Document:

purchasesaleagreementwegman9.htm

    PURCHASE
      AND SALE AGREEMENT

    

    

    

    This
      Purchase and Sale Agreement (this
“Agreement”) is dated, for reference purposes only, as of the
      8th day of June, 2007, and is by and between WEGMAN/MANOR NUMBER ONE, LLC,
      a New
      York limited liability company, WEGMAN/MANOR NUMBER TWO, LLC, a New York limited
      liability company, WEGMAN/MANOR NUMBER THREE, LLC, a New York limited liability
      company and WEGMAN/FAMILY NUMBER FOUR, LLC, a New York limited liability company
      (each a “Seller” and collectively, the
“Sellers”), and EMERITUS CORPORATION, a Washington
      corporation
      or its assignee (“Purchaser”).

    

    1.           PURCHASE
      AND SALE

    

    On
      the terms and conditions set forth
      herein, the Sellers agree to sell to the Purchaser and the Purchaser agrees
      to
      purchase from the Sellers, the following:

    

    (a)           The
      real property situated in the State of New York, which are more particularly
      described in Exhibit A attached hereto (the “Real
      Property”), together with all of the improvements on the Real Property
      which, as of the date of this Agreement, are and shall constitute at the time
      of
“Closing” (as that term is defined below) constitute licensed
      adult homes (collectively, the “Facilities”).

    

    (b)           Such
      equipment, furniture, fixtures, inventory, vehicles, supplies (including linens,
      dietary supplies and housekeeping supplies but specifically excluding food
      and
      other consumable inventories) and other tangible and intangible personal
      property which is currently owned or shall be acquired by Sellers prior to
      the
      Closing and located on the Real Property and used in connection with the
      operation of the Facilities, including but not limited to, all licenses, permits
      and approvals for the operation of the Facilities (to the extent assignable),
      all guaranties and warranties provided to Sellers in connection with the
      construction and equipping of the Facilities, all entitlements, telephone
      numbers, any right, title or interest which Sellers may have in and to any
      service marks, trademarks or trade names owned, used or employed by Sellers
      in
      conjunction with the operation of the Facilities, specifically including any
      rights of the Sellers in the names under which each of the Facilities does
      business, and any trade marks related thereto and goodwill associated therewith,
      but specifically excluding cash, cash equivalents and accounts receivable for
      the period prior to the “Closing Date” (as defined below) (collectively, the
“Personal Property”).  The Real Property, Facilities
      and Personal Property are sometimes hereinafter collectively referred to as
      “Sellers’ Assets.”

    

    (c)           The
      parties acknowledge that as of the date of this Agreement and as of the date
      of
      the Closing (as defined below), each of the Facilities is subject to a lease
      with Painted Post Partners, a Washington General Partnership (the
“Tenant”) initially dated as September 1, 1996 and as amended
      from time to time (as in effect and amended, the
“Lease”).  The Purchaser acknowledges that
      substantially all of the assets described above as “Personal Property” are owned
      or leased by the Tenant.   The Purchaser currently operates each
      of the Facilities on behalf of the Tenant and is familiar with each of the
      Facilities, their respective operation and condition.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    2.           PURCHASE
      PRICE

    

    The
      aggregate purchase price payable by
      Purchaser to Sellers for Sellers’ Assets shall be an amount equal to
      Eighty-eight Million Dollars ($88,000,000.00) (the “Purchase
      Price”).  The Purchase Price shall be payable as
      follows:

    

    (a)           Upon
      the expiration of the “Feasibility Period” (as that term is
      defined below) and provided that Purchaser has not elected to terminate this
      Agreement pursuant to its right to do so hereunder, One Hundred Thousand Dollars
      ($100,000.00) (the “Earnest Money”) shall be delivered by
      Purchaser to Ticor Title Guarantee Title Insurance Company, located at
      Rochester, New York (the “Escrow Agent”), which amount shall be
      deposited into an interest bearing account, with any interest earned thereon
      accruing to the benefit of Purchaser.

    

    (b)           Each
      Seller is currently obligated under certain mortgage loans (collectively the
      “Existing Loans”) made by GMAC Commercial Mortgage Corporation
      and M&T Real Estate Inc. (the “Existing Lender”), the
      repayment of which is secured by a Mortgage and Security Agreement encumbering
      the Real Property (the “Existing Mortgages”).  In the
      event Purchaser assumes the Existing Mortgages, Purchaser shall receive at
      the
      time of Closing a credit against the Purchase Price in an amount equal to the
      then current outstanding principal balance of the Existing Loans.  In
      the event one or more of the Existing Mortgages are assigned to Purchaser’s
      lender, the Sellers shall receive a credit against the Purchase Price in an
      amount equal to one-half of the mortgage tax savings by reason of such
      assignment.

    

    (c)           The
      balance of the Purchase Price, which amount shall be equal to the Purchase
      Price
      less the sum of (i) the amount of the Earnest Money and (ii) if Purchaser
      assumes one or more of the Existing Loans, the outstanding principal balance
      as
      of the Closing Date of such Existing Loans, shall be due and payable either,
      by
      certified check or by wire transfer at Closing (the “Remaining
      Balance”).

    

    (d)           The
      Purchase Price shall be allocated among Sellers’ Assets in a manner mutually
      acceptable to Sellers and Purchaser.  Except as specifically provided
      in this Agreement, Purchaser does not hereby, or in connection herewith, assume
      any liability of Sellers whatsoever in relation to Sellers’ Assets which relates
      to the period prior to Closing.

    

    

    3.           CLOSING

    

    The
      closing of the purchase and sale of
      the Sellers’ Assets under this Agreement (the “Closing”) shall
      take place on or before the date five (5) days following the satisfaction or
      waiver of the conditions to closing set forth in Paragraphs 13 and 14 (the
      “Closing Date”).  Closing shall occur at the offices
      of Phillips Lytle LLP, 1400 First Federal Plaza, Rochester, New York or at
      such
      other place as Purchaser and Sellers may mutually agree.  In the event
      the scheduled Closing Date falls on a Saturday, Sunday or a legal holiday,
      the
      Closing Date shall be the next business day thereafter.

    
      
         

      

      
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    4.           CONVEYANCE

    

    Conveyance
      of the Sellers’ Assets to
      Purchaser shall be effected by a warranty deed with full covenants (the
“Warranty Deed”) and bill of sale. Fee simple insurable title
      to the Real Property and marketable title to the Personal Property shall be
      conveyed from Sellers to Purchaser free and clear of all liens, charges,
      easements and encumbrances of any kind, other than the following:

    

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

    

    (b)           The
      lien of the Existing Mortgages and other security interest provided by Sellers
      as security for the Existing Loans (provided that Purchaser has assumed the
      Existing Loans), as provided for herein;

    

    (c)           The
      rights of the Tenant under the Lease and the rights of the residents under
      the
      Residential Agreements;

    

    (d)           Covenants,
      easements and restrictions of record, providing the improvements do not encroach
      upon any easement;

    

    (d)           Condemnation
      of a portion of premises commonly known as Perinton Park Manor to provide access
      between Chardonnay Drive and Courtney Drive, in the Town of Perinton, Monroe
      County, New York; and

    

    (e)           Such
      items of record as described in the Title Commitment (as defined below) which
      are not objected to by Purchaser in accordance with the terms of Paragraph
      13(h).

    

    

    5.           COSTS,
      PRORATIONS AND ADJUSTMENTS

    

    The
      costs of the transaction and the
      expenses related to the ownership and operation of the Sellers’ Assets shall be
      allocated among Sellers and Purchaser as follows:

    

    (a)           Sellers
      shall pay all recording fees due on the sale of the Real Property and the
      Facilities.

    

    (b)           Sellers
      shall pay any transfer taxes due on the sale of the Real
      Property.   Purchaser shall pay any sales tax due on the sale of
      the Personal Property.

    

    (c)           Purchaser
      shall pay the cost of the premium for a standard owner’s policy of title
      insurance in the full amount of the Purchase Price and the cost of any
      additional premium in order to obtain extended coverage for said policy or
      a
      simultaneous loan policy.

    

    (d)           Purchaser
      shall pay for the cost of any redate of the Survey.

    
      
         

      

      
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    (e)           Purchaser
      shall pay for the cost of the Phase I Report (as defined below) which Purchaser
      may elect to obtain in connection with its Feasibility Review of the
      Property.

    

    (f)           All
      rents and expenses related to the ownership or operation of the Sellers’ Assets
      shall be prorated as of the Closing Date, with Sellers responsible for amounts
      attributable to the period prior to the Closing Date and with Purchaser
      responsible for amounts attributable to the period from and after the Closing
      Date.

    

    (g)           Real
      and Personal Property taxes and assessments shall be prorated as of the Closing
      Date, with Sellers responsible for taxes and assessments attributable to the
      period prior to the Closing Date and with Purchaser responsible for taxes and
      assessments attributable to the period from and after the Closing
      Date.

    

    (h)           Utilities
      serving the Real Property and the Facilities shall not be adjusted.

    

    (i)           Purchaser
      and Sellers shall each pay their own attorney’s fees.

    

    (j)           Purchaser
      and Sellers shall share any escrow fees on a 50-50 basis.

    

    (k)           Sellers
      shall pay the cost of obtaining and recording any releases necessary to deliver
      title to the Sellers’ Assets in accordance with the terms of this
      Agreement.

    

    (l)           Purchaser
      shall be responsible for all fees related to the licensure of the Facilities
      in
      Purchaser’s or Tenant’s name.

    

    (m)           Purchaser
      shall pay for the recording fees incurred for recording of the deed and Mortgage
      and for the payment of any required New York State Mortgage Tax with respect
      to
      any mortgage.

    

    

    6.           POSSESSION

    

    At
      Closing, Purchaser shall be entitled
      to possession of the Sellers’ Assets, subject only to the rights of the Tenant
      under the Lease and residents of the Facilities under the Resident Agreements
      (as defined below).

    

    

    7.           SELLERS’
      REPRESENTATIONS AND WARRANTIES

    

    Sellers
      hereby warrant and represents
      to Purchaser that:

    

    (a)           Sellers’
      Authority.  Each Seller has full power and authority to execute
      and deliver this Agreement and all related documents and to carry out the
      transactions contemplated herein. This Agreement is valid, binding and
      enforceable against Sellers in accordance with its terms,

    
      
         

      

      
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    except
      as
      such enforceability may be limited by creditors rights laws and applicable
      principles of equity (regardless of whether such enforceability is considered
      in
      a proceeding in equity or at law).  The execution of this Agreement
      and the consummation of the transaction contemplated herein do not result in
      a
      breach of the terms and conditions of nor constitute a default under or
      violation of, any law, regulation, court order, mortgage, note, bond, indenture,
      agreement, license or other instrument or obligation to which Sellers are now
      a
      party or by which Sellers or any of the assets of Sellers may be bound or
      affected.

    

    (b)           Title.  As
      of the Closing, Sellers shall have good and insurable fee simple title to the
      Real Property and the Facilities, subject only to the easements, reservations
      and encumbrances, if any, permitted under Paragraph 4, and good and marketable
      title to the Personal Property free and clear of all liens and
      encumbrances.

    

    (c)           The
      Real Property.  The Facilities are located on certain parcels of
      land more particularly described in Exhibit A attached
      hereto.  The improvements on the Real Property are not to Sellers’
knowledge, located in an area designated by the Director of the Federal
      Emergency Management Agency as a special flood hazard area.  Sellers
      make no representation with respect to the roofs of the Facilities, structural
      components of the Facilities, and major mechanical systems at the Facilities,
      including, but not limited to, the air conditioning, electrical and heating
      and
      ventilating systems.

    

    (d)           Necessary
      Action.  Sellers will proceed with all due diligence to take all
      action and obtain all consents prior to Closing necessary for it to lawfully
      enter into and carry out the terms of this Agreement.

    

    (e)           Taxes
      and Tax Returns.  All tax returns, reports and filings of any kind
      or nature required to be filed by Sellers prior to Closing with respect to
      its
      ownership and operation of the Facilities and its ownership of the Real Property
      and the Personal Property have been properly completed and timely filed in
      material compliance with all applicable requirements and all taxes or other
      obligations which are due and payable by Sellers have been timely
      paid.

    

    (f)           Litigation.  There
      is no litigation, investigation, or other proceeding pending or, to the best
      of
      each Seller’s knowledge, threatened against or relating to any of Sellers, its
      properties or business, which is material to any of Sellers’ Assets or to this
      Agreement, or which would prevent any Sellers from performing its obligations
      hereunder, and the transaction contemplated herein has not been challenged
      by
      any governmental agency or any other person, nor do Sellers know, or have
      reasonable grounds to know, of any basis for any such litigation, investigation
      or other proceeding.

    

    (g)           Books
      and Records.  All of the books and records maintained by Sellers
      with respect to its ownership and/or operation of the Sellers’ Assets are true,
      accurate and correct in all material respects.

    

    (h)           Facilities
      Resident Agreements.  Purchaser has in its possession copies of
      each of the resident agreements which have been entered into with the residents
      of the Facilities and as are in effect (collectively the “Resident
      Agreements”).

    
      
         

      

      
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    (i)           Rent
      Roll.  Purchaser has in its possession a true and correct rent
      roll which identifies each of the residents of the Facilities, the monthly
      rent
      required to be paid by each such tenant and the date to which any such rent
      has
      been paid.

    

    (j)           Liens.  There
      are no mechanics’, materialmen’s or similar claims or liens presently claimed
      or, to the best of Sellers’ knowledge, which will be claimed against the
      Sellers’ Assets for work performed in connection with the construction,
      maintenance or improvement of the Facilities or which has otherwise been
      arranged for at the request of a Seller or of which any Seller has
      knowledge.

    

    (k)           Environmental
      Matters.  Except in accordance with and in full compliance with,
      any and all applicable governmental laws, regulations and requirements
      (collectively, the “Environmental Laws”) relating to
      environmental and occupational health and safety matters and hazardous
      materials, substances or wastes (as defined from time to time under any
      applicable federal, state or local laws, regulations or ordinances), Sellers
      have not released into the environment or discharged, placed or disposed of
      any
      such hazardous materials, substances or wastes or caused the same to be so
      released into the environment or discharged, placed or disposed of at, on or
      under the Sellers’ Assets. To each Seller’s actual knowledge, no hazardous
      materials, substances or wastes are located on the Real Property or the
      Facilities or have been released into the environment or discharged, placed
      or
      disposed of in, on or under the Real Property or the Facilities.  To
      each Seller’s actual knowledge, no underground storage tanks are or have been
      located on the Real Property.  To each Seller’s actual knowledge, the
      Real Property has never been used as a dump for waste material.  To
      each Seller’s actual knowledge, the Real Property and the Facilities and their
      prior uses comply with and at all times have complied with, all Environmental
      Laws.

    

    (l)           Employees.  Sellers
      have not hired and prior to Closing will not hire any employees in connection
      with the intended operations at the Facilities.

    

    (m)           Compliance
      with Law

    

    (i)           The
      Sellers’ Assets are (and shall be as of the Closing Date) in compliance with all
      currently applicable municipal, county, state and federal laws, regulations,
      ordinances, standards and orders and with all municipal, health, building and
      zoning by-laws and regulations (including, without limitation, the building
      and
      zoning codes) where the failure to comply therewith or to obtain a waiver
      therefrom could have a material adverse effect on the business, property,
      condition (financial or otherwise) or operation of the Sellers’ Assets;
      provided, however, the foregoing representation by Seller shall not apply to
      any
      matters for which Emeritus is responsible for as the operator of the Facility
      or
      Painted Post Partners is responsible for as lessee of the Real
      Property;

    

    (ii)           As
      of the Closing Date, there shall be no outstanding deficiencies or work orders
      of any authority having jurisdiction over the Sellers’ Assets requiring
      conformity to any applicable statute, regulation, ordinance or by-law pertaining
      thereto; and

    

    
      
         

      

      
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    (iii)  Sellers
      are not aware
      of any claim, requirement or demand of any agency supervising or having
      authority over the Facilities to rework or redesign it or to provide additional
      furniture, fixtures or equipment so as to conform to or comply with any existing
      law, code or standard which has not been fully satisfied prior to the date
      hereof or which will not be satisfied prior to the Closing Date.

    

    (n)           Operating
      Contracts.  Within fifteen (15) days following the mutual
      execution of this Agreement, each Seller shall provide to Purchaser true and
      correct copies of all operating contracts to which Sellers are a party in
      connection with the operations to be conducted at the Facilities (the
“Operating Contracts”).  Sellers shall not enter into
      any additional Operating Contracts without the prior written approval of
      Purchaser.  As of the Closing Date, each of the Operating Contracts
      shall be in full force and effect and none of the Operating Contracts shall
      have
      been modified or amended except as set forth in any amendment provided to
      Purchaser.  As of the Closing Date, Sellers shall certify in writing
      to Purchaser that Sellers are not in default of any of its obligations under
      the
      Operating Contracts and that Sellers are not aware of any default or any action
      which, with the passage of time or the giving of notice or both would constitute
      a default, under the Operating Contracts by any other party
      thereto.  At Closing, Sellers shall deliver to Purchaser duly executed
      assignments of any of the Operating Contracts and where required the consent
      of
      the contractive party, which Purchaser elects to assume pursuant to Paragraph
      11(a) (iv) below.

    

    (o)           The
      Facilities.  There is no action pending or, to the best knowledge
      of each Seller, recommended by any state or federal agency having jurisdiction
      thereof, or any action of any other type (either as of the date hereof or as
      of
      the Closing Date) which would have a material adverse effect on the Facilities,
      its operations or business.

    

    (p)           Disclosure.  No
      representation or warranty by any Seller contained in this Agreement and no
      statement contained in any certificate, list, exhibit, or other instrument
      furnished or to be furnished to Purchaser pursuant hereto, or in connection
      with
      the transaction contemplated hereby, contains or will contain any untrue
      statement of a material fact, or omits or will omit to state any material facts
      which are necessary in order to make the statements contained herein or therein
      not misleading.

    

    

    8.           PURCHASER’S
      REPRESENTATIONS AND WARRANTIES

    

    Purchaser
      hereby warrants and
      represents to Sellers that:

    

    (a)           Status
      of Purchaser.  Purchaser is a corporation duly organized and
      validly existing under the laws of the State of Washington and is, or prior
      to
      Closing will be, duly qualified to do business in the State of New
      York.

    

    (b)           Authority.  Purchaser
      has full power and authority to execute and to deliver this Agreement and all
      related documents, and to carry out the transactions contemplated herein. This
      Agreement is valid, binding and enforceable as against Purchaser in accordance
      with its terms, except as such enforceability may be limited by creditors’
rights laws and applicable principles of

    
      
         

      

      
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    equity.  The
      execution of this Agreement and the consummation of the transaction contemplated
      herein do not result in a breach of the terms and conditions of nor constitute
      a
      default under or violation of Purchaser’s Articles of Incorporation or By-laws
      or any law, regulation, court order, mortgage, note, bond, indenture, agreement,
      license or other instrument or obligation to which Purchaser is a party or
      by
      which Purchaser or any of the assets of Purchaser may be bound or
      affected.

    

    (c)           Litigation.  There
      is no litigation, investigation or other proceeding pending or threatened
      against or relating to Purchaser, its properties or business which is material
      to this Agreement, or which would prevent Purchaser from performing its
      obligations hereunder, nor does Purchaser know or have reasonable grounds to
      know of any basis for any such action.

    

    (d)           Necessary
      Action.  Purchaser will proceed with all due diligence to take all
      action and obtain all consents prior to Closing necessary for it to lawfully
      enter into and carry out the terms of this Agreement, including, but not limited
      to, obtaining the consent of its Board of Directors.

    

    (e)           Disclosure.  No
      representation or warranty by Purchaser contained in this Agreement and no
      statement contained in any certificate, list, exhibit, or other instrument
      furnished or to be furnished to Sellers pursuant hereto, or in connection with
      the transaction contemplated hereby, contains or will contain any untrue
      statement of a material fact, or omits or will omit to state any material facts
      which are necessary in order to make the statements contained herein or therein
      not misleading.

    

    (f)           Knowledge.  As
      operator of each of the Facilities, Purchaser has no actual knowledge that
      the
      representations and warranties of the Sellers contained in paragraph 7 hereof
      contain any untrue statement of a material fact or omit to state any material
      facts which are necessary in order to make the statements contained therein
      not
      misleading.

    

    9.           BROKER

    

    Sellers
      and Purchaser represent and
      warrant to each other that they have employed no broker and/or finder in
      connection with this transaction. In the event any claim, damage or cause of
      action for brokerage and/or finder’s fees is asserted against a party to this
      Agreement who did not request such services, the party through whom the broker
      and/or finder is making the claim shall indemnify, defend (with an attorney
      of
      indemnitee’s choice) and hold harmless the other party from and against any and
      all such claims, demands and causes of action.

    

    

    10.           SELLERS’
      COVENANTS

    

    (a)           Pre-Closing.  Between
      the date hereof and the Closing Date, except as contemplated by this Agreement
      or with the prior written consent of Purchaser:

    

    (i)           Sellers
      will not enter into any operating contracts or service agreements in connection
      with the operation of the Facilities;

    
      
         

      

      
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    (ii)           Sellers
      will not enter into any Resident Agreements for the Facilities;

    

    (iii)           Sellers
      will not enter into any employment agreements in connection with the operation
      of the Facilities;

    

    (iv)           Other
      than as set forth in Paragraph 4, Sellers will satisfy and discharge all claims,
      liens, security interests, tenancies (other than any Operating Contracts which
      Purchaser elects to assume at Closing pursuant to the terms hereof, the Lease
      and the Resident Agreements), and encumbrances on Sellers’ Assets;

    

    (v)           Each
      Seller will file all tax returns, reports and filings of any kind or nature
      required to be filed by each Seller and will timely pay all taxes or other
      obligations which are due and payable with respect to Sellers’
Assets;

    

    (vi)           Sellers
      will not take any action inconsistent with its obligations under this Agreement
      or which could hinder or delay the consummation of the transactions contemplated
      by this Agreement;

    

    (vii)           Sellers
      will not sell or agree to sell any of the items which comprise the Personal
      Property nor otherwise enter into any agreement materially affecting any of
      the
      Sellers’ Assets;

    

    (viii)                      Sellers
      will maintain in force the existing hazard and liability insurance policies,
      or
      comparable coverage, for the Sellers’ Assets as now may be in
      effect;

    

    (ix)           Sellers
      will not enter into any contract or commitment affecting the Sellers’ Assets
      except in the ordinary course of business and any such contract or commitment
      shall be terminable prior to closing and Sellers will advise Purchaser by
      written notice of any contracts or commitments which it enters, whether in
      the
      ordinary course of business or otherwise and Seller shall terminate such
      contracts or commitments prior to closing if Purchaser so requests;

    

    (x)           Sellers
      will timely pay all obligations which are due and payable with respect to the
      Sellers’ Assets;

    

    (xi)           Sellers
      will take all necessary action to achieve compliance with any laws, regulations,
      ordinances, standards and orders applicable to the Sellers’ Assets which are
      enacted after execution of this Agreement and prior to Closing;

    

    (xii)   Within
      twenty
      (20) days following the mutual execution of this Agreement, Sellers will (a)
      deliver to Purchaser a UCC-1 search report covering the name of Sellers and
      the
      name of the Facilities, a copy of the existing surveys with respect to the
      Real
      Property prepared (the “Survey”), and (c) if requested, arrange
      with the Escrow Agent for the issuance and delivery to Purchaser and to
      Purchaser’s attorney of a title report or commitment covering the
      Real

    
      
         

      

      
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    property,
      together with copies of all exception documents referenced therein (the
“Title Commitment”);

    

    (xiii)                      At
      least five (5) days prior to the Closing Date, Sellers shall deliver to
      Purchaser an updated UCC-1 search report;

    

    (xiv)                      Sellers
      will provide Purchaser within twenty (20) days following the mutual execution
      of
      this Agreement with copies of the following documents relating to the Real
      Property and the Facilities to the extent the same are in Sellers’ possession or
      reasonable control (collectively, the “Property Documents”):
      all environ­mental reports, structural reports and geological reports,
      governmental licenses, permits and approvals, service and maintenance contracts
      not previously delivered, existing surveys of the Real Property, wetland
      reports, soils reports, architectural drawings, engineering tests and reports,
      all appraisals prepared for the Real Property and the Facilities, and all loan
      documents evidencing the Existing Loans; and

    

    (xv)           If
      Purchaser assumes the Existing Loans, Sellers shall cooperate in good faith
      with
      Purchaser in obtaining the consent of the Existing Lender to Purchaser’s
      assumption of said loans.

    

    (b)           Closing.  On
      the Closing Date, each Seller agrees to:

    

    (i)           Execute
      and deliver to Purchaser a good and sufficient Warranty Deed to the Real
      Property (including the Facilities) owned by it and bill of sale with respect
      to
      the Personal Property owned by it and such endorsements, assignments and other
      instruments of transfer and conveyance as shall be necessary to transfer and
      assign Sellers’ Assets to Purchaser as herein provided;

    

    (ii)           Deliver
      the Sellers’ Assets to Purchaser in a good condition;

    

    (iii)           Deliver
      to Purchaser a duly executed assignment of the Lease;

    

    (iv)           Pay
      its share of the Closing costs described in Paragraph 5;

    

    (v)           Deliver
      to Purchaser an Assignment and Assumption Agreement in with respect to any
      of
      the Operating Contracts which Purchaser has assumed pursuant to Paragraph 11
      (a)
      (iv) (the “Operating Contract Assumption
      Agreement”);

    

    (vi)           Deliver
      to Purchaser copies of all guaranties and warranties pertaining to the
      construction of the Facilities and the equipping of the Facilities with the
      Personal Property and execute in favor of Purchaser such written assignments
      as
      Purchaser shall deem reasonably necessary to cause the assignment of the
      beneficial interest under each such warranty and guaranty;

    

    (vii)   Deliver
      to
      Purchaser any amendments or updates to the Property Documents which were
      previously provided to Purchaser pursuant to Paragraph 10(a) above
      and

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    any
      additional Property Documents which have been prepared or generated following
      the date of the initial delivery of Property Documents as provided above;
      and

    

    (viii)                      If
      Purchaser has assumed the Existing Loans, execute and deliver to Escrow Agent
      such documents and instruments as may be reasonably required by the Existing
      Lender, in order to provide for Purchaser’s assumption of the Existing
      Loans.

    

    (c)           Post-Closing.  After
      the Closing of this Agreement, Sellers agree that, at Purchaser’s sole cost and
      expense, it will take such actions and properly execute and deliver to Purchaser
      such further instruments of assignment, conveyance and transfer as, in the
      reasonable opinion of counsel for Purchaser and Sellers, may be reasonably
      necessary to assure, complete and evidence the full and effective transfer
      and
      conveyance of Sellers’ Assets.

    

    

    11.           PURCHASER’S
      COVENANTS

    

    (a)           Pre-Closing.  Between
      the date hereof and the Closing Date, except as contemplated by this Agreement
      or with the consent of Sellers, Purchaser agrees that:

    

    (i)           Purchaser
      will not take any action inconsistent with its obligations under this Agreement
      or which could hinder or delay the consummation of the transaction contemplated
      by this Agreement;

    

    (ii)           Purchaser
      will proceed with all due diligence and use its best efforts to obtain all
      consents and approvals necessary to permit the consummation of the transaction
      contemplated by this Agreement and/or necessary to permit Purchaser to own
      and
      Purchaser or Tenant to operate the Facilities;

    

    (iii)           Purchaser
      will proceed with all due diligence to conduct such investigations with respect
      to Sellers’ Assets as it deems to be reasonably necessary in connection with its
      purchase thereof, including, but not limited to, zoning investigations, soil
      studies, environ­mental assessments, seismic assessments, wetlands reports,
      review of all Property Documents provided by Sellers, investigations of Sellers’
and the Facilities’ operating books and records and structural inspections,
      provided, however, no studies or investigations conducted at the Real Property
      will be physically intrusive on the Real Property or the Facilities unless
      Sellers consent thereto, which consent shall not be unreasonably withheld (the
      “Feasibility Review”); provided, however, nothing herein shall
      be construed as amending or modifying in any manner the representations or
      warranties of Sellers set forth in this Agreement, which representations and
      warranties shall be separate from and unaffected by Purchaser’s Feasibility
      Review; and provided, further, that Purchaser shall maintain the confidentiality
      of any documents or information obtained by it during the course of its
      Feasibility Review and shall return the same to Sellers in the event the
      transaction provided for herein fails to close for any reason
      whatsoever;

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (iv)           On
      or before the expiration of the Feasibility Period (as that term is defined
      below), Purchaser will advise Sellers in writing which, if any, of the Operating
      Contracts it elects to assume as of the Closing Date; and

    

    (v)           If
      Purchaser elects to assume the Existing Mortgages, Purchaser shall proceed
      with
      all due diligence and use its best efforts to obtain all consents and approvals
      necessary from the Existing Lender to permit the assumption of the Existing
      Mortgage and the release of the Sellers from liability thereunder.

    

    (b)           Closing.  On
      the Closing Date, Purchaser agrees that it will:

    

    (i)           Pay
      its share of the Closing costs described in paragraph 10(a)(xxi);

    

    (ii)           Deliver
      to Sellers the Assignment and Assumption Agreement with respect to the Operating
      Contracts which Purchaser has assumed;

    

    (iii)           If
      Purchaser has assumed the Existing Loans, execute and deliver to the Escrow
      Agent such documents and instruments as may be reasonably required by the
      Existing Lender in order to provide Purchaser’s assumption of the Existing
      Loans; and

    

    (iv)           Pay
      the balance of the Purchase Price as required pursuant to Paragraph
      2.

    

    

    12.           MUTUAL

    

    Following
      the execution of this
      Agreement, Purchaser and Sellers agree:

    

    (a)           If
      any event should occur, either within or without the knowledge or control of
      Purchaser or Sellers, which would prevent fulfillment of the conditions to
      the
      obligations of any party hereto to consummate the transaction contemplated
      by
      this Agreement, to use its or their reasonable efforts to cure the same as
      expeditiously as possible; and

    

    (b)           To
      cooperate fully with each other in preparing, filing, prosecuting, and taking
      any other actions which are or may be reasonable and necessary to obtain the
      consent of any governmental instrumentality or any third party or to accomplish
      the transaction contemplated by this Agreement.

    

    

    13.           PURCHASER’S
      CONDITIONS

    

    All
      obligations of Purchaser under this
      Agreement are subject to fulfillment of each of the following conditions, any
      one or all or which may be waived in writing by Purchaser:

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (a)           Sellers’
      Representations and Warranties True at Closing. Sellers’ representations and
      warranties contained in this Agreement or in any certificate or document
      delivered in connection with this Agreement or the transactions contemplated
      herein shall be true in all material respects at and as of the date of Closing
      as though such representations and warranties were then again made.

    

    (b)           Sellers’
      Performance.  Sellers shall have performed all of its obligations
      under this Agreement that are to be performed prior to or at Closing to the
      extent the same have not been waived by Purchaser in accordance with the terms
      hereof.

    

    (c)           No
      Defaults.  Sellers shall not be in default, where said default
      cannot be cured by Closing, under any mortgage, contract, lease or other
      agreement to which any Seller is a party or by which any Seller is bound and
      which affects or relates to the Real Property, the Personal Property or the
      Facilities.

    

    (d)           Feasibility
      Review.  Purchaser shall be satisfied with the results of its
      Feasibility Review, including but not limited to (i) Purchaser’s approval of the
      physical condition of the Real Property and the Facilities, including the
      results of any environmental assessment report which Purchaser elects to obtain
      at Purchaser’s expense, and (ii) Purchaser’s review and approval of all Property
      Documents.  Purchaser shall advise Sellers in writing on or before the
      date forty-five (45) days following the mutual execution of this Agreement
      (the
“Feasibility Period”) of (i) any objections pursuant to its
      Feasibility Review and (ii) whether it intends to assume the Existing Loan.
      Nothing herein shall be construed as amending or modifying in any manner the
      representations or warranties of Sellers set forth in this Agreement, which
      representations and warranties shall be separate from and unaffected by
      Purchaser’s Feasibility Review except as to any representations or warranties
      which, during the course of Purchaser’s Feasibility Review, Purchaser obtains
      knowledge of falsity or inaccuracy.  In the event Purchaser elects to
      terminate this Agreement by reason Purchaser’s disapproval of is Feasibility
      Review, Purchaser shall notify Sellers in writing on or before the expiration
      of
      the Feasibility Period, and the parties shall have no further rights or
      obligations hereunder, other than Purchaser’s right to the return of its Earnest
      Money and Sellers’ obligation to pay any title cancellation and UCC search fees
      incurred as a result of such termination.

    

    (e)           Title
      Review.  Within twenty (20) days following receipt of the Title
      Commitment (together with legible copies of all of the recorded documents
      referenced therein as exceptions) and the Survey, Purchaser shall have reviewed
      and approved or disapproved those matters reflected on the Title Commitment
      and
      the Survey.  In the event Purchaser objects to any such matters,
      Purchaser shall advise Sellers in writing of its objections within said fifteen
      (15) day period; provided, however that such objections shall not include those
      items specifically excluded in Paragraph 4.  Within ten (10) days of
      Sellers’ receipt of Purchaser’s objections, Sellers shall advise Purchaser in
      writing as to whether it intends to correct the defects to which Purchaser
      has
      objected.  If Sellers fails to notify Purchaser within said ten (10)
      day period or timely notifies Purchaser of its refusal to correct some or all
      of
      such defects, Purchaser shall have ten (10) days following the earlier of (i)
      the expiration of said Sellers’ ten (10) day response period or (ii) the date
      Purchaser receives Sellers’ notice of refusal, to advise Sellers of its decision
      to close, notwithstanding the defects, or to terminate this
      Agreement.  In the event of any such termination, neither party shall
      have any further rights or obligations hereunder, other than Sellers’ obligation
      to return or to direct

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    the
      return of Purchaser’s Earnest Money.  Any approval of the Title
      Commitment shall be subject to Purchaser’s review of and approval of any
      additional title matters which may be reflected in the update to the Title
      Commitment which Sellers shall provide to Purchaser following the completion
      of
      the Facilities improvements. Any matter reflected in the Title Commitment or
      the
      Survey not objected to in accordance with the terms hereof shall be deemed
      accepted by Purchaser;

    

    (f)           Title
      Policy.  The Title Insurer shall issue to Purchaser as of the date
      of Closing, an ALTA Owner’s extended coverage policy of title insurance for the
      Real Property and the Facilities issued on ALTA 2006 form (the “Title
      Policy”) with a value of not less than the amount of the Purchase Price
      (excluding that portion allocated to the purchase of the Personal Property)
      insuring Purchaser’s interest in the Real Property and the Facilities, and
      subject to no exceptions other than those of the usual printed exceptions (the
      Survey, and mechanics lien exceptions being specifically unacceptable to
      Purchaser) and those exceptions to which Purchaser has not objected as provided
      for in Paragraph 13(g) above.

    

    (g)           UCC
      Search.  On or before the Closing Date, Purchaser shall be
      satisfied with the results of the UCC search conducted by Sellers pursuant
      to
      Paragraph 10(a).

    

    (h)           Board
      Approval.  On or before the end of the Feasibility Period,
      Purchaser shall have obtained any required approval of its Board of Directors
      to
      the acquisition of the Sellers’ Assets pursuant to the terms of this
      Agreement.

    

    In
      the event any of the foregoing
      conditions are not satisfied or are not otherwise waived by Purchaser prior
      to
      the applicable period for satisfaction or waiver, Purchaser shall have the
      right
      to terminate this Agreement in accordance with the provisions of Paragraph
      17
      and in such event Purchaser shall receive a full refund of its Earnest Money
      together with any interest earned thereon.

    

    

    14.           SELLERS’
      CONDITIONS

    

    All
      obligations of Sellers under this
      Agreement are subject to the fulfillment, prior to or at Closing, of each of
      the
      following conditions, any one or all of which may be waived by Sellers in
      writing:

    

    (a)           Purchaser’s
      Representations and Warranties True at Closing.  Purchaser’s
      representations and warranties contained in this Agreement or in any certificate
      or document delivered in connection with this Agreement or the transactions
      contemplated herein shall be true in all material respects at and as of the
      date
      of Closing as though such representations and warranties were then again
      made.

    

    (b)           Purchaser’s
      Performance.  Purchaser shall have performed its obligations under
      this Agreement that are to be performed prior to or at Closing to the extent
      the
      same have not been waived by Sellers in accordance with the terms
      hereof.

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    In
      the event any of the foregoing
      conditions are not satisfied or are not otherwise waived by Purchaser prior
      to
      the applicable period for satisfaction or waiver, Sellers shall have the right
      to terminate this Agreement in accordance with the provisions of Paragraph
      17
      and in such event Purchaser shall receive full refund of its Earnest Money
      together with any interest earned thereon.

    

    

    15.           SELLERS’
      INDEMNIFICATION

    

    Sellers
      shall indemnify, defend and
      hold Purchaser harmless from and against:

    

    (a)           Except
      as otherwise provided in this Agreement, any and all obligations relating to
      the
      ownership of Sellers’ Assets and the operation of the Facilities which exist at
      the Closing Date, including, but not limited to any obligations under the Lease,
      or the Operating Contracts which Purchaser elects to assume at
      Closing;

    

    (b)           Any
      and all damage, loss or liability arising from and after the Closing Date under
      any of the Operating Contracts which Purchaser does not assume at
      Closing;

    

    (c)           Any
      and all damage, loss, or liability resulting from any misrepresentation of
      a
      material fact, breach of warranty or nonfulfillment of any agreement on the
      part
      of Sellers under this Agreement or from any misrepresentation in any certificate
      furnished or to be furnished to Purchaser hereunder;

    

    (d)           Any
      and all liability or loss arising out of or relating to any failure in
      connection with the transaction contemplated herein to comply with the
      requirements of any laws or regulations relating to bulk sales or transfers;
      and

    

    (e)           Any
      and all actions, suits, proceedings, demands, assess­ments, judgments,
      reasonable costs, and other reasonable expenses, including, but not limited
      to,
      reasonable attorney’s fees, incident to any of the foregoing.

    

    (f)           For
      purposes of Paragraph 15(a), an obligation shall be deemed to “exist” as of the
      Closing Date if it relates to events which occurred prior to the Closing Date
      even if it is not asserted until after the Closing Date.

    

    

    16.           PURCHASER’S
      INDEMNITY

    

    Purchaser
      shall indemnify, defend and
      hold Sellers harmless from and against:

    

    (a)           Except
      as otherwise provided in this Agreement, any and all obligations relating to
      the
      ownership of the Sellers’ Assets and the operation of the Facilities from and
      after the Closing Date, including, but not limited to, any obligations under
      any
      of the Resident Agreements or

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    Operating
      Contracts which Purchaser elects to assume at Closing and any obligations with
      respect to the Resident Deposits;

    

    (b)           Any
      and all damage, loss or liability resulting from any misrepresentation of a
      material fact, breach of warranty or non-fulfillment of any agreement on the
      part of Purchaser under this Agreement or from any misrepresentation in any
      certificate furnished or to be furnished to Sellers hereunder;

    

    (c)           Any
      and all damage, loss or liability resulting from the conduct by or the
      negligence or willful misconduct of Purchaser in performing its Feasibility
      Review; and

    

    (d)           Any
      and all actions, suits, proceedings, demands, assessments, judgments, reasonable
      costs and other reasonable expenses, including, but not limited to, reasonable
      attorney’s fees, incident to any of the foregoing.

    

    

    17.           TERMINATION

    

    (a)           This
      Agreement may be terminated and the transaction contemplated herein abandoned
      at
      any time prior to Closing:

    

    (i)           By
      mutual agreement of the parties;

    

    (ii)   By
      Sellers, if
      any of the conditions set forth in Paragraph 14 shall have become incapable
      of
      fulfillment prior to the Closing Date or such earlier date as may be
      specifically provided for the performance thereof (as the same may be extended)
      through no fault of Sellers and the same shall not have been waived by
      Sellers;

    

    (iii)   By
      Purchaser,
      if any of the conditions set forth in Paragraph 13 shall have become incapable
      of fulfillment prior to the Closing Date or such earlier date as may be
      specifically provided for the performance thereof (as the same may be extended)
      through no fault of Purchaser and the same shall not have been waived by
      Purchaser;

    

    (iv)           By
      either Sellers or Purchaser in the event of a material breach by the other
      party
      of its obligations hereunder; or

    

    (v)           If
      the Closing has not occurred by July 31, 2007 (the “Outside Closing
      Date”), unless extended by mutual written agreement of the
      parties.

    

    (b)           In
      the event that prior to the Closing Date, a material portion of the Real
      Property, the Facilities or the Personal Property shall have been damaged or
      destroyed by fire or other casualty, or shall have been taken or condemned
      by
      any public or quasi-public authority under the power of eminent domain,
      Purchaser shall have the right to terminate this Agreement on written notice
      to
      Sellers.  In the event Purchaser elects not to terminate its rights
      hereunder, then Sellers shall assign to Purchaser all of its rights to any
      insurance proceeds or condemnation award and all

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    claims
      in
      the connection therewith. In the event Purchaser exercises its termination
      rights hereunder, the parties shall have no further rights or obligations
      hereunder other than Purchaser’s right to the return of its Earnest
      Money.

    

    (c)           Neither
      party to this Agreement may claim termination or pursue any other remedy
      referred to in Paragraph 17(a) on account of a breach of a condition, covenant
      or warranty by the other, without first giving such other party written notice
      of such breach and not less than ten (10) days within which to cure such
      breach.  The Closing Date shall be postponed, if necessary, to afford
      such opportunity to cure; provided, however, in no event shall the Closing
      Date
      be postponed beyond the Outside Closing Date.

    

    (d)           In
      the event the Closing has failed to occur as a result of a material breach
      by
      Purchaser of its obligations hereunder resulting in Sellers electing to
      terminate this Agreement under Paragraph 17(a) (iv) or (v), Sellers’ sole remedy
      shall be to retain Purchaser’s Earnest Money as full and complete liquidated
      damages, the parties acknowledging and agreeing that the amount of damages
      which
      Sellers may incur as a result of such termination may be difficult to ascertain
      and that the amount of the Earnest Money is a reasonable and fair estimate
      thereof, after which the parties shall have no further rights or obligations
      hereunder.

    

    (e)           In
      the event the Closing has failed to occur as a result of a material breach
      by
      Sellers of its obligations hereunder resulting in Purchaser electing to
      terminate this Agreement under Paragraph 17(a) (iv) or (v), Purchaser shall
      have
      the right either to (i) terminate this Agreement and receive a full refund
      of
      its Earnest Money, together with all interest accrued thereon, after which
      neither party shall have any further rights or obligations hereunder or (ii)
      seek specific performance of Sellers’ obligations hereunder or damages for
      Sellers’ breach of its obligations hereunder. In the event Purchaser elects to
      terminate this Agreement as a result of a failure of any of the Purchaser’s
      conditions hereunder, as provided for in Paragraph 17(a) (iii), Purchaser shall
      be entitled to a full refund of its Earnest Money deposit together with any
      interest accrued thereon.

    

    

    18.           [RESERVED].

    

    

    19.           [RESERVED].

    

    

    20.           [RESERVED].

    

    

    21.           NOTICES

    

    Any
      notice, request or other
      communication to be given by any party hereunder shall be in writing and shall
      be sent by registered or certified mail, postage prepaid, by overnight courier
      guaranteeing overnight delivery or by facsimile transmission (if confirmed
      verbally or in writing by mail as aforesaid), to the following
      address:

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    

    To
      Seller:                                c/o
      Wegman Companies, Inc.

    550
      Latona Road, Building
      A

    Rochester,
      New York
      14626-2730

    Attention:  Philip
      R.
      Wegman

    Telephone
      No.:  (716)
      225-7370

    Facsimile
      No.:   (716)
      225-0887

    

    with
      a copy
      to:                      Phillips
      Lytle LLP

    1400
      First Federal Plaza

    Rochester,
      New
      York  14614

    Attention:  Thomas
      R. Burns,
      Esq.

    Telephone
      No.:  (585)
      238-2001

    Facsimile
      No.:   (585)
      232-7866

    

    To
      Purchaser:                        Emeritus
      Corporation

    3131
      Ellicott Avenue, Suite
      500

    Seattle,
      Washington  98121

    Attention:  Eric
      Mendelsohn,
      Director of Real Estate

                      and
      Legal Affairs 

    Telephone
      No.:  (206)
      301-4493

    Facsimile
      No.:   (206)
      357-7388

    

    With
      a copy
      to:                     Davis
      Wright Tremaine LLP

    1201
      Third Avenue, Suite
      2200

    Seattle,
      Washington  98101

    Attention:  Jim
      Greenfield,
      Esq.

    Telephone
      No.: (206
      757-8055

    Facsimile
      No.: (206)
      757-7055

    

    Notice
      shall be deemed given three (3)
      business days after deposit in the mail, on the next day if sent by overnight
      courier and on receipt if sent by facsimile (and confirmed verbally or by mail
      as aforesaid).

    

    

    22.           SOLE
      AGREEMENT

    

    This
      Agreement may not be amended or
      modified in any respect whatsoever except by instrument in writing signed by
      the
      parties hereto. This Agreement constitutes the entire agreement between the
      parties hereto and supersedes all prior and contemporaneous negotiations,
      discussions, writings and agreements between them.  Time is of the
      essence.

    

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    23.           SUCCESSORS

    

    The
      terms of this Agreement shall be
      binding upon and inure to the benefit of and be enforceable by and against
      the
      heirs and successors of the parties hereto, it being specifically understood
      and
      agreed that Purchaser shall have the right to assign in whole or in part its
      rights and obligations hereunder to any affiliated entity or any entity which
      is
      sponsored by Purchaser; provided no such assignment shall relieve Purchaser
      of
      its obligations hereunder.

    

    

    24.           CAPTIONS

    

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

    

    

    25.           SURVIVAL

    

    All
      covenants, warranties and
      representations of Purchaser and Sellers herein shall survive for two years
      after Closing other than Sellers’ representation and warranty in Paragraph 7.1.,
      which shall survive for the applicable statute of limitations
      period.

    

    

    26.           GOVERNING
      LAW

    

    This
      Agreement shall be governed by and
      construed in accordance with the laws of the State of New York.

    

    

    27.           SEVERABILITY

    

    Should
      any one or more of the
      provisions of this Agreement be determined to be invalid, unlawful or
      unenforceable in any respect, the validity, legality and enforceability of
      the
      remaining provisions hereof shall not in any way be affected or impaired
      thereby.

    

    

    28.           COUNTERPARTS

    

    This
      Agreement may be executed in any
      number of counterparts, each of which shall be an original; but such
      counterparts shall together constitute but one and the same
      instrument.

    

    

    29.           THIRD
      PARTY BENEFICIARY

    

    The
      provisions of this Agreement are
      not intended to confer any benefits upon any person or entity not a party to
      this Agreement.

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    

    30.           ATTORNEY’S
      FEES

    

    Should
      either party institute any
      action or proceeding to enforce or interpret this Agreement or any provision
      hereof, for damages by reason of any alleged breach of this Agreement or of
      any
      provision hereof, or for a declaration of rights hereunder, the prevailing
      party
      in any such action or proceeding shall be entitled to receive from the other
      party all costs and expenses, including reasonable attorneys’ and other fees,
      incurred by the prevailing party in connection with such action or
      proceeding.  The term “attorneys’ and other fees”
shall mean and include attorneys’ fees, accountants’ fees, and any and all other
      similar fees incurred in connection with the action or proceeding and the
      preparations therefor.  The term “action or
      proceeding” shall mean and include actions, proceedings, suits,
      arbitrations, appeals and other similar proceedings.

    

    [Signatures
      of the parties on following page]

    
      
         

      

      
        20

        
          

        

      

      
         

              

                   

        

      

    

    IN
      WITNESS WHEREOF, the parties hereby
      execute this Agreement as of the day and year set forth opposite each party’s
      signature below with the last date constituting the date of mutual execution
      of
      this Agreement.

    

    Dated:                      June
      8,
      2007                                                                PURCHASER:

    

    EMERITUS
      CORPORATION,

    a
      Washington corporation

    

    

    By:
      /s/ Eric
      Mendelsohn                                                                

    

    Its:
      Director of Real Estate and Legal
      Affairs

    

    

    

    Dated:                      June
      7,
      2007                                                                SELLER:

    

    WEGMAN/MANOR
      NUMBER ONE,
      LLC

    

    

    By:
      /s/ Philip R.
      Wegman                                                         

                           
      Philip R. Wegman, Manager

    

    WEGMAN/MANOR
      NUMBER TWO,
      LLC

    

    

    By:
      /s/ Philip R.
      Wegman                                                                

                            Philip
      R. Wegman, Manager

    

    

    WEGMAN/MANOR
      NUMBER THREE,
      LLC

    

    

    By:
      /s/ Philip R.
      Wegman                                                                

                            Philip
      R. Wegman, Manager

    

    

    WEGMAN/MANOR
      NUMBER FOUR,
      LLC

    

    

    By:
      /s/ Philip R. Wegman

                            Philip
      R. Wegman, Manager

    

    
      
              

                  
        

           

                  
      
      

                    

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      A

    

    Facilities

    

    

    

    
      	
              Colonie
                Manor

              626
                Watervliet Shaker Road

              Latham,
                New York  12110

            	
              Bassett
                Park Manor

              111
                St. Gregory Court

              Williamsville,
                New York  14221

            
	 	 
	
              Bassett
                Manor

              245
                Bassett Road

              Williamsville,
                New York  14221

            	
              Woodland
                Manor

              505
                Clubhouse Road

              Vestal,
                New York  13850

            
	 	 
	
              Westside
                Manor

              4055
                Long Branch Road

              Liverpool,
                New York  13090

            	
              Eastside
                Manor

              7164
                East Genesee Street

              Fayetteville,
                New York  13066

            
	 	 
	
              Bellevue
                Manor

              4330
                Onondaga Boulevard

              Syracuse,
                New York  13219

            	
              Westside
                Manor

              1404
                Long Pond Road

              Rochester,
                New York  14626

            
	 	 
	
              Perinton
                Park Manor

              100
                Chardonnay Drive

              Fairport,
                New York  14450lwatson@bakerdonelson.com

    [PRESTIGE
      BRANDS INC. LOGO]

    

    Mark
      Pettie

    Chairman
      and CEO

    

    April
      9,
      2007

    

    

    Mr.
      James
      E. Kelly

    34
      Edgewood Road

    Edison,
      New Jersey 08820

    

    Dear
      Jim,

    

    We
      are
      very pleased that you will be joining Prestige Brands Inc. as Senior
      Vice President, Marketing
      effective April 17th, 2007. In this important leadership role you will report
      directly to me and be a key member of the Prestige Brands leadership
      team.

    

    The
      terms
      and conditions of your employment as SVP, Marketing consists of the
      following:

    

    
      	·  	
              Annual
                salary of $250,000 paid twice
                monthly.

            

    

    
      	·  	
              Participation
                in the Management Bonus Plan for the fiscal year ending March 31,
                2008.
                Payments will be made in May of every year for the preceding year,
                which
                ends on 3/31. You must be an employee at the end of the year to qualify.
                Your target eligibility (which is dependant on the Company achieving
                budget objectives) is 45% of annual salary. The actual bonus may
                be
                higher, lower or non-existent dependant on financial performance
                of the
                Company.

            

    

    
      	·  	
              Eligibility
                for the Long Term Incentive Plan (LTIP) with an initial 2008 grant
                of
                $346,875.

            

    

    
      	·  	
              A
                sign on/retention bonus of $75,000 payable in two equal installments
                of
                $37,500 on April 30th
                ,
                2007 and $37,500 on April 30th,
                2008. In order to earn this retention bonus you must be employed
                in good
                standing with the company through the payout
                dates.

            

    

    
      	·  	
              Severance
                Benefit of one year’s salary and target bonus if terminated for reasons
                other than “cause”, conditioned on the execution of a severance
                agreement.

            

    

    

    

    

    

    

    

    90
      North
      Broadway Irvington, New York 10533

    phone:
      (914) 524-6882 fax:
      (914) 524-7401 email: mpettie@prestigebrandsinc.com

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	·  	
              Medical
                Insurance (eligible immediately)

            

    

    
      	·  	
              Dental
                Insurance (eligible after 1 month)

            

    

    
      	·  	
              Employee
                Life Insurance (eligible after 1 month, Company
                paid)

            

    

    
      	·  	
              Long-term
                Disability Insurance (eligible after 1 month, Company
                paid)

            

    

    
      	·  	
              Long-term
                Care Insurance (eligible after 3 months, Company
                paid)

            

    

    
      	·  	
              Flexible
                Spending Account (eligible after 3
                months)

            

    

    
      	·  	
              401k
                Plan (eligible after 6 months)

            

    

    
      	·  	
              4
                weeks vacation

            

    

    

    Jim,
      everyone you have met with was impressed with your background and track record
      of accomplishments and we believe you will make a very strong contribution
      to
      the Prestige organization. Personally, I very much look forward to the
      opportunity to work with you.

    

    

    Sincerely,

    

    /s/
      Mark Pettie              

    Mark
      Pettie

    Chairman
      and Chief Executive Officer

    

    Cc:    P.
      Anderson

      
      S. O’Brien

      
      C. Jolly

    

    /s/
      James E. Kelly                 4/11/07              

    James
      E.
      Kelly               Date

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