harmless Seller and its officers, directors, members, shareholders and
tenants harmless from and against any and all claims, demands, obligations,
losses, liabilities, damages, recoveries and deficiencies (including interest,
penalties and reasonable attorneys’ fees, costs and expenses) which any of them
may suffer as a result of: (A) any breach of or inaccuracy in the
representations and warranties, or breach, non-fulfillment or default in the
performance of any of the conditions, covenants and agreements, of Buyer
contained in this Agreement or in any certificate or document delivered by Buyer
pursuant to any of the provisions of this Agreement, unless Buyer cures such
matter in the manner provided in Section 8(p) herein, or (B) the existence
against the Real Property of any mechanic’s or materialmen’s claims arising from
actions of Buyer or Buyer’s Consultants prior to the Closing, or (C) any
obligation which is expressly the responsibility of Buyer under this Agreement.
Any amount due under the aforesaid indemnity shall be due and payable by Buyer
within thirty (30) days after demand therefor. Buyer shall have the right to
contest any such claims, liabilities or obligations as provided herein or any
other cost, claim or liability arising out of or relating to events or Buyer’s
ownership, operation or use of the Facility after the Closing Date.

 

 

 

 

(iii)             The parties intend that all indemnification claims be made as
promptly as practicable by the party seeking indemnification (the “Indemnified
Party”). Whenever any claim shall arise for indemnification hereunder, the
Indemnifying Party shall promptly notify the party from whom indemnification is
sought (the “Indemnitor”) of the claim, and the facts constituting the basis for
such claim (the “Indemnification Claim”). Failure to notify the Indemnitor will
not relieve the Indemnitor of any liability that it may have to the Indemnified
Party, except to the extent the defense of such action is materially and
irrevocably prejudiced by the Indemnified Party’s failure to give such notice.

 

(iv)             An Indemnitor shall have the right to defend against an
Indemnification Claim, with counsel of its choice reasonably satisfactory to the
Indemnified Party, if (a) within fifteen (15) days following the receipt of
notice of the Indemnification Claim the Indemnitor notifies the Indemnified
Party in writing that the Indemnitor will indemnify the Indemnified Party from
and against the entirety of any damages the Indemnified Party may suffer
resulting from, relating to, arising out of, or attributable to the
Indemnification Claim, (b) the Indemnitor provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnitor will
have the financial resources to defend against the Indemnification Claim and
pay, in cash, all damages the Indemnified Party may suffer resulting from,
relating to, arising out of, or attributable to the Indemnification Claim, (c)
the Indemnification Claim involves only money damages and does not seek an
injunction or other equitable relief, (d) settlement of, or an adverse judgment
with respect to, the Indemnification Claim is not in the good faith judgment of
the Indemnified Party likely to establish a precedential custom or practice
materially adverse to the continuing business interests of the Indemnified
Party, and (e) the Indemnitor continuously conducts the defense of the
Indemnification Claim actively and diligently.

 

(v)               So long as the Indemnitor is conducting the defense of the
Indemnification Claim in accordance with Section 16(a)(iv), then (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Indemnification Claim, (B) the Indemnified
Party shall not consent to the entry of any order or finalization of any
tentative settlement, the only condition of which is the consent of the
Indemnified Party thereto, with respect to the Indemnification Claim without the
prior written consent of the Indemnitor (not to be withheld unreasonably), and
(C) the Indemnitor will not consent to the entry of any order or finalization of
any tentative settlement, the only condition of which is the consent of the
Indemnified Party thereto, with respect to the Indemnification Claim without the
prior written consent of the Indemnified Party (not to be unreasonably withheld
or delayed, provided that it will not be deemed to be unreasonable for an
Indemnified Party to withhold its consent with respect to (i) any breach of any
law, order or permit, (ii) any violation of the rights of any person, or (iii)
any matter which Indemnified Party believes could have a material adverse effect
on any other actions to which the Indemnified Party or its Affiliates are party
or to which Indemnified Party has a good faith belief it may become party.
Notwithstanding the foregoing provisions of this Subsection (v), if Indemnified
Party refuses its consent to any of the matters set forth in clauses (i) through
(iii) above, the indemnity amount shall be determined as if such consent had
been given and Indemnitor shall pay over to the Indemnified Party such amount
and be absolved from any further obligation as to that particular claim;
Indemnified Party may then resolve the claim in the manner it sees fit without
further recourse against Indemnitor.

 

 

 

 

(vi)             Each party hereby consents to the non-exclusive jurisdiction of
any governmental body, arbitrator, or mediator in which an action is brought
against any Indemnified Party for purposes of any Indemnification Claim that an
Indemnified Party may have under this Agreement with respect to such action or
the matters alleged therein, and agrees that process may be served on such party
with respect to such claim anywhere in the world, provided however, that any
venue relating to any claim or proceeding arising out of this Agreement or any
other agreement between Seller and Buyer shall be the State and the laws of the
State shall apply.

 

(b)               Insurance Proceeds. In determining the amount of damages for
which either party is entitled to assert an Indemnification Claim, the amount of
any such claims or damages shall be determined after deducting therefrom the
amount of any insurance coverage or proceeds or other third party recoveries
received by such other party in respect of such damages. If an indemnification
payment is received by the Indemnified Party in respect of any damages and the
Indemnified Party later receives insurance proceeds or other third party
recoveries in respect of such damages, the Indemnified Party shall immediately
pay to the Indemnifying Party a sum equal to the lesser of the actual amount of
net insurance proceeds or other third party recoveries (remaining after recovery
costs and expenses) or the actual amount of the indemnification payment
previously paid by or on behalf of the Indemnified Party.

 

(c)                No Incidental, Consequential and Certain Other Damages. An
Indemnitor shall not be liable to an Indemnified Party for incidental,
consequential, enhanced, punitive or special damages unless such damages are
included in a third-party claim and such Indemnified Party is liable to the
third party claimant for such damages.

 

(d)               Indemnification if Negligence of Indemnity; No Waiver of
Rights or Remedies.

 

UNLESS OTHERWISE PROVIDED HEREIN, THE INDEMNIFICATION PROVIDED IN THIS
SECTION 16 WILL BE APPLICABLE WHETHER OR NOT THE SOLE, JOINT, OR CONTRIBUTORY
NEGLIGENCE OF THE INDEMNIFIED PARTY IS ALLEGED OR PROVEN. THE PARTIES AGREE THE
PRECEDING SENTENCE IS COMMERCIALLY CONSPICUOUS. Each Indemnified Party’s rights
and remedies set forth in this Agreement shall survive the Closing or other
termination of this Agreement, shall not be deemed waived by such Indemnified
Party’s consummation of the Closing of the sale transactions (unless the
Indemnified Party has knowledge of the existence of an Indemnification Claim at
Closing and decides to proceed with Closing)and will be effective regardless of
any inspection or investigation conducted by or on behalf of such Indemnified
Party or by its directors, officers, employees, or representatives or at any
time (unless such inspection or investigation reveals the existence of an
Indemnified Claim and such party proceeds with Closing), whether before or after
the Closing Date.

 

 

 

 

(e)                Other Indemnification Provisions. A claim for any matter not
involving a third party may be asserted by notice to the Party from whom
indemnification is sought.

 

(f)                Dispute Resolution. Any dispute arising out of or relating to
claims for indemnification pursuant to this Article 16 or any other dispute
hereunder, shall be resolved in accordance with the procedures specified herein,
which shall be the sole and exclusive procedure for the resolution of any such
disputes.

 

17.              Notices. Any notice, request for consent or approval, election
or other communication provided for or required by this Agreement shall be in
writing and shall be delivered by hand, by air courier service, postage prepaid
(certified with return receipt requested), fax transmission or electronic
transmission followed by delivery of the hard copy of such communication by air
courier service or mail as aforesaid, addressed to the person to whom such
notice is intended to be given at such address as such person may have
previously furnished in writing to the such party’s last known address. Until
receipt of written notice to the contrary, the parties’ addresses for notices
shall be:

 

To Buyer:

Cornerstone Healthcare Real Estate Fund, Inc.

c/o Cornerstone Healthcare Properties

1920 Main Street, Suite 400

Irvine, CA 92614

Attention: Kent Eikanas

Phone: (949) 812-4335

Email: KEikanas@crefunds.com

    With a Copy to:

DLA Piper LLP (US)

2000 University Avenue

East Palo Alto, CA 94303

Attention: Rachel Rosati Warner

Phone: (650) 833-2268

Email: Rachel.Warner@dlapiper.com

 

To Seller:

Aledo Senior Housing LLC

c/o Richard H. Stone

523 Blackhawk Avenue

Milan, IL 61264

Phone: (309) 787-5047

Email: rhstone@mediacombb.net

    With a Copy to:

John R. Eichelberger

2206 Lucas Street

PO Box 1186

Muscatine, IA 52761

Phone: (563) 263-6900

E-mail: john@jrelaw.com

   

 

 

 

 

18.              Sole Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the transactions contemplated
herein, and all prior or contemporaneous oral agreements, understandings
representations and statement, and all prior written agreements, understandings,
letters of intent and proposals are merged into this Agreement. Neither this
Agreement nor any provisions hereof may be waived, modified, amended, discharged
or terminated except by an instrument in writing signed by the party against
which the enforcement of such waiver, modification, amendment, discharge or
termination is sought, and then only to the extent set forth in such instrument.

 

19.              Assignment; Successors. Neither party shall assign this
Agreement without the prior written consent of the other; provided, however,
Buyer may assign all of its rights, title, liability, interest and obligation
pursuant to this Agreement to one or more entities owned, controlled by or under
common control with Buyer. Subject to the limitations on assignment set forth
above, all the terms of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by and against the heirs, successors and assigns
of the parties hereto.

 

20.              Severability. Should any one or more of the provisions of this
Agreement be determined to be invalid, unlawful or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby and each such provision
shall be valid and remain in full force and effect.

 

21.              Risk of Loss. Until the Closing Date, Seller shall bear the
risk of loss for the Facility and after the Closing Date, the risk of loss for
the Facility between Buyer and Tenant shall be governed by the Post Closing
Lease.

 

22.              Holidays. If any date herein set forth for the performance of
any obligations by Seller or Buyer or for the delivery of any instrument or
notice as herein provided should be on a Saturday, Sunday or legal holiday, the
compliance with such obligations or delivery shall be deemed acceptable on the
next business day following such Saturday, Sunday or legal holiday. As used
herein, the term “legal holiday” means any state or federal holiday for which
financial institutions or post offices are generally closed in the State for
observance thereof.

 

23.              Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which together
shall be deemed to constitute one and the same instrument. Facsimile signature
pages or electronically transmitted signature pages shall constitute original
counterparts for all purposes.

 

24.              Covenant Not to Compete; Non-Solicitation of Employees. Except
with regard to the Aledo Rehabilitation & Health Care Center located at 304 S.W.
12th Street, Aledo, Illinois (which is currently owned by Tenant), then for a
period of three (3) years following the Closing Date, Seller and Tenant,
individually, agree (i) not to own, manage, lease or operate a long term skilled
nursing home facility which is located within a ten (10) mile radius of the
Facility and (ii) not to solicit the transfer of patients or residents of any of
the Facility to any long term care skilled nursing home facility or assisted
living facility which is managed, leased or operated by any entity owned and/or
controlled by any of Seller or such individual within a ten (10) mile radius of
the Facility.

 

 

 

 

25.              Confidentiality. The provisions of the Confidentiality
Agreement attached hereto as Exhibit C and executed by the parties either prior
to the date of this Agreement are hereby incorporated by this reference and the
parties hereto agree to comply with the terms thereof.

 

26.              Illinois Tax Withholding. On or before Closing, Seller shall
deliver to Buyer a certificate issued by the Illinois Department of Revenue (and
any applicable Mercer County authority) stating that the withholding obligations
under Section 902(d) (“Section 902(d)”) of the Illinois Income Tax Act (“Act”)
(and any applicable Mercer County statutes) do not apply to the transaction
contemplated by this Agreement or specifying the holdback of sale proceeds which
will satisfy Buyer's obligations under said Section 902(d) of the Act and any
applicable Mercer County statutes. If the certificate is not so delivered to
Buyer, as aforesaid, or if the certificate is so delivered and requires that
funds be withheld pursuant to the terms thereof, then Buyer may, at the Closing,
deduct and withhold from the proceeds that are due to Seller the amount
necessary to comply with the withholding requirements imposed by Section 902(d)
of the Act and any applicable Mercer County statutes. Buyer shall deposit the
amounts withheld in escrow with the Title Company, as escrowee, pursuant to
terms and conditions acceptable to Seller and Buyer, but in any event complying
with Section 902(d) of the Act and any applicable Mercer County statutes.
Notwithstanding the foregoing provisions of this Section 26, Seller may, at its
option, in lieu of the foregoing, provide Buyer with an indemnity agreement, in
form and substance reasonably satisfactory to Buyer, pursuant to which Seller
indemnifies Buyer with respect to all liabilities which may be imposed upon
Buyer as a result of the Section 902(d) and equivalent obligations; however, if
Seller subsequently obtains a certificate from the Illinois Department of
Revenue and any applicable Mercer County agency indicating that Buyer is not
required to hold back any such sales proceeds, then the aforementioned indemnity
agreement shall be null and void.

 

27.              Exhibits and Schedules. To the extent that one or more Exhibits
or Schedules are not attached to this Agreement at the time this Agreement is
executed, Seller and Buyer agree that this Agreement is not rendered
unenforceable by reason of such fact. Seller shall provide such exhibits to
Buyer during the Due Diligence Period as promptly as possible in order to allow
the parties to agree upon such Exhibits and Schedules and to afford Buyer
adequate time in which to complete its due diligence review prior to the
expiration of the Due Diligence Period.

 

28.              Prevailing Party. Subject to the limitations as otherwise set
forth in this Agreement, if an action shall be brought on account of any breach
of or to enforce or interpret any of the terms, covenants or conditions of this
Agreement, the prevailing party shall be entitled to recover from the other
party, as part of the prevailing party’s costs, reasonable attorney’s fees, the
amount of which shall be fixed by the court and shall be made a part of any
judgment rendered.

 

 

 

 

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

 

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

 

[Signatures on Following Pages]

 

 

 

 

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement by parties
legally entitled to do so as of the day and year first set forth above.

 

  “SELLER”:           ALEDO SENIOR HOUSING LLC,   an Illinois limited liability
company               By:   /s/ Richard H. Stone     Richard H. Stone,
Member-Manager               “BUYER”:         CORNERSTONE HEALTHCARE REAL ESTATE
FUND, INC., a Maryland corporation               By: /s/ Terry G. Roussel   Its:
CEO

 

 

 

 

LIST OF EXHIBITS

 

A.Legal Descriptions of Real Property

 

B.Intentionally Omitted

 

C.Confidentiality Agreement

 

D.Intentionally Omitted

 

E.Warranty Deed

 

F.Bill of Sale

 

 

 

 

 

 

LIST OF SCHEDULES

 

Schedule l(a) List of Facility, Operator(s)     Schedule 1(c) Personal Property
    Schedule 1(e) Trademarks and Names     Schedule 1(g) Capital Improvements  
  Schedule 8(a)(v) Claims, Litigation     Schedule 8(b) Violations    
Schedule 8(d) Hazardous Substances     Schedule 8(f) Leases and Contracts    
Schedule 8(g) Financial Reports     Schedule 8(h) Interests in Suppliers, etc.  
  Schedule 8(j) Matters relating to Licensure     Schedule 8(k) Matters relating
to Reports and Reimbursements     Schedule 8(l) Surveys, Cost Reports, Private
Rates, Census and Licensed Beds     Schedule 8(m) Occupied Beds; Rates    
Schedule 10(a)(v) Due Diligence Items

 

 

 

 

 

EXHIBIT A

 

LEGAL DESCRIPTION

 

Tract I of MERCER CENTER ADDITION NO. 2, as shown by the Final Plat recorded on
September 12, 2005, as Document No. 349235, in the Mercer County Recorder’s
office, being part of the Northeast Quarter of the Northwest Quarter of Section
21, Township 14 North, Range 3 West of the 4th P.M., Mercer Township, Mercer
County, Illinois, and being more particularly described as follows:

 

Commencing at an iron pipe found at the North Quarter Corner of said Section 21,
thence South 00 degrees – 13 minutes – 42 seconds West along the East Line of
said Northwest Quarter, a distance of 770.00' to an iron pin found at the
Southeast Corner of Mercer Center Addition No. 1, thence North 89 degrees – 21
minutes – 42 seconds West along the South Line of Mercer Center Addition No. 1,
a distance of 580.00' to an iron pin set on the West Right-of-Way Line of a
Public Road, thence North 00 degrees – 13 minutes – 42 seconds East along said
West Right-of-Way Line, a distance of 43.62' to an iron pin set, said point
being the Point of Beginning, thence continuing North 00 degrees – 13 minutes –
42 seconds East along said West Line, a distance of 435.00' to a concrete
monument set, thence North 89 degrees – 29 minutes – 51 seconds West, a distance
of 335.00' to an iron pin set, thence South 00 degrees – 13 minutes – 42 seconds
West, a distance of 435.00' to a concrete monument set, thence South 89 degrees
– 29 minutes – 51 seconds East, a distance of 335.00' to the Point of Beginning.

 

 

 

 

EXHIBIT B

 

Intentionally Omitted

 

 

 

 

 

EXHIBIT C

 

 

CONFIDENTIALITY

AGREEMENT

 

[image_001.jpg]

 

 

 

 

EXHIBIT D

 

INTENTIONALLY OMITTED

 

 

 

 

EXHIBIT E

 

GRANT DEED

 

AFTER RECORDING RETURN TO AND SEND SUBSEQUENT TAX BILLS TO:

 

 

 

 

 

 

 

 

 

SPACE ABOVE THIS LINE FOR RECORDER’S USE

 

 

WARRANTY DEED

 

This Deed, made this ____ day of ______________, 2013, between
_____________________________________, a ___________________________
("Grantor"), and ____________________________, a ______________________________,
whose address is
_________________________________________________________________ ("Grantee"),
WITNESSETH, that Grantor, for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration in hand paid, by Grantee, the
receipt of which is hereby acknowledged, by these presents does REMISE, RELEASE,
ALIENATE AND CONVEY unto the Grantee, FOREVER, all the following described real
estate, situated in the County of Mercer and State of Illinois, known and
described as follows, to wit:

 

See Schedule 1 attached hereto and made a part hereof.

 

Together with all and singular hereditaments and appurtenances belonging there,
or in any way appertaining, and the reversion or reversions, remainder or
remainders, rents, issues and profits thereof, and all the estate, right, title,
interest, claim or demand whatsoever, of the Grantor, either at law or in equity
of, in and to the above-described premises, with the hereditaments and
appurtenances:

 

TO HAVE AND TO HOLD the said premises as described above, with the
appurtenances, unto the Grantee, forever.

 

And Grantor, for itself and its successors, does covenant, promise and agree to
and with Grantee and its successors and assigns that it has not done or suffered
to be done, anything whereby the said premises hereby granted are, or may be, in
any manner encumbered or charged, except as herein recited; and that it WILL
WARRANT AND DEFEND, said premises against all persons lawfully claiming, or to
claim the same, by, through or under it, subject only to those matters listed on
Schedule 2 attached hereto and made a part hereof.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

IN WITNESS WHEREOF, Grantor executed this Deed the day and year first above
written.

 

   

______________________________, a

______________________________

                                                                          By:  
  Name:         Its:  

 

 

STATE OF  ________________ )   ) SS

COUNTY OF  ______________)  

 

I, _________________________, a Notary Public in and for said County in the
State aforesaid, do hereby certify that ___________________________, the
___________________ of ____________________________________, a
__________________________________, personally known to me to be the same person
whose name is subscribed to the foregoing instrument, appeared before me this
day in person and acknowledged that he signed and delivered such instrument as
his own free and voluntary act and as the free and voluntary act of said limited
partnership and limited liability company, in the capacity set forth therein.

 

IN WITNESS WHEREOF, I have hereunto set my hand and official seal this ____ day
of ___________________, 2013.

 

___________________________________

Notary Public

 

My commission expires: __________________

 

 

 

 

SCHEDULE 1 to Warranty DEED

 

DESCRIPTION OF LAND

 

Tract I of MERCER CENTER ADDITION NO. 2, as shown by the Final Plat recorded on
September 12, 2005, as Document No. 349235, in the Mercer County Recorder’s
office, being part of the Northeast Quarter of the Northwest Quarter of Section
21, Township 14 North, Range 3 West of the 4th P.M., Mercer Township, Mercer
County, Illinois, and being more particularly described as follows:

 

Commencing at an iron pipe found at the North Quarter Corner of said Section 21,
thence South 00 degrees – 13 minutes – 42 seconds West along the East Line of
said Northwest Quarter, a distance of 770.00' to an iron pin found at the
Southeast Corner of Mercer Center Addition No. 1, thence North 89 degrees –
21 minutes – 42 seconds West along the South Line of Mercer Center Addition No.
1, a distance of 580.00' to an iron pin set on the West Right-of-Way Line of a
Public Road, thence North 00 degrees – 13 minutes – 42 seconds East along said
West Right-of-Way Line, a distance of 43.62' to an iron pin set, said point
being the Point of Beginning, thence continuing North 00 degrees – 13 minutes –
42 seconds East along said West Line, a distance of 435.00' to a concrete
monument set, thence North 89 degrees – 29 minutes – 51 seconds West, a distance
of 335.00' to an iron pin set, thence South 00 degrees – 13 minutes – 42 seconds
West, a distance of 435.00' to a concrete monument set, thence South 89 degrees
– 29 minutes – 51 seconds East, a distance of 335.00' to the Point of
Beginning. 

 

 

 

 

SCHEDULE 2 TO WARRANTY DEED

 

PERMITTED EXCEPTIONS

 

 

 

 

EXHIBIT F

 

BILL OF SALE

 

BILL OF SALE

 

THIS BILL OF SALE (this “Bill of Sale”) is entered into as of this 2nd day of
July, 2013, whereby Aledo Senior Housing, LLC (“Seller”), does hereby sell and
convey to [INSERT CORNERSTONE ENTITY] (“Buyer”), with reference to the following
facts:

 

RECITALS:

 

A. WHEREAS, concurrently herewith Seller is conveying to Buyer certain real
property, together with all improvements thereon, lying and being situated in
Mercer County, Illinois, as described on Exhibit A, incorporated herein by
reference (said land and improvements thereon are referred to herein as the
(“Property”).

 

B. WHEREAS, it is the desire of Seller to quitclaim to Buyer, all of Seller’s
right, title and interest, free and clear of liens and encumbrances, to all of
the tangible personal property, inventory, equipment, machinery, supplies
including drugs and other supplies, spare parts, furniture, furnishings,
warranty claims, contracts, including but not limited to supply contracts,
contracts rights, intellectual property, including but not limited to patents,
trade secrets, and all rights and title to the names under which the Property
operates, mailing lists, customer lists, vendor lists, resident files, books and
records (collectively, the “Personal Property”). The Personal Property includes
the equipment listed on Schedule 1 attached hereto and made a part hereof.

 

NOW THEREFORE, in consideration of the foregoing and other good and valuable
consideration in hand paid by Buyer to Seller, the receipt and sufficiency of
which are hereby acknowledged:

 

1. Transfer. Seller hereby transfers, free and clear of all liens and
encumbrances, to Buyer all of Seller’s right, title and interest, if any, in and
to the Personal Property.

 

2. Acceptance. Buyer hereby accepts the foregoing quitclaim of the Personal
Property.

 

3. Counterparts. This Bill of Sale may be executed in one or more counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute one and the same instrument.

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have entered into this Bill of Sale as of
the day and year first written above.

 

      SELLER:                 Aledo Senior Housing LLC,       An Illinois
Limited Liability Company                     Dated:   July 2, 2013   By: /s/
Richard H. Stone       Name: Richard H. Stone       Its: member-manager        
 

 

      BUYER:                 HP Aledo LLC,       a Delaware Limited Liability
Company                     Dated:   July 2, 2013   By: Cornerstone Core
Properties REIT, Inc.       Name: /s/ Kent Eikanas       Its: President        
 

 

 

 

 

 

EXHIBIT A
to Bill of Sale

 

Legal Description

 

Tract I of MERCER CENTER ADDITION NO. 2, as shown by the Final Plat recorded on
September 12, 2005, as Document No. 349235, in the Mercer County Recorder’s
office, being part of the Northeast Quarter of the Northwest Quarter of Section
21, Township 14 North, Range 3 West of the 4th P.M., Mercer Township, Mercer
County, Illinois, and being more particularly described as follows:

 

Commencing at an iron pipe found at the North Quarter Corner of said Section 21,
thence South 00 degrees – 13 minutes – 42 seconds West along the East Line of
said Northwest Quarter, a distance of 770.00' to an iron pin found at the
Southeast Corner of Mercer Center Addition No. 1, thence North 89 degrees –
21 minutes – 42 seconds West along the South Line of Mercer Center Addition No.
1, a distance of 580.00' to an iron pin set on the West Right-of-Way Line of a
Public Road, thence North 00 degrees – 13 minutes – 42 seconds East along said
West Right-of-Way Line, a distance of 43.62' to an iron pin set, said point
being the Point of Beginning, thence continuing North 00 degrees – 13 minutes –
42 seconds East along said West Line, a distance of 435.00' to a concrete
monument set, thence North 89 degrees – 29 minutes – 51 seconds West, a distance
of 335.00' to an iron pin set, thence South 00 degrees – 13 minutes – 42 seconds
West, a distance of 435.00' to a concrete monument set, thence South 89 degrees
– 29 minutes – 51 seconds East, a distance of 335.00' to the Point of Beginning.

 

 

 

 

SCHEDULE 1
to Bill of Sale

 

 

 

 

 

 

 

SCHEDULE 1(a)

 

FACILITY; LICENSED BEDS

 

Facility

 

  Licensed Nursing Beds The skilled nursing facility located on the Real
Property   66 units with some of the units over 450 square feet in size having
double occupancy

 

 

 

 

SCHEDULE 1(c)

 

PERSONAL PROPERTY

 

See the attached 21 pages.

 

SCHEDULE 1(e)

 

TRADEMARKS AND NAMES

 

Heritage Woods

 

Heritage Woods of Aledo LLC

 

 

 

 

SCHEDULE 8(a)(v)

 

CLAIMS, LITIGATION

 

 

None

 

 

SCHEDULE 8(b)

 

VIOLATIONS

 

 

None.

 

 

SCHEDULE 8(d)

 

HAZARDOUS SUBSTANCES

 

 

None.

 

 

SCHEDULE 8(f)

 

LEASES AND CONTRACTS

 

 

See the attached 11 pages.

 

 

SCHEDULE 8(g)

 

FINANCIAL REPORTS

 

 

See the attached 45 pages.

 

 

SCHEDULE 8(h)

 

INTEREST IN SUPPLIERS, ETC.

 

 

None.

 

 

SCHEDULE 8(j)

 

MATTERS RELATING TO LICENSURE

 

 

See the attached 6 pages.

 

 

SCHEDULE 8(k)

 

MATTERS RELATING TO REPORTS AND REIMBURSEMENTS

 

 

See Schedule 8(j).

 

 

SCHEDULE 8(l)

 

SURVEYS, COST REPORTS, PRIVATE RATES, CENSUS AND LICENSED BEDS

 

 

Seller represents that all current information has been provided to Buyer.

 

 

SCHEDULE 8(m)

 

OCCUPIED BEDS; RATES

 

 

Seller represents that all current information has been provided to Buyer.

 

 

 

 

SCHEDULE 10(a)(v)

DUE DILIGENCE MATERIALS

 

Seller has made available to Buyer all Due Diligence Materials through an
electronic drop box established for the transaction contemplated by this
Agreement, except for the following documents and information that Buyer has
requested and Seller has agreed to provide to Buyer:

 

Personal list, job descriptions, rate of pay, hire date, and accrued vacation
/paid time off.

Description of the employee benefits, insurance, 401k, employee handbook.

List and copies of wage garnishments, including balances due and amounts
previously paid (non-support) together with copies of the garnishment orders.

List of any employee wage assignments together with supporting documents.

Description of phone system: number of lines, is there a maintenance contract,
if so with whom.

Resident biographies.

Contact information for family members/POA/emergency contacts.

Copy of resident contract and handbook.

Copy of vehicle titles.

List of association memberships – AALC, ALFA, NCAL, etc.

Contact information for the following:

Chamber members.

Community Business List.

Agency contacts (HFS Surveyors and representatives).

Media contacts (include current advertising plan).

Current beautician arrangement.

Last rate increase and amount.

Admission/discharge reports from last 12-months.

 

 

 

 

 

Summary Report:

Litéra® Change-Pro TDC 7.0.0.242 Document Comparison done on 1/28/2013 12:37:05
PM

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