EXHIBIT
10.5


 


PURCHASE AND SALE
AGREEMENT


 


                THIS
PURCHASE AND SALE AGREEMENT
(this “Agreement”) shall be effective as of October 10, 2008 (the “Effective
Date”), by and between ANDERSON SENIOR LIVING
PROPERTY, LLC, an Oregon limited liability company, MT. PLEASANT OAKDALE I PROPERTY, LLC, an Oregon limited
liability company, MT. PLEASANT OAKDALE II
PROPERTY, LLC, an Oregon limited liability company, CHARLOTTE OAKDALE PROPERTY, LLC, an Oregon limited liability
company, GREENSBORO OAKDALE PROPERTY, LLC, an Oregon
limited liability company, PINEHURST OAKDALE
PROPERTY, LLC, an Oregon limited liability company, and WINSTON-SALEM OAKDALE PROPERTY, LLC, an Oregon limited
liability company, each a Debtor and Debtor in Possession (collectively, the “Seller”) under Case No. 08-07254 (jointly administered)
(the “Case”) in the United States Bankruptcy
Court for the Middle District of Tennessee (the “Bankruptcy
Court”), and FIVE STAR QUALITY CARE,
INC., a Maryland corporation (“Purchaser”).  (Seller and Purchaser are hereinafter
referred to collectively as “Parties” and
individually as a “Party.”)


 


RECITALS


 


A.            Seller, together with the certain other entities (the “TICs”), (i) is the owner of certain real property more
particularly described on Exhibit 1
attached hereto and incorporated by reference (collectively, the “Land”) and (ii) is the owner of buildings, improvements
and other


 

















 


assets located on the Land, including
assisted living and retirement living facilities identified on Exhibit 1  attached hereto
(collectively, the “Facilities” and
each individually, a “Facility”).  Certain other persons (the “Master Tenants”) lease the Facilities under ground leases
entered into with Seller and the TICs (the “Master
Leases”).  Seller, the TICs,
and the Master Tenants are sometimes hereafter referred to collectively as the “Seller Parties.”


 


C.            Seller wishes to sell to Purchaser (as to Seller’s
interests), and to cause to be sold to Purchaser (as to the interests of the
TICs), pursuant to Section 363 of Chapter 11 of Title 11 of the United
States Code (the “Bankruptcy Code”)
(i) the Land (including the interests of Seller and of the TICs); (ii) the
Facilities and related improvements (including the interests of Seller and of
the TICs); and (iii) the personal property owned by Seller and the TICs
related to the Facilities; and to cause the sale of the Master Tenants’
personal property and the assignment of the Master Tenants’ Contracts (as said
term is defined below) to Purchaser, all at the price and on the other terms
and conditions specified below, and Purchaser wishes to so purchase and acquire
such assets.


 


AGREEMENT


 


The Recitals set forth above
are hereby incorporated herein by this reference.  Now, therefore, for good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Seller
and Purchaser agree as follows:


 


1.             Purchase.  Subject to the Bankruptcy Court’s entry of
the orders referred to in this Agreement, Seller agrees to sell to Purchaser,
or cause to be sold to Purchaser, on the Closing Date (as defined below), and
Purchaser agrees to purchase on the Closing Date, in accordance with the terms
of this Agreement:


 


2

















 


(a)           the Land and all
easements, beneficial interests, rights and privileges appurtenant to the Land;


 


(b)           the existing
buildings, fixtures, structures and other improvements located upon or affixed
to the Land (including, without limitation, the Facilities), together with,
except to the extent owned by residents and not constituting Personal Property
(as hereinafter defined), all apparatus, equipment and appliances incorporated
therein and used in connection with the ownership, operation or occupancy
thereof (the “Improvements”);


 


(c)           all of the Seller
Parties’ right, title and interest in and to all tangible personal property
located within and/or used in connection with the ownership, operation or
occupancy of the Improvements including all moveable trade fixtures, furniture,
motor vehicles, personal computers, medical equipment, books and records (including,
without limitation, sales, marketing and advertising materials, lists of
present suppliers and personnel, employment records, and all records relating
to the personal, medical, social, and financial status of each resident, including
but not limited to, admission applications, Multiple Data Set (MDS)
evaluations, care plans, medical records, and other resident specific data
required to be kept by licensing and certification authorities), and other inventories, stocks and supplies
used in connection with the ownership, operation or occupancy of the Facilities
to the extent of the Seller Parties’ interests therein (the “Personal Property”);


 


(d)           all of the Seller
Parties’ right, title and interest in and to the resident agreements for the
Facilities in effect on the Closing Date, including any refundable deposits
under the resident agreements (the “Resident Agreements”);
and


 


3





















 


(e)           all of the Seller
Parties’ right, title and interest, if any, in and to (i) the trade names
listed on Schedule 3 attached hereto
(the “Trade Names”), and (ii) the
Assumed Contracts (as hereinafter defined), and all warranties, guarantees,
licenses, permits, building plans and drawings, surveys, and resident lists and
correspondence, records, telephone exchanges and numbers, claims (including tax
appeals and condemnation claims), goodwill, accounts receivable which have been
outstanding for more than thirty (30) days as of the Closing Date, and any
other intangible property of any kind or nature to the extent transferable
(collectively, the “Rights”).


 


The Land and the
Improvements are collectively referred to herein as the “Real
Property”.  The Real Property,
Personal Property, Resident Agreements and Rights are referred to herein
collectively as the “Property.”  Notwithstanding any other provision of this
Agreement, the Property will not include the Excluded Assets (as defined
below).


 


2.             Excluded Assets.  Notwithstanding anything to the contrary set
forth in this Agreement, Seller is not transferring to Purchaser any of, and
Purchaser shall acquire no right, title or interest in or to the following
assets of the Seller Parties (the “Excluded Assets”):


 


(a)           all cash, cash
equivalents, securities and investments, and accounts receivable, notes
receivable, premiums receivable, and other rights to receive payments from
customers or residents of the Facility or from others, including all trade
accounts receivable representing amounts payable to any Seller Party for services
rendered to such customers or residents prior to the Closing Date except as
otherwise provided herein (provided, however, in no event shall any refundable
deposits under the Resident Agreements or any unpaid accounts 


 


4





















 


receivable
which have been outstanding for more than thirty (30) days as of the Closing
Date be considered a part of the Excluded Assets);


 


(b)           all proprietary
books, records, files, and papers (whether in hard copy or computer format)
that are not used in, and that do not relate to or affect, the Property;


 


(c)           any governmental
authorization that relates to or affects any Facility but which is not
assignable or transferable and does not run with the land;


 


(d)           all personnel and
employment records that relate to former or current Facility Employees (as
defined below) except those hired by Purchaser or Purchaser’s designee as
provided herein or otherwise to the extent that legal requirements require such
records, or copies of such records, to remain at the Facilities;


 


(e)           all insurance
policies to which any Seller Party or any affiliate of a Seller Party is a
party (but without derogation of Purchaser’s right to proceeds thereof in
accordance with the terms of this Agreement);


 


(f)            all refundable
utility or other vendor deposits, except as provided herein;


 


(g)           any other property
of a Seller Party that is expressly described on Schedule
1 attached hereto; and


 


(h)           All preference or
avoidance claims of and actions of Seller, including any such claims and
actions arising under Sections 544, 547, 548, 549 and 550 of the Bankruptcy
Code.


 


5





















 


3.             Opening
of Escrow; Deposits.


 


(a)           Upon full execution,
this Agreement shall constitute a binding agreement between the Parties;
provided, however, that Seller’s authority to enter into the transactions
contemplated in this Agreement is subject to Bankruptcy Court approval.  This Agreement shall also constitute escrow
instructions to Escrow Agent (as defined below).  If Escrow Agent requires separate escrow
instructions, the Parties shall execute such escrow instructions in a form and
substance reasonably satisfactory to the Parties upon Escrow Agent’s request; provided,
however, as between the Parties, in the event of any conflict between
this Agreement and such escrow instructions, this Agreement shall control.  Promptly upon full execution of this
Agreement by Purchaser, Seller and Lawyers Title Insurance Corporation, 140
East 45th Street, New York, New York 10017 (“Escrow Agent”),
an escrow (the “Escrow”) shall be deemed open with
Escrow Agent, which Escrow shall be governed by the terms of this
Agreement.  When this Agreement has been
fully executed by Purchaser and Seller and delivered to Escrow Agent, Escrow
Agent shall notify Purchaser and Seller in writing.  The date on which Purchaser receives such
notice from Escrow Agent shall be the opening of the Escrow.


 


(b)           As security for
Purchaser’s obligations under this Agreement, within one (1) business day after
the Effective Date, Purchaser shall deposit into Escrow two million two hundred
and fifty thousand dollars  ($2,250,000.00)
by wire transfer of immediately available funds as an initial earnest money
deposit (the “Deposit”).  Escrow Agent shall deposit the Deposit into
an interest-bearing money market account with a bank or financial institution
reasonably acceptable to the Parties. 
Any interest earned on the Deposit shall be considered a part of the
Deposit and the Deposit shall be applied towards the Purchase Price (as defined
below) at the Closing.  The Deposit will
be non-refundable to Purchaser except as specifically 


 


6





















 


provided
in this Agreement.  If Purchaser fails to
deposit the Deposit on or before the date for performance as provided in this
paragraph, this Agreement may be terminated at Seller’s option by written
notice to Purchaser, whereby this Agreement shall be of no further force and
effect, except for the provisions herein which by their terms expressly survive
the termination of this Agreement.


 


4.             Purchase
Price.  At the Closing, Purchaser
shall deposit into Escrow, for the benefit of Seller, an aggregate purchase
price of forty four million dollars ($44,000,000.00) for the Property (the “Purchase Price”), as adjusted pursuant to the terms of this
Agreement, and inclusive of the Deposit. 
The Purchase Price shall be payable by wire transfer of immediately
available funds, inclusive of the Deposit, at Closing.


 


5.             Access to
Property.  From the Effective Date to the earlier of the Closing or the termination
of this Agreement, Seller shall and shall cause each Seller Party to, upon
reasonable notice, (a) afford to the officers, employees, accountants,
counsel and other representatives of Purchaser (each a “Purchaser Representative”), reasonable
access, during normal business hours, to the Property and all books and records
relating thereto (including any documents governing each Plan (hereinafter
defined), including descriptions of each Plan that are provided to the Facility
Employees); provided that nothing herein shall require the
provision of such access to the extent it would unreasonably interfere with the
normal business operations of any Seller Party or interfere unreasonably or
otherwise disturb the residents of the Property; (b) furnish to Purchaser
and the Purchaser Representatives such additional financial and operating data
and other information regarding the Property as Purchaser or the Purchaser
Representatives may from time to time reasonably request in connection with the
transactions 


 


7

















 


contemplated by this
Agreement, (c) permit the Purchaser Representatives to perform, during
normal business hours, investigations with respect to title, survey, structural
and environmental matters affecting the Property at such reasonable times as
the Purchaser Representatives may reasonably request, provided, however,
that any invasive environmental sampling, testing or analysis proposed by a Purchaser
Representative shall be subject to Seller’s prior written consent, which shall
not be unreasonably withheld, and (d) permit the Purchaser Representatives
to meet with and interview the Facility Employees (as hereinafter defined) and
residents. 
Purchaser shall be liable for any damage or injury caused by
Purchaser or any Purchaser Representative during any entry onto the Property
while exercising such rights.


 


6.             Deed, Bill of
Sale and Assignments.  Title to the
Real Property will be conveyed by a special warranty deed substantially in the
form attached hereto as Exhibit 2A and 2B
(the “Deed”). 
Title to the Personal Property will be conveyed by Bill of Sale
substantially in the form attached hereto as Exhibit 3
(the “Bill of Sale”); to the Resident Agreements,
by an Assignment and Assumption of Resident Agreements substantially in form
attached hereto as Exhibit 4
(the “Assignment and Assumption of Resident Agreements”);
and to the Rights, if any, by an Assignment of Rights substantially in the form
attached hereto as  Exhibit 5
(the “Assignment of Rights”).  As used herein the Deed, the Bill of Sale,
the Assignment of Resident Agreements and the Assignment of Rights are referred
to collectively as the “Conveyance Documents”.  All such Conveyance Documents will be dated
as of the Closing Date and will be executed by the applicable Seller Parties.


 


7.             Contracts.  Effective as of the
Closing Date, Purchaser shall assume, perform and discharge those certain
debts, obligations, duties, or liabilities of every type and trade, known or
unknown, liquidated or unliquidated, matured or unmatured, assertable or
unassertable, fixed, 


 


8

















 


contingent, absolute or
otherwise which shall first arise or accrue under the Assumed Contracts (as
defined below) on or after the Closing Date (the “Liabilities”).  All service, maintenance, supply and
management contracts to which the Seller Parties are a party and which are
related to the Property or the operation of the Facility are listed on Schedule 2 attached hereto (the “Contracts”).  Within
fifteen (15) days after the Effective Date, subject to extension day-for-day
for each day after the Effective Date by which Purchaser shall not have
received true and complete copies of the Contracts, Purchaser will give notice
to Seller advising which Contracts it will assume and which it will require the
Seller Parties to terminate or cause to be terminated (at no cost or expense to
Purchaser) as of the Closing Date.  The
contracts and all other agreements that Purchaser elects to assume are referred
to herein as the “Assumed  Contracts.”  Purchaser
shall have no liability or obligation with respect to any Contracts or any
other contracts or agreements relating to the Facilities or the Land except for
the Assumed Contracts, and shall have no liability or obligation which shall
have accrued or arisen prior to Closing with respect to any Assumed Contracts.


 


8.             Seller’s
Representations and Warranties. Seller, to the best of its actual
knowledge, makes the following representations and warranties to Purchaser, which representations and warranties shall be
true and correct in all material respects on and as of the Closing, and which
representations and warranties shall survive the Closing for a period of one (1) year:


 


(a)           Organization,
Standing and Power.  Seller is
duly organized and validly existing under the laws of its state of formation or
organization and is fully authorized to transact business and to own and convey
property in the state in which its Property is located and has full power and
right, subject to the approval of the Bankruptcy Court, to enter into and
perform this 


 


9





















 


Agreement, and the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated herein by Seller, have been duly authorized.


 


(b)           Authorization of
Seller.  This Agreement is,
and all documents which are to be executed by Seller and delivered to Purchaser
on the Closing Date are, and on the Closing Date will be, duly authorized,
executed and delivered by Seller, and are, and on the Closing Date will be,
legal, valid and binding obligations of Seller. 
Subject to the Seller’s
obtaining the Approval Order (as defined below), the execution and delivery of
this Agreement, the consummation of the transactions herein contemplated, and
the performance of, fulfillment of and compliance with the terms and conditions
hereof by Seller do not and will not:  (i) conflict
with or result in a breach of the certificates of formation, operating
agreements or similar corporate documents of the Seller; (ii) violate any
statute, law, rule or regulation, or any judgment, order, writ, injunction
or decree of any court or governmental authority; or (iii) violate or
conflict with or constitute a default under any agreement, instrument or
writing of any nature to which Seller is a party or by which Seller or its
assets or properties may be bound.


 


(c)           Permitted
Encumbrances.  The Property is not
subject to any liens, claims or encumbrances which will be binding on
the Property following the Closing and which could reasonably be expected to
unreasonably interfere with or impair the current or future use, marketability
or value of any Property.  No Property or
Facility is in material violation of any easements, covenants or other
encumbrances that will be binding on the Property or such Facility following
the Closing.


 


(d)           Resident
Agreements.  Except for the Master
Leases, as of October 10, 2008, there is no tenancy or other occupancy in
the Property or any part thereof, except for the 


 


10





















 


Resident Agreements set
forth on the rent roll attached hereto as Schedule 5.  Schedule 5
is, in all material respects, a true, correct and complete copy of all the rent
rolls for the Facilities and sets forth, for each of the Resident Agreements, (i) the
name of the occupant or resident thereunder and the applicable unit number, (ii) the
current monthly rental amount (including base and care income), under such
Resident Agreement and any free rent or other rent concessions, (iii) the
move-in date and the expiration date of the current term of such Resident
Agreement, (iv) the amount of any community fees, up-front payment
(whether refundable or not), security deposit, advance rent or other deposits
paid under such Resident Agreement, and (v) a schedule of all of the
documents comprising the Resident Agreement and any guaranties thereof.  Except as set forth on said Schedule 5, (A) no party to
any of the Resident Agreements is in material default thereunder; (B) no
resident has prepaid any rents, fees or other charges under any of the Resident
Agreements; and (C) no resident is entitled to any guaranteed rates or
other incentives or inducements that would preclude Purchaser from charging
market rates to any resident under any Resident Agreement.  A true, correct and complete copy of the
standard form of Resident Agreement for the Facilities is being provided
contemporaneously with the execution of this Agreement.


 


(e)           Contracts.  The copies of the Contracts heretofore
delivered by Seller to Purchaser are true, correct and complete copies thereof;
the Contracts have not been amended except as evidenced by amendments similarly
delivered and constitute the entire agreement between the parties thereto.  Each Contract is in full force and effect on
the terms set forth therein, and there are no defaults or circumstances which,
with the giving of notice, the passage of time or both, would constitute a
default by any party under such Contract.


 


11




















 


(f)            No
Condemnations.  Neither Seller nor
Master Tenant has received written notice of any pending or threatened
condemnation of all or any part of the Property and no such condemnation is
pending or threatened.


 


(g)           No Pending
Assessments.  Neither Seller nor
Master Tenant has received written notice of any pending assessment for
municipal improvements applicable to the Property and no such assessments are
pending.


 


(h)           No Violations of Law.  Neither Seller nor Master Tenant has received
written notice from any governmental or public authority (i) that the
Property or any part thereof is or may be in violation of any applicable fire,
health, building, use, occupancy, zoning or other laws where such violation
remains outstanding or (ii) that any work is or may be required to be done
upon or in connection with the Property or any part thereof, where such work
remains outstanding.  None of the
Facilities nor the use, occupancy or condition thereof violates, in any material
way, any applicable fire, health, building, use, occupancy, zoning or other
laws, rules and regulations of any federal, state, city or county
government or any agency, body, or subdivision thereof having any jurisdiction
over such Facility or any easements, covenants, restrictions or other matters
of record with respect to the Land on which such Facility is located.


 


(i)            Healthcare Licensing.  The Seller Parties currently maintain all
applicable licenses and approvals (collectively, the “Healthcare
Licenses”) which are necessary to permit each Facility to be
operated as it is currently operated and to permit the Seller Parties to
provide the services which they currently provides to the residents of such
Facilities.  Seller has provided
Purchaser with true, correct and complete copies of the last two (2) annual
compliance surveys related to such Healthcare Licenses.  Each of the Healthcare Licenses is in full
force and effect 


 


12





















 


and no Seller Party has received any written notice
regarding, nor does Seller have any knowledge of, any circumstance at any
Facility which would need to be rectified in connection with such Healthcare
Licenses.


 


(j)            Environmental
Matters.  Neither Seller nor Master
Tenant has received written notice from any federal, state or local
governmental authority or agency that remains outstanding and unresolved or
uncured claiming that (i) any Facility or any use thereof violates any
law, rule or regulation relating to the prevention of pollution or
protection of the environment or human health and safety (collectively “Environmental Laws”), or (ii) any
Seller Party or any tenant or other occupant of the Property has violated or
has liability under any Environmental Laws with respect to the Property, or (iii) any
investigation, cleanup or other work is required at the Property pursuant to
any Environmental Law.  Neither the
Property nor any Facility nor the use, occupancy or condition thereof violates,
in any material way, any applicable Environmental Law.  No hazardous or toxic substances, materials,
waste or chemicals (including without limitation oil, gasoline and diesel fuel)
(“Hazardous Materials”) are
located at or have been used on the Property except in compliance with
Environmental Law.  No material quantity
of Hazardous Material has been discharged, dispersed, released, disposed of or
allowed to escape on, under or at the Property. 
No underground storage tanks, friable asbestos or polychlorinated
biphenyls are located at the Property, and the Property does not contain mold
in amount or condition that would reasonably be expected to result in material
cost or expense for removal or remediation or otherwise result in material liability. 
Seller has provided Purchaser with true, correct and complete copies of
all environmental reports and assessments in its possession or control relating
to the Property.


 


13





















 


(k)           Medicare and Medicaid.  No
governmental authority has imposed or threatened any sanction, including but
not limited to, loss of or limitation on license, termination from the Medicare
or Medicaid programs, denial of payment for new admissions, directed plans of
correction, or civil money penalties that apply to or may affect the operation
of any Facility.  No Seller Party has
received any notice of deficiency from any governmental authority with respect
to any Facility.  All cost reports
which have been prepared and filed by or on behalf of any Seller Party with
respect to any Facility were prepared
and filed in accordance with applicable Medicare and Medicaid cost reporting
requirements.


 


(l)            Employees.  The schedule of Facility Employees to be
delivered pursuant to Section 12 below is and will be true, accurate and
complete in all material respects.  All
of the Facility Employees are employees of the Seller.  No Facility Employees are represented by any
labor organization, and no labor organization or group of Facility Employees
has made a pending demand for recognition or has filed a petition seeking a
representation proceeding with the National Labor Relations Board within the
last two (2) years.


 


(m)          No
Litigation.  Except for the Seller’s
Chapter 11 case, no Seller Party has received written notice of, and Seller has
no knowledge of, any legal actions, suits, or other legal or administrative
proceedings, pending or threatened against any Seller Party or any Facility
which will materially adversely affect the ability of any such party to perform
its obligations under this Agreement or any other agreement with Purchaser to
acquire portions of or interests in the Property or the current operations at
any Facility.


 


14





















 


(n)           Not a
Foreign Person.  Seller is not, and
to Seller’s knowledge, no other Seller Party is, a “foreign person” as such
term is defined under Section 1445(1)(3) of the Internal Revenue
Code.


 


(o)           Tax
Matters.  No claim has ever been
received by any Seller from a taxing authority in a jurisdiction where such
Seller does not file tax returns that it is or may be subject to taxation by
that jurisdiction or that it must file tax returns in such jurisdiction.


 


(p)           Compliance with ERISA.  Seller has provided Purchaser,
contemporaneously with the execution of this Agreement, a brochure which sets
forth a list of each employee benefit plan (including without limitation each “employee
benefit plan,” within the meaning of Section 3 of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”)) and
every other employee benefit plan or arrangement operated and administered by
any Seller Party (each a “Plan”).  Each Plan has been operated and administered
in material compliance with all applicable laws, rules and regulations of
any federal, state, city or county government or any agency, body, or
subdivision thereof having jurisdiction. 
No Seller Party has incurred any liability pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the Internal Revenue
Code of 1986, as amended to date (the “Revenue
Code”), relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by any Seller Party
or any ERISA Affiliate of any Seller Party, or in the imposition of any lien on
any of the rights, properties or assets of any Seller Party, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Revenue Code or Section 4068
of ERISA, other than such liabilities or liens as would not be individually or
in the aggregate material.  For purposes
of this Section, an 


 


15





















 


“ERISA Affiliate”  shall mean any natural person or entity of any
kind (each, a “Person”) and/or such Person’s
subsidiaries or any trade or business (whether or not incorporated) which is
under common control with such Person or such Person’s subsidiaries or which is
treated as a single employer with such Person or such Person’s subsidiaries
under Section 414(b), (c), (m) or (o) of the Revenue Code or Section 4001(b)(1) of
ERISA.


 


(q)           Operating Statements.  Seller has provided Purchaser with complete
and accurate copies of the monthly operating statements for the Property for
the 2008 calendar year through August 31, 2008 (collectively, the “Operating Statements”).  The Operating Statements are the operating
statements used by the Seller Parties in the ownership and operation of the
Property, and, except as otherwise noted therein, are complete and accurate, do
not contain any untrue statement of a material fact or omit to state a material
fact required by GAAP to be stated therein or necessary in order to make the
statements contained therein not misleading, and fairly present the results of
operations of the Seller Parties on the bases therein stated, as of the
respective dates thereof, and for the respective periods covered thereby.


 


9.             Purchaser’s Representations and
Warranties.  Purchaser makes the
following representations and warranties to Seller, which representations
and warranties shall be true and correct in all material respects on and as of
the Closing, and which representations and warranties shall survive the Closing
for a period of one (1) year:


 


(a)           Organization,
Standing and Power.  Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland.  Purchaser
has all requisite entity power and authority to own, lease and operate its
properties, to 


 


16





















 


carry
on its business as now being conducted and to execute, deliver and perform this
Agreement and all writings relating hereto.


 


(b)           Authorization of
Purchaser.  The execution, delivery
and performance of this Agreement by Purchaser have been duly and validly
authorized.  The execution and delivery
of this Agreement, the consummation of the transactions herein contemplated,
and the performance of, fulfillment of and compliance with the terms and
conditions hereof by Purchaser do not and will not:  (i) conflict with or result in a breach
of the articles of incorporation or by-laws of Purchaser; (ii) violate any
statute, law, rule or regulation or any order, writ, injunction or decree
of any court or governmental authority; or (iii) violate or conflict with
or constitute a default under any agreement, instrument or writing of any
nature to which Purchaser is a party or by which Purchaser or its assets or
properties may be bound.


 


(c)           Funds.  Purchaser has sufficient capacity and
relationships with third parties, lenders and/or equity investors to enable it
to purchase or finance the purchase of the Property and apply for all necessary
licenses related thereto.  Purchaser is a
sophisticated real estate investor and has the experience, knowledge and
ability to evaluate the purchase of the Property and the operations of the
Facilities.  In no event shall the
receipt or availability of any funds or financing by Purchaser or any of its
affiliates or any other financing or other similar transactions be a condition
to any of Purchaser’s obligations hereunder.


 


10.          Bankruptcy Court
Approvals.


 


(a)           Promptly following
the Effective Date (and in no event later than five (5) business days
thereafter), Seller will make a motion in the form of Exhibit 7 hereto (the “Sale Motion”) seeking entry of an order from the Bankruptcy
Court in the form of Exhibit 8
hereto 


 


17





















 


(the
“Procedures Order”) and a subsequent
order approving sale of the Property in the form of Exhibit 9
hereto (the “Sale Order”).  Following the filing of
the Sale Motion, Seller shall use reasonable commercial efforts to promptly
obtain the Procedures Order and the Sale Order. 
Both Purchaser’s and Seller’s obligations to consummate the transactions
contemplated in this Agreement which the Purchaser and Seller may hereafter
enter into shall be conditioned upon the Bankruptcy Court’s entry of the
Procedures Order and the Sale Order substantially in the forms attached hereto;
provided that the addition of provisions to the Procedures Order or the Sale
Order that are not adverse to Purchaser in any material manner shall not
relieve Purchaser of its obligation to proceed hereunder.  If, for any reason whatsoever, the Bankruptcy
Court does not issue the Procedures Order, then either party may terminate this
Agreement upon written notice to the other party, whereupon this Agreement
shall immediately terminate, Escrow Agent shall return the Deposit to Purchaser
and Seller and Purchaser shall be relieved of any further liability or
obligation hereunder, except as expressly otherwise hereinafter provided.  Notwithstanding the foregoing, in the event
that the Bankruptcy Court enters an order approving a third party (an “Upset Purchaser”) as the purchaser of the
Property pursuant to an agreement between Upset Purchaser and Seller (the “Upset Agreement”) at the hearing on the
sale, this Agreement shall not be terminated, but rather this Agreement shall
become a “back-up bid” (with the Deposit being returned to the Purchaser upon
Bankruptcy Court approval of an Upset Agreement) which shall remain open for
acceptance by Seller for a period of sixty (60) days following such order, but
subject and subordinate in all respects to the rights of the Upset Purchaser
under the Upset Agreement.  Purchaser may
terminate this Agreement upon written notice to Seller if the Procedures Order
and the Sale Order are for any reason whatsoever not entered by the Bankruptcy
Court on or before November 14, 2008, whereupon this Agreement shall 


 


18





















 


immediately
terminate, Escrow Agent shall return the Deposit to Purchaser and Seller and
Purchaser shall be relieved of any further liability or obligation hereunder,
except as expressly otherwise hereinafter provided.  Purchaser shall be entitled to a break-up fee
in the amount of $500,000.00 (the “Break-Up
Fee”) if the Property is sold to an Upset Purchaser.  The obligations to pay the Break-Up Fee
survive termination of this Agreement.


 


(b)           On or about September 8,
2008, Seller filed an adversary proceeding with the Bankruptcy Court requesting
issuance of an order (the “Section 363(h) Order”)
pursuant to Section 363(h) of the Bankruptcy Code (the “Section 363(h) Action”) authorizing Seller to sell
the interests of the TICs.  The Parties
agree that the intermediate deadlines for various actions set forth in this
Agreement will not be subject to, or otherwise affected by, the timing of the
Bankruptcy Court’s ruling on the 363(h) Action as long as Seller has
received such authority by the Closing Date. 
If the Section 363(h) Order has not been entered on or before December 29,
2008, Purchaser shall have the unilateral right to terminate this Agreement,
which right is exercisable in Purchaser’s sole discretion by written notice
delivered to Seller, whereupon this Agreement shall immediately terminate, the
Escrow Agent shall return the Deposit to Purchaser and the Parties shall be
relieved of any further liability or obligation hereunder, except as expressly
otherwise herein provided.  If Purchaser
does not elect to terminate the Agreement as aforesaid, then the Agreement
shall continue in effect until January 31, 2009.  If the Agreement is so extended but the Section 363(h) Order
has not been entered on or before January 29, 2009, either Seller or
Purchaser shall have the right to terminate this Agreement, which right is
exercisable in Seller’s or Purchaser’s sole discretion by written notice
delivered to the other, whereupon this Agreement shall immediately terminate,
the Escrow Agent shall return the Deposit to Purchaser and the Parties shall be
relieved of any further liability or obligation 


 


19





















 


hereunder,
except as expressly otherwise herein provided. 
In addition, Purchaser shall have the unilateral right to terminate this
Agreement, which right shall be exercisable in Purchaser’s sole discretion by
written notice delivered to Seller at or prior to Closing, in the event that
Seller does not cause any Master Tenant to perform in accordance with this
Agreement, in which event the Escrow Agent shall return the Deposit to
Purchaser and the Parties shall be relieved of any further liability or
obligation hereunder, except as expressly otherwise herein provided.


 


(c)           Seller shall
promptly provide Purchaser with drafts of all documents, motions, orders,
filings or pleadings that Seller proposes to file with the Bankruptcy Court
that relate to the consummation or approval of this Agreement or the
transactions contemplated herein, and will provide Purchaser with reasonable
opportunity to review and approve such filings, including without limitation
any order relating to the assignment of the Assumed Contracts.


 


11.          Licensing Requirements.  Purchaser agrees that promptly following the
Bankruptcy Court’s approval of Purchaser as the purchaser of the Property
(irrespective of  whether the Bankruptcy
Court has entered an order approving Seller’s 363(h) Action by such date),
but in no event later than the second business day following issuance of such
approval, Purchaser shall submit an application completed with Purchaser’s
information and with all schedules and required background information in
Purchaser’s control to the regulatory
authorities in the states of North Carolina and South Carolina to obtain licensing approval required for
Purchaser (or its designee) to operate the Facility (“Licensing
Approvals”); provided, however, nothing contained herein shall
operate to prohibit Purchaser from, and Seller hereby consents to Purchaser,
contacting the appropriate licensing authorities and commencing 


 


20

















 


the licensing process prior to obtaining the
Bankruptcy Court’s approval of Purchaser as purchaser of the Property as
contemplated hereby. Following submission of the completed application and
documentation, Purchaser shall diligently pursue the Licensing Approvals,
including by fully completing all information in Purchaser’s control in a timely
manner, by attaching all required information and exhibits in Purchaser’s
control to the Licensing Approvals and by promptly responding to requests made
in connection with the Licensing Approvals, with the purpose of obtaining such
approvals no later than the earlier of (i) forty five (45) days after
entry of the Sale Order or (ii) December 31, 2008 (the “Licensing Period”). 
If Purchaser does not obtain all Licensing Approvals on or before the
expiration of the Licensing Period, then either Purchaser or Seller shall have
the right to terminate this Agreement upon written notice to the other Party
and Escrow Agent, and, upon such termination of the Agreement, provided
Purchaser shall have used commercially reasonable efforts to obtain the
Licensing Approvals, Purchaser shall be entitled to a return of the
Deposit.   Purchaser shall be responsible
for any and all of Purchaser’s costs associated with the Licensing Approvals
and the assignment of existing provider agreements.  However, Seller shall cooperate with and
assist Purchaser with respect the Licensing Approvals and the assignment of any
existing provider agreements, and shall cause the Seller Parties so to
cooperate as well, including providing all information in such party’s control
necessary for the application and executing the application if required.  Except as otherwise set forth in this
Agreement (and without derogation of Seller’s representations and warranties),
Purchaser shall be solely responsible for any and all costs associated with the
change of ownership process, including any physical plant or other changes
required to bring the Facility into compliance with the currently effective
licensing and certification and other legal


 


21
















 


requirements if and to the extent it is not currently
in such compliance and such compliance is required as a matter of state or
federal law.


 


12.          Employee Matters.


 


(a)           Within ten (10) days
of the Effective Date, Seller shall deliver to Purchaser a schedule setting
forth: (i) the name of each of the current employees at the Facilities
(the “Facility Employees”), (ii) each
Facility Employee’s position, job description, and rate of pay, (iii) a
reasonable estimate of all benefits that each Facility Employee is entitled as
a legal matter to receive under currently applicable legal requirements or
management policies as of the then scheduled Closing Date, and (iv) the
then current employer’s liability for the Facility Employee’s vacation, sick,
personal time-off, and any other accrued rights or benefits as of the then
scheduled Closing Date.  Not less than
two (2) business days prior to the Closing Date, Seller shall deliver an
updated schedule with updated information that shall be accurate as of the
Closing Date.


 


(b)           Until such time as
Purchaser or Purchaser’s designee has decided whether or not to hire such
Facility Employees, all personnel and employment records relating to former or
current Facility Employees shall be made available to Purchaser.


 


(c)           Within twenty (20)
days of Seller’s delivery of initial schedule and related information relating
to the Facility Employees as described in paragraph 12(a) above, Purchaser
shall provide Seller with its (or its designee’s) hiring criteria (the “Hiring Criteria”) with respect to Facility Employees.  Purchaser
shall have the right, but shall not be obligated, to offer employment to and
hire any or all of the Facility Employees as of the Closing Date upon
such terms and conditions of employment as may be determined by Purchaser or
its designee.  It is 


 


22





















 


expressly agreed that the Facility Employees are not
third party beneficiaries of this Agreement.  Notwithstanding the foregoing, Purchaser shall
offer employment to at least ninety five percent (95%) of the Facility
Employees meeting Purchaser’s Hiring Criteria upon such terms and conditions so
as the termination by Seller of the Facility Employees not offered employment
by Purchaser shall not constitute a mass layoff or plant closing under the WARN
Act; provided, however, in no event shall Purchaser be obligated
or required to hire any employees who are not employed on-site at a Facility
(such as regional employees in a central office).  For a period of twelve (12) months following
the Effective Date, Seller shall not permit any Seller Party to solicit any of
the Facility Employees hired by Purchaser or its designee.  The
foregoing restriction shall not apply to any Facility Employees terminated by
Purchaser.


 


(d)           On the Closing Date, Seller shall cause the
termination of the employment of each of the Facility Employees.  Seller shall be solely responsible for
severance pay and all wages and benefits accrued on or before the Closing due
to each of the Facility Employees.  Seller
shall be solely responsible for all employment obligations of the Facility
Employees arising or accruing on or before the Closing (including any salaries, vacation accruals, sick pay,
bonuses, commissions, fringe benefits, employee claims, COBRA claims, withholding or employment taxes, or any other
amounts due any Facility Employees that are due and payable or that have
accrued for services provided prior to and including the Closing, workers’
compensation claims, claims related to employment or termination of employment,
and claims relating to Seller’s employee benefit plans).  Notwithstanding the foregoing, if Purchaser so elects
(and to the extent permitted under applicable employment agreements and
applicable law), Seller shall not pay employees who were rehired by Purchaser
accrued vacation pay, but rather Purchaser shall or shall cause its manager to
assume the obligations for such accrued vacation 


 


23





















 


time and Purchaser shall
receive a credit at Closing in the amount of such accrual.  Seller shall indemnify, defend and hold
harmless Purchaser and it affiliates, members,
managers, officers, directors, employees, agents, representatives, successors
and assigns from any liability relating from and against any loss, claim or damage (including,
without limitation, reasonable attorney’s fees) incurred by Purchaser in
connection with any failure by Seller to comply with its obligations under this
paragraph 12(d).  Seller’s obligations
under this paragraph 12(d) shall survive the closing under this Agreement.


 


(e)           Except as may be required by applicable law, the
levels of compensation and employee benefits offered to any Facility Employees
that may be hired by Purchaser shall be determined by Purchaser in its sole
discretion.


 


(f)            The Parties do not
believe the provisions of the Workers Adjustment and Retraining Notification
Act (the “WARN Act”) apply to the transactions as
they are structured under this Agreement and do not expect to incur any such
liability as a result of actions taken or not taken prior to the Closing.


 


13.          Closing.


 


(a)           Date of Closing.  The closing of the transactions contemplated
by this agreement (the “Closing”) will
occur in the offices of Escrow Agent either in person or via delivery of
original documents on or before the day that is the later of (i) three (3) business
days after issuance of the Licensing Approvals and (ii) three (3) business
days after entry of the 363(h) Order (the “Closing Date”);
provided, however, if the Closing has not occurred on or before December 31,
2008, then, subject to the terms of Paragraph 10(b) of this Agreement,
either Purchaser or Seller shall have the right to terminate this Agreement
upon written notice to 


 


24





















 


the
other Party and Escrow Agent, and upon such termination, the Escrow Agent shall
return the Deposit to Purchaser and the Parties shall be relieved of any
further liability or obligation hereunder, except as expressly otherwise herein
provided.


 


(b)           Closing Deliveries.  At the Closing, Seller will deposit with
Escrow Agent the following documents executed and acknowledged, as applicable,
by the appropriate Seller Parties: the Deed; the Bill of Sale; the Assignment
and Assumption of Resident Agreements; the Assignment of Rights; a non-foreign
affidavit substantially in the form attached hereto as Exhibit 6, from (or in the case of a entity
disregarded as separate from its owner for federal income tax purposes, with
respect to) each Seller; a settlement statement; a proration worksheet
(which shall have been provided to Purchaser in draft form not later than five (5) business
days prior to Closing); terminations of the Master Leases, in a form and
substance reasonably satisfactory to Purchaser; terminations of all existing
management agreements with SunWest Management, Inc. or its affiliates
relating to the Property; organizational documents and authorizing resolutions
for the Seller; documentation acceptable to Purchaser that no amounts are due
as the result of any applicable bulk sales or non-resident withholding laws;
and such other items as Purchaser or its title company may reasonably require
(including an owner’s affidavit in such from as will permit Purchaser’s title
company to delete exceptions for mechanics liens and parties in possession —
other than residents under Resident Agreements — and a gap indemnity in such
form as will permit the title company to release the Purchase Price to Seller
prior to recording the applicable Conveyance Documents).  At the Closing, Purchaser shall deposit with
Escrow Agent an amount equal to the adjusted Purchase Price (less the Deposit
and other credits specifically set forth in the paragraph); executed counterparts
of the Assignment of Resident Agreements and the Assignment of Rights; all
escrow fees, real
estate transfer taxes as required 


 


25





















 


by statute or local ordinance relating to the transfer of the Property
from the Seller Parties to Purchaser, charges allocable to Purchaser’s financing for this
transaction, the recording fee on the Deed, and its share of prorated items;
and such other items as may be reasonably requested in order for Purchaser to
comply with the terms of this Agreement. 
Purchaser shall also be responsible for any premiums, costs or charges
for title insurance, extended title coverage, endorsements, lender’s coverage,
obtained by Purchaser or at Purchaser’s request and all other similar
amounts.  Seller shall pay its share of
prorated items.  All refundable deposits
under the Resident Agreements, if any, shall be transferred to Purchaser at the
Closing, or shall be credited to Purchaser against the amount payable by
Purchaser at Closing, at Seller’s option. 
Each Party shall pay its own attorneys’ fees.  To the extent that transfer tax, documentary
stamps, recordation tax or charges or title premiums are customarily paid by
the Seller in the jurisdiction where a property is located, such cost shall be
paid by Purchaser as aforesaid, but Purchaser shall receive a credit against
the Purchase Price in an amount equal to such cost.  Purchaser will be entitled to deduct and
withhold from any amounts otherwise payable pursuant to this Agreement to any
Person such amounts as required under the Revenue Code or any other provision
of tax law.  To the extent that amounts
are so withheld, such withheld amounts will be treated for all purposes hereof
as having been paid to such Person in respect of which such deduction and
withholding was made.


 


(c)           Resident Agreements, Assumed Contracts
and Records.  Seller shall deliver to Purchaser outside of
escrow at Closing originals of all (i) the Resident Agreements, (ii) Assumed
Contracts, (iii) personnel and employment records that relate to former or
current Facility Employees, (iv) records relating to the personal,
medical, social, and financial status of each resident, including but not
limited to, admission applications, Multiple Data Set (MDS) 


 


26





















 


evaluations, care plans,
medical records, and other resident specific data required to be kept by
licensing and certification authorities, and (v) any other records
pertaining to any Facility.  Subject to
the terms of this Agreement and applicable law, Purchaser will make such
documentation available to Seller at the Property, upon request, if a Seller
Party needs such in connection with claims or litigation related to periods
prior to the Closing.  Notwithstanding
the foregoing, no Seller Party shall be required to provide documents that
constitute Excluded Assets.


 


(d)           Title Policy.  
Purchaser’s obligation to proceed to Closing shall be conditioned upon
receipt of a national title insurance company’s irrevocable commitment to issue
one or more ALTA owner’s title insurance policies to Purchaser, insuring title
to the Real Property is vested in Purchaser, subject only to the Permitted
Exceptions, with such endorsements as shall be reasonably required by the
Purchaser, and without standard exceptions for mechanics’ liens or parties in
possession (other than residents under Resident Agreement).  For purposes of the preceding sentence, “Permitted
Exceptions”  shall mean,
collectively, (i) liens for real estate taxes or assessments not yet due
and payable or due and payable but not yet delinquent and (ii) such other
non monetary encumbrances with respect to the Property as would not reasonably
be expected to unreasonably interfere with or impair the current or future use,
marketability or value of any Facility. 
If the condition to Closing set forth in this paragraph 13(d) is
not satisfied on or before the Closing Date, then Purchaser may elect to
terminate this Agreement by giving Seller and Escrow Agent written notice
thereof on or before the Closing Date whereupon this Agreement will be
terminated, the Escrow Agent shall return the Deposit to
Purchaser and the Parties shall be relieved of any further liability or
obligation hereunder, except as expressly otherwise herein provided.


 


27





















 


(e)           Possession.  At Closing, Seller shall deliver possession
of the Property to Purchaser free and clear of all rights, liens and claims
(including, without limitation, the Master Leases and any monetary
encumbrances) other than the rights of residents under the Resident Agreements.


 


(f)            Non-Foreign
Affidavit of TICs.  Seller shall use reasonable efforts to
deliver to Purchaser at or prior to Closing a non-foreign affidavit
substantially in the form attached hereto as Exhibit 6, from (or in the case of a entity
disregarded as separate from its owner for federal income tax purposes, with
respect to) each TIC.


 


14.          Proration of Facility Expenses and Revenues.


 


(a)           Expenses.  Expenses pertaining to the
billing period in which the Closing Date occurs, real and personal property
taxes, prepaid or unpaid expenses, utility charges, amounts due under Assumed
Contracts, and other related items of expense attributable to the Facilities
shall be prorated between Seller (on behalf of the applicable Seller Party) and
Purchaser as of the Closing Date based on a 366 day year.  Seller is responsible for expenses incurred
in the operation of the Facilities prior to the Closing Date.  In general, such prorations shall be made so
as to allocate to Seller expenses which have accrued during or otherwise relate
to time periods prior to the Closing Date and to allocate to Purchaser expenses
which accrue during or otherwise relate to time periods commencing from and
after the Closing Date.  To the extent
such charges are not able to be allocated, determined or credited through
Escrow, the intent of this provision shall be implemented by Purchaser
remitting to Seller any unpaid invoices which reflect expenses which accrue
during or otherwise relate to time periods prior to the Closing Date and by
Purchaser assuming responsibility for the payment of any invoices 


 


28





















 


which reflect expenses which accrue during or
otherwise relate to time periods commencing from and after the Closing Date,
with any overage or shortage in payments by either Party to be adjusted and
paid as provided in subparagraphs (b) and (c) below.  Seller shall be entitled to a refund of all
deposits held by utility companies, if applicable, and, where necessary,
Purchaser shall arrange to make its own deposits with the utility companies on
or prior to the Closing.


 


(b)           Basis for Prorations.  All
such prorations shall be made on the basis of actual days elapsed in the
relevant accounting, billing or revenue period and shall be based on the most
recent information available.  Utility
charges which are not metered and read on the Closing Date shall be estimated
based on prior charges, and shall be re-prorated outside of Escrow upon receipt
of statements therefor as of the Closing Date.


 


(c)           Settlement of Prorations.  All
amounts owing from or to Seller or Purchaser that require adjustment after the
Closing Date shall be settled within sixty (60) calendar days after the Closing
Date or, in the event the information necessary for such adjustment is not
available within said sixty (60) day period, then as soon thereafter as
practicable.  Each Party shall make such
records reasonably available for inspection by the other Parties as are
reasonable to demonstrate the accuracy of any adjustments.


 


(d)           Petty Cash.  On the Closing Date, Seller
shall retain all petty cash maintained by any Seller Party at any Facility.


 


(e)           Amounts under Resident Agreements. 
Seller shall assign to Purchaser at Closing all accounts related to the
Resident Agreements including, but not limited to, all security deposit
accounts, if any, or if applicable shall give Purchaser a credit for any such
security deposits at Closing.  Purchaser
shall receive a credit for any rent and other income (i.e., including 


 


29





















 


any other revenues,
receipts and royalties) collected by Seller before Closing that applies to any
period on or after the Closing Date. 
Purchaser shall also receive a credit for the amount of any unexpired
free rent or other landlord concessions under Resident Agreements.  Uncollected rent and other uncollected income
shall not be prorated at Closing.  Seller
shall pay all leasing commissions and tenant improvements with respect to any
and all Resident Agreements and other agreements for the rental of space
entered into prior to the Effective Date or without Purchaser’s consent.  Seller and Purchaser shall allocate the
payment of leasing commissions and tenant improvements between the parties (but
only to the extent such leasing commissions or tenant improvements have been
approved in writing by Purchaser) with respect to leasing commissions and
tenant improvements which are agreed to pursuant to agreements entered into by
Seller after the Effective Date but before the Closing Date and with Purchaser’s
written consent.


 


(f)            Survival.  The Parties’
obligations under this Section 14 shall survive the Closing for a
period of one (1) year (or such shorter period as may be specified
herein).


 


15.          Seller Covenants. Seller
covenants and agrees that commencing on the Effective Date and through Closing
and as a condition thereof (the “Contract Period”):


 


(a)           Operation of Property.  Seller will and will cause the applicable
Seller Parties to operate and maintain the Facilities in a first class and
professional manner.  Without limiting
the foregoing, Seller will and will cause the Seller Parties to (i) timely
pay and perform their obligations in all material respects under the Resident
Agreements and Assumed Contracts, (ii) pay all post-petition taxes as they
come due and payable, (iii) maintain insurance on the 


 


30





















 


Property (in amounts and
types consistent with past practice), and (iv) use its best efforts to
preserve its relationships with residents, suppliers and others having business
dealings with it.


 


(b)           New Agreements.  Seller will or will cause the applicable
Seller Parties to provide Purchaser with prompt notice and copies of all new
Resident Agreements, Resident Agreement amendments and Resident Agreement
extensions (“New Resident Agreements”) and
Resident Agreement terminations occurring during the Contract Period.  Seller will not and will not permit any
applicable Seller Party to enter into any New Resident Agreements for less than
market rent.  Any New Resident Agreements
shall be on the standard form Resident Agreement and shall not contain free
rent or other concessions except as otherwise approved by Purchaser in writing
in its sole discretion.  Seller will not
and will not permit any Seller Party to terminate any Resident Agreement,
except in the ordinary course of business consistent with such Seller Party’s
past practices.  Seller will not permit
any Seller Party to relocate any resident from any Facility or solicit any
resident individually or generally to relocate from the Facilities, in either
case without the prior written consent of Purchaser which may be withheld in
Purchaser’s sole discretion.  From and
after the date hereof, Seller will not and will not permit any applicable
Seller Party to enter into any contract (other than New Resident Agreements,
Resident Agreement amendments and Resident Agreement terminations as provided
above) that will be an obligation affecting the Property subsequent to the
Closing Date except for contracts entered into in the ordinary course of
business that are terminable without cause and without payment of a penalty on
not more than 30-days’ notice.


 


(c)           Personal Property.  Seller will not and will not permit any
Seller Party to remove any Personal Property from the Real Property except as
may be required for necessary 


 


31





















 


repair or replacement,
and in the event of such replacement, the replacement shall be of equal or
better quality and quantity as existed as of the time of its removal.


 


(d)           Cooperation.  Seller shall not take, and shall ensure that
none of Seller’s affiliates (as such term is used in the Bankruptcy Code) take,
any action or fail to take any action, which action or failure to act would
reasonably be expected to (i) prevent or impede the consummation of the
transactions contemplated by this Agreement in accordance with the terms of
this Agreement, or (ii) result in (A) the reversal, avoidance,
revocation, vacating or modification (in any manner that would reasonably be
expected to materially and adversely affect Purchaser’s rights hereunder) or (B) the
entry of a stay pending appeal with respect to the Procedures Order or the Sale
Order.  Seller will and will cause the
applicable Seller Parties to reasonably cooperate with Purchaser in order to
effect a smooth transition of the operations at the Facilities to Purchaser.


 


(e)           Seller shall promptly notify
Purchaser of any material change in any condition with respect to the Property
or any Facility or of any event or circumstance which makes any representation
or warranty of Seller under this Agreement untrue or misleading.


 


16.          Post Closing
Obligations.  All of the following
obligations, duties, provisions and agreements shall survive Closing.


 


(a)           Records.


 


(i)            After the Closing,
to the extent required by law, Purchaser shall keep and preserve all medical
records and other records that it obtained from a Seller Party for 


 


32





















 


persons
who were residents of the Facility for such period of time as may be required
by any applicable legal requirement.


 


(ii)           In order to and for
the limited purpose of facilitating Seller’s efforts to administer and close the
Case (including the preparation of filings in the Case and state, local and
federal tax returns and other filings, reconciliation of claims filed in the
Case, removal of corporate and other records and information relating or
belonging to entities other than Seller), but subject in all events to the
requirements of any applicable laws, for a period of one (1) year
following the Closing:


 


(A)          Purchaser shall permit Seller’s
counsel and other professionals and counsel for any successor to Seller and
their respective professionals (collectively, “Permitted
Access Parties”) reasonable access to the financial and other books
and records relating to the Property or the operation of the Facility that are
non-proprietary in nature (including all records pertaining to the Facility
Employees, to the extent permitted by applicable law) and the systems
containing such information, books and records, which access shall include (xx)
the right of such Permitted Access Parties to copy, at such Permitted Access
Parties’ expense, such documents and records as they may request in furtherance
of the limited purposes described above, and (yy) Purchaser’s copying and
delivering to the relevant Permitted Access Parties such documents or records
as they may request, but only to the extent such Permitted Access Parties
furnish Purchaser with reasonably detailed written descriptions of the
materials to be so copied and the applicable Permitted Access Party reimburses
Purchaser for the reasonable costs and expenses thereof, and


 


33
















 


(B)          Following prior
written request from Seller, Purchaser shall provide the Permitted Access
Parties (at no cost to the Permitted Access Parties) with reasonable access to
any manager at a Facility during regular business hours to assist Seller and
the other Permitted Access Parties for the limited purposes described above,
provided that such access does not unreasonably interfere with such manager’s
normal job activities.


 


(iii)          Seller agrees to maintain
any information obtained by it pursuant to the provisions of this Paragraph 16(a) in
strict confidence and Seller shall not disclose or permit the disclosure of any
such information to any third party (other than the Permitted Access Parties)
without the Purchaser’s prior written consent, which shall not be unreasonably
withheld with respect to any such disclosure that is required in connection
with the Case.


 


(iv)          Purchaser acknowledges and agrees that the
books, records and other materials described in this paragraph are unique and
the event of a breach by Purchaser of its obligations under this paragraph
Seller would suffer injury for which it would not be fully compensated with
monetary damages and accordingly, in the event of a breach by Purchaser of its
obligations under this paragraph, Seller shall be entitled to seek to enjoin a
breach by Purchaser of its obligations under this paragraph and/or to
specifically enforce the obligations of Purchaser hereunder.


 


(b)           Accounts Receivable.


 


(i)            Each
Seller Party shall retain its right, title and interest in and to all unpaid
accounts receivable with respect to the Facility, including all rents and other
charges pertaining to residents of the Facility (“Rents”),
which have been outstanding for thirty (30) days or fewer as of the Closing
Date; and, in no event shall any Seller Parties retain any right, title or 


 


34





















 


interest in or to any Rents which have been
outstanding for more than thirty (30) days as of the Closing Date, such Rents
outstanding for more than thirty (30) days as of the Closing Date to be
assigned to Purchaser at Closing as part of the Rights covered hereunder.  For a period of three (3) months after
Closing, Purchaser shall use reasonable efforts to account for and transmit to
Seller any collections of receivables, including Rents, received by Purchaser
which relate to the period prior to the Closing Date and which have been
retained by any Seller Party hereunder; provided, however, in no
event shall Purchaser be obligated to initiate any lawsuit or other action
against any residents in connection with such efforts.  Rents received after Closing shall be applied
to the most recent Rent payments due in reverse chronological order, such that
Rents that have been outstanding for the shortest period of time shall be paid
first and Rents that have been outstanding for the longest period of time shall
be paid last.


 


(ii)           Third
Party Payments.  In furtherance and
not in limitation of the requirements set forth in paragraph 16(b)(i), payments
received by Purchaser after the Closing Date from third party payors, including
Medicare, Medicaid, managed care organizations, the VA or any other federal or
state agency for or on account of Rents which any Seller Party is entitled to
retain hereunder shall be handled as follows:


 


(A)          If
such payments either specifically indicate on the accompanying remittance
advice, or if the Parties agree, that they relate to the period prior to the
Closing Date, they shall be forwarded to Seller, within ten (10) business
days after receipt thereof together with copies of applicable remittance
advices; and


 


35

















 


(B)          If
such payments are silent as to the period to which they relate, or indicate on
the accompanying remittance advice, or if the Parties agree, that they relate
to the period on or after the Closing Date, they shall be retained by
Purchaser; and


 


(C)          If
such payments indicate on the accompanying remittance advice, or the Parties
agree, that they relate to periods both prior to and after the Closing Date,
the portion thereof which relates to the period on and after the Closing Date
shall be retained by Purchaser and the balance shall be forwarded to Seller,
within ten (10) business days after receipt thereof together with copies
of applicable remittance advices; provided, however, unless
otherwise specified in the remittance or otherwise agreed to by the Parties,
such payments shall be applied first to the periods from and after the Closing
Date with the balance being applied to periods prior to the Closing Date.


 


(iii)          Payments
Received by Seller.  Any payments
received by a Seller Party after the Closing Date which represent payments for
services rendered or goods sold by Purchaser from and after the Closing Date or
which such Seller Party is not otherwise entitled to retain hereunder shall be
forwarded to Purchaser by Seller, within ten (10) business days after
receipt thereof together with copies of applicable remittance advices.


 


(iv)          Private
Payments Received by Purchaser.  Any
private payments received by Purchaser which relate to any residents discharged
from the Facility prior to the Closing Date (the “Discharged
Residents”) for or on account of Rents which have been retained by a
Seller Party hereunder shall be forwarded to Seller within ten (10) business
days of receipt thereof together with copies of applicable remittance advices
or other information received.  Purchaser
shall request that such Discharged Residents remit such payments directly to
Seller at 


 


36





















 


a location other than the Facility.  Any private payments received after Closing
from or on behalf of any residents other than Discharged Residents shall be
applied to the most recent balance due and then to aged balances due in reverse
chronological order.


 


(v)           Recovery
of Accounts Receivable.  No Seller
Party shall have any right to recover payment from any current resident of a
Facility or to dispossess any resident from a Facility.


 


(vi)          Misapplied
Payments.  In the event the Parties
mutually determine that any payment hereunder was misapplied by the Parties,
the Party which erroneously received said payment shall remit the same to the
other within ten (10) business days after said determination is made.


 


(vii)         Reports.  For the six (6) month period following
the Closing Date or until the Seller Parties receive payment of all accounts
receivable attributable to the operation of the Facility prior to the Closing
Date, whichever is sooner, Purchaser shall provide Seller with: (a) an
accounting by the 20th day of each month setting forth all accounts
received by Purchaser during the preceding month with respect to the Seller
Parties’ accounts receivable; and (b) copies of all remittance advice
relating to such amounts received and any other reasonable supporting
documentation as may be required for Seller to determine the Seller Parties’
accounts receivable that have been paid. 
Purchaser shall deliver such accounting to Seller at the address set
forth for notices to Seller herein.


 


(viii)        Survival.
The obligations of the Parties to forward the accounts receivable payments
pursuant to this paragraph are absolute and unconditional and irrespective of
any circumstances whatsoever that might constitute a legal or equitable
discharge, 


 


37





















 


recoupment, offset, counterclaim or defense of the
Parties, the right to assert any of which with respect to proceeds of any
accounts receivable is hereby waived. 
All representations, warranties, covenants and obligations of the
Parties under this paragraph shall survive the Closing for six (6) months.


 


(c)           Patient Trust Funds Accounting.


 


(i)            Patient
Trust Funds.            Within ten (10) days
after the Effective Date and on the Closing Date (or such earlier date as may be required by
applicable legal requirements), Seller shall cause the Master Tenant to furnish
to Purchaser a list of all residents of the Facility and an accounting of all
personal funds, if any, of residents of the Facility that a Seller Party holds
in a custodial capacity (“Patient Trust Funds”).  Such accounting shall set forth the name of
each resident for whom such funds are held and the amount held by a Seller
Party on behalf of such resident. 
Contemporaneously with the Closing, Seller shall cause all such funds to
be transferred to Purchaser, and Purchaser and the applicable Seller Party
shall execute and deliver a receipt and assumption agreement in compliance with
applicable law acknowledging receipt and assumption by Purchaser of such
funds.  At the Closing,
Seller shall deliver to Purchaser a list specifying all tenants that owe Rents,
which list shall set forth in reasonable detail the amount of such Rents, the
period(s) to which each such amount owing relates and the nature of each
such amount.


 


(ii)           Indemnification.  Following the transfer of Patient Trust Funds
to Purchaser, Seller shall have no further liability for any of the transferred
Patient Trust Funds, and Purchaser shall indemnify, defend and hold harmless
the Seller Parties and their affiliates, members, managers, officers,
directors, employees, agents, representatives, successors and 


 


38





















 


assigns from any liability relating thereto.  Except for the transferred Patient Trust
Funds, Purchaser shall have no liability for claims for Patient Trust Funds,
and the Seller shall indemnify, defend and hold harmless Purchaser and their
affiliates, members, managers, officers, directors, employees, agents,
representatives, successors and assigns from any liability relating thereto.


 


(d)           Applicability
of Regulatory and Licensing Authorities. 
Notwithstanding any other provision of this Agreement to the contrary,
all actions to be taken by a Party under this Agreement must be in compliance
with all applicable licensure laws and regulations (“Licensure
Laws”).  In the event a
provision of this Agreement is not consistent with the requirements of the
Licensure Laws (such as a prohibition on transfer of resident contracts or
other operational assets prior to Licensing Approval being obtained), then the
Licensure Laws shall prevail over such inconsistent provisions and the Parties
agree to work together in good faith to achieve the intent of this Agreement
through other reasonable approaches.


 


17.          “AS-IS” SALE;
LIMITATION; DISCLAIMER NOTICE. 
PURCHASER ACKNOWLEDGES THAT NOTWITHSTANDING ANY PRIOR OR CONTEMPORANEOUS
ORAL OR WRITTEN REPRESENTATIONS, STATEMENTS, DOCUMENTS OR UNDERSTANDINGS, AND
EXCEPT FOR THE BANKRUPTCY PROCEEDINGS REFERRED TO HEREIN, THIS AGREEMENT
CONSTITUTES THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND SUPERSEDES ANY SUCH PRIOR OR CONTEMPORANEOUS ORAL OR WRITTEN
REPRESENTATIONS, STATEMENTS, DOCUMENTS OR UNDERSTANDINGS.  PURCHASER FURTHER ACKNOWLEDGES THAT, EXCEPT
AS EXPRESSLY CONTAINED IN THIS AGREEMENT OR IN ANY OTHER DOCUMENT TO BE 


 


39

















 


EXECUTED
AND DELIVERED BY ANY SELLER PARTY IN CONNECTION WITH THE CLOSING, (I) NEITHER
SELLER, NOR ANY PRINCIPAL, AGENT, ATTORNEY, EMPLOYEE, BROKER OR OTHER
REPRESENTATIVE OF SELLER HAS MADE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND
WHATSOEVER, EITHER EXPRESS OR IMPLIED, REGARDING THE PROPERTY (INCLUDING INCOME
TO BE DERIVED OR EXPENSES TO BE INCURRED IN CONNECTION WITH THE PROPERTY, THE
PHYSICAL CONDITION OF ANY PERSONAL PROPERTY COMPRISING A PART OF THE
PROPERTY OR WHICH IS THE SUBJECT OF ANY LEASE OR CONTRACT TO BE ASSUMED BY
PURCHASER AT THE CLOSING, THE ENVIRONMENTAL CONDITION OR OTHER MATTER RELATING
TO THE PHYSICAL CONDITION OF ANY REAL PROPERTY OR IMPROVEMENTS COMPRISING A PART OF
THE PROPERTY, THE ZONING OF ANY SUCH REAL PROPERTY OR IMPROVEMENTS, THE VALUE
OF THE PROPERTY (OR ANY PORTION THEREOF), THE TRANSFERABILITY OF THE PROPERTY,
THE TERMS, AMOUNT, VALIDITY, COLLECTIBILITY OR ENFORCEABILITY OF ANY ASSUMED
LIABILITIES OR ASSUMED CONTRACT, THE TITLE OF THE PROPERTY (OR ANY PORTION
THEREOF), OR ANY OTHER MATTER OR THING RELATING TO THE PROPERTY OR ANY PORTION
THEREOF), AND (II) THAT PURCHASER IS NOT RELYING ON ANY WARRANTY,
REPRESENTATION OR COVENANT, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY
AND AGREES THAT PURCHASER IS ACQUIRING THE PROPERTY IN WHOLLY AN “AS-IS,” “WHERE-IS”
CONDITION WITH ALL FAULTS AND WAIVES ALL CONTRARY RIGHTS AND REMEDIES AVAILABLE
TO IT UNDER STATE AND FEDERAL LAW. 
EXCEPT AS EXPRESSLY CONTAINED IN THIS AGREEMENT OR IN ANY OTHER DOCUMENT
TO 


 


40

















 


BE
EXECUTED AND DELIVERED BY ANY SELLER PARTY IN CONNECTION WITH THE CLOSING,
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE USE AND
CONDITION OF THE PROPERTY, INCLUDING THE CONDITION OF THE SOILS OR GROUNDWATERS
OF THE PROPERTY AND THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS ON OR UNDER
THE PROPERTY OR ITS COMPLIANCE WITH APPLICABLE STATUTES, LAWS, CODES,
ORDINANCES, REGULATIONS OR REQUIREMENTS RELATING TO LEASING, ZONING,
SUBDIVISION, PLANNING, BUILDING, FIRE, SAFETY, HEALTH OR ENVIRONMENTAL MATTERS
OR ITS COMPLIANCE WITH COVENANTS, CONDITIONS AND RESTRICTIONS (WHETHER OR NOT
OF RECORD) OR OTHER LOCAL, MUNICIPAL, REGIONAL, STATE OR FEDERAL REQUIREMENTS,
OR OTHER STATUTES, LAWS, CODES, ORDINANCES, REGULATIONS OR REQUIREMENTS.  WITHOUT IN ANY WAY LIMITING THE FOREGOING,
SELLER HEREBY DISCLAIMS ANY WARRANTY (EXPRESS OR IMPLIED) OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE AS TO ANY PORTION OF THE PROPERTY.  EXCEPT AS EXPRESSLY CONTAINED IN THIS
AGREEMENT OR IN ANY OTHER DOCUMENT TO BE EXECUTED AND DELIVERED BY ANY SELLER
PARTY IN CONNECTION WITH THE CLOSING, PURCHASER FURTHER ACKNOWLEDGES THAT
PURCHASER HAS CONDUCTED AN INDEPENDENT INSPECTION AND INVESTIGATION OF THE
PHYSICAL CONDITION OF ALL PORTIONS OF THE PROPERTY AND ALL SUCH OTHER MATTERS
RELATING TO OR AFFECTING THE PROPERTY AS PURCHASER DEEMED NECESSARY OR
APPROPRIATE AND THAT IN PROCEEDING WITH ITS 


 


41

















 


ACQUISITION
OF THE PROPERTY, PURCHASER IS DOING SO BASED SOLELY UPON SUCH INDEPENDENT
INSPECTIONS AND INVESTIGATIONS.


 


18.          Remedies.


 


(a)           If any warranty or
representation of Purchaser made herein shall prove untrue in any material
respect when made or as of the Closing Date (as if such warranty or
representation was first made on the Closing Date, notwithstanding any
reference therein to the Effective Date) or if Purchaser defaults and, as a
result of such default, Purchaser fails to complete the purchase of the
Property on or prior to the Closing Date, then Seller may give Purchaser two (2) business
days notice thereof and opportunity to cure and if Purchaser does not cure
within said period then Seller’s sole and exclusive remedy, at law or in
equity, shall be to elect to terminate this Agreement by giving notice of such
termination to Purchaser and Escrow Agent, whereupon this Agreement will be
terminated, Escrow Agent shall pay the Deposit, to Seller, and neither Party
shall have any further rights or obligations under this Agreement except as
expressly provided herein.  Purchaser and
Seller agree that it would be impractical and extremely difficult to estimate
the damages that Seller may suffer in the event that Purchaser defaults and
fails to complete the purchase of the Property. 
Therefore, Purchaser and Seller agree that a reasonable estimate of the
total net detriment that Seller would suffer in the event that Purchaser
defaults and fails to complete the purchase of the Property is, and Seller’s
sole and exclusive remedy (whether at law or in equity) shall be, an amount
equal to the Deposit.  This amount will
be the full, agreed and liquidated damages for any breach of this Agreement by
Purchaser.  The payment of this amount as
liquidated damages is not intended as a forfeiture or penalty, but is intended
to constitute liquidated damages to Seller.


 


42




















 


(b)           If any warranty or
representation of Seller made herein shall prove untrue in any material respect
when made or as of the Closing Date (as if such representation was first being
made as of the Closing Date, notwithstanding any reference therein to the
Effective Date) or if any Seller shall fail to perform any of its obligations
under this Agreement on or prior to the Closing Date, then Purchaser may give
such Seller two (2) business days notice thereof and opportunity to cure
and if Seller does not cure within said period then Purchaser’s sole and
exclusive remedy under this Agreement shall be to elect to terminate this
Agreement by giving Seller and Escrow Agent written notice thereof whereupon
this Agreement will be terminated, the Escrow Agent shall deliver to Purchaser
the Deposit, and neither Party shall have any further rights or obligations
under this Agreement, except as otherwise provided herein.  Notwithstanding the foregoing, if any
warranty or representation of Seller made herein shall prove untrue in any
material respect when made or as of the Closing Date and the breach of such
representation or warranty is not discovered until after the Closing but within
the applicable survival period provided herein, or if, from and after the
Closing, any Seller shall fail to perform any of its obligations under this
Agreement on or prior to the date for performance provided herein, then
Purchaser may give such Seller five (5) business days notice thereof and
opportunity to cure and if Seller does not cure within said period, then
Purchaser shall have all remedies available to it at law or in equity,
including, without limitation, all rights under Sections 503(b)(1) and
507(a)(2) of the Bankruptcy Code.


 


(c)           The Parties
agree that if any dispute arises out of or in connection with this Agreement or
any of the documents executed hereunder or in connection herewith, the
Bankruptcy Court (and any court having appellate jurisdiction as to such
dispute) shall have exclusive personal and subject matter jurisdiction and
shall be the exclusive venue to resolve any 


 


43





















 


and all disputes relating
to the transaction contemplated by this Agreement.  The Bankruptcy Court shall have sole
jurisdiction over such matters and the parties affected thereby and Purchaser
and Seller each hereby consent and submit to such jurisdiction, provided,
however, if such Court determines that subject-matter jurisdiction is not
available in the Bankruptcy Court, Purchaser and Seller hereby agree to submit
any and all disputes arising out of this Agreement to the jurisdiction and
venue of the United States District Court for the Middle District of Tennessee,
or if such court will not have jurisdiction, then to the federal or state court
sitting in a state in which the Property is located.  If any such dispute arises in connection with
this Agreement, including an action to rescind this Agreement, the
substantially prevailing party therein will be entitled to recover from the
losing party the substantially prevailing party’s costs and expenses, including
reasonable attorneys fees, incurred in connection therewith, in preparation
therefor and on appeal therefrom, which amounts will be included in any
judgment entered therein.


 


(d)           The Parties’
obligations under paragraph 18 of this Agreement shall survive Closing.


 


19.          Casualty;
Condemnation.  If (i) there is
any loss, damage or destruction to the Property by fire or other casualty
(except eminent domain) (a “Casualty Event”)
which would enable more than ten percent (10%) of the residents at any Facility
to terminate their Resident Agreements, or (ii) there is a Casualty Event
and the damage is in excess of three million dollars ($3,000,000.00), or (iii) there
is a condemnation proceeding in which any material portion of the Real Property
relating to any Facility (including, without limitation, any access or parking)
shall be taken or in which the Property taken has a fair market value in excess
of three million dollars 


 


44

















 


($3,000,000.00)
(any of the foregoing shall be referred to herein as the “Floor”),
then Purchaser will have the right to terminate this Agreement and receive a
return of the Deposit, if it so notifies Seller in writing not later than the
first to occur of (a) ten (10) days after it is advised of such
Casualty Event or condemnation proceeding or (b) the Closing Date.  Seller shall promptly notify Purchaser in
writing of a Casualty Event or condemnation affecting the Property, and if the
Casualty or condemnation is less than or equal to the Floor, will assign (or
cause to be assigned) to Purchaser at Closing each Seller Party’s rights with
respect to all insurance or condemnation proceeds related thereto less any sums
expended by such Seller Party with Purchaser’s consent to restore such
casualty, and Purchaser will receive a credit equal to the deductible plus any
uninsured amounts.  If the Casualty Event
or condemnation is in excess of the Floor and Purchaser elects not to terminate
this Agreement, then Seller will assign (or will cause to be assigned) to
Purchaser at Closing each Seller Party’s rights with respect to all insurance
or condemnation proceeds related thereto less any sums reasonably expended by
such Seller Party with Purchaser’s consent to restore such casualty, and
Purchaser will receive a credit equal to the deductible plus any uninsured
amounts.


 


20.          Notices.  All notices provided for herein may be
telecopied (with machine verification of receipt), sent by Federal Express or
other overnight courier service or delivered or mailed registered or certified
mail, return receipt requested.  If a
notice is mailed, it will be considered delivered upon receipt or refusal
thereof.  If a notice is sent via
telecopy on a business day it will be deemed received upon receipt of
verification of transmission generated by the sender’s machine.  If a notice sent via overnight courier, it
will be deemed received upon the next business day, provided it is then
delivered.  Attorneys for each party may
give notices on behalf of the Party whom they represent.  The addresses to be used in connection with
such 


 


45

















 


correspondence
and notices are the following, or such other address as a Party will from time
to time direct:


 


	
  Seller:

  	
  Sunwest Management, Inc.

  
	
   

  	
  Attn.: J. Wallace Gutzler

  
	
   

  	
  3723 Fairview Industrial Dr, SE

  
	
   

  	
  Suite 270, PO Box 3006

  
	
   

  	
  Salem, OR 97302-0006

  
	
   

  	
  Facsimile No.: (503) 485-1192

  
	
   

  	
  E-mail: wally.gutzler@sunwestmanagement.com

  
	
   

  	
   

  
	
  with copy to:

  	
  Steptoe & Johnson LLP

  
	
   

  	
  Attn.: Greg R. Yates

  
	
   

  	
  750 Seventh Avenue

  
	
   

  	
  New York, New York 10019

  
	
   

  	
  Facsimile No.: (212) 506-3960

  
	
   

  	
  E-mail: gyates@steptoe.com

  
	
   

  	
   

  
	
  Purchaser:

  	
  Five Star Quality Care, Inc.

  
	
   

  	
  Attn: Bruce J. Mackey, Jr.

  
	
   

  	
  400 Centre Street

  
	
   

  	
  Newton, Massachusetts 02458

  
	
   

  	
  Facsimile No.: (617) 796-8385

  
	
   

  	
  E-mail: bmackey@5sqc.com

  
	
   

  	
   

  
	
  with copy to:

  	
  Sullivan & Worcester LLP

  
	
   

  	
  Attn: John M. Steiner

  
	
   

  	
  One Post Office Square

  
	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
  Facsimile No.: (617) 338-2880

  
	
   

  	
  E-mail: jsteiner@sandw.com

  



 


Any single notice delivered to Seller as
provided herein shall be effective as against all Sellers without the need to
deliver multiple copies thereof.


 


21.          Hart-Scott-Rodino.  Seller and Purchaser have each independently
determined that the execution of this Agreement and the consummation of the
transactions contemplated hereby are exempt from the filing and waiting period
requirements of Section 7A of the Clayton Act, as added by Section 201
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 


 


46

















 


U.S.C.
Section 18a, and the rules and regulations promulgated thereunder (“HSR Act”).  In making
such determination, Seller and Purchaser each did not and shall not rely upon
any written or oral statement, representation or warranty made by or on behalf
of another Party, whether or not contained in this Agreement, as to the
applicability of the HSR Act to the transactions contemplated hereby.


 


22.          Assignment.  This Agreement will inure to the benefit of
and be binding upon the Parties hereto and their heirs, successors and
permitted assigns.  Neither Party may
assign this Agreement without the prior written consent of the other Party,
which consent will not be unreasonably withheld, conditioned or delayed, except
that Purchaser may assign this Agreement or its rights hereunder, in whole or
in part, to an affiliate of Purchaser or an affiliate of Senior Housing
Properties Trust.


 


23.          Confidentiality.  Purchaser and Seller on behalf of Seller and
each of the Seller Parties each covenants that it will maintain the
confidentiality of all confidential information which it receives from the
other or its agents and all reports, studies and other documentation which it
develops based thereon until Closing, except as otherwise required in order to
perform its inspections under this Agreement, or by applicable law or court rule or
order if this transaction closes, and further covenants that, if this
transaction does not close, it will destroy all such documents.  Notwithstanding the foregoing, once the
Bankruptcy Court has entered the Sale Order, Purchaser may begin marketing the
Facilities in their corresponding communities in accordance with Purchaser’s
customary practices.  Purchaser’s
provision of such information to investors, attorneys, lenders, employees and
consultants during the term of this Agreement will not be deemed to violate the
foregoing covenant so long as the recipients agree to honor the confidentiality
requirement.


 


47

















 


24.          Applicable Law.  This Agreement will be governed by and
construed in accordance with the laws of the State of New York (without regard
to principles of conflict of laws).


 


25.          Commissions.  Each Party shall be responsible for all
commissions and/or finders fees that it has incurred with regard to this
transaction, if any, and shall indemnify and hold the other Party to this
Agreement and their affiliates, members,
managers, officers, directors, employees, agents, representatives, successors
and assigns harmless therefrom. Purchaser has not been represented by a
broker under a written agreement between Purchaser and a broker in connection
with the sale contemplated by this Agreement. Seller has been represented by CB
Richard Ellis, a broker (“Seller’s Broker”),
in connection with the sale contemplated by this Agreement. Seller shall pay
the brokerage commission to Seller’s Broker pursuant to the written agreement
between Seller and such Seller’s Broker and shall indemnify Purchaser and its affiliates, members, managers,
officers, directors, employees, agents, representatives, successors and assigns
against any claim against Purchaser or the Property by Seller’s Broker
arising therefrom.


 


26.          Costs and Expenses.  Except as otherwise provided herein, each
Party hereto will bear its own costs and expenses in connection with the
negotiation, preparation and execution of this Agreement and other
documentation related hereto and in the performance of its duties under this
Agreement.


 


27.          Miscellaneous.


 


(a)           Headings.  The headings in this Agreement are for
convenience only and do not in any way limit or affect the terms and provisions
of this Agreement.  All references to 


 


48





















 


“paragraphs” shall be to the numbered paragraphs of this Agreement unless
specifically stated otherwise.


 


(b)           Calculation of
Time Periods.  Unless otherwise
specified, in computing any period of time described in this Agreement, the day
of the act or event after which the designated period of time begins to run is
not to be included and the last day of the period so computed is to be
included, unless such last day is a Saturday, Sunday or legal holiday, in which
event it shall end on the next business day. 
The final day of any such period will be deemed to end at 5:00 p.m.
Eastern Time.


 


(c)           Time of Essence.  Purchaser and Seller expressly and
specifically agree time is of the essence of this Agreement and all provisions,
obligations and conditions thereof.  All
time periods set forth herein in terms of “days”
refer to calendar days.  Whenever notice
must be given, documents delivered or an act done under this Agreement on a day
that is not a business day, the notice may be given, document delivered or act
done on the next following day that is a business day.  As used in this Agreement, “business day” shall mean a day other than
a Saturday, Sunday or a day observed as a legal holiday.


 


(d)           Gender.  Wherever appropriate in this Agreement, the
singular will be deemed to refer to the plural and the plural to the singular,
and pronouns of certain genders will be deemed to include either or both of the
other genders.


 


(e)           Counterparts.  This Agreement may be executed in
counterparts, each of which will be deemed an original, but which when taken
together will constitute one and same instrument.


 


49





















 


(f)            Exhibits.  The exhibits and schedules referred to herein
and attached to this Agreement are incorporated herein as if set forth in full.


 


(g)           Construction.  This Agreement is the result of negotiations
between the Parties, neither of whom has acted under any duress or compulsion,
whether legal, economic or otherwise. 
Accordingly, the terms and provisions hereof shall be construed in
accordance with their usual and customary meanings.  Seller and Purchaser hereby waive the
application of any rule of law which otherwise might be applicable to the
construction of this Agreement that ambiguous or conflicting terms or
provisions should be construed against the Party who (or whose attorney)
prepared the executed Agreement or any earlier draft of the same.  As used in this Agreement, “sole discretion” shall mean sole,
absolute, unfettered and unreviewable judgment and discretion without regard to
whether such judgment or discretion is exercised reasonably or
unreasonably.  As used in this Agreement,
the term “including” shall mean “including, but not limited to.”


 


(h)           Interpretation.
If there is any specific and direct conflict between, or any ambiguity
resulting from, the terms and provisions of this Agreement and the terms and
provisions of any document, instrument or other agreement executed in
connection herewith or in furtherance hereof, including any exhibits hereto,
the same shall be consistently interpreted in such manner as to give effect to
the general purposes and intention as expressed in this Agreement, which shall
be deemed to prevail and control.


 


(i)            Severability.  If any term or provision of this Agreement
shall, to any extent, be determined by a court of competent jurisdiction to be
invalid or unenforceable, the remainder of this Agreement shall not be affected
thereby, but such term or provision shall be 


 


50





















 


reduced
or otherwise modified by such court or authority only to the minimum extent
necessary to make it valid and enforceable, and each term and provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by
law.  If any term or provision cannot be
reduced or modified to make it reasonable and permit its enforcement, it shall
be severed from this Agreement and the remaining terms shall be interpreted in
such a way as to give maximum validity and enforceability to this Agreement.  It is the intention of the Parties hereto
that if any provision of this Agreement is capable of two constructions, one of
which would render the provision void and the other of which would render the
provision valid, then the provision shall have the meaning which renders it
valid.


 


28.          Unenforceability.  If any provision of this Agreement is held to
be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability will not affect the remainder of such provision
or any other provisions of this Agreement.


 


29.          Amendment,
Modifications.  This Agreement may
not be altered, amended, changed, waived, terminated or modified in any respect
or particular unless the same is in writing and signed by or on behalf of the
Party to be charged therewith.


 


30.          Waiver.  A Party may, at any time or times, at its
election, waive any of the conditions to its obligations under this Agreement,
but any such waiver will be effective only if contained in a writing signed by
such Party.  No waiver will reduce the
rights and remedies of such Party by reason of any breach of the other
Party.  No waiver by any Party of any
breach under this Agreement will be deemed a waiver of any other or subsequent
breach.


 


31.          Facsimile or
Electronic Scanned Signatures.  Each
Party (i) has agreed to permit the use, from time to time and where
appropriate, of telecopied or electronically scanned and 


 


51

















 


transmitted
signatures in order to expedite the transaction contemplated by this Agreement,
(ii) intends to be bound by its respective telecopied or scanned and
transmitted signature, (iii) is aware that the other will rely on the
telecopied or scanned signature, and (iv) acknowledges such reliance and
waives any defenses to the enforcement of the documents effecting the
transaction contemplated by this Agreement based on the fact that a signature
was sent by telecopy or electronic mail.


 


32.          Delivery of
Possession.  Possession of the
Property shall be delivered to Purchaser on the Closing Date “as is,” “where
is,” and “with all faults” (including being subject to then existing tenancies
under the Resident Agreements), except as otherwise provided in this Agreement
or in any document to be executed and delivered by any Seller Party in
connection with the Closing.


 


33.          Deposit of
Agreement into Escrow. 
Notwithstanding anything to the contrary, this Agreement shall not
constitute a binding contract between Seller and Purchaser until executed by
both of them and among Seller, Purchaser, and Escrow Agent, until executed by
all three of them.


 


34.          Information Provided by Seller.  Notwithstanding any other provision of this
Agreement, but subject to the express representations of Seller hereunder,
Seller makes no warranty as to the accuracy or completeness of any information
provided by Seller to Purchaser pursuant to this Agreement.


 


35.          WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HEREBY UNCONDITIONALLY
WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, ANY OF 


 


52

















 


THE DOCUMENTS RELATED
HERETO, ANY DEALINGS BETWEEN OR AMONGST THE PARTIES RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN AND AMONGST THE PARTIES HEREUNDER.


 


The remainder of this page intentionally
left blank


 


53
















 


                IN
WITNESS WHEREOF, the undersigned Seller and Purchaser have executed this
Agreement as of the date first set forth above, intending to be fully bound by
its terms and conditions.


 


	
   

  	
  SELLER

  
	
   

  	
   

  
	
   

  	
  ANDERSON SENIOR LIVING PROPERTY, LLC,

  an Oregon limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Senior Living Properties II, LLC, an

  Oregon limited liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Name: Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Title: Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  CHARLOTTE OAKDALE PROPERTY, LLC,

  an Oregon limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Senior Living Properties II, LLC, an

  Oregon limited liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Name: Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Title: Manager

  
	
   

  	
   

  
	
   

  	
  GREENSBORO OAKDALE PROPERTY, LLC,

  an Oregon limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Senior Living Properties II, LLC, an

  Oregon limited liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Name: Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Title: Manager

  



 


54

















 


	
   

  	
  MT. PLEASANT OAKDALE I PROPERTY, LLC,

  an Oregon limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Senior Living Properties II, LLC, an

  Oregon limited liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Name: Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Title: Manager

  
	
   

  	
   

  
	
   

  	
  MT. PLEASANT OAKDALE II PROPERTY, LLC,

  an Oregon limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Senior Living Properties II, LLC, an

  Oregon limited liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Name: Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Title: Manager

  
	
   

  	
   

  
	
   

  	
  PINEHURST OAKDALE PROPERTY, LLC,

  an Oregon limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Senior Living Properties II, LLC, an

  Oregon limited liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Name: Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Title: Manager

  



 


55

















 


	
   

  	
  WINSTON-SALEM
  OAKDALE PROPERTY, LLC,

  an Oregon limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Senior Living Properties
  II, LLC, an

  Oregon limited liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Name: Jon M. Harder

  
	
   

  	
   

  	
   

  	
  Title: Manager

  



 


56

















 


	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  FIVE
  STAR QUALITY CARE, INC.,

  a Maryland corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  Bruce J. Mackey Jr.

  President

  



 


57

















 


ACCEPTANCE
BY ESCROW AGENT


 


The undersigned Escrow Agent: (a) accepts
the Escrow created by the foregoing Agreement; (b) agrees to act in
accordance with the terms thereof; and (c) agrees to be the person
responsible for closing the transaction within the meaning of Section 6045(e)(2)(A) of
the Internal Revenue Code of 1986 (the “Code”),
and to file all necessary information reports, returns, and statement
(collectively, “Reports”)
regarding the transaction required by the Code, and promptly, upon the filing
thereof, transmit copies thereof to Purchaser and Seller.


 


 


	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  
	
   

  
	
   

  
	
  Escrow No.:

  	
   

  
				



 

















 


The following exhibits have been omitted and
will be supplementally furnished to the Securities and Exchange Commission upon
request:


 


Schedule
1 (Excluded Assets), Schedule 2 (Contracts), Schedule 3 (Trade Names), and
Schedule 5 (Resident Agreements).  Exhibit 1
(Legal Description of the Land), Exhibit 2A (North Carolina Limited
Warranty Deed), Exhibit 2B, (South Carolina Limited Warranty Deed), Exhibit (Bill
of Sale), Exhibit 4 (Assignment and Assumption of Resident Agreements), Exhibit 5
(Assignment of Rights), Exhibit 6 (Non-Foreign Affidavits), Exhibit 7
(Sale Motion), Exhibit 8 (Approval Order), and Exhibit 9 (Sale Order)