Document:

Ex1040

Exhibit 10.40

SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT (this “Amendment”) is made and entered effective as of August 8, 2014 (the “Effective Date”), by and between AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P. a Delaware limited partnership (“Purchaser”), ECI ACQUISITION 1, LLC, a Delaware limited liability company, VILLAGE ASSISTED LIVING LLC, an Iowa limited liability company, MT. PLEASANT ASSISTED LIVING LLC, an Iowa limited liability company, BURLINGTON ASSISTED LIVING LLC, an Iowa limited liability company, MUSCATINE ASSISTED LIVING LLC, an Iowa limited liability company, CARROLL ASSISTED LIVING LLC, an Iowa limited liability company, FT. MADISON ASSISTED LIVING LLC, an Iowa limited liability company and BURLINGTON INDEPENDENT LIVING LLC, an Iowa limited liability company (collectively, the “Seller”).
WHEREAS, Purchaser and Seller entered into that certain Asset Purchase Agreement dated August 1, 2014 as amended by that certain First Amendment to Asset Purchase Agreement dated August 7, 2014 (the “Agreement”), and the parties desire to amend the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

		
	1.
	Recitals and Defined Terms.  The foregoing recitals are true and correct and are incorporated herein by reference.  All capitalized terms used herein and not expressly defined shall have the meaning given to them in the Agreement.

		
	2.
	Immediate Repair Credit.  Upon the Closing of the transactions contemplated by the Agreement, Purchaser shall receive a credit in a total amount equal to $70,500.00 for certain repairs to the Facilities identified by the Purchaser’s third party consultants as immediately necessary, which repairs are more specifically described in Exhibit A attached hereto.   Such credit shall be reduced or, as applicable, eliminated to the extent Purchaser has determined to its reasonable satisfaction that such conditions have been repaired or corrected by the Seller prior to Closing.  Without limiting the foregoing, the parties further agree that Seller has agreed to repair, at Seller’s expense, recent water damage occurring at the Cedar Rapids Facility as the result of a drainage backup pursuant to agreements with agreements Jarvis and ServPro of Cedar Rapids, and will provide to Purchaser evidence reasonably satisfactory to Purchaser of the completion of such repairs prior to Closing (including proof of payment and evidence of applicable lien releases for such repairs to the extent requested by Purchaser).  

		
	3.
	Ground Lease Estoppel and Amendment.  In addition to the Ground Lease Estoppel required by the Agreement (and without limiting Seller’s obligations with respect thereto), Seller will make commercially reasonable efforts to have a separate estoppel and amendment in a form to be provided by Purchaser and relating to the Pennsylvania Facility Ground Lease executed by the tenant under the Pennsylvania Facility Ground Lease prior to Closing. For the avoidance of 

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doubt, the receipt of an executed copy of such separate estoppel and amendment is not a condition to Closing that would otherwise allow Purchaser to delay Closing.

		
	4.
	Prairie Hills Ottumwa Facility Condominium.  As a condition to Purchaser’s obligations to complete the transactions contemplated by the Agreement, Seller shall cause all rights and entitlements of the Developer (as defined in the Declaration (as herein defined)), and the professional manager identified in the Declaration, in and pursuant to the Declaration of Submission of Property to Horizontal Property Regime for Prairie Hills at Ottumwa, a Condominium (the “Declaration”) to be assigned to Purchaser or Purchaser’s designee.

		
	5.
	Purchase Price Allocations.  The parties agree that the allocations of Purchase Price required by Section 3.3 of the Agreement have not yet been finalized and may be amended by mutual agreement of Seller and Purchaser prior to Closing.  Without limiting the foregoing, Seller acknowledges and agrees that Purchaser has no obligation to accept any allocation of the Purchase Price to any party other than a party comprising Seller (provided, however, that this provision shall not limit Seller’s ability to pay expenses with proceeds from the Purchase Price or otherwise distribute portions of the Purchase Price to third-parties).

		
	6.
	Agreement Remains In Effect.  The Agreement, as modified by this Amendment, is hereby ratified and affirmed as binding and in full force and effect.

		
	7.
	Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be deemed an original.  This Amendment may be executed by counterpart signatures and all counterpart signature pages shall constitute a part of this Agreement.  Delivery of a counterpart hereof via facsimile transmission or by electronic mail transmission, including but not limited to an Adobe file format document (also known as a PDF file), shall be as effective as delivery of a manually executed counterpart hereof.

[Signature Pages Follow.]

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IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to Asset Purchase Agreement as of the date first above written.

SELLER:

ECI ACQUISITION 1, LLC, 
a Delaware limited liability company 

By:  Elliott Company of Iowa, Inc., 
        its sole member

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

VILLAGE ASSISTED LIVING LLC, 
an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

MT. PLEASANT ASSISTED LIVING LLC, 
an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

BURLINGTON ASSISTED LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

[signature page to Second Amendment to Purchase Agreement]

 

MUSCATINE ASSISTED LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

CARROLL ASSISTED LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

FT. MADISON ASSISTED LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

BURLINGTON INDEPENDENT LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

[signature page to Second Amendment to Purchase Agreement]

PURCHASER:

AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P. a Delaware limited partnership

        	
	
	

By:   American Realty Capital       Healthcare Trust II, Inc., 
a Maryland corporation, 
its general partner

	

	By:   /s/ Edward M. Weil, Jr.         
Name:  Edward M. Weil, Jr.
Title:   President
      

[signature page to Second Amendment to Purchase Agreement]

EXHIBIT A

Identified Repairs

Facility             Identified Repair              Credit

Mount Pleasant Facility
Concrete pavement repairs        $ 3,000

Subtotal for Facility:                        $ 3,000

Muscatine Facility
Concrete sidewalk and pavement 
replacement                $  8,500
Repair of parking lot lights and 
entrance sign lights                3,000    
Subtotal for Facility:                        $11,500     

Cedar Rapids Facility
                
Replace damaged concrete walk      $   450
Roof repairs                                350
Subtotal for Facility:                         $    800

Clinton Facility
Van-accessible handicapped space
with signage                  $  350
                 Replace missing handicapped 
signage                        300
Concrete sidewalk full depth 
replacement                    3,500
Subtotal for Facility:                         $ 4,150

Independence Facility
Replace damaged concrete 
walkway                 $ 1,050
Subtotal for Facility:                         $ 1,050

Pennsylvania Facility 

Concrete pavement             $18,000
Retaining wall                   22,500
Roofing                     3,000
Semi-annual inspection and
preventative maintenance               2,400
Subtotal for Facility:                        $50,000                        
Total Credit:                                 $70,500Ex1041

Exhibit 10.41

THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT (this “Amendment”) is made and entered effective as of August 26, 2014 (the “Effective Date”), by and between AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P. a Delaware limited partnership (“Purchaser”), ECI ACQUISITION 1, LLC, a Delaware limited liability company, VILLAGE ASSISTED LIVING LLC, an Iowa limited liability company, MT. PLEASANT ASSISTED LIVING LLC, an Iowa limited liability company, BURLINGTON ASSISTED LIVING LLC, an Iowa limited liability company, MUSCATINE ASSISTED LIVING LLC, an Iowa limited liability company, CARROLL ASSISTED LIVING LLC, an Iowa limited liability company, FT. MADISON ASSISTED LIVING LLC, an Iowa limited liability company and BURLINGTON INDEPENDENT LIVING LLC, an Iowa limited liability company (collectively, the “Seller”).
WHEREAS, Purchaser and Seller entered into that certain Asset Purchase Agreement dated August 1, 2014 as amended by that certain First Amendment to Asset Purchase Agreement dated August 7, 2014 and that certain Second Amendment to Asset Purchase Agreement dated August 8, 2014 (the “Agreement”), and the parties desire to amend the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

		
	1.
	Recitals and Defined Terms.  The foregoing recitals are true and correct and are incorporated herein by reference.  All capitalized terms used herein and not expressly defined shall have the meaning given to them in the Agreement.

		
	2.
	Partial Closing; Additional Closing Condition.  

		
	(a)
	Partial Closing.  The parties have agreed to Closing of the purchase of all Purchased Property as of the date hereof other than the Purchased Property relating to the Pennsylvania Facility (the “Partial Closing”) to allow additional time for the conditions to Closing (including the condition provided in Section 2(c) below) for closing of Purchased Property related to the Pennsylvania Facility (the “Pennsylvania Closing”) to be met.  Accordingly, the parties acknowledge and agree all provisions of the Agreement which apply to the Purchased Property and the Business relating to the Pennsylvania Facility shall continue in full force and effect notwithstanding the Closing of the other Facilities.   Notwithstanding Section 3.3 of the Agreement (as amended hereby), the parties agree that the Purchase Price for the Purchased Property related to the Pennsylvania Facility shall be Eleven Million Four Hundred Thousand and No/100 U.S. Dollars ($11,400,000.00).

		
	(b)
	Deposit.  Upon consummation of the Partial Closing, Two Million Five Hundred Thousand ($2,500,000.00) of the Deposit will released to Seller and credited against the Purchase Price. The remaining Five Hundred Thousand ($500,000.00) of the Deposit 

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shall remain in escrow with the Escrow Agent in accordance with the terms of the Agreement and the existing escrow agreement until the Pennsylvania Closing or the earlier release of such Deposit pursuant to the Agreement. 

		
	(c)
	Holdback Amount.   Upon the Pennsylvania Closing, Purchaser shall deposit the Holdback Amount with respect to Pennsylvania Closing in an interest-bearing escrow account with the Escrow Agent pursuant to a separate Post-Closing Escrow Agreement which shall contain the terms described in Section 3.2 of the Agreement; provided, however, that fifty percent (50%) of such Holdback Amount shall be released to Seller at the end of the sixth (6th) calendar month following the date of the Pennsylvania Closing, less any amounts claimed by Purchaser prior to such distribution date, which shall be held in accordance with the terms of the applicable Post-Closing Escrow Agreement until finally adjudicated, and the remainder of the Holdback Amount shall be released to Seller at the end of the tenth (10th) calendar month following the date of the Pennsylvania Closing, less any amounts claimed by Purchaser prior to such distribution date, which shall be held in accordance with the terms of the applicable Post-Closing Escrow Agreement until finally adjudicated.

		
	(d)
	Closing Condition; Closing Date.  In addition to the conditions upon the Purchaser’s obligation to make its deliveries and effect and consummate Pennsylvania Closing contained in Section 5.3 of the Agreement:  

(i)     The Purchaser shall not be obligated to consummate the Pennsylvania Closing unless and until Purchaser is in receipt of financial statements for the Pennsylvania Facility prepared in accordance with the applicable rules and regulations governing financial statements for acquired properties promulgated by the Securities and Exchange Commission including, but not limited to Section 3-05 of Regulation S-X. 

(ii)     The “Closing Date” as it relates to the Pennsylvania Closing shall be the date which is fifteen (15) business days following the date the condition described in clause (i) above is satisfied.  

(iii)    The additional closing condition described in this paragraph shall be known as the “Pennsylvania Financials Condition.”

		
	(e)
	Outside Closing Date.  Effective upon the consummation of the Partial Closing, Section 5.6(c) of the Agreement shall be amended in its entirety as follows:

“5.6(c).  

(i) If the Closing Conditions as set forth in Section 5.3 and the Pennsylvania Financials Condition have not been satisfied, or waived by Purchaser and the Pennsylvania Closing shall not have occurred on or before December 31, 2014 (the “Outside Date”), this Agreement shall automatically terminate with respect 

2

to the Pennsylvania Facility, in which case the remaining portion of the Deposit shall be returned to Purchaser, and Purchaser and Seller shall have no further liability hereunder with respect to the Pennsylvania Facility except with respect to the surviving provisions described in ARTICLE 9.

(ii) For the avoidance of doubt, no termination of this Agreement with respect to the Pennsylvania Facility shall terminate, abridge or otherwise affect the rights and obligations of the parties hereto pursuant to the Agreement with respect to the other Facilities, including without limitation the rights and obligations of each party pursuant to ARTICLE 8 of this Agreement.”

		
	(f)
	Non-Compete Obligations. For the avoidance of doubt, Purchaser agrees that the ownership, investment in or managing of the Pennsylvania Facility by the Seller or any of its affiliates shall not be deemed a violation of the provisions of Section 10.14 of the Agreement. 

		
	3.
	Allocation of Purchase Price.  Section 3.3 of the Agreement is replaced is its entirety as follows: 

“Section 3.3  Allocation of Purchase Price.   Each party has determined its own, independent allocation of Purchase Price among the individual Facilities and among Real Property, Personal Property and Other Assets with respect to each Facility.  Each party shall file federal, state and local returns based on each party’s own determination of the proper allocations of the Purchase Price, each party bearing responsibility for its own allocations and bearing its own consequences of any discrepancies.”

		
	4.
	Government Program Payments.  For the avoidance of doubt, to the extent the Seller receives payment under any Government Programs for any Facility attributable to the period from and after the Proration Date applicable to such Facility; Seller shall promptly forward such payments to Purchaser pursuant to Section 3.4 of the Agreement. 

		
	5.
	Agreement Remains In Effect.  The Agreement, as modified by this Amendment, is hereby ratified and affirmed as binding and in full force and effect.

		
	6.
	Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be deemed an original.  This Amendment may be executed by counterpart signatures and all counterpart signature pages shall constitute a part of this Agreement.  Delivery of a counterpart hereof via facsimile transmission or by electronic mail transmission, including but not limited to an Adobe file format document (also known as a PDF file), shall be as effective as delivery of a manually executed counterpart hereof.

[Signature Pages Follow.]

3

IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to Asset Purchase Agreement as of the date first above written.

SELLER:

ECI ACQUISITION 1, LLC, 
a Delaware limited liability company 

By:  Elliott Company of Iowa, Inc., 
        its sole member

 By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

VILLAGE ASSISTED LIVING LLC, 
an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

MT. PLEASANT ASSISTED LIVING LLC, 
an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

BURLINGTON ASSISTED LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

[signature page to Third Amendment to Purchase Agreement]

 

MUSCATINE ASSISTED LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

CARROLL ASSISTED LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

FT. MADISON ASSISTED LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

BURLINGTON INDEPENDENT LIVING LLC, an Iowa limited liability company

By:    /s/ James T. Elliott IV                
Name:     James T. Elliott IV                
Title:    President                    

[signature page to Third Amendment to Purchase Agreement]

PURCHASER:

AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P. a Delaware limited partnership

        	
	
	

By:   American Realty Capital       Healthcare Trust II, Inc., 
a Maryland corporation, 
its general partner

	

	By:    /s/ Thomas D’Arcy            
Name: Thomas D’Arcy
Title:   Chief Executive Officer      

[signature page to Third Amendment to Purchase Agreement]

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