Document:

HCR3 8K031915 Exh. 10.1

EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

BETWEEN

GAHC3 NEBRASKA SENIOR HOUSING PORTFOLIO, LLC (“Purchaser”) 
and
DIAL - RIDGEWOOD SENIOR LIVING, L.L.C.
and
SILVERCREST FOUNTAIN VIEW INDEPENDENT LIVING L.P. (“Sellers”)

March 13, 2015

	
			
	TABLE OF CONTENTS

	 
	 
	 

	ARTICLE I.
	PURCHASE AND SALE
	3

	1.1
	Transfer of Assets at the Closing
	3

	1.2
	Excluded Assets
	4

	1.3
	Closing Mechanics
	4

	1.4
	Purchase Price
	5

	1.5
	Payment of Purchase Price
	5

	1.6
	Assumed Liabilities and Excluded Liabilities
	6

	1.7
	Allocation of Purchase Price
	7

	1.8
	Diligence Period
	7

	ARTICLE II.
	REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
	8

	2.1
	Organization and Qualification
	8

	2.2
	Authority; Binding Effect
	8

	2.3
	Licenses
	8

	2.4
	Governmental Authorities
	9

	2.5
	Taxes
	9

	2.6
	No Defaults or Consents
	10

	2.7
	Contracts
	10

	2.8
	Title to Property and Related Matters
	11

	2.9
	Hazardous Substances
	13

	2.10
	Patriot Act
	14

	2.11
	Survey Reports, Etc.; Compliance with Law
	14

	2.12
	Capital Expenditures
	15

	2.13
	Absence of Notices
	16

	2.14
	Resident Records
	16

	2.15
	Advance Payments and Resident Funds
	16

	2.16
	Medicare and Medicaid Participation
	16

	2.17
	Licensed Beds and Units
	19

	2.18
	Intellectual Property
	20

	2.19
	Financial Statements
	20

	2.20
	No Litigation
	21

	2.21
	Absence of Certain Changes or Events
	21

	2.22
	Condition of Assets
	21

	2.23
	Employee and Labor Relations
	22

	2.24
	Employee Benefit Plans
	23

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

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	2.25
	Inventory
	25

	2.26
	Insurance
	25

	2.27
	Related-Party Transactions
	25

	2.28
	Broker
	26

	2.29
	Truth of Warranties, Representations and Statements
	26

	ARTICLE III.
	REPRESENTATIONS AND WARRANTIES OF PURCHASER
	26

	3.1
	Organization
	26

	3.2
	Authority, Binding Effect
	26

	3.3
	No Violation
	26

	3.4
	Broker
	27

	3.5
	Truth of Warranties, Representations and Statements
	27

	ARTICLE IV.
	ADDITIONAL COVENANTS OF SELLER
	27

	4.1
	Interim Operations
	27

	4.2
	Borrowing
	28

	4.3
	Full Access and Disclosure
	28

	4.4
	Consents and Satisfaction of Conditions
	29

	4.5
	Compliance With Laws
	29

	4.6
	Taxes
	29

	4.7
	No Disposition of Assets
	29

	4.8
	Further Documentation
	30

	4.9
	Confidentiality
	30

	4.10
	Title Insurance and Survey; Environmental Assessments
	30

	4.11
	Financial Information
	31

	4.12
	Certain Employment Matters
	31

	4.13
	No Shop
	31

	4.14
	Cost Reports
	32

	4.15
	Employment Records; Resident Records
	32

	4.16
	Surveys; Resolution of Audit Deficiencies; Cooperation
	33

	4.17
	COBRA Compliance
	33

	4.18
	Capital Expenditures
	34

	4.19
	Changes in Representations and Warranties
	34

	4.20
	Appointment of Sellers’ Agent
	34

	4.21
	Restrictions on Distributions by Seller
	35

	4.22
	Transfer Agreements and Provider Agreements
	35

	ARTICLE V.
	COVENANTS OF PURCHASER
	36

	5.1
	Confidentiality
	36

	5.2
	Compliance with Laws
	36

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

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	5.3
	Books and Records
	36

	5.4
	Cooperation
	37

	5.6
	Further Documentation
	39

	5.7
	Changes in Representations and Warranties
	39

	ARTICLE VI.
	OTHER COVENANTS
	39

	6.1
	Residents Rents; Accounts Receivable; Move-In Deposits and Move-In Fees
	39

	6.2
	Medicaid and Medicare
	41

	6.3
	Transfer Matters
	41

	6.4
	Pre-Closing Access
	41

	6.5
	Workers’ Compensation
	42

	6.6
	Seller’s Financial Books and Records
	42

	6.7
	Approvals and Consents
	42

	6.8
	Discharged Resident Records
	42

	6.9
	Management Agreement
	42

	ARTICLE VII.
	INDEMNIFICATION
	42

	7.1
	Indemnification by Seller
	42

	7.2
	Indemnification by Purchaser
	43

	7.3
	Notification of Claims and Indemnification Procedures
	44

	7.4
	Survival of Representations, Warranties and Covenants
	45

	7.5
	Set-Off
	46

	7.6
	Net Damages
	46

	7.7
	Liability Limitations
	46

	ARTICLE VIII. 
	CONDITIONS TO THE OBLIGATIONS OF PURCHASER
	47

	8.1
	Representations and Warranties; Performance
	47

	8.2
	Consents
	47

	8.3
	No Proceeding or Litigation
	47

	8.4
	Title Insurance
	47

	8.5
	Material Adverse Change
	48

	8.6
	Census and Payor Mix Conditions
	48

	8.7
	Other Agreements
	49

	ARTICLE IX.
	CONDITIONS TO THE OBLIGATIONS OF SELLER
	49

	9.1
	Representations and Warranties; Performance
	49

	9.2
	Consents
	49

	9.3
	No Proceeding or Litigation
	49

	9.4
	Other Agreements
	50

	ARTICLE X.
	CLOSING
	50

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

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	10.1
	Closing
	50

	10.2
	Resident Funds
	52

	10.3
	Closing Adjustments
	52

	10.4
	Other Costs at the Closing
	53

	10.5
	Post-Closing Purchase Price Reconciliation
	53

	ARTICLE XI.
	CONDEMNATION; DAMAGE OR DESTRUCTION
	54

	11.1
	Condemnation
	54

	11.2
	Damage or Destruction
	55

	ARTICLE XII.
	TERMINATION; REMEDIES
	57

	12.1
	Termination Events
	57

	12.2
	Opportunity to Cure
	57

	12.3
	Effect of Termination; Remedies
	57

	12.4
	DAMAGES
	58

	ARTICLE XIII. 
	MISCELLANEOUS PROVISIONS
	59

	13.1
	Amendment and Modification
	59

	13.2
	Joint and Several Liability
	59

	13.3
	Waiver of Compliance; Consent
	59

	13.4
	Notices
	59

	13.5
	Expenses
	60

	13.6
	Attorneys’ Fees
	60

	13.7
	Assignment
	60

	13.8
	Governing Law
	61

	13.9
	Business Day
	61

	13.10
	Counterparts; Electronic/Facsimile Signature
	61

	13.11
	Headings; Use of Terms; Section References
	61

	13.12
	Entire Agreement
	61

	13.13
	Warranty of Authority
	61

	13.14
	Schedules
	61

	13.15
	Time of the Essence
	62

	13.16
	Representation by Counsel
	62

	13.17
	Reliance
	62

	13.18
	Publicity
	62

	13.19
	Jurisdiction; Waiver of Jury Trial
	62

	13.20
	Knowledge
	63

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of March 13, 2015 (the “Date of Execution”), is made and entered into by and among GAHC3 Nebraska Senior Housing Portfolio, LLC, a limited liability company organized under the laws of the State of Delaware (“Purchaser”), and Dial – Ridgewood Senior Living, L.L.C., a limited liability company organized under the laws of the State of Nebraska and Silvercrest Fountain View Independent Living L.P., a limited partnership organized under the laws of the State of Nebraska (individually, the “Seller” and collectively, the “Sellers”).
RECITALS:
A.    The Sellers own and operate (i) the senior housing facility located at 5710 South 108th Street, Omaha, Nebraska, 68137 (the “Fountain View Facility”), and (ii) the senior housing facility located at 12301 North 149 Circle, Bennington, Nebraska, 68007 (the “Ridgewood Facility”).  The Fountain View Facility and the Ridgewood Facility individually are referred to as a “Facility” and collectively as the “Facilities.” The Fountain View Facility and the Ridgewood Facility have, respectively, the number of licensed beds and/or units set forth on Exhibit A. 
B.    The parties desire to enter into this Agreement pursuant to which Purchaser or entities formed by Purchaser for the purpose of acquiring the Facilities (each, a “Real Estate Purchaser” and collectively, the “Real Estate Purchasers”) will acquire the Facilities and will purchase, accept and assume from the Sellers, respectively, and each Seller will sell, convey, transfer and assign to such Real Estate Purchaser, the following assets (excluding therefrom, however, the Excluded Assets) (collectively, the “Real Property Assets”): 
(i)    each Seller’s valid and insurable fee simple title and all other rights, title and interest of such Seller in and to the parcels of real property on which the Facilities are located, such real property being more particularly described on Exhibit B, and any additional parcel(s) of real property owned by the Sellers and more particularly described on Exhibit B (collectively, the “Real Property”); 
(ii)     each Seller’s fee simple title in and to all buildings, structures, facilities, amenities, driveways, walkways, parking lots and other improvements located on the Real Property owned by such Seller and any construction in progress, including without limitation, all fixtures, fittings and components thereof (such as any and all elevators, partitions, ducts, motors, compressors, and the heating, ventilating, air conditioning, plumbing, sprinkler, drainage, lighting, gas, electrical and all other systems located therein) (collectively, the “Improvements”); 
(iii)     all right, title and interest of each Seller in and to any alleys, strips or gores adjoining the Real Property, any easements, rights of way or other interests in, on, under or to, any land, highway, street, road or right of way, open or proposed, in, under, across, abutting or benefiting the Real Property owned by such Seller, and any pending or future action for condemnation, eminent domain or similar proceeding, or for any damage to the Real Property by reason of a change of grade thereof, and all other accessions, appurtenant rights and privileges of each Seller in and to the Real Property and the Improvements;   

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(iv)     to the extent each Facility currently has all right, title and interest of each Seller (or their respective Affiliates) in and to all furniture, furnishings, equipment, computers, machinery, mechanical systems, security and alarm systems, and nurse call systems (other than automobiles, vans, buses or other vehicles which are included in the Operating Assets) located at the Facilities owned or operated by them or used in connection therewith (collectively, the “Sellers’ FF&E”); 
(v)     all right, title and interest of each Seller in and to the items of tangible personal property owned or used in connection with the Facility located at the Real Property owned or leased by such Seller; and
(vi)     to the extent in Seller’s or Seller’s Affiliates’ possession, all right, title and interest of each of them in and to the books, records, documents, surveys, reports, drawings, plans, specifications, diagrams, environmental assessments and other architectural or engineering work product related to the Real Property and Improvements owned or leased by such Seller (the “Real Property Records”).
C.    The parties desire to enter into this Agreement pursuant to which Purchaser will, concurrently with the Real Estate Purchasers’ acquisition of the Real Property Assets associated with such Facility, purchase, accept and assume from the Sellers, respectively, and each Seller will sell, convey, transfer and assign to Purchaser, the following assets (excluding therefrom, however, the Excluded Assets) (collectively, the “Operating Assets”, and together with the Real Property Assets, collectively, the “Assets”); provided, however, that the parties acknowledge and agree that, following the Date of Execution but prior to Closing, Purchaser will assign to one or more entities formed by Purchaser as taxable REIT subsidiaries for the purpose of operating the Facilities (individually and collectively, the “TRS Entity”) all of Purchaser’s rights hereunder to acquire the Operating Assets from the Sellers:
(i)    all right, title and interest of each of the Sellers in and to all supplies, inventory, consumables, linens, pharmaceutical products and other medical goods and supplies, perishable and nonperishable food products, and other similar tangible property used in the operation of the Facilities (collectively, the “Inventory”);
(ii)    all Assumed Contracts and all Assumed Residency Agreements; 
(iii)    to the extent each Seller’s interest is assignable without violating any and all laws, rules, regulations, statutes, terms of any Provider Agreements, manual provisions, ordinances or requirements or any judgments, decrees, writs, injunctions or orders of any Governmental Authority in effect as of the Date of Execution, or as enacted or amended from time to time from the Date of Execution through the Effective Time) (“Applicable Laws”), and only to the extent the TRS Entity in its sole discretion elects to assume the same, all Licenses relating to or used in connection with the Facilities or the operation thereof;
(iv)    all right, title and interest of each Seller (or their respective Affiliates) in and to all Intellectual Property, including without limitation, the following:  any trademarks, trade names, service marks, trade dress and all variations thereof used in connection with the operation of the Facilities, specifically including the identified on Schedule 2.18; all telephone and facsimile numbers relating to the Facilities (including all “800” numbers) and all e-mail addresses and domain names associated with the Facilities; all post office box addresses associated with the Facilities; and all software or other computer programs (as allowed by the software provider) used in connection with the operation of the Facilities;

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(v)    to the extent in Seller’s or Seller’s Affiliates’ possession, all books, data and records (including electronic versions thereof) related to the Facilities, including emails, financial and accounting records, contacts, calendars, customer lists, referral source lists, regulatory surveys and reports, incident tracking reports, advertising and marketing materials and competitive analyses, all policy and procedure manuals (including those used for the operation of the Facilities), all records and reports (except for such records and reports where transfer is prohibited by Applicable Laws) relating to any or all residents and Residents residing at the Facilities from time to time on or after the Date of Execution (collectively, “Residents”), but only to the extent such Residents remain Residents on the Closing Date (collectively, “Resident Records”), all Employee Records, but only to the extent such Employee Records are for Employees who become Transitioned Employees, all leads regarding prospective Facility residents and Residents and copies of Seller’s general ledgers and trial balances, disbursement journals and records, accounts payable journals and records, cash receipts journals and records, sales journals and records, payroll journals and records, fixed asset records, financial statements, and other financial books and records related to any of the foregoing (collectively, “Books and Records”); 
(vi)    all right, title and interest of each Seller (or their respective Affiliates) in and to all automobiles, vans, buses or other vehicles located at the respective Facilities owned or operated by it or used in connection therewith and in and to all furniture, furnishings, equipment, computers, office equipment and supplies located at the Facilities (collectively, the “Sellers’ FF&E”) (collectively, the Sellers’ FF&E and the Sellers’ FF&E are referred to as the “FF&E”); and
(vii)    all right, title and interest of each Seller (or their respective Affiliates) in any and all other items of tangible and intangible personal property used or useful in connection with the use, operation, management and maintenance of the Facilities, and all goodwill of Seller associated with the businesses operated at the Facilities (collectively, the “Business”).
D.    Upon the consummation of Purchaser’s acquisition of the Assets, Seller or one of its Affiliates, as an eligible independent contractor (the “EIK Manager”), shall enter into a management agreement with the TRS Entity, whereby the EIK Manager shall operate the Facilities on a day-to-day basis for and on behalf of the TRS Entity on the terms and subject to the conditions set forth herein and in such management agreement (such actions and transactions, together with the Purchaser’s acquisition of the Assets, collectively, the “Transactions”).
E.    For ease of reference, Appendix A contains a list of the section numbers in which capitalized terms used herein are defined.  
NOW, THEREFORE, in consideration of the recitals, and of the mutual agreements, representations, warranties, conditions and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I. 
PURCHASE AND SALE
1.1    Transfer of Assets at the Closing.  For and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the terms and conditions herein provided, at the Closing and with respect to each Facility, Seller (and, to 

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the extent required, their respective Affiliates) shall respectively sell, convey, transfer and assign the Real Property Assets and Operating Assets owned by them to the Real Estate Purchasers and the TRS Entity designated by Purchaser, and each such Real Estate Purchaser and TRS Entity shall purchase, accept and assume the Real Property Assets and Operating Assets from Seller.  
1.2    Excluded Assets.  Notwithstanding anything to the contrary contained herein, the Assets shall not include the following items (collectively, the “Excluded Assets”):  
(a)    All of Seller’s bank accounts, cash, cash equivalents and securities except to the extent any portion thereof is subject to the prorations or reconciliation procedures set forth herein;
(b)    All replacement and tax escrow reserves, utility deposits and workers compensation trust assets of Seller;  
(c)    All prepaid expenses of Seller, including insurance prepayments; 
(d)    All vehicles, office furniture, computers and cell phones used by the Principals and set forth on Schedule 1.2(d);
(e)    All accounts receivable of Seller including receivables from any Affiliate of Seller, accounts receivable relating to Residents’ fees and rents and/or services provided prior to the Effective Time, whether from any Governmental Authority, Resident or other person or entity whatsoever;
(f)    Except as otherwise expressly provided in this Agreement (including with respect to the Move-In Deposits), all refunds or reimbursements of whatever nature or description which relate to or are attributable to the period prior to the Effective Time and all deposits, escrowed funds and similar funds;
(g)    Except to the extent otherwise expressly provided in this Agreement, all claims, disputes and litigation, and all amounts of any nature or description relating thereto, to the extent such dispute, claim or litigation is related to the period prior to the Effective Time;
(h)    All of Seller’s rights and benefits under this Agreement; and
(i)    Seller’s organizational documents, minute books and other books and records relating solely to the existence of each of the entities comprising Seller as separate legal entities; 
(j)    Those additional items set forth on Schedule 1.2(k).  
1.3    Closing Mechanics.
(a)    Unless this Agreement shall have been terminated pursuant to an express right to terminate as herein provided, the closing hereunder related to the purchase and sale of the Assets (the “Closing”) shall occur at 10:00 a.m. Pacific Time on the thirtieth (30th) day following the date that is the later of (i) the expiration of the Diligence Period, or (ii) the date on which all conditions to such Closing expressly stated in this Agreement are satisfied or waived in writing, or such other date as may be mutually agreed to by the parties (the “Closing Date”).  Subject to the preceding sentence, the parties hereto acknowledge that their respective intention is to have a Closing Date which is the last day of a 

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calendar month.  For purposes of the foregoing, if said 30th day is not the last day of a calendar month, the Closing Date shall be on the last day of the current calendar month in which said 30th day occurs. The Closing will be effective for accounting purposes as of 11:59:59 p.m. Pacific Time on the Closing Date (the “Effective Time”) such that the Closing Date will be a day of income and expense to Seller.  The Closing shall take place through an exchange of consideration and documents using overnight courier service, wire transfers, electronic mail or facsimile.
(b)    On the Closing Date, all documents and other materials required from Seller under Section 10.1(b) (collectively, the “Seller Documents”) and from Real Estate Purchasers and the TRS Entity under Section 10.1(c) (collectively, the “Purchaser Documents”) in order to effectuate the consummation of the Closing shall be delivered to the offices of the Title Company, as escrow agent, or at such other place as Purchaser may reasonably require.  Notwithstanding the foregoing, (i) Seller may deliver all of the Seller Documents required hereunder to the Title Company or to Purchaser’s counsel on or before the Closing Date (to hold in escrow in accordance with customary conveyancing practices subject to the consummation of the Closing), and (ii) Real Estate Purchasers and the TRS Entity may deliver all of the Purchaser Documents required hereunder to the Title Company or to Seller’s counsel on or before the Closing Date (to hold in escrow in accordance with customary conveyancing practices subject to the consummation of the Closing).  
1.4    Purchase Price.  The aggregate purchase price (the “Purchase Price”) for the Assets shall be Sixty Six Million and No/100 Dollars ($66,000,000.00), subject to the prorations and further adjustments as provided for in this Agreement.  Subject to the terms of Section 1.7, and solely for the purpose of allocating certain Closing costs hereunder, the Purchase Price for the Ridgewood Facility Assets is stipulated be Twenty-three Million Five Hundred Thousand and No/100 Dollars ($23,500,000.00), and the purchase price for the Fountain View Facility is stipulated to be Forty-two Million Five Hundred Thousand and No/100 Dollars ($42,500,000.00), subject to the prorations and further adjustments as provided for in this Agreement.  
1.5    Payment of Purchase Price.  
(a)    Within three (3) Business Days following the later of (i) the Date of Execution and (ii) the commencement of the Diligence Period, Purchaser shall deposit with Chicago Title Insurance Company, as escrow agent (“Escrow Agent”), an amount equal to Two Million and No/100 Dollars ($2,000,000) (together with any interest and earnings thereon, the “Deposit”), which amount shall be held pursuant to the terms of the escrow agreement (the “Escrow Agreement”).  
(b)    At the Closing, Five Hundred Thousand and No/100 Dollars ($500,000.00) of the Purchase Price for the Ridgewood Facility and Five Hundred Thousand and No/100 Dollars ($500,000.00) of the Purchase Price for the Fountain View Facility (which amounts may be adjusted during the Diligence Period by agreement of the parties) will be retained by Purchaser for the one (1) year period following the Closing Date as a non-exclusive source of funds to satisfy any Purchaser Indemnified Losses made by any Purchaser Indemnified Party (the “Indemnity Holdback”).  Purchaser reserves the right during the Due Diligence Period to negotiate for a higher Indemnity Holdback not to exceed Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) per Property based upon information it learns during its investigations.  Fifty percent (50%) of the Indemnity Holdback then remaining, less the amount of any Purchaser Indemnified Losses against the Indemnity Holdback that are outstanding as of said date, will be released to Seller within thirty (30) days after the first six months of the Closing, and the remaining balance of the Indemnity Holdback, if any, less the amount of any Purchaser Indemnified Losses against the remaining 

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balance of the Indemnity Holdback that are outstanding as of said date, will be released to Seller within thirty (30) days after the first anniversary of the Closing.  The conditions for the release or forfeiture of the Indemnity Holdback are more particularly set forth in that certain Indemnity Holdback Agreement, which shall be executed and delivered by Purchaser and Seller at the Closing, in the form to be agreed upon during the Diligence Period (the “Indemnity Holdback Agreement”).
(c)    At the Closing, Purchaser shall pay the Purchase Price, adjusted for any prorations, credits and additions for the benefit of Purchaser or Seller as specified in this Agreement, less the Deposit by wire transfer of immediately available federal funds to the Title Company, and the Title Company shall disburse all funds it receives from the parties in connection with the Closing pursuant to the Closing Statement.  Seller shall be responsible for any prepayment penalties or fees associated with the pay-off of any debt encumbering the Real Property or any of the other Assets.
(d)    At the Closing, Seller shall pay and discharge in full any and all Monetary Encumbrances, and Seller shall pay all penalties, fees and charges in connection therewith.  
(e)    Any provision herein that entitles Purchaser to a return of the Deposit upon termination or cancellation of this Agreement shall be construed to provide for a return of the entire portion of the Deposit and any interest earned or accrued thereon held by Escrow Agent pursuant to the Escrow Agreement, if any. 
(f)    At the Closing, Seller and Purchaser shall make the adjustments and prorations specified in Sections 1.5, 6.1, 10.2 and 10.3 and shall, as applicable, make the payments set forth in the Closing Statement. 
1.6    Assumed Liabilities and Excluded Liabilities.  
(a)    At the Closing, neither Purchaser nor any of the Real Estate Purchasers nor TRS Entity shall assume any liabilities or obligations of Seller whatsoever, fixed or contingent, other than (i) the applicable Real Estate Purchaser shall accept title to the applicable Real Property, subject however to obtaining any Required Consents; and (ii) the applicable TRS Entity shall assume the Provider Agreements, Assumed Contracts and Assumed Residency Agreements, only to the extent such obligations and liabilities assumed by the TRS Entity under the Assumed Contracts and Assumed Residency Agreements relate to periods after the Effective Time, subject however to obtaining any Required Consents and any other applicable third party consents (collectively, the foregoing (i) and (ii) are the “Assumed Liabilities”).  Each applicable Real Estate Purchaser shall exercise its respective commercially reasonable efforts to assume or take title subject to and all Required Consents in connection therewith.    
(b)    Seller shall retain, promptly pay and discharge in the ordinary course all liabilities and obligations of Seller other than the Assumed Liabilities.  SPECIFICALLY, THIS AGREEMENT EXCLUDES, AND REAL ESTATE PURCHASERS AND TRS ENTITIES ARE NOT ASSUMING, ANY LIABILITIES OF SELLER OTHER THAN THE ASSUMED LIABILITIES (COLLECTIVELY, THE “EXCLUDED LIABILITIES”). THE EXCLUDED LIABILITIES INCLUDE, BUT ARE NOT LIMITED TO, ANY LIABILITIES OR OBLIGATIONS UNDER ANY LOAN OR MORTGAGE, SELLER'S ACCOUNTS PAYABLE AND ALL OBLIGATIONS ARISING OUT OF OR RELATED TO THE OPERATION OF THE BUSINESS AND THE FACILITIES PRIOR TO THE EFFECTIVE 

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TIME, INCLUDING WITHOUT LIMITATION COSTS, EXPENSES AND OTHER LIABILITIES AND OBLIGATIONS ARISING FROM THE OPERATION OF THE BUSINESS AND THE FACILITIES (INCLUDING MEDICAL MALPRACTICE CLAIMS OR OTHER INJURY OR DEATH TO PERSONS, INCLUDING CURRENT OR FORMER RESIDENTS); LIABILITY FOR OVERPAYMENT AND FRAUD UNDER MEDICARE, MEDICAID OR ANY THIRD-PARTY PAYOR AGREEMENT OR OTHER RESIDENT-RELATED CONTRACTUAL OBLIGATION; OBLIGATIONS UNDER ANY COLLECTIVE BARGAINING AGREEMENT, EMPLOYMENT AGREEMENT, PENSION OR RETIREMENT PLAN, PROFIT-SHARING PLAN, STOCK PURCHASE OR STOCK OPTION PLAN, MEDICAL OR OTHER BENEFITS OR INSURANCE PLAN, COMPENSATION OBLIGATION OR AGREEMENT OR SEVERANCE PAY PLAN OR AGREEMENT AND ANY OTHER EMPLOYEE BENEFIT PLAN; AND LIABILITY FOR ANY AND ALL TAXES (EXCEPT TAXES PRORATED IN ACCORDANCE WITH SECTION 10.3(a)). FOR PURPOSES OF CLARIFICATION, ANY AND ALL ACCOUNTS PAYABLE OR OTHER OBLIGATIONS ACCRUING TO AND EXISTING AS OF THE EFFECTIVE TIME ARE AND SHALL REMAIN THE SOLE OBLIGATION AND RESPONSIBILITY OF SELLER.  
1.7    This Section Intentionally Deleted.  
1.8    Diligence Period.   As used herein, the term “Diligence Period” shall mean the 45 day period commencing on the Date of Execution.  Within five (5) Business Days following execution of this Agreement, Seller shall deliver to Purchaser all of the Diligence Materials in its possession.  All such due diligence items shall be sent to Purchaser at the address set forth in Section 13.4, to the attention of Phil Han.  Seller also shall deliver to Purchaser the Schedules not affixed to this Agreement at execution as required by Section 13.14.  Additionally, during the term of this Agreement, Purchaser, its employees, contractors, agents and designees, shall have the right to enter each Facility for the purposes of inspecting and testing the same, and making surveys, mechanical and structural engineering studies, inspecting construction, and conducting any other interviews, investigations and inspections as Purchaser may reasonably require to assess the condition and suitability of the Facility and the Assets; provided, however, that such activities by or on behalf of Purchaser at the Facility shall not materially interfere with the conduct of business at the Facility; and provided further, however, that Purchaser shall indemnify and hold Seller harmless from and against any and all claims or damages to the extent directly resulting from the activities of Purchaser at the Facility (but not claims or damages arising out of the findings of such activities), and Purchaser shall repair any and all damage caused, in whole or in part, by Purchaser and return the Facility to its condition prior to such damage, which obligation shall survive Closing or any termination of this Agreement.  Seller shall reasonably cooperate with the efforts of Purchaser and the Purchaser’s representatives to inspect the Facility.  Purchaser shall give Seller reasonable notice before entering the Facility, and Seller may have a representative present during any and all examinations, inspections and/or studies at the Facility.  Purchaser shall have the unconditional right, for any reason or no reason, to terminate this Agreement by giving written notice thereof to Seller prior to the expiration of the Diligence Period, in which event this Agreement shall become null and void, whereupon Escrow Agent shall refund the Deposit to Purchaser (which obligation and right shall survive such termination), and all rights, liabilities and obligations of the parties under this Agreement shall expire, except as otherwise expressly set forth herein.  If Purchaser does not so terminate this Agreement prior to the expiration of the Diligence Period, Purchaser conclusively shall be deemed to have waived its right to terminate this Agreement pursuant to this Section. 

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ARTICLE II. 
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
As an inducement to Purchaser to enter into this Agreement and to consummate the transactions contemplated herein, each Seller, with respect to their own entities that comprise Seller, represents, warrants and covenants the following, each of which warranties, representations and covenants is material to and is relied upon by Purchaser: 
2.1    Organization and Qualification.  Each Seller is duly organized and validly existing and in good standing under the laws of the jurisdiction in which it is organized, with full power and authority to carry on its business as it has been and is currently being conducted and to own, lease and operate its assets as and in the places they have been and now are owned, leased or operated. With respect to each Seller, Schedule 2.1 sets forth each jurisdiction in which such Seller is licensed or qualified to do business, and such Seller is duly licensed and qualified to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the operation of its business as currently conducted makes such licensing or qualification necessary. The duly elected officers, if any, of each Seller are set forth on Schedule 2.1.
2.2    Authority; Binding Effect.  
(a)    Each Seller has, and at the Closing, as applicable, will have, the full and unrestricted right, corporate or limited liability company power and authority to execute, deliver and perform this Agreement and to consummate the transactions and perform all obligations contemplated hereby and in all agreements, instruments and documents being or to be executed and delivered by such Seller in connection with such transactions, including, without limitation, the Seller Documents (collectively, “Seller Related Documents”).
(b)    This Agreement does and each Seller Related Document, upon due execution and delivery by each Seller, will constitute the legal, valid and binding obligation of each of the Sellers, enforceable in accordance with its respective terms.
(c)    Each Seller has obtained all required corporate approvals required for the execution and consummation of this Agreement, the Seller Related Documents and all transactions contemplated hereby and thereby to which they are a party or are otherwise bound.
2.3    Licenses.  Schedule 2.3 sets forth all permits, licenses, participations in all Third Party Payor Programs, including, without limitation, all Provider Agreements, provider numbers and other authorizations issued or required by Governmental Authorities in connection with the use, operation, management and maintenance of the Business and the Facilities, including, without limitation, such licenses, certificates of need (“CON”), and ancillary permits, as are required for (x) the operations of the Facilities as senior housing facilities, as the case may be, (y) the operation of any other businesses or services conducted or provided at the Facilities such as, without limitation, salon, elevator or pharmacy services, or (z) any modifications, expansions or additions to the Facilities, if any (collectively, the “Licenses”).  Each License (i) has not (A) been transferred to any location other than the applicable Facility or (B) pledged as collateral security, (ii) is free from restrictions or known conflicts that would materially impair the use or operation of the applicable Facility as intended, and (iii) is not provisional, probationary, or restricted in any way, except in instances where a Governmental Authority has issued a 

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provisional, probationary or restricted license, permit or certification in the ordinary course pending issuance of a final license, permit or certification as set forth on Schedule 2.3, and (iv) except as set forth on Schedule 2.3, may be transferred to Purchaser as contemplated by this Agreement without violating any Applicable Laws and without restriction or loss of any benefits afforded thereby, without notice to, or receipt of any consent or approval from, any Governmental Authority in connection therewith.  Except as set forth on Schedule 2.3, the Licenses are valid, in full force and effect, in good standing, there are no pending nor, to the Knowledge of Seller, threatened proceedings for the revocation, suspension, termination, probation, restriction, limitation, or non-renewal of any License and Seller has not received notice and has no Knowledge that Seller is in violation of, or being investigated for a potential violation of, any restriction or other Applicable Laws in connection with the Licenses, the Business or the Facilities or otherwise restricting or otherwise affecting possession, operation and use thereof.  Except as set forth on Schedule 2.3, Seller has not taken any action to rescind, withdraw, revoke, amend, modify, supplement or otherwise alter the nature, tenor or scope of any License or applicable Third Party Payor Program participation other than non-material alterations effected in the ordinary course of the Business consistent with past practice.  Seller is the sole holder of all the Licenses and there is no other person or entity that operates, manages or leases the Facilities.  To the Knowledge of Seller, each Employee who is required by Applicable Law to hold a License to deliver health care services to Residents (including the performance of diagnostic services such as x-ray or lab services) holds such License and is performing only those services which are permitted by such License.  
2.4    Governmental Authorities.  Except as set forth on Schedule 2.4, Seller is not required to submit any notice, report or other filing with any federal, state, municipal, foreign or other governmental or regulatory authority, including any Nebraska state healthcare licensure agency (a “Nebraska Licensure Agency”) (the foregoing, individually, a “Governmental Authority” and collectively, “Governmental Authorities”) in connection with the execution or delivery of this Agreement or any of the Seller Related Documents or the consummation of the transactions contemplated hereby and thereby, in each case by Seller, and no consent, approval or authorization of any Governmental Authority is required to be obtained by Seller in connection with the execution, delivery and performance of this Agreement except as set forth on Schedule 2.4.
2.5    Taxes.  Except as set forth in Schedule 2.5, (i) all real property taxes and assessments in connection with the Real Property Assets and allocable to the period prior to delinquent payment to the Closing have been paid or, by the time of Closing, will be paid by Seller, or such taxes will be prorated between the parties as contemplated in Section 10.3(a) and (ii) all personal property taxes and assessments in connection with the Operating Assets and allocable to the period prior to the Closing have been paid or, by the time of Closing, will be paid by Seller, or such taxes will be prorated between the parties as contemplated in Section 10.3(a).  In addition: (a) all income, sales, use, bed and franchise taxes due and payable by Seller during the period of Seller’s (or any Affiliate of Seller’s) ownership of the Assets, if any, and all interest and penalties thereon, if any, have been paid or, by the time of Closing, will be paid by Seller; (b) all tax returns required to be filed by Seller, if any (including, without limitation, all sales, use, income, franchise and payroll tax returns and reports), have been properly and timely filed, and correctly reflect the tax position of Seller, and all taxes respectively due under such tax returns have been paid thereby or will be paid in the ordinary course of Seller’s business and in any event on or before the Closing, as applicable; (c) Seller is not subject to a claim for deficiency or other action in connection with any taxes and is not paying any taxes for any prior period under any installment agreement, compromise or settlement agreement or any other arrangement with any Governmental Authority; (d) no tax returns of Seller have been or are being examined by the Internal Revenue Service (“IRS”) or any state or local 

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Governmental Authority; (e) all tax returns filed or required to be filed by or on behalf of Seller after the Date of Execution, covering periods prior to and including the Closing Date, will be properly and timely filed (giving consideration for allowable extensions) and all taxes respectively due under such tax returns will be timely paid; (f) Seller has complied with all Applicable Laws relating to the payment and withholding of taxes in connection with any amounts paid or owing to any Employee, independent contractor, creditor, stockholder, or other third party, including, without limitation, all information reporting, backup withholding, and maintenance of required records with respect thereto; and (g) Seller has not received any notice of any obligation to pay any employment taxes owed or allegedly owed with respect to Employees.
2.6    No Defaults or Consents.  Except as set forth on Schedule 2.6, the execution, delivery and performance of this Agreement and any of the Seller Related Documents by Seller does not and will not:
(a)    Conflict with or result in any breach of the provisions of, or constitute a default under the articles of incorporation, bylaws, articles of organization, operating agreement, partnership agreement or other governing organizational or charter documents, as the case may be, of any Seller;
(b)    Violate any restriction to which Seller is subject or, with or without the giving of notice, the passage of time, or both, violate (or give rise to any right of termination, cancellation or acceleration under) any mortgage, deed of trust, license, lease, indenture or other material agreement or instrument (including any Material Contracts), whether oral or written, to which Seller is a party, or by which it or the Assets are bound, or result in the termination of any such instrument or termination of any provisions or rights in respect of any of the Assets, or result in the creation or imposition of any lien, charge or encumbrance upon the Assets;
(c)    Create any liens or other encumbrances on the Assets;
(d)    Constitute a violation of any Applicable Law of any Governmental Authority; 
(e)    Result in the breach or violation of any of the material warranties and representations herein set forth by Seller; or
(f)    Result in the loss of any rights, privileges, authorizations or benefits afforded or intended by any of the Assets or the Licenses.
2.7    Contracts.
(a)    Schedule 2.7(a)(i) includes a true and correct list as of the Date of Execution of all outstanding contracts, leases or other agreements, whether written or oral, to which Seller is a party or relating to the Assets or the operation of the Facilities or the Business, in each case setting forth the applicable termination dates therefor and the services or goods provided thereunder (collectively, the “Contracts”), excluding (i) the Residency Agreements, (ii) any contract, lease or other agreement which is cancellable without penalty on thirty (30) days or less notice, (iii) any contract, lease or other agreement which is entered into in the ordinary course of business consistent with past practice, is not material to the Business and does require the expenditure of more than Fifty Thousand Dollars ($50,000.00) per year (either individually or together with any related agreements), and (iv) any of the insurance policies listed in Schedule 2.26 (or the renewal of any such policies) (such contracts and agreements, including any management agreement, administrative services agreement, pharmacy services agreement, cost-sharing 

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agreement or real property lease between any Seller, on the one hand, and any Affiliate(s) of Seller, on the other hand, covered by Schedule 2.27(a)(i), but expressly excluding those described in clauses (i) – (iv), collectively, the “Material Contracts”).  Seller has provided Purchaser true and complete copies of each such Material Contract.  Seller has not received notice of any default, and there is no default, existing or continuing by Seller or, to Seller’s Knowledge, any other party under the terms of any Material Contracts, and each Material Contract is in full force and effect and is valid and enforceable by Seller in accordance with its terms.  At least twenty-one (21) days prior to the Closing Date, Seller shall deliver to Purchaser a certificate in which Seller (A) restates as of the Closing Date the representations and warranties contained in the preceding portions of this Section 2.7(a) (and an updated Schedule 2.7(a)(i) to bring forward the list of any Contracts required to be set forth in such representations and warranties to the date of such certificate), and (B) identifies any consents required in order that the assignments of any Contracts by Seller at Closing not result in a violation of any restrictions, termination of any rights or the creation of any liens, charges or encumbrances with respect to the Contracts, with or without the giving of notice, the passage of time or both. At or prior to the Closing, Seller will cause those Contracts (whether entered into before or after the Date of Execution) identified by Purchaser in its sole discretion in writing at least thirty (30) days prior to the Closing Date to be terminated effective as of immediately prior to the Closing, all at no cost to Purchaser or any Affiliate thereof, and all such other Contracts not so designated for termination shall be assigned to the Real Estate Purchaser or the TRS Entity at the Closing, in Purchaser’s sole discretion and at no cost to Purchaser or the TRS Entity (collectively, “Assumed Contracts”). Notwithstanding the foregoing, for the avoidance of doubt, subject to and in accordance with Section 1.6(a), the parties have agreed that (w) the TRS Entity will at Closing assume the Provider Agreements as more particularly set forth in Section 5.5(b), and (x) the TRS Entity will assume the Residency Agreements as more particularly set forth in Section 2.7(b), and (y) the applicable TRS Entity or Real Estate Purchaser will assume those Assumed Contracts set forth on Schedule 2.7(a). 
(b)    Included on Schedule 2.7(b)(i) are specimen residency agreements for the Facilities, and on Schedule 2.7(b)(ii), a true, correct and complete resident roll dated as of the last day of the calendar month preceding the month in which the Date of Execution occurs for each Facility.  Except as set forth on Schedule 2.7(b), all Residents (or their authorized agents) of the Facilities have executed residency agreements as of the Date of Execution (“Residency Agreements”), no Residency Agreements vary in any material respect from the terms of the specimen agreements attached hereto, all Residency Agreements were entered into on an arms’ length basis, do not provide for payment of a single sum in exchange for lifetime care or other prepaid services and do not contain any provisions that prohibit or limit the right to raise monthly occupancy or other fees or rents payable thereunder for more than six (6) months after the initial occupancy date under such Residency Agreement.  All Residency Agreements are terminable by the Resident therein named upon no more than thirty (30) days’ notice and comply with all Applicable Laws, including, without limitation, all required regulatory standards of any Governmental Authorities with regulatory jurisdiction over the Business and the Facilities and all Third Party Payor Programs.  True, correct and complete copies of all Residency Agreements are located at the Facilities to which they relate and access thereto have been or will be provided to Purchaser as part of its due diligence review. For the avoidance of doubt, the parties have agreed that the TRS Entity shall at Closing assume from Seller all Residency Agreements (including those entered into after the Date of Execution in accordance with Section 4.1(a)) in effect as of the Closing Date with the Residents of the Facilities as of the Closing Date, and the contractual obligation of Seller to refund Move-In Deposits, if any, to former Residents, to the extent that Purchaser receives a credit for such Move-In Deposits pursuant to Section 6.1(d) (collectively, the “Assumed Residency Agreements”).   

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2.8    Title to Property and Related Matters.
(a)    One or more of the Sellers is the holder of good and marketable fee simple title and all other rights, title and interest in and to the Real Property and the Improvements, in each case free and clear of all Monetary Encumbrances, and without exception to title other than for the Permitted Encumbrances.  Except as set forth on Schedule 2.8(a), the Sellers are organized under the laws of Nebraska, have continuously operated the Facilities for a period of not less than five (5) years and using no names other than (i) the legal names and/or trade names of the Sellers and (ii) the names of the Facilities set forth on Exhibit A.  There are no violations of any covenants or restrictions encumbering the Assets.  No unrecorded agreements, documents or instruments entered into by any Seller or otherwise to Seller’s Knowledge affect the title to any Real Property or Improvements other than the Permitted Encumbrances.
(b)    Except for items leased by one or more of the Sellers and listed on Schedule 2.8(b), one or more of the Sellers owns fee simple title to all Assets that are personal property free and clear of all mortgages, security interests, liens or other encumbrances, other than any Monetary Encumbrance as Seller shall pay and discharge in full prior to or at the Closing.
(c)    All Facilities are supplied with such utilities as are necessary for the operation of such Facilities and the Business as currently operated and for their intended purposes, and Seller has no Knowledge of any future plans by any utility provider to curtail or eliminate any utilities currently serving the Assets.  All utility bills and deposits required by any utility provider have been paid by Seller.  
(d)    Each of the Facilities abuts on and has direct vehicular access to a public road, or has access to a public road via a permanent irrevocable and insurable easement benefiting the Real Property upon which such Facility is located, and Seller has no Knowledge of, and has received no notice that alleges any breach or default under any instrument creating any such easement or attempting to terminate or revoke such easement.
(e)    To Seller’s Knowledge there are no pending rezoning or other pending land use actions affecting the Assets or any properties in the immediate vicinity of the Assets.  Seller has not received written notice of, and has no Knowledge of, any threatened or contemplated rezoning or other land use actions affecting or which will affect the Assets, including, without limitation, on properties in the immediate vicinity of the Assets.  The current use of each Facility is lawfully permitted as a currently conforming use and there is no known violation of any Applicable Laws relating to the zoning, land use, building, fire, life safety codes or other similar requirements of Applicable Laws and Governmental Authorities. 
(f)    Seller shall pay as due any debt or non-disputed sum owed to any contractor, laborer, mechanic, materialman, architect or engineer for work, labor or services performed or rendered, or for materials supplied or furnished, in connection with the Assets for which any such person or entity could lawfully assert a lien against the Assets.
(g)    There are no condemnation or eminent domain proceedings pending or, to the Knowledge of Seller, threatened or contemplated against the Assets or any part thereof, or access thereto, and Seller has not received notice, oral or written, of the desire of any Governmental Authority or other entity to take or use the Assets or any part thereof.  

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(h)    There are no parties other than Seller in possession of the Assets, or any portion thereof, pursuant to lease, management agreement or otherwise, other than Residents pursuant to Residency Agreements.
(i)    There are no outstanding options or rights of first refusal to purchase the Assets or any portion thereof or interest therein.
(j)    The Assets constitute all of the assets necessary and sufficient to conduct the operation of the Facilities and the Business in the manner that such operations have been conducted and as required by Applicable Laws.  Except for the Assets, there are no other assets owned by Seller or any Affiliates or Related Parties thereof which are or may be used or useful in connection with the conduct of the Business or the Facilities or any expansion of the Business or the Facilities.
2.9    Hazardous Substances.  For purposes of this Agreement, “Environmental Laws” shall mean the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Section 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. Sections 9601 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), the Clean Air Act (42 U.S.C. §7401 et seq.), the Safe Water Drinking Act (42 U.S.C. §300(f) et seq.), the Occupational Safety and Health Act, and all other applicable state, county, municipal, administrative or other environmental, hazardous waste or substance, health and safety laws, ordinances, rules, regulations, judgments, orders and requirements of any Governmental Authority relating or pertaining to (A) any aspect of the environment, (B) the preservation or reclamation of natural resources, (C) the management, release and threatened release of Hazardous Substances, (D) response actions and corrective actions regarding Hazardous Substances, (E) the ownership, operation or maintenance of personal and real property that manages or releases Hazardous Substances or at which Hazardous Substances are managed, (F) common law torts, including so-called “toxic torts”, and (G) environmental or ecological conditions on, under or about the Assets, all as in effect as of the Date of Execution and on the Closing Date.  For purposes of this Agreement, “Hazardous Substance” shall mean any and all substances, wastes, materials, pollutants, contaminants, compounds, chemicals or elements which are defined or classified as a “hazardous substance”, “hazardous material”, “toxic substance”, “hazardous waste”, “pollutant”, “contaminant” or words of similar import under any Environmental Law, including, without limitation, all dibenzodioxins and dibenzofurans, polychlorinated biphenyls (PCBs), petroleum hydrocarbon, including crude oil or any derivative thereof, any radioactive material, raw materials used or stored in any Facility, Improvement or building components including, asbestos-containing materials in any form, radon gas and mold of a type or in amounts that may present a health hazard.
(a)    Except as set forth on Schedule 2.9(a), to Seller’s Knowledge, the Assets do not contain any Hazardous Substance, except for Hazardous Substances typically used in, and in quantities necessary for the day-to-day operation of, the Facilities and the Business and which are commonly used in other similar facilities, such as cleaning fluids, insecticides and medicines (the “Common Products”), which Common Products have been used, transported, stored and disposed of in compliance with all applicable Environmental Laws.
(b)    Except as set forth on Schedule 2.9(b), there is no pending or threatened litigation or proceeding before any Governmental Authority in which any person or entity alleges the presence, 

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release or threat of release of any Hazardous Substance or violation of Environmental Laws at any Facility.
(c)    Except as set forth on Schedule 2.9(c), Seller has not received any notice of, and Seller has no Knowledge that, any Governmental Authority or employee or agent thereof has determined, or threatens to determine, or is investigating, that there is a presence, release or threat of release or placement on, in or from the Assets, or the generation, transportation, storage, treatment or disposal at the Assets, of any Hazardous Substance.  Seller shall notify Purchaser promptly of any receipt of any such notice or Knowledge after the Date of Execution.
(d)    Except as set forth on Schedule 2.9(d), (i) to Seller’s Knowledge, Seller has owned and operated the Assets in compliance with all applicable Environmental Laws, has obtained all necessary licenses, permits and other authorizations under the Environmental Laws for the operation of the Assets, and has not used any of the Assets for the generation, storage, manufacture, use, transportation, disposal or treatment of Hazardous Substances, and (ii) the Assets are currently in compliance with all applicable Environmental Laws.
(e)    Except as set forth on Schedule 2.9(e), to Seller’s Knowledge, there has been no discharge of any Hazardous Substance on or from any of the Assets during the time of Seller’s ownership or occupancy thereof.
(f)    Seller has delivered to Purchaser true and complete copies of all reports or tests in the possession of Seller with respect to (i) the compliance of the Assets with Environmental Laws and (ii) the presence of Hazardous Substances on, in or from the Facilities or the Real Property, each of which is listed on Schedule 2.9(f).  
2.10    Patriot Act.  Seller is in compliance with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the “Order”), and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the Order and such other rules, regulations, legislation or orders are collectively called the “Orders”).  Neither Seller nor any Affiliate thereof (a) is listed on the Specially Designated Nationals and Blocked Person List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”), (b) is a Person (as defined in the Order) who has been determined by any competent authority to be subject to the prohibitions contained in the Orders; or (c) is owned or controlled by (including, without limitation, by virtue of such Person being a director or owning voting shares or interests), or acts for or on behalf of, any Person on the Lists or any other Person who has been determined by any competent authority to be subject to the prohibitions contained in the Orders.
2.11    Survey Reports, Etc.; Compliance with Law.
(a)    Seller has delivered to Purchaser true and complete copies of all survey and other Governmental Authority reports, statements of deficiencies, plans of correction, audits and any other investigation notices, warnings, waivers, related correspondence or reports filed, issued, sent, and received, with respect to the Facilities or the Business in its possession (collectively, “Licensing Surveys”) or the Provider Agreements (collectively, “Audits”) since January 1, 2009, and Seller shall also promptly 

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deliver to Purchaser any Licensing Surveys or Audits received, filed or arising with respect to the Facilities or the Business between the Date of Execution and the Effective Time.  There are no material deficiencies or violations noted in any Licensing Surveys or Audits except as set forth on Schedule 2.11, and Seller has remedied, discharged and complied with all applicable plans of correction or other requirements, such that there are no current violations or deficiencies with respect to any of the Licenses or the Provider Agreements.  
(b)    Except as set forth on Schedule 2.11, Seller has not been granted any waivers from compliance with Applicable Laws.  Seller is currently conducting, has at all times conducted, and between the Date of Execution and the Effective Time will conduct its operation of the Facilities and the Business in full compliance with all Applicable Laws.  Without limiting the foregoing, to Seller’s Knowledge, Seller (and the operation of each Facility participating in the Medicare and/or Medicaid programs) is in compliance with the applicable provisions of the Applicable Laws of any Governmental Authority having jurisdiction over the ownership, use, operation, management or maintenance of any Facility, including (i) staffing requirements, (ii) health and fire safety codes including quality and safety standards, (iii) Applicable Laws relating to the prevention of fraud and abuse, (iv) insurance, reimbursement and cost reporting requirements, government payment program requirements and disclosure of ownership and related information requirements, (v) requirements of applicable Governmental Authorities, including those relating to each Facility’s physical structure and environment, licensing, quality and adequacy of nursing facility care, distributions of pharmaceuticals, rate setting, equipment, personnel, and operating policies, and (vi) any other Applicable Laws or agreements for reimbursement for the type of care or services provided with respect to each Facility.  Each Facility and the use thereof complies in all material respects with all applicable local, state and federal building codes, fire codes, life safety codes and other similar regulatory requirements and no waivers of such physical plant standards exist at any of the Facilities.  
(c)    None of the Facilities has been cited for any deficiency that would result in a denial of payment for new admissions, civil monetary penalty, termination, final revocation or cancellation of any License or termination or other restriction of a Provider Agreement, and Seller has not received notice, either formal or informal, and Seller has no Knowledge, that any such actions will or may be taken or that Seller or any Facility is under investigation or review with respect to the foregoing.
(d)    Neither Seller nor any Facility has received any written or verbal notice or communication from any Governmental Authority alleging any violation of accreditation, professional, trade, industry, ethical or other applicable standards by Seller or any Facility.  
2.12    Capital Expenditures.  Except as set forth on Schedule 2.12, and other than ordinary course repair or maintenance projects Seller may undertake with respect to the Facilities, Seller does not have any outstanding contracts for capital expenditures relating to the Facilities, nor does Seller have any agreement, obligation or commitment for capital expenditures relating to the Facilities, including, without limitation, additions to property, plant, equipment or tangible capital assets.  Seller has not deferred or delayed implementing any capital expenditures at the Facilities required under this Agreement and the Facilities and all systems are in good working order and condition (normal wear and tear excepted) to the extent required to operate the Facilities and the Business consistent with past practices and in full compliance with all Applicable Laws.

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2.13    Absence of Notices.  Except as disclosed on Schedule 2.13, Seller has not received any notice, and Seller has no Knowledge, that (a) any vendor or supplier of the Facilities or the Business intends to discontinue, substantially alter prices or terms to, or significantly diminish its relationship with the Facilities or the Business, either as a result of the transactions contemplated hereby or otherwise or (b) any federal, state, county, municipal or other Governmental Authority is alleging any fire, health, safety, building, pollution, environmental, zoning or other violation of Applicable Law, including, without limitation, applicable health care licensure laws or violations under the Licenses, with respect to any Facility or any part thereof, which has not been corrected.
2.14    Resident Records.  Except as provided on Schedule 2.14, Seller has received no notice, and Seller has no Knowledge: (a) that Resident Records used or developed in connection with the Business have not been maintained in accordance with any Applicable Laws (including but not limited to HIPAA) governing the preparation, maintenance of confidentiality, use or disclosure, transfer or destruction of such records; and (b) of any material deficiency in the Resident Records or any other Books and Records.
2.15    Advance Payments and Resident Funds.  The accounting for Resident Funds provided to Purchaser by Seller pursuant to the provisions of Section 10.2, if any, will be complete and accurate in all respects as of the Closing.
2.16    Medicare and Medicaid Participation.  
(a)    Attached hereto as Schedule 2.16(a) is a true and complete census report which sets forth the occupancy status of each Facility, the average daily rate and other charges payable with respect thereto, the class of payment or reimbursement (i.e., the payor mix or allocation among private, third‐party payor, Medicare, Medicaid and Veterans Administration), the average monthly census of the applicable Facility, occupancy rates and any arrearages in payments for each Facility for calendar year 2014 and year-to-date for 2015.  An updated  Schedule 2.16(a) containing the information required for the period expiring on the last date of the calendar month before the Closing Date  will be delivered by Seller to Purchaser at least five (5) Business Days before the Closing.
(b)    Except as set forth on Schedule 2.16(b), 
(i)    each Facility is currently eligible, and between the Date of Execution and the Effective Time will remain eligible to receive payment without restriction under Title XVIII (“Medicare”) and Title XIX (“Medicaid”) of the Social Security Act, and is a “provider” with valid and current Provider Agreements and with one or more provider numbers, licenses, agreements and certificates with the federal Medicare and all applicable state Medicaid and successor programs.  
(ii)    all material Provider Agreements and Licenses have been obtained by Seller and are in full force and effect, including approved provider status in any Third Party Payor Programs.  For purposes of this  Agreement, “Third Party Payors” collectively means Medicare, Medicaid, TRICARE, private or public insurers, health maintenance organizations, preferred provider organizations or programs and self-insured employee assistance programs and any other federal, state or local governmental reimbursement programs, or successor programs to any of the above, and “Third Party Payor Programs” collectively means all programs with Third Party Payors in which the Facilities participate;

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(iii)    if any Facility has historically received payments under TRICARE, it did so on a co-insurance basis and did not have separate provider agreements or provider numbers with TRICARE;  
(iv)    Seller is in compliance with the requirements for participation in the Medicare and Medicaid programs with respect to each Facility that currently participates in such programs.  Seller had no deficiencies on its most recent survey (standard or complaint) that would result in a denial of payment for new admissions. Seller was not cited with any substandard quality of care deficiencies on its most recent survey; and  
(v)    the Facilities are in compliance with the conditions of participation of the Third Party Payor Programs in which it participated or participates.  
(c)    (i)    All Medicare, Medicaid and private insurance cost reports and financial reports, other requests for reimbursement or other required filings of Seller and the Business and the Facilities for the Third Party Payor Programs which were required to be submitted or filed by or on behalf of each Facility during the three (3) year period prior to the Date of Execution have been properly and timely filed and were, at the time of the filing thereof, complete and accurate in all respects, and not misleading, and except as set forth in Schedule 2.16(c)(i), there are no outstanding overpayments, set-offs or adjustments to any payments which have been made or are currently due and owing to or from (or anticipated to be due and owing to or from) Seller or the Business or the Facilities under any Third Party Payor Programs.
(ii)    Schedule 2.16(c)(ii) indicates which of such cost reports or reimbursement filings have not been audited and finally settled and a brief description of any and all notices of program reimbursement, proposed or pending audit adjustments, disallowances, appeals of disallowances and any and all other unresolved claims or disputes in respect of such cost reports or reimbursement filings.  Seller has not received any notice of any dispute with any governmental payor, any fiscal intermediary or any other party regarding any cost report or reimbursement filing which has not been resolved, and there is no basis for any such dispute.  All billing practices of Seller with respect to the Business and the Facilities to all Third Party Payor Programs have been in compliance with all Applicable Laws and policies of such Third Party Payor Programs in all respects.  Seller has received no notice or communication that Seller has billed or received any payment or reimbursement in excess of amounts permitted by Applicable Law, except to the extent cured or corrected and all penalties or interest discharged in connection with such cure or correction, and to the Knowledge of Seller, there is no basis for such a claim that has not been so resolved.
(d)    Seller is not currently a named participant in, or subject to any action, proceeding, suit, audit, or sanction, or any investigation by any Governmental Authority or any other administrative or investigative body or entity or any other Third Party Payor or any Resident or resident (including whistleblower suits, or suits brought pursuant to federal or state False Claims Acts, and Medicaid/ Medicare/state fraud/abuse laws) which may result, directly or indirectly or with the passage of time, in the imposition of a material fine, penalty, alternative, interim or final sanction, a lower rate certification or reimbursement rate for services rendered to eligible Residents, recoupment, recovery, suspension or discontinuance of all or part of reimbursement from any Governmental Authority, Third Party Payor, insurance carrier or private payor, or any other civil or criminal remedy, or which could reasonably be expected to have a material adverse effect on the Business, or the operation of any Facility, including any 

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Facility’s ability to accept or retain residents, or which could result in the appointment of a receiver or manager, or in the modification, limitation, annulment, revocation, transfer, surrender, suspension or other impairment of a License, or affect participation in the Medicare, Medicaid or any other Third Party Payor Program, as applicable, or any successor program thereto, at current rate certification or reimbursement rate, nor, to the Knowledge of Seller, has any such action, proceeding, suit, investigation or audit been threatened during the past three (3) years.
(e)    Neither Seller nor any of its Affiliates have provided any incentives to contracted provider networks or providers that have violated any Applicable Law with respect to inducing, directly or indirectly, such contracted provider networks or providers to refer residents or patients to any of the Facilities.  Seller and each Facility are, and during the past three (3) years have been, in compliance with the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), Stark law (42 U.S.C. § 1395nn), False Claims Act (31 U.S.C. § 3729 et seq.) and any state or other federal law prohibiting kickbacks or certain referrals relating or applicable to Medicare or any other state or federal health care programs.  In addition, Seller, the Business and each Facility are, and during the past three (3) years have been, in compliance with all Applicable Laws pertaining to (i) billings to insurance companies, health maintenance organizations and other managed care plans or otherwise related to insurance fraud and (ii) collection agencies and the performance of collection services.
(f)    None of Seller or, to Seller’s Knowledge, any of its Employees, agents or contractors are an “Ineligible Person,” which is defined for the purposes of this Section 2.16(f) to mean an individual or entity who:  (i) is currently excluded, debarred, suspended or otherwise ineligible to participate in the federal health care programs or in federal procurement or nonprocurement programs or state health care programs (or who, to Seller’s Knowledge, has been threatened with any of the foregoing); or (ii) has been convicted of a criminal offense that falls within the ambit of 42 U.S.C. § 1320a-7(a), but has not yet been excluded, debarred, suspended or otherwise declared ineligible.  Seller shall promptly notify Purchaser upon receipt of any notice or Knowledge that Seller or any of its Employees, agents or contractors have become or may become an Ineligible Person prior to the Closing.
(g)    There are no Contracts with Residents or residents of any Facility or with any other persons or organizations that deviate from or that conflict with any statutory or regulatory requirements.
(h)    All Third Party Payor accounts receivable of Seller are free of any liens, charges or encumbrances (other than Permitted Encumbrances), no such receivables have been pledged as collateral security for any loan or indebtedness and there are no violations of the Medicare or Medicaid anti-assignment rules.
(i)    There are no bed taxes, provider fees, indigent and charity care commitments, or other similar fees due and owing to any Governmental Authorities or any of the Third Party Payor Programs. 
(j)    There are no outstanding life safety code deficiencies or waivers for any life safety code deficiencies at any of the Facilities.
(k)    There are no pending Third Party Payor Program audits by any Governmental Authority or other third party.

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(l)    Other than Medicare, Medicaid and Veterans Administration programs, Seller is not a participant in any federal, state or local program whereby any Governmental Authority or any intermediary, agency, board or other authority or entity may have the right to recover funds with respect to any Facility by reason of the advance of federal, state or local funds, including those authorized under the Hill-Burton Act (42 U.S.C. § 291, et seq.).  Seller has received no written notice, and Seller has no Knowledge, of any actual or alleged violation of applicable antitrust laws by Seller.
(m)    Seller and its operations are in compliance with the Health Insurance Portability and Accountability Act of 1996 (Public Law 104-91) and the regulations issued in connection therewith, and as amended by the Health Information Technology for Economic and Clinical Health Act provisions of the American Recovery and Reinvestment Act of 2009 (Public Law 111-005) and the regulations issued in connection therewith (collectively, “HIPAA”), including, without limitation, having business associate or confidentiality agreements in effect as required by HIPAA with all of its Business Associates (as defined in HIPAA) , and any applicable state or other federal laws regarding confidentiality of Resident information.  Further, when acting as a Business Associate, Seller has in effect agreements with each of its Covered Entity (as defined in 45  C.F.R. § 160.103) clients that satisfy the requirements of 45  C.F.R. § 164.504(e) and neither Seller nor to Seller’s Knowledge any other party is in breach of any such agreements.  Seller is currently submitting, receiving and handling the transactions that have been standardized pursuant to HIPAA in compliance with HIPAA.  Seller has not received any complaints from any person or entity regarding any of Seller’s agents’, employees’ or contractors’ uses or disclosures of, or privacy or security practices regarding, individually identifiable health-related information.  With regard to individually identifiable health-related information, Seller has no Knowledge of any misuse, improper disclosure, breach of a confidentiality agreement or security incident (each as determined by reference to HIPAA, or state law, as applicable) by Seller or Seller’s agents, employees or contractors.  As currently structured, the operations of Seller comply with HIPAA.
(n)    Seller has provided to Purchaser a copy of the Business’s current compliance program materials, including, without limitation, all program descriptions, compliance officer and committee descriptions, ethics and risk area policy materials, training and education materials, auditing and monitoring protocols, reporting mechanisms, and disciplinary policies.  Seller (i) is not a party to a corporate integrity agreement with the Office of Inspector General of the United States Department of Health and Human Services, or any other corrective action plan or settlement with any Governmental Authority (ii) has no reporting obligations pursuant to any settlement agreement entered into with any Governmental Authority, (iii) is not currently and has not been the subject of any government payor program investigation conducted by any federal or state enforcement agency, (iv) is not currently and has not been a defendant in any unsealed qui tam/False Claims Act litigation, (v) has not been served with or received any search warrant, subpoena, civil or criminal investigative demand, contact letter or telephone or personal contact by or from any federal or state enforcement agency, and (vi) has not received any complaints from employees, independent contractors, vendors, physicians, Residents or any other person or entity that would indicate that Seller has violated any Applicable Laws. Seller is in compliance with the false claims education and other requirements of the Deficit Reduction Act of 2005 and with the applicable requirements of Nebraska laws.  
2.17    Licensed Beds and Units.  Each Facility is duly licensed as a senior housing facility as required under the Applicable Laws of the Governmental Authorities.  The total number of licensed beds/units at each of the Facilities as of the Date of Execution is as set forth on Exhibit A.  Except as set forth on Schedule 2.17, Seller has not applied to reduce the number of licensed beds of any Facility or to 

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move or transfer the right to any or all of the licensed beds or operations of any Facility to any other location or to amend or otherwise materially change any Facility and/or the number of beds approved by the state health department or equivalent (or any subdivision) or other applicable Governmental Authority, and except as set forth in Schedule 2.17, to Seller’s Knowledge, there are no proceedings or actions pending or contemplated to reduce the number of licensed beds of any Facility.  Exhibit A also identifies for each of the Facilities the number of beds which are certified for participation in the Medicare and Medicaid programs and the licensure category or categories maintained by such Facility.  No Facility is subject to a required minimum occupancy or utilization level under the Medicaid program in place at such Facility. Seller shall take no action between the Date of Execution and the Closing Date which changes the number of beds, the number of beds certified for participation in the Medicare and Medicaid programs or the licensure or category or categories maintained by each such Facility without obtaining the prior written consent of Purchaser.  At no time during Seller’s ownership or operation of the Facilities and the Business has the number of Residents at any Facility exceeded the licensed capacity for such Facility. 
2.18    Intellectual Property.  Schedule 2.18 lists all Intellectual Property used by Seller in the operation of the Facilities and the Business.  For these purposes, “Intellectual Property” shall mean, collectively, all: (i) United States or foreign patents, patent applications, patent disclosures and all renewals, reissues, divisions, continuations, extensions or continuations-in-part thereof; (ii) trademarks, service marks, trade dress, trade names, fictitious names, corporate names and registrations and applications for registration thereof; and (iii) copyrights (registered or unregistered), registrations and applications for registration thereof, including all renewals, derivative works, enhancements, modifications, updates, new releases or other revisions thereof.  Except as specified on Schedule 2.18, Seller owns or licenses and/or has the sole right to use all of the Intellectual Property.  Upon the consummation of the transactions contemplated hereby and compliance with Applicable Laws as to the assignment of such Intellectual Property, Purchaser will have obtained all rights of Seller to own, license and/or otherwise exclusively use the Intellectual Property.  No claims have been asserted and no claims are pending or, to Seller’s Knowledge, threatened by any person or entity, as to the use of any such Intellectual Property or challenging or questioning the validity or effectiveness of any state or federal registration of the Intellectual Property and Seller has not received any notice of such claim or knows of any valid basis for such claim. Seller’s use of the Intellectual Property, and Purchaser’s continued use of the Intellectual Property following the Closing in the same manner as heretofore used by Seller, does not and will not infringe the rights of any person or entity.
2.19    Financial Statements.  Seller has previously delivered to Purchaser copies of: (i) unaudited, consolidated income statements, balance sheets, changes in partners’ equity and cash flow statements for Seller for the calendar years ended 2012, 2013 and 2014 (collectively, the “Year-End Financial Statements”); (ii)  unaudited, consolidated income statements and balance sheets as of and for the period ended on the last day of the calendar month preceding the month in which the Date of Execution occurs (the “Most Recent Financial Statements”; collectively, with the Year-End Financial Statements, the “Financial Statements”), copies of which are attached as Schedule 2.19; and (iii) a schedule of capital improvements to the Facilities that were completed in the fiscal years ended 2012 and  2013 and the period covered by the Most Recent Financial Statements.  The Year-End Financial Statements and the Most Recent Financial Statements (including the notes thereto) are true, correct and complete in all material respects, have been prepared using standards that Seller will identify to Purchaser upon receipt of Purchaser’s request, which standards have been applied on a consistent basis throughout the periods covered thereby, and which present fairly the financial position of Seller as of such dates and the results of operations of Seller for such periods.  

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2.20    No Litigation.  Except as set forth on Schedule 2.20, there are no actions, suits, claims, governmental investigations or other legal or administrative proceedings, or any orders, decrees or judgments in progress, pending or in effect, that have been served on any of Seller or its resident agent, or, to the Knowledge of Seller, threatened against or relating to Seller, the Facilities, the Business or any of the Assets or against or relating to the transactions contemplated by this Agreement, and there are none pending in state courts, or in any federal courts, or, to the Knowledge of Seller, pending in other jurisdictions or threatened in writing, at law or in equity, by or before any federal, state or municipal court or other Governmental Authority.  If the matters set forth on Schedule 2.20, if any, are decided adversely, it will not materially or adversely affect the Assets, Seller or Seller’s operation of the Facilities or the Business, or the transactions contemplated by this Agreement.
2.21    Absence of Certain Changes or Events.  Since January 1, 2015, through the Date of Execution, and between the Date of Execution and the Effective Time, neither the Facilities nor any of the Sellers have:  
(a)    Suffered any Material Adverse Change;
(b)    Entered into any employment contracts, offered options to or granted any increase in the compensation or benefits provided or to be provided to or payable or to become payable by Seller or any Affiliates thereof to any of its officers or employees and any employees providing services with respect to the Facilities (collectively, “Employees”), except as set forth on Schedule 2.21 or for compensation granted to new Employees who were hired in the ordinary course of business on substantially similar terms to existing Employees with comparable duties and experience;
(c)    Other than in the ordinary course of business, consistent with past practices, sold, transferred or otherwise disposed of, or agreed to sell, transfer or otherwise dispose of, any assets related to or connected with the Facilities or the Business having a fair market value at the time of sale, transfer or disposition of $10,000.00 or more in the aggregate, or cancelled, or agreed to cancel, any debts or claims relating primarily to the Facilities or the Business in the amount of $10,000.00 or more in the aggregate; 
(d)    Made any change in any method of accounting or accounting practice relating to the Facilities or the Business;
(e)    Imposed any encumbrance upon any of the Assets; or
(f)    Entered into any Contract to do any of the foregoing, or any taken action or omission that would result in any of the foregoing.
2.22    Condition of Assets.  As of the Date of Execution and as of the Closing Date, except as set forth on Schedule 2.22, all of the Assets are in the exclusive possession or control of one or more of the Sellers and are located at or on the Facilities, and all of the tangible Assets are in good condition and working order (normal wear and tear excepted) to the extent required to operate the Facilities and the Business consistent with past practices and in full compliance with Applicable Laws.

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2.23    Employee and Labor Relations. 
(a)    Seller is and has been in compliance with all federal, state or other Applicable Laws respecting employment and employment practices at the Facilities (collectively, “Employment Laws”).  
(b)    Seller is in full compliance with all Employment Laws and Contracts relating to collective bargaining, wages, hours, overtime, employee classification, immigration, working conditions, hiring, promotion, affirmative action, equal employment opportunity, occupational health and safety (including employee training), terms and conditions of employment, and the payment and withholding of taxes and similar obligations.  Seller has not received any written or oral notice of any violation of any Employment Laws or Contracts.  All Employees are properly classified under the Fair Labor Standards Act and any applicable state law. Seller has withheld from the wages and salaries of its Employees as required by Applicable Law and is not liable for any arrears of wages or any tax or penalty in connection therewith.
(c)    No legal claim, cause of action, grievance, judgment,  other adverse charge or decision of any kind (including any in the nature of employment discrimination of any type, breach of contract, wrongful discharge, retaliation, health, safety, child labor violations, workplace violence, or non-payment of wages, benefits or wage supplements), notice of complaint or internal complaint or communication with respect to application for employment, employment, the terms or conditions of employment, the handling of benefits or termination of employment or any other alleged breach of any Employment Laws has been asserted or threatened against Seller or any Affiliate thereof in connection with the operation of the Facilities or the Business, nor is the internal investigation of any such matters currently pending.
(d)    Seller is not subject to any consent decree, injunction or other form of court or administrative order relating to any practice relating to labor, collective bargaining, employment, civil rights, discrimination, affirmative action or wage and hour issues.
(e)    No labor strike, picketing action, dispute, slowdown or stoppage or unfair labor practices are actually pending or, to the Knowledge of Seller, threatened against, or involving, Seller or any of the Facilities or the Business.
(f)    There is no pending grievance or arbitration and no unsatisfied or unremedied grievance or arbitration award against Seller or any agent, representative or Employee thereof and there is no basis for any such grievance or arbitration.  There is no unfair labor practice charge, pending trial of unfair labor practice charges, unremedied unfair labor practice finding or adverse decision of the National Labor Relations Board or of any other Governmental Authority (including, but not limited to the Nebraska Department of Labor), or any hearing officer or administrative law judge thereof, against Seller or any agent, representative or Employee thereof, and there is no basis for any such unfair labor practice charge.
(g)    Seller is not a party to any collective bargaining agreement, and no collective bargaining agreement is currently being negotiated by Seller.  No petitions for representation have been filed against Seller, any of the Facilities or the Business, nor have any demands been made for recognition and there are no attempts underway to organize or represent Employees of Seller. 
(h)    Seller does not owe to any Employee or former employee of the Business overtime pay (other than overtime pay for the current payroll period), wages or salary for any period other than the 

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current payroll period, vacation, holiday or other time off or pay in lieu thereof (other than time off or pay in lieu thereof earned in respect of the current year), or any amount arising from any violation of any law, rule, regulation, standard or contract relating to the payment of wages, fringe benefits, wage supplements or hours of work.
(i)    Attached as Schedule 2.23(i) is a true, correct and complete description of Seller’s employment policies and practices regarding PTO.
(j)    Except as set forth on Schedule 2.23(j), all personnel engaged in operating the Business and the Facilities are Employees of Seller and are employees-at-will.  There are no employment agreements, written or oral, in effect with any of the Employees.
(k)    Seller has taken any and all actions required by law necessary to comply with the Worker Adjustment and Retraining Notification Act, or state statute of similar import (collectively, “WARN”), with respect to any event or occurrence affecting the Business or the Facilities since the effective date of WARN. 
(l)    Attached as Schedule 2.23(l) is a true, correct and complete list (“Employee Roster”) of all Employees as of January 1, 2015, which lists their respective salaries or hourly pay rates, place of employment, accrued PTO, accrued bonus, position and term of employment, part-time or full-time status, and, for hourly Employees, the number of hours worked for calendar year 2013, and year-to-date as of January 1, 2015.   An updated Employee Roster, as of the Closing Date, will be delivered by Seller at the Closing.
2.24    Employee Benefit Plans.  
(a)    Schedule 2.24(a) sets forth an accurate and complete list of each “employee benefit plan” (as defined by Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and rules and regulations promulgated thereunder (“ERISA”)), and any other bonus, profit sharing, pension, deferred compensation, stock option, stock purchase, fringe benefit, severance, post-retirement, scholarship, disability, sick leave, vacation, individual employment, commission, bonus, retention, or other plan, agreement, policy, trust fund or arrangement (each such plan, agreement, policy, trust fund or arrangement is referred to herein as an “Employee Benefit Plan”, and collectively, the “Employee Benefit Plans”) that is currently in effect, was maintained since December 31, 2008 or that has been approved before the Date of Execution but is not yet effective, for the benefit of:
(i)    Employees of Seller, or any other persons performing services for Seller or the Business;
(ii)    Former employees of Seller working in the Business, or any other persons formerly performing services for Seller or the Business; and/or
(iii)    beneficiaries of anyone described in (i) or (ii);
(collectively, “Covered Persons”) or with respect to which Seller or any ERISA Affiliate has or has had any obligation on behalf of any Covered Person, and specifies which Seller sponsors each of said Employee Benefit Plans.  Except as disclosed on Schedule 2.24(a), there are no other benefits to which any Covered Person is entitled.  “ERISA Affiliate” is hereby defined to include any trade or business, 

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whether or not incorporated, other than Seller, which has employees who are or have been at any date of determination occurring within the preceding six (6) years, treated pursuant to Section 4001(a)(14) of ERISA and/or Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”) as employees of a single employer that includes Seller.
(b)    Except as disclosed on Schedule 2.24(b), neither Seller nor any ERISA Affiliate maintains or contributes, and has ever maintained or contributed to, an Employee Benefit Plan that is subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA.
(c)    Except as disclosed on Schedule 2.24(c), neither Seller nor any ERISA Affiliate contributes or has ever been obligated to contribute to any multi-employer plan within the meaning of ERISA Section 3(37).  
(d)    Except as disclosed on Schedule 2.24(d), the consummation of the transactions contemplated by this Agreement will not (i) entitle any Employee or former employee of Seller to severance pay, unemployment compensation or any other payment under an Employee Benefit Plan or otherwise, (ii) accelerate the time of payment or vesting or increase the amount of compensation due to any such Employee or former employee, or (iii) increase any benefits otherwise payable under any Employee Benefit Plan.
(e)    Each Employee Benefit Plan has been operated and administered in all respects in accordance with its terms and all Applicable Laws and the rules and regulations thereunder, including, without limitation, ERISA and the Code, including Section 4980B of the Code and Part 6 of Subtitle B of Title 1 of ERISA (“COBRA”).  There is no pending or, to Seller’s Knowledge, threatened litigation, action, suit, proceeding or investigation against or involving any Employee Benefit Plan (other than a routine claim for benefits).  All Employee Benefit Plans that are “pension plans” (as defined in Section 3(2) of ERISA) have received favorable determination letters from the IRS (or opinion letters as the case may be) as to their tax-qualified status and the tax-exempt status of any related trust under Sections 401(a) and 501 of the Code, respectively, which determinations are currently in effect.
(f)    Schedule 2.24(f) lists the name of each Covered Person who, as of the Date of Execution, is on a leave of absence (whether or not pursuant to the Family and Medical Leave Act of 1993, as amended (“FMLA”)) and who is receiving or entitled to receive health coverage under an Employee Benefit Plan, whether pursuant to FMLA, COBRA or otherwise.  Schedule 2.24(f) also lists the name of each Covered Person who is on a leave of absence (whether or not pursuant to FMLA) and whose reemployment is governed by the Uniformed Services Employment and Reemployment Rights Act of 1994.  An updated Schedule 2.24(f), as of the Closing Date, will be delivered by Seller at the Closing.
(g)    Each Employee Benefit Plan that is a nonqualified deferred compensation plan, as defined by Section 409A of the Code, has been maintained in good faith compliance between January 1, 2005 and December 31, 2008, and has been maintained in compliance since January 1, 2009, with Section 409A of the Code, the U.S. Treasury Department Regulations and IRS guidance issued thereunder.
(h)    Seller has not had any obligation to contribute to or provide benefits pursuant to, or any other liability of any kind with respect to, (i) a “multiple employer welfare arrangement” (within the meaning of Section 3(40) of ERISA), (ii) a “plan maintained by more than one employer” (within the 

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meaning of Section 413(c) of the Code) or (iii) any common law theory of joint, dual or multi-employer liability.
(i)    Purchaser shall not, as a result of the transactions contemplated by this Agreement (or any employment by Purchaser of Covered Persons):
(i)    become liable for any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost assessment or other similar type of liability or expense of Seller or of any ERISA Affiliate (including predecessors thereof) with regard to any Employee Benefit Plan, or any Employee Benefit Plan sponsored, maintained or contributed to by an ERISA Affiliate (including predecessors thereof) (assuming a definition of “Employee Benefit Plan” such as that provided in Section 2.24(a) hereof were applicable to ERISA Affiliates as to those same types of agreements, policies, trusts, funds and arrangements sponsored, maintained or contributed by them) (each such Employee Benefit Plan for an ERISA Affiliate being an “ERISA Affiliate Employee Benefit Plan”) including, without limitation, withdrawal liability arising under Title IV, Subtitle E, Part 1 of ERISA or liabilities under Section 412 of the Code or Section 302(a)(2) of ERISA; or
(ii)    be or become a party to any Employee Benefit Plan or any ERISA Affiliate Employee Benefit Plan. 
2.25    Inventory.  As of the Date of Execution and at the Closing, the Inventory will be in sufficient quantity and condition for the normal operation of the Business in compliance with Applicable Laws and all requirements of Governmental Authorities and consistent with past practices and in any event in a quantity sufficient for the operation of the Business by Seller for not less than fourteen (14) days after the Closing Date.
2.26    Insurance.  Seller maintains and has maintained property, fire, casualty, workman’s compensation, general liability insurance and other forms of insurance relating to the Assets, the Facilities and the operation of the Business against risks of the kind customarily insured against and in amounts customarily insured in the industry (and, where appropriate, in amounts not less than the replacement cost of the Assets).  Attached as Schedule 2.26 is a list of insurance policies carried and insurance coverages maintained by Seller with respect to the Assets, the Facilities, and the Business, and upon request by Purchaser, Seller shall provide copies of any such policies to Purchaser.  All commercial general liability and professional liability policies maintained by or for the benefit of Seller have been “occurrence” policies and not “claims made” policies or Seller shall have obtained “tail coverage”, as described on Schedule 2.26.  Seller shall maintain its insurance policies in effect on a continuous basis through the Effective Time.      
2.27    Related-Party Transactions.  Except as set forth in Schedule 2.27 attached hereto, no Related Party: (i) has any contractual or other claim, express or implied, or of any kind whatsoever against the Business, Seller or any of the Assets; (ii) has any interest in the Business, Seller, or any of the Assets; or (iii) is engaged in any other transaction with the Business, Seller, or any of the Assets. As used herein, “Related Party” means any of the shareholders, members or partners of Seller, any officers, managers or directors of Seller, any immediate family member of any such shareholders, members, partners, officers, managers or directors, or any Affiliate of the foregoing. As used herein, “Affiliate” of a party means any party controlling, controlled by or under common control with such party.

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2.28    Broker.  Except for Marcus & Millichap Real Estate Investment Services, Inc., no agent, broker, person or firm acting for or on behalf of Seller or any Affiliate thereof is, or shall be, entitled to any broker’s fees, finder’s fees or other fees or commissions from any party in connection with this Agreement or any of the transactions contemplated hereby, and Purchaser shall have no obligation to pay any fees or commissions to any such persons or entities.  On or before the Closing, Seller shall have paid all of the fees and commissions to which Marcus & Millichap Real Estate Investment Services, Inc., are entitled in connection with this Agreement or any of the transactions contemplated hereby. 
2.29    Truth of Warranties, Representations and Statements.  No representation, warranty or covenant made by Seller in this Agreement, the Schedules or the Exhibits attached to this Agreement, or any of the Seller Related Documents, contains an untrue statement of a material fact or omits to state a material fact required to be stated herein or therein or is necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.  
ARTICLE III. 
REPRESENTATIONS AND WARRANTIES OF PURCHASER 
As an inducement to Seller to enter into this Agreement and to consummate the transactions contemplated herein, Purchaser represents and warrants the following, each of which warranties and representations is material to and is relied upon by Seller:
3.1    Organization.  Purchaser is duly organized and validly existing and in good standing under the laws of its jurisdiction of organization, with full power and authority to carry on its business as currently being conducted.
3.2    Authority, Binding Effect.  
(a)    Purchaser has, and at the Closing, as applicable, will have, the full and unrestricted right, organizational power and authority to execute, deliver and perform this Agreement and to consummate the transactions and perform all obligations contemplated hereby and in all agreements, instruments and documents being or to be executed and delivered by Purchaser in connection with such transactions, including, without limitation, the Purchaser Documents (collectively, “Purchaser Related Documents”).
(b)    This Agreement does and each Purchaser Related Document, upon due execution and delivery by Purchaser, will constitute the legal, valid and binding obligation of Purchaser, enforceable in accordance with its respective terms.
(c)    Purchaser has obtained all required organizational approval required for the execution and consummation of this Agreement, the Purchaser Related Documents and all transactions contemplated hereby and thereby.
3.3    No Violation.  Purchaser is not subject to or obligated under any articles of incorporation, bylaw, laws, articles of organization, operating agreement, partnership agreement or other similar governing or charter document, or rule or regulation of any Governmental Authority, or any agreement or instrument, or any license, franchise or permit, or subject to any order, writ, injunction or decree which would be in any material respect breached or violated by the execution, delivery or performance of this Agreement.

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3.4    Broker.  Except as set forth on Schedule 3.4, no agent, broker, person or firm acting for or on behalf of Purchaser is, or shall be, entitled to any broker’s fees, finder’s fees or other fees or commissions from the Purchaser in connection with this Agreement or any of the transactions contemplated hereby, and Seller shall have no obligation to pay any fees or commissions to any such persons or entities.  
3.5    Truth of Warranties, Representations and Statements.  No representation, warranty or covenant made by Purchaser in this Agreement, the Schedules or the Exhibits attached to this Agreement contains an untrue statement of a material fact or omits to state a material fact required to be stated herein or therein or is necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. 
ARTICLE IV. 
ADDITIONAL COVENANTS OF SELLER
Seller covenants and agrees during the period after the Date of Execution and through the Closing Date as follows:
4.1    Interim Operations.  Between the Date of Execution and the Closing Date, Seller shall retain full authority and control of the operation of the Business and the Facilities.  Except as Purchaser in its sole discretion otherwise approves, in advance, in writing, or as otherwise expressly required hereunder, Seller shall: (i) operate the Business and the Facilities in a manner consistent with all Applicable Laws and past practices (both operational and financial); (ii) maintain the Assets in good order and condition (normal wear and tear excepted) to the extent required to operate the Business and the Facilities consistent with past practices and in full compliance with Applicable Laws; (iii) comply with all Applicable Laws with respect to the Assets and the operation thereof, including, without limitation, all required regulatory standards of any Governmental Authorities with regulatory jurisdiction over the Business and the Facilities and all Third Party Payor Programs; (iv) timely pay all payments due on or before the Closing Date under, and otherwise maintain and comply with, all Provider Agreements, Contracts and all Residency Agreements, each without change except as expressly provided herein; (v) except as may be required by Applicable Law, not make any changes or modifications to any Provider Agreements, Contracts or Residency Agreements or incur any further obligations or surrender any rights thereunder, except that Seller may enter into new residency agreements with new Residents and may renew existing Residency Agreements on substantially the same terms and conditions as other Residency Agreements in effect prior to the Date of Execution for the same Facility and otherwise consistent with the specimen residency agreement attached hereto on Schedule 2.7(b), provided in no event shall such new residency agreements provide for any “move in” specials or free rent, fix rental amounts for more than sixty (60) days, provide for a single payment for lifetime services, or be at rates that are lower than the rates reflected in Schedule 4.1(a)(v); (vi) not enter into any contracts, agreements or leases (or any amendment of any of them) which would have had to be disclosed on any schedule hereto had such contracts, agreements or leases been entered into prior to the Date of Execution, unless such contract, agreement or lease (or amendment thereof) has been approved in advance in writing by Purchaser, such approval not to be unreasonably withheld; (vii) keep in full force and effect (and renew as applicable) present insurance policies and Licenses through the Closing Date; (viii) maintain in good standing all Licenses and use commercially reasonable efforts to maintain (and not terminate) all goodwill of Residents, parties to all Contracts and vendors; (ix) not allow the number of Residents at any Facility to exceed the licensed capacity for such Facility; (x) except for any bonuses which Seller may in its 

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discretion propose to pay at its sole cost and expense to certain management employees in connection with the transaction contemplated by this Agreement, not cause or permit any of the following with respect to any Employees: any new bonus, percentage compensation, service award or other like benefit, or any increase in the compensation payable or to become payable by Seller to any Employees; or any change in the method of calculating any presently existing bonus, percentage compensation, service award or other like benefit, granted, made or accrued to or to the credit of any of the Employees, or any increase in any Employee welfare, insurance, pension, retirement or similar payment or arrangement made or agreed to pursuant to existing welfare, pension and retirement Employee Benefit Plans and arrangements, deferred compensation, or other Employee Benefit Plans; and (xi) except as expressly permitted hereunder, not take any action that would cause any of the changes, events or conditions described in Section 2.21.
4.2    Borrowing.  Other than with the written consent of Purchaser, from and after the Date of Execution, Seller shall not create, or permit to become effective, any additional Monetary Encumbrance on the Business, the Facilities or the Assets.  For the avoidance of doubt, all Monetary Encumbrances shall be satisfied by Seller at Closing.
4.3    Full Access and Disclosure.  
(a)    The term “Facility Management” means the following personnel (if any with respect to any certain Facility): the Principals, all “home office” management personnel of Seller (or other personnel with managerial oversight of the Business and the Facilities), the executive director/administrator of each Facility, the director of nursing at each Facility, the social services director at each Facility, the director of rehabilitation services at each Facility, the head reimbursement person at each Facility, the head sales person at each Facility and the head maintenance person at each Facility.  Seller has notified the Facility Management of the pending sale of the Facilities to Purchaser and instructed the Facility Management to fully cooperate with Purchaser and to treat the pending sale with utmost confidentiality. 
(b)    From and after the date hereof, Seller shall afford to Purchaser and its counsel, accountants, environmental consultants, engineers, appraisers and other authorized representatives and contractors (collectively, “Purchaser’s Representatives”), upon reasonable notice to Seller (which may be oral notice), access to the Facilities during business hours, including, without limitation, all FF&E, all Books and Records and any and all vehicles, financial data and records, operating data and other information requested, including the Financial Statements, audits, inspection reports, plans of correction with respect to Licensing Surveys and Audits (all with respect to the past three (3) years), current room rates (including dates and amounts of increases), census data and residency mix, payroll information, Third Party Payor Program reports, employment agreements, personnel policies and all contracts, agreements, correspondence files and other documents relating to the Facilities, the Assets and the Business, so that Purchaser will have a full opportunity to conduct a comprehensive due diligence review of the Facilities, the Assets and the Business, including without limitation, analyzing and inspecting the physical condition of the Real Property Assets.  Seller shall be entitled to have a representative present during Purchaser’s scheduled visits.  Seller shall furnish such additional financial and operating data and other information as Purchaser and Purchaser’s Representatives shall from time to time request, and Seller shall supplement or amend any information, written or otherwise, previously delivered or otherwise disclosed to Purchaser with respect to any matter hereafter arising which, if existing or occurring as of the Date of Execution, would have been required to be set forth or disclosed. Purchaser’s visits to the Facilities shall be non-disruptive of Employees and Residents.   

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(c)    On request, Seller shall afford Purchaser reasonable access to Seller’s non-Facility Management, including the chief nursing officer, human resources director, director of quality assurance and chief information officer. 
(d)    After the receipt of the Governmental Approvals, Seller and Purchaser shall hold joint meetings at such times as Purchaser shall reasonably request with the Residents and Employees, to announce that the Assets will be sold to Purchaser.  Purchaser will be entitled to meet with and interview any and all Employees.      
(e)    Notwithstanding the Sections above, nothing in this Agreement shall afford to Purchaser any access which shall unreasonably disrupt the operation of the Business.   
(f)    Purchaser’s due diligence review and any inspections pursuant hereto shall not waive or release Seller from any of its representations, warranties or covenants in this Agreement.  
4.4    Consents and Satisfaction of Conditions.  Other than the Governmental Approvals which under Section 5.5 are the responsibility of Purchaser and the TRS Entity, Seller shall obtain in writing and in form and substance reasonably satisfactory to Purchaser, at Seller’s cost and expense, on or prior to the Closing, all consents (including without limitation, the Required Consents) necessary for Seller to fulfill Seller’s obligations to consummate the transactions contemplated hereby at the Closing and to fulfill all conditions precedent to Closing.  Seller will reasonably cooperate with Purchaser in the performance by Purchaser of its obligations under this Agreement and in obtaining all Required Consents.  Without limiting the foregoing, Seller will assist Purchaser in responding to questions raised by, attending meetings with, and assisting with the preparation of documents required by Governmental Authorities in order to obtain all Required Consents.
4.5    Compliance With Laws.  Seller shall comply in all material respects with all Applicable Laws in connection with the execution, delivery and performance of this Agreement, the transactions contemplated hereby and the ownership, use, operation, management and maintenance of the Assets, the Business and the Facilities prior to the Closing.
4.6    Taxes.  Seller shall timely file all federal, state and local tax returns and, to the extent applicable, estimates and reports, and pay all amounts then due for all taxes for all periods through and including the Closing Date to the extent due and payable at any time prior to the Effective Time and otherwise to the extent necessary to transfer the Assets, the Business and the Facilities to Purchaser in accordance with the terms of this Agreement. Furthermore, Seller shall give all required notices and make all required filings, on behalf of Purchaser when required, of the transactions contemplated hereby, including any notices and filings required to obtain tax good standing letters or tax clearances or certificates with the tax authorities of the State of Nebraska and any other state or any local tax authority with which Seller is required to file tax returns and/or pay taxes.
4.7    No Disposition of Assets.  Except for Assets depleted and replaced in the ordinary course, Seller shall not sell, lease or otherwise dispose of or distribute any of the Assets or properties related thereto or necessary for the operation of the Facilities and the Business and, to the extent depleted or replaced in the ordinary course, Seller shall restock and replenish any portion of the Assets consumed or used between the Date of Execution and the Closing Date with Assets of comparable quality.

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4.8    Further Documentation.  Seller agrees that following the Closing Date, upon request by Purchaser, Seller will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances and assurances as may be reasonably required, in order to more fully assign, grant, transfer, convey, assure and confirm to Purchaser, or for aiding and assisting in collecting and reducing to possession, all of the Assets to be sold to Purchaser pursuant to this Agreement or transitioning the operations of the Facilities to the TRS Entity.
4.9    Confidentiality.  Seller will, and will cause its Affiliates to, keep confidential all information relating to the terms of this Agreement and all information relating to Purchaser (other than information that is a matter of public knowledge or that has heretofore been or is hereafter published in any publication for public distribution or, through no fault of Seller, filed as public information with any Governmental Authority) and such information shall not at any time be used for the advantage of Seller, its Affiliates or its or their respective representatives or disclosed to third parties (including Employees) by Seller, its Affiliates or its or their respective representatives, other than to the extent necessary to consummate the transactions contemplated hereby or as required under law.
4.10    Title Insurance and Survey; Environmental Assessments.
(a)    Seller has provided to Purchaser a copy of all of the currently effective title insurance policies on each of the Facilities and the Real Property, plats and surveys in its possession that relate to the Real Property, and copies of any recorded instruments listed as exceptions to title in those title insurance policies.  
(b)    Purchaser, at Purchaser’s option, shall use commercially reasonable efforts to obtain: (i) updated real property surveys for each of the Facilities (collectively, the “Surveys”), and (ii) title commitments for each of the Facilities (collectively, the “Title Commitments”), issued by Escrow Agent (also referred to herein as the “Title Company”), which Title Commitments shall contain commitments by the Title Company to issue to Purchaser title insurance policies on extended coverage ALTA Owner’s forms, inclusive of a non-imputation endorsement, in form and substance reasonably acceptable to Purchaser (each a “Title Policy” and collectively the “Title Policies”) insuring the good and marketable fee simple title to the Facilities.  Seller will cause all standard exceptions to be deleted from the Title Policies at the Closing, other than exceptions for (i) such itemized matters shown on the Surveys to which Purchaser does not object pursuant to the provisions hereof and (ii) taxes for the year in which the Closing occurs which are not yet due and payable, and Seller will execute and deliver or otherwise obtain such documents and instruments as the Title Company shall require, including, without limitation, Seller’s affidavits, gap indemnities and the like.  Upon execution of this Agreement, Purchaser shall make application for such title insurance, and provide Seller with a copy of the application. Not later than ten (10) days of receipt thereof, Purchaser shall give written notice to Seller accepting or objecting to the Title Commitments and Surveys, with any such notice of objection specifying the exceptions or other matters to which Purchaser objects and Seller shall have ten (10) days to accept or reject such exceptions by written notice to Purchaser; and if Seller fails to deliver such notice to Purchaser, Seller shall be deemed to have agreed to cure such objections, and the cure thereof shall be a condition to Purchaser’s obligation to close hereunder.  The failure of Purchaser to object to any matter reflected in any Title Commitment or Survey shall be deemed a waiver by Purchaser of any right to object to any matter so shown; provided, however, that notwithstanding anything to the contrary contained in this Section 4.10, Seller shall be unconditionally obligated to pay any outstanding indebtedness evidenced by, and cause the release of any, lien, mortgage, deed of trust, deed to secure debt, security agreement, judgment, tax lien or other 

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encumbrance affecting the Assets and capable of being released through or as a result of the payment of money (collectively, “Monetary Encumbrances”), irrespective of whether Purchaser objects to same unless and only to the extent that such obligation is waived in writing by Purchaser. 
(c)    Notwithstanding the foregoing, Purchaser shall not have the right to object to any of the following, all of which shall be deemed to be “Permitted Encumbrances” hereunder: (A) the Assumed Liabilities and (B) ad valorem taxes for the year in which the Closing occurs, not yet due and payable. 
(d)    Seller has provided to Purchaser copies of any previously prepared environmental assessments or other environmental assessments in the possession of Seller conducted for any of the Facilities or the Real Property as set forth on Schedule 2.9(f).  Seller will permit Purchaser and its agents to conduct new environmental assessments for each Facility.  Notwithstanding the foregoing, Purchaser shall not perform any Phase II environmental assessments or other intrusive environmental investigation without Seller’s prior consent.  
4.11    Financial Information.  From the Date of Execution and through the Effective Time, Seller shall deliver to Purchaser (a) not later than the thirtieth (30th) day of the next succeeding calendar month (i) internally-prepared, unaudited monthly individual Facility financial statements (including a balance sheet and detailed income statement) showing current month, year-to-date, and budget comparison data and per diem amounts; (ii) accounts receivable aging; (iii) monthly Medicaid rate reports (i.e., net revenue rates tie out report) including Medicaid pending; (iv) monthly CMI report, and prior year Medicaid assessments roll forward activity; (v) monthly Medicare days by RUGS categories; (vi) detailed resident/patient days by payor; (vii) month and year-to-date capital expenditures; and (viii) management reports and updated resident/patient rolls in the form attached as Schedule 2.7(b); and (b) not later than the tenth (10th) Business Day after receipt thereof, Medicaid rate changes based on rate letters.  The financial statements delivered by Seller pursuant to this Section shall be prepared on a basis consistent with the Financial Statements.  
4.12    Certain Employment Matters.  From and after the Closing, Seller shall assume all liability for, and neither Purchaser nor any of its Affiliates shall have any liability or obligation in respect of any pre-Closing obligations of Seller in respect of any collective bargaining agreement, employment agreement, pension or retirement plan, profit sharing plan, stock purchase or stock option plan, medical or other benefits or insurance plan, compensation obligation or agreement or severance pay plan or agreement and any other Employee Benefit Plan, including any contribution, tax lien, penalty, cost, interest, claim, loss action, suit damage, cost assessment or other similar type of liability expense of Seller or any of its ERISA Affiliates with regard thereto.
4.13    No Shop.  At no time between the Date of Execution and the Closing Date shall any or all of Seller, the Principals or any of their respective officers, directors, employees, agents or Affiliates (or any of their respective agents), directly or indirectly, solicit, initiate, encourage, participate in any negotiation or discussion, enter into any agreement in respect of any Facility or Seller, or cooperate with any person or entity regarding any Acquisition Proposal.  The term “Acquisition Proposal” shall mean any proposal (other than a proposal by Purchaser) for the acquisition of all or a substantial portion of the equity interests or assets of any Facility, any Assets or Seller, or for a merger, consolidation or other business combination pursuant to which any other person or entity would acquire any Facility, any Assets or Seller, or any substantial equity interest in any Facility, the Assets or Seller.  Seller represents and warrants that, 

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prior to the Date of Execution, Seller has ceased and caused to be terminated all discussions or negotiations with any parties other than Purchaser with respect to any Acquisition Proposal, and has terminated access of any such parties to any information with regard to the Assets, the Facilities and the Business, and any such parties have returned any such information previously made available by or on behalf of Seller.  
4.14    Cost Reports.  
(a)    Seller shall prepare and file when due any and all Medicare, Medicaid and private insurance cost reports and financial reports, other requests for reimbursement or other required filings of Seller and the Business and the Facilities for the Third Party Payor Programs which are required to be submitted or filed by or on behalf of each Facility during the period after the Date of Execution and through the Closing Date.  Each such report shall be, at the time of the filing thereof, complete and accurate in all respects, and not misleading, and as of the Closing Date, except as set forth on Schedule 2.16(c)(i), there shall be no outstanding overpayments, set-offs or adjustments to any payments which have been made or are then due and owing, as of the Closing Date, to or from (or anticipated to be due and owing to or from) any Seller or the Business or the Facilities under any Third Party Payor Programs.  At least ten (10) days after filing any such report, Seller shall provide Purchaser with a copy of each such report.  
(b)    After the Closing, Seller shall properly prepare and timely file when due any and all final cost reports for each Facility as and to the extent required by any Governmental Authority or Third Party Payor Program for the pre-Closing time period within the time frame required by Applicable Law for each Facility for which such a report should be prepared.  At least ten (10) days prior to filing any such final Medicaid cost report, Seller shall provide Purchaser with an opportunity to review and comment on such reports, but content shall be Seller’s sole responsibility to prepare. Such reports shall thereafter be filed by Seller. Seller will be responsible for the accuracy and completeness of such reports and will be responsible for any audits, overpayments, penalties or other costs arising out of such reports or otherwise for the time period for which Seller was the operator or licensee of a Facility.
4.15    Employment Records; Resident Records.  
(a)    From and after the Closing, Purchaser, unless prevented by Applicable Law, and anything in this Agreement to the contrary notwithstanding, shall retain possession of all Resident Records, and shall provide reasonable access thereto to Seller.  Seller shall for seven (7) years after the Effective Time retain and make available to Purchaser its Books and Records relating to all Employees, including any and all records or written documents relating to performance reviews, performance improvement plans, statements of disciplinary actions taken, medical records and all other information maintained in such Employees’ personnel files (collectively, “Employee Records”). Immediately prior to the Closing, Seller shall, at Purchaser’s option, remove and retain, but only to the extent permitted by Applicable Law, all records in Seller’s possession relating to all prior Residents of the Facilities who were not residing therein on the Closing Date (“Discharged Resident Records”).  In the event that Seller does not remove all Discharged Resident Records as herein required that Purchaser has specified should be removed, then Purchaser may, upon not less than fifteen (15) days’ prior written notice to Seller, destroy such Discharged Resident Records.

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(b)    Seller’s Books and Records used or developed in connection with the Business conducted at the Facilities have been maintained in all material respects in accordance with all Applicable Laws governing the preparation, maintenance of confidentiality, transfer and/or destruction of such records and there is no material deficiency in Seller’s Books and Records.    
(c)    At least two (2) weeks prior to the Closing Date, Seller shall deliver to Purchaser customer data consisting of the names of all Residents, the names and addresses of the Residents’ responsible parties and such further information as Purchaser may reasonably require in order for the TRS Entity to be able to assume full operation of the Facilities and full accounting functions on the Closing Date.
(d)    Upon request, subject to any restrictions under Applicable Laws, Seller shall have reasonable access, at its expense, to any records transferred to or held by Purchaser as relates to pre-Closing operations of the Facility.  
4.16    Surveys; Resolution of Audit Deficiencies; Cooperation.  
(a)    Seller shall provide to Purchaser, within five (5) Business Days of receipt by Seller, any items related to or included in any Licensing Surveys and Audits with respect to the Facilities and the Business between the Date of Execution and the Closing Date.  Seller shall exercise commercially  reasonable efforts to finally settle and resolve any deficiencies, reimbursements, audit adjustments, disallowances, unresolved claims or disputes or other amounts owed or alleged to be owed to any Governmental Authorities or any other third parties under any Provider Agreements or Third Party Payor Programs (collectively “Program Reimbursements”) prior to the Effective Time.  Seller shall be obligated to timely deliver to Purchaser, upon Purchaser’s request, both before and after the Closing for a reasonable time period, all information and documentation within Seller’s control and to cooperate in good faith with all reasonable requests from Purchaser to enable Purchaser to make timely filings with the Governmental Authorities.
(b)    Seller represents and warrants to Purchaser that Schedule 4.16(b) to this Agreement sets forth all reserves of Seller for Program Reimbursements with respect to the operations at each of the Facilities as of the calendar month preceding the month in which the Date of Execution occurs, determined in conformity with generally accepted accounting principles (“GAAP”) applied on a basis consistent with past practices (the “Program Reimbursement Reserve”), together with the signed report of Seller’s independent public accountants in respect thereof (the “Program Reimbursement Reserve Report”).  On or before five (5) days preceding the Closing Date, Seller shall deliver a certificate certifying to Purchaser the amount of the Program Reimbursement Reserves as of a date not more than sixty (60) days prior to the Closing Date (the “Closing Date Program Reimbursement Reserve”) together with the Program Reimbursement Reserve Report as executed by Seller’s independent public accountants with respect thereto.
4.17    COBRA Compliance.  Seller shall be liable and responsible for, and Purchaser shall incur no liability or responsibility with respect to, any Continuation Coverage (as that term is defined by COBRA Section 4980B of the Code and Section 601, et seq. of ERISA) for any Employee terminated at any time prior to or at the Closing.  Purchaser shall not assume, honor or accept any employee benefit plan of Seller or its Affiliates, including, without limitation, any “employee benefit plan” within the meaning of Section 3(3) of ERISA and Seller shall be solely responsible for satisfying all obligations (whether arising 

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under federal, state or local law or pursuant to contract) which may arise or which may have arisen prior to the Closing Date in connection with the employment of any Employees or the creation, funding, operation or termination of any of the employee benefit plans by or on behalf of Seller that cover any of the Employees. 
4.18    Capital Expenditures.  Prior to the Closing Date, Seller shall diligently undertake, continuously prosecute and complete all capital projects as needed on an emergency basis or as otherwise required to maintain the Facilities in good condition and working order (normal wear and tear excepted), consistent with past practices and in full compliance with all Applicable Laws, all at Seller’s sole cost and expense, it being understood that in no event shall Seller be entitled to any reimbursement from Purchaser in respect thereof.
4.19    Changes in Representations and Warranties.  Throughout the period from the Date of Execution through and including the Closing Date, Seller shall give Purchaser prompt written notice of (a) any representation and warranty made by Seller in this Agreement which Seller hereafter learns was inaccurate or incorrect when originally made, (b) any event, change or occurrence arising after the Date of Execution which would make any representation or warranty of Seller inaccurate or incorrect as of the time of such event, change or occurrence (Seller hereby acknowledging and agreeing that all representations and warranties of Seller herein are hereby deemed re-made and re-affirmed by Seller each and every day while this Agreement is in effect), and (c) any event, change or occurrence arising after the Date of Execution which will or reasonably may be anticipated to prevent Seller from making the same representations and warranties as set forth herein on and as of the Closing Date.  The giving of any such notices shall not limit or modify any rights of Purchaser hereunder arising in the case of a breach of a representation or warranty by Seller, and Purchaser shall have the right, subject to and in accordance with Article XII, to terminate this Agreement and receive an immediate refund of the Deposit at any time prior to the Closing, following receipt by Purchaser of any such notice of any materially inaccurate or incorrect representation or warranty under clauses (a) – (c) of this Section, and Purchaser shall have and retain all other rights and remedies hereunder in respect of any breach of a representation or warranty by Seller.  Any determination of materiality under this Section shall be made by Purchaser in its reasonable discretion.
4.20    Intentionally deleted. 
4.21    Transfer Agreements and Provider Agreements.   
(a)    To the extent Seller has any interest in any Provider Agreement in effect at any Facility, Seller agrees to exercise commercially reasonable efforts to obtain and provide to Purchaser as soon as reasonably practicable written certification from (i) each applicable Governmental Authority or other appropriate fiscal intermediary with respect to such Provider Agreement, to the effect that, to the extent that such interest in such Provider Agreement is assignable without violating any Applicable Laws, such Provider Agreement remains in place, is not subject to any limitations, the identification of the related provider number assigned under such Provider Agreement and such other matters as Purchaser may reasonably request, and (ii) each other Third Party Payor Program, such matters as Purchaser may reasonably request; provided, however, that Purchaser may only use such Provider Agreement and provider number (other than the Medicaid Provider Agreement and Medicaid provider number) on a temporary basis while it or any Affiliate thereof obtains its own Provider Agreement and provider number and that Purchaser shall diligently pursue this effort and keep Seller apprised of its progress.

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(b)    Seller shall deliver to Purchaser a list, sorted by Facility, of all transfer agreements, whether oral or written, between each of the Facilities, on the one hand, and hospitals (“Hospitals”), on the other hand (“Transfer Agreements”), together with true and complete copy of each such written Transfer Agreement in Seller’s possession, relating to transfer arrangements currently in place.   In addition, Seller shall deliver to Purchaser a list, sorted by Facility, of all Provider Agreements, whether oral or written, between each of the Facilities, on the one hand, and Third Party Payors, on the other hand, together with true and complete copy of each such written Provider Agreement in Seller’s possession, relating to Third Party Payor Programs currently in place.  To the extent that Seller does not have complete copies of any Transfer Agreement or Provider Agreement, Seller agrees that Purchaser may contact the Hospital or Third Party Payor, as applicable, to (i) attempt to obtain a copy of such Transfer Agreement or Provider Agreement and/or (ii) otherwise communicate with the Hospital or Third Party Payor Program with respect to a Transfer Agreement or Provider Agreement between the Third Party Payor Program or Hospital, as applicable, and Purchaser (including obtaining a written provider plan between such parties), and that Seller will reasonably cooperate with and assist Purchaser in connection with the foregoing.
ARTICLE V. 
COVENANTS OF PURCHASER
Purchaser covenants and agrees during the period after the Date of Execution and through the Closing Date as follows:
5.1    Confidentiality.  Prior to the Closing, Purchaser will use its commercially reasonable efforts to keep confidential all information relating to the terms of this Agreement, all information relating to Seller, all information gathered in connection with its due diligence review and all information related to the Assets and Facilities (other than information that is a matter of public knowledge, through no fault of a party requiring confidentiality, or that has heretofore been or is hereafter published in any publication for public distribution or filed as public information with any Governmental Authority) and such information shall not at any time be used by Purchaser, except to evaluate and consummate the transactions contemplated by this Agreement; provided, however, that Purchaser shall be permitted to make such disclosures as are (i) required pursuant to Applicable Law, order, subpoena or demand of any Governmental Authority or (ii) necessary to be disclosed to lessors, lenders, Governmental Authorities, Purchaser’s Representatives and other third parties in order to consummate the transactions contemplated hereby.    
5.2    Compliance with Laws.  Purchaser shall comply in all material respects with all Applicable Laws in connection with Purchaser’s execution, delivery and performance of this Agreement and the transactions contemplated hereby. 
5.3    Books and Records.  Purchaser understands that all of the Books and Records (other than those removed by Seller pursuant to the terms of Section 4.15(a)) are being transferred to the TRS Entity subject to the requirements of Applicable Laws.  Purchaser agrees to cause the TRS Entity to maintain all such Books and Records for the requisite period prescribed by Applicable Law.  In addition, if and to the extent permitted by Applicable Law, Purchaser agrees to cause the TRS Entity to allow Seller, or Seller’s agents or representatives upon reasonable advance notice and at Seller’s sole cost and expense, to examine from time to time such Books and Records relating to the period of Seller’s operation of the Facilities and the Business, to promptly cooperate with Seller, Seller’s agents or representatives in their examination or review of such Books and Records, and to permit Seller to obtain copies thereof, upon request.  

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5.4    Cooperation.  Following Closing, Purchaser shall cooperate with Seller and provide reasonable access to the Books and Records in Purchaser’s possession which are required by Seller to respond to any litigation, investigation, inquiry, government audit and/or third-party payor audit, upon reasonable advance notice  unless prohibited by Applicable Law.  Seller shall be responsible for the costs and expenses of copying any records in Purchaser’s possession or any costs of third parties unrelated to Purchaser (e.g. record management companies) in making the records available to Seller.  
5.5    Regulatory Consents; Governmental Approvals.  
(a)    Subject to performance by Seller of its obligation to cooperate and provide information as contemplated by Sections 4.4 and 4.16, Purchaser shall cause, to the extent allowed by law, the TRS Entity to make, at its cost, all filings with Governmental Authorities and use commercially reasonable efforts to seek to obtain, and diligently pursue, all permits, approvals, authorizations and consents of all Governmental Authorities required to permit the TRS Entity to operate the Facilities, including, without limitation, filing applications to obtain all necessary or appropriate approvals for all Licenses, agreements, certificates and other consents from all Governmental Authorities, and Third Party Payor Program administrators and agencies, and any municipality or other governmental agency or administrative body that authorizes or regulates the operation of the Facilities and the conduct of the Business as presently operated upon terms and conditions acceptable to Purchaser in its sole discretion (individually and collectively, “Governmental Approvals”).  Attached to this Agreement as Schedule 5.5(a) is a list that has been agreed upon by Purchaser and Seller of Licenses that Purchaser requires to be issued in the name of the TRS Entity with an effective date of the Closing Date, and which are required for the operation of the Facilities by the TRS Entity from and after the Closing Date.  Without limiting the generality of the foregoing, as soon as is practical following the Date of Execution, Purchaser shall cause the TRS Entity to file the requisite applications with the Nebraska Licensure Agency, and Purchaser shall use commercially reasonable efforts to cause the TRS Entity to obtain, and diligently pursue obtaining, all approvals of such applications, and shall not unreasonably request any extensions of any time periods by which Purchaser must reply or provide information to the Nebraska Licensure Agency.  Purchaser shall from time to time update Seller on the status of such applications and shall promptly upon receipt provide to Seller copies of all correspondence to and from the Nebraska Licensure Agency in connection with such applications.  Each party shall furnish promptly to each other all information that is not otherwise available to the other party and that such party may reasonably request in connection with any such filing.  Seller shall reasonably cooperate with Purchaser in the performance by Purchaser of its obligations under this Agreement in obtaining all Governmental Approvals.  Without limiting the foregoing, Seller will assist Purchaser and the TRS Entity in responding to questions raised by, attending meetings with, and assisting with the preparation of documents required by Governmental Authorities in order to obtain all Governmental Approvals.
(b)    Without limiting the generality of Section 5.5(a):
(i)     With respect to any revenues or reimbursement received by the Facilities from or as a result of Third Party Payor Programs, including, without limitation, Medicare and Medicaid programs, Purchaser, to the extent permitted by Applicable Law, shall cause the TRS Entity to take an assignment of and assume Seller’s participation, provider and reimbursement agreements or arrangements (and provider numbers) in effect for the benefit of the operation of the Facilities relating to any right of payment or claim arising out of or in connection with the participation of the Facilities in any Third Party Payor Programs (“Provider Agreements”) and obtain all necessary consents or approvals (which at the 

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Closing may be oral or written commitments to issue such consents or approvals) of such assignments, each of which shall be upon such terms and conditions acceptable to Purchaser in its sole discretion; provided, that, the TRS Entity will not assume any of Seller’s obligations in respect of Program Reimbursements arising with respect to periods occurring on or before the Effective Time.  Seller agrees that to the extent permitted by Applicable Law, it will transfer and assign the Provider Agreements along with all its rights thereunder to the TRS Entity, and further agrees to promptly provide such letters, consents, verifications, information and other documents, as necessary and required by Applicable Law or regulation, and any fiscal intermediary, the Nebraska Licensure Agency, any other third party or Governmental Authority having jurisdiction over the Facilities, Licenses, the Provider Agreements and the TRS Entity as may be reasonably requested or required to effectuate the transfer or assignment of the Provider Agreements. Seller acknowledges that, if permitted by Applicable Law, the TRS Entity may bill Medicaid and Medicare for services furnished after the Effective Time to Residents who qualify as Medicaid and Medicare beneficiaries from and after the Effective Time, utilizing the provider number issued to Seller under the assigned Provider Agreement, as applicable.  
(ii)    With respect to any revenues or reimbursement received by the Facilities from or as a result of Medicaid program, Purchaser shall, to the extent permitted by Applicable Law, cause the TRS Entity to obtain a provider agreement and provider number for the benefit of the operation of the Facilities relating to any right of payment or claim arising out of or in connection with the participation of the Facilities in the Medicaid program (the “Medicaid Provider Agreement”), and obtain all necessary consents or approvals, which at the Closing may be oral (if confirmed in writing) or written commitments to issue such consents or approvals, with respect to such the issuance of such Medicaid Provider Agreement, including without limitation, (x) notifying the Nebraska Department of Health and Human Services, Medicaid and Long-Term Care Provider Enrollment and any other applicable Nebraska Medicaid agency (individually and collectively, the “Nebraska Medicaid Agency”) of the transaction contemplated by this Agreement, and (y) entering into the Medicaid Provider Agreement with the Nebraska Medicaid Agency, each of which shall be in such forms as required by the Nebraska Medicaid Agency and upon such terms and conditions acceptable to Purchaser in its sole discretion.  Seller agrees to promptly provide such letters, consents, verifications, information and other documents, as necessary and required by Applicable Law or regulation, to the Nebraska Medicaid Agency, any other third party or Governmental Authority having jurisdiction over the Facilities, Licenses, the Medicaid Provider Agreement and the TRS Entity as may be reasonably requested or required for the TRS Entity to obtain the Medicaid Provider Agreement and for any and all obligations and liabilities arising out of or related to the participation of the Facilities in the Medicaid program prior to the Effective Time to be Excluded Liabilities, including without limitation, (x) notifying the Nebraska Medicaid Agency of the transaction contemplated by this Agreement, and (y) posting an indemnity bond or irrevocable standby letter of credit, each of which shall be in such forms as required by the Nebraska Medicaid Agency.
(c)    The Governmental Approvals under Section 5.5(a) and the actions (and all necessary consents or approvals) under Section 5.5(b) shall be referred to collectively as “Regulatory Consents”.
(d)    It shall be an express condition precedent to the obligation of each of parties hereto to consummate the transactions under this Agreement that the Regulatory Consents are obtained.  In the event that, on or before 5:00 pm on the date that is one hundred twenty (120) days following the Date of Execution (the “Outside Date”) the TRS Entity has not obtained the Regulatory Consents, then either Seller or Purchaser may terminate this Agreement upon written notice to the other parties and Escrow 

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Agent (the “Regulatory Contingency Termination Notice”).  In the event that either Seller or Purchaser delivers a Regulatory Contingency Termination Notice pursuant to this Section 5.5, this Agreement shall terminate as of the date of the delivery of the Regulatory Contingency Termination Notice in accordance with Article XII below.
5.6    Further Documentation.  Purchaser agrees that following the Closing Date, upon request by Seller, Purchaser will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, documents and assurances as may be reasonably required, without enlarging or extending any obligations or liability of Purchaser under this Agreement in any manner and without (except to the extent required by this Agreement) requiring the expenditure of any funds by Purchaser which are not reimbursed by Seller, to fully consummate the transactions contemplated by this Agreement. 
5.7    Changes in Representations and Warranties.  Throughout the period from the Date of Execution through and including the Closing Date, Purchaser shall give Seller prompt written notice of (a) any representation and warranty made by Purchaser in this Agreement which Purchaser hereafter learns was inaccurate or incorrect when originally made and (b) any event, change or occurrence which will or reasonably may be anticipated to prevent Purchaser from making the same representations and warranties as set forth herein on and as of the Closing Date.
ARTICLE VI. 
OTHER COVENANTS
6.1    Residents Rents; Accounts Receivable; Move-In Deposits and Move-In Fees.  
(a)    Prior to the Closing, except as provided in this Section 6.1(a), Seller shall bill the Residents in the ordinary course of business for amounts due under Residency Agreements and the TRS Entity shall assume responsibility for the billing of such amounts on and after the Effective Time.  The parties acknowledge that private-pay Residents are billed monthly by Seller in advance on or about the last day of the preceding calendar month.  Seller shall bill private-pay Residents for the calendar month of the Closing, but not for the calendar month after the Closing.  The TRS Entity shall bill Residents for those private pay items that are billed in arrears (including, if applicable, for items such as haircuts, guest meals, therapy services and other similar items) attributable to the calendar month of the Closing; provided, however Seller shall bill residents and patients for such items if the Closing occurs on the last day of a calendar month.  Regardless of which party bills the Residents or Third Party Payor Programs, the portion of all resident/patient rents and service fees allocable to the time period before the Effective Time shall be allocated to Seller and the portion thereof allocable to the time period on and after the Effective Time shall be allocable to Purchaser and will be accounted for as part of the reconciliation process set forth in Section 10.5. 
(b)    Delinquent rents and service fees for the period on or before the Effective Time will remain the property of Seller.  Seller shall retain all rights in and title to all pre-closing accounts receivable except to the extent any portion relates in part to dates on and after the Effective Time.  With respect to the collection of delinquent rents and service fees for the period before the Closing Date, as to (i) former Residents who are not Residents on the Closing Date, Seller may conduct whatever collection actions it deems commercially necessary and reasonable to recover such past due amounts, and (ii) Residents who are Residents on the Closing Date, Seller may not conduct any collection activity except with respect to 

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delinquent accounts which remain past due more than sixty (60) days following the Closing Date.  Seller shall notify Purchaser prior to engaging any third party to pursue collection activities and, upon Purchaser’s request, shall cooperate in good faith with Purchaser in pursuing such actions.  For the period from the Date of Execution until the Closing Date, Seller may continue its past practices, including eviction practices, with respect to the collection of delinquent rents and service fees of Residents. Anything to the contrary contained in this Agreement notwithstanding, Seller shall retain all collections relating to pre-Closing rents and services rendered. 
(c)    All rents and service fees received by either party after the Effective Time from any Resident which does not specify the service dates for which such payment relates will be applied in the following order of priority: (i) first, to amounts owed by that Resident for the calendar month of Closing prorated accordingly between the parties as applicable; (ii) second,  (A) to Seller for the delinquent amounts owed by that Resident attributable to periods before the Effective Time but only with respect to undesignated payments received during the period expiring sixty (60) days after the Closing Date and (B) after the sixtieth (60th) day following the Closing Date, to amounts owed by that Resident due and payable to Purchaser; and (iii) third, (A) to amounts owed by that Resident due and payable to Purchaser until the sixtieth (60th) day following the Closing Date and (B) after the sixtieth (60th) day following the Closing Date, to Seller for the delinquent amounts owed by that Resident attributable to the periods before the Effective Time.  All payments received by either Purchaser or Seller from Residents which specify a date of service for such Residents shall be credited to the party who rendered the services on the specified dates.  In addition, as soon as reasonably practicable but in no event more than thirty (30) days after its receipt thereof, Purchaser shall remit to Seller any payments under Third Party Payor Programs received by Purchaser that apply to a pre-Closing account of the Resident for whom the payment is made in accordance with the dates of service indicated on the remittance, together with a copy of the remittance advice. 
(d)    With respect to entrance fees, security deposits and move-in fees paid by any Resident of the Facilities at any time prior to the Effective Time, including, without limitation, Residents as of the Closing Date as well as prior Residents of the Facilities (such deposits and fees, collectively “Move-In Deposits”), Purchaser shall be entitled to a credit at the Closing for the portion of such Move-In Deposits that are refundable to any such Resident as of the Closing Date in accordance with the term of the applicable Residency Agreement.
(e)    If the Closing occurs at calendar month end, then Purchaser shall receive a credit at the Closing equal to 100% of the resident/patient fees billed and collected by Seller in advance for the calendar month after the Closing occurs, subject to the reconciliation process set forth in Section 10.5.
(f)    If the Closing occurs other than at calendar month end, Purchaser shall receive a credit at the Closing equal to the following, subject to the reconciliation process set forth in Section 10.5:
(i)    For the calendar month in which the Closing occurs, a credit equal to Purchaser’s pro rata share of the amount of the total fees billed and collected by Seller in advance for such calendar month; and
(ii)    For the calendar month after the Closing occurs, to the extent that Seller has billed and collected for that calendar month in advance under Section 6.1(a), a credit equal to 100% of the resident/patient fees so billed and collected.

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(g)    Each party agrees that they will provide each other with any information reasonably required to enable either party to complete its billing to Residents and Third Party Payor Programs.
6.2    Medicaid and Medicare.  
(a)    Seller shall bill the applicable third party or Governmental Authority for all applicable Third Party Payor Program reimbursements for the calendar month prior to the Closing.  For the calendar month in which the Closing occurs, Seller shall bill the applicable third party or Governmental Authority for all periods prior to the Closing and the TRS Entity shall bill the applicable third party or Governmental Authority for all periods on or after the Effective Time.  
(b)    Seller is entitled to payments of receivables on account of items or services provided on dates of service before the Effective Time, even if such receivables are collected after the Closing, and the TRS Entity is entitled to payments of receivables on account of items or services provided on dates of service from and after the Effective Time.  The TRS Entity and Seller shall each deliver periodically (and in any event, no less frequently than monthly) to the other any such payments actually received by such party and due to the other party as contemplated hereby.
6.3    Transfer Matters.  If, prior to or within one (1) year following the Closing, any of the Governmental Authorities conducts a survey or inspection of any of the Facilities (a “Transfer Survey”), including any such Transfer Survey which is a standard survey, a complaint survey or a survey prompted by the transactions contemplated by this Agreement, then Seller agrees to be responsible for all citations and deficiencies attributable to (i) pre-Closing activities that violate any Applicable Law (and which violation did not first occur after the Closing Date) and (ii) pre-Closing conditions, and Seller shall correct or pay, or both, for such citations and deficiencies to the extent applicable.  Seller’s responsibility shall include correcting all non-compliances and citations, paying any and all fines, providing a plan of correction (prior to the Closing) and providing and bearing the expense for all consultants, staff, materials, supplies and equipment necessary to complete the plan of correction and achieve full compliance.  To the extent that such corrections cannot be completed prior to the Closing, Seller shall be required to place in escrow at the Closing an amount equal to one hundred percent (100%) of the reasonable estimated cost of the corrections required.
6.4    Pre-Closing Access.  During the [two (2) week] period prior to the Closing Date, Seller shall permit the employees and representatives of the TRS Entity to be present at the Facilities at scheduled times to, as applicable and reasonably desired by the TRS Entity, commence installation of time clocks, computers, billing, accounting and security systems, and do such other things as may be reasonably necessary to effect an orderly transition of the Facilities.
6.5    Workers’ Compensation.  Seller shall be responsible for and pay any and all workers’ compensation and other similar claims asserted by or with respect to any Employees or former employees of Seller (or any of them) in respect of any injury or other compensable event or occupational illness or disease that occurred or is attributable to any event, state of facts or condition that existed or occurred prior to or on the Closing Date.  Purchaser is responsible for and shall pay any and all workers’ compensation and other similar claims asserted by or with respect to any Employees in respect of any injury or other compensable event or occupational illness or disease that occurred or is attributable to any event, state of facts or condition that first existed or occurred following the Closing Date. 

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6.6    Seller’s Financial Books and Records.  Seller agrees to maintain all of Seller’s Financial Books and Records for the requisite period prescribed by Applicable Law, but in no event less than seven (7) years.  In addition, if and to the extent permitted by Applicable Law, Seller agrees to allow Purchaser, or its agents or representatives, upon reasonable advance notice and at Purchaser’s sole cost and expense, to examine from time to time such Seller’s Financial Books and Records, to promptly cooperate with Purchaser, its agents or representatives in their examination or review of such Seller’s Financial Books and Records, and to permit Purchaser to obtain copies thereof, upon request.  
6.7    Approvals and Consents.  Prior to the Closing Date, and without limiting the other provisions of this Agreement, Seller and Purchaser will take all corporate and other action and exercise their respective commercially reasonable efforts to fulfill their respective obligations hereunder.  In addition, Seller shall use its commercially reasonable best efforts to obtain in writing, at its cost and expense and in form and substance reasonably satisfactory to Purchaser as promptly as possible, all Required Consents (other than the Regulatory Consents which under Section 5.5 are the responsibility of the TRS Entity) and Purchaser shall reasonably cooperate with Seller’s efforts to obtain such consents. 
6.8    Discharged Resident Records.  For a period of seven (7) years after the Effective Time (or such longer period of time as may be required by Applicable Laws), Seller agrees to allow Purchaser, or its agents or representatives, in connection with a valid business purpose and upon reasonable advance notice and at Purchaser’s sole cost and expense, to examine from time to time the Discharged Resident Records, to promptly cooperate with Purchaser, its agents or representatives in their examination or review of such Discharged Resident Records, and to permit Purchaser to obtain copies thereof, upon request.  
6.9    Management Agreement.  The Seller shall cause the EIK Manager to enter into a management agreement with the TRS Entity, as manager (the “Manager”), for the management of the Facilities and subject to finalizing the Form Management Agreement (defined below) pursuant to the terms of this Section 6.9. The management of each such facility by the Manager shall commence, and the management agreement for such facility shall be executed and become effective, not less than one (1) day prior to the Closing Date (the “Management Agreement Deadline”). The form of the management agreement shall be substantially in the form attached hereto as Schedule 6.9. 
ARTICLE VII. 
INDEMNIFICATION
7.1    Indemnification by Seller.
(a)    Subject to the limitations set forth in this Article VII and the other provisions of this Agreement, each entity comprising Seller shall, for the property it owns only, indemnify, protect, defend, exculpate and hold Purchaser, Real Estate Purchasers, the TRS Entity, Purchaser’s Permitted Assignees and their respective partners, shareholders, members, directors, managers, officers, employees and agents (collectively, “Purchaser Indemnified Parties”) harmless from and against, and agree promptly to defend Purchaser Indemnified Parties from and reimburse Purchaser Indemnified Parties for, any and all Losses, for the property it owns only, (collectively, “Purchaser Indemnified Losses”) which Purchaser Indemnified Parties may at any time suffer or incur, or become subject to, as a result of or in connection with:  

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(i)    Any and all obligations of Seller and Seller’s Affiliates, representatives, employees and agents (together with Seller, collectively, “Seller Agents”), or any of them, of any nature whatsoever, including, without limitation, all liabilities and obligations with respect to claims (including, without limitation, recoupment actions, audits or any enforcement by Governmental Authorities or any third parties to collect amounts owed in connection with Third Party Payor Programs), damages, or injuries, related to or arising out of the ownership, use, leasing, management, maintenance or operation of the Facilities, the Business or any of the Assets prior to the Effective Time, whether such obligation accrues or is asserted before or after the Effective Time, except for Assumed Liabilities;
(ii)    Any material breach, inaccuracy, misrepresentation or omission in any of the material representations or warranties made by Seller in or pursuant to (a) this Agreement or any Exhibit or Schedule hereto, or (b) any instrument, certificate or affidavit delivered by Seller at the Closing;
(iii)    Any breach of any material covenant, agreement or undertaking made by any of Seller Agents under this Agreement or as set forth in any instrument, certificate or affidavit delivered by or on behalf of Seller Agents at the Closing; 
(iv)    Any and all liability or loss arising out of or relating to any failure in connection with the transactions contemplated herein to comply with the requirements of any Applicable Laws relating to bulk sales or transfers;
(v)    Any violation of Environmental Laws by Seller or any discharge of any Hazardous Substance on or from any of the Assets during the time of Seller’s ownership or occupancy thereof; and/or
(vi)    Any Excluded Liabilities.
(b)    As used herein, “Losses” means any and all damages, losses, taxes, liabilities, claims, judgments, penalties, causes of action, investigations, audits, demands, assessments, adjustment, settlement payments, deficiencies, fines, diminutions in value, costs and expenses (including without limitation reasonable attorneys’ fees and court costs) and interest (including interest imposed from the date of any such Loss).
7.2    Indemnification by Purchaser.   
(a)    Subject to the limitations set forth in this Article VII and the other provisions of this Agreement, Purchaser shall indemnify, protect, defend, exculpate, and hold Seller and its shareholders, members, managers, directors, officers, employees, and agents (collectively, “Seller Indemnified Parties”) harmless from and against, and agree promptly to defend Seller Indemnified Parties from and reimburse Seller Indemnified Parties for, any and all Losses (collectively, “Seller Indemnified Losses”) which Seller Indemnified Parties may at any time suffer or incur, or become subject to, as a result of or in connection with:
(i)    Any material breach or inaccuracy of any of the representations or warranties made by Purchaser in or pursuant to this Agreement or in any instrument, certificate or affidavit delivered by Purchaser to Seller at the Closing or in any Exhibit, Schedule, certificate, or other executed document furnished or to be furnished to Seller hereunder;

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(ii)    Any failure by Purchaser to carry out, perform, satisfy and discharge in any material respect any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement or in any instrument, certificate or affidavit delivered by Purchaser to Seller at the Closing;
(iii)    Any and all claims, including any suit, action, or other proceeding brought by applicable Governmental Authorities or quasi-Governmental Authorities against Seller arising from the ownership and operation of the Facilities by Purchaser or a Purchaser designee, or as to any overpayments made to Purchaser or a Purchaser designee by third parties including, without limitation, over payments made with respect to Medicaid, Medicare, and other Third Party Payor Programs, if applicable; and
(iv)    Any and all claims arising out of Purchaser’s post-Closing obligations under the Assumed Liabilities; and
(v)    (i) all taxes that result from, relate to or accrue in connection with the operation of the Facilities on and after the Closing Date; and (ii) liabilities and obligations arising out of personal injury claims accruing with respect to or related to the services provided at the Facilities after the Closing Date. 
(b)    As used herein, “Losses” means any and all damages, losses, taxes, liabilities, claims, judgments, penalties, causes of action, investigations, audits, demands, assessments, adjustment, settlement payments, deficiencies, fines, diminutions in value, costs and expenses (including without limitation reasonable attorneys’ fees and court costs) and interest (including interest imposed from the date of any such Loss).  In the event Purchaser makes a claim as set forth herein and such claim is found not valid, Purchaser shall reimburse Seller for all its costs incurred to defend such claim including, but not limited to, attorney’s fees and other third parties.    

7.3    Notification of Claims and Indemnification Procedures.   
(a)    A party entitled to be indemnified pursuant to Section 7.1 or Section 7.2 or any other provision of this Agreement (the “Indemnified Party”) shall notify the party liable for such indemnification (the “Indemnifying Party”) in writing, which contains reasonable documentation or proof, of any third party claim which the Indemnified Party has reasonably determined gives rise or will likely give rise to a right of indemnification under this Agreement, as soon as possible after the Indemnified Party becomes aware of such claim and has made such determination; provided, however, that the Indemnified Party’s failure to give such notice to the Indemnifying Party in a timely fashion shall not result in the loss of the Indemnified Party’s rights with respect thereto except to the extent the Indemnified Party is prejudiced by the delay.  Subject to the Indemnifying Party’s right to defend in good faith third party claims as hereinafter provided, the Indemnifying Party shall satisfy its obligations under this Article VII within thirty (30) days after the receipt of written notice thereof from the Indemnified Party, it being agreed that the Indemnifying Party need not satisfy such obligations during any period in which the Indemnifying Party is defending in good faith the applicable third party claim in the manner described herein below:
(i)    If the Indemnified Party notifies the Indemnifying Party, with the documentation or proof, of any claim pursuant to Section 7.3 (a), and if such claim relates to a claim 

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asserted by a third party against the Indemnified Party which the Indemnifying Party acknowledges is a claim for which it must indemnify or hold harmless the Indemnified Party under Section  7.1 or Section 7.2, the Indemnifying Party shall have the right to either (i) pay such claim or (ii) employ counsel reasonably acceptable to the Indemnified Party to defend any such claim asserted against the Indemnified Party.  The Indemnified Party shall have the right to participate in the defense of any such claim.  The Indemnifying Party shall notify the Indemnified Party in writing, as promptly as possible (but in any case reasonably in advance of the due date for the answer or response to a claim) after the date of the notice of claim given by the Indemnified Party to the Indemnifying Party under Section 7.3 (a) of its election to defend in good faith any such third party claim.  So long as the Indemnifying Party is defending in good faith any such claim asserted by a third party against the Indemnified Party and is able to demonstrate to the Indemnified Party its financial wherewithal to fully perform its indemnification obligation in the event such contested claim is resolved adversely to the Indemnified Party, the Indemnified Party shall not settle or compromise such claim.  The Indemnified Party shall make available to such counsel all records and other materials in the Indemnified Party’s possession reasonably required by it for its use in contesting any third party claim.  Whether or not the Indemnifying Party elects to defend any such claim, the Indemnified Party shall have no obligations to do so.
(ii)    The Indemnified Party shall have the right to participate in any matter through counsel of its own choosing at its own expense (unless the Indemnified Party determines in good faith that there is a conflict of interest that prevents counsel for the Indemnifying Party from representing the Indemnified Party, in which case the Indemnifying Party will have the right to choose and fund other counsel to represent the Indemnified Party or to reimburse the Indemnified Party for the expenses of its counsel).  After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such third party claim, and for so long as the Indemnifying Party diligently pursues such defense and is able to demonstrate to the Indemnified Party its financial wherewithal to fully perform its indemnification obligation in the event such contested claim is resolved adversely to the Indemnified Party, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such third party claim, except to the extent such participation is requested by the Indemnifying Party, in which event the Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable legal expenses and out-of-pocket expenses incurred in connection with such requested participation.
(iii)    An Indemnifying Party may not, without the prior written consent of the Indemnified Party, settle or compromise any claim against an Indemnified Party or consent to the entry of any judgment with respect to which indemnification is being sought hereunder unless such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability arising out of such claim and does not contain any equitable order, judgment or term which in any manner affects, restrains or interferes with the business of the Indemnified Party or any of the Indemnified Party’s Affiliates.
(iv)    If any amounts payable by an Indemnifying Party to an Indemnified Party is not paid when due, such unpaid amount shall bear interest at an interest rate equal to a margin of 2% plus the “Prime Rate” as published by the Wall Street Journal (Eastern edition) under its Money Rates column and specified as the base rate on corporate loans at large U.S. commercial banks or, if it no longer publishes such, the rate of interest announced from time to time by Well Fargo Bank as its prime rate, base rate or reference rate. 

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7.4    Survival of Representations, Warranties and Covenants.  The representations and warranties contained in this Agreement shall survive for a period of twelve (12) months following the Closing Date, and shall thereafter cease to be of any force and effect, except for (a) claims as to which notice has been given prior to such date and which are pending on such date, (b) claims based upon representations and warranties set forth in Section 2.1, 2.2 or 2.8 or Seller’s indemnification obligations with respect to Program Reimbursements, which shall survive without limitation, and (c) claims based upon representations and warranties set forth in Section 2.5, 2.9 or 2.24, which shall survive until the expiration of the applicable statute of limitations (each, a “Claims Period”).  If any act, omission, disclosure or failure to disclose shall form the basis for a claim for breach of more than one representation or warranty, and such claims have different periods of survival hereunder, then the termination of the survival period of one claim shall not affect a party’s right to make a claim based on the breach of the representation or warranty still surviving.  All covenants of the parties contained in this Agreement which have a definitive term associated with such covenant shall survive the Closing Date for such term.  All other covenants of the parties contained in this Agreement shall survive the Closing until fully performed.
  
7.5    Set-Off.  The Purchaser Indemnified Parties may set-off against unpaid amounts of the Indemnity Holdback, if any, any amounts otherwise payable by Seller or the Principals to any of the Purchaser Indemnified Parties for any Purchaser Indemnified Losses, all in accordance with the Indemnity Holdback Agreement.  The Indemnity Holdback and the right of set-off, however, shall not be exclusive of any other right or remedy any of the Purchaser Indemnified Parties may have with respect to the Purchaser Indemnified Losses, whether under this Agreement, at law or in equity.  Seller and the Principals hereby agree that to the extent the Purchaser Indemnified Losses exceed the amount of the Indemnity Holdback then in existence, Seller and the Principals, jointly and severally, will be liable for all such Purchaser Indemnified Losses. 
7.6    Net Damages.   Notwithstanding anything contained herein to the contrary, the amount of any Losses incurred or suffered by an Indemnified Party shall be calculated after giving effect to any proceeds or recoveries actually received by the Indemnified Party from any other third party, including any proceeds from insurance policies covering the event or claim giving rise to the indemnification obligation, net of the reasonable costs incurred by Purchaser or any of its Affiliates in obtaining any such proceeds or recoveries.
7.7    Liability Limitations. 
(a)    The maximum aggregate liability of Seller to the Purchaser Indemnified Parties with respect to claims for Purchaser Indemnified Losses under Section 7.1(a)(ii) will be limited to an amount equal to six and six-tenths percent (6.6%) of the Purchase Price (the “Cap”); provided, however, the Cap shall not apply to any Purchaser Indemnified Losses incurred or suffered by any of them and arising out of or resulting from (i) any breach of any Exempt Representations and Warranties or (ii) claims based upon intentional behavior.
(b)    The maximum aggregate liability of the Purchaser to the Seller Indemnified Parties with respect to claims under Section 7.2 will be limited to the Cap; provided, however, the Cap shall not apply to any Seller Indemnified Losses incurred or suffered by any of them and arising out of or resulting from claims based upon intentional behavior.

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(c)    Seller will not have any liability to any Purchaser Indemnified Parties under Section 7.1(a)(ii) until the Purchaser Indemnified Parties shall have incurred on a cumulative basis Losses exceeding one percent (1%) of the Purchase Price (the “Basket”), at which point Seller shall be liable for all Losses incurred by the Purchaser Indemnified Parties,  including the amount of the Basket; provided, however, the Basket shall not apply to any Losses incurred or suffered by any of them arising out of or resulting from (i) any breach of any Exempt Representations and Warranties or (ii) claims based upon intentional behavior.
(d)    Purchaser will not have any liability to the Seller Indemnified Parties under Section 7.1 until the Seller Indemnified Parties shall have incurred on a cumulative basis Losses exceeding the Basket, at which point Purchaser shall be liable for all Losses incurred by the Seller Indemnified Parties, including the amount of the Basket; provided, however, the Basket shall not apply to any Losses incurred or suffered by any of them arising out of or resulting from claims based upon intentional behavior.
(e)    The representations and warranties set forth in Sections 2.1, 2.2, 2.5, 2.8, 2.9, 2.16, 2.20, 2.22 and 2.23 are hereinafter referred to as the “Exempt Representations and Warranties”.
ARTICLE VIII. 
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
The obligation of Purchaser to effect the transactions contemplated hereby to be consummated at the Closing shall be subject to the satisfaction of each of the following conditions, unless waived in writing by Purchaser.
8.1    Representations and Warranties; Performance.  
(a)    The representations and warranties made by Seller herein and in the Seller Related Documents shall be true and correct in all material respects as of the Date of Execution and at and as of the Closing Date, with the same effect as though made on such date.
(b)    Seller shall have performed and complied with each of its covenants pursuant to this Agreement or any Seller Related Documents in all material respects through the Closing Date (including without limitation, the timely delivery to Purchaser of any materials required to be delivered pursuant to the terms hereof).  
8.2    Consents.  Seller, Purchaser, Real Estate Purchasers and/or the TRS Entity shall have received or obtained and the Regulatory Consents.  Without limiting the foregoing, Purchaser shall be satisfied, in its reasonable discretion, that all material consents have been obtained and all required filings have been made as a condition to the consummation of the transaction set forth in this Agreement, including those set forth in Sections 2.3, 2.4, 2.6 and 2.7 (collectively, together with the Regulatory Consents, the “Required Consents”).  
8.3    No Proceeding or Litigation.  No injunction, judgment, order, decree, ruling or charge shall be in effect under any action, suit or proceeding before any Governmental Authority, court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator that (a) prevents consummation of any of the transactions contemplated by this Agreement or (b) would cause any of the transactions contemplated by this Agreement to be rescinded following 

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consummation, provided that Purchaser has not solicited or encouraged any such action, suit or proceeding.  
8.4    Title Insurance.  Purchaser shall have received the Title Policies in the forms described in Section 4.10 and Purchaser shall have received satisfactory evidence, including, without limitation, results of Uniform Commercial Code Financing Statement searches, that all Assets are free and clear of encumbrances other than the Permitted Encumbrances, and any Monetary Encumbrances as Seller shall pay and discharge in full prior to or on or at the Closing.
8.5    Material Adverse Change.  There has been no Material Adverse Change.  For purposes hereof, the term “Material Adverse Change” shall mean (a) any change or event or effect that is or may be materially adverse to Seller, the Business, or the operations, results of operations, assets, properties or financial condition of any of the Facilities, individually, or all Facilities, taken as a whole; (b) any change or event or effect that is or may be materially adverse to the ability of Seller to perform its obligations under this Agreement or any of the Seller Documents; (c) a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement, including without limitation any revocation of any License required to operate any of the Facilities, the issuance of any moratorium on the acceptance of residents to any of the Facilities, or the general denial of payment by any Governmental Authority with respect to new admissions or the existing residents at any of the Facilities; (d) any change or event or effect that adversely affects validity or enforceability of this Agreement or any of the Seller Documents; (e) receipt of notice from any Governmental Authority of a termination, revocation, rescission, suspension or refusal to renew any of the Licenses; or (f) receipt of notice from any Governmental Authority of a so-called “fast-track” decertification or a survey finding of serious and immediate jeopardy at any Facility.   
8.6    Census and Payor Mix Conditions.
(a)    Category Condition.  With respect to each of the Facilities, the revenue for the Facility during the Test Period deriving from Medicaid shall not exceed ten percent (10%) of the total revenue for the Facility.  
(b)      Census Conditions.  With respect to the Facilities combined, the average number of units/rooms occupied by Residents per day during the Test Period shall not be less than ninety-three percent (93%).  
As used in this Section, the term “Test Period” shall mean the twelve (12) month period ending at the end of a calendar month occurring nearest the sixtieth (60th) day preceding the Closing Date; except that to the extent the days that any units/rooms in a Facility during such period are unavailable for occupancy due to a casualty event, such days shall be excluded from the applicable Test Period.  Neither a unit/room of a Resident nor the revenue deriving therefrom shall be included for purposes of the calculations conducted pursuant to this Section if the Residency Agreement for such Resident contains terms that are materially different from the terms set forth on the specimen agreement attached hereto as Schedule 2.7(b) or to the extent that rent and other sums payable thereunder are less than the rate set forth on Schedule 4.1(a)(v).
8.7    Other Agreements.  Seller shall have delivered into the Closing escrow its countersigned copies of this Agreement and the Seller Related Documents.

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ARTICLE IX. 
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligation of Seller to effect the transactions contemplated hereby to be consummated at the Closing shall be subject to the satisfaction of each of the following conditions, unless waived in writing by Seller.
9.1    Representations and Warranties; Performance.  
(a)    The representations and warranties made by Purchaser herein and in the Purchaser Related Documents shall be true and correct in all material respects on and as of the Date of Execution and at and as of the Closing Date, with the same effect as though made on such date.
(b)    Purchaser shall have performed and complied with each of its covenants pursuant to this Agreement or any Purchaser Related Documents in all material respects through the Closing Date.
9.2    Consents.  Seller, Purchaser, Real Estate Purchasers and/or the TRS Entity shall have received or obtained the Required Consents.  
9.3    No Proceeding or Litigation.  No injunction, judgment, order, decree, ruling or charge shall be in effect under any action, suit or proceeding before any Governmental Authority, court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator that (a) prevents consummation of any of the transactions contemplated by this Agreement or (b) would cause any of the transactions contemplated by this Agreement to be rescinded following consummation, provided that Seller has not solicited or encouraged any such action, suit or proceeding.  
9.4    Other Agreements.  Purchaser shall have delivered into the Closing escrow its countersigned copies of this Agreement and the Purchaser Related Documents.
ARTICLE X. 
CLOSING
10.1    Closing.  
(a)    Possession.  Possession of all Assets sold hereunder shall be delivered to Real Estate Purchasers and the TRS Entity on the Closing Date.
(b)    Seller Closing Documents.  Seller shall deliver or cause to be delivered to Purchaser, on the Closing Date, the following Seller Documents:
(i)    duly executed Warranty Deeds for each Facility, in recordable form and otherwise sufficient to convey such Facility to Real Estate Purchasers pursuant to laws of the State of Nebraska, as reasonably approved by Real Estate Purchasers and the Title Company;
(ii)    such additional bills of sale, certificates of title and other appropriate instruments of assignment and conveyance, in form mutually but reasonably satisfactory to Purchaser and Seller, dated as of the Closing Date, conveying title to the Assets, free and clear of all liens, liabilities, security interests or encumbrances except for Permitted Encumbrances;

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(iii)    duly executed titles and registrations to all vehicles included in the FF&E;
(iv)    a then current resident/patient roll in the form attached as Schedule 2.7(b), updated Schedules to this Agreement, and schedule of refundable Move-In Deposits all as certified by Seller as of the Closing Date as true, complete and accurate;  
(v)    originals of all of the Assumed Contracts, Assumed Residency Agreements and Licenses;
(vi)    evidence of the authority of Seller to execute and deliver this Agreement and the Seller Related Documents in order to effectuate the Closing; 
(vii)    duly executed affidavits and documents in form satisfactory to obtain the Title Policies, with a so-called non-imputation endorsement, without exception for mechanic’s, materialman’s or other statutory liens; 
(viii)    a closing statement setting forth in reasonable detail the financial transactions contemplated by this Agreement to be consummated at the Closing (“Closing Statement”), duly executed by Seller;
(ix)    a duly executed certificate of Seller certifying that the conditions set forth in Article VIII have been satisfied and met as of the Closing Date; 
(x)    duly executed certificates and affidavits of non-foreign status in form reasonably acceptable to Purchaser;
(xi)    a statement certified by the chief executive or chief financial officer of Seller as to the amount of unsettled Program Reimbursements as of the Closing Date;
(xii)    an accounting of Resident Funds, including the warranty and all other information required pursuant to Section 10.2; 
(xiii)    a duly executed assumption and assignment of the applicable Provider Agreement(s) in form and substance reasonably acceptable to the TRS Entity (the “Provider Agreement Assignment”); 
(xiv)    duly executed instruments providing for the assignment of Other Contract Rights, and the assignment and assumption of the Assumed Contracts in form and substance reasonably acceptable to Purchaser and Seller (the “Assignment and Assumption Agreement”); 
(xv)    such additional assignments in form reasonably acceptable to Purchaser and Seller of all Assets that are intangible property, including, without limitation, documents, chattel paper, instruments, contract rights, goodwill, going concern value, general intangibles and Intellectual Property, but excluding all Excluded Assets; 
(xvi)    the duly executed Indemnity Holdback Agreement;

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(xvii)    Seller’s certificate with respect to the Closing Date Program Reimbursement Reserve and related Program Reimbursement Reserve Report required by Section 4.16(b);  
(xviii)    the duly executed Management Agreement; and
(xix)    any other documents reasonably required by Purchaser or the Title Company. 
(c)    Purchaser Closing Documents.  Purchaser shall deliver or cause to be delivered to Seller, on the Closing Date, the following Purchaser Documents:
(i)    payment of the Purchase Price, as provided in Section 1.5;
(ii)    instructions executed by Purchaser authorizing the Deposit to be released to Seller;
(iii)    evidence of the authority of Purchaser to execute and deliver this Agreement and the Purchaser Related Documents in order to effectuate the Closing; 
(iv)    the Closing Statement, duly executed by Purchaser;
(v)    the Assignment and Assumption Agreement, duly executed by the appropriate Purchaser designees;
(vi)    the Provider Agreement Assignment, duly executed by the TRS Entity;
(vii)    a duly executed certificate of Purchaser certifying that the conditions set forth in Article IX have been satisfied and met as of the Closing Date; 
(viii)    Purchaser’s counterpart to the Closing Statement; 
(ix)    the duly executed Indemnity Holdback Agreement; 
(x)    the duly executed Management Agreement; and
(xi)    any other documents reasonably required by Seller.
(d)    Automatic Payment Methods.  Seller shall terminate all electronic fund transfers and other automatic payment methods relating to Third Party Payor Programs and health maintenance organizations within thirty (30) days after the Closing Date in order to facilitate the transactions contemplated in this Agreement.
10.2    Resident Funds.  At the Closing, Seller shall transfer all funds belonging to Residents which are held by Seller in a custodial capacity (other than Move-In Deposits), including any Resident deposits required by Third Party Payor Programs (collectively, “Resident Funds”), to a bank account designated by Purchaser and Purchaser shall, in writing, acknowledge receipt of and expressly assume all of Seller’s financial and custodial obligations with respect thereto, it being the intent and purpose of this provision that, at the Closing, Seller will be relieved of all fiduciary and custodial obligation with respect 

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to such Resident Funds and that Purchaser or its designee will assume all such obligations and be directly accountable to the Residents with respect to all Resident Funds actually received by Purchaser.  At the Closing, Seller shall provide Purchaser with an accounting of all Resident Funds as of the Closing, subject to adjustment within fifteen (15) days following the Closing Date.  Such accounting will set forth the names of the Residents for whom such Resident Funds are held and the amounts held on behalf of each Resident, and will be organized by Facility.  The accounting must include Seller’s warranty that the accounting is true, correct and complete as of the Closing Date, subject to adjustment during the fifteen (15) day period referenced above.  
Notwithstanding the foregoing, Seller will indemnify and hold Purchaser Indemnified Parties harmless from all liabilities, claims and demands in the event the amount of such Resident Funds, if any, refunded to an individual Resident does not represent the full amount due to the individual Resident as of the date of the Final Reconciliation.
10.3    Closing Adjustments.
(a)    Real Estate and Personal Property Taxes; Prorations.  Real and personal property taxes and assessments shall be prorated as of the Closing Date for the Facility to which they relate.  Said prorations shall be based on the tax year of the municipality in which the Assets are located and shall be based on the most recent available bill and which are paid prior to delinquency.  Said prorations shall be paid prior to all taxes being delinquent with reference to the most recent available tax information with a post-closing re-proration being made within thirty (30) days after either party’s receipt of the actual final tax bills for the applicable years.  If such amounts are not paid by Seller to Purchaser, or by Purchaser to Seller, as the case may be, within thirty (30) days after the post-closing re-proration, then the amount owed shall accrue interest thereafter at the rate of 1.5% per month; provided, however, that in no event will interest be charged in excess of the amount permitted by Applicable Law.  
(b)    Prepaid Resident Fees.  In accordance with Section 6.1, Purchaser shall receive a credit for all prepaid resident/patient fees and Move-In Deposits, which amounts shall be subject to reconciliation pursuant to Section 10.5.
(c)    Other Prorations.  Charges for water, fuel, gas, oil, heat, electricity and other utilities, operating charges and other prepaid amounts shall be prorated as of the Closing Date for the Facility to which they relate to the extent such accounts are transferred at Closing; provided, that, accounts for water, fuel, gas, oil, heat, electricity and other utilities to the greatest extent practicable shall not be transferred at Closing and each party shall cooperate with the other in order to facilitate a smooth transition through the termination of prior accounts and opening of new accounts effective as of the Effective Time.  Any such prorated amounts will not be paid pursuant to the Closing Statement, but will instead be part of the post-closing reconciliation process described in Section 10.5.
(d)    Estimated Costs.  All payables, including accounts payable for Inventory, utilities, payroll, services, supplies and materials, which accrue prior to the Effective Time shall be Seller’s responsibility and shall be subject to the reconciliation process described in Section 10.5.  All payables, including accounts payable for Inventory, utilities, payroll, services, supplies and materials, which accrue after Effective Time shall be paid by Purchaser.

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(e)    Closing Statement Accounting.  All calculations and prorations under this Section 10.3 shall be made on the accrual basis of accounting.
10.4    Other Costs at the Closing.
(a)    At or before the Closing, Seller shall pay (i) any and all recordation and transfer taxes (including real property transfer taxes) ; and (ii) all sales tax payable with respect to the transfer of tangible personal property included within the Assets. Each of Purchaser and Seller shall pay fifty percent (50%) of any escrow or similar closing charges of the Title Company 
(b)    At or before the Closing, the TRS Entity or Real Estate Purchaser shall pay (i) the title exam fees and the basic premium for the Title Policies, (ii) the cost of all title endorsements, (iii) the costs of preparing the Survey, (iv) the costs of any UCC searches, (v) any mortgage tax, (vi) any recording fees; (vii) any sales tax with respect to tangible personal property included within the Assets, and (viii) fifty percent (50%) of any escrow or similar closing charges of the Title Company.  
10.5    Post-Closing Purchase Price Reconciliation.  Within sixty (60) days after the Closing Date, representatives of Purchaser shall prepare and deliver to Seller a proposed initial statement of reconciliation itemizing the following:  (a) all costs, charges and expenses paid by one party with respect to the Facilities (for operating costs, utilities, payroll, property taxes and the like which are for time periods occurring both before and after the Effective Time) that are properly allocable to the other party; (b) all Resident rents and service fees actually collected by either party with respect to the Facilities, and (c) all other allocated and prorated amounts identified in Section 10.3 above (the “Initial Reconciliation”) and to whom such amounts should be properly allocated.  The Initial Reconciliation shall include appropriate detail to identify the items being adjusted.  A final reconciliation of all such expenses, costs, charges, service fees and rents shall be prepared by Purchaser and Seller within ninety (90) days after the Closing Date (the “Final Reconciliation”).  Throughout the period leading up to the Initial Reconciliation and the Final Reconciliation, each party shall provide to the other party any information it may receive regarding the revenue and expense items described in clauses (a) and (b) of this Section 10.5 and all other allocated and prorated amounts identified in Section 10.3 above.  The Final Reconciliation shall appropriately reflect the net amount owed to Purchaser or to Seller as a result of such reconciliation, but without any proration or adjustment made as a result of Inventory, supplies, or other consumables on hand at the Closing (none of which shall be subject to proration or adjustment).  After approval of the Final Reconciliation by both parties, the party determined to owe cash as a result of such Final Reconciliation shall promptly pay such cash to the other party.  Notwithstanding the foregoing: (y) in the event that after the approval of the Final Reconciliation any the TRS Entity receives any amount from any Third Party Payor Program relating to the provision of services during any period prior to the Effective Time, Purchaser shall cause such TRS Entity to pay such amount to Seller as provided in Sections 6.1 and 6.2; and (z) in the event that after the approval of the Final Reconciliation, Seller receives any amount from any Third Party Payor Program relating to the provision of services during any period after the Effective Time, Seller shall pay such amount to Purchaser as provided in Sections 6.1 and 6.2.

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ARTICLE XI. 
CONDEMNATION; DAMAGE OR DESTRUCTION
11.1    Condemnation.
(a)    In the event that any proceedings for the condemnation of the Real Property or any portion thereof are instituted by any Governmental Authority prior to Closing, then promptly upon obtaining knowledge of the institution of such proceedings, each party will notify the other party in writing (the “Condemnation Notice”) of the pendency of such proceedings.  As used in this Section 11.1:  (i) the terms “condemnation”, or “condemn” or “taking” means the exercise of, or intent to exercise, the power of eminent domain, expressed in writing, as well as the filing of any proceeding for such purpose, by a Condemning Authority, and shall include a voluntary sale by Seller to any such Condemning Authority, either under the threat of condemnation or while such proceedings are pending; and (ii) the term “Condemning Authority” means a Governmental Authority with the right or power of eminent domain.  A condemnation shall be deemed to occur in point of time upon the actual physical taking of possession pursuant to the exercise of said power of eminent domain.  For avoidance of doubt, a condemnation proceeding shall be deemed to commence upon receipt of written notice of the intent to condemn.  
(b)    If proceedings for condemnation are instituted by any Condemning Authority with respect to any Real Property or any portion thereof prior to Closing (a “Condemned Property”), then at the election of Purchaser, which election shall be set forth in a written notice from Purchaser to Seller (the “Condemnation Election Notice”), either: (i) this Agreement shall terminate pursuant to this Section 11 upon delivery of the Condemnation Election Notice to Purchaser; (ii) the Condemned Property and all other Assets and Assumed Liabilities that are related to such Condemned Property (collectively, the “Condemned Property Elements”) shall be excluded from the transactions contemplated by this Agreement pursuant to Section 11.1(c) and the Closing shall proceed with respect to the balance of the Assets and Assumed Liabilities; or (iii) this Agreement shall remain in full force and effect, Purchaser shall not be entitled to an abatement of the Purchase Price by reason of such condemnation, and the proceeds of any award or payment in respect of such condemnation shall be paid over to, or assigned to, Purchaser, as applicable, at the Closing.  The Condemnation Election Notice shall be delivered by Purchaser to Seller within twenty (20) Business Days following the receipt by Purchaser of the Condemnation Notice.  If Purchaser fails to deliver the Condemnation Election Notice within that twenty (20) Business Day period, Purchaser shall be deemed to have elected to terminate this Agreement in its entirety.  Any termination of this Agreement pursuant to this Section 11.1(b) shall be in accordance with Article XII below. Condemned Property shall also include any Facility to the extent any change of grade or closing of any such street or highway abutting or adjacent to such Facility would materially impair access to and from such Facility or otherwise materially interfere with its occupancy and use as a senior housing facility.
(c)    In the event that Purchaser makes the election under Section 11.1(b) (ii): (i) all of the respective covenants, obligations, representations and warranties of each of the parties in this Agreement with respect to the Condemned Property Elements shall be void ab initio and of no force or effect; (ii) the Purchase Price shall be reduced by the aggregate fair market values of the Condemned Property Elements; (iii) Seller and Purchaser shall mutually execute a written amendment to this Agreement, to be prepared by Purchaser and subject to the approval of Seller, in its sole and absolute discretion, to confirm and evidence the reduction in the Purchase Price and the application of the 

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provisions of this Section 11.1(c) with respect to the Condemned Property Elements; and (iv) all proceeds from such condemnation shall belong to the applicable Seller.
11.2    Damage or Destruction. 
(a)    Subject to the provisions of Section 11.2(b):  (x) all risk or loss concerning the Assets that occurs on or prior to the Closing shall be borne by Seller; and (y) all risk of loss concerning the Assets that occurs after the Closing shall be borne by Purchaser.
(b)    In the event that, on or prior to the Closing Date, the Assets are damaged in whole or in part by fire or other casualty, the following procedures shall apply:
(i)    Seller shall notify Purchaser in writing of the damage within two (2) Business Days following Seller becoming aware of such damage (the “Asset Damage Notice”).
(ii)    If the estimated costs of repairing damage to any Real Property (the “Damaged Property”) and any Assets located on the Damaged Property (collectively, the “Damaged Property Components”) is less than Five Hundred Thousand and No/100 Dollars ($500,000.00) (the “Damage Threshold Amount”), which estimated repair costs (the “Estimated Repair Costs”) shall be determined in accordance with Section 11.2(b)(iii), then the provisions of Section 11.2(c) of this Agreement shall exclusively apply.  In the event that the Estimated Repair Costs to repair damage to the Damaged Property Components for any Damaged Property is equal to or greater than the Damage Threshold Amount, then the provisions of Section 11.2(d) of this Agreement shall exclusively apply.
(iii)    Within thirty (30) calendar days following the delivery of the Asset Damage Notice, Seller shall deliver to Purchaser a written notice (the “Damage Estimate Notice”) that sets forth Seller’s reasonable estimate of Estimated Repair Costs to repair the damage to the Damage Property Components for the Damaged Property.  In the event that Purchaser reasonably challenges Seller’s estimate of the Estimated Repair Costs in the Damage Estimate Notice, then Purchaser must deliver a written notice to Seller (the “Estimate Dispute Notice”) within thirty (30) days following Purchaser’s receipt of the Damage Estimate Notice that sets forth Purchaser’s estimate of the Estimated Repair Costs.  If Purchaser fails to deliver the Estimated Dispute Notice to Seller within such thirty (30) day period, Purchaser shall be deemed to have waived its right to challenge Seller’s estimate of the Estimated Repair Costs in the Damage Estimate Notice and Seller’s estimate shall be binding on the Parties.  In the event that Purchaser delivers an Estimate Dispute Notice to Seller, then Seller shall deliver a written notice to Purchaser (the “Estimate Response Notice”), within three (3) Business Days following the delivery of the Estimate Dispute Notice, electing to either: (i) utilize Purchaser’s estimate of Estimated Repair Costs in the Estimate Dispute Notice, in which case Purchaser’s estimate shall be final and binding on the parties, or (ii) have the Estimated Repair Costs determined by a contractor licensed in the State of Nebraska reasonably acceptable to both Purchaser and Seller (the “Estimating Contractor”).  Failure by Seller to deliver the Estimate Response Notice to Purchaser prior to the expiration of such three (3) Business Day period (the “Estimate Election Deadline”) shall be deemed to be Seller’s election to have the Estimated Repair Costs determined by an Estimating Contractor.  In the event that Seller elects or is deemed to have elected to have the Estimated Repair Costs determined by an Estimating Contractor, the parties shall mutually attempt to agree on an Estimating Contractor within five (5) Business Days following the Estimating Election Deadline.  If the parties are unable to mutually agree on an Estimating Contractor, then prior to the expiration of the five (5) Business Day period, Seller and Purchaser shall each designate 

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in writing to the other party a contractor licensed in the State of Nebraska and those two designated contractors shall select the Estimating Contractor. The determination by the Estimating Contractor of the amount of the Estimated Repair Costs shall be final and binding on the parties.
(c)    In the event that the Estimated Repair Costs to the Damaged Property Components for any Damaged Property, as determined pursuant to Section 11.2(b)(iii), is less than the Damage Threshold Amount, then Seller shall deliver a written notice to Purchaser (the “Minor Damage Election Notice”) in which Seller elects either to: (i) have Seller that owns the Damaged Property repair the damage to the Damaged Property Components prior to Closing (which shall be extended for a reasonable period of time to permit performance of such repairs) at no cost or expense to Purchaser; or (b) not repair such damage prior to Closing, in which case Purchaser shall be entitled to a credit against the Purchase Price in the amount of the Estimated Repair Costs.  If Seller fails to deliver the Minor Damage Election Notice to Purchaser within five (5) Business Days following the determination of Estimated Repair Costs pursuant to Section 11.2(b)(iii), Seller shall be deemed to have elected to have the applicable Seller repair the Damaged Property Components.
(d)    In the event that the Estimated Repair Costs to the Damaged Property Components for any Damaged Property, as determined pursuant to Section 11.2(b)(iii), is equal to or greater than the Damage Threshold Amount, at the election of Purchaser, which election shall be set forth in a written notice from Purchaser to Seller (the “Major Damage Election Notice”), this Agreement may be terminated pursuant to this Section upon delivery of the Major Damage Election Notice to Seller.  The Major Damage Election Notice shall be delivered by Purchaser to Seller within five (5) Business Days following the final determination of the Estimated Repair Amount pursuant to Section 11.2(b)(iii).  If Purchaser fails to deliver the Major Damage Election Notice within that five (5) Business Day period, Purchaser shall be deemed to have elected to terminate this Agreement.  If Purchaser elects to proceed with the Closing of the transactions contemplated under and pursuant to the provisions of this Agreement, Seller shall (i) assign to Purchaser the right to collect any and all insurance proceeds in respect of such Damaged Property after the Closing, and (ii) provide Purchaser a credit against the Purchase Price in an amount of equal to (a) any applicable deductible and (b) any insurance proceeds received as of the Closing Date.  Any termination of this Agreement pursuant to this Section 11.2 shall be in accordance with Article XII below.
ARTICLE XII. 
TERMINATION; REMEDIES
12.1    Termination Events.  This Agreement may be terminated as follows:
(a)    By mutual consent of the parties (a “Consent Termination”);
(b)    By Purchaser if the conditions to Closing set forth in Article VIII have not been satisfied by the Outside Date for reasons other than a breach of this Agreement by Purchaser (a “Purchaser Condition Termination”);
(c)    By Seller if the conditions to Closing set forth in Article IX have not been satisfied by the Outside Date for reasons other than a breach of this Agreement by Seller (a “Seller Condition Termination”);
(d)    By Purchaser as provided in Section 1.8;  

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(e)    By Purchaser or Seller upon delivery of Regulatory Contingency Termination Notice (a “Regulatory Contingency Termination”) pursuant to Section 5.5; 
(f)    By Purchaser pursuant to Section 11.1 or 11.2 (a “Casualty/Condemnation Termination”); 
(g)    By Purchaser, in the event of a material breach of this Agreement by Seller which breach is not cured after the notice and cure period provided for in Section 12.2 (a “Seller Breach Termination”); or
(h)    By Seller, in the event of a material breach of this Agreement by Purchaser which breach is not cured after the notice and cure period provided for in Section 12.2 (a “Purchaser Breach Termination”). 
12.2    Opportunity to Cure.  No party to this Agreement may claim termination pursuant to Section 12.1(g) or (h) or pursue any other remedy referred to in this Section 12 on account of such breach by the other party, without first giving the other party written notice of such breach and not less than thirty (30) days within which to cure such or breach. The Closing Date shall be postponed if necessary to afford such opportunity to cure.  Seller may not claim termination pursuant to Section 12.1(d) or pursue any other remedy referred to in this Section 12 on account of Purchaser’s failure to deliver the Deposit to Escrow Agent, without first giving Purchaser written notice of such breach and not less than  three (3) Business Days within which to cure such failure.   
12.3    Effect of Termination; Remedies. 
(a)    In the event of a termination of this Agreement by Purchaser or Seller under this Section 12, (i) written notice thereof shall forthwith be given to the other parties and the Escrow Agent; (ii) this Agreement shall forthwith become void and of no further force or effect, other than with respect to Sections 2.28, 3.4, 4.9, 5.1, 10.4, 12.3 and Article XIII of this Agreement which shall survive the termination of this Agreement and shall be enforceable by the parties hereto, and there shall be no liability or obligation on the part of any party hereto, except for breaches of the surviving provisions of this Agreement set forth immediately above; (iii) Purchaser shall have no right, option, title or interest to purchase the Assets, or any portion thereof; (iv) the Escrow Agreement shall be terminated; (v) if the event of termination is a Refundable Event, Escrow Agent shall return the Deposit to Purchaser, together with any interest earned thereon, if any, as set forth in this Agreement; (vi) if the event of termination is not a Refundable Event, Escrow Agent shall pay the Deposit to Seller, together with any interest earned thereon; and (vii) Purchaser shall withdraw its regulatory filings related to the transactions contemplated by this Agreement or made for the operation of the Facilities and the Business after the Closing.  The parties will promptly execute any documents and instructions reasonably requested by the other party or Escrow Agent relating to the termination of this Agreement or the Escrow Agreement or the delivery of the Deposit pursuant to this Agreement.  “Refundable Events” are expressly limited to the following events: (a) a Consent Termination, (b) a Seller Breach Termination; (c) a Regulatory Contingency Termination; (d) a Purchaser Condition Termination; (e) a Seller Condition Termination, or (f) a Casualty / Condemnation Termination.  If this Agreement is terminated for any of the above reasons, then a Refundable Event shall have occurred and the Deposit shall be promptly refunded to Purchaser.

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(b)    If a Seller Breach Termination occurs, Purchaser shall be entitled to a return of the Deposit and to receive a sum equal to Purchaser’s out-of-pocket costs and expenses, including attorneys’ fees and expenses, from Seller, jointly and severally, as liquidated damages, which reimbursement of costs and expenses shall not exceed the sum of One Hundred Thousand and No/100 Dollars ($100,000.00).  If, after a default by any Seller that is not cured within the applicable cure period, Purchaser has not terminated this Agreement, Purchaser may (i) seek and shall be entitled to specific performance of Seller’s obligations under this Agreement, (ii) pursue a claim for all costs and expenses, including reasonable attorney fees and expenses, in pursuing such claim and, if Purchaser so elects, Purchaser may concurrently with (that is, in the same complaint but not in a separate action) and in the alternative to such claim for specific performance and related costs and expenses, pursue a claim for liquidated damages as set forth in this Section 12.3(b), and (iii) pursue any other rights or remedies Purchaser may have, whether under this Agreement or otherwise, at law or in equity.  Upon the receipt of liquidated damages as set forth in this Section 12.3(b), no party shall have any further rights or obligations under this Agreement, except as provided in Section 12.3(a).  If the Closing does not occur, the remedies provided for in this Section shall be the exclusive remedy of Purchaser for a breach of this Agreement by Seller.  Notwithstanding the foregoing, the limitation of remedies provided for in this Section shall not apply to (i) any indemnity obligations of Seller under this Agreement, and (ii) any reasonable attorneys’ fees, costs and interest awarded to Purchaser in any proceeding between Seller and Purchaser pursuant to or arising from this Agreement in which Purchaser is the prevailing party.
(c)    If a Purchaser Breach Termination occurs, Seller shall be entitled to receive the Deposit as liquidated damages and no party shall have any further rights or obligations under this Agreement, except as otherwise provided in Section 12.3(a).  If Closing does not occur, the remedies provided for in this Section shall be the exclusive remedy of Seller for a breach of this Agreement by Purchaser.  
12.4    DAMAGES.  THE PARTIES AGREE THAT SELLER WILL SUFFER DAMAGES IN THE EVENT OF THE BREACH OF THIS AGREEMENT BY  PURCHASER.  SUCH DAMAGES WILL, HOWEVER, BE EXTREMELY DIFFICULT TO ASCERTAIN FOR THE FOLLOWING REASONS: (1) THE DAMAGES TO WHICH SELLER WOULD BE ENTITLED IN A COURT OF LAW MAY BE BASED IN PART ON THE DIFFERENCE BETWEEN THE ACTUAL VALUE OF THE ASSETS AND THE ASSUMED LIABILITIES AS OF THE CLOSING DATE AND THE PURCHASE PRICE FOR THE ASSETS AND THE ASSUMED LIABILITIES AS SET FORTH IN THIS AGREEMENT; (2) PROOF OF THE AMOUNT OF SUCH DAMAGES MAY BE BASED ON OPINIONS OF VALUE OF THE ASSETS AND THE ASSUMED LIABILITIES, WHICH CAN VARY IN SIGNIFICANT AMOUNTS; AND (3) IT IS IMPOSSIBLE TO PREDICT AS OF THE DATE OF EXECUTION WHETHER THE VALUE OF THE ASSETS AND THE ASSUMED LIABILITIES WILL INCREASE OR DECREASE AS OF THE CLOSING DATE. PURCHASER AND SELLER DESIRE TO LIMIT THE AMOUNT OF DAMAGES FOR WHICH PURCHASER MIGHT BE LIABLE SHOULD PURCHASER FAIL TO CONSUMMATE THE ACQUISITION UNDER THIS AGREEMENT.  PURCHASER AND SELLER WISH TO AVOID THE COSTS AND LENGTHY DELAYS WHICH WOULD RESULT IF SELLER FILED A LAWSUIT TO COLLECT ITS DAMAGES FOR SUCH A BREACH OF THIS AGREEMENT.  THEREFORE, IF THE CLOSING DOES NOT OCCUR ON THE REQUIRED CLOSING DATE DUE TO A BREACH OF THIS AGREEMENT BY PURCHASER, THEN THE SUM EQUAL TO THE FULL AMOUNT OF THE LIQUIDATED DAMAGES SPECIFIED IN  SECTION 12.3(c) SHALL BE DEEMED TO CONSTITUTE A REASONABLE ESTIMATE OF THE DAMAGES. 

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ARTICLE XIII. 
MISCELLANEOUS PROVISIONS
13.1    Amendment and Modification.  This Agreement may be amended, modified and supplemented only by written agreement of the parties sought to be charged by such amendment, modification or supplement.
13.2    Liability.  Each Seller shall and is hereby liable for all duties, obligations and liabilities of its own facility arising under or by virtue of this Agreement, including, without limitation, in connection with any breach of Seller’s representations, warranties or covenants of its facility.  In no event shall one Seller be liable for the other Seller’s facility or re, including but not limited to those set forth in Article VII.
13.3    Waiver of Compliance; Consent.  Any failure of Seller on the one hand, or Purchaser, on the other hand, to comply with any obligation, covenant, agreement or condition may be waived in writing by the other party, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.  Whenever this Agreement requires or permits consent by or on behalf of any party, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 13.3.
13.4    Notices.  All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be personally delivered, or sent by facsimile or electronic transmission (provided that, if notice is given by electronic transmission, a copy of such notice shall be thereafter promptly deposited with an overnight commercial delivery service as hereinafter provided), or sent by overnight commercial delivery service (provided a receipt is available with respect to such delivery), and shall be effective when received (including receipt of notice by facsimile or electronic transmission):
(a)    If to Seller, to:
Dial – Ridgewood Senior Living, L.L.C.
11506 Nicholas Street  Ste. 100
Omaha, NE  68154
Attention: Ted Lowndes
Fax No.: 402-493-5549
E-mail:  Ted.Lowndes@dialsmi.com
Silvercrest Fountain View Independent Living L.P.
11506 Nicholas Street  Ste. 100
Omaha, NE  68154
Attention:  Robert J. Furley, CFO
Fax No.:  402-496-2120
E-mail:   bfurley@dialrealtycorp.com 

with a copy to:
Michael C. Carter, Esq.
11506 Nicholas Street, Ste. 103

58

Omaha, NE  68154
Fax No.: 402-493-8069
E-mail: mike@mikecarterlaw.com
(b)    If to Purchaser, to:
GAHC3 NEBRASKA SENIOR HOUSING PORTFOLIO, LLC 
c/o Griffin-American Healthcare REIT III, Inc. 
18191 Von Karman Avenue, Suite 300
Irvine, CA  92612
Attn.: Stefan Oh
Email:  soh@ahinvestors.com

with a copy to:
Arnall Golden Gregory LLP
171 17th Street, NW, Suite 2100
Atlanta, Georgia 30363
Attention:  Steven A. Kaye, Esq.
Fax No.:  (404) 873-8100
E-mail:  steven.kaye@agg.com
or to such other person or address as any party shall furnish to the other parties in writing pursuant to this Section 13.4.  
13.5    Expenses.  Except as otherwise provided herein, each party hereto shall bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby.  
13.6    Attorneys’ Fees.  In the event any proceeding or suit is brought to enforce this Agreement, the prevailing party shall be entitled to all reasonable costs and expenses (including reasonable attorneys’ fees) incurred by such party in connection with any action, suit or proceeding to enforce the other’s obligations under this Agreement.
13.7    Assignment.  This Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective heirs, successors and permitted assigns.  Purchaser may without the prior written consent of Seller (a) assign in whole or in part its rights under this Agreement including its right to acquire any one or more Facilities (or any portion of the Assets) to one or more Affiliates of Purchaser, including joint venture entities in which Purchaser or its Affiliates share control with third parties, (b) assign or collaterally assign its rights to indemnification to any lender, assignee or Affiliate of Purchaser (each such assignee a “Purchaser’s Permitted Assignee”).  Notwithstanding the foregoing, any such assignment by Purchaser pursuant to (a) or (b) shall not relieve Purchaser of any of its obligations under this Agreement.  Seller may not assign this Agreement without first obtaining Purchaser’s prior written consent, which may be withheld in Purchaser’s sole discretion.  Upon an assignment by Purchaser of its rights under the Agreement in accordance with this Section 13.7, Purchaser’s Permitted Assignee(s) shall be deemed to be the Purchaser hereunder (as it relates to the 

59

subject of such assignment) and shall be the beneficiary of all of Seller’s warranties, representations and covenants in favor of Purchaser under this Agreement.  
13.8    Governing Law.  This Agreement shall be governed by the laws of the State of Nebraska as to, without limitation, matters of validity, construction, effect and performance but exclusive of its conflicts of laws provisions.
13.9    Business Day.  If the date for the giving of notice or performance of any duty or obligation hereunder falls on a day that is not a Business Day, such date shall be automatically extended to the next Business Day.  As used herein, a “Business Day” means any day other than a Saturday, Sunday or any other day on which United States federally chartered banks are authorized to be closed.
13.10    Counterparts; Electronic/Facsimile Signature.  This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Executed counterparts of this Agreement or any amendment hereto may be delivered by electronic or facsimile transmission.
13.11    Headings; Use of Terms; Section References.  The Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  The singular shall include the plural and vice versa where the context shall so require.  All references herein to “including” shall mean “including without limitation”. All Article, Section, Exhibit and Schedule references herein are to Articles, Sections, Exhibits and Schedules of this Agreement, unless otherwise specified.
13.12    Entire Agreement.  This Agreement, which term as used throughout includes the Exhibits and Schedules hereto, embodies the entire agreement and understanding of the parties in respect of the subject matter contained herein.  There are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly set forth or referred to herein.  This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to such subject matters contained herein.  
13.13    Warranty of Authority.  Each of the parties warrants that the persons signing on its behalf have the right and power to enter into this Agreement and to bind them to the terms of this Agreement. 
13.14    Schedules.  Nothing in any Schedule and Exhibit shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the applicable Schedule or Exhibit identifies the exception and the specific representation to which it relates with reasonable particularity and describes the relevant facts in reasonable detail.  The Schedules and Exhibits are arranged in sections and subsections corresponding to the numbered and lettered sections and subsections of the Agreement to which such Schedule and Exhibit relates.  Any fact or item disclosed on any Schedule and Exhibit hereto shall not be deemed by reason only of such inclusion to be material and shall not be employed as a point of reference in determining any standard of materiality under this Agreement.  In addition, disclosures on the Schedules and Exhibits are made on a Facility by Facility basis and any such disclosure shall only relate to the Facility so indicated.  Several Schedules and Exhibits designated in this Agreement are not attached to this Agreement as of the date of execution.  Within ten (10) Business Days following the execution of this Agreement, Seller shall deliver to Purchaser a complete set of all Schedules not and Exhibits so attached, together with Seller’s written authorization for Purchaser to affix same to its executed copy of this 

60

Agreement, and Purchaser shall have the right to approve same to the extent the content thereof is other than a disclosure by Seller. 
13.15    Time of the Essence.  Time is of the essence of this Agreement.
13.16    Representation by Counsel.  The parties acknowledge that they have been represented by independent legal counsel of their choosing throughout all of the negotiations that preceded the execution of this Agreement, and that each party has executed this Agreement with the consent and on the advice of such independent legal counsel.  This Agreement is a negotiated document.  As a result, any rule of construction providing for any ambiguity in the terms of this Agreement to be construed against the draftsperson of this Agreement shall be inapplicable to the interpretation of this Agreement.
13.17    Reliance.  The rights of Purchaser to indemnification or any other remedies under this Agreement shall not be impacted or limited by any knowledge that Purchaser may have acquired, or could have acquired, whether before or after the Closing Date, by any investigation or diligence by Purchaser or otherwise. Seller hereby acknowledges and agrees that, in executing and in carrying out the provisions of this Agreement, regardless of any investigation made (or not made) by or on behalf of Purchaser, and regardless of the results of any such investigation made by Purchaser, Purchaser is expressly relying upon the representations, warranties and covenants of Seller contained in this Agreement and any Seller Related Documents.
13.18    Publicity.  No party shall issue any press release or public announcement relating to the subject matter of this Agreement without the prior written approval of the other parties, which approval shall not be unreasonably withheld or delayed; provided, however, that any party may make (without the consent of the other party) (a) such public disclosure it believes in good faith is required by Applicable Law (in which case, to the extent practicable, the disclosing party shall advise the other parties and provide them with a copy of the proposed disclosure prior to making the disclosure) and (b) disclosures in connection with satisfying or obtaining any Required Consent or disclosures of information already in the public domain.
13.19    Jurisdiction; Waiver of Jury Trial.  Except as otherwise provided in this Agreement, in the event any party to this Agreement commences any litigation, proceeding or other legal action in connection with or relating to this Agreement, any Seller Related Document or Purchaser Related Document or any matters described or contemplated herein or therein, the parties to this Agreement hereby (a) agree under all circumstances absolutely and irrevocably to institute any litigation, proceeding or other legal action in a court of competent jurisdiction located within the City of Omaha, Nebraska, whether a state or federal court; (b) agree that in the event of any such litigation, proceeding or action, such parties will consent and submit to personal jurisdiction in any such court described in clause (a) and to service of process upon them in accordance with the rules and statutes governing service of process (it being understood that nothing in this Section 13.19 shall be deemed to prevent any party from seeking to remove any action to a federal court in Omaha, Nebraska); and (c) agree to waive to the fullest extent permitted by law any objection that they may now or hereafter have to the venue of any such litigation, proceeding or action in any such court or that any such litigation, proceeding or action was brought in an inconvenient forum. EACH OF THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, INCLUDING TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER, AND 

61

AGREES THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
13.20    Knowledge.  As used herein, “Knowledge” or similar capitalized terms mean the knowledge of the Ted Lowndes, Robert J. Furley and Patrick Day (collectively, the “Principals”) (or his/her successor in such position), and each administrator for each Facility.  For purposes of this definition, such parties shall be deemed to have “knowledge” of a particular fact, circumstance or other matter if any of such parties is or at any time was actually aware of such fact, circumstance or other matter, or if any of such parties, after conducting an investigation reasonable under the circumstances, should have been aware of such fact, circumstance or other matter.   
13.21    Cooperation with Audit.  Seller acknowledges that Purchaser and its intended assignee are or may be affiliated with a publicly registered company (“Registered Company”) promoted by Purchaser or its affiliate.  Seller acknowledges that it has been advised that Purchaser or such assignee may be required to make certain filings with the Securities and Exchange Commission (the “SEC Filings”) that relate to the three most recent pre-acquisition fiscal years (the “Audited Year”) and the current fiscal year through the date of acquisition (the “stub period”) for the Property.  To assist the assignee in preparing the SEC Filings, Seller covenants to provide said assignee with the following during the Diligence Period and thereafter until the first anniversary of the Effective Time: (i) access to bank statements for the Audited Year and stub period; (ii) rent roll as of the end of the Audited Year and stub period; (iii) operating statements for the Audited Year and stub period; (iv) access to the general ledger for the Audited Year and stub period; (v) cash receipts schedule for each month in the Audited Year and stub period; (vi) access to invoices for expenses and capital improvements in the Audited Year and stub period; (vii) accounts payable ledger and accrued expense reconciliations; (viii) check register for the 3-months following the Audited Year and stub period; (ix) all leases and 5-year lease schedules; (x) copies of all insurance documentation for the Audited Year and stub period; (xi) copies of accounts receivable aging as of the end of the Audited Year and stub period along with an explanation for all accounts over 30 days past due as of the end of the Audited Year and stub period; (xii) signed representation letter in the form attached hereto as Schedule “13.21-A” (“Representation Letter”), and (xiii) to the extent necessary, a signed audit letter in the form attached hereto as Schedule “13.21-B”(“Audit Letter”).  Seller also agrees to deliver a signed Representation Letter and signed Audit Letter to Purchaser within five (5) business days prior to Closing, and such delivery shall be a condition to Closing. The provisions of this Section shall survive Closing.   Seller also agrees to reasonably cooperate with Purchaser to obtain a comfort letter, as may be requested by Purchaser.  

[SIGNATURE PAGES FOLLOW]

62

CONFIDENTIAL; NOT FOR DISTRIBUTION FOR ANY PURPOSE

IN WITNESS WHEREOF, the parties hereto have executed or have caused their duly authorized officers to execute this Agreement as of the date first written above.

PURCHASER:

GAHC3 NEBRASKA SENIOR HOUSING PORTFOLIO, LLC

		
	By: 
	Griffin-American Healthcare REIT III Holdings, LP, its Sole Member                

By: Griffin-American Healthcare REIT III, Inc. its General Partner

By:      /s/ Shannon K S Johnson        
Name:       Shannon K S Johnson        
Title:        Chief Financial Officer      

SELLERS:

DIAL – RIDGEWOOD SENIOR LIVING, L.L.C.

By:          /s/ Ted Lowndes            
Name:              Ted Lowndes            
Title:             Manager                

SILVERCREST FOUNTAIN VIEW INDEPENDENT LIVING L.P.

By:         /s/ Robert J. Furley            
Name:         Robert J. Furley            
Its:         Manager of General Partner,     
             Silvercrest Fountain View, LLCExhibit 4.7

 

Innocoll
AG – Stock Option Plan

Section 1

Preliminary Remarks

		1.	The management board of Innocoll AG, registered with the commercial register of the local court
of Regensburg under HRB 14298 (the “Company”), has decided, with the consent of the supervisory board,
to introduce a stock option plan for members of the management board and employees of the Company and its subsidiaries (the “Stock
Option Plan”) in order for the management and employees to participate in the Company’s success.

		2.	For this purpose, the general meeting of the Company has resolved on 4 December 2014 to create
a Contingent Capital I in the amount of EUR 150.920. The amendment of the articles of association has been registered with the
commercial register on 9 January 2015.

		3.	The Company has listed its American Depositary Shares (“ADS(s)”) representing
its ordinary shares on the NASDAQ Global Market. Each ADS represents an ownership interest in 1/13.25 ordinary shares of the Company
which are deposited with Citibank N.A. and held by Citigroup Global Markets AG as custodian. It is intended that the Grantees shall
have the right to exchange ordinary shares in the Company received under the Stock Option Plan into ADSs.

Section 2

Defined Terms

In this Stock Option Plan
defined terms shall have the meaning ascribed to them in the relevant section or in this Section 2.1 or in the articles of
association of the Company. The following terms are defined:

		1.	“Acceptance declaration” shall have the meaning as described in Section 10.1.

		2.	“ADS” shall have the meaning as described in Section 1.3.

		3.	“AktG” shall mean the German Stock Corporation Act as in effect from time to
time.

		4.	“Affiliate”
means any entity, whether now or hereafter existing, which controls, is

 

    	 

    	 

    

 

	 	 	controlled by, or is under common control with, the Company
(including, but not limited to, joint ventures, limited liability companies, and partnerships). For this purpose, “control”
shall mean ownership of 50% or more of the total combined voting power or value of all classes of stock or interests of the entity,
or the power to direct the management and policies of the entity, by contract or otherwise.

		5.	“Articles” shall mean the articles of Innocoll AG.

		6.	“Bad Leaver” shall mean any Grantee whose Termination of Affiliation with the
Company is a Bad Leaver Event.

		7.	“Bad Leaver Event” shall mean a Termination of Affiliation for Cause initiated
by the Company.

		8.	“Bank Business Days” shall be such days on which banks are open for business
in Frankfurt am Main, Germany.

		9.	“Cause”
means:

		a)	the commission of any act by a Grantee constituting financial dishonesty against the Company or
any of its Affiliates, which could be chargeable as a crime under applicable law;

		b)	an act of dishonesty, fraud, intentional misrepresentation, moral turpitude, illegality or harassment
which, as determined in good faith by the Board, would: (i) materially adversely affect the business or the reputation of the Company
or any of its Affiliates with their respective current or prospective customers, suppliers, lenders and/or other third parties
with whom such entity does or might do business; or (ii) expose the Company or any of its Affiliates to a risk of civil or criminal
legal damages, liabilities or penalties;

		c)	in the case of employees, the repeated failure to follow the directives of the management board
or the chief executive officer of the Company or any of its Affiliates,

		d)	any material misconduct in violation of the Company’s or an Affiliate’s policies, or

		e)	willful and deliberate non-performance of the Grantee’s duties in connection with the business
affairs of the Company or its Affiliates.

		10.	“Change of Control” means the direct or indirect acquisition of more than 50%
of the ordinary shares in the Company entitled to vote by a company or person who is not an Affiliate of the Company.

 

    	Page | 2

    	 

    

 

		11.	“Code”
means the United States Internal Revenue Code of 1986 (and any successor Internal Revenue Code), as amended from time to
time. References to a particular section of the Code include references to regulations and rulings thereunder and to successor
provisions.

		11.	“Company” has the meaning set forth in Section 1.1

		12.	“Disability”
means a permanent and total disability within the meaning of Section 22(e)(3) of the Code.

		13.	“Exercise Period” has the meaning set forth in Section 7.

		14.	“Exercise Price” has the meaning set forth in Section 9.

		15.	“Final Value ADS” has the meaning set forth in Section 8.

		16.	“Final Value MSCI World Index” has the meaning set forth in Section 8.

		17.	“Grantee” has the meaning set forth in Section 3.

		18.	“Grant Date” has the meaning set forth in Section 4.3.

		19.	“Offer Letter” has the meaning set forth in Section 4.3.

		20.	“Option Right”
has the meaning set forth in Section 4.2.

		21.	“Starting Value” has the meaning set forth in Section 8.

		22.	“Stock Option Plan” has the meaning set forth in Section 1.1.

		23.	“Parties” has
the meaning set forth in Section 17.

		24.	“Tax-Related Items” has the meaning set forth in Section 16.

		25.	“Term” has
the meaning set forth in Section 5.

		26.	“Termination of Affiliation”
occurs on the first day on which an individual is for any reason no longer providing services to the Company or an Affiliate in
the capacity of an employee or member of the management board, including by reason of any transaction that causes each Affiliate
for whom the individual performs services to cease to be an Affiliate of the Company.

		30.	“Waiting Period”
has the meaning set forth in Section 6.

		31.	“Trading Day” shall mean such day on which the Nasdaq Global Market (“Nasdaq”)
or such other stock exchange where the Company’s shares or ADSs are listed, as applicable, are open for trading

 

    	Page | 3

    	 

    

 

Section 3

Persons entitled to participate

Members of the management
board and employees of the Company and its subsidiaries (in each case as of the Grant Date) (“Grantees”) are
entitled to participate in the Stock Option Plan.

Section 4

Granting of stock options 

		1.	The Company will offer a total amount of up to 150.920 option rights to acquire ordinary shares
under the Stock Option Plan.

		2.	Grantees who are entitled to participate pursuant to Section 3 shall have the right, subject to
the following provisions, to acquire ordinary shares for the Exercise Price pursuant to Sec. 9 from the Company (“Option
Right”) and to exchange such ordinary shares into ADSs. Grantees shall receive one ordinary share, to be exchanged into
13,25 ADS per Option Right. To avoid fractional shares and ADSs, the number of Option Rights granted and Option Rights exercised
at any time must always be divisible by four.

		3.	Option Rights may be granted at any time during the year to new management board members and (direct
and indirect) employees. Options for existing employees shall be granted each year, during the month of December or during the
first quarter of the following year. Option rights shall be deemed to be granted as of the last trading day on NASDAQ prior to
the grant (the “Grant Date”).

		4.	Option Rights shall be granted by individual agreement between the Grantee and the Company in the
form of a written offer to the Grantee (the “Offer Letter”), specifying the number of Option Rights offered,
the Exercise Price, the Grant Date, and the Waiting Period, all as defined hereinafter. The offer shall be accepted by the Grantee
countersigning the Offer Letter and sending a countersigned original to the Company within the period specified in the Offer Letter.

		5.	Any granting of Option Rights shall be subject to the recommendation/approval of the compensation
committee within the Company’s supervisory board. Subject to such recommendation/approval the management board shall determine
the number of Option Rights granted to employees and execute the respective Offer Letters. The supervisory board shall determine
the number of Option Rights granted to each member of the management board, and the chairman of the supervisory board shall execute
the Offer Letters to members of the management 

 

    	Page | 4

    	 

    

 

	 	 	board. The allocations shall be made at the management and supervisory board’s
reasonable discretion, taking into account the principle of equal treatment.

		6.	Option Rights are granted without consideration.

		7.	Option Rights are granted subject to the condition precedent that the resolution of the general
meeting on 4 December 2014 regarding the creation of contingent capital and approving the terms of the Stock Option Plan, and the
related amendment of the articles of association are registered with the commercial register. Option Rights shall be null and void
if the resolution of the general meeting dated 4 December 2014 is declared invalid by a final and non-appealable court decision
pursuant to Sec. 241 et seq. of the German Stock Corporation Act (AktG).

		8.	The Company and each Grantee agree to use commercially reasonable efforts to perform all such acts
and to execute any documents and instruments as are required or reasonably requested by the Company and/or the depositary or the
custodian to provide for the exchange of the Grantee's ordinary shares received upon exercise of such Grantee's Option Rights into
ADSs.

Section 5

Term 

		1.	Option Rights may be exercised within 10 years of the Grant Date (the “Term”).

		2.	Option Rights which have not been exercised within the Term expire.

		3.	This Stock Option Plan shall be valid until such time as it is replaced or amended.

Section 6

Waiting Period 

Option Rights cannot be
exercised within four years of the Grant Date (“Waiting Period”). After the Waiting Period, Option Rights may
be exercised within any Exercise Period within the Term.

 

    	Page | 5

    	 

    

 

Section 7

Exercise Period 

		1.	Option Rights may be exercised at any time during the year, unless there is a Blocking Period as
set out in para. 2 (“Exercise Period”). During a Blocking Period, Option Rights must not be exercised. To the
extent an Exercise Period coincides with a Blocking Period, the Exercise Period shall be shortened.

		2.	Blocking periods (“Blocking Periods”) shall be

		(i)	the period from the end of the seventh Trading Day before, up to the third Trading Day after, the
company’s general meeting;

 

		(ii)	the period between the first Trading Day on which the company has published an offer to acquire
new shares, bonds or option rights, up to the end of the last day of the subscription period for such offer; and

 

		(iii)	the period beginning at the opening of trading on the first Trading Day that is two weeks prior
to the end of each quarter and ending at the close of trading on the second Trading Day after the publication of the quarterly
reports of the Company.

Section 8

Conditions for Exercise

		1.	Option Rights must only be exercised if during the period between the end of the Grant Date of
the Option Right and the first day of the relevant Exercise Period the price of the Company’s ADS on NASDAQ has risen by
a higher percentage than the performance of the MSCI World Index has increased during the same period.

		2.	The relevant factors for the comparison
of the development of both (i) the price of the Company’s ADS on NASDAQ and (ii) the MSCI World Index is the difference
(percentage) between both during the period, starting with the end of the Grant Date (“Starting Value”) until
the Final Value ADS and until the Final Value MSCI World Index as set out hereinafter. The Final Value of the Company’s
ADS is the arithmetic average of the price of the Company’s ADS on NASDAQ during the 20 trading days on NASDAQ, preceding
the first day of the relevant Exercise Period

 

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	 	 	(“Final Value
ADS”). The Final Value of the MSCI World Index is its arithmetic average during the 20 trading days preceding the first
day of the relevant Exercise Period (“Final Value MSCI World Index”).

Section 9

Exercise Price

		1.	Upon exercising the Option Right, the Grantee has to pay the Exercise Price to the Company without
delay (unverzüglich).

		2.	The exercise price per Option Right shall, at the Company’s discretion either be (i) 13,25
times the average closing price of the Company’s ADS on NASDAQ Global Market on the last 10 trading days immediately preceding
the Grant Date or (ii) 13,25 times the price of the Company’s ADS on NASDAQ Global Market on the Grant Date (the “Exercise
Price”), multiplied by the number of Option Rights exercised. The Exercise Price must not be lower
than one Euro.

Section 10

Exercise of Option Rights

		1.	The Option Right shall be exercised by a written declaration (“Acceptance Declaration”)
pursuant to section 198 Stock Corporation Act in duplicate to the Company. The Acceptance Declaration must substantially be in
the form attached hereto as Annex 10.1, and also contain the number of Option Rights exercised, and the details of the Grantee’s
deposit account(s) into which the ordinary shares and, subsequently, the ADSs shall be booked.

		2.	The exercise of the Option Rights will be effective upon receipt of the Acceptance Declaration
by the Company, which must occur within an Exercise Period.

		3.	Upon receipt of the Acceptance Declaration, the Company has to deliver the number of ordinary shares
corresponding to the exercised Option Rights simultaneously (Zug-um-Zug) with payment of the Exercise Price, within ten
Bank Business Days after the Exercise Period has lapsed and the Company has received the Exercise Price.

		4.	The Company shall deliver the ordinary shares using contingent capital, but may alternatively also
use own ordinary shares it has repurchased.

		5.	Ordinary shares delivered in fulfilment of the Option Rights shall confer the right to 

 

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	 	 	receive
dividends for the business year in which they have been issued. Until the exercise of the Option Right, the holder of the Option
Right shall not be entitled to dividends or other distributions of the ordinary share or ADSs.

		6.	Upon acceptance of the Option Rights, the employee, who is entitled to participate, acknowledges
that he/she is an employee of the Company who may obtain insider knowledge. He/she knows that the sale of shares or ADSs (acquired
by exercising the Option Rights or otherwise) using insider knowledge may be punishable by law and he/she shall be obliged not
to use insider knowledge while selling his/her ordinary shares or ADSs.

Section 11

Expiration of Option Rights

		1.	In case of a Termination of Affiliation not constituting a Bad Leaver event and occurring within
180 days after a Change of Control, the Grantee shall have the right to exercise all Option Rights for which the Waiting Period
has expired at the time that the Termination of Affiliation becomes effective within the first 12 months following the Termination
of Affiliation. Any Option Rights for which the Waiting Period has not lapsed at the time of the Termination of Affiliation can
be exercised within the first 12 months after the Waiting Period has lapsed. Any Option Rights not exercised within such 12 month
period shall expire.

		2.	In the event of a Termination of Affiliation not constituting a Bad Leaver event and occurring
within 180 days before a Change of Control, the Grantee shall be deemed to have retained his or her Option Rights, and Sec. 11,
para. 1 shall apply mutatis mutandis, whereby the date of the Change of Control shall be deemed to be the date of the Termination
of Affiliation.

		3.	In case of any Termination of Affiliation not (i) occurring within 180 days before or after a Change
of Control, or (ii) constituting a Bad Leaver Event, the Grantee shall retain such percentage of his or her options equal to (the
number of months of service by the Grantee from the Grant Date to the Termination of Affiliation) ./. 36 so that those options
vest pro rata over a period of 3 years, beginning with the Grant Date. All other Option Rights granted to the Grantee shall expire
without any compensation at the time that the Termination of Affiliation becomes effective. The Grantee shall have the right to
exercise any retained Option Rights for which the Waiting Period has expired at the time that the Termination of Affiliation becomes
effective within the first 12 months following the Termination of Affiliation. Any

 

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	 	 	 retained Option Rights for which the Waiting
Period has not lapsed at the time of the Termination of Affiliation can be exercised within the first 12 months after the Waiting
Period has lapsed. Any retained Option Rights not exercised within such 12 month period shall expire.

		4.	In case of a Bad Leaver Event, any Option Rights granted to a Bad Leaver shall expire without any
compensation at the time that the Termination of Affiliation becomes effective.

		5.	Subject to German law, the management board or, in case of options granted to management board
members, the supervisory board, may, subject to the recommendation/approval of the compensation committee within the supervisory
board, enter into individual agreements with certain Grantees which deviate from the stipulations set out in this section 11.

Section 12

Amendment of Option Rights

		1.	In case of a merger of the Company with another company (Verschmelzung), a conversion of
the stock corporation (Formwechsel), a capital increase from the company’s reserves (bonus share) or equivalent measures,
the contents of this offer shall remain unchanged. The Option Rights shall continue in any entity which is the Company’s
legal successor (Gesamtrechtsnachfolger) as a consequence of any merger, acquisition or conversion, and the terms of the
Option Rights shall be amended, if necessary, to preserve the market value of the Option Rights as of the time of the merger, acquisition
or conversion. If, in the case of a merger or acquisition, the acquiring or merged company is legally entitled to and resolves
to terminate any outstanding Option Rights, the holders of any such Option Rights shall be entitled to receive a cash payment equal
to the market value of the Option Rights as of the date of such termination, such market value to be determined by the Compensation
Committee of the supervisory board acting in its sole discretion. In case of a stock split or stock consolidation without change
of the aggregate share capital and in case of a cancellation of shares (Einziehung) the number of ordinary shares
to be issued in exchange for one option right shall be increased or reduced accordingly, as the case may be.

 

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		2.	Any fractions of ordinary shares or ADSs shall not be delivered or compensated. However,
if several Option Rights are exercised by the same Grantee, fractions of ordinary shares or ADSs shall be added up, subject, in
the case of the ADSs to the provisions of the deposit agreement.

Section 13

Transfer of Option Rights

Option Rights are not
transferable, except by inheritance upon the death of a Grantee. Any disposal, pledge, granting of beneficial interest or
any other measure which is economically equivalent to the disposal of Option Rights shall not be permitted and shall lead to the
immediate expiration without any compensation of the respective Option Rights. 

Section 14

Cash Payments

The Company reserves the
right to make a cash payment upon exercise of the Option Rights instead of delivering ordinary shares. Such cash payment shall
be equivalent to the closing price of the Company’s ADSs on NASDAQ Global Market on the day that the Option Rights are exercised,
multiplied by 13,25, multiplied by the number of of ordinary shares for which Option Rights are exercised. This payment will be
set off against the Exercise Price to be paid by the Grantee.

Section
15

Voluntariness

Option Rights are granted
voluntarily by the Company and do not confer any rights to receive further Option Rights. Notwithstanding the number and repetition
of allocations of Option Rights by the Company and its exercise, no commercial practice (betriebliche Übung) shall
be established by the allocation and exercise of Option Rights. This shall also apply if Option Rights are granted in several following
years.

 

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Section
16

Tax

The granting, release,
assignment and exercise of option rights may cause a taxable monetary benefit on behalf of the Grantees.

With respect to
any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to a Grantee’s
receipt of Option Rights or shares hereunder and legally applicable to the Grantee (“Tax-Related Items”), the
Grantee acknowledges that the ultimate liability for all Tax-Related Items is and remains with the Grantee. The
Company shall pay the occurring income tax, including church tax, solidarity tax and social security contributions as well as other
social taxes pursuant to the applicable legal provisions. In this regard, the Company is entitled (by one or a combination of the
following):

 

		(i)	to withhold from the Grantee’s salary or other cash compensation paid to the Grantee by the
Company pursuant to the applicable legal provisions,

 

		(ii)	to withhold from proceeds of a sale of new ordinary shares acquired upon settlement of this Agreement
(such sale being implemented by the Company on the Grantee’s behalf) either through a voluntary sale or through a mandatory
sale arranged by the Company, or

 

		(iii)	to withhold the relevant number of new ordinary shares to be issued upon settlement of this plan
in order to issue such new ordinary shares to any other Grantee or third party and to satisfy the Tax-Related Items by the respective
proceeds therefrom.

Section 17

Declarations

Unless otherwise agreed herein, all notices,
legal remedies or claims required or given hereunder between the Company and the Grantees (together the “Parties”),
are sent to the Parties by registered mail to the address last notified to the other Party.

    	Page | 11

    	 

    

 

Section 18

Costs

Any costs and fees related to the administration
and exercise of the Option Rights, including any fees for the Grantee’s deposit account, have to be borne by the Grantee. 

Section 19

Amendments and Severability

		1.	Changes or additions to this Stock Option Plan must be made in writing to become effective unless
the notarisation or another specific form is prescribed by law. This applies accordingly to the amendment of the written form clause.

		2.	If a provision of this Stock Option Plan should be completely or partly invalid or impracticable,
or if this Stock Option Plan should contain omissions, then the validity of the remaining provisions shall not be affected hereby.
In place of the invalid or impracticable provision, a reasonable stipulation shall apply which, if legally permitted, most closely
approximates the intention of the Shareholders in terms of the spirit and purpose of this Stock Option Plan.

Section 20

Miscellaneous

		1.	This Stock Option Plan is governed by German law. In case of disputes of the Parties resulting
out of or in connection with this Stock Option Plan, to the extent to which a specification about the place of jurisdiction is
permissible, lies exclusively within the competence of the respective local responsible court at the relevant registered office
of the Company.

		2.	Option Rights shall be special incentives awarded to the Grantee and shall not be taken into account
in computing the amount of salary or compensation of the Grantee for purposes of determining any pension, retirement, death or
other benefit under (a) any pension, retirement, profit-sharing, bonus, insurance or other employee benefit plan of the Company
or any Affiliate, except as such plan shall otherwise expressly provide, or (b) any agreement between (i) the Company or any
Affiliate and (ii) the Grantee, except as such agreement shall otherwise expressly provide.

		3.	Nothing in this Stock Option Plan shall interfere with or limit in any way the right of the Company
or any Affiliate to terminate the Grantee’s employment or service 

 

    	Page | 12

    	 

    

 

	 	 	contract at any time, nor confer upon the Grantee the right
to continue in the employ of or as an officer of the Company or any Affiliate.

		4.	Headings in this Stock Option Plan are inserted merely for the purposes of ease of reference and
shall have no effect on the content or the interpretation of the provisions.

 

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