UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________
Commission file number: 000-55201
American Realty Capital Healthcare Trust II, Inc.
(Exact name of registrant as specified in its charter)
Maryland
  
38-3888962
(State or other  jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
405 Park Ave., 14 th  Floor, New York, NY       
  
10022
(Address of principal executive offices)
  
(Zip Code)
(212) 415-6500
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes x No

As of October 31, 2014 , the registrant had 83,211,594 shares of common stock outstanding.


AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

INDEX TO FINANCIAL STATEMENTS

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2
Table of Contents

Part I — FINANCIAL INFORMATION
Item 1. Financial Statements.

AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)



 
 
September 30,
2014
 
December 31,
2013
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
65,640

 
$
3,220

Buildings, fixtures and improvements
 
838,200

 
37,114

Acquired intangible lease assets
 
103,443

 
5,952

Total real estate investments, at cost
 
1,007,283

 
46,286

Less: accumulated depreciation and amortization
 
(11,786
)
 
(1,094
)
Total real estate investments, net
 
995,497

 
45,192

Cash and cash equivalents
 
766,061

 
111,833

Restricted cash
 
1,902

 
—

Investment securities, at fair value
 
18,544

 
—

Receivable for sale of common stock
 
4,920

 
1,286

Prepaid expenses and other assets
 
18,930

 
1,888

Deferred costs
 
4,680

 
7

Total assets
 
$
1,810,534

 
$
160,206

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Mortgage notes payable
 
$
66,028

 
$
—

Mortgage premiums, net
 
3,146

 
—

Below market lease liabilities, net
 
339

 
57

Accounts payable and accrued expenses
 
15,107

 
962

Deferred rent and other liabilities
 
1,230

 
46

Distributions payable
 
11,100

 
992

Total liabilities
 
96,950

 
2,057

 
 
 
 
 
Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding at September 30, 2014 and December 31, 2013
 
—

 
—

Common stock, $0.01 par value, 300,000,000 shares authorized, 81,457,445 and 7,529,789 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively
 
814

 
75

Additional paid-in capital
 
1,793,520

 
161,952

Accumulated other comprehensive loss
 
(36
)
 
—

Accumulated deficit
 
(80,714
)
 
(3,878
)
Total stockholders' equity
 
1,713,584

 
158,149

Total liabilities and stockholders' equity
 
$
1,810,534

 
$
160,206


The accompanying notes are an integral part of these statements.


3
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except for share and per share data)
(Unaudited)



 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
10,620

 
$
564

 
$
14,061

 
$
590

Operating expense reimbursement
 
1,034

 
88

 
1,849

 
89

Resident services and fee income
 
164

 
—

 
164

 
—

Total revenues
 
11,818

 
652

 
16,074

 
679

 
 
 
 
 
 
 
 
 
 Expenses:
 
 
 
 
 
 
 
 
Property operating
 
4,202

 
88

 
5,231

 
89

Acquisition and transaction related
 
17,884

 
533

 
20,887

 
651

General and administrative
 
1,221

 
49

 
2,212

 
104

Depreciation and amortization
 
7,391

 
381

 
10,629

 
397

Total expenses
 
30,698

 
1,051

 
38,959

 
1,241

Operating loss
 
(18,880
)
 
(399
)
 
(22,885
)
 
(562
)
Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(1,418
)
 
—

 
(2,163
)
 
—

Income from investment securities and interest income
 
275

 
—

 
296

 
—

Total other expense
 
(1,143
)
 
—

 
(1,867
)
 
—

Net loss
 
$
(20,023
)
 
$
(399
)
 
$
(24,752
)
 
$
(562
)
 
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
 
Unrealized loss on investment securities, net
 
(36
)
 
—

 
(36
)
 
—

Comprehensive loss
 
$
(20,059
)
 
$
(399
)
 
$
(24,788
)
 
$
(562
)
 
 
 
 
 
 
 
 
 
Basic and diluted weighted-average shares outstanding
 
71,813,126

 
2,559,022

 
40,401,362

 
991,948

Basic and diluted net loss per share
 
$
(0.28
)
 
$
(0.16
)
 
$
(0.61
)
 
$
(0.57
)

The accompanying notes are an integral part of these statements.

4
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 2014
(In thousands, except for share data)
(Unaudited)



 
Common Stock
 
 
 
Accumulated Other Comprehensive Income
 
 
 
 
 
Number of
Shares
 
Par Value
 
Additional
Paid-in
Capital
 
 
Accumulated Deficit
 
Total Stockholders' Equity
Balance, December 31, 2013
7,529,789

 
$
75

 
$
161,952

 
$
—

 
$
(3,878
)
 
$
158,149

Issuance of common stock
72,993,267

 
730

 
1,813,838

 
—

 
—

 
1,814,568

Common stock offering costs, commissions and dealer manager fees
—

 
—

 
(204,350
)
 
—

 
—

 
(204,350
)
Common stock issued through distribution reinvestment plan
947,382

 
9

 
22,491

 
—

 
—

 
22,500

Common stock repurchases
(19,029
)
 
—

 
(475
)
 
—

 
—

 
(475
)
Equity-based compensation
6,036

 
—

 
64

 
—

 
—

 
64

Distributions declared
—

 
—

 
—

 
—

 
(52,084
)
 
(52,084
)
Other comprehensive loss
—

 
—

 
—

 
(36
)
 
—

 
(36
)
Net loss
—

 
—

 
—

 
—

 
(24,752
)
 
(24,752
)
Balance, September 30, 2014
81,457,445

 
$
814

 
$
1,793,520

 
$
(36
)
 
$
(80,714
)
 
$
1,713,584


The accompanying notes are an integral part of this statement.



5
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Nine Months Ended September 30,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net loss
$
(24,752
)
 
$
(562
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation
6,515

 
306

Amortization of intangibles
4,114

 
91

Amortization of deferred financing costs
841

 
—

Amortization of mortgage premiums
(387
)
 
—

Accretion of below-market lease liability and amortization of above-market lease assets, net
51

 
3

Equity-based compensation
64

 
11

Changes in assets and liabilities:
 
 
 
Prepaid expenses and other assets
(6,222
)
 
(402
)
Accounts payable and accrued expenses
8,548

 
327

Deferred rent and other liabilities
1,184

 
50

Net cash used in operating activities
(10,044
)
 
(176
)
Cash flows from investing activities:
 
 
 
Investment in real estate and other assets
(886,068
)
 
(41,834
)
Deposits for real estate acquisitions
(10,451
)
 
(210
)
Capital expenditures
(139
)
 
—

Purchase of investment securities
(18,580
)
 
—

Net cash used in investing activities
(915,238
)
 
(42,044
)
Cash flows from financing activities:
 
 
 

Payments of mortgage notes payable
(293
)
 
—

Payments of deferred financing costs
(5,408
)
 
—

Proceeds from issuance of common stock
1,810,934

 
91,923

Common stock repurchases
(294
)
 
—

Payments of offering costs and fees related to common stock issuances
(203,567
)
 
(11,002
)
Distributions paid
(19,476
)
 
(380
)
Payments to affiliate
(484
)
 
(399
)
Restricted cash
(1,902
)
 
—

Net cash provided by financing activities
1,579,510

 
80,142

Net change in cash
654,228

 
37,922

Cash, beginning of period
111,833

 
3

Cash, end of period
$
766,061

 
$
37,925


6
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Nine Months Ended September 30,
 
2014
 
2013
Supplemental Disclosures:
 
 
 
Cash paid for interest
$
1,137

 
$
—

Cash paid for taxes
79

 
—

 
 
 
 
Non-Cash Financing Activities:
 
 
 
Proceeds from mortgage notes payable used to acquire investments in real estate
$
66,321

 
$
—

Premiums on assumed mortgage notes payable
3,533

 
—

Liabilities assumed in real estate acquisitions
4,633

 
—

Common stock issued through distribution reinvestment plan
22,500

 
385

Reclassification of deferred offering costs to equity
—

 
807


The accompanying notes are an integral part of these statements.

7
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)


Note 1 — Organization
American Realty Capital Healthcare Trust II, Inc. (the "Company") was incorporated on October 15, 2012 as a Maryland corporation that elected and qualified to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2013. On February 14, 2013, the Company commenced its ongoing initial public offering (the "IPO") on a "reasonable best efforts" basis of up to $1.7 billion of common stock, $0.01 par value per share, at a price of $25.00 per share, subject to certain volume and other discounts, pursuant to a registration statement on Form S-11, as amended (File No. 333-184677) (the "Registration Statement"), filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended. The Registration Statement also covers up to 14.7 million shares of common stock available pursuant to a distribution reinvestment plan (the "DRIP") under which common stockholders may elect to have their distributions reinvested in additional shares of common stock. The Company reserves the right to reallocate shares covered in the Registration Statement between the IPO and the DRIP. On July 23, 2014, the Company announced the reallocation of 13.9 million shares of the 14.2 million remaining unsold shares available pursuant to the DRIP. On August 1, 2014, the Company registered an additional 25.0 million shares to be issued under the DRIP pursuant to a registration statement on Form S-3 (File No. 333- 197802 ).
As of September 30, 2014 , the Company had 81.5 million shares of common stock outstanding, including unvested restricted shares and shares issued pursuant to the DRIP, and had received total gross proceeds from the IPO and the DRIP of $2.0 billion . As of September 30, 2014 , the aggregate value of all share issuances and subscriptions of common stock outstanding was $2.0 billion based on a per share value of $25.00 (or $23.75 for shares issued under the DRIP). Until the NAV pricing date (as described below) the per share purchase price in the IPO will be up to  $25.00  per share (including the maximum allowed to be charged for commissions and fees) and shares issued under the DRIP will be equal to  $23.75  per share, which is equal to 95%  of the offering price in the IPO. Beginning with the NAV pricing date (as described below), the per share price for shares in the IPO and under the DRIP will vary quarterly and will be equal to the Company’s per share net asset value (“NAV”), as determined by American Realty Capital Healthcare II Advisors, LLC (the “Advisor”), plus applicable commissions and fees, in the case of the primary offering, and the per share purchase price in the DRIP will be equal to the NAV per share. The NAV pricing date means the date on which the Company files its Quarterly Report on Form 10-Q (or Annual Report on Form 10-K should such filing constitute the applicable quarterly financial filing) with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the second full fiscal quarter following the earlier of (i) the date on which the Company has invested all of the net proceeds of its primary offering, plus the net proceeds from debt financing equal to its target leverage ratio, but excluding working capital reserves and facilities and (ii) February 14, 2015, which is two years from the effective date of the IPO.
The Company was formed to acquire a diversified portfolio of healthcare-related real estate assets, including medical office buildings, seniors housing communities and other healthcare-related facilities. All such properties may be acquired and operated by the Company alone or jointly with another party. The Company may also originate or acquire first mortgage loans secured by real estate. The Company purchased its first property and commenced real estate operations in May 2013. As of September 30, 2014 , the Company owned 88 properties consisting of 4.1 million rentable square feet, which were 97.3% leased, excluding seniors housing communities, with a weighted-average remaining lease term of 10.2 years .
Substantially all of the Company's business is conducted through American Realty Capital Healthcare Trust II Operating Partnership, LP (the "OP"), a Delaware limited partnership. The Company is the sole general partner and holds substantially all of the units of limited partner interests in the OP ("OP units"). American Realty Capital Healthcare II Special Limited Partnership, LLC (the "Special Limited Partner"), an entity controlled by the Company's sponsor, American Realty Capital VII, LLC (the "Sponsor"), contributed $2,020 to the OP in exchange for 90 OP units, which represents a nominal percentage of the aggregate OP ownership. A holder of OP units has the right to convert OP units for the cash value of a corresponding number of shares of the Company's common stock or, at the option of the OP, a corresponding number of shares of the Company's common stock, in accordance with the limited partnership agreement of the OP, provided, however, that such OP units must have been outstanding for at least one year. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP's assets.

8
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

The Company has no direct employees. The Advisor has been retained by the Company to manage the Company's affairs on a day-to-day basis. The Company has retained American Realty Capital Healthcare II Properties, LLC (the "Property Manager") to serve as the Company's property manager. Realty Capital Securities, LLC (the "Dealer Manager") serves as the dealer manager of the IPO. The Advisor, the Property Manager and the Dealer Manager are under common control with the parent of the Sponsor, as a result of which, they are related parties, and each of which have or will receive compensation, fees and expense reimbursements for services related to the IPO and the investment and management of the Company's assets. The Advisor, Property Manager and Dealer Manager have or will also receive compensation, fees and expense reimbursements during the Company's offering, acquisition, operational and liquidation stages.
Note 2 — Summary of Significant Accounting Policies
The accompanying consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to this Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the results for the entire year or any subsequent interim period.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2013 , which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 6, 2014 . There have been no significant changes to Company's significant accounting policies during the nine months ended September 30, 2014 other than the updates described below.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board ("FASB") issued new accounting guidance clarifying the accounting and disclosure requirements for obligations resulting from joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The new guidance was effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.
In April 2014, the FASB amended the requirements for reporting discontinued operations. Under the revised guidance, in addition to other disclosure requirements, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale, disposed of by sale or other than by sale. The Company has adopted the provisions of this guidance effective January 1, 2014 and have applied the provisions prospectively. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.
In May 2014, the FASB issued revised guidance relating to revenue recognition. Under the revised guidance, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is not permitted under GAAP. The revised guidance allows entities to apply the full retrospective or modified retrospective transition method upon adoption. The Company has not yet selected a transition method and is currently evaluating the impact of the new guidance.

9
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Note 3 — Real Estate Investments
The following table presents the allocation of the assets acquired during the nine months ended September 30, 2014 and 2013 :
 
 
Nine Months Ended September 30,
(Dollar amounts in thousands)
 
2014
 
2013
Real estate investments, at cost:
 
 
 
 
Land
 
$
62,420

 
$
2,279

Buildings, fixtures and improvements
 
800,947

 
34,291

Total tangible assets
 
863,367

 
36,570

Acquired intangibles:
 
 
 
 
In-place leases
 
97,284

 
5,180

Above-market lease assets
 
207

 
236

Below-market lease liabilities
 
(303
)
 
(61
)
Total assets acquired, net
 
960,555

 
41,925

Mortgage notes payable assumed to acquire real estate investments
 
(66,321
)
 
—

Premiums on mortgages assumed
 
(3,533
)
 
—

Other liabilities assumed (1)  
 
(4,633
)
 
(91
)
Cash paid for acquired real estate investments
 
$
886,068

 
$
41,834

Number of properties purchased
 
81

 
6

___________________
(1) Other liabilities assumed includes $1.4 million in tenant security deposits assumed at acquisition of properties acquired and a $3.2 million capital lease obligation incurred in conjunction with the transaction described below during the nine months ended September 30, 2014 .
During the nine months ended September 30, 2014 , the Company acquired leasehold interests in six properties from Pinnacle Health Hospitals, a Pennsylvania nonprofit corporation ("PHH"), and has accounted for such interests as capital leases. The Company allocated $118.5 million and $16.3 million of assets at cost associated with the leasehold interests to buildings, fixtures and improvements and in-place leases, respectively, in the table above. Additionally, the Company entered into arrangements to sublease all or a portion of the six properties back to PHH, and assumed in-place subleases with other third-party tenants. Future minimum base rental payments due to the Company under subleases to PHH and other third-party tenants totaled $110.6 million . See Note 9 — Commitments and Contingencies for minimum base cash rental payments due from the Company to PHH under these leasehold interests.
The allocations to land, buildings, fixtures and improvements have been provisionally assigned to each class, pending receipt of additional information. The following table presents unaudited pro forma information as if the acquisitions during the nine months ended September 30, 2014 had been consummated on January 1, 2013. Additionally, the unaudited pro forma net loss was adjusted to exclude acquisition and transaction related expense of $20.9 million from the nine months ended September 30, 2014 .
 
 
Nine Months Ended September 30,
(In thousands)
 
2014
 
2013
Pro forma revenues
 
$
109,522

 
$
106,590

Pro forma net income (loss)
 
$
(9,902
)
 
$
2,167


10
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

The following table presents future minimum base rental cash payments due to the Company over the next five years and thereafter.  These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items.
(In thousands)
 
Future Minimum
Base Rent Payments
October 1, 2014 — December 31, 2014
 
$
9,651

2015
 
38,371

2016
 
36,761

2017
 
35,659

2018
 
34,354

Thereafter
 
278,851

 
 
$
433,647

The following table lists the tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income for all properties on a straight-line basis as of September 30, 2014 and 2013 :
 
 
September 30,
Tenant
 
2014
 
2013
Adena Health System
 
*
 
11.9%
Advocate Health and Hospitals Corporation
 
*
 
12.0%
HH/Killeen Health System, LLC
 
*
 
14.1%
IASIS Healthcare, LLC
 
*
 
16.9%
Meridian Senior Living, LLC
 
18.8%
 
*
National Mentor Holdings, Inc.
 
*
 
27.4%
Pinnacle Health Hospitals
 
21.4%
 
*
Platinum Health Care, LLC
 
12.6%
 
*
_______________________________
* Tenant's annualized rental income on a straight-line bases was not greater than 10% of total annualized rental income for all portfolio properties as of the period specified
The following table lists the states where the Company has concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of September 30, 2014 and 2013 :
 
 
September 30,
State
 
2014
 
2013
Colorado
 
*
 
27.4%
Florida
 
32.0%
 
*
Illinois
 
*
 
25.3%
Iowa
 
20.9%
 
*
Louisiana
 
*
 
16.9%
Michigan
 
10.0%
 
*
Ohio
 
*
 
11.9%
Texas
 
*
 
14.1%
_______________________________
* State's annualized rental income on a straight-line bases was not greater than 10% of total annualized rental income for all portfolio properties as of the period specified

11
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AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Note 4 — Investment Securities
As of September 30, 2014 , the Company had investments in common stock, redeemable preferred stock, real estate income funds and a senior note with an aggregate fair value of $18.5 million . The real estate income funds are managed by an affiliate of the Sponsor (see Note 10 — Related Party Transactions and Arrangements ). These investments are considered available-for-sale securities and, therefore, increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive loss as a component of equity on the consolidated balance sheets unless the securities are considered to be other than temporarily impaired at which time the losses would be reclassified to expense.
The following table details the unrealized gains and losses on investment securities as of September 30, 2014 . The Company had no such investments as of December 31, 2013 .
(In thousands)
 
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
September 30, 2014
 
 
 
 
 
 
 
 
Investment securities
 
18,580

 
121

 
(157
)
 
18,544

Unrealized losses as of September 30, 2014 were considered temporary and, therefore, no impairment was recorded during the three and nine months ended September 30, 2014 .
The Company's preferred stock investments are redeemable at the respective issuer's option five years after issuance. The senior note matures in  28.5 years and bears interest at  5.45% as of September 30, 2014 .
Note 5 — Revolving Credit Facility
On March 21, 2014, the Company entered into a senior secured credit facility in the amount of $50.0 million (the "Credit Facility"). On April 15, 2014, the Company entered into an increase letter, increasing the amount available under the Credit Facility to $200.0 million . The Credit Facility contains an "accordion" feature to allow the Company, under certain circumstances, to increase the aggregate commitments under the Credit Facility to a maximum of $450.0 million .
The Company has the option, based upon its leverage, to have the Credit Facility priced at either: (a) LIBOR, plus an applicable margin that ranges from 1.60% to 2.20% ; or (b) the Base Rate, plus an applicable margin that ranges from 0.35% to 0.95% . Base Rate is defined in the Credit Facility as the greatest of (i) the fluctuating annual rate of interest announced from time to time by the lender as its “prime rate,” (ii) 0.5% above the federal funds effective rate or (iii) the applicable one-month LIBOR plus 1.0% .
The Credit Facility provides for monthly interest payments for each Base Rate loan and periodic payments for each LIBOR loan, based upon the applicable LIBOR loan period, with all principal outstanding being due on the maturity date on March 21, 2017, subject to two one -year extension options. The Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty (subject to standard breakage costs). In the event of a default, the lender has the right to terminate its obligations under the Credit Facility and to accelerate the payment on any unpaid principal amount of all outstanding loans.
Availability of borrowings is based on a pool of eligible unencumbered real estate assets. The Company did not have any borrowing capacity as there were no assets assigned to the borrowing base of the Credit Facility as of September 30, 2014 . There were no advances outstanding as of September 30, 2014 .
The Credit Facility requires the Company to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of September 30, 2014 , the Company was in compliance with the financial covenants under the Credit Facility agreement.

12
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Note 6 — Mortgage Notes Payable
The following table reflects the Company's mortgage notes payable as of September 30, 2014 . The Company had no mortgage notes payable as of December 31, 2013 .
 
 
 
 
Outstanding Loan Amount as of
 
Effective Interest Rate
 
 
 
 
Portfolio
 
Encumbered Properties
 
September 30, 2014
 
 
Interest Rate
 
Maturity
 
 
 
 
(In thousands)
 
 
 
 
 
 
Creekside Medical Office Building - Douglasville, GA
 
1
 
$
5,186

 
5.32
%
 
Fixed
 
Sep. 2015
Bowie Gateway Medical Center - Bowie, MD
 
1
 
6,076

 
6.18
%
 
Fixed
 
Sep. 2016
Medical Center of New Windsor - New Windsor, NY
 
1
 
8,859

 
6.39
%
 
Fixed
 
Sep. 2017
Plank Medical Center - Clifton Park, NY
 
1
 
3,516

 
6.39
%
 
Fixed
 
Sep. 2017
Cushing Center - Schenectady, NY
 
1
 
4,312

 
5.71
%
 
Fixed
 
Feb. 2016
Countryside Medical Arts - Safety Harbor, FL
 
1
 
6,097

 
6.07
%
 
Fixed
(1)  
Apr. 2019
St. Andrews Medical Park - Venice, FL
 
3
 
6,739

 
6.07
%
 
Fixed
(1)  
Apr. 2019
Campus at Crooks & Auburn Building C - Rochester Hills, MI
 
1
 
3,643

 
5.91
%
 
Fixed
 
Apr. 2016
Slingerlands Crossing Phase I - Bethlehem, NY
 
1
 
6,779

 
6.39
%
 
Fixed
 
Sep. 2017
Slingerlands Crossing Phase II - Bethlehem, NY
 
1
 
7,901

 
6.39
%
 
Fixed
 
Sep. 2017
Benedictine Cancer Center - Kingston, NY
 
1
 
6,920

 
6.39
%
 
Fixed
 
Sep. 2017
Total
 
13
 
$
66,028

 
6.15
%
(2)  
 
 
 
_______________________________
(1) Fixed interest rate through May 10, 2017. Interest rate changes to variable rate starting May 11, 2017.
(2) Calculated on a weighted average basis for all mortgages outstanding as of September 30, 2014 .
The following table summarizes the scheduled aggregate principal payments on mortgage notes payable for the five years subsequent to September 30, 2014 :
(In thousands)
 
Future Principal
Payments
October 1, 2014 — December 31, 2014
 
$
235

2015
 
6,020

2016
 
14,347

2017
 
33,196

2018
 
212

Thereafter
 
12,018

 
 
$
66,028

Some of the Company's mortgage notes payable agreements require the compliance of certain property-level financial covenants including debt service coverage ratios. As of September 30, 2014 , the Company was in compliance with financial covenants under its mortgage notes payable agreements.

13
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Note 7 — Fair Value of Financial Instruments
The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, if any, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 — Unobservable inputs that reflect the entity's own assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.
The Company has investments in common stock, redeemable preferred stock, a real estate income fund and senior notes that are traded in active markets and therefore, due to the availability of quoted market prices in active markets, the Company has classified these investments as Level 1 in the fair value hierarchy.
The following table presents information about the Company's assets measured at fair value on a recurring basis as of September 30, 2014 , aggregated by the level in the fair value hierarchy within which those instruments fall. The Company had no such assets as of December 31, 2013 .
(In thousands)
 
Quoted Prices in Active Markets
Level 1
 
Significant Other Observable Inputs
Level 2
 
Significant Unobservable Inputs
Level 3
 
Total
September 30, 2014
 
 
 
 
 
 
 
 
Investment securities
 
$
18,544

 
$
—

 
$
—

 
$
18,544

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, other receivables, due to affiliates, accounts payable and distributions payable approximates their carrying value on the consolidated balance sheets due to their short-term nature. The fair values of the Company's remaining financial instruments that are not reported at fair value on the consolidated balance sheets are reported below:
 
 
 
 
Carrying Amount (1)  at
 
Fair Value at
 
Carrying Amount at
 
Fair Value at
(In thousands)
 
Level
 
September 30, 2014
 
September 30, 2014
 
December 31, 2013
 
December 31, 2013
Mortgage notes payable and premiums, net
 
3
 
$
69,174

 
$
69,561

 
$
—

 
$
—

_______________________________
(1) Carrying value includes $66.0 million mortgage notes payable and $3.1 million mortgage premiums, net as of September 30, 2014 .
The fair value of the mortgage notes payable are estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of borrowing arrangements.

14
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AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Note 8 — Common Stock
The Company had 81.5 million and 7.5 million shares of common stock outstanding, including unvested restricted shares and shares issued pursuant to the DRIP, and had received total proceeds of $2.0 billion and $186.8 million , including proceeds from shares issued pursuant to the DRIP, as of September 30, 2014 and December 31, 2013 , respectively.
On April 9, 2013, the Company's board of directors authorized, and the Company declared, distributions payable to stockholders of record each day during the applicable period at a rate equal to $0.0046575343 per day, or 6.8% per annum, based on a price of $25.00 per share of common stock. Distributions began to accrue on May 24, 2013, 15 days following the Company's initial property acquisition. Distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month. Distribution payments are dependent on the availability of funds. The board of directors may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distributions payments are not assured.
The Company has a Share Repurchase Program ("SRP") that enables stockholders, subject to certain conditions and limitations, to sell their shares to the Company. Under the SRP, stockholders may request that the Company repurchase all or any portion of their shares of common stock, if such repurchase does not impair the Company's capital or operations. The Company will fund repurchases from proceeds from the sale of common stock pursuant to the DRIP. The following table summarizes the number of shares repurchased under the SRP cumulatively through September 30, 2014 :
 
 
Number of Requests
 
Number of Shares Repurchased
 
Average Price per Share
Cumulative repurchases as of December 31, 2013
 
2

 
1,600

 
$
25.00

Nine months ended September 30, 2014 (1)
 
19

 
19,029

 
24.97

Cumulative repurchases as of September 30, 2014 (1)
 
21

 
20,629

 
$
24.97

_____________________________
(1) Includes eight unfulfilled repurchase requests consisting of 8,866 shares at an average repurchase price per share of $24.97 , which were approved for repurchase as of September 30, 2014 and are expected to be completed in November 2014 .
Note 9 — Commitments and Contingencies
Future Minimum Lease Payments
The Company has entered into lease agreements related to certain acquisitions under leasehold interests arrangements. The following table reflects the minimum base cash rental payments due from the Company over the next five years and thereafter.  These amounts exclude contingent rent payments, as applicable, that may be payable based on provisions related to increases in annual rent based on exceeding certain economic indexes among other items.
(In thousands)
 
Future Minimum
Base Rent Payments (1)
October 1, 2014 — December 31, 2014
 
$
43

2015
 
172

2016
 
176

2017
 
179

2018
 
183

Thereafter
 
11,629

 
 
$
12,382

_______________________________
(1) Future minimum base rental payments includes $2.3 million of imputed interest related to our capital lease obligations.
Litigation
In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company.

15
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. As of September 30, 2014 , the Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.
Note 10 — Related Party Transactions and Arrangements
As of September 30, 2014 and December 31, 2013 , the Special Limited Partner owned 8,888 shares of the Company's outstanding common stock. The Advisor and its affiliates may incur and pay costs and fees on behalf of the Company. As of December 31, 2013 , the Company had $0.5 million payable to the Sponsor primarily related to funding the payment of third party professional fees and offering costs. There were no such amounts payable as of September 30, 2014 .
During the nine months ended September 30, 2014 , the Company invested $2.0 million in real estate income funds managed by an affiliate of the Sponsor (see Note 4 — Investment Securities ). There is no obligation to purchase any additional shares and the shares can be sold at any time.
Fees Paid in Connection with the IPO
The Dealer Manager is paid fees in connection with the sale of the Company's common stock in the IPO. The Dealer Manager is paid a selling commission of up to 7.0% of the per share purchase price of offering proceeds before reallowance of commissions earned by participating broker-dealers. In addition, the Dealer Manager is paid up to 3.0% of the gross proceeds from the sale of shares, before reallowance to participating broker-dealers, as a dealer-manager fee. The Dealer Manager may reallow its dealer-manager fee to participating broker-dealers. A participating broker-dealer may elect to receive a fee equal to 7.5% of the gross proceeds from the sale of shares by such participating broker-dealer, with 2.5% thereof paid at the time of such sale and 1.0% thereof paid on each anniversary of the closing of such sale up to and including the fifth anniversary of the closing of such sale. If this option is elected, the dealer manager fee will be reduced to 2.5% of gross proceeds. The following table details total selling commissions and dealer manager fees incurred from and due to the Dealer Manager as of and for the periods presented:
 
 
 
 
 
 
 
 
 
 
Payable as of
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
September 30,
 
December 31,
(In thousands)
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Total commissions and fees incurred from the Dealer Manager
 
$
67,004

 
$
5,947

 
$
172,201

 
$
8,692

 
$
465

 
$
127

The Advisor and its affiliates receive compensation and reimbursement for services relating to the IPO, including transfer agent services provided by an affiliate of the Dealer Manager. All offering costs incurred by the Company or its affiliated entities on behalf of the Company are charged to additional paid-in capital on the accompanying balance during the IPO. The following table details offering costs and reimbursements incurred from and due to the Advisor and Dealer Manager as of and for the periods presented:
 
 
 
 
 
 
 
 
 
 
Payable as of
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
September 30,
 
December 31,
(In thousands)
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Fees and expense reimbursements from the Advisor and Dealer Manager
 
$
14,700

 
$
538

 
$
30,023

 
$
1,253

 
$
720

 
$
192

The Company is responsible for offering and related costs from the IPO, excluding commissions and dealer manager fees, up to a maximum of 2.0% of gross proceeds received from the IPO, measured at the end of the IPO. Offering costs in excess of the 2.0% cap as of the end of the IPO are the Advisor's responsibility. As of September 30, 2014 , offering and related costs, excluding commissions and dealer manager fees, were lower than 2.0% of gross proceeds received from the IPO by $1.0 million .

16
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

After the general escrow break, the Advisor and the Dealer Manager elected to cap cumulative offering costs for the IPO, including selling commissions and dealer manager fees, incurred by the Company, net of unpaid amounts, to 15% of gross common stock proceeds during the offering period of the IPO. As of September 30, 2014 , cumulative offering costs were $229.1 million . Cumulative offering costs net of unpaid amounts were less than the 15% threshold as of September 30, 2014 .
Fees Paid in Connection With the Operations of the Company
The Advisor is paid an acquisition fee equal to 1.0% of the contract purchase price of each acquired property and 1.0% of the amount advanced for a loan or other investment. The Advisor is also reimbursed for services provided for which it incurs investment-related expenses, or insourced expenses. Such insourced expenses may not exceed 0.5% of the contract purchase price of each acquired property and 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimburses the Advisor for third party acquisition expenses. Once the proceeds from the IPO have been fully invested, the aggregate amount of acquisition fees and financing coordination fees (as described below) may not exceed 1.5% of the contract purchase price and the amount advanced for a loan or other investment for all the assets acquired. In no event will the total of all acquisition fees, acquisition expenses and any financing coordination fees payable with respect to the Company's portfolio of investments or reinvestments exceed 4.5% of the contract purchase price of the Company's portfolio to be measured at the close of the acquisition phase or 4.5% of the amount advanced for all loans or other investments.
If the Advisor provides services in connection with the origination or refinancing of any debt that the Company obtains and uses to acquire properties or to make other permitted investments, or that is assumed, directly or indirectly, in connection with the acquisition of properties, the Company will pay the Advisor a financing coordination fee equal to 0.75% of the amount available and/or outstanding under such financing, subject to certain limitations.
For its asset management services, the Company causes the OP to issue (subject to periodic approval by the board of directors) to the Advisor performance-based restricted partnership units of the OP designated as "Class B units," which are intended to be profit interests and will vest, and no longer be subject to forfeiture, at such time as: (x) the value of the OP's assets plus all distributions made equals or exceeds the total amount of capital contributed by investors plus a 6% cumulative, pre-tax, non-compounded annual return thereon (the "economic hurdle"); (y) any one of the following occurs: (1) a listing; (2) an other liquidity event or (3) the termination of the advisory agreement by an affirmative vote of a majority of the Company's independent directors without cause; and (z) the Advisor is still providing advisory services to the Company (the "performance condition"). Such Class B units will be forfeited immediately if: (a) the advisory agreement is terminated for any reason other than a termination without cause; or (b) the advisory agreement is terminated by an affirmative vote of a majority of the Company's independent directors without cause before the economic hurdle has been met.
The asset management subordination is an amount equal to: (i) the excess of (A) the product of (y) the cost of assets (or the lower of the cost of assets and the applicable quarterly NAV once we begin calculating NAV) multiplied by (z) 0.1875% over (B) any amounts payable as an oversight fee (as described below) for such calendar quarter; divided by (ii) the value of one share of common stock as of the last day of such calendar quarter, which is equal initially to $22.50 (the IPO price minus the selling commissions and dealer manager fees). When and if approved by the board of directors, the Class B units are expected to be issued to the Advisor quarterly in arrears pursuant to the terms of the limited partnership agreement of the OP. The value of issued Class B units will be determined and expensed when the Company deems the achievement of the performance condition to be probable. As of September 30, 2014 , the Company cannot determine the probability of achieving the performance condition. The Advisor receives distributions on vested and unvested Class B units equal to the distribution rate received on the Company's common stock. Such distributions on issued Class B units are included in general and administrative expenses in the consolidated statement of operations and comprehensive loss until the performance condition is considered probable to occur. As of September 30, 2014 , the Company's board of directors approved the issuance of 27,418 Class B Units to the Advisor in connection with this arrangement.
Unless the Company contracts with a third party, the Company pays the Property Manager a property management fee of 1.5% of gross revenues from the Company's stand-alone single-tenant net leased properties and 2.5% of gross revenues from all other types of properties, respectively. The Company also reimburses the affiliate for property level expenses. If the Company contracts directly with third parties for such services, the Company will pay them customary market fees and will pay the Property Manager an oversight fee of up to 1.0% of the gross revenues of the property managed. In no event will the Company pay the Property Manager or any affiliate both a property management fee and an oversight fee with respect to any particular property.

17
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Effective June 1, 2013, the Company entered into an agreement with the Dealer Manager to provide strategic advisory services and investment banking services required in the ordinary course of the Company's business, such as performing financial analysis, evaluating publicly traded comparable companies and assisting in developing a portfolio composition strategy, a capitalization structure to optimize future liquidity options and structuring operations.  Strategic advisory fees were amortized over the estimated remaining term of the IPO and, as such, have been fully amortized as of September 30, 2014 . These fees are included in general and administrative expenses in the accompanying consolidated statement of operations and comprehensive loss.
The following table details amounts incurred, forgiven and payable in connection with the Company's operations-related services described above as of and for the periods presented:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Payable as of
 
 
2014
 
2013
 
2014
 
2013
 
September 30,
 
December 31,
(In thousands)
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
2014
 
2013
One-time fees and reimbursements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition fees and related cost reimbursements
 
$
12,280

 
$
—

 
$
457

 
$
—

 
$
14,333

 
$
—

 
$
541

 
$
—

 
$
—

 
$
—

Financing coordination fees
 
52

 
—

 
—

 
—

 
1,997

 
—

 
—

 
—

 
—

 
—

Ongoing fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property management and leasing fees
 
—

 
124

 
—

 
9

 
—

 
171

 
—

 
9

 
—

 
—

Strategic advisory fees
 
335

 
—

 
152

 
—

 
605

 
—

 
180

 
—

 
—

 
—

Distributions on Class B Units
 
9

 
—

 
—

 
—

 
16

 
—

 
—

 
—

 
—

 
1

Total related party operation fees and reimbursements
 
$
12,676

 
$
124

 
$
609

 
$
9

 
$
16,951

 
$
171

 
$
721

 
$
9

 
$
—

 
$
1

The Company reimburses the Advisor's costs of providing administrative services, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company's operating expenses at the end of the four preceding fiscal quarters exceeds the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Additionally, the Company reimburses the Advisor for personnel costs in connection with other services during the operational stage; however, the Company may not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives acquisition fees, acquisition expenses or real estate commissions. No reimbursement was incurred from the Advisor for providing services during the three and nine months ended September 30, 2014 or 2013 .
In order to improve operating cash flows and the ability to pay distributions from operating cash flows, the Advisor may elect to waive certain fees. Because the Advisor may waive certain fees, cash flow from operations that would have been paid to the Advisor may be available to pay distributions to stockholders. The fees that are forgiven are not deferrals and, accordingly, will not be paid to the Advisor. In certain instances, to improve the Company's working capital, the Advisor may elect to absorb a portion of the Company's property operating and general and administrative costs, which the Company will not repay. The following table reflects costs absorbed by the Advisor during the periods presented.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Receivable as of
(In thousands)
 
2014
 
2013
 
2014
 
2013
 
September 30, 2014
 
December 31, 2013
Property operating expenses absorbed
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
150

General and administrative expenses absorbed
 
—

 
302

 
—

 
479

 
—

 
843

Total expenses absorbed
 
$
—

 
$
302

 
$
—

 
$
479

 
$
—

 
$
993

Fees Paid in Connection with the Liquidation or Listing of the Company's Real Estate Assets
The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of the Company's total return to stockholders, payable annually in arrears, such that for any year in which the Company's total return on stockholders' capital exceeds 6.0% per annum, the Advisor will be entitled to 15.0% of the excess total return but not to exceed 10.0% of the aggregate total return for such year. This fee will be paid only upon the sale of assets, distributions or other event which results in the return on stockholders' capital exceeding 6.0% per annum. No subordinated performance fees were incurred during the three and nine months ended September 30, 2014 or 2013 .

18
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

The Company will pay a brokerage commission on the sale of property, not to exceed the lesser of 2.0% of the contract sale price of the property and 50.0% of the total brokerage commission paid if a third party broker is also involved; provided, however, that in no event may the real estate commissions paid to the Advisor, its affiliates and unaffiliated third parties exceed the lesser of 4.5% of the contract sales price and a reasonable, customary and competitive real estate commission, in each case, payable to the Advisor if the Advisor or its affiliates, as determined by a majority of the independent directors, provided a substantial amount of services are provided in connection with the sale. No such fees were incurred during the three and nine months ended September 30, 2014 or 2013 .
The Company will pay the Special Limited Partner a subordinated participation in the net sales proceeds of the sale of real estate assets of 15.0% of remaining net sale proceeds after return of capital contributions to investors plus payment to investors of a 6.0% cumulative, pre-tax non-compounded return on the capital contributed by investors. The Special Limited Partner will not be entitled to the subordinated participation in net sale proceeds unless the Company's investors have received a 6.0% cumulative non-compounded return on their capital contributions. No such fees were incurred during the three and nine months ended September 30, 2014 or 2013 .
If the common stock of the Company is listed on a national exchange, the Company will pay the Special Limited Partner a subordinated incentive listing distribution of 15.0% of the amount by which the adjusted market value of real estate assets plus distributions exceeds the aggregate capital contributed by investors plus an amount equal to a 6.0% cumulative, pre-tax non-compounded annual return to investors. The Special Limited Partner will not be entitled to the subordinated incentive listing distribution unless investors have received a 6.0% cumulative, pre-tax non-compounded return on their capital contributions. No such fees were incurred during the three and nine months ended September 30, 2014 or 2013 . Neither the Special Limited Partner nor any of its affiliates can earn both the subordinated participation in the net sales proceeds and the subordinated incentive listing distribution.
Upon termination or non-renewal of the advisory agreement with the Advisor, with or without cause, the Special Limited Partner, through its controlling interest in the Advisor, will be entitled to receive distributions from the OP equal to 15% of the amount by which the sum of the Company's market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an annual 6% cumulative, pre-tax, non-compounded return to investors. The Special Limited Partner may elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs.
Note 11 — Economic Dependency
Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common ownership with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company's common stock available for issue, transfer agency services, as well as other administrative responsibilities for the Company including accounting services, transaction management services and investor relations.
As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that the Advisor and its affiliates are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
Note 12 — Share-Based Compensation
Restricted Share Plan
The Company has an employee and director incentive restricted share plan (the "RSP"), which provides for the automatic grant of 1,333 restricted shares of common stock to each of the independent directors, without any further action by the Company's board of directors or the stockholders, on the date of initial election to the board of directors and on the date of each annual stockholder meeting. Restricted stock issued to independent directors will vest over a five -year period following the first anniversary of the date of grant in increments of 20.0% per annum. The RSP provides the Company with the ability to grant awards of restricted shares to the Company's directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company. The total number of common shares granted under the RSP may not exceed 5.0% of the Company's outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 3.4 million shares (as such number may be adjusted for stock splits, stock dividends, combinations and similar events).

19
Table of Contents
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Restricted share awards entitle the recipient to receive shares of common stock from the Company under terms that provide for vesting over a specified period of time. Such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient's employment or other relationship with the Company. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in shares of common stock shall be subject to the same restrictions as the underlying restricted shares. The following table reflects restricted share award activity for the nine months ended September 30, 2014 :
 
 
Number of Common Shares
 
Weighted-Average Issue Price
Unvested, December 31, 2013
 
3,999

 
$
22.50

Granted
 
3,999

 
22.50

Vested
 
(800
)
 
22.50

Unvested, September 30, 2014
 
7,198

 
$
22.50

As of September 30, 2014 , the Company had $0.1 million of unrecognized compensation cost related to unvested restricted share awards granted under the Company's RSP. That cost is expected to be recognized over a weighted-average period of 4.1 years . The fair value of the restricted shares is being expensed over the vesting period of five years . Compensation expense related to restricted stock was approximately $8,000 and $4,000 during the three months ended September 30, 2014 and 2013 , respectively. Compensation expense related to restricted stock was approximately $18,000 and $11,000 during the nine months ended September 30, 2014 and 2013 , respectively. Compensation expense related to restricted stock is recorded as general and administrative expense in the accompanying consolidated statements of operations.
Other Share-Based Compensation
The Company may issue common stock in lieu of cash to pay fees earned by the Company's directors at the respective director's election. There are no restrictions on the shares issued since these payments in lieu of cash relate to fees earned for services performed. During the three and nine months ended September 30, 2014 , the Company issued 1,433 and 2,036 shares in lieu of approximately $32,000 and $46,000 in cash, respectively. There were no shares issued in lieu of cash during the three and nine months ended September 30, 2013 .
Note 13 — Net Loss Per Share
The following is a summary of the basic and diluted net loss per share computation for the three and nine months ended September 30, 2014 and 2013 :
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Net loss (in thousands)
 
$
(20,023
)
 
$
(399
)
 
$
(24,752
)
 
$
(562
)
Basic and diluted weighted-average shares outstanding
 
71,813,126

 
2,559,022

 
40,401,362

 
991,948

Basic and diluted net loss per share
 
$
(0.28
)
 
$
(0.16
)
 
$
(0.61
)
 
$
(0.57
)
The Company had the following common share equivalents as of September 30, 2014 and 2013 , which were excluded from the calculation of diluted loss per share attributable to stockholders as the effect would have been antidilutive:
 
 
September 30,
 
 
2014
 
2013
Unvested restricted stock
 
7,198

 
3,999

OP Units
 
90

 
—

Class B units
 
27,418

 
618

Total common share equivalents
 
34,706

 
4,617


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AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Note 14 — Segment Reporting
During the three and nine months ended September 30, 2014 , the Company operated in three reportable business segments for management and internal financial reporting purposes: medical office buildings; triple-net buildings; and seniors housing communities. During the three and nine months ended September 30, 2013 , the Company did not own any seniors housing communities and therefore, operated in two reportable business segments.
These operating segments are the segments of the Company for which separate financial information is available and for which segment results are evaluated in deciding how to allocate resources and in assessing performance. The medical office buildings segment primarily consists of medical office buildings leased to healthcare-related tenants under long-term leases, which may require such tenants to pay a pro rata share of property-related expenses. The seniors housing communities segment primarily consists of investments in assisted living, independent living, memory care and skilled nursing facilities located in the United States which the Company operates through engaging independent third-party managers. The triple-net buildings segment primarily consists of investments in hospitals, inpatient rehabilitation facilities and seniors housing communities under long-term leases, under which tenants are generally responsible to directly pay property-related expenses. The Company evaluates performance of the combined properties in each segment based on net operating income. Net operating income is defined as total revenues less property operating and maintenance expenses. There are no intersegment sales or transfers. The Company uses net operating income to evaluate the operating performance of real estate investments and to make decisions concerning the operation of the properties. The Company believes that net operating income is useful to investors in understanding the value of income-producing real estate. Net income is the GAAP measure that is most directly comparable to net operating income; however, net operating income should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes certain items such as operating fees to affiliates, acquisition and transaction related expenses, general and administrative expenses, depreciation and amortization expense and interest expense. Additionally, net operating income as defined by the Company may not be comparable to net operating income as defined by other REITs or companies.
For federal income tax purposes, the Company has qualified to be taxed as a REIT beginning with the taxable year ended December 31, 2013. REIT status imposes limitations related to seniors housing communities. Generally, to qualify as a REIT, the Company cannot directly operate seniors housing communities. However, such facilities may generally be operated by a taxable REIT subsidiary ("TRS") pursuant to a lease with the Company. Therefore, the Company has formed a TRS subsidiary under the OP to operate the seniors housing communities pursuant to contracts with unaffiliated management companies. The Company's TRS entity incurred $0.1 million in federal and state income taxes for the three and nine months ended September 30, 2014 . The Company did not own any seniors housing communities and therefore did not have any TRS entities or incur any federal or state income tax expense during the three and nine months ended September 30, 2013 . Federal and state income taxes are included in general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss.

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AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

The following tables reconcile the segment activity to consolidated net income for the three and nine months ended September 30, 2014 and 2013 .
 
 
Three Months Ended September 30, 2014
 
Nine Months Ended September 30, 2014
(In thousands)
 
Medical Office Buildings
 
Triple-Net Buildings
 
Seniors Housing Communities
 
Consolidated
 
Medical Office Buildings
 
Triple-Net Buildings
 
Seniors Housing Communities
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
 
$
4,044

 
$
2,000

 
$
4,576

 
$
10,620

 
$
6,684

 
$
2,801

 
$
4,576

 
$
14,061

Operating expense reimbursements
 
1,022

 
12

 
—

 
1,034

 
1,808

 
41

 
—

 
1,849

Resident services and fee income
 
—

 
—

 
164

 
164

 
—

 
—

 
164

 
164

Total revenues
 
5,066

 
2,012

 
4,740

 
11,818

 
8,492

 
2,842

 
4,740

 
16,074

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating and maintenance
 
1,389

 
15

 
2,798

 
4,202

 
2,390

 
43

 
2,798

 
5,231

Net operating income
 
$
3,677

 
$
1,997

 
$
1,942

 
7,616

 
$
6,102

 
$
2,799

 
$
1,942

 
10,843

Acquisition and transaction related
 
 
 
 
 
 
 
(17,884
)
 
 
 
 
 
 
 
(20,887
)
General and administrative
 
 
 
 
 
 
 
(1,221
)
 
 
 
 
 
 
 
(2,212
)
Depreciation and amortization
 
 
 
 
 
 
 
(7,391
)
 
 
 
 
 
 
 
(10,629
)
Interest expense
 
 
 
 
 
 
 
(1,418
)
 
 
 
 
 
 
 
(2,163
)
Income from investment securities and other income
 
 
 
 
 
 
 
275

 
 
 
 
 
 
 
296

Net loss attributable to stockholders
 
 
 
 
 
 
 
$
(20,023
)
 
 
 
 
 
 
 
$
(24,752
)
 
 
Three Months Ended September 30, 2013
 
Nine Months Ended September 30, 2013
(In thousands)
 
Medical Office Buildings
 
Triple-Net Buildings
 
Seniors Housing Communities
 
Consolidated
 
Medical Office Buildings
 
Triple-Net Buildings
 
Seniors Housing Communities
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
 
$
288

 
$
276

 
$
—

 
$
564

 
$
314

 
$
276

 
$
—

 
$
590

Operating expense reimbursements
 
77

 
11

 
—

 
88

 
78

 
11

 
—

 
89

Resident services and fee income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total revenues
 
365

 
287

 
—

 
652

 
392

 
287

 
—

 
679

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating and maintenance
 
77

 
11

 
—

 
88

 
78

 
11

 
—

 
89

Net operating income
 
$
288

 
$
276

 
$
—

 
564

 
$
314

 
$
276

 
$
—

 
590

Acquisition and transaction related
 
 
 
 
 
 
 
(533
)
 
 
 
 
 
 
 
(651
)
General and administrative
 
 
 
 
 
 
 
(49
)
 
 
 
 
 
 
 
(104
)
Depreciation and amortization
 
 
 
 
 
 
 
(381
)
 
 
 
 
 
 
 
(397
)
Net loss attributable to stockholders
 
 
 
 
 
 
 
$
(399
)
 
 
 
 
 
 
 
$
(562
)

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AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

The following table reconciles the segment activity to consolidated total assets as of September 30, 2014 and December 31, 2013 :
 
 
September 30,
 
December 31,
(In thousands)
 
2014
 
2013
ASSETS
 
 
 
 
Investments in real estate:
 
 
 
 
Medical office buildings
 
306,695

 
27,520

Triple-net buildings
 
201,628

 
17,672

Seniors housing communities
 
487,174

 
—

Total reportable segments, net
 
995,497

 
45,192

Cash and cash equivalents
 
766,061

 
111,833

Restricted cash
 
1,902

 
—

Investment securities, at fair value
 
18,544

 
—

Receivable for sale of common stock
 
4,920

 
1,286

Prepaid expenses and other assets
 
18,930

 
1,888

Deferred costs
 
4,680

 
7

Total assets
 
1,810,534

 
160,206

Note 15 — Subsequent Events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements except for the following transactions:
Sales of Common Stock
As of October 31, 2014 , the Company had 83.2 million shares of common stock outstanding, including unvested restricted shares and shares issued pursuant to the DRIP from total gross proceeds from the IPO and the DRIP of $2.1 billion .
Total capital raised to date, including shares issued under the DRIP, is as follows:
Source of Capital (in thousands)
 
Inception to September 30, 2014
 
October 1, 2014 to October 31, 2014
 
Total
Common stock
 
$
2,023,455

 
$
43,148

 
$
2,066,603

Acquisitions
The following table presents certain information about the properties that the Company acquired from October 1, 2014 to October 31, 2014 :
 
 
Number of Properties
 
Rentable
Square Feet
 
Base
Purchase Price (1)  
 
 
 
 
 
 
(In thousands)
Portfolio, September 30, 2014
 
88

 
4,091,547

 
$
1,001,763

Acquisitions
 
8

 
441,537

 
141,410

Portfolio, October 31, 2014
 
96

 
4,533,084

 
$
1,143,173

________________________
(1)    Contract purchase price, excluding acquisition related costs.

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AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)

Management Update
On November 10, 2014, in light of his recent appointment as chief executive officer of RCS Capital Corporation, Edward M. Weil, Jr. resigned from his roles as president, secretary and treasurer of the Company, effective as of that same date. Mr. Weil did not resign pursuant to any disagreement with the Company. Simultaneously with Mr. Weil’s resignation, the Company’s board of directors appointed Thomas P. D’Arcy, currently the chief executive officer of the Company, to serve as the Company’s president and secretary. Mr. D’Arcy will also continue to serve in his capacity as chief executive officer of the Company. Also simultaneously with Mr. Weil’s resignation, the Company’s board of directors appointed Edward F. Lange, Jr., currently the chief financial officer and chief operating officer of the Company, to serve as the Company’s treasurer. Mr. Lange will also continue to serve in his capacity as chief financial officer and chief operating officer of the Company.


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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of American Realty Capital Healthcare Trust II, Inc. and the notes thereto. As used herein, the terms the "Company," "we," "our" and "us" refer to American Realty Capital Healthcare Trust II, Inc., a Maryland corporation, including, as required by context, American Realty Capital Healthcare Trust II Operating Partnership, LP, a Delaware limited partnership, which we refer to as the "OP," and its subsidiaries. The Company is externally managed by American Realty Capital Healthcare II Advisors, LLC (our "Advisor"), a Delaware limited liability company. Capitalized terms used herein, but not otherwise defined, have the meaning ascribed to those terms in "Part I — Financial Information" included in the notes to the consolidated financial statements and contained herein.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
•
All of our executive officers are also officers, managers and/or holders of a direct or indirect controlling interest in the Advisor, our dealer manager, Realty Capital Securities, LLC (the "Dealer Manager") and other AR Capital, LLC affiliated entities ("American Realty Capital"). As a result, our executive officers, our Advisor and its affiliates face conflicts of interest, including significant conflicts created by our Advisor's compensation arrangements with us and other investment programs advised by American Realty Capital affiliates and conflicts in allocating time among these investment programs and us. These conflicts could result in unanticipated actions.
•
Because investment opportunities that are suitable for us may also be suitable for other American Realty Capital advised investment programs, our Advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could reduce the investment return to our stockholders.
•
No public market currently exists, or may ever exist, for shares of our common stock which are, and may continue to be, illiquid.
•
We focus on acquiring a diversified portfolio of healthcare-related assets located in the United States and are subject to risks inherent in concentrating investments in the healthcare industry.
•
The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of tenants to make lease payments to us.
•
If we and our Advisor are unable to find suitable investments, then we may not be able to achieve our investment objectives or pay distributions.
•
We may be unable to pay or maintain cash distributions or increase distributions over time.
•
We are obligated to pay fees, which may be substantial, to our Advisor and its affiliates.
•
We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants.
•
Increases in interest rates could increase the amount of our debt payments and limit our ability to pay distributions.
•
We are permitted to pay distributions from unlimited amounts of any source. Until substantially all of the proceeds from our initial public offering ("IPO") are invested, we may use proceeds from our IPO and financings to fund distributions until we have sufficient cash flows from operations. There are no established limits on the amount of net proceeds and borrowings that we may use to fund distribution payments, except in accordance with our organizational documents and Maryland law.
•
Any distributions may reduce the amount of capital we ultimately invest in properties and other permitted investments and negatively impact the value of our stockholders' investment in us.

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Table of Contents

•
We have not and may not in the future generate cash flows sufficient to pay our distributions to stockholders, as such, we may be forced to borrow at higher rates or depend on our Advisor to waive reimbursement of certain expenses and fees to fund our operations.
•
We are subject to risks associated with any dislocations or liquidity disruptions that may exist or occur in the credit markets of the United States from time to time.
•
We may fail to continue to qualify to be treated as a real estate investment trust ("REIT") for United States federal income tax purposes, which would result in higher taxes, may adversely affect our operations and would reduce our NAV and cash available for distributions.
•
We may be deemed to be an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and thus subject to regulation under the Investment Company Act.
Overview
We were incorporated on October 15, 2012 as a Maryland corporation that elected and qualified to be taxed as a REIT for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2013. On February 14, 2013, we commenced our IPO on a "reasonable best efforts" basis of up to $1.7 billion of common stock, $0.01 par value per share, at a price of $25.00 per share, subject to certain volume and other discounts, pursuant to a registration statement on Form S-11, as amended (File No. 333-184677) (the "Registration Statement"), filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"). The Registration Statement also covers up to 14.7 million shares of common stock available pursuant to a distribution reinvestment plan (the "DRIP") under which common stockholders may elect to have their distributions reinvested in additional shares of common stock. We reserve the right to reallocate shares covered in the Registration Statement between the IPO and the DRIP. On July 23, 2014, we announced the reallocation of 13.9 million shares of the 14.2 million remaining unsold shares available pursuant to the DRIP. On August 1, 2014, we registered an additional 25.0 million shares to be issued under the DRIP pursuant to a registration statement on Form S-3 (File No. 333- 197802 ).
As of September 30, 2014 , we had 81.5 million shares of common stock outstanding, including unvested restricted shares and shares issued pursuant to the DRIP, and had received total gross proceeds from the IPO and the DRIP of $2.0 billion . As of September 30, 2014 , the aggregate value of all share issuances and subscriptions of common stock outstanding was $2.0 billion based on a per share value of $25.00 (or $23.75 for shares issued under the DRIP). Until the NAV pricing date (as described below) the per share purchase price in the IPO will be up to  $25.00 per share (including the maximum allowed to be charged for commissions and fees) and shares issued under the DRIP will be equal to  $23.75  per share, which is equal to 95%  of the offering price in the IPO. Beginning with the NAV pricing date (as described below), the per share price for shares in the IPO and under the DRIP will vary quarterly and will be equal to our NAV, as determined by our Advisor, plus applicable commissions and fees, in the case of the primary offering, and the per share purchase price in the DRIP will be equal to the NAV per share. The NAV pricing date means the date on which we file our Quarterly Report on Form 10-Q (or Annual Report on Form 10-K should such filing constitute the applicable quarterly financial filing) with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the second full fiscal quarter following the earlier of (i) the date on which we have invested all of the net proceeds of its primary offering, plus the net proceeds from debt financing equal to its target leverage ratio, but excluding working capital reserves and facilities and (ii) February 14, 2015, which is two years from the effective date of the IPO.
We were formed to acquire a diversified portfolio of healthcare-related assets, including medical office buildings, seniors housing communities and other healthcare-related facilities. All such properties may be acquired and operated by us alone or jointly with another party. We may also originate or acquire first mortgage loans secured by real estate. We purchased our first property and commenced real estate operations in May 2013. As of September 30, 2014 , we owned 88 properties consisting of 4.1 million rentable square feet, which were 97.3% leased, excluding seniors housing communities, with a remaining lease term of 10.2 years .
Substantially all of our business is conducted through the OP. We are the sole general partner and hold substantially all of the units of limited partner interests in the OP ("OP units"). American Realty Capital Healthcare II Special Limited Partnership, LLC (the "Special Limited Partner"), an entity controlled by American Realty Capital VII, LLC (the "Sponsor"), contributed $2,020 to the OP in exchange for 90 OP units, which represents a nominal percentage of the aggregate OP ownership. A holder of OP units has the right to convert OP units for the cash value of a corresponding number of shares of our common stock or, at the option of the OP, a corresponding number of shares of our common stock, in accordance with the limited partnership agreement of the OP. The remaining rights of the limited partners are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP's assets.

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We have no direct employees. The Advisor is our affiliated external advisor, which we have retained to manage our affairs on a day-to-day basis. We have retained American Realty Capital Healthcare II Properties, LLC (the "Property Manager") to serve as our property manager. The Dealer Manager serves as the dealer manager of the IPO. The Advisor, the Property Manager and the Dealer Manager are under common control with the parent of the Sponsor, as a result of which, they are related parties, and each of which have or will receive compensation, fees and expense reimbursements for services related to the IPO and the investment and management of our assets. The Advisor, Property Manager and Dealer Manager have or will also receive fees during our offering, acquisition, operational and liquidation stages.
Significant Accounting Estimates and Critical Accounting Policies
Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates and critical accounting policies include:
Offering and Related Costs
Offering and related costs include all expenses incurred in connection with our IPO. Offering costs (other than selling commissions and the dealer manager fees) include costs that may be paid by the Advisor, the Dealer Manager or their affiliates on our behalf. These costs include but are not limited to (i) legal, accounting, printing, mailing, and filing fees; (ii) escrow service related fees; (iii) reimbursement of the Dealer Manager for amounts it may pay to reimburse the bona fide diligence expenses of broker-dealers; and (iv) reimbursement to the Advisor for a portion of the costs of its employees and other costs in connection with preparing supplemental sales materials and related offering activities. We are obligated to reimburse the Advisor or its affiliates, as applicable, for organization and offering costs paid by them on our behalf, provided that the Advisor is obligated to reimburse us to the extent organization and offering costs (excluding selling commissions and the dealer manager fee) incurred by us in our IPO exceed 2.0% of gross offering proceeds in the IPO. As a result, these costs are only our liability to the extent aggregate selling commissions, the dealer manager fee and other organization and offering costs do not exceed 12.0% of the gross proceeds determined at the end of our IPO.
Revenue Recognition
Our rental income is primarily related to rent received from tenants, which are recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease. Because many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record a receivable, and include in revenues, unbilled rent receivables that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When we acquire a property, the terms of existing leases are considered to commence as of the acquisition date for the purposes of this calculation. We defer the revenue related to lease payments received from tenants in advance of their due dates. Cost recoveries from tenants are included in operating expense reimbursement in the period the related costs are incurred, as applicable.
We continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, we will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the consolidated statements of operations.
Investments in Real Estate
Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and improvements and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.
We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis. We are required to present the operations related to properties that have been sold or properties that are intended to be sold as discontinued operations in the statement of operations at fair value for all periods presented to the extent the disposal of a component represents a strategic shift that has or will have a major effect on our operations and financial results. Properties that are intended to be sold are to be designated as "held for sale" on the balance sheet.

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Long-lived assets are carried at cost and evaluated for impairment when events or changes in circumstances indicate such an evaluation is warranted or when they are designated as held for sale. Valuation of real estate is considered a "critical accounting estimate" because the evaluation of impairment and the determination of fair values involve a number of management assumptions relating to future economic events that could materially affect the determination of the ultimate value, and therefore, the carrying amounts of our real estate. Additionally, decisions regarding when a property should be classified as held for sale are also highly subjective and require significant management judgment.
Events or changes in circumstances that could cause an evaluation for impairment include the following:
•
a significant decrease in the market price of a long-lived asset;
•
a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition;
•
a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator;
•
an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; and
•
a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset.
We review our portfolio on an ongoing basis to evaluate the existence of any of the aforementioned events or changes in circumstances that would require us to test for recoverability. In general, our review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property's use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value expected, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. We are required to make subjective assessments as to whether there are impairments in the values of our investments in real estate. These assessments have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income.
Purchase Price Allocation
We allocate the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. We utilize various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third-parties or on our analysis of comparable properties in our portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable.
The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by us in our analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at contract rates during the expected lease-up period, which typically ranges from six to 12 months. We also estimate costs to execute similar leases including leasing commissions, legal and other related expenses.
Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease. The capitalized below-market lease values are amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, we initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.

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The aggregate value of intangible assets related to customer relationship is measured based on our evaluation of the specific characteristics of each tenant's lease and our overall relationship with the tenant. Characteristics considered by us in determining these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals, among other factors.
The value of in-place leases is amortized to expense over the initial term of the respective leases, which range primarily from one to 14  years. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.
In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. We also consider information obtained about each property as a result of our pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Derivative Instruments
We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such agreements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions.
We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.
Recently Issued Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board ("FASB") issued new accounting guidance clarifying the accounting and disclosure requirements for obligations resulting from joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The new guidance was effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The adoption of this guidance did not have a material impact on our consolidated financial position, results of operations or cash flows.
In April 2014, the FASB amended the requirements for reporting discontinued operations. Under the revised guidance, in addition to other disclosure requirements, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale, disposed of by sale or other than by sale. We have adopted the provisions of this guidance effective January 1, 2014, and have applied the provisions prospectively. This adoption of this guidance did not have a material impact on our consolidated financial position, results of operations or cash flows.
In May 2014, the FASB issued revised guidance relating to revenue recognition. Under the revised guidance, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is not permitted under GAAP. The revised guidance allows entities to apply the full retrospective or modified retrospective transition method upon adoption. We have not yet selected a transition method and are currently evaluating the impact of the new guidance.

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Table of Contents

Properties
The following table presents certain additional information about the properties we own as of September 30, 2014 :
Portfolio
 
Acquisition
Date
 
Number
of Properties
 
Rentable
Square Feet
 
Occupancy
 
Remaining
Lease Term  (1)
 
Base Purchase Price  (2)
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Medical Office Buildings:
 
 
 
 
 
 
 
 
 
 
 
 
Fresenius Medical Care - Winfield, AL
 
May 2013
 
1
 
5,564

 
100.0%
 
8.4
 
$
1,920

Adena Health Center - Jackson, OH
 
Jun. 2013
 
1
 
24,924

 
100.0%
 
9.4
 
5,446

Oak Lawn Medical Center - Oak Lawn, IL
 
Aug. 2013
 
1
 
26,324

 
100.0%
 
3.4
 
10,300

Surgery Center of Temple - Temple, TX
 
Aug. 2013
 
1
 
10,400

 
100.0%
 
12.4
 
6,150

Greenville Health System - Greenville, SC
 
Oct. 2013
 
1
 
21,603

 
100.0%
 
5.5
 
4,300

Arrowhead Medical Plaza II - Glendale, AZ
 
Feb. 2014
 
1
 
45,366

 
94.0%
 
3.2
 
11,170

Village Center Parkway - Stockbridge, GA
 
Feb. 2014
 
1
 
25,051

 
72.1%
 
5.8
 
4,100

Stockbridge Family Medical - Stockbridge, GA
 
Feb. 2014
 
1
 
19,822

 
65.7%
 
3.8
 
3,120

Creekside Medical Office Building - Douglasville, GA
 
Apr. 2014
 
1
 
54,899

 
87.6%
 
7.2
 
10,030

Bowie Gateway Medical Center - Bowie, MD
 
May 2014
 
1
 
36,260

 
100.0%
 
6.2
 
12,450

Campus at Crooks & Auburn Building D - Rochester Hills, MI
 
May 2014
 
1
 
24,529

 
88.9%
 
5.3
 
5,000

Medical Center of New Windsor - New Windsor, NY
 
May 2014
 
1
 
48,377

 
80.8%
 
4.6
 
11,590

Plank Medical Center - Clifton Park, NY
 
May 2014
 
1
 
24,835

 
84.4%
 
0.3
 
4,530

Cushing Center - Schenectady, NY
 
May 2014
 
1
 
45,301

 
95.3%
 
5.2
 
13,200

Berwyn Medical Center - Berwyn, IL
 
May 2014
 
1
 
42,779

 
100.0%
 
6.8
 
11,000

Countryside Medical Arts - Safety Harbor, FL
 
May 2014
 
1
 
50,972

 
100.0%
 
10.3
 
9,342

St. Andrews Medical Park - Venice, FL.
 
May 2014
 
3
 
60,441

 
95.3%
 
3.5
 
13,308

Campus at Crooks & Auburn Building C - Rochester Hills, MI
 
Jun. 2014
 
1
 
24,224

 
100.0%
 
7.5
 
5,250

Slingerlands Crossing Phase I - Bethlehem, NY
 
Jun. 2014
 
1
 
43,173

 
93.1%
 
6.6
 
10,600

Slingerlands Crossing Phase II - Bethlehem, NY
 
Jun. 2014
 
1
 
47,696

 
100.0%
 
6.5
 
12,175

UC Davis Medical Office Building - Elk Grove, CA
 
Jul. 2014
 
1
 
25,861

 
100.0%
 
8.6
 
10,049

Laguna Professional Center - Elk Grove, CA
 
Jul. 2014
 
2
 
41,932

 
96.3%
 
3.5
 
17,451

Benedictine Cancer Center - Kingston, NY
 
Aug. 2014
 
1
 
36,479

 
100.0%
 
15.2
 
11,200

Arrowhead Medical Plaza I - Glendale, AZ
 
Sep. 2014
 
1
 
34,172

 
57.0%
 
4.4
 
8,100

Cardiovascular Consultants of Cape Girardeau Medical Office Building- Cape Girardeau, MO
 
Sep. 2014
 
1
 
28,634

 
100.0%
 
4.3
 
8,500

Fredericksen Outpatient Center Clinical Building - Mechanicsburg, PA
 
Sep. 2014
 
1
 
69,437

 
100.0%
 
12.0
 
24,065

Brady MOB - Harrisburg, PA
 
Sep. 2014
 
1
 
92,413

 
100.0%
 
12.0
 
26,370

Community Health MOB - Harrisburg, PA
 
Sep. 2014
 
1
 
48,212

 
100.0%
 
12.0
 
7,020

Fredericksen Outpatient Center I - Mechanicsburg, PA
 
Sep. 2014
 
1
 
56,057

 
100.0%
 
4.7
 
11,255

Fredericksen Outpatient Center II - Mechanicsburg, PA
 
Sep. 2014
 
1
 
64,259

 
100.0%
 
9.4
 
20,585

Total Medical Office Buildings
 
 
 
33
 
1,179,996

 
94.6%
 
7.3
 
309,576

Triple-Net Leased Buildings:
 
 
 
 
 
 
 
 
 
 
 
 
Ouachita Community Hospital - West Monroe, LA
 
Jul. 2013
 
1
 
17,830

 
100.0%
 
9.4
 
6,834

CareMeridian - Littleton, CO
 
Aug. 2013
 
1
 
27,630

 
100.0%
 
12.8
 
11,275

Big Spring Care Center - Humansville, MO
 
Jul. 2014
 
1
 
19,832

 
100.0%
 
14.8
 
6,761

Buffalo Prairie Care Center - Buffalo, MO
 
Jul. 2014
 
1
 
20,070

 
100.0%
 
14.8
 
3,778

Cassville Health Care & Rehab - Cassville, MO
 
Jul. 2014
 
1
 
33,697

 
100.0%
 
14.8
 
3,380

Country Aire Retirement Estates - Lewistown, MO
 
Jul. 2014
 
1
 
23,034

 
100.0%
 
14.8
 
5,568

Edgewood Manor Nursing Home - Raytown, MO
 
Jul. 2014
 
1
 
34,160

 
100.0%
 
14.8
 
2,585

Georgian Gardens - Potosi, MO
 
Jul. 2014
 
1
 
33,682

 
100.0%
 
14.8
 
4,872

Gregory Ridge Living Center - Kansas City, MO
 
Jul. 2014
 
1
 
46,121

 
100.0%
 
14.8
 
5,369

Marshfield Care Center - Marshfield, MO
 
Jul. 2014
 
1
 
23,383

 
100.0%
 
14.8
 
3,878

Parkway Health Care Center - Kansas City, MO
 
Jul. 2014
 
1
 
30,673

 
100.0%
 
14.8
 
6,164

Buchanan Meadows - Buchanan, MI
 
Aug. 2014
 
1
 
25,577

 
100.0%
 
14.9
 
7,384

Crystal Springs - Kentwood, MI
 
Aug. 2014
 
1
 
36,756

 
100.0%
 
14.9
 
15,377

Golden Orchards - Fennville, MI
 
Aug. 2014
 
1
 
25,811

 
100.0%
 
14.9
 
5,823

Lakeside Vista - Holland, MI
 
Aug. 2014
 
1
 
110,401

 
100.0%
 
14.9
 
12,742

Liberty Court - Dixon, IL
 
Aug. 2014
 
1
 
19,541

 
100.0%
 
14.9
 
2,123

Prestige Centre - Buchanan, MI
 
Aug. 2014
 
1
 
14,800

 
100.0%
 
14.9
 
2,552

Prestige Commons - Chesterfield Twp, MI
 
Aug. 2014
 
1
 
39,995

 
100.0%
 
14.9
 
5,752


30
Table of Contents

Portfolio
 
Acquisition
Date
 
Number
of Properties
 
Rentable
Square Feet
 
Occupancy
 
Remaining
Lease Term  (1)
 
Base Purchase Price  (2)
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Prestige Pines - Dewitt, MI
 
Aug. 2014
 
1
 
24,847

 
100.0%
 
14.9
 
3,598

Prestige Place - Clare, MI
 
Aug. 2014
 
1
 
10,760

 
100.0%
 
14.9
 
1,266

Prestige Point - Grand Blanc, MI
 
Aug. 2014
 
1
 
15,817

 
100.0%
 
14.9
 
3,363

Prestige Way - Holt, MI
 
Aug. 2014
 
1
 
15,185

 
100.0%
 
14.9
 
5,883

The Atrium - Rockford, IL
 
Aug. 2014
 
1
 
21,862

 
100.0%
 
14.9
 
4,830

Waldon Woods - Wyoming, MI
 
Aug. 2014
 
1
 
49,270

 
100.0%
 
14.9
 
6,320

Whispering Woods - Grand Rapids, MI
 
Aug. 2014
 
1
 
82,654

 
100.0%
 
14.9
 
13,187

Golden Years - Harrisonville, MO
 
Sep. 2014
 
1
 
47,670

 
100.0%
 
14.8
 
9,644

Landis Memorial - Harrisburg, PA
 
Sep. 2014
 
1
 
314,790

 
100.0%
 
12.0
 
42,565

Total Triple-Net Leased Buildings
 
 
 
27
 
1,165,848

 
100.0%
 
14.1
 
202,873

Seniors Housing Communities:
 
 
 
 
 
 
 
 
 
 
 
 
Horizon Bay Memory Care by the Bay - Tampa, FL
 
Jul. 2014
 
1
 
56,996

 
99.3%
 
N/A
 
24,200

Autumn Ridge of Clarkston - Clarkston, MI
 
Aug. 2014
 
1
 
68,725

 
93.0%
 
N/A
 
22,000

Sunnybrook of Burlington - Burlington, IA
 
Aug. 2014
 
1
 
52,678

 
95.5%
 
N/A
 
18,490

Sunnybrook of Carroll - Carroll, IA
 
Aug. 2014
 
1
 
38,185

 
97.8%
 
N/A
 
12,600

Sunnybrook of Fairfield - Fairfield, IA
 
Aug. 2014
 
1
 
52,857

 
90.5%
 
N/A
 
15,500

Sunnybrook of Ft. Madison - Ft. Madison, IA
 
Aug. 2014
 
1
 
38,947

 
93.5%
 
N/A
 
10,400

Sunnybrook of Mt. Pleasant - Mt. Pleasant, IA
 
Aug. 2014
 
1
 
38,835

 
100.0%
 
N/A
 
12,000

Sunnybrook of Muscatine - Muscatine, IA
 
Aug. 2014
 
1
 
53,484

 
96.9%
 
N/A
 
15,200

Prairie Hills at Cedar Rapids - Cedar Rapids, IA
 
Aug. 2014
 
1
 
50,000

 
91.1%
 
N/A
 
9,500

Prairie Hills at Clinton - Clinton, IA
 
Aug. 2014
 
1
 
55,791

 
98.6%
 
N/A
 
21,175

Prairie Hills at Des Moines - Des Moines, IA
 
Aug. 2014
 
1
 
58,366

 
56.8%
 
N/A
 
15,000

Prairie Hills at Tipton - Tipton, IA
 
Aug. 2014
 
1
 
39,194

 
84.8%
 
N/A
 
11,400

Prairie Hills at Independence - Independence, IA
 
Aug. 2014
 
1
 
44,624

 
84.5%
 
N/A
 
11,800

Prairie Hills at Ottumwa - Ottumwa, IA
 
Aug. 2014
 
1
 
40,939

 
100.0%
 
N/A
 
10,500

Diamond View Assisted Living Community - Meridian, ID
 
Sep. 2014
 
1
 
55,846

 
92.5%
 
N/A
 
8,700

Benton House - Brunswick - Brunswick, GA
 
Sep. 2014
 
1
 
33,847

 
66.4%
 
N/A
 
16,741

Benton House - Dublin - Dublin, GA
 
Sep. 2014
 
1
 
40,944

 
87.3%
 
N/A
 
10,685

Benton House - Johns Creek - Johns Creek, GA
 
Sep. 2014
 
1
 
38,675

 
85.6%
 
N/A
 
13,915

Benton House - Lee's Summit - Lee's Summit, MO
 
Sep. 2014
 
1
 
48,008

 
98.6%
 
N/A
 
29,584

Benton House - Roswell - Roswell, GA
 
Sep. 2014
 
1
 
40,010

 
91.1%
 
N/A
 
10,498

Benton House - Titusville - Titusville, FL
 
Sep. 2014
 
1
 
45,933

 
75.4%
 
N/A
 
16,317

Allegro at Elizabethtown - Elizabethtown, KY
 
Sep. 2014
 
1
 
58,216

 
91.0%
 
N/A
 
8,743

Allegro at Jupiter - Jupiter, FL
 
Sep. 2014
 
1
 
174,860

 
98.6%
 
N/A
 
57,255

Allegro at St Petersburg - St Petersburg, FL
 
Sep. 2014
 
1
 
194,800

 
84.0%
 
N/A
 
15,546

Allegro at Stuart - Stuart, FL
 
Sep. 2014
 
1
 
218,892

 
92.8%
 
N/A
 
70,223

Allegro at Tarpon - Tarpon Springs, FL
 
Sep. 2014
 
1
 
106,051

 
97.8%
 
N/A
 
17,732

Total Seniors Housing Communities
 
 
 
26
 
1,745,703

 
90.3%
 
N/A
 
485,704

Land:
 
 
 
 
 
 
 
 
 
 
 
 
Sunnybrook of Burlington - Land - Burlington, IA
 
Aug. 2014
 
1
 
N/A

 
N/A
 
N/A
 
610

Allegro at St Petersburg - Land - St Petersburg, FL
 
Sep. 2014
 
1
 
N/A

 
N/A
 
N/A
 
3,000

Total Land
 
 
 
2
 
N/A

 
N/A
 
N/A
 
3,610

Portfolio, September 30, 2014
 
 
 
88
 
4,091,547

 
97.3%
 
10.2
 
$
1,001,763

_______________________________
(1)
Remaining lease term in years as of September 30, 2014 , calculated on a weighted-average basis, as applicable, excluding seniors housing communities.
(2)
Contract purchase price, excluding acquisition related costs.
Results of Operations
We purchased our first property and commenced our real estate operations in May 2013. As of September 30, 2014 , we owned 88 properties with an aggregate purchase price of $1.0 billion , comprised of 4.1 million rentable square feet. As of September 30, 2013 , we owned six properties with an aggregate purchase price of $41.9 million , comprised of 112,672 rentable square feet. Accordingly, our results of operations for the three and nine months ended September 30, 2014 as compared to the three and nine months ended September 30, 2013 reflect significant increases in most categories.

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Table of Contents

Comparison of the Three Months Ended September 30, 2014 to the Three Months Ended September 30, 2013
Rental Income
Rental income was $10.6 million for the three months ended September 30, 2014 , compared to approximately $0.6 million for the three months ended September 30, 2013 . The increase in rental income was directly related to our acquisitions.
Operating Expense Reimbursements
Operating expense reimbursements were $1.0 million for the three months ended September 30, 2014 , compared to $0.1 million for the three months ended September 30, 2013 . Pursuant to many of our lease agreements, tenants are required to pay their pro rata share of property operating expenses, in addition to base rent, whereas under certain other lease agreements, the tenants are generally directly responsible for all operating costs of the respective properties. The increase in operating expense reimbursements was directly related to our acquisitions.
Resident Services and Fee Income
Resident services and fee income of $0.2 million for the three months ended September 30, 2014 relates to services offered to residents in our seniors housing communities depending on the level of care required, as well as fees associated with other ancillary services. We did not own any seniors housing communities and therefore did not have any resident services and fee income for the three months ended September 30, 2013 .
Property operating expenses
Property operating expenses were $4.2 million for the three months ended September 30, 2014 , compared to $0.1 million for the three months ended September 30, 2013 . These costs primarily relate to the costs associated with maintaining our properties, including real estate taxes, utilities, repairs, maintenance and unaffiliated third party property management fees, as well as costs relating to caring for the residents in our seniors housing communities. The increase in property operating expenses was directly related to our acquisitions.
Acquisition and Transaction Related Expenses
Acquisition and transaction related expenses of $17.9 million for the three months ended September 30, 2014 related to our acquisition of 64 properties with an aggregate purchase price of $818.7 million . Acquisition and transaction related expenses of $0.5 million for the three months ended September 30, 2013 , related to our acquisition of four properties for an aggregate purchase price of $34.6 million .
General and Administrative Expenses
General and administrative expenses were $1.2 million for the three months ended September 30, 2014 , compared to approximately $49,000 for the three months ended September 30, 2013 . Professional fees and federal and state taxes increased $0.9 million in order to support our larger real estate portfolio. In addition, the Advisor absorbed $0.3 million in general and administrative expenses during the three months ended September 30, 2013 . No general and administrative expense was absorbed by the Advisor during the three months ended September 30, 2014 .
Depreciation and Amortization Expenses
Depreciation and amortization expense was $7.4 million for the three months ended September 30, 2014 , compared to $0.4 million for the three months ended September 30, 2013 . The increase in depreciation and amortization expense related to our acquisitions. The purchase price of acquired properties is allocated to tangible and identifiable intangible assets and depreciated or amortized over the estimated useful lives of the properties.
Interest Expense
Interest expense of $1.4 million for the three months ended September 30, 2014 related to our mortgage notes payable balance of $66.0 million as of September 30, 2014 , as well as non-usage fees on our senior secured credit facility and the related amortization of deferred financing costs. We did not have any debt and, therefore, did not have interest expense during the three months ended September 30, 2013 .
Income From Investment Securities and Interest Income
Income from investment securities and interest income of $0.3 million for the three months ended September 30, 2014 includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. We did not have any investment securities or interest bearing accounts during the three months ended September 30, 2013 and, therefore, had no income from our investment securities or interest income.

32
Table of Contents

Comparison of the Nine Months Ended September 30, 2014 to the Nine Months Ended September 30, 2013
Rental Income
Rental income was $14.1 million for the nine months ended September 30, 2014 , compared to $0.6 million for the nine months ended September 30, 2013 . The increase in rental income was directly related to our acquisitions.
Operating Expense Reimbursements
Operating expense reimbursements were $1.8 million for the nine months ended September 30, 2014 , compared to $0.1 million for the nine months ended September 30, 2013 . Pursuant to many of our lease agreements, tenants are required to pay their pro rata share of property operating expenses, in addition to base rent, whereas under certain other lease agreements, the tenants are generally directly responsible for all operating costs of the respective properties. The increase in operating expense reimbursements was directly related to acquisitions.
Resident Services and Fee Income
Resident services and fee income of $0.2 million for the nine months ended September 30, 2014 relates to services offered to residents in our seniors housing communities depending on the level of care required, as well as fees associated with other ancillary services. We did not own any seniors housing communities and therefore did not have any resident services and fee income for the nine months ended September 30, 2013 .
Property operating expenses
Property operating expenses were $5.2 million for the nine months ended September 30, 2014 , compared to $0.1 million for the nine months ended September 30, 2013 . These costs primarily relate to the costs associated with maintaining our properties, including real estate taxes, utilities, repairs, maintenance and unaffiliated third party property management fees, as well as costs relating to caring for the residents in our seniors housing communities. The increase in property operating expenses was directly related to acquisitions.
Acquisition and Transaction Related Expenses
Acquisition and transaction related expenses of $20.9 million for the nine months ended September 30, 2014 , related to our acquisition of 81 properties with an aggregate purchase price of $955.5 million . Acquisition and transaction related expenses of $0.7 million for the nine months ended September 30, 2013 , related to our acquisition of six properties for a aggregate purchase price of $41.9 million .
General and Administrative Expenses
General and administrative expenses were $2.2 million for the nine months ended September 30, 2014 , compared to $0.1 million for the nine months ended September 30, 2013 . Professional fees, federal and state taxes, board member compensation and insurance costs increased $1.7 million in order to support our larger real estate portfolio. In addition, the Advisor absorbed $0.5 million in general and administrative expenses during the nine months ended September 30, 2013 . No general and administrative expense was absorbed by the Advisor during the nine months ended September 30, 2014 .
Depreciation and Amortization Expenses
Depreciation and amortization expense was $10.6 million for the nine months ended September 30, 2014 , compared to $0.4 million for the nine months ended September 30, 2013 . The increase in depreciation and amortization expense related to our acquisitions. The purchase price of acquired properties is allocated to tangible and identifiable intangible assets and depreciated or amortized over the estimated useful lives of the properties.
Interest Expense
Interest expense of $2.2 million for the nine months ended September 30, 2014 related to our mortgage notes payable balance of $66.0 million as of September 30, 2014 , as well as non-usage fees on our senior secured credit facility and the related amortization of deferred financing costs. We did not have any debt and, therefore, did not have interest expense during the nine months ended September 30, 2013 .
Income From Investment Securities and Interest Income
Income from investment securities and interest income of $0.3 million for the nine months ended September 30, 2014 includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. We did not have any investment securities or interest bearing accounts during the nine months ended September 30, 2013 and, therefore, had no income from our investment securities or interest income.

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Cash Flows for the Nine Months Ended September 30, 2014
During the nine months ended September 30, 2014 , net cash used in operating activities was $10.0 million . The level of cash flows used in or provided by operating activities is affected by the volume of acquisition activity, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses. Cash flows used in operating activities during the nine months ended September 30, 2014 included $20.9 million of acquisition and transaction costs. Cash outflows related to a net loss adjusted for non-cash items of $13.6 million (net loss of $24.8 million adjusted for non-cash items including depreciation and amortization of tangible and intangible real estate assets and mortgage premiums and share based compensation of $11.2 million ) and an increase in prepaid and other assets of $6.2 million due to rent and other receivables, unbilled receivables recorded in accordance with straight-line basis accounting and prepaid real estate taxes and insurance. These cash outflows were partially offset by an increase in accounts payable and accrued expenses of $8.5 million primarily related to accrued real estate taxes and accrued property operating expenses for our medical office buildings and seniors housing communities and $1.2 million in deferred rent.
Net cash used in investing activities during the nine months ended September 30, 2014 was $915.2 million . The cash used in investing activities included $886.1 million to acquire 81 properties. Net cash used in investing activities also included $0.1 million of capital expenditures, $10.5 million for deposits on pending real estate acquisitions and $18.6 million for the purchase of investment securities.
Net cash provided by financing activities of $1.6 billion during the nine months ended September 30, 2014 related to proceeds, net of receivables, from the issuance of common stock of $1.8 billion , partially offset by payments made on mortgage notes payable of $0.3 million , payments of deferred financing costs of $5.4 million , payments for common stock repurchases of $0.3 million , payments related to offering costs of $203.6 million , distributions paid to stockholders of $19.5 million , payments to affiliates for advances to fund offering costs of $0.5 million and increases in restricted cash of $1.9 million . 
Cash Flows for the Nine Months Ended September 30, 2013
During the nine months ended September 30, 2013, net cash used in operating activities was $0.2 million. The level of cash flows used in or provided by operating activities is affected by the volume of acquisition activity and the receipt of scheduled rent payments. Cash flows used in operating activities during the nine months ended September 30, 2013 included $0.7 million of acquisition and transaction costs. Cash outflows included a net loss adjusted for non-cash items of $0.2 million (net loss of $0.6 million adjusted for non-cash items including depreciation and amortization of tangible and intangible real estate assets and share based compensation of $0.4 million) and an increase in prepaid expenses of $0.4 million primarily related to real estate taxes, insurance, rent receivable and unbilled rent receivables recorded in accordance with accounting for rental income on a straight-line basis. These cash outflows were partially offset by cash inflows that consisted of an increase in accounts payable and accrued expenses of $0.3 million related to accrued real estate taxes and accrued professional fees, and deferred rent of $0.1 million.
The net cash used in investing activities during the nine months ended September 30, 2013 of $42.0 million related to the acquisition of six properties with an aggregate purchase price of $41.9 million. Net cash used in investing activities also included a deposit on an acquisition of $0.2 million, which closed in October 2013.
Net cash provided by financing activities of $80.1 million during the nine months ended September 30, 2013 related to proceeds, net of receivables, from the issuance of common stock of $91.9 million, partially offset by net advances from affiliates of $0.4 million, payments related to offering costs of $11.0 million and $0.4 million in distributions paid to stockholders.
Liquidity and Capital Resources
Pursuant to the IPO, we are offering and selling up to $1.7 billion in shares of our common stock to the public, until the NAV pricing date, at $25.00 per share (including the maximum allowed to be charged for commissions and fees). We are also offering up to 14.7 million shares of our common stock to be issued pursuant to our DRIP, under which our stockholders may elect to have distributions reinvested in additional shares. We reserve the right to reallocate shares covered in the Registration Statement between the IPO and the DRIP. On July 23, 2014, we announced the reallocation of 13.9 million of our approximately 14.2 million remaining unsold shares available pursuant to the DRIP. On August 1, 2014, we registered an additional 25.0 million shares to be issued under the DRIP pursuant to a registration statement on Form S-3. Commencing with the NAV pricing date, the per share purchase price in the IPO will vary quarterly and will be equal to the NAV per share, as determined by the Advisor, plus applicable commissions and fees and the per share purchase price in the DRIP will be equal to the NAV per share. As of September 30, 2014 , we had 81.5 million shares of common stock outstanding, including unvested restricted shares and shares issued pursuant to the DRIP, and had received total gross proceeds from the IPO and the DRIP of $2.0 billion .

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On March 21, 2014, we entered into a senior secured credit facility in the amount of $50.0 million (the "Credit Facility"). On April 15, 2014, we entered into an increase letter, increasing the amount available under the Credit Facility to $200.0 million. The Credit Facility contains an "accordion" feature to allow us, under certain circumstances, to increase the aggregate commitments under the Credit Facility to a maximum of $450.0 million. The Credit Facility matures on March 21, 2017, subject to two one-year extension options. There were no advances outstanding as of September 30, 2014 . Availability of borrowings is based on a pool of eligible unencumbered real estate assets. We plan to add our unencumbered acquisitions to the borrowing base of the Credit Facility during the fourth quarter of 2014. As of September 30, 2014 , we had no assets assigned to the Credit Facility.
As of September 30, 2014 , we had cash of $766.1 million , which we expect to use to fund acquisitions. We expect cash flows from operations and the sale of common stock to be used primarily to invest in additional real estate, pay debt service, pay operating expenses and pay stockholder distributions. As of October 31, 2014, we had raised $2.1 billion in our IPO, which we expect to close during the fourth quarter of 2014. We expect to utilize the net proceeds from the sale of our common stock and proceeds from our Credit Facility and secured financings to fund future property acquisitions.
Generally, we will fund our acquisitions from the net proceeds of our IPO. We intend to acquire our assets with cash advances under our Credit Facility and mortgage or other debt proceeds, but we also may acquire assets free and clear of permanent mortgage or other indebtedness by paying the entire purchase price for the asset in cash or in OP Units. As of October 31, 2014 , we owned 96 properties with an aggregate purchase price of $1.1 billion . We currently have $514.2 million of assets under contract and executed letters of intent. Pursuant to the terms of the purchase and sale agreements and letters of intent, our obligation to close upon these acquisitions is subject to certain conditions customary to closing, including the successful completion of due diligence and fully negotiated binding agreements. We may decide to temporarily invest any unused proceeds from common stock offerings in certain investments that could yield lower returns than the properties. These lower returns may affect our ability to make distributions.
We expect to fund our future short-term operating liquidity requirements through a combination of net cash provided by our current property operations and the operations of properties to be acquired in the future, proceeds from our Credit Facility and secured mortgage financings. Once we have used all the proceeds from the IPO to acquire properties, management expects that cash flow from our properties will be sufficient to fund operating expenses and the payment of our monthly distributions. Other potential future sources of capital include proceeds from secured and unsecured financings from banks or other lenders, proceeds from public and private offerings, proceeds from the sale of properties and undistributed funds from operations.
We expect to use debt financing as a source of capital. Under our charter, the maximum amount of our total indebtedness may not exceed 300% of our total "net assets" (as defined in our charter) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments. We may exceed that limit if approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report on Form 10-Q or annual report on Form 10-K, as applicable, following such borrowing along with justification for exceeding such limit. This charter limitation, however, does not apply to individual real estate assets or investments. In addition, it is currently our intention to limit our aggregate borrowings to 45% of the aggregate fair market value of our assets (calculated after the close of our IPO and once we have invested substantially all the proceeds of our IPO), unless borrowing a greater amount is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report following such borrowing along with justification for borrowing such a greater amount. This limitation, however, will not apply to individual real estate assets or investments. At the date of acquisition of each asset, we anticipate that the cost of investment for such asset will be substantially similar to its fair market value, which will enable us to satisfy our requirements under our charter. However, subsequent events, including changes in the fair market value of our assets, could result in our exceeding these limits.
Once our NAV exceeds $1.0 billion, in the aggregate, we intend to maintain 5% of the overall value of our portfolio in liquid assets. However, our stockholders should not expect that we will maintain liquid assets at or above this level. To the extent that we maintain borrowing capacity under our Credit Facility, such available amount will be included in calculating our liquid assets. Our Advisor will consider various factors in determining the amount of liquid assets we should maintain, including, but not limited to, our receipt of proceeds from sales of additional shares, our cash flow from operations, available borrowing capacity under our Credit Facility, if any, our receipt of proceeds from any asset sale, and the use of cash to fund repurchases. The board of directors will review the amount and sources of liquid assets on a quarterly basis.

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Our board of directors has adopted a Share Repurchase Program ("SRP") that enables our stockholders to sell their shares to us under limited circumstances. At the time a stockholder requests a repurchase, we may, subject to certain conditions, repurchase the shares presented for repurchase for cash to the extent we have sufficient funds available to fund such purchase. There are limits on the number of shares we may repurchase under this program during any 12-month period. Further, we are only authorized to repurchase shares using the proceeds secured from the DRIP in any given quarter. The following table reflects the number of shares repurchased under the Company's SRP cumulatively through September 30, 2014 :
 
 
Number of Requests
 
Number of Shares Repurchased
 
Average Price per Share
Cumulative repurchases as of December 31, 2013
 
2

 
1,600

 
$
25.00

Nine months ended September 30, 2014 (1)
 
19

 
19,029

 
24.97

Cumulative repurchases as of September 30, 2014 (1)
 
21

 
20,629

 
$
24.97

_____________________________
(1) Includes eight unfulfilled repurchase requests consisting of 8,866 shares at an average repurchase price per share of $24.97 , which were approved for repurchase as of September 30, 2014 and are expected to be completed in November 2014 .
Acquisitions
As of October 31, 2014 , we owned 96 properties with an aggregate purchase price of $1.1 billion . We currently have $514.2 million of assets under contract and executed letters of intent. Pursuant to the terms of the purchase and sale agreements and letters of intent, our obligation to close upon these acquisitions is subject to certain conditions customary to closing, including the successful completion of due diligence and fully negotiated binding agreements. There can be no assurance that we will complete these acquisitions.
Funds from Operations and Modified Funds from Operations
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a measure known as funds from operations ("FFO"), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to net income or loss as determined under accounting principles generally accepted in the United States ("GAAP").
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment writedowns, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT's policy described above.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Additionally, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indicators exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, because impairments are based on estimated undiscounted future cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges.

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Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and modified funds from operations ("MFFO"), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.
There have been changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT's definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. We are using the proceeds raised in our offering to, among other things, acquire properties. We intend to begin the process of achieving a liquidity event (i.e., listing of our common stock on a national stock exchange, a merger or sale or another similar transaction) within three to five years of the completion of the offering. Thus, unless we raise, or recycle, a significant amount of capital after we complete our offering, we will not be continuing to purchase assets at the same rate as during our offering. Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association ("IPA"), an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to purchase a significant amount of new assets after we complete our offering. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is stabilized. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our IPO has been completed and our portfolios have been stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our IPO and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. MFFO should only be used to assess the sustainability of our operating performance after our IPO has been completed and our portfolio has been stabilized because it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.
We define MFFO, a non-GAAP measure, consistent with the IPA's Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations ("Practice Guideline") issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

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Our MFFO calculation complies with the IPA's Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to non-controlling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued acquisition fees and expenses negatively impact our operating performance during the period in which properties are acquired and negatively impact the returns earned on an investment in our shares, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. Therefore, MFFO may not be an accurate indicator of our operating performance, during periods in which properties are being acquired. MFFO that excludes such costs and expenses would only be comparable to that of non-listed REITs that have completed their acquisition activities and have similar operating characteristics as us. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives as items which are unrealized. We view both gains and losses from dispositions of assets and fair value adjustments of derivatives as items which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to our investors. Acquisition fees and expenses will not be reimbursed by our Advisor if there are no further proceeds from the sale of shares in our offering, and therefore such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows.
Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other non-listed REITs with similar acquisition periods and targeted exit strategies. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to acquire and manage properties. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to non-listed REITs, such as a limited and defined acquisition period. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management's analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.
Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO has limitations as a performance measure while an offering is ongoing such as our offering where the price of a share of common stock is a stated value and there is no NAV determination during the offering stage and for a period thereafter. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and NAV is disclosed. FFO and MFFO are not useful measures in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO or MFFO.
Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.

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The table below reflects the items deducted or added to net loss in our calculation of FFO and MFFO for the period indicated:
 
 
Three Months Ended
 
Nine Months Ended
(In thousands)
 
March 31,
2014
 
June 30,
2014
 
September 30,
2014
 
September 30, 2014
Net loss (in accordance with GAAP)
 
$
(582
)
 
$
(4,147
)
 
$
(20,023
)
 
$
(24,752
)
Depreciation and amortization
 
857

 
2,381

 
7,391

 
10,629

FFO
 
275

 
(1,766
)
 
(12,632
)
 
(14,123
)
Acquisition fees and expenses (1)
 
404

 
2,599

 
17,884

 
20,887

Amortization of above or accretion of below market leases and liabilities, net (2)
 
15

 
22

 
14

 
51

Straight-line rent (3)
 
(80
)
 
(117
)
 
(462
)
 
(659
)
Accretion of discount/amortization of premiums
 
—

 
(106
)
 
(281
)
 
(387
)
MFFO
 
$
614

 
$
632

 
$
4,523

 
$
5,769

______________________________
(1) In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management's analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our Advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property.
(2) Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges relating to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate.
(3) Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, providing insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management's analysis of operating performance.
Distributions
On April 9, 2013, our board of directors authorized, and we declared, distributions payable to stockholders of record each day during the applicable period at a rate equal to $0.0046575343 per day, or 6.8% per annum, based on a price of $25.00 per share of common stock. Distributions began to accrue on May 24, 2013, 15 days following our initial property acquisition. Distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month.
The amount of distributions payable to our stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for distribution, our financial condition, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to qualify and maintain our status as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). Distribution payments are dependent on the availability of funds. Our board of directors may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.

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During the nine months ended September 30, 2014 , distributions paid to common stockholders totaled $42.0 million , inclusive of $22.5 million of distributions reinvested through the DRIP. During the nine months ended September 2014 , cash used to pay distributions was generated from net proceeds from our offering.
The following table shows the sources for the payment of distributions to common stockholders, including distributions on unvested restricted stock, for the periods indicated:
 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31, 2014
 
June 30, 2014
 
September 30, 2014
 
September 30, 2014
(In thousands)
 
 
 
Percentage of Distributions
 
 
 
Percentage of Distributions
 
 
 
Percentage of Distributions
 
 
 
Percentage of Distributions
Distributions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions paid in cash
 
$
1,923

 
 
 
$
5,481

 
 
 
$
12,068

 
 
 
$
19,472

 
 
Distributions reinvested
 
2,047

 
 
 
6,060

 
 
 
14,393

 
 
 
22,500

 
 
Distributions on unvested restricted stock
 
2

 
 
 
1

 
 
 
1

 
 
 
4

 
 
Total distributions
 
$
3,972

 
 
 
$
11,542

 
 
 
$
26,462

 
 
 
$
41,976

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source of distribution coverage:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows provided by (used in) operations (1)
 
$
1,301

 
32.8
%
 
$
(163
)
 
(1.4
)%
 
$
(1,138
)
 
(4.3
)%
 
$
—

 
—
%
Proceeds from issuance of common stock
 
624

 
15.7
%
 
5,645

 
48.9
 %
 
13,207

 
49.9
 %
 
19,476

 
46.4
%
Common stock issued under the DRIP / offering proceeds
 
2,047

 
51.5
%
 
6,060

 
52.5
 %
 
14,393

 
54.4
 %
 
22,500

 
53.6
%
Proceeds from financings
 
—

 
—
%
 
—

 
—
 %
 
—

 
—
 %
 
—

 
—
%
Total source of distribution coverage
 
$
3,972

 
100.0
%
 
$
11,542

 
100.0
 %
 
$
26,462

 
100.0
 %
 
$
41,976

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows provided by operations (GAAP basis) (1)
 
$
1,301

 
 
 
$
(163
)
 
 
 
$
(11,182
)
 
 
 
$
(10,044
)
 
 
Net loss (in accordance with GAAP)
 
$
(582
)
 
 
 
$
(4,147
)
 
 
 
$
(20,023
)
 
 
 
$
(24,752
)
 
 
______________________________
(1) Cash flows used in operations for the three months ended March 31, 2014 , June 30, 2014 and September 30, 2014 and for the nine months ended September 30, 2014 reflect acquisition and transaction related expenses of $0.4 million , $2.6 million , $17.9 million and $20.9 million , respectively.

For the nine months ended September 30, 2014 , cash flows used in operations were $10.0 million . As shown in the table above, we funded distributions with proceeds from our IPO as well as proceeds from our IPO which were reinvested in common stock issued under our DRIP. To the extent we pay distributions in excess of cash flows provided by operations, our stockholders' investment may be adversely impacted. Since inception, our cumulative distributions have exceeded our cumulative FFO. See “Risk Factors - Distributions paid from sources other than our cash flows from operations, particularly from proceeds of our IPO, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments and may dilute our stockholders' interests in us, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect our stockholders' overall return.” under Item 1A in this Quarterly Report on Form 10-Q.

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Table of Contents

The following table compares cumulative distributions paid to cumulative net loss and cumulative cash flows provided by operations (in accordance with GAAP) for the period from October 15, 2012 (date of inception) through September 30, 2014 :
 
 
For the Period
from October 15, 2012
(date of inception) to
(In thousands)
 
September 30, 2014
Distributions paid:
 
 
Common stockholders in cash
 
$
20,775

Common stockholders pursuant to DRIP/offering proceeds
 
23,845

Unvested restricted stock
 
7

Total distributions paid
 
$
44,627

 
 
 
Reconciliation of net loss:
 
 
Revenues
 
$
17,891

Acquisition and transaction related
 
(21,617
)
Depreciation and amortization
 
(11,706
)
Other operating expenses
 
(7,689
)
Other non-operating expenses
 
(1,867
)
Net loss (in accordance with GAAP) (1)
 
$
(24,988
)
 
 
 
Cash flows provided by operations
 
$
(10,808
)
 
 
 
FFO
 
$
(13,220
)
_____________________
(1) Net loss as defined by GAAP includes the non-cash impact of depreciation and amortization expense as well as costs incurred relating to acquisitions and related transactions.
Loan Obligations
The payment terms of our loan obligations require principal and interest amounts payable monthly with all unpaid principal and interest due at maturity. Our loan agreements stipulate that we comply with specific reporting covenants. As of September 30, 2014 , we were in compliance with the debt covenants under our loan agreements.
Our Advisor may, with approval from our independent board of directors, seek to borrow short-term capital that, combined with secured mortgage financing, exceeds our targeted leverage ratio. Such short-term borrowings may be obtained from third-parties on a case-by-case basis as acquisition opportunities present themselves. We view the use of short-term borrowings, including advances under our credit facility, as an efficient and accretive means of acquiring real estate. Our secured debt leverage ratio (total secured debt, divided by the base purchase price of acquired real estate investments) was approximately 6.6% as of September 30, 2014 .

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Table of Contents

Contractual Obligations
The following table reflects contractual debt obligations under our mortgage notes payable and minimum base rental cash payments due for leasehold interests over the next five years and thereafter as of September 30, 2014 . These minimum base rental cash payments due for leasehold interests amounts exclude contingent rent payments, as applicable, that may be payable based on provisions related to increases in annual rent based on exceeding certain economic indexes among other items. As of September 30, 2014 , the outstanding mortgage notes payable had weighted average effective interest rates of 6.15% . As of September 30, 2014 , we had no advances outstanding under the Credit Facility.
 
 
 
 
October 1, 2014 — December 31, 2014
 
Years Ended December 31,
 
 
(In thousands)
 
Total
 
 
2015 — 2016
 
2017 — 2018
 
Thereafter
Principal on mortgage notes payable
 
$
66,028

 
$
235

 
$
20,367

 
$
33,408

 
$
12,018

Interest on mortgage notes payable
 
11,565

 
1,013

 
7,233

 
3,060

 
259

Lease rental payments due
 
12,382

 
43

 
348

 
362

 
11,629

 
 
$
89,975

 
$
1,291

 
$
27,948

 
$
36,830

 
$
23,906

Election as a REIT  
We elected and qualified to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2013. We believe that, commencing with such taxable year, we are organized and operate in such a manner as to qualify for taxation as a REIT under the Code. We intend to continue to operate in such a manner to qualify for taxation as a REIT, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified as a REIT. In order to qualify and continue to qualify, for taxation as a REIT, we must distribute annually at least 90% of our REIT taxable income. REITs are also subject to a number of other organizational and operational requirements. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties as well as federal income and excise taxes on our undistributed income.
Inflation
We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions. In addition, we may be required to pay costs for maintenance and operation of properties which may adversely impact our results of operations due to potential increases in costs and operating expenses resulting from inflation.
Related-Party Transactions and Agreements
We have entered into agreements with affiliates of our Sponsor, under which we have paid or may in the future pay certain fees or reimbursements to our Advisor, its affiliates and entities under common control with our Advisor in connection with acquisition and financing activities, sales and maintenance of common stock under our IPO, transfer agency services, asset and property management services and reimbursement of operating and offering related costs. See Note 10 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related party transactions, agreements and fees.
In addition, the limited partnership agreement of the OP provides for a special allocation, solely for tax purposes, of excess depreciation deductions of up to $10.0 million to our Advisor, a limited partner of the OP.  In connection with this special allocation, our Advisor has agreed to restore a deficit balance in its capital account in the event of a liquidation of the OP and has agreed to provide a guaranty or indemnity of indebtedness of the OP. Our Advisor is directly or indirectly controlled by certain of our officers and directors.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The market risk associated with financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our long-term debt, which consists of secured financings and our Credit Facility (which had no advances outstanding as of September 30, 2014 ), bears interest at fixed rates and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars, and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We do not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.
As of September 30, 2014 , our debt included fixed-rate secured mortgage financings with a carrying value of $69.2 million and a fair value of $69.6 million . Changes in market interest rates on our fixed-rate debt impact the fair value of the notes, but it has no impact on interest due on the notes. For instance, if interest rates rise 100 basis points and our fixed rate debt balance remains constant, we expect the fair value of our obligation to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed–rate debt assumes an immediate 100 basis point move in interest rates from their September 30, 2014 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed-rate debt by $1.3 million . A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt by $1.1 million .
These amounts were determined by considering the impact of hypothetical interest rates changes on our borrowing costs, and assuming no other changes in our capital structure. The information presented above includes only those exposures that existed as of September 30, 2014 and does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.
Item 4. Controls and Procedures.
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that the disclosure controls and procedures are effective.
No change occurred in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended September 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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Table of Contents

PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 1A. Risk Factors.
Our potential risks and uncertainties are presented in the section entitled "Item 1A. Risk Factors," disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013 . The following additional risk factors should be considered regarding our potential risks and uncertainties:
Recent disclosures made by American Realty Capital Properties, Inc., or ARCP, an entity previously sponsored by the parent of our Sponsor, regarding certain accounting errors may affect our ability to raise capital.
ARCP recently filed a Form 8-K announcing that its audit committee had concluded that the previously issued financial statements and other financial information contained in certain public filings should no longer be relied upon as a result of certain accounting errors that were identified but intentionally not corrected, and other AFFO and financial statement errors that were intentionally made. These accounting errors resulted in the resignations of ARCP’s former chief financial officer and its former chief accounting officer. ARCP has initiated an investigation into these matters that is ongoing; no assurance can be made regarding the outcome of the investigation. ARCP’s former chief financial officer is one of the non-controlling owners of the parent of our Sponsor.  While ARCP’s former chief financial officer does not have a current role in the management of our Sponsor’s or our business, he did serve as our chief financial officer from October 2012 to December 2013.
As a result of this announcement, a number of broker-dealer firms that had been participating in the distribution of offerings of public, non-listed REITs sponsored directly or indirectly by the parent of our Sponsor have temporarily suspended their participation in the distribution of those offerings. Although we have substantially completed our initial public offering, we may seek to raise additional capital in connection with the operation of our business.  Similarly to other entities sponsored directly or indirectly by the parent of our Sponsor, the recent announcement by ARCP, as well as any future announcements by ARCP, may have an adverse effect on our ability to access capital through, among other things, equity offerings or lending arrangements.  If we are unable to access additional capital it may have a material adverse effect on our business including, among other things, our ability to achieve our investment objectives.
Our stockholders' interest in us may be diluted if the price we pay in respect of shares repurchased under our share repurchase program exceeds the net asset value, at such time as we calculate the NAV of our shares.
The prices we may pay for shares repurchased under our share repurchase program may exceed the NAV of such shares at the time of repurchase, which may reduce the NAV of the remaining shares.
Distributions paid from sources other than our cash flows from operations, particularly from proceeds of our IPO, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments and may dilute our stockholders' interests in us, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect our stockholders' overall return.
Our cash flows used in operations were $10.0 million for the nine months ended September 30, 2014 . During the nine months ended September 30, 2014 , we paid distributions of $42.0 million , of which $19.5 million , or 46.4% , was funded from proceeds from the IPO and $22.5 million , or 53.6% , was funded from proceeds from our IPO which were reinvested in common stock issued under our DRIP. During the nine months ended September 30, 2014 cash flow from operations included an increase in accounts payable and accrued expenses of $8.5 million , as reflected on the statement of cash flows. Accordingly, if these accounts payable and accrued expenses had been paid during the nine months ended September 30, 2014 , there would have been $8.5 million less in cash flow from operations available to pay distributions. Using offering proceeds to pay distributions, especially if the distributions are not reinvested through our DRIP, reduces cash available for investment in assets or other purposes, and reduces our per share stockholders' equity. We may continue to use net offering proceeds to fund distributions.

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Table of Contents

We may not generate sufficient cash flows from operations to pay distributions. If we have not generated sufficient cash flows from our operations and other sources, such as from borrowings, the sale of additional securities, advances from our Advisor, and our Advisor's deferral, suspension or waiver of its fees and expense reimbursements, to fund distributions, we may use the proceeds from our IPO. Moreover, our board of directors may change our distribution policy, in its sole discretion, at any time. Distributions made from offering proceeds are a return of capital to stockholders, from which we will have already paid offering expenses in connection with our IPO. We have not established any limit on the amount of proceeds from our IPO that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would: (1) cause us to be unable to pay our debts as they become due in the usual course of business; (2) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences, if any; or (3) jeopardize our ability to qualify as a REIT.
Funding distributions from borrowings could restrict the amount we can borrow for investments, which may affect our profitability. Funding distributions with the sale of assets or the proceeds of our IPO may affect our ability to generate additional operating cash flows. Funding distributions from the sale of additional securities could dilute each stockholder's interest in us if we sell shares of our common stock or securities that are convertible or exercisable into shares of our common stock to third-party investors. Payment of distributions from the mentioned sources could restrict our ability to generate sufficient cash flows from operations, affect our profitability or affect the distributions payable to stockholders upon a liquidity event, any or all of which may have an adverse effect on an investment in our shares.
We rely significantly on three major tenants (including, for this purpose, all affiliates of such tenants) and therefore, are subject to tenant credit concentrations that make us more susceptible to adverse events with respect to those tenants.
As of September 30, 2014 , the following three major tenants represented annualized rental income on a straight-line basis, which represented 5% or more of our consolidated annualized rental income on a straight-line basis including for this purpose, all affiliates of such tenants:
Tenant
 
Percentage of Straight-Line Rental Income
Meridian Senior Living, LLC
 
18.8%
Pinnacle Health Hospitals
 
21.4%
Platinum Health Care, LLC
 
12.6%
Therefore, the financial failure of any of these tenants could have a material adverse effect on our results of operations and our financial condition. In addition, the value of our investment is driven by the credit quality of the underlying tenant, and an adverse change in either the tenant's financial condition or a decline in the credit rating of such tenant may result in a decline in the value of our investments.
Our property portfolio has a high concentration of properties located in six states. Our properties may be adversely affected by economic cycles and risks inherent to those states.
As of September 30, 2014 , the following six states represented annualized rental income on a straight-line basis, which represented 5% or more of our consolidated annualized rental income on a straight-line basis:
State
 
Percentage of Straight-Line Rental Income
Florida
 
32.0%
Georgia
 
8.0%
Iowa
 
20.9%
Michigan
 
10.0%
Missouri
 
7.0%
Pennsylvania
 
7.4%

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Any adverse situation that disproportionately affects the states listed above may have a magnified adverse effect on our portfolio. Real estate markets are subject to economic downturns, as they have been in the past, and we cannot predict how economic conditions will impact this market in both the short and long term. Declines in the economy or a decline in the real estate market in these states could hurt our financial performance and the value of our properties. Factors that may negatively affect economic conditions in these states include:
•
business layoffs or downsizing;
•
industry slowdowns;
•
relocations of businesses;
•
changing demographics;
•
increased telecommuting and use of alternative work places;
•
infrastructure quality;
•
any oversupply of, or reduced demand for, real estate;
•
concessions or reduced rental rates under new leases for properties where tenants defaulted; and
•
increased insurance premiums.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Registered Securities.
Unregistered Sales of Equity Securities
We did not sell any equity securities that were not registered under the Securities Act during the nine months ended September 30, 2014 .
Use of Proceeds of Registered Securities
On February 14, 2013 we commenced our IPO on a "reasonable best efforts" basis of up to a maximum of $1.7 billion of common stock, consisting of up to 68.0 million shares, pursuant to the Registration Statement (File No. 333-184677) initially filed on October 31, 2012 with the SEC under the Securities Act. The Registration Statement, which was declared effective by the SEC on February 14, 2013, also covers 14.7 million shares of common stock pursuant the DRIP under which common stockholders may elect to have their distributions reinvested in additional shares of common stock. We reserve the right to reallocate shares covered in the Registration Statement between the IPO and the DRIP. On July 23, 2014, we announced the reallocation of 13.9 million of our approximately 14.2 million remaining unsold shares available pursuant to the DRIP. On August 1, 2014, we registered an additional 25.0 million shares to be issued under the DRIP pursuant to a registration statement on Form S-3 (File No. 333-197802). As of September 30, 2014 , we have issued 81.5 million shares of our common stock, including unvested restricted shares and shares issued pursuant to the DRIP, and received $2.0 billion of offering proceeds, including proceeds from shares issued pursuant to the DRIP.
The following table reflects the offering costs associated with the issuance of common stock:
 
 
Nine Months Ended
(In thousands)
 
September 30, 2014
Selling commissions and dealer manager fees
 
$
172,201

Other offering costs
 
32,149

Total offering costs
 
$
204,350

The Dealer Manager may reallow the selling commissions and a portion of the dealer manager fees to participating broker-dealers. The following table details the selling commissions incurred and reallowed related to the sale of shares of common stock:
 
 
Nine Months Ended
(In thousands)
 
September 30, 2014
Total commissions paid to the Dealer Manager
 
$
172,201

Less:
 
 
  Commissions to participating brokers
 
(117,636
)
  Reallowance to participating broker dealers
 
(19,782
)
Net to the Dealer Manager
 
$
34,783


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As of September 30, 2014 , we have incurred $229.1 million of cumulative offering costs in connection with the issuance and distribution of our shares in connection with our IPO. As of September 30, 2014 , cumulative offering costs included $35.0 million of offering costs reimbursements incurred from the Advisor and Dealer Manager, excluding commission and dealer manager fees. The Advisor elected to cap cumulative offering costs incurred by us, net of unpaid amounts, to 15% of gross common stock proceeds during the offering period. Cumulative offering costs, net of unpaid amounts, were less than the 15% threshold as of September 30, 2014 . Cumulative offering proceeds from the sale of common stock exceeded cumulative offering costs by $1.8 billion at September 30, 2014 .
We have used and expect to continue to use substantially all of the net proceeds from our IPO to primarily acquire a diversified portfolio of income producing real estate properties, focusing predominantly on medical office buildings and healthcare-related facilities. We may also originate or acquire first mortgage loans secured by real estate. As of September 30, 2014 , we have used the net proceeds from our IPO to purchase 88 properties with an aggregate contract purchase price of $1.0 billion . We have used and may continue to use net proceeds from our IPO to fund a portion of our distributions. Once we have used all the proceeds from the IPO to acquire properties, management expects that cash flow from our properties will be sufficient to fund operating expenses and the payment of our monthly distributions.
Issuer Purchases of Equity Securities
The following table reflects the number of shares repurchased under the Company's SRP cumulatively through September 30, 2014 :
 
 
Number of Requests
 
Number of Shares Repurchased
 
Average Price per Share
Cumulative repurchases as of December 31, 2013
 
2

 
1,600

 
$
25.00

Nine months ended September 30, 2014 (1)
 
19

 
19,029

 
24.97

Cumulative repurchases as of September 30, 2014 (1)
 
21

 
20,629

 
$
24.97

_____________________________
(1) Includes eight unfulfilled repurchase requests consisting of 8,866 shares at an average repurchase price per share of $24.97 , which were approved for repurchase as of September 30, 2014 and are expected to be completed in November 2014 .
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.

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Table of Contents
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC.
 
By:
/s/ Thomas P. D'Arcy
 
 
Thomas P. D'Arcy
 
 
Chief Executive Officer (Principal Executive Officer)
 
 
 
 
By:
/s/ Edward F. Lange
 
 
Edward F. Lange
 
 
Chief Financial Officer and Chief Operating Officer
(Principal Financial Officer and Principal Accounting Officer)

Dated: November 14, 2014


48
EXHIBITS INDEX

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 (and are numbered in accordance with Item 601 of Regulation S-K):
Exhibit No.
  
Description
10.28 *
 
Agreement for Lease of Real Property, dated as of June 14, 2014, by and between American Realty Capital VII, LLC and Pinnacle Health Hospitals
10.29*
 
First Amendment to Agreement for Lease of Real Property, dated as of July 16, 2014, by and between American Realty Capital VII, LLC and Pinnacle Health Hospitals
10.30*
 
Second Amendment to Agreement for Lease of Real Property, dated as of August 1, 2014, by and between American Realty Capital VII, LLC and Pinnacle Health Hospitals
10.31*
 
Third Amendment to Agreement for Lease of Real Property, dated as of September 26, 2014, by and between American Realty Capital VII, LLC and Pinnacle Health Hospitals
10.33*
 
Agreement of Sale, dated as of June 16, 2014, by and among American Realty Capital Healthcare Trust Operating Partnership, L.P., Leisure Living Properties - Holt, LLC, Leisure Living Properties - Dewitt, LLC, Lifehouse Crystal Manor Property, LLC, Lifehouse Waldon Woods Property, LLC, Lifehouse - Golden Acres Properties, LLC, Lifehouse - Golden Acres Properties II, LLC, Lifehouse Grand Blanc Properties, LLC, Lifehouse Clare Properties, LLC, Lifehouse Mt. Pleasant Properties, LLC, Lifehouse Mt. Pleasant Properties II, LLC, Lifehouse Prestige Commons Properties, LLC, Leisure Living Properties - Buchanan, LLC, Lifehouse Buchanan Property-II, LLC, Leisure Living Properties - Grand Rapids, LLC, Leisure Living Properties - Holland, LLC, Lifehouse - Oakridge Manor Dixon Properties, LLC, Lifehouse - Oakridge Manor Rockford Properties, LLC, (collectively, the “Lifehouse Sellers”), and Lifehouse Holdings, LLC, as representative of the Lifehouse Sellers
10.34*
 
First Amendment to Agreement of Sale, dated as of July 20, 2014, by and among American Realty Capital Healthcare Trust Operating Partnership, L.P., the Lifehouse Sellers and Lifehouse Holdings, LLC, as representative of the Lifehouse Sellers
10.35*
 
Second Amendment to Agreement of Sale, dated as of August 7, 2014, by and among American Realty Capital Healthcare Trust Operating Partnership, L.P., American Realty Capital Healthcare Trust II Operating Partnership, L.P., the Lifehouse Sellers and Lifehouse Holdings, LLC, as representative of the Lifehouse Sellers
10.36*
 
Asset Purchase Agreement, dated as of July 2, 2014, by and between American Realty Capital Healthcare Trust II Operating Partnership, LP and PHBS REALTY, LLC, PHGG REALTY, LLC, PHCA REALTY, LLC, PHKC SWOPE REALTY, LLC, PHKC CLEVELAND REALTY, LLC, PHMC REALTY, LLC, PHDC REALTY, LLC, PHBC REALTY, LLC, PHGY REALTY, LLC and PHEM REALTY, LLC
10.37*
 
First Amendment to Asset Purchase Agreement, dated as of July 30, 2014, by and between American Realty Capital Healthcare Trust II Operating Partnership, LP and PHBS REALTY, LLC, PHGG REALTY, LLC, PHCA REALTY, LLC, PHKC SWOPE REALTY, LLC, PHKC CLEVELAND REALTY, LLC, PHMC REALTY, LLC, PHDC REALTY, LLC, PHBC REALTY, LLC, PHGY REALTY, LLC and PHEM REALTY, LLC
10.38*
 
Asset Purchase Agreement, dated as of August 1, 2014, by and among American Realty Capital Healthcare Trust II Operating Partnership, LP and ECI Acquisition I, LLC, Village Assisted Living, LLC, Mt. Pleasant Assisted Living, LLC, Burlington Assisted Living, LLC, Muscatine Assisted Living, LLC, Carroll Assisted Living, LLC, Ft. Madison Assisted Living, LLC and Burlington Independent Living, LLC
10.39*
 
First Amendment to Asset Purchase Agreement, dated as of August 7, 2014, by and among American Realty Capital Healthcare Trust II Operating Partnership, LP and ECI Acquisition I, LLC, Village Assisted Living, LLC, Mt. Pleasant Assisted Living, LLC, Burlington Assisted Living, LLC, Muscatine Assisted Living, LLC, Carroll Assisted Living, LLC, Ft. Madison Assisted Living, LLC and Burlington Independent Living, LLC
10.40*
 
Second Amendment to Asset Purchase Agreement, dated as of August 8, 2014, by and among American Realty Capital Healthcare Trust II Operating Partnership, LP and ECI Acquisition I, LLC, Village Assisted Living, LLC, Mt. Pleasant Assisted Living, LLC, Burlington Assisted Living, LLC, Muscatine Assisted Living, LLC, Carroll Assisted Living, LLC, Ft. Madison Assisted Living, LLC and Burlington Independent Living, LLC
 10.41*
 
Third Amendment to Asset Purchase Agreement, dated as of August 26 2014, by and among American Realty Capital Healthcare Trust II Operating Partnership, LP and ECI Acquisition I, LLC, Village Assisted Living, LLC, Mt. Pleasant Assisted Living, LLC, Burlington Assisted Living, LLC, Muscatine Assisted Living, LLC, Carroll Assisted Living, LLC, Ft. Madison Assisted Living, LLC and Burlington Independent Living, LLC
10.42*
 
Asset Purchase Agreement, dated as of August 25, 2014, by and among American Realty Capital VII, LLC, The Allegro at Abacoa, L.L.C., College Harbor Properties, L.L.C., The Allegro at Willoughby, L.L.C., The Allegro at East Lake, L.L.C. and Harbor Towers, L.L.C. and The Allegro at Helmwood, L.L.C.

49
EXHIBITS INDEX

Exhibit No.
  
Description
10.43*
 
First Amendment to Senior Secured Revolving Credit Agreement, dated September 18, 2014, to the Senior Secured Revolving Credit Agreement dated as of March 21, 2014, between American Realty Capital Healthcare Trust II Operating Partnership, LP, American Realty Capital Healthcare Trust II, Inc. and KeyBank National Association, individually and as agent for itself and the other lenders party from time to time
31.1 *
 
Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *
 
Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *
 
Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 *
 
XBRL (eXtensible Business Reporting Language). The following materials from American Realty Capital Healthcare Trust II, Inc.'s Quarterly Report on Form 10-Q for the three months ended September 30, 2014, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Loss, (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements. As provided in Rule 406T of Regulation S-T, this information in furnished and not filed for purpose of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934
____________________
*     Filed herewith

50

 

Exhibit 10.28

 

AGREEMENT FOR LEASE OF REAL PROPERTY

 

PINNACLE HEALTH PORTFOLIO

 

BLOOM MOB: 4310 LONDONDERRY ROAD, HARRISBURG, PA

BRADY MOB: 205 SOUTH FRONT STREET, HARRISBURG, PA

COMMUNITY HEALTH MOB: 2645 NORTH THIRD STREET, HARRISBURG, PA

FOC MOB: 2005, 2015 AND 2025 TECHNOLOGY PARKWAY, MECHANICSBURG, PA

LANDIS MEMORIAL: 2501 NORTH THIRD STREET, HARRISBURG, PA

and

MEDICAL SCIENCES PAVILION: 4300 LONDONDERRY ROAD, HARRISBURG, PA

 

THIS AGREEMENT FOR LEASE OF REAL PROPERTY (this “ Agreement ”) is made and entered into as of the Effective Date by and among AMERICAN REALTY CAPITAL VII, LLC, a Delaware limited liability company (“ Lessee ”), as lessee, and PINNACLE HEALTH HOSPITALS, a Pennsylvania non-profit corporation (“ Bloom Lessor ,” “ Brady Lessor ,” “ Community Health Lessor ,” “ FOC Lessor ,” “ Landis Lessor ” and “ Medical Sciences Lessor ;” Medical Sciences Lessor, together with Bloom Lessor, Brady Lessor, Community Health Lessor, FOC Lessor, and Landis Lessor, are referred to herein, individually and collectively, as “ Lessor ”), as lessor.

 

BACKGROUND

 

A.           Bloom Lessor is the fee owner of the Real Property described on Exhibit A-1-1 attached hereto and made a part hereof (the “ Bloom Real Property ”).

 

 

B.           Brady Lessor is the fee owner of the Real Property described on Exhibit A-1-2 attached hereto and made a part hereof (the “ Brady Real Property ”).

 

C.           Community Health Lessor is the fee owner of the Real Property described on Exhibit A-1-3 attached hereto and made a part hereof (the “ Community Health Real Property ”).

 

D.           FOC Lessor is the fee owner of the Real Property described on Exhibit A-1-4 attached hereto and made a part hereof (the “ FOC Real Property ”).

 

E.           Landis Lessor is the fee owner of the Real Property described on Exhibit A-1-5 attached hereto and made a part hereof (the “ Landis Real Property ”).

 

F.           Medical Sciences Lessor is the fee owner of the Real Property described on Exhibit A-1-6 attached hereto and made a part hereof (the “ Medical Sciences Real Property ”).

 

I.           Lessee desires to lease the Property (defined below) from Lessor and Lessor desires to lease the Property to Lessee on the terms and conditions set forth in this Agreement.

 

 
 

 

In consideration of the mutual promises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

 

1.           Terms and Definitions . The terms listed below shall have the respective meaning given them as set forth adjacent to each term.

 

(a)          “ Bloom Property ” shall mean the Bloom Real Property and all matters described in (ii)-(vii) of the definition of “Property” in connection with the Bloom Real Property.

 

(b)          “ Brady Property ” shall mean the Brady Real Property and all matters described in (ii)-(vii) of the definition of “Property” in connection with the Brady Real Property.

 

(c)           “ Broker ” shall mean Hammond Hanlon Camp LLC , acting as Lessor’s agent.

 

(d)           “ Closing ” shall mean the consummation of the transaction contemplated herein, which shall occur, subject to any applicable extension periods set forth in this Agreement, on the date that is five (5) business days after the last day of the Due Diligence Period (as defined herein) unless the Lessee waives the full Due Diligence Period and elects to close earlier by providing written notice thereof to Lessor. The date of Closing is sometimes hereinafter referred to as the “ Closing Date .” Neither party will need to be present at Closing, it being anticipated that the parties will deliver all Closing documents and deliverables in escrow to the Escrow Agent (or if both Lessee and Lessor agree, to Lessee’s and/or Lessor’s counsel) prior to the date of Closing.

 

(e)          “ Community Health Property ” shall mean the Community Health Real Property and all matters described in (ii)-(vii) of the definition of “Property” in connection with the Community Health Real Property.

 

(f)           “ Due Diligence Period ” shall mean the period beginning upon the Effective Date and extending until 11:59 PM EDT on the date that is thirty (30) days thereafter or the date on which Lessor receives written notice of Lessee’s waiver of the Due Diligence Period. Lessor shall deliver to Lessee all of the Due Diligence Materials within five (5) business days after the Effective Date, and for each day that passes thereafter until all of the Due Diligence Materials are delivered to Lessee, the Due Diligence Period and the Closing Date shall be extended by one (1) business day.

 

(g)           “ Earnest Money ” shall mean Eight Million Seven Hundred Thousand and No/100 Dollars ($8,700,000.00). The Earnest Money shall be delivered to Escrow Agent within three (3) business days after the Effective Date. The Earnest Money shall be deposited by Lessee in escrow with Escrow Agent, to be applied as part payment of the Leasehold Transaction Price at the time of Closing, or disbursed as agreed upon in accordance with the terms of this Agreement. Lessor and Lessee each shall pay one-half of all reasonable escrow fees charged by Escrow Agent.

 

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(h)           “ Effective Date ” The date that is one (1) business day after the date of execution and delivery of this Agreement by both Lessor and Lessee shall be the “Effective Date” of this Agreement.

 

(i)           “ Escrow Agent ” shall mean Stewart Title Guaranty Company, whose address is One Washington Mall - Suite 1400, Boston, MA 02108, Attention: Annette Comer, Telephone: 617-933-2441, Telecopy: 617-727-8372; E-Mail: acomer@stewart.com. The parties agree that the Escrow Agent and Lessee’s title agent, if any, shall be responsible for (x) organizing the issuance of the Title Commitment (hereinafter defined) and Title Policy (hereinafter defined), (y) preparation of the closing statement, and (z) collections and disbursement of the funds.

 

(j)          “ FOC Property ” shall mean the FOC Real Property and all matters described in (ii)-(vii) of the definition of “Property” in connection with the FOC Real Property.

 

(k)           “ Ground Leases ” shall mean the ground leases for the Leasehold Properties to be entered into at Closing between Lessor, as landlord, and Lessee, as tenant. Each of the Ground Leases may be referred to herein individually as a “ Ground Lease ” or the “ Ground Lease .”

 

(l)           “ Guarantors ” shall mean the guarantors under the Guaranties. Each of the Guarantors may be referred to herein individually as a “ Guarantor ” or the “ Guarantor .”

 

(m)           “ Guaranties ” shall mean the Lease guaranties executed by the Guarantors. Each of the Guaranties may be referred to herein individually as a “ Guaranty ” or the “ Guaranty .”

 

(n)          “ Landis Property ” shall mean the Landis Real Property and all matters described in (ii)-(vii) of the definition of “Property” in connection with the Landis Real Property.

 

(o)           “ Leasehold Properties ” shall mean all of the Properties.

 

(p)           “ Leasehold Transaction Price ” shall mean One Hundred Seventy Four Million Sixty Thousand and No/100 Dollars ($174,060,000.00). The allocation of the Leasehold Transaction Price and the Earnest Money among the Properties is set forth on Schedule 1 attached hereto.

 

(q)           “ Leases ” shall mean those certain leases described on Exhibit A-2 attached hereto and made a part hereof and referred to in Section 6(b)(i) of this Agreement between Lessor, as landlord, and the tenants described on Exhibit A-2 attached hereto, as tenant (each tenant, individually, a “ Tenant ”, and collectively, the “ Tenants ”), as amended. Each of the Leases may be referred to herein individually as a “ Lease ” or the “ Lease .”

 

(r)           “ Medical Sciences Property ” shall mean the Medical Sciences Real Property and all matters described in (ii)-(vii) of the definition of “Property” in connection with the Medical Sciences Real Property.

 

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(s)           “ Pinnacle Leases ” shall mean, collectively, the space leases for (i) the Bloom Real Property, (ii) the Brady Real Property, (iii) the Community Health Real Property, (iv) the FOC Real Property (to consist of three separate leases, namely, the FOC Clinical Lease, the FOC I Lease and the FOC II Lease), (v) the Landis Real Property and (vi) the Medical Sciences Real Property to be entered into at Closing between Lessee, as landlord, and Pinnacle Tenant, as tenant. Each of the Pinnacle Leases may be referred to herein individually as a “ Pinnacle Lease ” or the “ Pinnacle Lease .”

 

(t)           “ Pinnacle Tenant ” shall mean PinnacleHealth, a Pennsylvania non-profit corporation.

 

(u)           “ Property ” shall collectively mean (i) those certain parcels of real property which are listed on Exhibits A-1-1 through and A-1-6 attached hereto, together with all right, title and interest of Lessor, if any, in and to the land lying in the bed of any street or highway in front of or adjoining such real property, and all appurtenances and all the estate and rights of Lessor, if any, in and appurtenant to such parcels of real property, including, without limitation, all appurtenant easements and rights-of-way, and all air and subsurface rights appurtenant to such parcels of real property, as the case may be (such parcels of real property, together with all such rights and appurtenances, being collectively referred to herein as the “ Real Property ”); (ii) all of the buildings (each individually called a “ Building ” and collectively called the “ Buildings ”), facilities and other improvements situated on the Real Property or required to be constructed under the respective Leases (collectively, the “ Improvements ”); (iii) all right, title and interest of Lessor, if any, in and to the lighting, electrical, mechanical, plumbing and heating, ventilation and air conditioning systems used in connection with the Real Property and the Buildings, and all carpeting, draperies, appliances and other fixtures and equipment attached or appurtenant to the Real Property together with all personal property (other than furniture, equipment not necessary to operate the Buildings or building systems and not permanently affixed to the Buildings or Real Property, trade fixtures and inventory) owned by Lessor and located on the Real Property or on and/or in the Buildings (collectively, the “ Personal Property ”); (iv) all right, title and interest of Lessor in and to all plans and specifications, architectural drawings, building permits and other permits issued in connection with the construction, operation, use or occupancy of the Improvements, and all warranties and guaranties respecting the Buildings and Personal Property; (v) to the extent not otherwise described in subsection (i), all right, title and interest of Lessor in and to all leases respecting the Buildings and Personal Property, including, without limitation, all prepaid rent or security or other deposits thereunder and all right, title and interest of the Affiliates under the Guaranties; (vi) all right, title and interest of Lessor in and to all licenses, permits, authorizations and approvals issued by any governmental agency or authority which pertain to the Real Property and the Buildings, to the extent they exist and are transferable and assignable; and (vii) to the extent the same are assignable, all site plans, surveys, and plans which relate to the Real Property. Any references to “Property” in the singular, such as references to “a Property” or “each Property”, refer to an individual parcel of Real Property and all matters described in (ii)-(vii) in connection with such Real Property. Any references to “Properties” refer to each Property collectively.

 

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(v)         “ Real Estate Taxes ” shall mean all real estate taxes, rollback taxes, personal property taxes, water and sewer use charges, or payments in lieu of taxes, and any other charges and assessments constituting a lien on the Property.

 

(w)           Lessor and Lessee’s Notice address

 

(i)           “ Lessor’s Notice Address ” shall be as follows, except as same may be changed pursuant to the Notice section herein:

 

PinnacleHealth

409 South 2 nd Street

Suite 2B

Harrisburg, PA 17104

Attention: William H. Pugh, Senior Vice President and CFO

Tel. No.: 717-231-8245

Email: wpugh@pinnaclehealth.org

 

And to:

 

Christopher P. Markley, Esq.

409 South 2 nd Street

Suite 2C

Harrisburg, PA 17104

Tel. No.: 717-231-8210

Email: cmarkley@pinnaclehealth.org

 

And to:

 

Norris, McLaughlin & Marcus, P.A.

1611 Pond Road

Suite 300

Allentown, PA 18104

Attention: Matthew R. Sorrentino, Esq.

Tel. No.: 610-391-1800

Email: msorrentino@nmmlaw.com

 

(ii)          “ Lessee’s Notice Address ” shall be as follows, except as same may be changed pursuant to the Notice section herein:

 

Michael Weil

c/o American Realty Capital Healthcare Trust II, Inc.

405 Park Avenue, 2 nd Floor

New York, NY 10022

Tel. No.: (212) 415-6505

Fax No.: (857) 207-3397

Email: mweil@arlcap.com

 

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And to:

 

Jesse Galloway, Esq.

c/o American Realty Capital Healthcare Trust II, Inc.

405 Park Avenue, 14th Floor

New York, NY 10022

Tel. No.: (212) 415-6516

Fax No.: (646) 861-7751

Email: jgalloway@arlcap.com

 

And Due Diligence Materials (if provided by email) to:

 

duediligence@arlcap.com

 

With hard copies and/or CDs to:

 

James A. (Jim) Mezzanotte

c/o American Realty Capital VII, LLC

7621 Little Avenue, Suite 200

Charlotte, North Carolina 28226

Tel. No.: (704) 626-4410

Fax No.: (212) 415.6507

Email: jmezzanotte@arlcap.com

 

2.           Lease of the Property. Subject to the terms of this Agreement, Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the Property for the Leasehold Transaction Price.

 

3.           Payment of Leasehold Transaction Price.

 

(a)          The Leasehold Transaction Price to be paid by Lessee to Lessor shall be paid by wire transfer of immediately available funds in the amount of the Leasehold Transaction Price plus or minus prorations, credits and adjustments as provided in Section 4 and elsewhere in this Agreement to Escrow Agent, at the time of Closing, or as otherwise agreed to between Lessee and Lessor.

 

(b)          The parties agree that the value of the Personalty is de minimis , and no part of the Leasehold Transaction Price is allocated to it.

 

4.           Proration of Expenses and Payment of Costs and Recording Fees .

 

(a)           Prorations . The following items will be prorated as of 12:01 A.M. on the Closing Date, with all items of income and expense for the Property being borne by Lessee from and after (and including) the Closing Date: Tenant Receivables (hereinafter defined) and other income and rents that have been collected by Lessor as of Closing; fees and assessments; prepaid expenses and obligations under service contracts which are assigned, if any; accrued operating

 

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expenses; ground rent and other amounts paid and payable under the Ground Leases; Real Estate Taxes; and any assessments by private covenant for the then-current calendar year of Closing.

 

(b)           Taxes

 

(i)          If Real Estate Taxes for the year of Closing are not known or cannot be reasonably estimated, Real Estate Taxes will be prorated based on Real Estate Taxes for the year prior to Closing. Any additional Real Estate Taxes in the nature of “roll back” taxes or relating to the year of Closing arising out of a change in the use of the Real Property and Improvements or a change in ownership shall be paid by Lessor when due and payable, and Lessor will indemnify Lessee from and against any and all such Real Estate Taxes arising out of the leasing of the Property, which indemnification obligation will survive the Closing.

 

(ii)         If Lessor has engaged or will engage prior to the expiration of the Due Diligence Period, consultants for the purpose of protesting the amount of taxes or the assessed valuation for certain tax periods for the Property (“ Protest Proceedings ”), any cash refunds or proceeds actually distributed (collectively, “ Cash Refunds ”) will be apportioned as described below. Any Cash Refunds (including interest thereon) on account of a favorable determination, after deduction of costs and expenses incurred for such Protest Proceedings, shall be: (A) the property of Lessor to the extent such Cash Refunds were for Real Estate Taxes paid by Lessor applicable to a period prior to the Closing Date; (B) prorated between Lessee and Lessor for taxes paid for a period during which the Closing Date occurred; and (C) the property of Lessee for Real Estate Taxes for a period after the Closing Date. Lessor and Lessee agree to notify the other in writing of any receipt of a Cash Refund within fifteen (15) business days of receipt of such Cash Refund. To the extent either party obtains a Cash Refund, a portion of which is owed to the other party, the receiving party shall deliver the Cash Refund to the other party within fifteen (15) Business Days of its receipt. Lessee agrees and acknowledges that Lessor has the right to initiate proceedings to protest the valuation of any of the Property prior to the expiration of the Due Diligence Period. Lessor agrees to give Lessee notice of Lessor’s intent to initiate such proceedings prior to initiation of such proceedings and at any time subsequent to the end of the Due Diligence Period shall obtain Lessee’s consent to initiation of such proceedings, which consent may be withheld in Lessee’s sole discretion.         

 

(c)           Utilities . Lessee will take all steps necessary to effectuate the transfer of all utilities to its name as of the Closing Date, and where necessary, post deposits with the utility companies. The Lessor will ensure that all utility meters are read as of the Closing Date. Lessor will be entitled to recover any and all deposits held by any utility company as of the Closing Date.

 

(d)           Tenant Receivables . Rents due from Tenants under Leases (including operating expense and real estate tax contributions or reimbursements and similar charges (collectively, “ Pass-Through Expenses ”)), set-offs due or required to be paid under or by reason of the Leases (collectively called “ Tenant Receivables ”) shall be adjusted by appropriate credit to the Lessor or Lessee (as the case may be) on the Closing Date. If, at the Closing Date, any Tenant is in arrears in the payment of rents (“ Uncollected Delinquent Tenant Receivables ”), Lessor will disclose the same to Lessee in writing or on the rent roll to be delivered to Lessee pursuant to Section 10 hereof and such amounts shall not be adjusted on the Closing Date. Prior to the

 

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Closing Date, Lessor shall use Lessor’s current business practices to collect Uncollected Delinquent Tenant Receivables. If Lessee shall collect Uncollected Delinquent Tenant Receivables within ninety (90) days after the Closing Date, then Lessee shall turn over to Lessor the arrearages so collected, less the reasonable cost of collection thereof, if any; provided, however, Lessor may continue to seek to collect the Uncollected Delinquent Tenant Receivables by legal action following the Closing Date. All rents collected by Lessee after the Closing Date (except for amounts specifically billed and paid as end of year reconciliation payments for Pass-Through Expenses, which shall be separately accounted for and allocated, pro rata, between Lessor and Lessee as their interest may appear) shall be first applied to rents due and payable after the Closing Date and only the excess thereof shall be paid over to Lessor on account of the Uncollected Delinquent Tenant Receivables. Lessor shall prepare the reconciliation for Pass-Through Expenses for the Property and provide such reconciliation to Lessee and Lessee’s property manager. Lessee agrees to cause its property manager to cooperate with Lessor in preparing such reconciliation. To the extent that items to be apportioned hereunder may be required to be paid directly by a Tenant under its Lease, the same shall not be apportioned, provided, however, that such items shall have been paid by such Tenant currently through the month including the Closing Date. The provisions of this subparagraph 4(d) shall survive Closing. Lessor expressly agrees that if Lessor receives any amounts after the Closing Date which are attributable, in whole or in part, to any period after the Closing Date, Lessor will notify Lessee of such fact and will remit to Lessee that portion of the monies so received by Lessor to which Lessee is entitled within ten (10) business days after receipt thereof. With respect to unbilled Tenant Receivables, Lessee covenants and agrees to cause its property manager to (A) bill the same in the ordinary course of its business and (B) cooperate with Lessor to determine the correct amount of operating expenses and/or taxes due.

 

A reconciliation or determination of Pass-Through Expenses, Uncollected Delinquent Tenant Receivables and unbilled Tenant Receivables due under the Leases shall be made at Closing to the extent possible. To the extent such information is not available at Closing, the foregoing shall be subject to adjustment following the Closing in accordance with the terms of Section 4(e), below. The provisions of this Section 4(d) will survive the Closing.

 

(e)          If final bills are not available or cannot be issued prior to Closing for any item being prorated under Section 4(a) through (d), then, for each separate item for which an adjustment is to be made, the following will apply: (i) initially the matter subject to allocation at Closing (including without limitation the Pass-Through Expenses) shall be re-prorated within sixty (60) days following the Closing; (ii) a further adjustment of prorated items shall occur one hundred twenty (120) days following the close of the calendar year in which the Closing occurs; and (iii) a final adjustment shall occur not later than thirty-six (36) months after the Closing. All such rights and obligations under this Section 4(e) will survive the Closing.

 

(f)          All security deposits under the Leases collected and not properly applied by Lessor as of the Closing (and interest thereon if required by law or contract) must be transferred or credited to Lessee at Closing. As of the Closing, Lessee will assume each Lessor’s obligations related to the security deposits, but only to the extent they are credited or transferred to Lessee.

 

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(g)          Lessor shall pay or be charged with the following costs and expenses in connection with this transaction:

 

(i)          100% of all Title Policy premiums, including search costs and a survey endorsement, but excluding any other endorsements issued in connection with such policies other than endorsements that Lessor elects to purchase to cover title issues, if any;

 

(ii)         Transfer taxes and conveyance fees on the transfer or leasing of the Property;

 

(iii)        Broker’s commission payments in accordance with Section 24 of this Agreement;

 

(iv)        All fees relating to the granting, executing and recording of each Memo of Ground Lease (defined below) for each Property; and

 

(v)         Any unpaid leasing commissions or tenant improvement allowances or future rent concessions under the Leases entered into as of the Effective Date.

 

(h)          Lessee shall pay or be charged with the following costs and expenses in connection with this transaction:

 

(i)          Title Policy premiums for any endorsements issued in connection therewith other than endorsements that Lessor elects to purchase to cover title issues, if any, and other than a survey endorsement;

 

(ii)         all costs and expenses in connection with Lessee’s financing, including appraisal, points, commitment fees and the like and costs for the filing of all documents necessary to complete such financing and related documentary stamp tax and intangibles tax; and

 

(iii)        Lessee shall pay for the cost of its own survey, Phase I environmental study and due diligence investigations.

 

(i)          Each party shall pay its own legal fees incidental to the negotiation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

 

(k)          Lessor and Lessee each shall pay one-half of all reasonable escrow fees charged by Escrow Agent.

 

5.           Title . At Closing, Lessor agrees to lease the Properties to Lessee with title thereto being marketable, free and clear of all liens, defects of title, conditions, easements, assessments, restrictions, and encumbrances except for Permitted Exceptions (as hereinafter defined); provided, however, that Lessee agrees and acknowledges that, while each Property will have a surveyed legal description at Closing, the Properties will not, as of the Closing, be subdivided in accordance with local municipal requirements. The term “Permitted Exceptions” (as hereinafter defined) shall be deemed to include the absence of municipal subdivision approval.

 

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6.           Examination of Property . Lessor and Lessee hereby agree as follows:

 

(a)          Lessee shall order a title commitment (the “ Title Commitment ” ) from Escrow Agent, a survey and a zoning report for each Property promptly after the date hereof. All matters shown in the Title Commitment, survey or zoning report ( “ Title Matters ”) with respect to which Lessee fails to object prior to the expiration of the Due Diligence Period shall be deemed “ Permitted Exceptions ”. However, Permitted Exceptions shall not include, and Lessor shall be obligated to remove of record prior to or at Closing, any mechanic’s lien or any monetary lien, fine or penalty, or any bond indentures, deeds of trust, mortgage, or other loan documents secured by any Property, or any judgments and federal and state tax liens (collectively, “ Liens ”). Lessor shall be required to cure or remove all Liens (by payment, bond deposit or indemnity acceptable to Escrow Agent). Lessor shall have no obligation to cure any Title Matter objected to, except the Liens as aforesaid, provided Lessor notifies Lessee of any objections which Lessor elects not to remove or cure within five (5) business days following receipt of Lessee’s objections. In the event that Lessor refuses to remove or cure any objections, Lessee shall have the right to terminate this Agreement upon written notice to Lessor given within five (5) business days after receipt of Lessor’s notice, upon which termination the Earnest Money, and all interest earned thereon, shall be returned to Lessee and neither party shall have any further obligation hereunder, except as otherwise expressly set forth herein. If any matter not revealed in the Title Commitment is discovered by Lessee or by the Escrow Agent and is added to the Title Commitment by the Escrow Agent at or prior to Closing, Lessee shall have until the earlier of (i) ten (10) days after the Lessee’s receipt of the updated, revised Title Commitment showing the new title exception, together with a legible copy of any such new matter, or (ii) the Closing Date, to provide Lessor with written notice of its objection to any such new title exception (an “ Objection ”). If Lessor does not remove or cure such Objection prior to the Closing Date, Lessee may terminate this Agreement as to the applicable Property, in which case the pro-rata portion of the Earnest Money set forth on Schedule 1 attached hereto applicable to such terminated Property, together with all interest earned thereon, shall be returned to Lessee, and neither party shall have any further obligation hereunder with respect to such terminated Property, except as otherwise expressly set forth herein. If Lessee terminates the Agreement as to a Property pursuant to the immediately preceding sentence and the Title Matter at issue was intentionally caused by Lessor, then upon such termination, Lessor shall reimburse Lessee for all out of pocket costs and expenses incurred by Lessee hereunder in connection with Lessee’s diligence of such Property.

 

(b)          Within five (5) business days following the Effective Date, Lessor shall provide to Lessee copies of the following documents and materials pertaining to each Property to the extent within Lessor’s possession or reasonably obtainable by Lessor or Lessor’s counsel: (i) a complete copy of all leases and lease guaranties affecting the Property and all amendments thereto and of all material correspondence relating thereto; (ii) a copy of all surveys and site plans of the Property, including without limitation any as-built survey obtained or delivered to tenants of the Property in connection with its construction; (iii) a copy of all architectural plans and specifications and construction drawings and contracts for improvements located on the Property; (iv) a copy of Lessor’s title insurance commitments and policies relating to the Property; (v) a copy of the certificate of occupancy (or local equivalent) and zoning reports for the Property; and of all governmental permits/approvals; (vi) a copy of all environmental, engineering and physical condition reports for the Property; (vii) copies of the Property’s real

 

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estate tax bills for the current and prior two (2) tax years or, if the Property has been owned by Lessor for less than two (2) tax years, for the period of ownership; (viii) the operating budget and any common area maintenance (CAM) reconciliations of the Property for the current year and following year, if available; (ix) the operating statements and delinquency reports of the Property for the twenty four (24) calendar months immediately preceding the Effective Date or if a Tenant has been operating for less than twenty-four (24) months, for the period of operation; (x) all service contracts and insurance policies which affect the Property, if any; (xi) a copy of all warranties relating to the improvements constructed on the Property, including without limitation any structural slab or roof warranties; (xii) a written inventory of all items of personal property to be conveyed to Lessee, if any; (xiii) Tenant financials for each Tenant, to the extent reasonably available to Lessor and consistent with each such Tenant’s reporting requirements; (xiv) a complete copy of any feasibility study completed by the developer of the Property; (xv) a copy of all primary and secondary state licenses or regulatory permits for the Property; and (xvi) a copy of any documents relating to a waiver of life safety code or physical plant requirements (collectively, the “ Due Diligence Materials ”). Lessor shall deliver any other documents relating to the Property reasonably requested by Lessee, to the extent within Lessor’s or its affiliates’ or agents’ possession or reasonably obtainable by Lessor, within three (3) business days following such request. Additionally, during the term of this Agreement, Lessee, its agents and designees, shall have the right to enter the Property for the purposes of inspecting the Property, conducting soil tests, and making surveys, mechanical and structural engineering studies, inspecting construction, and conducting any other investigations and inspections as Lessee may reasonably require to assess the condition and suitability of the Property; provided, however, that such activities by or on behalf of Lessee on the Property shall not damage the Property nor materially interfere with construction on the Property or the conduct of business by Tenants under the Leases; and provided further, however, that Lessee shall indemnify and hold Lessor harmless from and against any and all claims or damages to the extent resulting from the activities of Lessee on the Property, and Lessee shall repair any and all damage caused, in whole or in part, by Lessee and return the Property to substantially its condition prior to such damage, which obligation shall survive Closing or any termination of this Agreement. Lessor shall reasonably cooperate with the efforts of Lessee and the Lessee’s representatives to inspect the Property. After the Effective Date, Lessee shall be permitted to speak and meet with the Tenants in connection with Lessee’s due diligence. Upon signing this Agreement, Lessor shall provide Lessee with the name of a contact person(s) for the purpose of arranging site visits. Lessee shall give Lessor reasonable written notice (which in any event shall not be less than two (2) business days) before entering the Property, and Lessor may have a representative present during any and all examinations, inspections and/or studies on the Property. Lessee shall have the unconditional right, for any reason or no reason, to terminate this Agreement by giving written notice thereof to Lessor and the Escrow Agent prior to the expiration of the Due Diligence Period, in which event this Agreement shall become null and void with respect to all Properties, Lessee shall receive a refund of the Earnest Money, together with all interest earned thereon, and all rights, liabilities and obligations of the parties under this Agreement shall expire, except as otherwise expressly set forth herein. Lessee shall also have the right to terminate this Agreement with respect to any single Property if the Property subject to termination has specific material Lease, title, survey, property condition, zoning or environmental issues that a commercially reasonable lessee would not elect to close over, in which event this Agreement shall become null and void with respect to the terminated Property or Properties, Lessee shall receive a refund of the pro-rata portion of the

 

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Earnest Money set forth on Schedule 1 attached hereto applicable to such terminated Property or Properties, and all rights, liabilities and obligations of the parties under this Agreement shall terminate with respect to (but only with respect to) such terminated Properties, except as otherwise expressly set forth therein.

 

(c)          Within two (2) business days following the Effective Date, Lessor shall request an Estoppel Certificate (defined below) from each Tenant and a written waiver of right of first refusal, right of first offer or other purchase option that any party may have to purchase any Property. It shall be a condition of Closing that Lessor shall have obtained an estoppel certificate in the form attached hereto as Exhibit F (each, an “ Estoppel Certificate ,” and collectively, “ Estoppel Certificates ”) from each Tenant, and Lessor shall use good faith efforts to obtain the same. Each Estoppel Certificate obtained by Lessor shall be fully executed by the applicable Tenant and Guarantor(s), if any, and dated no earlier than thirty (30) days prior to the date of Closing. In addition, the business terms of each Estoppel Certificate must be in accordance with and not contradict the corresponding Lease. If any Lease and any amendments, bearing the original signatures of the landlord and tenant thereunder have not been delivered to Lessee previously, a copy thereof confirming that the copy is true, correct and complete shall be attached to the corresponding Estoppel Certificate. Lessor shall promptly deliver to Lessee photocopies or pdf files of each executed Estoppel Certificate when Lessor receives the same.

 

(d)          If the fee estate in any Property is encumbered by a mortgage that is not subordinate to the Ground Lease for such Property, it shall be a condition of Closing that Lessor shall have obtained either: (i) a subordination agreement in form and substance reasonably acceptable to Lessee from the holder of such mortgage, pursuant to which such mortgage will be subordinated to the applicable Ground Lease (each, a “ Fee Mortgage Subordination ”); or (ii) a release of lien of mortgage in form and substance reasonably acceptable to Lessee from the holder of such mortgage pursuant to which such Property is released from the lien of said mortgage (each, a “ Fee Mortgage Release ”). Within two (2) business days following the Effective Date, Lessor shall request the Fee Mortgage Subordination or Fee Mortgage Release from each such mortgagee.

 

(e)          Within two (2) business days following the Effective Date, Lessor shall deliver to Lessee the form of Ground Lease. Lessee and Lessor shall use good faith efforts to negotiate the final form of Ground Lease prior to the expiration of the Due Diligence Period. The Ground Lease for each Leasehold Property shall reflect the term, rent, rent escalations and renewal options applicable to such Leasehold Property described on Schedule 6(e) attached hereto and made a part hereof.

 

(f)          Within two (2) business days following the Effective Date, Lessor shall deliver to Lessee the form of the Pinnacle Leases. Lessee and Lessor shall use good faith efforts to negotiate the final form of the Pinnacle Leases prior to the expiration of the Due Diligence Period. The Pinnacle Leases shall reflect the term, rent, rent escalations, suite number, square footage and renewal options applicable to such Property described on Schedule 6(f) attached hereto and made a part hereof. The Pinnacle Leases for the Brady Property, Community Health Property, FOC Property (limited to the FOC Clinical Lease), Landis Property and Medical Sciences Property shall be triple-net (NNN). The Pinnacle Leases for the Bloom Property, FOC Property (limited to the FOC I Lease and the FOC II Lease) shall be double-net (NN).

 

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(g)          Lessor shall use good faith efforts to obtain estoppel certificates with respect to reciprocal easement agreements as may be reasonably requested by Lessee.

 

7.           Risk of Loss/Condemnation . Upon an occurrence of a casualty, condemnation or taking with respect to any Property, Lessor shall notify Lessee in writing of same. Until Closing, the risk of loss or damage to the Property, except as otherwise expressly provided herein, shall be borne by Lessor. In the event all or any portion of any Property is damaged in any casualty or condemned or taken (or notice of any condemnation or taking is issued) so that: (a) any Tenant has a right of termination or abatement of rent under its Lease, or (b) with respect to any casualty, if the cost to repair such casualty would exceed $250,000, or (c) with respect to any condemnation, any Improvements or access to the Property or more than five percent (5%) of the Property is (or will be) condemned or taken, then, Lessee may elect to terminate this Agreement with respect to such Property by providing written notice of such termination to Lessor within ten (10) business days after Lessee’s receipt of written notice of such condemnation, taking or damage, upon which termination the pro-rata portion of the Earnest Money set forth on Schedule 1 attached hereto applicable to such terminated Property shall be returned to Lessee, and neither party hereto shall have any further rights, obligations or liabilities under this Agreement with respect to such Property, except as otherwise expressly set forth herein. With respect to any condemnation or taking (of any notice thereof), if Lessee does not elect to cancel this Agreement as aforesaid, there shall be no abatement of the Leasehold Transaction Price and Lessor shall assign to Lessee at the Closing the rights of Lessor to the awards, if any, for the condemnation or taking, and Lessee shall be entitled to receive and keep all such awards. With respect to a casualty, if Lessee does not elect to terminate this Agreement with respect to any such Property or does not have the right to terminate this Agreement as aforesaid, there shall be no abatement of the Leasehold Transaction Price and Lessor shall assign to Lessee at the Closing the rights of Lessor to the proceeds under Lessor’s insurance policies covering such Property with respect to such damage or destruction (or pay to Lessee any such proceeds received prior to Closing) and pay to Lessee the amount of any deductible with respect thereto, and Lessee shall be entitled to receive and keep any monies received from such insurance policies.

 

8.           Earnest Money Disbursement . The Earnest Money shall be held by Escrow Agent, in trust, and disposed of only in accordance with the following provisions:

 

(a)          If the Closing occurs, Escrow Agent shall deliver the Earnest Money to, or upon the instructions of, Lessor and Lessee on the Closing Date to be applied as part payment of the Leasehold Transaction Price. If for any reason the Closing does not occur, Escrow Agent shall deliver the Earnest Money to Lessor or Lessee only upon receipt of a written demand therefor from such party, subject to the following provisions of this clause (a). Subject to the last sentence of this clause (a), if for any reason the Closing does not occur and either party makes a written demand (the “ Demand ”) upon Escrow Agent for payment of the Earnest Money, Escrow Agent shall give written notice to the other party of the Demand within one (1) business day after receipt of the Demand. If Escrow Agent does not receive a written objection from the other party to the proposed payment within five (5) business days after the giving of such notice by Escrow Agent, Escrow Agent is hereby authorized to make the payment set forth in the Demand. If Escrow Agent does receive such written objection within such period, Escrow Agent shall continue to hold such amount until otherwise directed by written instructions signed by Lessor

 

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and Lessee or a final judgment of a court. Notwithstanding the foregoing provisions of this clause (a), if Lessee delivers a notice to Escrow Agent stating that Lessee has terminated this Agreement on or prior to the expiration of the Due Diligence Period, then Escrow Agent shall immediately return the Earnest Money, or the pro-rata portion of the Earnest Money set forth on Schedule 1 attached hereto if Lessee terminates less than all of the Properties, to Lessee without the necessity of delivering any notice to, or receiving any notice from Lessor.

 

(b)          The parties acknowledge that Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that Escrow Agent shall not be deemed to be the agent of either of the parties, and that Escrow Agent shall not be liable to either of the parties for any action or omission on its part taken or made in good faith, and not in disregard of this Agreement, but shall be liable for its negligent acts and for any liabilities (including reasonable attorneys’ fees, expenses and disbursements) incurred by Lessor or Lessee resulting from Escrow Agent’s mistake of law respecting the scope or nature of Escrow Agent’s duties. Lessor and Lessee shall jointly and severally indemnify and hold Escrow Agent harmless from and against all liabilities (including reasonable attorneys’ fees, expenses and disbursements) incurred in connection with the performance of Escrow Agent’s duties hereunder, except with respect to actions or omissions taken or made by Escrow Agent in bad faith, in disregard of this Agreement or involving negligence on the part of Escrow Agent. Escrow Agent has executed this Agreement in the place indicated on the signature page hereof in order to confirm that Escrow Agent shall hold the Earnest Money in escrow, and shall disburse the Earnest Money pursuant to the provisions of this Section 8.

 

9.           Default

 

(a)          In the event that Lessor is ready, willing and able to close in accordance with the terms and provisions hereof, and Lessee defaults in any of its obligations undertaken in this Agreement, Lessor shall be entitled, as its sole and exclusive remedy to either: (i) if Lessee is willing to proceed to Closing, waive such default and proceed to Closing in accordance with the terms and provisions hereof; or (ii) declare this Agreement to be terminated, and Lessor shall be entitled to immediately receive all of the Earnest Money as liquidated damages as and for Lessor’s sole remedy. Upon such termination, neither Lessee nor Lessor shall have any further rights, obligations or liabilities hereunder, except as otherwise expressly provided herein. Lessor and Lessee agree that (a) actual damages due to Lessee’s default hereunder would be difficult and inconvenient to ascertain and that such amount is not a penalty and is fair and reasonable in light of all relevant circumstances, (b) the amount specified as liquidated damages is not disproportionate to the damages that would be suffered and the costs that would be incurred by Lessor as a result of having withdrawn the Property from the market, and (c) Lessee desires to limit its liability under this Agreement to the amount of the Earnest Money paid in the event Lessee fails to complete Closing, and such amount shall be paid to Lessor as liquidated damages and as Lessor’s sole remedy hereunder. Lessor hereby waives any right to recover the balance of the Leasehold Transaction Price, or any part thereof, and the right to pursue any other remedy permitted at law or in equity against Lessee. In no event under this Section or otherwise shall Lessee be liable to Lessor for any punitive, speculative or consequential damages.

 

(b)          In the event that Lessee is ready, willing and able to close in accordance with the terms and provisions hereof, and Lessor defaults in the obligations herein taken by

 

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Lessor, with respect to any or all of the Properties, Lessee may, as its sole and exclusive remedy, either: (i) waive any unsatisfied conditions and proceed to Closing in accordance with the terms and provisions hereof; (ii) terminate this Agreement with respect to any or all Properties by delivering written notice thereof to Lessor no later than Closing, upon which termination the Earnest Money shall be refunded to Lessee, Lessor shall pay to Lessee all of the out-of-pocket costs and expenses incurred by Lessee as to such Property or Properties in connection with this Agreement, which return and payment shall operate as liquidated damages and to terminate this Agreement and release Lessor and Lessee from any and all rights, obligations and liability hereunder, except those which are specifically stated herein to survive any termination hereof; (iii) enforce specific performance of Lessor’s obligations hereunder; or (iv) by notice to Lessor given on or before the Closing Date, extend the Closing Date for a period of up to thirty (30) days (the “ Lessee Closing Extension Period ” ), and the “Closing Date” shall be moved to the last day of the Closing Extension Period. If Lessee so extends the Closing Date, then Lessor may, but shall not be obligated to, cause said conditions to be satisfied during the Lessee Closing Extension Period. If Lessor does not cause said conditions to be satisfied during the Lessee Closing Extension Period, then Lessee shall have the remedies set forth in Section 9(b) (i) through (iii) above except that the term “Closing” shall read “Extended Closing”.

 

Notwithstanding the foregoing, in the event of a willful or intentional default of Lessor hereunder, Lessee shall, in addition to the foregoing remedies, be permitted to pursue any and all rights and remedies available to Lessee at law or in equity; provided, however, in no event shall Lessor be liable to Lessee for any punitive, speculative or indirect consequential damages.

 

10.          Closing

 

. The Closing shall consist of the execution and delivery of documents by Lessor and Lessee, with respect to each Property as set forth below, and delivery by Lessee to Lessor of the Leasehold Transaction Price in accordance with the terms of this Agreement. Lessor shall deliver to Escrow Agent for the benefit of Lessee at Closing the following executed documents for each Property (except as otherwise noted below):

 

(a)          Intentionally Deleted;

 

(b)          An Assignment and Assumption of Leases, Guaranties and Security Deposits, in the form attached hereto as Exhibit C;

 

(c)          A Bill of Sale for the Personal Property, if any, in the form attached hereto as Exhibit D;

 

(d)          An Assignment of Contracts, Permits, Licenses and Warranties in the form of Exhibit E;

 

(e)          The Ground Leases with respect to the Leasehold Properties;

 

(f)          The Pinnacle Leases;

 

(g)          A settlement statement setting forth the Leasehold Transaction Price, all prorations and other adjustments to be made pursuant to the terms hereof, and the funds required for Closing as contemplated hereunder;

 

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(h)          All transfer tax statements, declarations and filings as may be necessary or appropriate for purposes of recordation of the Memos of Ground Lease;

 

(i)          Good standing certificates and corporate resolutions or member or partner consents, as applicable, and such other documents as reasonably requested by Escrow Agent;

 

(j)          Corporate resolutions or member or partner consents, as applicable, from Lessor and Pinnacle Tenant, authorizing the execution and delivery of the Ground Leases and the Pinnacle Leases;

 

(k)          Originals of the Warranties (as hereinafter defined) re-issued at Lessor’s expense, to Lessee or Tenant, as requested by Lessee;

 

(l)          A certificate pursuant to Section 1445 of the Internal Revenue Code of 1986, as amended, or the regulations issued pursuant thereto, certifying the non-foreign status of Lessor;

 

(m)          An owner’s title affidavit as to mechanics’ liens and possession and other matters in customary form reasonably acceptable to Lessee and Escrow Agent;

 

(n)          Each Fee Mortgage Subordination or Fee Mortgage Release required pursuant to Section 6(d) herein, executed by the applicable mortgagee and notarized;

 

(o)          With respect to each Tenant, a Letter to Tenant in form of Exhibit H attached hereto;

 

(p)          An updated Rent Roll (defined below), arrears report and schedule of security deposits and letters of credit, certified by Lessor to be true and correct;

 

(q)          Certificates of insurance or other evidence reasonably satisfactory to Lessee memorializing and confirming that the Tenants are then maintaining policies of insurance of the types and in the amounts required by the Leases, which shall name Lessee and its mortgagee as additional insured parties and/or as loss payees and/or mortgagees, as appropriate, as their respective interests may appear;

 

(r)          A bring down certificate with respect to Lessor’s representations and warranties provided herein in a form reasonably satisfactory to Lessor and Lessee;

 

(s)          A Memorandum of Ground Lease for each of the Leasehold Properties (each, a “ Memo of Ground Lease ” and collectively, the “ Memos of Ground Lease ”) in the form attached to the Ground Leases; and

 

(t)          Such other instruments as are reasonably required by Lessee or Escrow Agent to close the escrow and consummate the lease of the Property in accordance with the terms hereof.

 

At Closing, Lessee shall instruct Escrow Agent to deliver the Earnest Money to Lessor which shall be applied to the Leasehold Transaction Price, shall deliver the balance of the

 

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Leasehold Transaction Price to Lessor and shall execute and deliver execution counterparts of the closing documents referenced in clauses (b), (e), (f), (g), (h), (n) and (s) above. Lessee shall have the right to advance the Closing upon five (5) days prior written notice to Lessor; provided that all conditions precedent to both Lessee’s and Lessor’s respective obligations to proceed with Closing under this Agreement have been satisfied (or, if there are conditions to a party’s obligation to proceed with Closing that remain unsatisfied, such conditions have been waived by such party). The Closing shall be held through the mail by delivery of the closing documents to the Escrow Agent on or prior to the Closing or such other place or manner as the parties hereto may mutually agree.

 

11.          Representations by Lessor . For the purpose of inducing Lessee to enter into this Agreement and to consummate the lease of the Property in accordance herewith, Lessor makes the following representations and warranties to Lessee as of the date hereof and as of the Closing Date with respect to each Property:

 

(a)          Lessor is duly organized (or formed), validly existing and in good standing under the laws of its state of organization, and to the extent required by law, the State in which the Property is located. Lessor has the power and authority to execute and deliver this Agreement and all closing documents to be executed by Lessor, and to perform all of Lessor’s obligations hereunder and thereunder. Neither the execution and delivery of this Agreement and all closing documents to be executed by Lessor, nor the performance of the obligations of Lessor hereunder or thereunder will result in the violation of any law or any provision of the organizational documents of Lessor or will conflict with any order or decree of any court or governmental instrumentality of any nature by which Lessor is bound. The execution, delivery and performance of this Agreement does not require the consent or approval of any court, administrative or governmental authority and does not result in the creation or imposition of any lien or equity of any kind whatsoever upon, or give to any other person any interest or right (including any right of termination or cancellation) in or with respect to, any material agreement to which Lessor is a party or the business or operations of Lessor or any of its properties or assets;

 

(b)          Except for any tax appeals and/or contests initiated by Lessor and/or Tenants, if any, Lessor has not received any written notice of any current or pending litigation, condemnation proceeding or tax appeals affecting Lessor or the Property and Lessor does not have any knowledge of any pending litigation, condemnation proceeding or tax appeals against Lessor or the Property; Lessor has not initiated, nor is Lessor participating in, any action for a change or modification in the current subdivision, site plan, zoning or other land use permits for the Property and Lessor has no knowledge that the Property may be rezoned;

 

(c)          Lessor has not entered into any leases, subleases, contracts, licenses or other agreements affecting the Property which will be binding upon Lessee after the Closing other than the Leases and the agreements referenced on Exhibit J annexed hereto;

 

(d)          Except for violations which have been cured or remedied on or before the date hereof, Lessor has not received any written notice from (or delivered any notice to) (i) any governmental authority regarding any violation of any law applicable to the Property and Lessor does not have knowledge of any such violations and (ii) any third party that the Property or the

 

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current use thereof violates any private covenant, restriction, easement or encumbrance and Lessor does not have any knowledge of any such violation;

 

(e)          Lessor has fee simple title to the Property free and clear of all liens and encumbrances except for Permitted Exceptions and Lessor is the sole owner of the entire lessor’s interest in each Lease;

 

(f)          With respect to each Lease: (i) the Lease and any Guaranty forwarded to Lessee under Section 6(b) is a true, correct and complete copy of the Lease and Guaranty; (ii) the Lease and Guaranty, if any, are in full force and effect and there is no default thereunder; (iii) no brokerage or leasing commissions or other compensation is or will be due or payable to any person, firm, corporation or other entity with respect to or on account of the current term of the Lease or any extension or renewal thereof; (iv) Lessor has no outstanding obligation to provide Tenant with an allowance to construct, or to construct at its own expense, any tenant improvements, except as set forth in Schedule 11(f)(iv) attached hereto; (v) intentionally deleted; (vi) Tenant is not entitled to rental concessions or abatements for any period subsequent to the scheduled date of Closing, except as set forth in Schedule 11(f)(vi) attached hereto; (vii) Tenant has not prepaid any rents as of the date hereof nor has Tenant delivered a security deposit, letter of credit or other security in connection with the Lease, except as set forth on Schedule 11(f)(vii) attached hereto; (viii) Tenant has not made any request for any assignment, transfer, or subletting in connection with all or a portion of the premises demised to Tenant which is presently pending or under consideration by Lessor; (ix) all specified work required to be performed by the landlord under the Lease up to the date of Closing has been completed or will be completed, at Lessor’s expense, prior to the Closing; (x) Lessor has not received and has no knowledge of any pending notices from Tenant electing to vacate the premises leased to Tenant or exercising any right of Tenant to terminate the Lease; and (xi) Lessor has heretofore billed Tenant for all fixed rent and additional rent due under the Lease as of the date hereof;

 

(g)          Attached hereto as Exhibit A-3 and made a part hereof is a true, correct and complete copy of the rent roll for the Property (the “ Rent Roll ”);

 

(h)          There are no occupancy rights, leases or tenancies affecting the Property other than the Leases. Neither this Agreement nor the consummation of the transactions contemplated hereby is subject to any first right of refusal or other purchase right in favor of any other person or entity; and apart from this Agreement, Lessor has not entered into any written agreements for the lease, purchase or sale of the Property, or any interest therein which has not been terminated;

 

(i)          The transactions contemplated hereby either (i) will not constitute a conveyance of all or substantially all the assets of Lessor, or (ii) if such transaction does constitute a conveyance of all or substantially all the assets of any Lessor, Lessor shall provide to Lessee at Closing an excise tax lien waiver or such other reasonably obtainable instruments evidencing compliance with laws or payment of taxes to the extent required by the law of the relevant state, or an indemnification from a party reasonably acceptable to Lessee for any resulting liability with respect to the period prior to the Closing;

 

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(j)          To Lessor’s knowledge, except as set forth in the environmental reports previously delivered by Lessor to Lessee, no hazardous substances have been generated, stored, released, or disposed of on or about the Property in violation of any law, rule or regulation applicable to the Property which regulates or controls matters relating to the environment or public health or safety (collectively, “ Environmental Laws ”) and no adverse environmental condition exists at the Property. Lessor has not received any written notice from (nor delivered any notice to) any federal, state, county, municipal or other governmental department, agency or authority (1) concerning any petroleum product or other hazardous substance discharge or seepage at, on, around or under the Property, or migrating from the Property, in violation of any Environmental Laws or; (2) of any pending actions, suits, claims and/or proceedings claiming that Lessor, any Tenant or the Property is in violation of any Environmental Laws. For purposes of this Subsection, “hazardous substances” shall mean any substance or material which is defined or deemed to be hazardous or toxic pursuant to any Environmental Laws. To Lessor’s knowledge, there are no underground storage tanks located on the Property;

 

(k)          Exhibit I attached hereto is a true, correct and complete listing of all warranties in effect for the Property (the “ Warranties ” );

 

(l)          Lessor is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code; and

 

(m)          There presently exists no unrestored casualty or condemnation affecting the Property.

 

The representations and warranties of Lessor shall survive Closing for a period of nine (9) months.

 

12.          Representations by Lessee.   Lessee represents and warrants to, and covenants with, Lessor as follows:

 

(a)          Lessee is a limited liability company duly formed, validly existing and in good standing under the laws of Delaware, is authorized to consummate the transaction set forth herein and fulfill all of its obligations hereunder and under all closing documents to be executed by Lessee, and has all necessary power to execute and deliver this Agreement and all closing documents to be executed by Lessee, and to perform all of Lessee’s obligations hereunder and thereunder. At Closing, each Approved Assignee (defined below) will be authorized to conduct business in the Commonwealth of Pennsylvania. This Agreement and all closing documents to be executed by Lessee have been duly authorized by all requisite corporate or other required action on the part of Lessee and are the valid and legally binding obligation of Lessee, enforceable in accordance with their respective terms. Neither the execution and delivery of this Agreement and all closing documents to be executed by Lessee, nor the performance of the obligations of Lessee hereunder or thereunder will result in the violation of any law or any provision of the organizational documents of Lessee or will conflict with any order or decree of any court or governmental instrumentality of any nature by which Lessee is bound.

 

The representations and warranties of Lessee shall survive Closing for a period of nine (9) months.

 

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13.          Conditions Precedent to Lessee’s Obligations. Lessee’s obligation to pay the Leasehold Transaction Price, and to accept title to the Property, shall be subject to compliance by Lessor with the following conditions precedent with respect to each Property on and as of the Closing Date:

 

(a)          Lessor shall deliver to Lessee on or before the Closing the items set forth in Section 10 above;

 

(b)          Lessee shall receive from Escrow Agent or any other title insurer approved by Lessee in its judgment and discretion, a current ALTA leasehold form of title insurance policy, as applicable, or irrevocable and unconditional binder to issue the same, with extended coverage for the Real Property in the amount of the Leasehold Transaction Price, dated, or updated to, the date of the Closing, insuring, or committing to insure, at its ordinary premium rates Lessee’s good and marketable title to the leasehold estate in the Real Property and the Improvements otherwise in such form and with such endorsements as provided in the title commitment approved by Lessee pursuant to Section 6 hereof and subject only to the Permitted Exceptions (the “ Title Policy ”);

 

(c)          Each Tenant shall be in possession of the premises demised under its respective Lease, open for business to the public and paying full and unabated rent under such Lease and no Tenant shall have assigned its Lease;

 

(d)          The representations and warranties of Lessor contained in this Agreement shall have been true when made and shall be true in all material respects at and as of the date of Closing as if such representations and warranties were made at and as of the Closing, and Lessor shall have performed and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Lessor prior to or at the Closing;

 

(e)          Lessor shall have delivered to Lessee a written waiver by each applicable party of any right of first refusal, right of first offer or other purchase option that such party has to lease or purchase the Property, or any part thereof, from Lessor;

 

(f)          Lessor shall have delivered to Lessee a copy of each Estoppel Certificate required to be delivered by Lessor under the terms of Section 6(c) hereof; and

 

(g)          Lessor shall have made all contributions, payments and/or reimbursements and completed any and all work required by any governmental authority in connection with the construction and development of the Property, including, without limitation, as required by any variance or site plan approval.

 

In the event that any of the foregoing conditions precedent has not been satisfied as of Closing, Lessee shall have the right terminate this Agreement by delivering written notice thereof to Lessor no later than that date which is fifteen (15) days after the Closing Date, upon which termination the Earnest Money shall be refunded to Lessee, and with respect to a failure under Subsections (a), (d) or (e) above, Lessor shall pay to Lessee upon receipt of reasonable documentary evidence of all of the out-of-pocket costs and expenses actually incurred by Lessee in connection with this Agreement, which return and payment shall operate to terminate this

 

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Agreement and release Lessor and Lessee from any and all liability hereunder, except those which are specifically stated herein to survive any termination hereof.

 

14.          Conditions Precedent to Lessor’s Obligations. Lessor’s obligation to lease the Property shall be subject to the following conditions precedent with respect to each Property on and as of the Closing Date:

 

(a)          Escrow Agent is in receipt of a release from Manufacturers and Traders Trust Company of its lien against certain of the Properties (as created by that certain document entitled “Master Open-End Mortgage and Security Agreement” dated June 23, 2009 by and between Lessor and Manufacturers and Traders Trust Company and recorded in the Dauphin County Recorder of Deeds Office on July 2, 2009 at Instrument Number 20090021845);

 

(b)          Lessee shall deliver to Escrow Agent on the Closing Date the remainder of the Leasehold Transaction Price, subject to adjustment of such amount pursuant to Section 4 hereof; and

 

(c)          The representations and warranties of Lessee contained in this Agreement shall have been true when made and shall be true in all material respects at and as of the date of Closing as if such representations and warranties were made at and as of the Closing, and Lessee shall have performed and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Lessee prior to or at the Closing.

 

To the extent that, notwithstanding the good faith efforts of Lessor to secure the release described in Section 14(a) above, the same has not been obtained by the Closing Date, then Lessor by written notice to Lessee given on or before the Closing Date, may extend the Closing Date to a date (the “ Extended Closing Date ”) that is no later than October 31, 2014 (the period between the Closing Date and the Extended Closing Date, the “ Lessor Closing Extension Period ” ), and the “Closing Date” shall be moved to the Extended Closing Date. If Lessor so extends the Closing Date, then Lessee may, but shall not be obligated to, cause said conditions to be satisfied during the Lessor Closing Extension Period. If Lessor does not cause said conditions to be satisfied by the Extended Closing Date, then Lessee may either (i) waive any unsatisfied conditions and proceed to Closing in accordance with the terms and provisions hereof; or (ii) terminate this Agreement with respect to any or all Properties by delivering written notice thereof to Lessor no later than five (5) business days following the Extended Closing Date, upon which termination the Earnest Money shall be refunded to Lessee, Lessor shall pay to Lessee all of the out-of-pocket costs and expenses incurred by Lessee as to such Property or Properties in connection with this Agreement, which return and payment shall operate as liquidated damages and to terminate this Agreement and release Lessor and Lessee from any and all rights, obligations and liability hereunder, except those which are specifically stated herein to survive any termination hereof.

 

15.          Notices. Unless otherwise provided herein, all notices and other communications which may be or are required to be given or made by any party to the other in connection herewith shall be in writing and shall be deemed to have been properly given and received on the date: (i) delivered by facsimile transmission or by electronic mail (e.g. email), (ii) delivered in

 

21
 

 

person, (iii) deposited in the United States mail, registered or certified, return receipt requested, or (iv) deposited with a nationally recognized overnight courier, to the addresses set out in Section 1, or at such other addresses as specified by written notice delivered in accordance herewith. Notwithstanding the foregoing, Lessor and Lessee agree that notice may be given on behalf of each party by the counsel for each party and notice by such counsel in accordance with this Section 15 shall constitute notice under this Agreement.

 

16.          Lessor Covenants.   Lessor agrees that it: (a) shall continue to operate and manage each Property in the same manner in which Lessor has previously operated and managed such Property; (b) shall, subject to Section 7 hereof and subject to reasonable wear and tear, maintain each Property in the same (or better) condition as exists on the date hereof; and (c) shall not, without Lessee’s prior written consent, which, after the expiration of the Due Diligence Period may be withheld in Lessee’s sole discretion: (i) amend the Leases or the Guaranties in any manner, nor enter into any new lease, other than the Ground Leases and the Pinnacle Leases, license agreement or other occupancy agreement with respect to any Property; (ii) consent to an assignment of any Lease or a sublease of the premises demised thereunder or a termination or surrender thereof; (iii) terminate any Lease or release any guarantor of or security for any Lease unless required by the express terms of such Lease; and/or (iv) cause, permit or consent to an alteration of the premises demised under the Leases (unless such consent is non-discretionary). Lessor shall promptly inform Lessee in writing of any material event adversely affecting the ownership, use, occupancy or maintenance of any Property, whether insured or not.

 

17.          314 Audit. Upon Lessee’s request, for a period of one (1) year after Closing, Lessor shall make the financial statements , including balance sheets, income statements, stockholders’ equity statements and cash flow statements and related notes prepared in accordance with United States generally accepted accounting standards, and any and all books, records, correspondence, financial data, leases, delinquency reports and all other documents and matters (other than confidential and privileged information) maintained by Lessor or their agents and relating to receipts, expenditures, contributions and distributions reasonably necessary to complete an audit pertaining to each Property for the three (3) most recent full calendar years and the interim period of the current calendar year (collectively, the “ Records ”) available to Lessee and/or its auditors for inspection, copying and audit by Lessee’s designated accountants, and at Lessee’s expense. Lessor shall provide Lessee and/or its auditors, but without expense to Lessor, with copies of, or access to, such factual and financial information as may be reasonably requested by Lessee or its designated accountants, and in the possession or control of Lessor, to enable Lessee to file any filings required by the Securities and Exchange Commission (the “ SEC ”) in connection with the lease of each Property. Lessor understands and acknowledges that Lessee is required to file audited financial statements related to each Property with the SEC within seventy-one (71) days of the Closing Date and agrees to provide any Records and requested reasonable representations and/or certifications to the Lessee’s auditors, on a timely basis to facilitate Lessee’s timely submission of such audited financial statements.

 

18.          Performance on Business Days. A "business day" is a day which is not a Saturday, Sunday or legal holiday recognized by the Federal Government. Furthermore, if any date upon which or by which action is required under this Agreement is not a business day, then the date for such action shall be extended to the first day that is after such date and is a business day. When calculating the period of time before which, within which or following which any act

 

22
 

 

is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-business day, the period in question shall end on the next succeeding business day.

 

19.          Entire Agreement. This Agreement constitutes the sole and entire agreement among the parties hereto and no modification of this Agreement shall be binding unless in writing and signed by all parties hereto. No prior agreement or understanding pertaining to the subject matter hereof (including, without limitation, any letter of intent executed prior to this Agreement) shall be valid or of any force or effect from and after the date hereof.

 

20.          Severability. If any provision of this Agreement, or the application thereof to any person or circumstance, shall be invalid or unenforceable, at any time or to any extent, then the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. Each provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.

 

21.          No Representations or Warranties. Lessee hereby acknowledges, understands and agrees that it has an opportunity to inspect the Property as set forth in Section 6 herein, and except as set forth in this Agreement, the Property shall be conveyed by lease at Closing to Lessee in “as-is” condition with no representation or warranties, express or implied, whatsoever.

 

22.          Applicable Law. This Agreement shall be construed under the laws of the State or Commonwealth in which the Property is located, without giving effect to any state's conflict of laws principles.

 

23.          Intentionally Deleted.

 

24.          Broker’s Commissions. Lessee and Lessor each hereby represent that, except for the Broker listed herein, there are no other brokers involved or that have a right to proceeds in this transaction. Lessor shall be responsible for payment of commissions to the Broker pursuant to a separate written agreement executed by Lessor. Lessor and Lessee each hereby agree to indemnify and hold the other harmless from all loss, cost, damage or expense (including reasonable attorneys' fees at both trial and appellate levels) incurred by the other as a result of any claim arising out of the acts of the indemnifying party (or others on its behalf) for a commission, finder's fee or similar compensation made by any broker, finder or any party who claims to have dealt with such party (except that Lessee shall have no obligations hereunder with respect to any claim by Broker). The representations, warranties and indemnity obligations contained in this section shall survive the Closing or the earlier termination of this Agreement.

 

25.          Assignment. Lessee may assign its rights under this Agreement, provided, however, that no such assignment shall relieve Lessee of any of its obligations hereunder until Closing is complete. Lessee is entering into this Agreement for and on behalf of the special purpose entities named on Schedule 25 attached hereto and made a part hereof (individually and collectively, “ Approved Assignee ”) and intends to assign each respective Approved Assignee its rights hereunder prior to Closing.

 

23
 

 

26.          Attorneys’ Fees. In any action between Lessee and Lessor as a result of failure to perform or a default under this Agreement, the prevailing party shall be entitled to recover from the other party, and the other party shall pay to the prevailing party, the prevailing party’s reasonable attorneys’ fees and disbursements and court costs incurred in such action.

 

27.          Time of the Essence . Time is of the essence with respect to each of Lessee’s and Lessor’s obligations hereunder.

 

28.          Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. Signatures on this Agreement which are transmitted electronically shall be valid for all purposes, however any party shall deliver an original signature on this Agreement to the other party upon request.

 

29.          Anti-Terrorism. Neither Lessee or Lessor, nor any of their affiliates, are in violation of any Anti-Terrorism Law (as hereinafter defined) or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. “Anti-Terrorism Laws” shall mean any laws relating to terrorism or money laundering, including: Executive Order No. 13224; the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or may hereafter be, renewed, extended, amended or replaced; the applicable laws comprising or implementing the Bank Secrecy Act; and the applicable laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing may from time to time be amended, renewed, extended, or replaced).

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGES]

 

24
 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

 

LESSEE:   LESSOR:
     
AMERICAN REALTY CAPITAL VII, LLC,   PINNACLE HEALTH HOSPITALS,
a Delaware limited liability company   a Pennsylvania non-profit corporation
     
By: /s/ Edward M. Weil, Jr.   By: /s/ Michael Young
  Name: Edward M. Weil, Jr.     Name: Michael Young
  Title:   President     Title:   President/CEO
     
Date: June 13, 2014   Date: June 11, 2014

 

THE UNDERSIGNED HEREBY ACKNOWLEDGES AND AGREES TO BE BOUND BY THE TERMS OF THIS AGREEMENT RELATING TO ESCROW AGENT AND THE EARNEST MONEY.

 

ESCROW AGENT:

 

STEWART TITLE GUARANTY COMPANY

 

By: /s/ Annette M. Comer  
     
Name:   Annette M. Comer  
     
Title: Vice President  
     
Date: June 16, 2014  

 

 
 

 

EXHIBITS AND SCHEDULES

 

Exhibits    
     
Exhibit A-1-1 - Bloom Real Property
     
Exhibit A-1-2 - Brady Real Property
     
Exhibit A-1-3 - Community Health Real Property
     
Exhibit A-1-4 - FOC Real Property
     
Exhibit A-1-5 - Landis Real Property
     
Exhibit A-1-6 - Medical Sciences Real Property
     
Exhibit A-2 - List of Leases
     
Exhibit A-3 - Rent Roll
     
Exhibit B-1 - Intentionally Deleted
     
Exhibit C - Form of Assignment and Assumption of Leases, Guaranties and Security Deposits
     
Exhibit D - Form of Bill of Sale
     
Exhibit E - Form of Assignment of Contracts, Permits, Licenses and Warranties
     
Exhibit F - Form of Estoppel Certificate
     
Exhibit G - Intentionally Omitted
     
Exhibit H - Form of Tenant Notice Letter
     
Exhibit I - Warranties
     
Exhibit J - Service Contracts
     
Schedules    
     
Schedule 1 - Leasehold Transaction Price Allocations
     
Schedule 6(e) - Ground Lease Terms
     
Schedule 6(f) - Pinnacle Lease Terms
     
Schedule 11(f)(iv) - Tenant Improvement Allowances

 

Exhibits and Schedules

 

 
 

 

Schedule 11(f)(vi) - Rent Concessions
     
Schedule 11(f)(vii) - Prepaid Rents, Security Deposits and Letters of Credit
     
Schedule 25 - Approved Assignees

 

Exhibits and Schedules

 

 
 

 

EXHIBIT A-1-1

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Bloom Real Property

 

[LESSOR TO PROVIDE LEGAL DESCRIPTION TO LESSEE BY JUNE 20, 2014]

 

A-1- 1
 

 

EXHIBIT A-1-2

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Brady Real Property

 

[LESSOR TO PROVIDE LEGAL DESCRIPTION TO LESSEE BY JUNE 20, 2014]

 

A-1- 2
 

 

EXHIBIT A-1-3

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Community Health Real Property

 

[LESSOR TO PROVIDE LEGAL DESCRIPTION TO LESSEE BY JUNE 20, 2014]

 

A-1- 3
 

 

EXHIBIT A-1-4

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

FOC Real Property

 

[LESSOR TO PROVIDE LEGAL DESCRIPTION TO LESSEE BY JUNE 20, 2014]

 

A-1- 4
 

 

EXHIBIT A-1-5

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Landis Real Property

 

[LESSOR TO PROVIDE LEGAL DESCRIPTION TO LESSEE BY JUNE 20, 2014]

 

A-1- 5
 

 

EXHIBIT A-1-6

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Medical Sciences Real Property

 

[LESSOR TO PROVIDE LEGAL DESCRIPTION TO LESSEE BY JUNE 20, 2014]

 

A-1- 6
 

 

EXHIBIT A-2

 

LIST OF LEASES

 

Bloom Real Property Leases

1. Lease Agreement, dated January 1, 2000, by and between Pinnacle Health Hospitals and Susquehanna Valley Surgery Center, as amended by (i) a lease amendment dated January 9, 2004, by and between Pinnacle Health Hospitals and Susquehanna Valley Surgery Center, and (ii) a renewal agreement letter dated January 8, 2010 by and between PinnacleHealth and Susquehanna Valley Surgery Center.

 

2. Lease Agreement, dated February 17, 2005, by and between Pinnacle Health Hospitals and Susquehanna Valley Surgery Center, as amended by (i) a lease amendment dated February 25, 2010.

 

3. Office Lease Agreement, dated February 27, 2004 by and between Pinnacle Health Hospitals and Knight, Boline & D’Amico Urology Associates.

 

4. Office Lease Agreement, dated October 25, 2011, by and between Pinnacle Health Hospitals and Medical Arts Allergy, P.C.

 

5. Office Lease Agreement, dates April 9, 2003, by and between Pinnacle Health Hospitals and Michael F. Lupinacci, d/b/a Physicians of Rehabilitation, Industrial and Spine Medicine, P.C., as amended by (i) Lease Addendum dated February 1, 2006, by and between Pinnacle Health Hospitals and Michael F. Lupinacci, d/b/a Physicians of Rehabilitation, Industrial and Spine Medicine, P.C., (ii) Second Lease Addendum dated September 21, 2007, , by and between Pinnacle Health Hospitals and Michael F. Lupinacci, d/b/a Physicians of Rehabilitation, Industrial and Spine Medicine, P.C., and (ii) letter dated July 1, 2013 by and between Zetter HealthCare Management Consultants, Pinnacle Health Hospitals and PRISM.

 

6. Office Lease Agreement, dated January 4, 2014, by and between Pinnacle Health Hospitals and Urology of Central PA.

 

FOC Real Property Leases

FOC I Leases

1. Lease Agreement, dated May 19, 2004, by and between Pinnacle Health Hospitals and Cumberland Ears, Nose and Throat and Facial Plastic Surgery, P.C., as amended by (i) Lease Addendum dated September 15, 2009, by and between Pinnacle Health Hospitals and Heritage Medical Group, LLP, and (ii) Lease Renewal Letter dated September 21, 2010, by and between Pinnacle Health and Heritage Ears, Nose and Throat and Facial Surgery.

 

2. Lease Agreement, dated September 2, 2004, by and between Pinnacle Health Hospitals and GDD Pharmacy Services, Inc. as amended by (i) Lease Renewal Letter dated January 26, 2010, by and between Pinnacle Health and Good Day Pharmacy.

 

A-2- 1
 

 

3. Lease Agreement, dated March 23, 2007 by and between Pinnacle Health Hospitals and Jones, Daly & Coldren Associates, as amended by (i) Lease Addendum and Extension, dated June 20, 2008, by and between Pinnacle Health Hospitals and Jones, Daly & Coldren Associates.

 

4. Basic Lease Information dated January 1, 2004, by and between Pinnacle Health Hospitals and Armesto Eye Associates, as amended by (i) Lease Addendum dated February 22, 2005, by and between Pinnacle Health Hospitals and Armesto Eye Associates, (ii) a Second Lease Addendum dated October 2, 2009, by and between Pinnacle Health Hospitals and Armesto Eye Associates (iii) a Third Lease Addendum dated January 13, 2011 by and between Pinnacle Health Hospitals and Armesto Eye Associates.

 

5. Lease dated December 16, 1999, by and between Pinnacle Health Hospitals and Leo D. Farrell M.D. and Deborah Darrell, M.D., as amended by (i) a First Amendment, dated September 1, 2000, by and between Pinnacle Health Hospitals and Leo D. Farrell M.D. and Deborah Darrell, M.D., (ii) a Corrective Addendum dated May 15, 2001, by and between Pinnacle Health Hospitals and Leo D. Farrell M.D. and Deborah Darrell, M.D., (superseding an Addendum dated April 25, 2001), (iii) a Third Addendum, dated October 3, 2001, by and between Pinnacle Health Hospitals and Leo D. Farrell M.D. and Deborah Darrell, M.D., (iv) a Fourth Addendum dated February 25, 2002, by and between Pinnacle Health Hospitals and Leo D. Farrell M.D. and Deborah Darrell, M.D., (v) a Fifth Lease Addendum dated August 4, 2005, by and between Pinnacle Health Hospitals and Leo D. Farrell M.D. and Deborah Darrell, M.D., (vi) a Sixth Addendum dated April 20, 2010, by and between Pinnacle Health Hospitals and Leo D. Farrell M.D. and Deborah Darrell, M.D.

 

6. Lease Agreement, dated January 26, 2009, by and between Pinnacle Health Hospitals and Peter Sakol, M.D., as amended by (i) a Lease Renewal Letter dated January 23, 2012 between Pinnacle Health Hospitals and Peter Sakol M.D.

 

7. Lease Agreement, dated April 22, 2010 by and between Pinnacle Health Hospitals and Scott Mueller, M.D.

 

8. Lease Agreement, dated January 15, 2013 by and between Pinnacle Health Hospitals and Reproductive Medicine Associates of Philadelphia, P.C.

 

9. Lease Agreement, dated February 1, 2013 by and between Pinnacle Health Hospitals and Arlington Orthopedics.

 

10. Office Lease Agreement, dated January 23, 2009 by and between Pinnacle Health Hospitals and Women First, Obstetrics and Gynecology, as amended by (i) a Lease Addendum dated October 1, 2011, by and between Pinnacle Health Hospitals and Women First, Obstetrics and Gynecology.

 

11. Office Lease Agreement, dated January 23, 2009 by and between Pinnacle Health Hospitals and Women First, Obstetrics and Gynecology, as amended by a Lease

 

A-2- 2
 

 

  Addendum dated October 1, 2011, by and between Pinnacle Health Hospitals and Women First, Obstetrics and Gynecology.

 

12. Office Lease dated August 15, 2002, by and between Pinnacle Health Hospitals and deRamon Plastic Surgery Institute, P.C., as amended by (i) an Addendum dated October 29, 2004, by and between Pinnacle Health Hospitals and deRamon Plastic Surgery Institute, P.C., and (ii) a Second Lease Addendum dated December 12, 2006, by and between Pinnacle Health Hospitals and deRamon Plastic Surgery Institute, P.C.

 

13. Lease Agreement, dated September 16, 2009 by and between Pinnacle Health Hospitals and Calagno and Rossi Vein Treatment Center, LLC.

 

14. Lease Agreement, dated August 1, 2000, by and between Pinnacle Health Hospitals and Medical Arts Allergy P.C, as amended by (i) Lease Addendum dated November 1, 2006, by and between Pinnacle Health Hospitals and Medical Arts Allergy P.C., (ii) Second Lease Addendum dated January 1, 2919 by and between Pinnacle Health Hospitals and Medical Arts Allergy P.C.

 

15. Ground and Rooftop Lease Agreement dated February 1, 2002 by and between Pinnacle Health Hospitals and Cellco Partnership d/b/a Verizon Wireless.

 

FOC II Leases

1. Lease Agreement, dated July 12, 2011, by and between Pinnacle Health Hospitals and Sandeep Kakaria, M.D.

 

2. Lease Agreement, dated May 11, 2011, by and between Pinnacle Health Hospitals and Ability Prosthetics and Orthotics, Inc.

 

3. Lease Agreement, dated August 1, 2010, by and between Pinnacle Health Hospitals and Burick Center for Health &Wellness.

 

A-2- 3
 

 

EXHIBIT A-3

 

RENT ROLL

 

(attached)

 

A-3- 1
 

 

 

A-3- 2
 

 

 

A-3- 3
 

 

 

A-3- 4
 

 

 

A-3- 5
 

 

 

A-3- 6
 

 

 

A-3- 7
 

 

 

A-3- 8
 

 

 

A-3- 9
 

 

EXHIBIT B-1

 

INTENTIONALLY DELETED

 

B- 1
 

 

EXHIBIT C

 

FORM OF
ASSIGNMENT AND ASSUMPTION OF LEASES, GUARANTIES AND SECURITY DEPOSITS

 

______________________________ ("Assignor"), in consideration of the sum of Ten and No/100 Dollars ($10.00) in hand paid and other good and valuable consideration, the receipt of which is hereby acknowledged, hereby assigns, transfers, sets over and conveys to ______________________________ ("Assignee"), all of Assignor's right, title and interest in and to those leases described in Exhibit A attached hereto and made a part hereof (as amended from time to time, the “Leases”), including any and all security deposits under the Leases, together with all of Assignor’s right, title and interest in and to those lease guaranties described in Exhibit B attached hereto and made a part hereof (as amended from time to time).

 

Subject to the limitations set forth below, Assignor does hereby agree to defend, indemnify and hold harmless Assignee from any liability, damages (excluding speculative damages, consequential damages and lost profits), causes of action, expenses and reasonable attorneys' fees incurred by Assignee by reason of the failure of Assignor to have fulfilled, performed and discharged all of the various commitments, obligations and liabilities of the lessor, or landlord under and by virtue of the Leases arising or accruing prior to the date of this Assignment. Subject to the limitations set forth below, Assignee does hereby agree to defend, indemnify and hold harmless Assignor from any liability, damages (excluding speculative damages, consequential damages and lost profits), causes of action, expenses and reasonable attorneys' fees incurred by Assignor by reason of the failure of Assignee to have fulfilled, performed and discharged all of the various commitments, obligations and liabilities of the Landlord under and by virtue of the Leases arising or accruing on and after the date of this Assignment.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

C- 1
 

 

IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment this ______ day of ______________, 2014, which Assignment is effective this date. This Assignment may be executed in counterparts, which when taken together shall be deemed one agreement.

 

  ASSIGNOR:
   
   
   
  By:  
  Name:   
  Title:  
   
  ASSIGNEE:
   
   
   
  By:  
    Name:   
    Title:  

 

C- 2
 

 

EXHIBIT A

 

Leases

 

C- 3
 

 

EXHIBIT B

 

Guaranties

 

C- 4
 

 

EXHIBIT D

 

FORM OF BILL OF SALE

 

For valuable consideration, the receipt and sufficiency of which is hereby acknowledged, ______________________________, a ___________________________, having an address at ____________________________ (“Lessor”), hereby bargains, sells, conveys and transfers to ____________________________ (“Lessee”), a _______________________________, all of Lessor’s right, title and interest in and to those certain items of personal and intangible property (including any warranty made by third parties in connection with the same and the right to sue on any claim for relief under such warranties) (the “Personal Property”) located at or held in connection with that certain real property located in the State of __________________________, as more particularly described on Schedule A attached hereto and made a part hereof.

 

Lessor has not made and does not make any express or implied warranty or representation of any kind whatsoever with respect to the Personal Property, including, without limitation, with respect to title, merchantability of the Personal Property or its fitness for any particular purpose, the design or condition of the Personal Property; the quality or capacity of the Personal Property; workmanship or compliance of the Personal Property with the requirements of any law, rule, specification or contract pertaining thereto; patent infringement or latent defects. Lessee accepts the Personal Property on an “as is, where is” basis.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

D- 1
 

 

IN WITNESS WHEREOF, Lessor has caused this instrument to be executed and delivered as of this ___ day of _______, 2014.

 

  LESSOR:  
     
     
     
  By:    
       
  Name:     
       
  Title:    

 

D- 2
 

 

SCHEDULE A

 

TO BILL OF SALE

 

[Add legal description of Real Property]

 

D- 3
 

 

EXHIBIT E

 

FORM OF ASSIGNMENT OF CONTRACTS,
PERMITS, LICENSES AND WARRANTIES

 

THIS ASSIGNMENT, made as of the ___ day of ________, 2014, by _________________, a __________________________ (“Assignor”), to _____________________________, a __________________________________________(“Assignee”).

 

WITNESSETH:

 

WHEREAS, by Agreement for Lease of Real Property (the “Agreement for Lease”) having an effective date of ________, 2014, between Assignor and American Realty Capital VII, LLC, Assignee’s predecessor-in-interest under the Agreement for Lease, Assignee has agreed to lease from Assignor as of the date hereof, and Assignor has agreed to lease to Assignee, that certain property located at ________________________ (the “Property”); and

 

WHEREAS, Assignor desires to assign to Assignee as of the date hereof all of Assignor’s right, title and interest in those contracts set forth on Exhibit A attached hereto and made a part hereof, and the permits, trademarks, licenses and warranties held by Assignor in connection with the Property (collectively, the “Contracts”).

 

NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Assignor hereby assigns, sets over and transfers unto Assignee to have and to hold from and after the date hereof all of the right, title and interest of Assignor in, to and under the Contracts. Assignor agrees without additional consideration to execute and deliver to Assignee any and all additional forms of assignment and other instruments and documents that may be reasonably necessary or desirable to transfer or evidence the transfer to Assignee of any of Assignor's right, title and interest to any of the Contracts.

 

This Assignment shall be governed by the laws of the State of _____________, applicable to agreements made and to be performed entirely within said State.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

E- 1
 

 

IN WITNESS WHEREOF, Assignor has duly executed this Assignment as of the date first above written.

 

  ASSIGNOR:
   
   
  a  
     
  By:  
  Name:   
  Title:  

 

E- 2
 

 

Exhibit A

 

Assumed Contracts

 

E- 3
 

 

EXHIBIT F

 

FORM OF ESTOPPEL CERTIFICATE

 

The undersigned hereby certifies to American Realty Capital VII, LLC (“ ARC VII ”), [_____________________] (“ Approved Assignee ”; ARC VII and Approved Assignee are hereinafter referred to, individually and collectively, as “ Lessee ”), KeyBank National Association (“ Lender ”) and their respective successors and assigns as follows:

 

1.          The undersigned is the tenant under that certain [insert title of lease document] [(the “ Lease ”)], dated as of _________ __, ____, by and between _________________________ (“ Landlord ”) and _________________________ (“ Tenant ”) [, as amended by that certain [insert title of lease amendment document], dated as of _________ __, ____, by and between _________________________ and _________________________ (collectively, the “ Lease ”)], pursuant to which Tenant leases certain premises known as [Suite ____], consisting of _______ rentable square feet, at that real property located at _________________________________________ (the “ Premises ”).

 

2.          Except as set forth above, the Lease has not been modified, changed, altered, supplemented or amended in any respect, nor have any provisions thereof been waived.

 

3.          The Lease is valid and in full force and effect on the date hereof. The Lease represents the entire agreement between Landlord and Tenant with respect to the Premises and the land on which the Premises are situated.

 

4.          Tenant is not entitled to, and has made no agreement with Landlord or its agents or employees concerning, free rent, partial rent, rebate of rent payments, credit or offset or reduction in rent, or any other type of rental concession including, without limitation, lease support payments, lease buy-outs, or assumption of any leasing or occupancy agreements of Tenant.

 

5.          The initial term of the Lease began on __________ __, _____ and expires on ________ __, 20__. The Rent Commencement Date was __________ __, ____. Tenant has accepted possession of the Premises and is open for business. Tenant has not sublet all or a portion of the Premises to any sublessee and has not assigned, transferred or encumbered any of its rights or interests under the Lease.

 

6.          Tenant has no outstanding options or rights to renew or extend the term of the Lease, except as follows: ________________ (if none, please state “none”). Tenant has no outstanding expansion options, other options, rights of first refusal or rights of first offer to purchase the Premises or any part thereof and/or the land on which the Premises are situated, or rights of first offer to lease with respect to all or any part of the Premises.

 

7.          The [Base Annual Rent] payable under the Lease is $____________ ($_________ monthly). Such [Base Annual Rent] payable under the Lease shall be adjusted during the initial term of the Lease as follows: (a) from ___________, 20__ to and including ______________, 20__, the Base Annual Rent shall be $_______ ($_______ monthly); (b) from ___________, 20___ to and including ____________, 20___ the Base Annual Rent shall be $________

 

F- 1
 

 

($________ monthly); [and from __________, 20__ to and including __________, 20___ the Base Annual Rent shall be $_________ ($__________ monthly)]. Such rent has been paid through and including the month of ____________, 2014. Additional rent under the Lease has been paid through and including the month of __________, 2014. No such rent (excluding security deposits) has been paid more than one (1) month in advance of its due date.

 

8.          Tenant's security deposit, if any, is $_________________ (if none, please state “none”).

 

9.          No event has occurred and no condition exists that constitutes, or that with the giving of notice or the lapse of time or both, would constitute, a default by Tenant or, to the best knowledge of Tenant, Landlord under the Lease. Tenant has no existing defenses or offsets against the enforcement of the Lease by Landlord.

 

10.         (a)          All required contributions by Landlord to Tenant on account of Tenant's improvements have been received by Tenant and all of Tenant's tenant improvements have been completed in accordance with the terms of the Lease.

 

(b)          Landlord has satisfied all its obligations to Tenant arising out of or incurred in connection with the construction of the tenant improvements on the Premises and no off-set exists with respect to any rents or other sums payable or to become payable by the Tenant under the Lease.

 

11.         All licenses necessary for using and operating the Premises as a medical office are held by Tenant and are in full force and effect.

 

12.         No voluntary actions or, to Tenant’s best knowledge, involuntary actions are pending against Tenant under the bankruptcy laws of the United States or any state thereof

 

13.         This Certificate is delivered to induce Lessee to acquire the Premises and Lender to provide certain financing to Lessee, with the understanding that Lessee and Lender shall rely upon the truth of the matters set forth in this Certificate.

 

[SIGNATURE PAGE FOLLOWS]

 

F- 2
 

 

The undersigned is duly authorized to execute this Certificate on behalf of Tenant.

 

Dated: ____________, 2014

 

TENANT:

 

____________________, a ________________

 

By:     
  Name:  
  Title:  

 

[DELETE THE FOLLOWING SECTION IF THE LEASE IS NOT GUARANTEED]

 

[_________________________, a _________________________] (“ Guarantor ”) certifies to and for the benefit of Lessee, Lender and their respective successors and assigns as follows:

 

With respect to that certain [Guaranty], dated as of ________ __, ____, by Guarantor to and for the benefit of Landlord (the “Guaranty” ): (a) Guarantor is the guarantor of the Lease pursuant to the Guaranty; (b) the Guaranty has not been modified, changed, altered, supplemented or amended in any respect, nor have any provisions thereof been waived; (c) the Guaranty is valid and in full force and effect on the date hereof; and (d) no voluntary actions or, to Guarantor’s best knowledge, involuntary actions are pending against Guarantor under the bankruptcy laws of the United States or any state thereof. This Certificate is delivered to induce Lessee to acquire the Premises and Lender to provide certain financing to Lessee, with the understanding that Lessee and Lender shall rely upon the truth of the matters set forth in this Certificate. The undersigned is duly authorized to execute this Certificate.

 

Dated: ____________, 2014

 

  [USE FOLLOWING SIGNATURE BLOCK FOR
  ENTITY GUARANTOR]
   
  GUARANTOR:
   
  ____________________,
  a ________________
   
  By:  
    Name:
    Title:
   
  [USE FOLLOWING SIGNATURE BLOCK FOR
PERSONAL GUARANTOR]
   
  GUARANTOR:
   
   
  Name:

 

F- 3
 

 

EXHIBIT G

 

[INTENTIONALLY OMITTED]

 

G- 1
 

 

EXHIBIT H

 

FORM OF NOTICE TO TENANT

 

________________ ___, 2014

 

TO:    [INSERT TENANT’S NOTICE ADDRESS FROM LEASE]

 

Re:    Notice of Change of Ownership of ______________________________

 

Ladies and Gentlemen:

 

YOU ARE HEREBY NOTIFIED AS FOLLOWS:

 

That as of the date hereof, the undersigned has transferred, sold, assigned, and conveyed all of its right, title and interest in and to the above-described property (the “Property”) to [APPROVED ASSIGNEE] (the “New Owner”) and assigned to New Owner, all of the undersigned’s right, title and interest under that certain Lease, dated _________, between ________as tenant and ____________as landlord (the “Lease”), together with any security deposits or letters of credit held thereunder.

 

Accordingly, New Owner is the landlord under the Lease and future notices and correspondence with respect to your leased premises at the Property should be made to the New Owner at the following address:

 

[APPROVED ASSIGNEE]

c/o American Realty Capital Healthcare Trust II, Inc.

7621 Little Avenue, Suite 200

Charlotte, North Carolina 28226

Attention: Regional Asset Manager

 

With a copy to:

 

[APPROVED ASSIGNEE]

c/o American Realty Capital Healthcare Trust II, Inc.

405 Park Avenue, 14 th Floor

New York, NY 10022

Attention: General Counsel

 

You will receive a separate notification from New Owner regarding the new address for the payment of rent. In addition, to the extent required by the Lease, please amend all insurance policies you are required to maintain pursuant to the Lease to name New Owner as an additional insured thereunder and promptly provide New Owner with evidence thereof.

 

[SIGNATURE PAGE FOLLOWS]

 

H- 1
 

 

  Very truly yours,
  [PRIOR LANDLORD)
   
  By:  
  Name:   
  Title:  

 

H- 2
 

 

EXHIBIT I

 

WARRANTIES

 

None

 

I- 1
 

 

EXHIBIT J

 

Service Contracts

 

PHH

Contracting

Entity

  Vendor   Type of Services   Term   Cost   Comment
FOHC   Cintas   Duralite Mats @ FOHC used by Environmental Services       $202.03/weekly    
CHC   Dempsey Uniform & Linen Supply  

PH Community Health Center Logo (2)

Welcome Pinnacle Health Logo (3)

 

     

$5.72/weekly

 

$5.72/weekly

   
Pinnacle   ABM Electrical Power Solutions  

Professional engineering reliability/testing for electrical distribution equipment for:

 

 

07/01/12 to 06/30/18

(for 4 hospitals)

  $9,960/annually Polyclinic Hospital, $11,556/annually Harrisburg Hospital, $16,620/annually Community General Osteopathic Hospital, $3,564/annually Fredricksen Outpatient Center    
Fredricksen Center   Bailey Landscape and Maintenance, Inc.   Landscape maintenance of grounds   04/01/14 to 03/31/15   $99,889/annually    
Osteopathic Hospital   Bailey Landscape and Maintenance, Inc.   Landscape maintenance of grounds   04/01/14 to 03/31/15   $114,540/annually    
Harrisburg Hospital   Black Landscape Contracting   Landscape maintenance of campus   04/01/14 to 03/31/15   $23,000/annually    
Polyclinic Hospital   Black Landscape Contracting   Landscape maintenance of campus   04/01/14 to 03/31/15   $36,500/annually    
Pediatric Surgery – 2600 N. 3 rd ST   Black Landscape Contracting   Landscape maintenance of campus   04/01/14 to 03/31/15   $3,900/annually    
Harrisburg Hospital (1 staff member year round)   Black Landscape Contracting   Landscape maintenance of campus   04/01/14 to 03/31/15   $68,000/annually    
Elizabeth PT   Black Landscape Contracting   Landscape maintenance of campus   04/01/14 to 03/31/15   $1,000/annually    
Pinnacle   Berkshire Systems Group   Fire system testing – service agreement   01/01/14 to 12/31/16   $13,692/annually    

 

J- 1
 

 

PHH

Contracting

Entity

  Vendor   Type of Services   Term   Cost   Comment
Pinnacle/CGOH   Cleveland Brothers  

Preventative maintenance service agreement (emergency generators)

 

  04/01/14 to 03/30/16   $12,934/3-year term Community Campus (6 units), $21,465/3-year term Harrisburg Campus (6 units), $2,292/3-year term Brady Hall (1 unit), $1,101/3-year term Cole Support Services (1 unit), $5,507/3-year term Polyclinic Campus (3 units), $3,358/3-year term Fredricksen Outpatient (1 unit), $5,473/3-year term Fredricksen Load Bank    
Fredricksen Outpatient Center   Eastern Time   Fire alarm system – inspection, testing and maintenance   02/01/13 to 01/31/14   $4,536/annually    
Pinnacle   F.T.S. Management, Inc.   Preventative maintenance – fuel tank cleaning and testing   2014   $3,226/annually Harrisburg Hospital (7 tanks), $1,252/annually Polyclinic Hospital (3 tanks), $2,474/annually Community Campus (5 tanks), $800/annually Fredricksen Campus (2 tanks), $1,360.00 Sulfur testing (17 tanks)    
Pinnacle   Greenhills   None stated   None stated   Varied    
Pinnacle   Kint Fire Protection  

Fire suppression systems for:

Harrisburg-Brady

Community

Polyclinic

Fredricksen

  01/01/14 to 12/31/16   $3,876/annually    
Pinnacle   Kone, Inc.   Maintenance for vertical transportation equipment   2010 to 2015   $18,884/monthly    

 

Exhibit J

 

 
 

 

PHH

Contracting

Entity

  Vendor   Type of Services   Term   Cost   Comment
Pinnacle   NRG Building Services  

Maintenance – building automation system for:

Polyclinic

CGH

Outpatient

Cole Warehouse

Harrisburg Hospital

  09-01/12 to 08/31/15   $68,175/annually    
Pinnacle   Orkin   Pest management   2014   $40,791.88/annually    
Pinnacle   Sodexho   Manage and operate services for patients, residents, employees, visitors and guests (food, etc.)   04-01-13 to 03-21-18   See attachments    
Pinnacle   Trane   Scheduled maintenance of chillers, cooling towers   08/01/12 to 07/31/15   $18,776/annually Bloom Outpatient Center, $18,817/annually Community General Osteopathic (central utility plant), $67,384/annually Community General Osteopathic, $19,339/annually Fredricksen Outpatient, $68,531/annually Polyclinic Hospital    
Pinnacle   Tri-Dim Filter Corp.   Filters, hepa, etc.   None stated   None stated    
Pinnacle   Waste Management   Waste disposal services   36 months and renewable   See attachments    
Pinnacle   Zeplin Security Group, Inc.   Alarm systems/monitoring  

12/01/11

(for 3 years)

  $25/monthly    

 

 

Exhibit J

 

 
 

 

Schedule 1

 

Leasehold Transaction Price Allocation

 

Property   Leasehold
Transaction Price 		    Earnest Money  
Bloom Property   $ 16,775,000.00     $ 840,000.00  
Brady Property   $ 26,370,000.00     $ 1,320,000.00  
Community Health Property   $ 7,020,000.00     $ 350,000.00  
FOC Property                
(a)  Property subject to the FOC Clinical Lease   $ 24,065,000.00     $ 1,200,000.00  
(b) Property subject to the FOC I Lease   $ 11,255,000.00     $ 560,000.00  
(c) Property subject to the FOC II Lease   $ 20,585,000.00     $ 1,030,000.00  
Landis Property   $ 42,565,000.00     $ 2,130,000.00  
Medical Sciences Property   $ 25,425,000.00     $ 1,270,000.00  
Totals   $ 174,060,000.00     $ 8,700,000.00  

 

Schedule 1

 

 
 

 

Schedule 6(e)

 

Ground Lease Terms

 

Ground Lessor: PinnacleHealth, a Pennsylvania non-profit corporation
   
Ground Tenant: Applicable Approved Assignee
   
Rent Commencement Date: Upon transaction close
   
Expiration Date: 55 years
   
Current Rent: $1,000.00 per month per property
   
Escalation: 2.5% annual increase
   
Renewal Options: Two, 10-year options

 

Schedule 6(e)

 

 
 

 

Schedule 6(f)

 

Pinnacle Lease Terms

 

(attached)

 

Schedule 6(f)

 

 
 

  

 

   

Note: The ground lease payment is not reimbursed by the tenant.

 

Schedule 6(f)

 

 
 

 

Schedule 11(f)(iv)

 

Tenant Improvement Allowances

 

Property   Suite/Tenant   Status
FOC   Suite 211 – RMA   Balance as of 5/15/14 - $11,903.73.  They pay an additional payment of $658.30 monthly to us.  The payment includes a 6% interest and they will complete their payments on 12/15/15.
FOC   Suite 209 – RMA   We are working with them on an expansion and have included a fit-out allowance of $54,835 as part of the rental payment.  This lease was already in process prior to the RFP being sent out.
FOC   Ability Prosthetics   Tenant Fit-out Allowance - $65 sq. ft. in exchange for a 10 year lease agreement.  November and December 2011 payments waived as part of the lease negotiations.
FOC   Kakaria   Tenant Fit-out Allowance - $65 sq. ft. in exchange for a 10 year lease agreement.

 

Schedule 11(f)(iv)

 

 
 

 

Schedule 11(f)(vi)

 

Rent Concessions

 

Property   Tenant   Details
Polyclinic  

Advanced Pain Management

 

3 Landis within Rehab Options Space

  10% discount offered if rent paid in advance rather than monthly for the year.  Tenant paid $4,713.93, thus rent paid through 7/31/14
FOC  

Grossman Foot and Ankle

 

Time Share Suite 201

  Tenant originally occupied Suite 209 and paid for the year (through 6/30/14)(which included a 10% discount inasmuch as the rent was paid in full). Landlord requested Tenant to relocate to Suite 201 so that Landlord could expand the RMA Suite.  Tenant did relocate in December 2013. Since Tenant had already prepaid rent for Suite 209, the lease for Suite 201 included rent concession for July, August and September 2014. Tenant paid Landlord in April 2014 for the period October 2014 – June 30, 2015 (the aforementioned 10% discount was applied to the payment).

 

Schedule 11(f)(vi)

 

 
 

 

Schedule 11(f)(vii)

 

Prepaid Rents, Security Deposits and Letters Of Credit

 

                    Deposits     Deposits     Deposits  
Customer Name   Account   Unit   Address   Move In   Charged     Received     Held  
Bloom Building                                        
PRISM (2,186 Sq Ft.) Suite 106   41   PRISM   Attention Kendra Rhayem   05/01/03     4,007.66       4,007.66       4,007.66  
PRISM (3,447 Sq Ft.) Sutie 100   41   PRISM   Attention Kendra Rhayem   2006     1,436.25       1,436.25       1,436.25  
PRISM (1,733 Sq Ft.)   41   PRISM   Attention Kendra Rhayem   2007/08     722.08       722.08       722.08  
Medical Arts Allergy Bloom 201   208   MedArtAlgy   c/o Elain Novak   02/17/12     3676.89       3676.89       3676.89  
Urology of Central PA Bloom 101   35   Urology101   Suite 101   02/01/04     5,458.92       5,458.92       5,458.92  
Totals for Property                     15,301.80       15,301.80       15,301.80  

 

Schedule 11(f)(vii)

 

 
 

 

                    Deposits     Deposits     Deposits  
Customer Name   Account   Unit   Address   Move In   Charged     Received     Held  
FOC-Physician Office Building 2                                        
Burick Center for Health & Wellness   172   Burick   2005 Technology Parkway   08/01/10     4289.00       4289.00       4289.00  
Dr. Sandeep Kakaria   212   Kakaria   2005 Technology Parkway   02/01/12     2815.00       2815.00       2815.00  
Ability Prosthetics   204   AbilityPro   2005 Technology Parkway   08/15/11     4,722.00       4,722.00       4,722.00  
Totals for Property                     11,826.00       11,826.00       11,826.00  
                                         
Fredricksen Outpatient Center 1                                        
Dr. Peter Sakol   20   Sakol   Suite 205   02/14/09     2,245.42       2,245.42       2,245.42  
de Ramon Plastic Surgery Institute, PC   16   deRamon   Suite 303   08/15/02     2,779.50       2,779.50       2,779.50  
Farrell Plastic Surgery   17   Farrell   Suite 204   04/01/00     2,833.33       2,833.33       2,833.33  
Good Day Pharmacy   25   Good Day   2250 Millennium Way, Suite 300   03/01/05     2,180.75       2,180.75       2,180.75  
Dr. Abram HENT   216   AbramHENT   Suite G03   04/01/12     3412.50       3412.50       3412.50  
Armesto Eye Associates OPTICAL SHOP   36   ArmstOShop   Suite 103 - Optical Shop   01/01/04     364.00       364.00       364.00  
Calcagno & Rossi Vein Treatment Ctr.   29   Calcagno/R   Suite 304 & 306   01/01/07     4,028.75       4,028.75       4,028.75  
JDC Pediatrics   19   JonesDalyC   Suite 108   07/01/01     6,000.00       6,000.00       6,000.00  
Medical Arts Allergy - FOC 310   21   MedArtAlle   c/o Elaine Novak   11/01/00     2,000.00       2,000.00       2,000.00  
Dr. Scott Mueller   28   S. Mueller   2025 Technology Parkway   10/20/00     2,643.33       2,643.33       2,643.33  
Totals for Property                     28,487.58       28,487.58       28487.58  

 

Schedule 11(f)(vii)

 

 
 

 

Schedule 25

 

Approved Assignees

 

Property   Approved Assignee
Bloom Property   ARHC BLHBGPA01, LLC
Brady Property   ARHC BRHBGPA01, LLC
Community Health Property   ARHC CHHBGPA01, LLC
FOC Real Property   ARHC FOMBGPA01, LLC
Landis Property   ARHC LMHBGPA01, LLC
Medical Sciences Property   ARHC MSHBGPA01, LLC

 

Schedule 25

 

 

 

Exhibit 10.29

FIRST AMENDMENT TO AGREEMENT FOR LEASE OF REAL PROPERTY
THIS FIRST AMENDMENT TO AGREEMENT FOR LEASE OF REAL PROPERTY (this “ Amendment ”) is made as of July 16, 2014, by and between PINNACLE HEALTH HOSPITALS, a Pennsylvania non-profit corporation (“ Lessor ”), and AMERICAN REALTY CAPITAL VII, LLC, a Delaware limited liability company (“ Lessee ”).
WHEREAS, Lessee and Lessor entered into that certain Agreement for Lease of Real Property, having an effective date of June 16, 2014 (the “ Agreement ”), with regard to the Property, as more particularly described in the Agreement. Lessee and Lessor wish to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual promise contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree that the Agreement shall be amended as follows:
1.
Due Diligence Period . Notwithstanding anything in the Agreement to the contrary or any other agreements or understandings to the contrary between Lessee and Lessor, the Due Diligence Period shall expire at 11:59 P.M. EDT on August 1, 2014.

2.
Reciprocal Easement Agreements . Lessor and Lessee acknowledge that certain of the Properties do not have legal rights to use and/or access, among other things, certain public rights of way, private roadways, utilities, sidewalks, building connectors and/or parking areas located on the medical campus owned by Lessor and surrounding the Properties (each, a “ Medical Campus ,” and collectively, the “ Medical Campuses ”), and certain of the Medical Campuses do not have legal rights to use and/or access, among other things, public rights of way, private roadways, utilities, sidewalks, building connectors and/or parking areas located on the Properties. Accordingly, Lessor and Lessee shall use good faith efforts to negotiate one or more reciprocal easement agreements to grant Lessor and Lessee reciprocal easement rights to the areas and improvements described in the immediately preceding sentence (collectively, the “ REAs ”). Prior to the expiration of the Due Diligence Period, Lessor and Lessee shall agree upon the Properties that will require REAs, and the execution and delivery of each such REA by each of the parties shall be a condition precedent to Lessee’s obligation to close with respect to each applicable Property.

3.
Closing Deliveries . Section 10(a) of the Agreement is hereby modified by deleting the words “Intentionally Deleted” and substituting in lieu thereof the words “The REAs.”

4.
Conditions Precedent to Lessee’s Obligations . Section 13 of the Agreement is hereby modified by adding the following new subsection:

1



“(h) The Ground Leases, the Pinnacle Leases and the REAs shall be in form and substance mutually acceptable to Lessor and Lessee in their respective sole and absolute discretion.”

5.
Miscellaneous . Except as expressly modified hereby the terms of the Agreement shall remain in full force and effect as written. Capitalized terms used herein but not defined herein shall have the meanings given to such terms in the Agreement. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. Signatures on this Amendment which are transmitted electronically shall be valid for all purposes, however any party shall deliver an original signature of this Amendment to the other party upon request.

[Signatures appear on following page ]

2


IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first set forth above.

LESSEE:
LESSOR:
 
 
AMERICAN REALTY CAPITAL VII, LLC,
a Delaware limited liability company
PINNACLE HEALTH HOSPITALS,  
a Pennsylvania non-profit corporation


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

By:     /s/ Michael Young          
   Name: Michael Young
   Title: President/CEO
    
 
 



 

Exhibit 10.30

 

SECOND AMENDMENT TO AGREEMENT FOR LEASE OF REAL PROPERTY

 

THIS SECOND AMENDMENT TO AGREEMENT FOR LEASE OF REAL PROPERTY (this “ Amendment ”) is made as of August 1, 2014, by and between PINNACLE HEALTH HOSPITALS, a Pennsylvania non-profit corporation (“ Lessor ”), and AMERICAN REALTY CAPITAL VII, LLC, a Delaware limited liability company (“ Lessee ”).

 

WHEREAS, Lessee and Lessor entered into that certain Agreement for Lease of Real Property, having an effective date of June 16, 2014 (the “ Initial Agreement ”), and that certain First Agreement for Lease of Real Property, dated as of July 16, 2014 (collectively, the “ Agreement ”), with regard to the Property, as more particularly described in the Agreement. Lessee and Lessor wish to amend the Agreement as provided herein.

 

NOW, THEREFORE, in consideration of the mutual promise contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree that the Agreement shall be amended as follows:

 

1. Exhibits . Exhibits A-1-1 through A-1-6 to the Initial Agreement are hereby attached hereto and incorporated into the Agreement.

 

2. Condominium Documents . Lessor shall convert the real property and improvements depicted on Exhibits B and C attached hereto and made a part hereof (the “ Brady Condominium Property ” and the “ FOC Condominium Property ,” respectively) to condominium ownership on or before the Closing Date. For each of the Brady Condominium Property and the FOC Condominium Property, Lessor and Lessee shall use good faith efforts to negotiate a condominium declaration, bylaws and any other documents necessary to establish and govern a condominium under the condominium laws of the Commonwealth of Pennsylvania (collectively, the “ Condominium Documents ”). The execution and delivery of the Condominium Documents by Lessor shall be a condition precedent to Lessee’s obligation to close with respect to the Brady Property and the FOC Property.

 

3. Due Diligence Period . Notwithstanding anything in the Agreement to the contrary or any other agreements or understandings to the contrary between Lessee and Lessor, the Due Diligence Period shall be extended (a) with respect to the Brady Property and the FOC Property, until 11:59 P.M. EDT on August 15, 2014, but solely with respect to Lessee’s title, survey and zoning review of the Brady Condominium Property (excluding the Brady Real Property) and the FOC Condominium Property (excluding the FOC Real Property), and (b) with respect to each of the Bloom Property and the Medical Sciences Property, until 11:59 P.M. ET on the date that is twenty-eight (28) days following the date on which Lessor delivers to Lessee documentation acceptable

 

 
 

  

to Lessee evidencing the approval of the subdivision of such Property by all requisite governmental authorities.

 

4. Property Repairs . Lessee has identified certain property condition deficiencies described on Exhibit D attached hereto and made a part hereof (the “ Repair Items ”). Lessor hereby agrees to provide Lessee with a credit to the Leasehold Transaction Price in the amount of $65,990.00 (the “ Repair Items Credit ”). Lessor may elect to complete any or all of the Repair Items prior to Closing and, subject to Lessee’s confirmation that such Repair Items were repaired to Lessee’s reasonable satisfaction, the Repair Items Credit will be reduced in proportion to the cost allocated to such Repair Items on Exhibit D attached hereto. In the event the actual cost incurred by Lessee to complete any Repair Item exceeds the amount allocated to such Repair Item on Exhibit D attached hereto, Lessor shall reimburse Lessee for the additional cost within ten (10) business days after receipt of Lessee’s written request for reimbursement, which request shall include a copy of the final invoice and evidence of payment of such Repair Item. Lessor’s obligations under this Section 4 shall survive the Closing.

 

5. Future Subdivision . Upon written request from Lessee, Lessor shall, at Lessor’s sole cost and expense, use commercially reasonable efforts after the Closing of the Brady Real Property and the FOC Real Property to subdivide the Brady Real Property and the FOC Real Property. Lessor’s obligations under this Section 5 shall survive the Closing.

 

6. Closing Deliveries . Section 10(a) of the Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof:

 

“(a) The Condominium Documents and the REAs;”

 

7. Conditions Precedent to Lessee’s Obligations . Section 13(h) of the Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof:

 

“(h) The Ground Leases, the Pinnacle Leases, the Condominium Documents and the REAs shall be in form and substance mutually acceptable to Lessor and Lessee in their respective sole and absolute discretion.”

 

8. Miscellaneous . Except as expressly modified hereby the terms of the Agreement shall remain in full force and effect as written. Capitalized terms used herein but not defined herein shall have the meanings given to such terms in the Agreement. This

 

 
 

  

Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. Signatures on this Amendment which are transmitted electronically shall be valid for all purposes, however any party shall deliver an original signature of this Amendment to the other party upon request.

 

[Signatures appear on following page ]

 

 
 

  

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first set forth above.

 

LESSEE:   LESSOR:
     
AMERICAN REALTY CAPITAL VII, LLC,   PINNACLE HEALTH HOSPITALS,
a Delaware limited liability company   a Pennsylvania non-profit corporation
     
By: /s/ Edward M. Weil, Jr   By: /s/ Christopher P. Markley
  Name: Edward M. Weil, Jr.     Name: Christopher  P. Markley
  Title:   President     Title: SVP Secretary and General Counsel

 

 
 

  

EXHIBIT A-1-1

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Bloom Real Property

 

(attached)

 

 
 

   

PINNACLE HEALTH HOSPITALS

 

COMMUNITY CAMPUS - BLOOM BUILDING

 

LEGAL DESCRIPTION

 

ALL of the following tract of land situated in Lower Paxton Township, Dauphin County, Commonwealth of Pennsylvania pursuant to a survey by C. W. Junkins Associates dated June 18, 2014 last revised July 1, 2014 as follows:

 

BEGINNING at a point, said point being South 74 degrees 53 minutes 47 seconds East 278.38 feet from an existing rebar at corner of lands of Pinnacle Health Hospitals and other lands of Pinnacle Health Hospitals, thence along a line parallel and six feet outside the building line North 45 degrees 44 minutes 28 seconds East 20.32 feet to a point, thence North 42 degrees 47 minutes 47 seconds West 15.41 feet to a point, thence North 45 degrees 30 minutes 51 seconds East 37.06 feet to a point, thence along the face of a masonry wall and the building line South 44 degrees 15 minutes 32 seconds East 15.55 feet to a point, thence along a line parallel and six feet outside the building line North 45 degrees 31 minutes 53 seconds East 75.23 feet to a point, thence along the back of the curb South 43 degrees 54 minutes 17 seconds East 163.61 feet to a point, thence along the edge of a concrete walk South 45 degrees 42 minutes 38 seconds West 4.83 feet to a point, thence along the same South 44 degrees 17 minutes 22 seconds East 6.00 feet to a point, thence South 45 degrees 16 minutes 27 seconds West 8.19 feet to a point, thence along a line parallel and six feet outside the building line South 44 degrees 20 minutes 16 seconds East 44.14 feet to a point, thence North 45 degrees 06 minutes 51 seconds East 10.37 feet to a point, thence along a line parallel and six feet outside a masonry wall South 44 degrees 13 minutes 22 seconds East 94.34 feet to a point, thence along the edge of a concrete walk South 45 degrees 38 minutes 08 seconds West 21.95 feet to a point, thence along a line parallel and six feet outside a masonry wall North 44 degrees 16 minutes 31 seconds West 17.27 feet to a point, thence along a line parallel and six feet outside the building line South 45 degrees 44 minutes 08 seconds West 101.27 feet to a point, thence along the same by a curve to the right with a radius of 10.90 feet, an arc length of 17.40 feet, a delta angle of 91 degrees 28 minutes 22 seconds, a chord bearing of North 89 degrees 26 minutes 58 seconds West and a chord length of 15.61 feet to a point, thence along the same North 44 degrees 56 minutes 44 seconds West 84.82 feet to a point, thence along a line parallel and six feet outside the building overhang South 46 degrees 21 minutes 10 seconds West 59.20 feet to a point, thence along the same by a curve to the right with a radius of 20.93 feet, an arc length of 39.48 feet, a delta angle of 108 degrees 03 minutes 27 seconds, a chord bearing of North 07 degrees 30 minutes 06 seconds West, and a chord length of 33.88 feet to a point, thence along the same North 46 degrees 14 minutes 10 seconds East 21.95 feet to a point, thence by a line parallel and six feet outside the building line by a curve to the right with a radius of 31.82 feet, an arc length of 38.82 feet, a delta angle of 69 degrees 53 minutes 30 seconds, a chord bearing of North 03 degrees 03 minutes 29 seconds West, and a chord length of 36.46 feet to a point, thence along the same North 44 degrees 42 minutes 01 seconds West 139.72 feet to a point the POINT OF BEGINNING .

 

Containing 0.945 acres

 

 
 

  

EXHIBIT A-1-2

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Brady Real Property

 

(attached)

 

 
 

 

PINNACLE HEALTH HOSPITALS

 

HARRISBURG CAMPUS - BRADY HALL

 

LEGAL DESCRIPTION

 

ALL of the following tract of land situate in the City of Harrisburg, County of Dauphin, and Commonwealth of Pennsylvania pursuant to a survey by C. W. Junkins Associates dated June 4, 2014 last revised July 1, 2014 as follows:

 

BEGINNING at a point, said point being North 55 degrees 21 minutes 10 seconds West 179.50 feet from the Northwest corner of South Front Street and Mary Street, thence along land now or formerly of the Norfolk Southern Corporation (Amtrack) North 34 degrees 09 minutes 48 seconds East 105.03 feet to a point, thence along the same North 51 degrees 55 minutes 12 seconds East 36.57 feet to a point, thence along the same South 55 degrees 44 minutes 48 seconds East 10.95 feet to a point, thence along the same North 34 degrees 15 minutes 12 seconds East 2.13 feet to a point, thence in and through lands of Pinnacle Health System on a line parallel and 6 feet outside the building line South 55 degrees 48 minutes 27 seconds East 58.69 feet to a point, thence along a line parallel and six feet outside a concrete transformer pad North 33 degrees 45 minutes 42 seconds East 8.26 feet to a point, thence along the same South 56 degrees 14 minutes 19 seconds East 22.10 feet to a point, thence along the same South 33 degrees 45 minutes 42 seconds West 35.98 feet to a point, thence along a line parallel and six feet outside the building line South 55 degrees 48 minutes 27 seconds East 69.64 feet to a point, thence along the face of a masonry wall South 34 degrees 10 minutes 49 seconds West 51.93 feet to a point, thence, South 55 degrees 48 minutes 27 seconds East 6.85 feet to a point, thence along the western line of Mary Street South 34 degrees 13 minutes 29 seconds West 40.44 feet to a point, thence North 55 degrees 48 minutes 27 seconds West 7.57 feet to a point, thence along a line parallel and six feet outside the building line South 34 degrees 11 minutes 33 seconds West 11.10 feet to a point, thence along the same North 55 degrees 48 minutes 42 seconds West 9.66 feet to a point, thence South 34 degrees 11 minutes 56 seconds West 12.25 feet to a point, thence along the southern property line of Pinnacle Health System and the South Front Street North 55 degrees 21 minutes 10 seconds West 162.28 feet to a point the POINT OF BEGINNING .

 

Containing 0.523 Acres

 

 
 

 

EXHIBIT A-1-3

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Community Health Real Property

 

(attached)

 

 
 

 

PINNACLE HEALTH HOSPITALS

 

POLYCLINIC CAMPUS - COMMUNITY HEALTH CENTER

 

LEGAL DESCRIPTION

 

ALL of the following tract or easement of land, with the improvements thereon erected, situate in the City of Harrisburg, County of Dauphin, and Commonwealth of Pennsylvania, being the tract or easement of land shown on an "ALTA/ASCM Building Title Survey for Pinnacle Health" prepared by C. W. Junkins Associates dated May 28, 2014 and revised June 30, 2014 described as follows:

 

BEGINNING at a point, said point being South 64 degrees 59 minutes 20 seconds East 12.66 feet from a rebar (found) at the southeast corner of North 3rd Street and Wiconisco Street, thence parallel to the building line at an offset of 6 feet the following two courses: (1) North 69 degrees 48 minutes 45 seconds East 81.82 feet to a point, (2) thence South 20 degrees 11 minutes 15 seconds East 20.95 feet to a point, thence parallel to a concrete pad at an offset of 6 feet the following two courses: (1) North 69 degrees 17 minutes 18 seconds East 11.09 feet to a point, (2) South 19 degrees 05 minutes 04 seconds East 12.18 feet to a point, thence along a building overhang at an offset of 6 feet by a curve to the right having a radius of 10.92 feet, an arc distance of 23.40 feet, the chord being South 26 degrees 17 minutes 15 seconds East 19.17 feet to a point, thence parallel to the concrete walkway at an offset of 6 feet South 20 degrees 55 minutes 53 seconds East 4.96 feet to a point, thence parallel to the building line at an offset of 6 feet the following two courses: (1) North 69 degrees 48 minutes 45 seconds East 23.92 feet to a point, (2) South 20 degrees 11 minutes 15 seconds East 34.85 feet to a point 1 foot north of a brick wall, thence parallel to said wall at an offset of 1 foot North 70 degrees 08 minutes 23 seconds East 5.16 feet to a point, thence parallel to a 6 foot wooden fence at an offset of 1 foot South 20 degrees 16 minutes 32 seconds East 50.97 feet to a point being 7.34 feet from the eastern property line and 1 foot south of the concrete stairs, thence parallel to said stairs at an offset of 1 foot South 69 degrees 48 minutes 45 seconds West 14.13 feet to a point, thence along the edge of a building overhang at the southeast entrance at an offset of 6 feet the following two courses, (1) South 20 degrees 11 minutes 15 seconds East 11.74 feet to a point, (2) thence along the same South 69 degrees 48 minutes 45 seconds West 30.01 feet to a point on the back of the concrete curb, thence along said curb South 20 degrees 11 minutes 15 seconds East 27.59 feet to a point, thence parallel to the building line at an offset of 6 feet the following two courses, (1) South 69 degrees 48 minutes 45 seconds West 79.79 feet to a point, (2) North 20 degrees 11 minutes 15 seconds West 119.34 feet to a point, thence parallel to the southern edge of the stairs to the western building entrance at an offset of 1 foot South 69 degrees 51 minutes 11 seconds West 3.45 feet to a point, thence parallel to the building overhang at an offset of 6 feet North 20 degrees 38 minutes 32 seconds West 15.68 feet to a point, thence parallel to the northern edge of the stairs to the western building entrance at an offset of 1 foot North 69 degrees 51 minutes 11 seconds East 3.58 feet to a point, thence parallel to the building line at an offset of 6 feet North 20 degrees 11 minutes 15 seconds West 47.20 feet to the POINT OF BEGINNING .

 

CONTAINING 0.440 Acres

 

BEING part of the tract or parcel of land shown as Lot 2 and Lot 3 on a "Preliminary/Final Subdivision Plan for Pinnacle Health Hospitals (Polyclinic Campus)" prepared by H. Edward Black and Associates, Ltd. Dated December 4, 2003 last revised January 30, 2004 and recorded in Dauphin County Recorder of Deeds in Plan Book X, Vol. 8, Page 31-33.

 

 
 

 

EXHIBIT A-1-4

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

FOC Real Property

 

(attached)

 

 
 

 

PINNACLE HEALTH HOSPITALS

WEST SHORE CAMPUS - FREDRICKSEN OUTPATIENT CENTER

LEGAL DESCRIPTION

 

ALL of the following tract or easement of land, with the improvements thereon erected, situate in the Township of Hampden, County of Cumberland, and Commonwealth of Pennsylvania, being the tract or easement of land shown on an "ALTA/ASCM Building Title Survey for Pinnacle Health" prepared by C. W. Junkins Associates dated May 28, 2014 and revised July 3, 2014 described as follows:

 

BEGINNING at a point, said point being North 29 degrees 59 minutes 07 seconds East 8.49 feet from the northeast corner of the Pinnacle Health Fredricksen Outpatient Center, and North 82 degrees 54 minutes 43 seconds West 622.38 feet from an existing rebar, thence parallel to the building line at an offset of 6 feet South 15 degrees 00 minutes 53 seconds East 169.14 feet to a point, thence parallel to a masonry wall at an offset of 1 foot North 74 degrees 59 minutes 07 seconds East 4.71 feet to a point, thence parallel to the building overhang at an offset of 6 feet by a curve to the right, said curve having a radius of 80.00 feet, an arc length of 102.07 feet, a chord bearing of South 10 degrees 44 minutes 30 seconds East and a chord length of 95.28 feet to a point, thence parallel to the building line at an offset of 6 feet the following four courses: (1) South 76 degrees 06 minutes 44 seconds East 28.90 feet to a point, (2) South 13 degrees 53 minutes 16 seconds West 112.40 feet to a point, (3) South 76 degrees 06 minutes 44 seconds East 27.36 feet to a point, (4) South 14 degrees 02 minutes 36 seconds West 30.90 feet to a point, thence parallel to a concrete wall at an offset of 6 feet North 75 degrees 57 minutes 24 seconds West 14.65 feet to a point, thence parallel to the metal stairs at an offset of 6 feet South 14 degrees 03 minutes 59 seconds West 10.54 feet to a point, thence along the same North 75 degrees 56 minutes 01 seconds West 5.62 feet to a point, thence parallel to the concrete dock at an offset of 6 feet South 14 degrees 03 minutes 59 seconds West 25.71 feet to a point being North 81 degrees 45 minutes 46 seconds West 679.37 feet from an existing rebar, thence parallel to the building line at an offset of 6 feet North 75 degrees 57 minutes 24 seconds West 190.24 feet to a point, thence parallel to the building overhang at an offset of 6 feet the following three courses (1) South 32 degrees 19 minutes 55 seconds West 48.32 feet to a point, (2) North 76 degrees 16 minutes 26 seconds West 20.71 feet to a point, (3) North 13 degrees 43 minutes 34 seconds East 52.90 feet to a point, thence parallel to the building line at an offset of 6 feet the following six courses: (1) South 82 degrees 09 minutes 26 seconds West 87.89 feet to a point, (2) North 07 degrees 50 minutes 34 seconds West 0.92 feet to a point, (3) South 82 degrees 09 minutes 26 seconds West 97.35 feet to a point, (4) North 07 degrees 50 minutes 34 seconds West 38.05 feet to a point, (5) North 82 degrees 09 minutes 26 seconds East 1.28 feet to a point, (6) North 07 degrees 50 minutes 34 seconds West 7.56 feet to a point, thence parallel to the building overhang at an offset of 6 feet the following three courses: (1) North 89 degrees 49 minutes 50 seconds West 41.98 feet to a point, (2) North 07 degrees 15 minutes 27 seconds West 24.41 feet to a point, (3) North 81 degrees 51 minutes 48 seconds East 41.32 feet to a point, thence parallel to the building line at an offset of 6 feet North 07 degrees 50 minutes 34 seconds West 40.11 feet to a point,

 

 
 

 

thence along the same North 82 degrees 09 minutes 26 seconds East 195.38 feet to a point, thence continuing along the same South 07 degrees 50 minutes 34 seconds East 38.02 feet to a point at the outside edge of a concrete sidewalk, thence along the outside edge of said concrete sidewalk North 81 degrees 59 minutes 46 seconds East 1.67 feet to a point, thence along the same by a curve to the right, said curve having a radius of 22.59 feet, an arc length of 27.44 feet, a chord bearing of North 43 degrees 05 minutes 02 seconds East and a chord length of 25.78 feet to a point on the outside edge of said concrete, thence parallel to the line of columns at an offset of 6 feet North 56 degrees 32 minutes 20 seconds East 83.60 feet to a point, thence parallel to a block wall at an offset of 6 feet by an curve to the right, said curve having a radius of 66.57 feet, an arc length of 49.24 feet, a chord bearing of North 12 degrees 09 minutes 32 seconds East and a chord length of 48.13 feet to a point, thence parallel to the building line at an offset of 6 feet North 15 degrees 00 minutes 53 seconds West 168.48 feet to a point, thence along the same North 74 degrees 59 minutes 07 seconds East 41.86 feet to a point, thence parallel to the building overhang at an offset of 6 feet the following three courses: (1) North 08 degrees 43 minutes 04 seconds West 39.58 feet to a point, (2) North 75 degrees 18 minutes 52 seconds East 27.44 feet to a point, (3) South 15 degrees 12 minutes 58 seconds East 44.79 feet to a point, thence parallel to the building line at an offset of 6 feet North 74 degrees 59 minutes 07 seconds East 32.51 feet to a point the POINT OF BEGINNING .

 

CONTAINING 2.129 Acres

 

BEING part of the tract or parcel of land shown as Tract 1 on a "Final Subdivision Plan for Fredricksen Health Center" prepared by H. Edward Black and Associates, Ltd. dated March 15, 2011 and recorded in Cumberland County instrument #201129102.

 

 
 

 

EXHIBIT A-1-5

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Landis Real Property

 

(attached)

 

 
 

 

PINNACLE HEALTH HOSPITALS

 

POLYCLINIC CAMPUS - LANDIS/MEMORIAL

 

LEGAL DESCRIPTION

 

ALL of the following tract of land situate in the City of Harrisburg, Dauphin County, Commonwealth of Pennsylvania pursuant to a survey by C. W. Junkins Associates dated June 9, 2014 last revised July 2, 2014 as follows:

 

BEGINNING at a point 8.51 feet off the corner of a brick wall, said point being North 57 degrees 15 minutes 35 seconds East 156.45 feet from the southwest corner of lands of Pinnacle Health System, said point being the northeast corner of the intersection of North 3rd Street and Schuykill Street, thence along a line parallel to the face of a brick wall and 6 feet outside the brick wall North 19 degrees 54 minutes 56 seconds West 100.14 feet to a point, thence along a line parallel to the building and 6 feet outside the building line South 69 degrees 57 minutes 16 seconds West 34.68 feet to a point, thence along a line parallel to the building and 6 feet outside the building line and building overhang North 20 degrees 02 minutes 44 seconds West 43.39 feet to a point, thence along the same South 69 degrees 57 minutes 16 seconds West 16.02 feet to a point, thence along the same North 20 degrees 02 minutes 44 seconds West 68.69 feet to a point, thence along the same North 69 degrees 57 minutes 16 seconds East 16.02 feet to a point, thence along the same North 20 degrees 02 minutes 44 seconds West 43.84 feet to a point, thence parallel to the building line and 6 feet off North 69 degrees 57 minutes 17 seconds East 23.73 feet to a point 1 foot off the face of a brick wall, thence along a line parallel to and 1 foot off said wall North 19 degrees 27 minutes 48 seconds West 101.79 feet to a point, thence along the face of said brick wall North 70 degrees 52 minutes 44 seconds East 47.35 feet to a point, thence along a line parallel to the building and 6 feet outside the building line North 20 degrees 02 minutes 44 seconds West 2.24 feet to a point, thence along the same North 69 degrees 57 minutes 16 seconds East 34.08 feet to a point six feet off the building overhang, thence along a line parallel to said overhang and 6 feet off North 20 degrees 11 minutes 04 seconds West 18.90 feet to a point, thence along the same North 69 degrees 48 minutes 11 seconds East 41.06 feet to a point thence along the same South 20 degrees 11 minutes 50 seconds East 19.10 feet to a point, thence along the same North 69 degrees 57 minutes 16 seconds East 9.51 feet to a point, thence along the same South 20 degrees 44 minutes 06 seconds East 9.31 feet to a point 6 feet off the building line, thence along a line parallel to the building line and 6 feet off North 69 degrees 57 minutes 16 seconds East 38.37 feet to a point, thence along the same South 20 degrees 02 minutes 44 seconds East 40.70 feet to a point thence along the same North 69 degrees 29 minutes 59 seconds East 16.77 feet to a point 6 feet off the edge of a concrete Wall, thence along a line parallel and 6 feet off said concrete wall South 20 degrees 30 minutes 01 second East 63.98 feet to a point 6 feet off a concrete dumpster pad, thence along a line parallel to the dumpster pad and 6 feet off North 69 degrees 57 minutes 16 seconds East 11.62 feet to a point, thence along a line parallel and 6 feet off said concrete pad South 20 degrees 09 minutes 13 seconds East 105.77 feet to a point, thence along a line parallel and 6 feet off a concrete dock South 23 degrees 45 minutes 25 seconds West

 

 
 

 

19.81 feet to a point, thence along a line parallel to the building and 6 feet of the building overhang South 20 degrees 17 minutes 26 seconds East 132.68 feet to a point, thence along a line parallel to the building overhang and 6 feet outside the overhang line South 69 degrees 57 minutes 16 seconds West 27.58 feet to a point 6 feet off the building line, thence along a line parallel to the building line South 20 degrees 02 minutes 44 seconds East 22.67 feet to a point, thence along the same South 69 degrees 57 minutes 16 seconds West 54.67 feet to a point 6 feet off the face of a brick wall, thence along a line parallel to said brick wall South 20 degrees 29 minutes 19 seconds East 4.52 feet to a point on the property line, said line also the northerly line of Schuylkill Street 60 feet wide, thence along said property line South 69 degrees 51 minutes 53 seconds West 13.30 feet to a point, thence along a line parallel and 6 feet off a brick wall North 20 degrees 29 minutes 19 seconds West 21.25 feet to a point 6 feet off the building line, thence along a line parallel to the building South 69 degrees 57 minutes 16 seconds West 8.47 feet to a point, thence along the same North 20 degrees 15 minutes 28 seconds West 9.04 feet to a point 6 feet off the face of a brick wall, thence along a line parallel to said brick wall South 69 degrees 44 minutes 32 seconds West 72.53 feet to a point the POINT OF BEGINNING .

 

Containing 1.709 acres or 74,425 square feet

 

 
 

 

 

EXHIBIT A-1-6

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Medical Sciences Real Property

 

(attached)

 

 
 

 

PINNACLE HEALTH HOSPITAL

 

COMMUNITY CAMPUS - MEDICAL SCIENCES PAVILION

 

LEGAL DESCRIPTION

 

ALL of the following tract of land situated in Lower Paxton Township, Dauphin County, Commonwealth of Pennsylvania pursuant to a survey by C. W. Junkins Associates dated June 24, 2014 last revised July 1, 2014 as follows:

 

BEGINNING at a point, said point being North 03 degrees 09 minutes 51 seconds West 588.63 feet from an existing concrete monument at corner of lands of Pinnacle Health Hospital and Londonderry Road, thence along a line parallel and six feet outside the building columns North 44 degrees 13 minutes 34 seconds West 77.70 feet to a point, thence along the same by a curve to the right with a radius of 106.24 feet, an arc length of 105.92 feet, a delta angle of 57 degrees 07 minutes 13 seconds, a chord bearing of North 15 degrees 04 minutes 57 seconds West, and a chord length of 101.59 feet to a point, thence along the same North 45 degrees 39 minutes 31 seconds East 23.29 feet to a point, thence along a line parallel and six feet outside the building overhang North 44 degrees 20 minutes 29 seconds West 23.29 feet to a point, thence along the same North 45 degrees 45 minutes 38 seconds East 57.78 feet to a point, thence along the same South 44 degrees 41 minutes 26 seconds East 45.52 feet to a point, thence along a line parallel and six feet outside the building line North 45 degrees 37 minutes 53 seconds East 6.47 feet to a point, thence along the same North 44 degrees 18 minutes 56 seconds East 39.67 feet to a point, thence along a line parallel and six feet outside the building overhang North 45 degrees 08 minutes 51 seconds East 19.08 feet to a point, thence along the same South 43 degrees 46 minutes 50 seconds East 17.88 feet to a point, thence along the face of a masonry wall North 46 degrees 13 minutes 10 seconds East 7.19 feet to a point, thence along the same and a fence South 43 degrees 33 minutes 09 seconds East 56.23 feet to a point, thence along the face of a masonry wall South 45 degrees 37 minutes 01 seconds West 32.89 feet to a point, thence along the building line South 44 degrees 17 minutes 27 seconds East 30.72 feet to a point, thence along the same South 45 degrees 40 minutes 00 seconds West 89.39 feet to a point, thence by a curve to the left with a radius of 7.80 feet, an arc length of 4.54 feet, a delta angle of 33 degrees 19 minutes 37 seconds, a chord bearing of South 09 degrees 15 minutes 28 seconds West, and a chord length of 4.48 feet to a point, thence along a line parallel and six feet outside the building line South 45 degrees 50 minutes 43 seconds West 26.92 feet to a point, thence along a concrete sidewalk South 62 degrees 03 minutes 33 seconds West 10.52 feet to a point the POINT OF BEGINNING .

 

Containing 0.561 Acres

 

 
 

 

 

EXHIBIT B

 

BRADY CONDOMINIUM PROPERTY

 

(to be provided)

 

 
 

 

 

EXHIBIT C

 

FOC CONDOMINIUM PROPERTY

 

(to be provided)

 

 
 

 

EXHIBIT D

 

REPAIR ITEMS

 

 

 

 

Exhibit 10.31

 

THIRD AMENDMENT TO AGREEMENT FOR LEASE OF REAL PROPERTY

 

THIS THIRD AMENDMENT TO AGREEMENT FOR LEASE OF REAL PROPERTY (this “ Amendment ”) is made as of September 26, 2014, by and between PINNACLE HEALTH HOSPITALS, a Pennsylvania non-profit corporation (“ Lessor ”), and AMERICAN REALTY CAPITAL VII, LLC, a Delaware limited liability company (“ Lessee ”).

 

WHEREAS, Lessee and Lessor entered into that certain Agreement for Lease of Real Property, having an effective date of June 16, 2014 (the “ Initial Agreement ”), that certain First Amendment to Agreement for Lease of Real Property, dated as of July 16, 2014 (the “ First Amendment ”), and that certain Second Amendment to Agreement for Lease of Real Property, dated as of August 1, 2014 (the “ Second Amendment ”; the Initial Agreement, as amended by the First Amendment and the Second Amendment, the “ Agreement ”), with regard to the Property, as more particularly described in the Agreement. Lessee and Lessor wish to amend the Agreement as provided herein.

 

NOW, THEREFORE, in consideration of the mutual promise contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree that the Agreement shall be amended as follows:

 

1. Closing Date . Notwithstanding anything to the contrary contained in the Agreement, the Closing Date for the Brady Property, Community Health Property, FOC Property and Landis Property shall occur on or before September 26, 2014, and the Closing Date for the Bloom Property and the Medical Sciences Property shall occur on or before October 10, 2014, subject, in each case, to any applicable extension periods set forth in the Agreement.

 

2. Amendments to the Agreement . The Agreement is hereby amended as follows:

 

(a) The defined term “Ground Leases” set forth in Section 1(k) of the Initial Agreement, is hereby deleted in its entirety. The following defined term is hereby added to Section 1 of the Initial Agreement:

 

“‘ Building Leases ’ shall mean those Building Master Leases for the Leasehold Properties to be entered into at Closing between Lessor, as landlord, and Lessee, as tenant. Each of the Building Leases may be referred to herein individually as a ‘ Building Lease ’ or the ‘ Building Lease .’”

 

Each instance of the defined term Ground Lease or Ground Leases in the Agreement is hereby replaced with the defined term Building Lease or Building Leases, as applicable.

 

 
 

  

(b) The defined term “Pinnacle Tenant” set forth in Section 1(t) of the Initial Agreement, is hereby modified by deleting the word “PinnacleHealth” and substituting the words “Pinnacle Health Hospitals” in lieu thereof.

 

(c) The words “ground rent” appearing in the third to final clause of Section 4(a) of the Initial Agreement are hereby deleted and the word “rent” is substituted in lieu thereof.

 

(d) Section 10(a) the Initial Agreement, as amended by Section 3 of the First Amendment and Section 6 of the Second Amendment, is hereby deleted in its entirety.

 

(e) Section 10(s) of the Initial Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof:

 

“A Memorandum of Building Master Lease for each of the Leasehold Properties (each, a ‘ Memo of Building Lease ’ and collectively, the ‘ Memos of Building Lease ’) in the form attached to the Building Master Leases; and”

 

Each instance of the defined term Memo of Ground Lease or Memos of Ground Lease in the Agreement is hereby replaced with the defined term Memo of Building Lease or Memos of Building Lease, as applicable.

 

(f) Section 13(h) of the Initial Agreement, as amended by Section 4 of the First Amendment and Section 7 of the Second Amendment, is hereby deleted in its entirety and the following is substituted in lieu thereof:

 

“The Building Master Leases and the Pinnacle Leases shall be in form and substance mutually acceptable to Lessor and Lessee in their respective sole and absolute discretion.”

 

(g) Section 14(a) and the final paragraph of Section 14 of the Initial Agreement are hereby deleted in their entirety.

 

(h) Schedule 6(e) to the Initial Agreement is hereby modified by deleting each instance of the word “Ground” and substituting the word “Building” in lieu thereof.

 

(i) Section 2 of the First Amendment is hereby deleted in its entirety.

 

2
 

  

(j) Section 2 and Section 3(b) of the Second Amendment are hereby deleted in their entirety. Exhibits B and C to the Second Amendment are hereby deleted in their entirety.

 

(k) Section 4 of the Second Amendment is hereby modified by deleting “$65,990.00” in the second sentence thereof and substituting “$33,250.00” in lieu thereof. Exhibit D to the Second Amendment is hereby deleted and replaced with Exhibit D attached hereto.

 

3. Mortgage Subordination – Brady Medical Center Rights . Reference is made to that certain Master Open-End Mortgage and Security Agreement, having an effective date of June 24, 2009, by Lessor to Manufacturers and Traders Trust Company, a New York banking corporation, recorded on July 2, 2009 as instrument number 20090021845 with the Recorder of Deeds, Dauphin County, Pennsylvania (together with all renewals, modifications, consolidations, replacements and extensions thereof, the “ Subject Mortgage ”). If and to the extent the Subject Mortgage encumbers any property subject to the “Tenant’s Medical Center Rights,” under and as defined in the Building Lease for the Brady Property (the “ Brady Medical Center Rights ”), then Lessor shall use best efforts to obtain a recordable instrument, in form and substance reasonably satisfactory to Lessee, subordinating the Subject Mortgage to the Brady Medical Center Rights and deliver same to Lessee for recordation within thirty (30) days of the date hereof.

 

4. Miscellaneous . Except as expressly modified hereby the terms of the Agreement shall remain in full force and effect as written. Capitalized terms used herein but not defined herein shall have the meanings given to such terms in the Agreement. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. Signatures on this Amendment which are transmitted electronically shall be valid for all purposes, however any party shall deliver an original signature of this Amendment to the other party upon request.

 

[Signatures appear on following page ]

 

3
 

  

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first set forth above.

  

LESSEE:   LESSOR:
     

AMERICAN REALTY CAPITAL VII, LLC,

a Delaware limited liability company

 

PINNACLE HEALTH HOSPITALS,

a Pennsylvania non-profit corporation 

  

By: /s/ Edward M. Weil, Jr.   By: /s/ William H. Pugh
  Name: Edward M. Weil, Jr.     Name: William H. Pugh
  Title:   President     Title: Senior Vice President and CFO

 

 
 

 

EXHIBIT D

 

REPAIR ITEMS

 

 

 

 

 

 

Exhibit 10.33

 

Execution Copy

 

AGREEMENT OF SALE

 

BETWEEN

 

CERTAIN LIFEHOUSE SELLERS

 

collectively, as Seller,

 

and

 

LifeHouse holdings, LLC

 

as Seller Representative,

 

AND

 

American Realty Capital Healthcare Trust Operating Partnership, L.P . ,

as Purchaser

 

June 16, 2014

 

 
 

 

TABLE OF CONTENTS

 

    Page
  Definitions 1
     
1. Purchase and Sale 7
     
2. Purchase Price 7
     
3. Property 10
     
4. Due Diligence 11
     
5. [Reserved] 15
     
6. Conditions to Closing 15
     
7. Certain Representations and Warranties by Seller 17
     
8. Covenants of Seller 25
     
9. Certain Representations and Warranties of Purchaser 26
     
10. Closing 28
     
11. Closing Documents 28
     
12. Prorations and Adjustments 30
     
13. Closing Costs 34
     
14. Remedies for Pre-Closing Defaults 34
     
15. Remedies for Post-Closing Defaults 35
     
16. Broker 40
     
17. Risk of Loss 40
     
18. Limited Warranties; Disclaimer 42
     
19. General Provisions 43
     
20. Interest in Bed of Streets 46
     
21. Diligence Materials 46
     
22. Waiver 47
     
23. Non-compete 47

 

- i -
 

  

24. Facsimile/Electronic Signatures 47
     
25. Severability 47
     
26. Assumed Liabilities 48
     
27. Calculation of Time Periods 48
     
28. Seller Representative 48
     
29. Exculpation 48
     
30. Joint and Several Liability 49
     
31. Illinois Bulk Sales Clearances 49
     
32. Purchaser Records Rights 49
     
33. Exhibits and Schedules 50

 

EXHIBITS AND SCHEDULES

 

Exhibit A Description of Land
Exhibit B Aggregate Purchase Price Allocation
Exhibit B-1 Purchase Price Allocation
Exhibit B-2 Deposit Allocation
Exhibit C-1 Form of Deed for Michigan Property
Exhibit C-2 Form of Deed for Illinois Property
Exhibit D FIRPTA Affidavit
Exhibit E Form of Assignment of Contracts
Exhibit F Form of Owner’s Affidavit
Exhibit G Certain Purchase Designees
Exhibit H Form of Assignment of Residency Agreements
Exhibit I Form of Bill of Sale and General Assignment
Exhibit J Form of Bridging Documents
Exhibit K Form of Post-Closing Escrow Agreement for Seller Escrow
Exhibit L Form of Temporary License Agreement
Exhibit M [Reserved]
Exhibit N Form of Membership Interest Purchase Agreement
Exhibit O Form of Guaranty of New Operator’s Obligations
Schedule 3(a) Domain Names Included in Intangibles
Schedule 3(b)(iv) Excluded Personal Property
Schedule 3(b)(vi) Excluded Computer Software
Schedule 7(a) General Disclosures
Schedule 7(a)(vi) Liens on Personal Property
Schedule 7(a)(x) Litigation
Schedule 7(a)(xi) Material Contracts
Schedule 7(a)(xii) Rent Roll
Schedule 7(a)(xix) Environmental Reports
Schedule 7(a)(xxvii) List of Seller’s property and liability insurance and claims thereunder

 

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AGREEMENT OF SALE

 

This AGREEMENT OF SALE (“ Agreement ”) is made as of June 16, 2014 (the “ Effective Date ”), by and among LEISURE LIVING PROPERTIES - HOLT, LLC , a Delaware limited liability company, LEISURE LIVING PROPERTIES - DEWITT, LLC , a Delaware limited liability company, LIFEHOUSE CRYSTAL MANOR PROPERTY, LLC , a Michigan limited liability company, LIFEHOUSE WALDON WOODS PROPERTY, LLC , a Michigan limited liability company, LIFEHOUSE - GOLDEN ACRES PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE – GOLDEN ACRES PROPERTIES II, LLC , a Michigan limited liability company, LIFEHOUSE GRAND BLANC PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE CLARE PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE MT. PLEASANT PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE MT. PLEASANT PROPERTIES II, LLC , a Michigan limited liability company, LIFEHOUSE - OAKRIDGE MANOR DIXON PROPERTIES, LLC , an Illinois limited liability company, LIFEHOUSE - OAKRIDGE MANOR ROCKFORD PROPERTIES, LLC , an Illinois limited liability company, LIFEHOUSE PRESTIGE COMMONS PROPERTIES, LLC , a Michigan limited liability company, LEISURE LIVING PROPERTIES – BUCHANAN, LLC , a Michigan limited liability company, LIFEHOUSE BUCHANAN PROPERTY-II, LLC , a Michigan limited liability company, LEISURE LIVING PROPERTIES – GRAND RAPIDS, LLC , a Michigan limited liability company, and LEISURE LIVING PROPERTIES – HOLLAND, LLC , a Michigan limited liability company (collectively, “ Sellers ” and individually, a “ Seller ”, as the context requires), LIFEHOUSE HOLDINGS, LLC , a Delaware limited liability company (the “ Seller Representative ”) and American Realty Capital Healthcare Trust Operating Partnership, L.P ., a Delaware limited partnership (“ Purchaser ”) .”

 

WITNESSETH:

 

WHEREAS, each Seller wishes to sell the applicable Real Property owned by such Seller to Purchaser and Purchaser wishes to purchase the Real Properties from Sellers in accordance with and subject to the terms and conditions of this Agreement;

 

WHEREAS, in connection with the purchase and sale of the Real Properties, Seller wishes to cause the Operators who operate the Business at each of the Facilities to transfer to Purchaser, and Purchaser wishes to acquire from the Operators, certain personal property assets in connection with the operation of the Business at the Facilities.

 

NOW, THEREFORE, in consideration of the terms and provisions of this Agreement and for other good and valuable consideration, the parties hereto agree as follows:

 

Definitions

 

“ Accrued Employee Benefits ” has the meaning set forth in Section 7(a)(xvi) .

 

“ Accrued Employee Benefits Payout Amount ” has the meaning set forth in Section 7(a)(xvi) .

 

“ Agreement ” has the meaning set forth in the introductory paragraph.

 

 
 

  

“ Affiliate ” with respect to any person or entity: (A) all persons or entities that, directly or indirectly, control, are controlled by, or under common control with, such person or entity; or (B) all persons or entities that, directly or indirectly, own, are owned by or under common ownership with, such person or entity.

 

“ Aggregate Purchase Price ” has the meaning set forth in Section 2(a) .

 

“ Applicable Properties ” has the meaning set forth in Section 6(b)(8) .

 

“ Appurtenances ” has the meaning set forth in Section 3(a) .

 

“ Assumed Liabilities ” means (i) all liabilities and obligations of a Seller and/or Operator arising under any agreement or contract included in the Properties, including, without limitation any Residency Agreements, and (ii) all liabilities and obligations of any of the Operators with respect to the operation of the Business and the Facilities arising on or after the Closing Date.

 

“ Bridging Documents ” has the meaning set forth in Section 6(c) .

 

“ Broker ” has the meaning set forth in Section 16 .

 

“Business ” means the operation of the respective Facilities as senior housing facilities by the Operators, including one hundred eighty-one (181) independent living units, and six hundred thirty (630) assisted living and memory care units, and related personal property, fixtures, equipment, and machinery used to operate such Facilities upon the Properties.

 

“ Business Day ” means any day other than (i) Saturday, (ii) Sunday, or (iii) any other day when federally insured banks in New York, New York are required or authorized to be closed.

 

“ Casualty ” has the meaning set forth in Section 17(b) .

 

“ Casualty Event ” has the meaning set forth in Section 17(b) .

 

“ Claims ” shall mean, collectively, damages, claims (including without limitation, any claim for damage to property of others or injury to or death of any persons), penalties, obligations, liabilities, fines, losses, causes of action, fees, injuries, liens, encumbrance, proceedings, judgments, actions, rights, demands, costs and expenses (including without limitation, reasonable attorneys’ fees whether or not legal proceedings are instituted and court and litigation costs).

 

“ Closing ” has the meaning set forth in Section 10 .

 

“ Closing Date ” has the meaning set forth in Section 10 .

 

“ Closing Document(s) ” shall mean the documents to be executed and delivered by Seller and Purchaser at Closing pursuant to Section 11 .

 

“ Closing Statement ” has the meaning set forth in Section 11(a) .

 

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“ Contracts ” shall mean all service contracts, leases of furniture, fixtures and equipment and any other agreements relating to the ownership of the Properties and the operation of the Business at each Property.

 

“ Deed ” has the meaning set forth in Section 11(a)(i) .

 

“ Deposit ” has the meaning set forth in Section 2(b)(i) .

 

“ Diligence Materials ” has the meaning set forth in Section 21 .

 

“ Due Diligence Deadline ” means 5:59 P.M. Eastern Time on the date that is 45 days after the Effective Date, unless such date is not a Business Day, in which event the Due Diligence Deadline shall be 5:59 P.M. Eastern Time on the next Business Day.

 

“ Due Diligence Period ” shall mean the period commencing on the Effective Date and expiring on the Due Diligence Deadline.

 

“ Effective Date ” has the meaning set forth in the introductory paragraph.

 

“ Employees ” has the meaning set forth in Section 7(a)(xvi) .

 

“ Environmental Laws ” means all past, present or future federal, state and local statutes, regulations, directives, ordinances, rules, policies, guidelines, court orders, decrees, arbitration awards and the common law, which pertain to environmental matters, contamination of any type whatsoever or health and safety matters, as such have been amended, modified or supplemented from time to time (including all present and future amendments thereto and re-authorizations thereof).

 

“ Escrow Agent ” shall mean Stewart Title Guaranty Company of Boston, Massachusetts.

 

“ Escrow Amount ” has the meaning set forth in Section 15 .

 

“ Excluded Liabilities ” shall mean all of the debts, obligations and liabilities of the Sellers and the Operators, other than the Assumed Liabilities and any other debts, obligations and liabilities expressly assumed by Purchaser pursuant to this Agreement or expressly assumed by New Operator pursuant to the Membership Interest Purchase Agreement and the Bridging Documents. Notwithstanding anything herein to the contrary, Excluded Liabilities shall include, without limitation, any liability, obligation, claim, action, suit, or proceeding pending as of the Closing Date, or any subsequent claim, action, suit, or proceeding arising out of or relating to any such other event occurring prior to the Closing, with respect to the Seller’s ownership or and Operator’s operation of its businesses prior to the Closing Date, including, without limitation, any obligation of Sellers and/or Operators for compliance with applicable federal, state, county, and local tax laws or regulations, including the obligations under such laws for the payment of taxes and the filing of tax returns, under Part 6 of Title I of ERISA and Section 4980B of the IRC, as amended (commonly known as “COBRA”), the Seller Plans (as herein defined), the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Occupational Safety and Health Act, the Age Discrimination in Employment Act of 1967, the Americans With

 

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Disabilities Act, the Family and Medical Leave Act, or state worker’s compensation and unemployment compensation laws, as now or hereafter amended.

 

“ Excluded Personal Property ” has the meaning set forth in Section 3(b) .

 

“ Existing Manager ” shall mean LifeHouse Management Services, LLC, a Delaware limited liability company.

 

“ Existing Survey ” has the meaning set forth in Section 4(a) .

 

“ Facility(ies) ” shall mean, individually and collectively, the facilities described on Exhibit B-1 , which are located on the respective Real Properties.

 

“ Financial Statements ” shall mean the statements of income and expenses for calendar years 2012 and 2013 and year-to-date monthly statements of income and expenses for 2014, including any such subsequent statements issued prior to Closing.

 

“ GAAP ” shall mean generally accepted accounting principles, consistently applied.

 

“ Gap Notice ” has the meaning set forth in Section 4(a) .

 

“ Gap Objections ” has the meaning set forth in Section 4(a) .

 

“ GE Prepayment Fees ” has the meaning set forth in Section 12(a)(vii) .

 

“ Governmental Approvals ” has the meaning set forth in Section 6(b)(7) .

 

“ Government Programs ” shall mean Medicaid, Medicare or any other governmental authority third party payor programs.

 

“ Hazardous Materials ” shall mean, without limitation, polychlorinated biphenyls, urea formaldehyde, radon gas, lead paint, radioactive matter, medical waste, asbestos, petroleum products, including crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas or such synthetic gas), and any substance, material, waste, pollutant or contaminant listed or defined as hazardous, infectious, or toxic under any applicable federal, state or local law.

 

“ Healthcare Laws ” shall mean all applicable laws relating to the operation of seniors housing facilities (including, but not limited to, assisted living services agencies, memory care facilities, managed residential communities, residential health care facilities and independent living facilities), patient healthcare, patient healthcare information, patient abuse, quality and adequacy of medical care, rate setting, equipment, personnel, operating policies, and fee splitting, including, without limitation, (a) all federal and state fraud and abuse laws; (b) the Health Insurance Portability and Accountability Act of 1996, including the Privacy Standards (45 C.F.R. Parts 160 and 164, the Electronic Transaction Standards (45 C.F.R. Parts 160 and 162) and the Security Standards (45 C.F.R. Parts 160, 162, and 164) promulgated under the Administrative Simplifications subtitle of the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical

 

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Health Act, enacted as part of the American Recovery and Reinvestment Act of 2009 (“ HIPAA ”); (c) Medicaid; (d) the Patient Protection and Affordable Care Act (P.L. 111-1468); (e) the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152); (f) quality, safety and accreditation standards and requirements of all applicable state laws or regulatory bodies; (g) all laws, policies procedures, requirements and regulations pursuant to which Operating Permits are issued; and (h) any and all other applicable health care laws, regulations, manual provisions, policies and administrative guidance, each of (a) through (h) as may be amended from time to time.

 

“ Healthcare Permits ” shall mean all licenses, permits, certifications, supplier or provider numbers, supplier or provider agreements (including participation agreements), authorizations, registrations or similar documents (a) issued or required under Healthcare Laws applicable to the business of Seller or necessary in the possession, ownership, use, operation, management or delivery of goods or services under Healthcare Laws, and/or (b) issued or required under Healthcare Laws applicable to the ownership, leasing and/or operation of the Property.

 

“ HUD ” has the meaning set forth in Section 12(a)(vi).

 

“HUD Lender” has the meaning set forth in Section 12(a)(vi) .

 

“HUD Loans” has the meaning set forth in Section 12(a)(vi).

 

“ HUD Prepayment Fees ” has the meaning set forth in Section 12(a)(vi) .

 

“ Improvements ” has the meaning set forth in Section 3(a) .

 

“ Intangibles ” means all of Seller’s and Operator’s right, title and interest in and to (i) the domain names set forth in Schedule 3(a) attached hereto, and (ii) the goodwill associated with the operation of the Business and the Facilities.

 

“ Land ” has the meaning set forth in Section 3(a) .          

 

“ Lists ” has the meaning set forth in Section 7(a)(xv) .

 

“ Material Contracts ” has the meaning set forth in Section 7(a)(xi).

 

“ Maximum Title Expense ” has the meaning set forth in Section 4(c) .

 

“ Membership Interest Purchase Agreement ” shall mean an agreement in the form attached hereto as Exhibit N .

 

“New Operator ” means an Affiliate of Meridian Senior Living or another entity designated by Purchaser to enter into the Membership Interest Purchase Agreement and operate one or more of the Facilities after a Closing.

 

“ Non-Permitted Title Objections ” has the meaning set forth in Section 4(c) .

 

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“ OFAC ” has the meaning set forth in Section 7(a)(xv) .

 

“ Operating Lease ” means, for each Property, the operating lease between the applicable Seller, as owner, and Operator, as tenant, relating to the Property.

 

“ Operating Permits ” has the meaning set forth in Section 7(a)(xxi) .

 

“ Operator(s) ” means each tenant under an applicable Operating Lease for each respective Facility. The “Operator(s)” hereunder are the entities that are the “Acquired Companies” under the Membership Interest Purchase Agreement.

 

“ Order ” and “ Orders ” have the meaning set forth in Section 7(a)(xv) .

 

“ Permitted Exceptions ” has the meaning set forth in Section 4(b) .

 

“ Personal Property ” has the meaning set forth in Section 3(a) .

 

“ Post-Closing Escrow Agreement ” shall mean the Post-Closing Escrow Agreement in the form of Exhibit K .

 

“ Property(ies) ” has the meaning set forth in Section 3(a) .

 

“ Property Purchase Price ” has the meaning set forth in Section 2(a) .

 

“ Purchaser ” has the meaning set forth in introductory paragraph.

 

“ Purchaser Designee ” means a special purpose entity that is an Affiliate of Purchaser which has been formed to acquire fee title to any Property. The parties agree that each of the Delaware limited liability companies listed on Exhibit G hereof shall constitute Purchaser Designees for purposes of this Agreement.

 

“ Real Property(ies) ” has the meaning set forth in Section 3(a) .

 

“ Rent Roll ” has the meaning set forth in Section 7(a)(xii) .

 

“ Reserves ” has the meaning set forth in Section 12(a)(vi) .

 

“ Residency Agreements ” shall mean all leases, rental, use, occupancy and reservation agreements, commitments, documents and instruments in favor of individual residents relating to any Property and all related documents, instruments, agreements, letters of credit, deposits and other items (including, without limitation, guarantees), including, without limitation, all amendments, modifications, supplements, renewals and extensions thereof, which relate to the occupancy of portions of the Property by individuals for independent living, assisted living and memory care purposes.

 

“ Seller ” has the meaning set forth in introductory paragraph.

 

“ Seller Escrow ” has the meaning set forth in Section 15 .

 

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“ Seller Knowledge Parties ” has the meaning set forth in Section 7 .

 

“ Seller Party(ies) ” means, collectively, the Sellers and the Seller Representative.

 

“ Seller Representative ” has the meaning set forth in the preamble of this Agreement.

 

“ Substantial Portion ” has the meaning set forth in Section 17(a) .

 

“ Survey ” has the meaning set forth in Section 4(a) .

 

“ Taking ” has the meaning set forth in Section 17(a) .

 

“ Tests ” has the meaning set forth in Section 4(d) .

 

“ Title Commitment ” has the meaning set forth in Section 4(a) .

 

“ Title Company ” has the meaning set forth in Section 4(a) .

 

“ Title Insurance Policy ” has the meaning set forth in Section 6(b) .

 

“ Title Objection Date ” has the meaning set forth in Section 4(a) .

 

“ Transaction ” means the transaction contemplated by this Agreement.

 

1.            Purchase and Sale . The Sellers agree to sell and assign, or to cause Operators to sell and assign, as applicable, to Purchaser (or Purchaser Designee), and Purchaser (or Purchaser Designee) agrees to purchase and assume, as applicable, from the Sellers and Operators, as applicable, the Properties for the Aggregate Purchase Price (defined below), subject to the terms and conditions set forth in this Agreement.

 

2.            Purchase Price .

 

(a)          The aggregate purchase price (the “ Aggregate Purchase Price ”) for the Properties shall be Ninety Million Two Hundred Thousand Dollars ($90,200,000), subject to prorations and the adjustments expressly set forth in this Agreement. Prior to the expiration of the Due Diligence Period, Sellers and Purchaser shall agree on (x) a reasonable allocation of the Aggregate Purchase Price to each Property, which shall be attached to this Agreement as Exhibit B , and, (y) with respect to each Property, a reasonable allocation as between (i) the Land and the Improvements, and (ii) the Personal Property, which shall be attached to this Agreement as Exhibit B-1 . The portion of the Aggregate Purchase Price allocated to each Property shall be deemed the “ Property Purchase Price ” for such Property. In the event this Agreement is terminated with respect to one or more Properties as a result of a Casualty or Taking pursuant to Section 17 , then the Aggregate Purchase Price shall be reduced by the applicable Property Purchase Price allocated to the terminated Property.

 

(b)          The Aggregate Purchase Price shall be payable by Purchaser to the Sellers as follows:

 

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(i)          On or before the third Business Day after the Effective Date, the sum of Three Million Dollars ($3,000,000) (the “ Deposit ”) shall be paid by electronic wire transfer of immediately available federal funds to an account designated by Escrow Agent. Sellers and Purchaser agree that the Deposit shall be allocated among the Properties on a pro rata basis, based on the allocation of the Aggregate Purchase Price and shall be attached to this Agreement as Exhibit B-2 prior to the expiration of the Due Diligence Period .

 

(ii)         In the event of a failure by Purchaser to make the Deposit as set forth in 2(b)(i) above, Seller Representative, on behalf of the Sellers, at its sole option, may cancel this Agreement and/or pursue any legal remedies Seller Representative or any Seller may have against Purchaser at the sole expense of Purchaser, such remedies being cumulative and not exclusive.

 

(iii)        On the Closing Date, the balance of the Aggregate Purchase Price, subject to adjustment and proration as expressly set forth in this Agreement, less the Deposit, shall be paid by electronic wire transfer of immediately available federal funds pursuant to wiring instructions to be given by Escrow Agent or as Escrow Agent may direct to Purchaser prior to the Closing and Purchaser shall cause Escrow Agent to distribute such funds to Sellers in accordance with this Agreement.

 

(c)          Escrow Agent shall hold and disburse the Deposit (or so much thereof as Escrow Agent is then holding) as follows:

 

(i)          Upon the Closing, Escrow Agent is authorized and directed to pay the Deposit to Sellers as Seller Representative may direct.

 

(ii)         If Seller Representative, on behalf of the Sellers, terminates this Agreement as a result of a Purchaser default pursuant to Section 14(a) below, Escrow Agent shall pay the Deposit to Seller Representative, who shall retain the Deposit in accordance with Section 14(a) below.

 

(iii)        If this Agreement is terminated by reason other than Purchaser’s default, Escrow Agent shall pay the Deposit to Purchaser.

 

(iv)        In the event this Agreement is terminated during the Due Diligence Period pursuant to Section 4(d) below, or is terminated with respect to one or more Properties as a result of a Casualty or Taking pursuant to Section 17 , then the Escrow Agent shall return to Purchaser the entire Deposit or, as applicable, the portion of the Deposit allocated to the terminated Property if the entire Agreement is not terminated.

 

(v)         Upon receipt from Purchaser of a completed W-9 form, Escrow Agent shall invest and reinvest, in the name of Purchaser, the Deposit, and any interest earned thereon, in United States Government Treasury Bills or Certificate(s) of Deposit or bank money market account(s) as Purchaser and Sellers mutually agree. Purchaser shall pay all income taxes owed in connection therewith. Escrow Agent, by signing this Agreement at the end hereof where indicated, signifies its agreement to hold the Deposit for the purposes as provided in this Agreement. In the event of any dispute, Escrow Agent shall have the right to deposit the Deposit with a court of competent jurisdiction to await the resolution of such dispute. Escrow Agent

 

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shall not incur any liability by reason of any action or non-action taken by it in good faith, or pursuant to the judgment or order of a court of competent jurisdiction. Escrow Agent shall have the right to rely upon the genuineness of all certificates, notices and instruments delivered to it pursuant hereto, and all the signatures thereto or to any other writing received by Escrow Agent purporting to be signed by any party hereto, and upon the truth of the contents thereof.

 

(vi)        Except as otherwise provided in Section 2(c)(i) and in this paragraph below, Escrow Agent shall not pay or deliver the Deposit to any party unless written demand is made therefor and a copy of such written demand is delivered to the other party pursuant to the notice provisions of this Agreement. If Escrow Agent does not receive a written objection from the other party to the proposed payment or delivery within five (5) Business Days after a copy of such demand is so given to such party, Escrow Agent is hereby authorized and directed to make such payment or delivery. If Escrow Agent does receive such written objection within such five (5) Business Day period or if for any other reason Escrow Agent in good faith shall elect not to make such payment or delivery, Escrow Agent shall forward a copy of the objections, if any, to the other party or parties, and continue to hold the Deposit unless otherwise directed by written instructions from the parties to this Agreement or by a judgment of a court of competent jurisdiction. In any event, Escrow Agent shall have the right to refrain from taking any further action with respect to the subject matter of the escrow until it is reasonably satisfied that such dispute is resolved or action by Escrow Agent is required by an order or judgment of a court of competent jurisdiction. Notwithstanding anything to the contrary contained herein, if Purchaser makes a demand for the Deposit before the Due Diligence Deadline, then the Deposit shall automatically and immediately be returned to Purchaser, and Seller Parties shall have no right to object.

 

(vii)       Escrow Agent shall be entitled to consult with counsel in connection with its duties hereunder. Seller and Purchaser, jointly and severally, agree to reimburse Escrow Agent, upon demand, for the reasonable costs and expenses including attorneys’ fees incurred by Escrow Agent in connection with its acting in its capacity as Escrow Agent. In the event of litigation relating to the subject matter of the escrow, whichever of Seller or Purchaser is not the prevailing party shall reimburse the prevailing party for any costs and fees paid by the prevailing party or paid from the escrowed funds to Escrow Agent.

 

(viii)      Except for any claim, action or proceeding resulting in a final determination that Escrow Agent acted in bad faith, acted with gross negligence or engaged in any type of willful misconduct, Escrow Agent shall not be responsible for any loss or delay occasioned by the closure or insolvency of the institution with which any funds are invested in accordance with this Agreement, and shall have no liability for interest on such funds. Escrow Agent shall not be liable for any loss or delay occasioned by the failure of said financial institution to wire funds in a timely manner.

 

(ix)         Escrow Agent may receive other benefits from the financial institution where the funds are deposited. Based upon the deposit of escrow funds in demand deposit accounts and other relationships with the financial institution, Escrow Agent is eligible to participate in a program whereby it may (i) receive favorable loan terms and earn income from the investment of loan proceeds and (ii) receive other benefits offered by the financial institution.

 

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3.            Property .

 

(a)          “ Property(ies) ” means, subject to the exclusions set forth in Section 3(b) below, individually or collectively (as the context requires), all of a Seller’s and/or Operator’s (as applicable) right, title and interest in and to each of the Real Property(ies) and the corresponding Personal Property(ies) associated with the Facility located at each Real Property. The “ Real Property(ies) ” shall mean: (i) the respective real property owned by such Seller as more fully described on Exhibit A attached hereto (the “ Land ”); (ii) all easements and other related rights appurtenant to the Land including, without limitation, all rights to make divisions thereof that are exempt from the platting requirements of the Michigan Land Division Act (MCL 560.101 et seq.), as it may be amended from time to time (collectively, “ Appurtenances ”); and (iii) all of the buildings, structures, fixtures and other improvements comprising real property and located on the Land and all property which might be considered personal property (including each Facility) except for the fact that it is inextricably related or attached to any such buildings, structures, fixtures and/or other improvements (collectively, “ Improvements ”). The “ Personal Property(ies) ” shall mean: (i) all Residency Agreements relating to each respective Facility; (ii) except for the Excluded Personal Property, all tangible personal property on hand at any Facility and owned by each respective Seller and each respective Operator, including without limitation all inventory and supplies on hand at each Facility on the Closing Date (including food, beverages, office and kitchen supplies), equipment, furniture, signage and vehicles owned by the respective Operators and used in connection with the Business as of the Closing Date, and (iii) the Intangibles.

 

(b)          The Property shall not include, and no Seller (or Operator or Affiliate of Seller) shall have any obligation to sell, transfer or convey to Purchaser the following (collectively, the “ Excluded Personal Property ”):

 

(i)          Accounts receivable relating to any Facility with respect to the period prior to Closing;

 

(ii)         All books and records relating to any Facility, any Seller and/or the past and present residents at any Facility that are consolidated with books or records relating to any other facility, seller or the past and present residents of any other facility to the extent such books or records contain confidential or proprietary information ( e.g. , attorney-client communications), or to the extent that such books or records cannot be properly shared under applicable law; provided, however, all records that are required by law to remain at any Facility shall so remain.

 

(iii)        All cash on hand at any Facility with respect to the period prior to Closing;

 

(iv)        The personal property listed on Schedule 3(b)(iv) attached hereto;

 

(v)         All trademarks, trade names, brand names, intellectual property, websites, URLs and domain names (other than websites, URLs and domain names set forth in Schedule 3(a) attached hereto), and all proprietary and marketing materials and documents of any Seller, and any trade names and trademarks related to the corporate or limited liability

 

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company name of any Seller, including, without limitation, any name containing the word “LifeHouse” or “Westport,” the so-called “Shirley Jones” marketing campaign, and the Montessori dementia program.

 

(vi)        The computer software and systems set forth on Schedule 3(b)(vi);

 

(vii)       Cash, accounts, deposits (including, without limitation, bank and demand deposit accounts (but excluding any refundable resident or tenant deposits), and insurance policies of Sellers and any Affiliates of Seller;

 

(viii)      Except as otherwise expressly set forth in this Agreement, rights to payments, reimbursements or refunds from the United States of America, any State, any insurer, municipality, public utility or other agency, individual or entity, including, without limitation, real estate and personal property tax refunds, payments, reimbursements and deposits with respect to any Facility relating to any period that precedes the Closing Date;

 

(ix)         All permits, licenses, approvals and authorizations issued, granted or given by or under the authority of any federal, state or local governmental or quasi-governmental agency, authority, official or tribunal which are not assignable, for which consent to assignment is not obtained, or for which an assignment will cause a Seller to incur liability or costs; and

 

(x)          All actions, suits, claims, rights and choses in action of any Seller and any promissory notes held by any Seller.

 

Notwithstanding the foregoing, Sellers shall cooperate (and shall cause the respective Operators to cooperate) with Purchaser to effect the orderly transfer of operation of the Properties (including, without limitation, transfer of electronic files, account information, utilities, etc.). In addition, at a Closing, Seller and Purchaser shall enter into a Temporary License Agreement in the form attached hereto as Exhibit L (the “ Temporary License Agreement ”), pursuant to which Seller shall grant a temporary license to Purchaser (or a designee of Purchaser) to use certain trademarks and software, as more particularly set forth in the Temporary License Agreement.

 

4.            Due Diligence .

 

(a)           Title . Purchaser shall have the right to cause to be issued and delivered to Purchaser title commitments (the “ Title Commitment(s) ”) issued by Stewart Title Guaranty Company (the “ Title Company ”) covering each of the Properties, accompanied by a copy of all recorded documents affecting each of the Properties listed as exceptions in Schedule B of the applicable Title Commitments. Each Seller has delivered to Purchaser a copy of the most recent lender’s title policy affecting the Property owned by such Seller and the existing ALTA survey of such Property (the “ Existing Survey(s) ”). Purchaser shall have the right to obtain updates of each Existing Survey, or new surveys (any such updates, together with any such new surveys, the “ Survey(s) ”). On or prior to five (5) Business Days prior to the Due Diligence Deadline, Purchaser shall furnish Seller Representative with notice of any objections Purchaser has to the Title Commitments or the Surveys (the “ Title Objection Date ”); provided, however, that except

 

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as otherwise set forth in this Agreement, the Seller Parties shall have no obligation to cure any such objections. Any matters contained in the Title Commitments or matters that are or would be disclosed by an accurate survey existing on the Effective Date to which Purchaser does not object, shall be deemed Permitted Exceptions. The Seller Representative shall, within three (3) Business Days following Purchaser’s delivery of notice of any objections of Purchaser to the Title Commitments or the Surveys, deliver a notice to Purchaser (a “ Seller’s Response Notice ”) indicating as to whether Seller will cause such matters to which Purchaser has objected to be cured and removed of record. If Seller Representative gives notice that the Seller will not cure or if Seller do not provide any notice within said three (3) Business Day period, Purchaser shall have the right, in its sole discretion, to terminate this Agreement within three (3) Business Days following its receipt of Seller Representative’s notice as aforesaid (or following the expiration of said three (3) Business Day period if Seller Representative does not give such notice), in which case the Agreement shall terminate and, the Deposit shall be returned to Purchaser and neither party shall have any further obligations to the other party hereunder. All defects, encumbrances, encroachments and other matters of title that exist on the Effective Date and which Seller is not obligated to remove pursuant to this Agreement and has not in this Agreement or in a separate writing expressly agreed to remove, shall be deemed Permitted Exceptions. Purchaser may, prior to Closing, notify Seller Representative in writing (a “ Gap Notice ”) of defects, encumbrances or encroachments raised in any update to the Title Commitments, Surveys or otherwise between the Due Diligence Deadline and the Closing Date (“ Gap Objections ”); provided that Purchaser must notify Seller Representative of such exceptions within ten (10) days after being made aware of the existence of such exceptions. If Purchaser sends a Gap Notice to Seller Representative, Seller and Purchaser shall have the same rights and obligations (as described in Section 4 hereof) with respect to such Gap Objections as they do with respect to objections to the initial drafts of the Title Commitments and Surveys. Any defects, encumbrances, encroachments and other matters of title that are not timely objected to in accordance with this Section 4(a) shall be deemed Permitted Exceptions.

 

(b)           Status of Title . Sellers shall deliver, and Purchaser or its designee shall accept, title to the applicable Property and consummate the Transaction subject to (i) the title matters deemed Permitted Exceptions under Section 4(a) above, and (ii) any items or exceptions to title set forth on the Surveys deemed Permitted Exceptions under Section 4(a) above (the title exceptions described in (i) and (ii) herein sometimes referred to collectively as “ Permitted Exceptions ”). In addition, “Permitted Exceptions” shall include all liens, encumbrances and matters of title arising out of the acts or omissions of Purchaser, New Operator, and their respective employees, agents, contractors and Affiliates.

 

(c)           Non-Permitted Title Objections .

 

(i)          If on the Closing Date any one or more Properties is affected by any lien, encumbrance, defect, encroachment or objection which is not a Permitted Exception (including any lien, encumbrance, defect, encroachment or objection that Seller has agreed to remove or cure under the terms of Section 4(a) ) (collectively, “ Non-Permitted Title Objections ”), then in such event, Sellers, at Seller Representative’s election, shall have the privilege to remove or satisfy the same, and shall, for that purpose, be entitled to one or more adjournments of the Closing for a period not to exceed thirty (30) days in the aggregate beyond the date scheduled for Closing.

 

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(ii)         No Seller Party shall be required to bring any action or proceeding or to otherwise incur any expense to remove or discharge any Non-Permitted Title Objection, except that the Sellers shall be obligated to remove or discharge any Non-Permitted Title Objection(s) that can be removed or discharged by payment of a liquidated sum of money only, and if both (1) such removal or discharge can reasonably be expected to be accomplished within a period of thirty (30) days beyond the date scheduled for the Closing, and (2) the sum of money required to accomplish such removal or discharge as to any one Property does not exceed Fifty Thousand Dollars ($50,000) as to any particular Property, and, as to all of the Properties in the aggregate, does not exceed Two Hundred Fifty Thousand Dollars ($250,000) (the “ Maximum Title Expense ”). In such event, Sellers agree to adjourn the Closing as set forth in Section 4(c)(i) , and to expend (or at Seller Representative’s election, to obligate the applicable Seller to expend by indemnity agreement, bond or any other manner) an amount not to exceed the Maximum Title Expense to remove or discharge such Non-Permitted Title Objections. If there shall be any Non-Permitted Title Objections that can be removed or discharged by the payment of a sum of money only which exceeds the Maximum Title Expense, or that can be removed by the payment of not more than the Maximum Title Expense but not within thirty (30) days and Seller Representative notifies Purchaser that Seller Parties elect not to, or cannot, remove or discharge such Non-Permitted Title Objections, Purchaser may elect to (i) terminate this Agreement by notice given within five (5) Business Days after receipt of Seller Representative’s notice in which case Purchaser shall be entitled to the return of the Deposit, or (ii) by notice given within five (5) Business Days after receipt of Seller Representative’s notice, close with a credit from Sellers equal to the lesser of the amount required to remove or discharge such Non-Permitted Title Objection or the Maximum Title Expense. If Purchaser fails to timely elect to close in accordance with clause (ii) as provided in the preceding sentence, Purchaser shall be deemed to have elected to terminate the Agreement as set forth in clause (i) above. Anything in this Section to the contrary notwithstanding, an attempt by any Seller Party to remove or discharge any Non-Permitted Title Objection shall not be deemed to be or create an obligation of such Seller Party to remove or discharge the same.

 

(iii)        The foregoing provisions of this Section to the contrary notwithstanding, each Seller agrees to remove or discharge (u) any lien, encumbrance, defect, encroachment or objection that Sellers have agreed in a Seller’s Response Notice to remove or cure under the terms of Section 4(a) , (v) any lien for delinquent taxes (except for liens applicable to taxes due and payable after Closing), (w) any mechanics’ lien or materialmens’ lien filed by any contractor, subcontractor or other party that was engaged by such Seller, the Existing Manager of the applicable Property or their respective Affiliates, (x) the existing loan encumbering the applicable Property (subject to Purchaser’s obligations set forth in Section 4(d)(ii) below), (y) any judgment lien applicable to any Property subject to the Maximum Title Expense, and (z) any Non-Permitted Title Objections voluntarily created by such Seller, Operator, Existing Manager, or their respective Affiliates or with such Seller’s consent, such Operator’s or Existing Manager’s consent or their respective Affiliates’ consent after the date hereof. For purposes of clarification, any amounts which a Seller is required to expend under this subparagraph (iii) shall not be included in, or subject to, the Maximum Title Expense.

 

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(d)           Tests and Inspections; Loan Documents .

 

(i)          From the Effective Date and continuing until the Closing, Purchaser and/or its representatives, including its officers, directors, employees, Affiliates, agents, accountants, and advisors, and Purchaser’s lender, shall have the right to enter, upon reasonable prior notice to Existing Manager (which can be made by e-mail or verbally) and during normal business hours, the Properties, while this Agreement remains in full force and effect, for the purpose of conducting such inspections, measurements, surveys, studies, investigations, analyses and other tests, relating to all aspects of the Property, including, without limitation, a close review and analysis of the Diligence Materials, as Purchaser or Purchaser’s lender (as applicable) deems appropriate (collectively, the “ Tests ”). In addition, Purchaser and Purchaser’s lender may investigate all other aspects of the Property.

 

(ii)         Purchaser’s access to the Properties shall be subject to the following: (A) Sellers shall have the option to have an agent or employee accompany Purchaser at all times during its investigation or inspection of such Property; provided, however, Sellers’ exercise of this option shall not, in any event, serve to unreasonably delay Purchaser’s ability to enter such Property in accordance with the terms of subsection (i) above; (B) Purchaser shall conduct the Tests in a manner that does not unreasonably interfere with the operations of the Facilities and Purchaser shall coordinate all visits to the Facilities in order to minimize the number of visits required; (C) Purchaser shall not conduct any invasive testing without Seller Representative’s prior written consent, which consent shall be granted or withheld in Seller Representative’s sole and absolute discretion; (D) Purchaser shall indemnify and hold harmless Seller Parties from and against all liabilities incurred by Seller Parties in connection with or by reason of any damage, death, or injury to any person or property occurring in connection with the Tests conducted by it prior to the Closing Date (other than any liability incurred in connection with or by reason of Purchaser’s discovery of any existing condition, including, without limitation, any Hazardous Materials) except to the extent such liabilities are caused by the gross negligence or intentional misconduct of one or more Seller Parties; and (E) Purchaser delivering to Seller Representative evidence of commercial general liability insurance in form and substance reasonably acceptable to Seller Representative and naming the applicable Seller as an additional insured thereunder. Without limiting the generality of the foregoing indemnity, Purchaser shall (x) remove or bond over any mechanics’ or other lien which may be recorded against the Property (or any part thereof) by any party providing labor, materials or services at the request of Purchaser and (y) not file or cause to be filed any application or make any request (other than inquiries of the public records) with any governmental or quasi-governmental agency prior to Closing which would or could lead to a hearing before any governmental or quasi-governmental agency or which would or could lead to a violation of applicable law or any change in zoning, parcelization, licenses, permits or other entitlements or any investigation or restriction on the use of the Properties, or any part thereof; provided, however, that Purchaser shall be entitled, at any time following the Effective Date, to submit applications for licensure to the extent required by law. The foregoing indemnity shall survive the expiration or any earlier termination of this Agreement.

 

(iii)        Purchaser may elect to proceed with the transaction contemplated by this Agreement in its sole and absolute discretion at any time by written notice given to Seller Representative on or before Due Diligence Deadline (the “ Due Diligence Notice ”) that

 

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Purchaser elects to consummate the purchase of the Properties in accordance with the terms of this Agreement.  If the Due Diligence Notice is not timely given, this Agreement shall be deemed terminated and the Title Company shall immediately return the Deposit to Purchaser, and, except for the provisions expressly stated to survive a termination of this Agreement, no party shall have any further liability to any other party under this Agreement.  If this Agreement is terminated pursuant to the provisions of this Section, then Purchaser shall promptly thereafter ( i.e. , not more than ten (10) Business Days after this Agreement is terminated) deliver to Seller Representative copies of any Phase I and/or Phase II environmental report, zoning report, surveys, title reports, appraisal and/or property condition report commissioned by or on behalf of Purchaser relating to the Properties, without representation or warranty whatsoever as to the completeness or accuracy thereof and without liability for any amounts which Purchaser may owe in connection therewith.

 

5.            [Reserved] .

 

6.            Conditions to Closing .

 

(a)          No Seller Party shall be obligated to proceed with Closing unless and until each of the following conditions have been fulfilled:

 

(1)         Sellers shall have received payment of the Aggregate Purchase Price in accordance with Section 2 of this Agreement, subject to the adjustments and prorations contemplated by this Agreement, and subject to reduction by the applicable Property Purchase Price with respect to any Property that is not included in the Closing pursuant to Section 17 below.

 

(2)         The continuing validity (in all material respects) of all of the representations and warranties of Purchaser set forth in Section 8.

 

(3)         New Operator shall have entered into the Membership Interest Purchase Agreement with certain Affiliates of Sellers that own the Operators of the Properties being conveyed in the applicable Closing in the form attached hereto as Exhibit N , and such Membership Interest Purchase Agreement shall be in escrow subject only to the occurrence of the Closing.

 

(4)         A creditworthy entity reasonably acceptable to Seller Representative shall have entered into a Guaranty of New Operator’s (or its designees’) respective obligations under the Bridging Documents and the Membership Interest Purchase Agreement in the form attached hereto as Exhibit O .

 

(b)           Purchaser shall not be obligated to proceed with Closing unless and until each of the following conditions have been fulfilled with respect to the Properties, other than Property that is not included in the Closing pursuant to Section 17 below:

 

(1)         The Title Company shall have delivered to Purchaser Title Commitments to issue at the prevailing promulgated rates, ALTA standard owner’s policy of title insurance with extended coverage insuring title to each of the Properties in the amount of the applicable Property Purchase Price, subject only to the Permitted Exceptions and containing all

 

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of the endorsements reasonably required by Purchaser and/or its lender, which are available in Michigan or Illinois, as applicable (the “ Title Insurance Policy(ies) ”), and shall be unconditionally prepared, subject only to the payment of the applicable premium, to issue to Purchaser the Title Insurance Policies.

 

(2)         The continuing validity (in all material respects) of all of the representations and warranties of each applicable Seller set forth in Section 7 , as applicable to each Property, except that the representations set forth in Section 7(a)(xi ) and Section 7(a)(xii) may be updated to reflect the actual status of Contracts and the Rent Roll as of the Closing, so long as the status of the Contracts is in compliance with Section 7 of this Agreement.

 

(3)         Any Operating Lease and any property management agreement affecting each Property will have been terminated effective as of Closing.

 

(4)         No action, proceeding, or investigation shall have been instituted or be threatened before or by any court or governmental authority that seeks to restrain or prohibit, or to seek substantial damages in respect of, or which is related to or arises out of, this Agreement or the consummation of the Transaction with respect to the applicable Seller or Property.

 

(5)         On or before the Closing, Purchaser shall have received, at Sellers’ sole cost and expense, copies of certificates evidencing insurance tail policies (collectively, a “ Tail Policy ”) covering each of the Properties that (A) cover incurred but unreported claims that would be covered under the respective Seller’s (or its Affiliates’) current commercial general liability insurance policies and current medical professional liability insurance policies, (B) cover the period from the Closing Date through the through date that is 545 days following the Closing Date (the “ Tail Period ”), and (C) are consistent, both in terms of coverage and limits, with the respective Seller’s’ (or its Affiliates’) current general liability and medical professional liability insurance policies. The Tail Policy shall name Purchaser, Purchaser’s Designee and New Operator as additional insureds as their interests may appear. The foregoing condition may be satisfied either through the extension of the respective Seller’s’ (or its Affiliates’) existing insurance policies to cover the Tail Period or the purchase of new policies to cover the Tail Period.

 

(6)         There shall be no existing uncured material breach of any of the covenants of the applicable Seller set forth in this Agreement that has not been waived by Purchaser or that would not be cured by the occurrence of the Closing.

 

(7)         Purchaser or, as applicable, New Operator shall have obtained verbal or other confirmation from all applicable governmental, administrative or quasi-governmental agencies or authorities issuing such approvals that the parties may consummate the Transaction with respect to each Facility and, as applicable, operate each Facility in substantially the same manner such Facility was operated by the applicable Operator prior to Closing, but not including the Assumption Approval (the “ Governmental Approvals ”). In the event any applicable governmental, administrative or quasi-governmental agencies or authorities issuing such Governmental Approvals requires improvements to any of the Properties (other than minor repairs in the Seller’s ordinary course of business) in order for Purchaser to obtain any

 

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Governmental Approvals, Sellers shall have no obligation to make such improvements, or to provide any funds or credit at Closing in connection with such improvements.

 

(8)         The aggregate resident census for all of the Properties, excluding any Properties that are terminated from this Agreement as a result of a casualty or condemnation in accordance with Section 17 (collectively, the “Applicable Properties ”) is at least equal to ninety percent (90%) of the aggregate resident census for the Applicable Properties as of the Effective Date of this Agreement.

 

(9)         Certain Affiliates of Sellers that own the Operators of the Properties being conveyed in the applicable Closing shall have entered into the Membership Interest Purchase Agreement with the New Operator in the form attached hereto as Exhibit N , and such Membership Interest Purchase Agreement shall be in escrow subject only to the occurrence of the Closing.

 

(c)           Governmental Approvals/Bridging Documents . Notwithstanding anything herein to the contrary (including, without limitation, Sections 5(b) and (c) above), in the event a particular Property or Properties satisfy all of the conditions to Closing other than the condition set forth in Section 6(b)(7) (the “ Affected Properties ”), then the Purchaser shall have the option to proceed to Closing with respect to the Properties that are not Affected Properties, and to extend Closing with respect to the Affected Property or Properties by thirty (30) days, which option may be exercised by giving notice to Seller and depositing with Escrow Agent an additional One Million Dollars ($1,000,000) as an additional deposit (“ Additional Deposit ”) on or before the originally scheduled Closing Date. In the event Purchaser does not exercise such option to extend the Closing with respect to such Affected Properties and/or any one or more of the Affected Properties does not satisfy the condition set forth in Section 6(b)(7) on or before the extended Closing Date, then provided that during the Due Diligence Period, both Purchaser and Seller shall have completed diligence reasonably acceptable to each indicating that use of the Bridging Documents to close the transaction with respect to any Affected Properties is not prohibited by any applicable regulatory body and shall not prejudice or unreasonably delay the ultimate issuance of any Governmental Approvals (and in the event neither party terminates this Agreement during the Due Diligence Period pursuant to Section 4(d)(iii) or Section 33, then each party shall be deemed to have satisfied itself as to such diligence except with respect to new information that is revealed to the parties after the expiration of the Due Diligence Period); (x) Purchaser shall be obligated to proceed to Closing hereunder, (y)  Seller shall provide the proper notice and filing (as necessary) of the Bridging Documents to the applicable governmental authority(ies); and (z) at Closing, New Operator and the applicable Seller, affiliate of Seller, or Existing Manager, as applicable, will enter into a temporary operations transfer agreement, lease and/or management agreement, in form and substance attached hereto as Exhibit J (the “ Bridging Documents ”), which allows Purchaser to acquire the applicable Facility, and for the Facility to be operated under the Operator’s license therefor pending Governmental Approvals in favor of the New Operator(s).

 

7.            Certain Representations and Warranties by Seller .

 

(a)           Representations and Warranties . Except as otherwise set forth in Schedule 7(a) or otherwise in any Schedule or Exhibit attached to this Agreement, each Seller hereby

 

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represents and warrants to Purchaser, jointly and severally, that as of the Effective Date (which representations shall be updated as of the Closing Date pursuant to Section 7(c) below):

 

(i)           Due Formation . Each Seller is a limited liability company duly formed, validly existing and in good standing under the laws of the state in which it was organized.

 

(ii)          Due Authorization . This Agreement has been duly authorized, executed and delivered by Seller and is the legal, valid and binding obligation of Seller, enforceable against such Seller in accordance with its terms.

 

(iii)         Due Execution and Delivery . All of the documents to be delivered by Seller at Closing will, at Closing, be duly authorized, executed and delivered by such Seller (and/or, if applicable, its Affiliates), will be the legal, valid and binding obligations of such Seller (and/or, if applicable, its Affiliates), and be enforceable against such Seller (and/or, if applicable, its Affiliates) in accordance with their respective terms (except as may be limited by bankruptcy, insolvency, or other similar laws affecting the rights of creditors generally or the general principles of equity), and the execution and delivery thereof and the performance by such Seller of the terms thereof will not violate any material provision of any agreement, instrument, writ, order or decree to which such Seller (and/or, if applicable, its Affiliates) is a party, or to which any portion of the applicable Property is subject.

 

(iv)         Consents . Except for the Governmental Approvals, neither Seller, the applicable Operator nor Existing Manager requires the authorization, consent or approval of any governmental agency or any other third party for Seller to enter into this Agreement or consummate the Transaction. Seller may, however, need to provide notice of the Transaction (which may or may not include the Bridging Documents) to certain applicable governmental authorities.

 

(v)          Mechanic’s Liens . There are no unsatisfied mechanics’ or materialmen’s lien rights encumbering the applicable Property or any portion thereof.

 

(vi)         Personal Property . Except as set forth on Schedule 7(a)(vi) , each Operator owns and has, or will have at the time of Closing, good title to all applicable Personal Property, free and clear of any liens and encumbrances, and the execution and delivery to Purchaser of the Bill of Sale required by Section 11(a)(vii) , along with the execution and delivery of certificates of title with respect to the automobiles, shall vest good title to all of the applicable Personal Property in Purchaser, free and clear of liens, encumbrances and adverse claims. Except for the Excluded Personal Property, the Personal Property comprises all material tangible personal property used by Operators in the operation of the Business as currently conducted.

 

(vii)        Condemnation . Seller has not received any written notice of any condemnation proceeding or other proceeding in the nature of eminent domain, or any other action for adverse possession, in connection with the applicable Property owned by such Seller or any portion or portions thereof or any utilities, sewers, roadways or other public

 

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improvements serving the applicable Property (and which proceeding would have a material adverse effect on the applicable Property).

 

(viii)       No Violations . Seller, the applicable Operator and Existing Manager have not received any written notice of any violation within the twelve month period prior to the Effective Date of [i] any penalty, sanction or other adverse action relating to the applicable Property owned by such Seller, which has not been cured in all material respects or waived, [ii] any laws, orders, rules or regulations, ordinances or codes of any kind or nature whatsoever relating to the applicable Property, the applicable Facility or the ownership or operation thereof (including, without limitation, zoning, building, fire, Healthcare Laws, occupational safety and health, zoning and land use, planning and environmental laws, orders, rules and regulations), which has not been cured in all material respects or waived; [iii] any covenants, conditions, restrictions or agreements affecting or relating to the ownership, use or occupancy of the applicable Property and/or the applicable Facility, which has not been cured in all material respects or waived; or [iv] any order, writ, regulation or decree relating to any matter referred to in [i], [ii] or [iii] above, which has not been cured or waived. If any Seller, Operator or Existing Manager receives any written notice of any violation between the Effective Date and the Closing Date, Seller shall promptly provide a copy of such notice to Purchaser and Seller shall be given a reasonable opportunity to cure the same (provided that Seller shall not have the right to extend the Closing Date unless agreed to by Purchaser).

 

(ix)          Tax Abatements and Assessments; Separate Tax Parcel . To Seller’s knowledge, (i) there are no tax abatements, tax increment financings or exemptions affecting the applicable Land, and (ii) Seller has not received notice of any, and to Seller’s knowledge there is no, (x) proposed increase in the assessed valuation of the applicable Land, (except as may result from the transactions contemplated under this Agreement), (y) pending or threatened special assessments affecting the applicable Land or (z) contemplated improvements affecting the applicable Land that may result in special assessments affecting the applicable Land.

 

(x)           Litigation . Except as may be set forth on Schedule 7(a)(x) , there is no suit, action, investigation, complaint or proceeding pending or, to the knowledge of Seller, threatened against Seller, the applicable Operator or Existing Manager or any portion of the applicable Property before or by any court, administrative agency or other governmental or quasi-governmental authority. Seller, the applicable Operator and/or Existing Manager have not entered into any settlement agreement, corporate integrity agreement or consent decree with any governmental authority concerning compliance with any applicable law. To Seller’s knowledge, Seller has not received written notice of any judgment, injunction, order, writ or decree of any court or other governmental authority or agency relating specifically to Seller or to the ownership, operation or management of the Property, any Facility and/or the operations of the Business.

 

(xi)          Contracts . Set forth on Schedule 7(a)(xi) is a true, correct and complete list of the Contracts relating to the applicable Property owned by Seller (and/or any Affiliate of Seller, including the Existing Manager and/or any Operator) that have a value, or involve payment by the applicable Seller or an Affiliate of Seller of at least Twenty-Five Thousand and no/100ths Dollars ($25,000.00) during any twelve (12) month period (the

 

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“ Material Contracts ”). Such Seller does not guarantee or undertake that any of such Contracts will be in effect as of the Closing. At Purchaser’s election (which election shall be made prior to the expiration of the Due Diligence Period), the Contracts designated by Purchaser will be assigned by Seller (or the applicable Affiliate of Seller) to one or more operating designees or Affiliates of Purchaser, and assumed by such operating Affiliate(s), as of the Closing Date, in accordance with the assignment attached hereto as Exhibit E . Seller, the applicable Operator and the Existing Manager have not received any written notice of any default under any such Contract which has not been cured or waived, and, to such Seller’s knowledge, all other parties to such Contracts have performed their obligations thereunder in all material respects and no other party is in default under any such Contract. Such Seller, such Operator and the Existing Manager have performed, in all material respects, their obligations under each such Contract to which it is a party, to its knowledge is not in default under any such Contract and has not received notice of default under any such Contract.

 

(xii)         Rent Roll . Set forth on Schedule 7(a)(xii) hereto is a rent roll for the applicable Facility (the “ Rent Roll ”) dated as of the date(s) set forth in such Schedule. Except as set forth on the applicable Rent Roll:

 

(1)         Other than the residents under the Residency Agreements, no party has any right to possess all or any portion of the applicable Property.

 

(2)         Seller has delivered, true, correct and complete copies of the Residency Agreements with respect to its applicable Property, including any and all amendments, modifications, supplements, renewals, and extensions thereof and guarantees in connection therewith.

 

(3)         All information set forth in the applicable Rent Roll is true and correct in all material respects as of its date.

 

(4)         Except as set forth on Schedule 7(a)(xii) , the Residency Agreements are in full force and effect and neither Seller nor, to such Seller’s knowledge, the applicable Operator, the Existing Manager, any resident or other tenant is in default under any Residency Agreement in any material respect. Such Seller, the applicable Operator and the Existing Manager have not received from any resident under a Residency Agreement a notice of default in performing any of their obligations under any Residency Agreement.

 

(5)         Each Operator owns and holds the entire landlord’s interest in each of the Residency Agreements relating to the applicable Property leased by such Operator. No Operator has assigned or pledged any Residency Agreement, or rents or any interest therein, to any person or entity other than the lenders in connection with existing mortgage loans encumbering the

 

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applicable Property which will be discharged at Closing in accordance with the terms of this Agreement.

 

(6)         Except as set forth on Schedule 7(a)(xii) , no brokerage or leasing commission or other compensation is currently due or will be due or payable to any person in connection with any of the Residency Agreements.

 

(7)         Except as set forth on Schedule 7(a)(xii) , no resident or other tenant has paid rent or fees more than one (1) month in advance.

 

(xiii)        [Reserved] .

 

(xiv)       Bankruptcy . Seller has not made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors, suffered the appointment of a receiver to take possession of all or substantially all of its assets, suffered the attachment or other judicial seizure of all or substantially all of its assets, admitted its inability to pay its debts as they come due, or made an offer of settlement, extension or composition to its creditors generally.

 

(xv)        OFAC . To the best of Seller’s knowledge, such Seller is in compliance with the requirements of Executive Order No. 133224, 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 ”). Further, Seller covenants and agrees to make its policies, procedures and practices regarding compliance with the Orders, if any, available to Purchaser for its review and inspection during normal business hours and upon reasonable prior notice. To the best of Seller’s knowledge, neither such Seller nor any beneficial owner of such Seller:

 

(1)         is listed on the Specially Designated Nationals and Blocked Persons 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 ”);

 

(2)         is a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or

 

(3)         is owned or controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders.

 

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Each Seller hereby covenants and agrees that if such Seller obtains knowledge that such Seller or any of its beneficial owners becomes listed on the Lists or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, such Seller shall promptly notify Purchaser in writing, and in such event, Purchaser shall have the right to terminate this Agreement without penalty or liability to such Seller immediately upon delivery of written notice thereof to Purchaser.

 

(xvi)       The following provisions shall apply with respect to Employees:

 

(1)         All persons employed at the applicable Property in connection with the operation or maintenance of the applicable Property (the “ Employees ”) are employees of Existing Manager or Affiliates of Existing Manager (the “ Employer Affiliates ”). Existing Manager and such Employer Affiliates shall be responsible for all Employee related issues, except that at Closing, Seller will (i) fund (or cause to be funded) directly to Existing Manager and such Employer Affiliates an amount equal to the amount necessary to pay the applicable Employees all severance and accrued vacation and other accrued paid time off and benefits (“ Accrued Employee Benefits ”) to which such Employees are entitled through the Closing Date (the “ Accrued Employee Benefits Payout Amount ”). Purchaser will offer, or will cause one or more of its Affiliates, Purchaser Designees or New Operators to offer, employment to a requisite number of Employees following Closing, on such terms as may be required, so as not to trigger the Worker Adjustment and Retraining Notification Act of 1988, 29 U.S.C. § 2101, et seq. (and any state equivalent statute) (collectively, the “ WARN Act ”). The Accrued Employee Benefits Payout Amount paid by Existing Manager and such Employer Affiliates will sufficient to provide the Employees with the Accrued Employee Benefits actually earned by the Employees through the Closing Date. For the purposes hereof, the term “ Accrued Employee Benefits ” shall be deemed to include, without limitation, a prorated portion (based upon the number of days in the applicable bonus period) of any bonus payable to any Employee to the extent that such portion of the bonus is attributable to services rendered by such Employee prior to the Closing Date, but payable after the Closing Date. Neither Seller nor to Seller’s Knowledge, the Existing Manager or such Employer Affiliates, is a party to any employment contract or other written agreement with any Employee. Neither Seller nor Existing Manager nor any such Employer Affiliates is a party to any collective bargaining agreement with respect to any Employees.

 

(2)         Each “employee benefit plan” as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ( “ ERISA ” ) regardless of whether such plan is subject to ERISA, and each bonus, deferred, or incentive compensation, stock purchase, stock option, severance, and termination pay plan or program (the “ Plans ”), that is maintained or contributed to by Seller, the Existing Manager or any Employer Affiliates for the benefit of Employees or pursuant to which Seller, the Existing Manager or any Employer Affiliates has any liability with respect to Employees ( “ Seller Plans ” ) has been administered and operated in material compliance with its terms and the applicable requirements of ERISA and the IRC, including the requirement to file an annual report. No Seller Plan is intended to be qualified under Section 401 of the IRC as a “multiemployer plan” (within the meaning of Section 3(37)

 

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of ERISA) or as a “multiple employer” plan (within the meaning of Section 4063 or 4064 of ERISA). There are no pending or, to Seller’s knowledge, threatened claims of any Employees (or former employees who provided services to the Business) against or otherwise involving any of the Seller Plans (other than routine claims for benefits). Neither Seller, the Existing Manager nor any Employer Affiliates has at any time (x) maintained, contributed to, or been required to contribute or had any liability (that has not been satisfied in full) to any Seller Plan subject to Title IV of ERISA, (y) incurred or expected to incur any liability to the Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA, or (z) incurred or expected to incur liability in connection with an “accumulated funding deficiency” within the meaning of Section 412 of the IRC, whether or not waived.

 

(xvii)      Lack of Conflict . Neither the execution of this Agreement nor the consummation of the Transaction will violate any restriction, court order, judgment, law, regulation, charter, bylaw, instrument, or agreement to which Seller or the applicable Property (or any portion thereof) are subject.

 

(xviii)     Non-Foreign Seller . Seller is not a foreign seller as defined in the “Foreign Investment in Real Property Tax Act.”

 

(xix)        Environmental . Seller has delivered to Purchaser copies of all final environmental reports or studies prepared for such Seller by third party consultants in such Seller’s possession relating to the applicable Property, which reports are listed on Schedule 7(a)(xix) attached hereto (the “ Environmental Reports ”). To Seller’s knowledge, except as disclosed in the Environmental Reports, such Seller is not aware that the applicable Property is in violation of any Environmental Laws. To Seller’s knowledge, such Seller is not aware of any current or former underground storage tanks at the applicable Property. Except as disclosed in the Environmental Reports, Seller has not received any written notice of any pending or, to such Seller’s knowledge, threatened action or proceeding arising out of the environmental condition of the applicable Property, Hazardous Materials located on the applicable Property, or any alleged violation of Environmental Laws, which either (i) has not been remediated or otherwise addressed in all material respects or (ii) would reasonably be expected to materially and adversely affect the operation of the applicable Facility.

 

(xx)         Financial Statements . The Financial Statements for the applicable Property are the financial statements used in such Seller’s ordinary course of business and, to such Seller’s knowledge, are in accordance with the books and records of such Seller, have been prepared using consistently applied accounting methods throughout the periods indicated, present fairly in all material respects the results of operations and financial condition of the Business for the respective periods indicated, and, to such Seller’s knowledge, do not contain any material inaccuracy or any material omission. Any monthly financial reports provided to Purchaser by Seller prior to Closing will based upon the books and records of Seller consistent with Seller’s current reporting practice, and will present fairly in all material respects the information purported to be presented therein.

 

(xxi)        Operating Permits . To Seller’s knowledge, each of the operating permits and Healthcare Permits which are necessary to operate the applicable Facility

 

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(collectively, the “ Operating Permits ”) is valid, in good standing and in full force and effect. Such Seller has not received any written notice of any action or proceeding, pending or threatened, from any governmental authority which would revoke, or cause to refuse to renew, suspend, limit, modify, or otherwise alter any such Operating Permit.

 

(xxii)       Licensed Healthcare Professionals . To such Seller’s knowledge, all licensed healthcare professionals currently providing services at the applicable Facility have all required licenses and certifications necessary to provide services at the applicable Property.

 

(xxiii)      Government Programs . Such Seller does not participate in any Government Programs, except for the Medicaid Waiver Program in Michigan. There are no pending or threatened (i) civil monetary penalties, terminations or exclusions from participation in any Government Programs for any Facility, (ii) material payment denials, or (iii) other sanctions of a governmental authority against Seller or the Facilities.

 

(xxiv)     Tax Certiorari Proceedings . There are no pending or outstanding assessment, real estate tax, ad valorem or similar tax appeals for any period with respect to any of the Properties.

 

(xxv)      Taxes and Tax Returns . The Sellers and Operators of the Properties have filed when due or will file when due in correct form all federal and state income tax returns for all periods ending on or prior to the Closing Date which are required to be filed by Operators on or prior to the Closing Date. Other than extensions to file Sellers’ and Operators’ respective tax returns, there are no agreements by any Operator for the extension of time for the assessment of any tax. To Seller’s knowledge, all federal, state, county and local income taxes due and payable by Sellers and/or Operators on or before the Effective Date have been paid and any such taxes due and payable at any time between the Effective Date through the Closing will be paid prior to Closing, and there are no federal, state or local tax liens pending against Sellers, Operators or the Properties. To Seller’s knowledge, there is no open audit of any Seller’s or Operator’s federal, state, local income, sales use or property tax returns pending, and Seller has received no written notice of the pendency of any such audit or examination. To Seller’s knowledge, none of the Sellers or Operators hold or has held a certificate or other authorization issued by any tax collection body for the purpose of avoiding the payment by such Seller or Operator of sales and use taxes upon such Seller’s or Operator’s purchases of goods and services, nor has any Seller or Operator applied for such a certificate or other authorization.

 

(xxvi)     Affordable Housing Units . To Seller’s knowledge, other than the Medicaid Waiver Program, no bedroom or unit at any Facility is leased or reserved for lease as an affordable housing unit or for low or moderate income residents. To Seller’s knowledge, no Facility is required to lease or reserve any unit or bedroom as an affordable housing unit or bedroom or for low or moderate income residents pursuant to a presently existing agreement or requirement of law.

 

(xxvii)    Insurance . Schedule 7(a)(xxvii) lists all of Seller’s policies of property and casualty insurance and liability insurance currently in effect and covering each Facility, the Business and/or the Property, copies of which have been made available for review by Purchaser. Each such policy currently is in full force and effect and, to Seller’s knowledge,

 

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Seller has not taken or failed to take any action which would limit or impair any of Seller’s rights thereunder with respect to any matter for which Purchaser could be held liable as a successor to Seller. Schedule 7(a)(xxvii) lists any pending, unresolved claims under Seller’s policies of property and casualty or liability insurance, as well as all claims made and resolved within the past three (3) years. Seller has not received written, or to Seller’s knowledge, oral, notice of any pending cancellation or nonrenewal of such policies.

 

(b)           Seller Knowledge Parties . The phrases “to such Seller’s knowledge,” the “knowledge of such Seller and/or of its Affiliates,” and similar terms used in this Agreement, shall mean in all cases only the actual current knowledge, without independent investigation, of the following individuals (or any one of them): Rowan Farber and Terri Fowler (the “ Seller Knowledge Parties ”) following reasonable consultation with the Executive Director for each Facility. For avoidance of doubt, the parties acknowledge and agree that in no event shall any of the Seller Knowledge Parties have any personal liability. In no event shall Purchaser be entitled to assert any cause of action against any of the Seller Knowledge Parties with respect to this Agreement or any breach hereof, nor shall any of the Seller Knowledge Parties have any personal liability whatsoever for any matter under or related to this Agreement. All representations and warranties made by Sellers in this Section 7 shall survive Closing for a period of 545 days .

 

(c)           Representation Update . At the Closing, Seller shall deliver an instrument (the “ Representation Update ”) confirming that the Seller’s representations in Section 7(a) above are and continue to be true and correct as of the Closing Date or, if applicable, advising Purchaser in what respects such representations are inaccurate as of the Closing Date, provided that the foregoing shall not modify or affect the condition to closing set forth in Section 6(b)(2).

 

8.            Covenants of Seller .

 

(a)           Operation of the Facility . Subject to the terms of this Agreement, each Seller, during the term of this Agreement, shall carry on the business and operations of the applicable Facility in substantially the same manner as heretofore carried on by it. Prior to the Closing Date, each Seller shall maintain (or replace with policies of like amounts) all existing insurance policies insuring the applicable Property and the operation of the applicable Facility. Such Seller shall maintain the inventory consistent with such Seller’s past practices and will replenish the same consistent with its past practices. Such Seller may extend, amend, modify or terminate any of the applicable Contracts as such Seller deems appropriate to operate, service and maintain the applicable Property consistent with normal business practices, and may enter into new Contracts; provided, however, that so long as this Agreement is in full force and effect, (A) from the date of this Agreement to the Closing Date, such Seller shall provide to Purchaser copies of new Contracts and any terminations, amendments, extensions, or modifications of existing Contracts, which such Seller has entered into, or intends to enter into, within two (2) business days thereof, (B) such Seller shall not, without the written consent of Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed), enter into (i) any leases of furniture, fixtures or equipment for the applicable Facility, (ii) any new Contract with respect to any one Property other than (x) automatic renewals of existing Contracts, and (y) Contracts that are consistent with past practices and have a value, or involves payment by (or to) such Seller or its Affiliate, of less than Twenty-Five Thousand Dollars ($25,000.00) during any twelve (12)

 

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month period or that are terminable with not more than thirty (30) days’ notice without penalty, (iii) any extension, amendment, modification, or termination of a Contract other than an extension of an existing Contract on identical terms (provided that Purchaser has not delivered to Seller Notice of its intent to terminate such Contract), or (iv) any new Residency Agreements except to the extent such Residency Agreements are on the standard form of resident lease and at rental rates, with promotional allowances, concessions, length of term, and on other terms and conditions consistent in all material respects with past practices, (C) such Seller shall not sell or otherwise transfer or encumber any part of the applicable Property, or any interest therein, or (D) without the prior written approval of Purchaser (which approval shall not be unreasonably withheld, conditioned or delayed), such Seller shall not make any material alterations to the applicable Property, or remove or otherwise dispose of any material portion of the Personal Property, except to the extent such Seller replaces the same with like items that are of equal or better quality and condition. In the event any regulatory authority or other entity requires improvements to any of the Properties (other than normal repairs in the Seller’s ordinary course of business) in order for Purchaser to obtain any Governmental Approvals, Seller shall have no obligation to make such improvements, or to provide any funds or credit at Closing in connection with such improvements.

 

(b)           Cooperation . Each Seller shall cooperate with Purchaser in all commercially reasonable respects, including by (A) executing and/or delivering necessary or desirable applications and other information and documents, to facilitate receipt of the Governmental Approvals, transfers of any permits or licenses required for the Properties and other authorizations in connection with the operation of the Property and (B) promptly notifying Purchaser of any communications to or from any governmental agency with respect to matters that could reasonably be expected to have a material adverse effect upon the applicable Facility.

 

(c)           Listings and Other Offers . No Seller will list the applicable Property with any broker or otherwise solicit or make or accept any offers to sell all or any part of such Property or any direct or indirect interest therein, engage in any discussions or negotiations with any third party with respect to the sale or other disposition of such Property or any direct or indirect interest therein, or enter into any contracts or agreements (whether binding or not) regarding any disposition of all or any part of such Property or any direct or indirect interest therein.

 

9.            Certain Representations and Warranties of Purchaser . Purchaser hereby represents and warrants to each Seller Party as follows:

 

(a)          This Agreement has been duly authorized, executed and delivered by Purchaser and is the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms.

 

(b)          The execution and delivery of this Agreement by Purchaser does not violate any provision of any agreement or judicial order to which Purchaser is a party or to which Purchaser is subject.

 

(c)          All the documents to be delivered by Purchaser at Closing will, at Closing, be duly authorized, executed and delivered by Purchaser (and/or, if applicable, its Affiliates),

 

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will be the legal, valid and binding obligations of Purchaser (and/or, if applicable, its Affiliates), and be enforceable against Purchaser (and/or, if applicable, its Affiliates) in accordance with their respective terms, and the execution and delivery thereof will not violate any provision of any agreement or judicial order to which Purchaser (and/or, if applicable, its Affiliates) is a party or, to the best of Purchaser’s knowledge, to which the Property is subject.

 

(d)          Purchaser is not required to obtain the consent of any person or entity to consummate the Transaction.

 

(e)          To the best of Purchaser’s knowledge, Purchaser is in compliance with the requirements of the Order and other similar requirements contained in the rules and regulations of OFAC and in any enabling legislation or other Executive Orders or regulations in respect thereof. Further, Purchaser covenants and agrees to make its policies, procedures and practices regarding compliance with the Orders, if any, available to Seller Representative for its review and inspection during normal business hours and upon reasonable prior notice. To the best of Purchaser’s knowledge, neither Purchaser nor any beneficial owner of Purchaser:

 

(i)          is listed on the Lists;

 

(ii)         is a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or

 

(iii)        is owned or controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders.

 

The phrases “to the best of Purchaser’s knowledge,” the “knowledge of Purchaser and/or of its Affiliates,” and similar terms used in this Agreement, shall mean in all cases only the actual current knowledge, without independent investigation, of the following individuals (or any one of them): Ross Sanders, Todd Jensen, Robert Sweet and Dan Castleberry (the “ Purchaser Knowledge Parties ”). For avoidance of doubt, the parties acknowledge and agree that in no event shall any of the Purchaser Knowledge Parties have any personal liability. In no event shall Purchaser be entitled to assert any cause of action against any of the Purchaser Knowledge Parties with respect to this Agreement or any breach hereof, nor shall any of the Purchaser Knowledge Parties have any personal liability whatsoever for any matter under or related to this Agreement.

 

Purchaser hereby covenants and agrees that if Purchaser obtains knowledge that Purchaser or any of its beneficial owners becomes listed on the Lists or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, Purchaser shall promptly notify Seller Representative in writing, and in such event, Sellers shall have the right to terminate this Agreement without penalty or liability to Sellers immediately upon delivery of written notice thereof to Purchaser.

 

All representations and warranties made by Purchaser in this Section 9 shall be true and correct in all material respects on the Effective Date and on the Closing Date. All of the representations and warranties made by Purchaser in this Section 9 shall survive Closing for a period of 545 days.

 

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10.          Closing . The closing of the sale of the Properties (“ Closing ”) shall take place at the office of the Title Company or at another place mutually agreed upon by the parties, on July 31, 2014, or such later date as to which the parties have mutually agreed to extend such date of closing, or as such date may be extended pursuant to the provisions of this Agreement. Notwithstanding anything herein to the contrary, in no event shall the Closing occur prior to the Due Diligence Deadline. The term “ Closing Date ” shall mean the date that the Closing occurs. Notwithstanding the foregoing, the parties need not attend the Closing in person and shall have the right to close the Transaction through escrow with Escrow Agent pursuant to written closing escrow instructions, which instructions shall be reasonably satisfactory to Seller Representative and Purchaser, and shall be consistent with the terms hereof. The Closing shall occur early enough in the day such that Seller shall be able to confirm receipt of Seller’s proceeds by federal wire transfer on the same day.

 

11.          Closing Documents .

 

(a)           Seller Closing Documents . At Closing, Sellers shall execute and deliver, or cause to be executed and delivered, to Purchaser the following documents:

 

(i)          For each Property located in Michigan, a deed in the form of Exhibit C-1 in favor of Purchaser, or at the written request of Purchaser, in favor of one or more Purchaser Designees and for each Property located in Illinois, a deed in the form of Exhibit C-2 in favor of Purchaser, or at the written request of Purchaser, in favor of one or more Purchaser Designees (individually, a “ Deed ” and collectively, the “ Deeds ”);

 

(ii)         For each Property, a certification of non-foreign status in the form of Exhibit D ;

 

(iii)        All documents necessary to transfer title to the vehicles and equipment owned by each Operator, to one or more Purchaser Designees;

 

(iv)        For each Property, a certification of the applicable Seller in form reasonably satisfactory to Purchaser, containing an updated Rent Roll for the applicable Property, and certifying the extent to which all of the representations and warranties of such Seller contained in this Agreement remain true and correct as of the Closing Date;

 

(v)         For each Property, a Bill of Sale and General Assignment, executed by the applicable Seller and Operator, in the form of Exhibit I attached hereto;

 

(vi)        For each Property, an assignment of Residency Agreements for the Facility in favor of Purchaser, or at the request of Purchaser, in favor of one or more Purchaser designees (which may include the New Operators), or one or more of Purchaser’s Affiliates, executed by the applicable Operator, in the form of Exhibit H attached hereto;

 

(vii)       For each Property, an Assignment of Contracts in favor of Purchaser, or at the request of Purchaser, in favor of one or more Purchaser designees (which may include the New Operators), or one or more of Purchaser’s Affiliates, in the form of Exhibit E executed by the applicable Operator;

 

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(viii)      The Bridging Documents, if applicable, pursuant to Section 6(c) .

 

(ix)         The Temporary License Agreement in the form of Exhibit L attached hereto.

 

(x)          Owner’s Affidavits in the form of Exhibit F ;

 

(xi)         Such transfer tax declarations as are required by the Title Company and/or by Purchaser in order to reflect the payment of taxes as contemplated by this Agreement;

 

(xii)        The Post Closing Escrow Agreement in the form of Exhibit K ;

 

(xiii)       For each Property, evidence of termination of any Operating Lease and any property management agreement for the applicable Property;

 

(xiv)      A closing statement prepared by Escrow Agent and reasonably approved by Seller Representative and Purchaser setting forth, among other things, all payments to and from escrow in connection with the purchase and sale of the Properties (the “ Closing Statement ”);

 

(xv)       For each Property, a notice to residents informing them of the sale of the applicable Property; and

 

(xvi)      Evidence of Seller’s authority to consummate the Transaction, and any other documentation reasonably and customarily required by the Title Company to consummate the Transaction.

 

(b)           Purchaser Closing Documents . At the Closing, Purchaser shall execute and deliver, or cause to be executed and delivered, to Seller the following documents:

 

(i)          Such transfer tax declarations as are required by the Title Company and/or by Seller in order to reflect the payment of taxes as contemplated by this Agreement.

 

(ii)         Closing Statement;

 

(iii)        For each Property, a Bill of Sale and General Assignment in the form of Exhibit I attached hereto.

 

(iv)        For each Property, an assignment of Residency Agreements for the Facility, in the form of Exhibit H attached hereto;

 

(v)         For each Property, an Assignment of Contracts in the form of Exhibit E ;

 

(vi)        The Post Closing Escrow Agreement in the form of Exhibit K ;

 

(vii)       The Bridging Documents, if applicable, pursuant to Section 6(c) ;

 

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(viii)      The Temporary License Agreement in the form of Exhibit L attached hereto; and

 

(ix)         Any other documentation reasonably required to consummate the Transaction.

 

(c)           Amounts to be Paid at Closing . At the Closing, Purchaser shall pay to Seller, by federally insured wire transfer, the total amount of the balance of the Aggregate Purchase Price, subject to the prorations and adjustments set forth in this Agreement.

 

(d)           Further Assurances . Seller and Purchaser shall, at the Closing, and from time to time thereafter, upon request, execute such additional documents as are reasonably necessary in order to convey, assign and transfer the Properties pursuant to this Agreement and otherwise complete the Transaction, provided that such documents are consistent with the terms of this Agreement, and do not increase Seller’s or Purchaser’s obligations hereunder or subject Seller or Purchaser to additional liability not otherwise contemplated by this Agreement. Additionally, if this Agreement is terminated, either party may request from time to time thereafter confirmation of such termination from the other party, upon which request, the non-requesting party shall promptly confirm to the requesting party in writing (by a recordable instrument if requested by the requesting party) that this Agreement has been terminated.

 

12.          Prorations and Adjustments .

 

(a)          The following items shall be prorated and adjusted between Sellers and Purchaser as of 11:59 p.m. of the day preceding the Closing, except as otherwise specified:

 

(i)          all income and revenue from the Properties including, without limitation, all resident payments (uncollected rents and other uncollected revenue shall not be adjusted at Closing and shall be subject to the provisions of Section 12(b) below);

 

(ii)         water, electricity, gas, sewer, telephone and other utility charges and deposits with utility companies to the extent such deposits are assignable and are assigned to Purchaser; provided, however, if there are meters on any of the Properties measuring the consumption of water, gas or electric current, the applicable Sellers shall, not more than one (1) Business Day prior to the Closing Date, make good faith efforts to have such meters read and shall pay promptly all utility bills for which Sellers are liable upon receipt of statements therefor. Purchaser shall be liable for and shall pay all utility bills for services rendered after such meter readings;

 

(iii)         Current general real estate taxes, personal property taxes, other ad valorem taxes and installments of assessments affecting the Properties located in Michigan shall be prorated as of the Closing Date on the basis of the most recent ascertainable amounts of each such item, with adjustments made at closing. For purposes of such prorations, “current” general real estate, personal property taxes and other ad valorem taxes means any of such impositions that were or will become first due and payable during the twelve (12) month period immediately preceding the Closing (the “ Current Tax Year ”), and “current” installments of assessments means assessment installments scheduled to be paid during the Current Tax Year. Current general real estate, personal property taxes, and other ad valorem taxes and assessment

 

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installments shall be prorated on a so-called due date basis, and shall be deemed to have been paid in advance by Sellers. Sellers shall be solely responsible for all general real estate taxes, personal property taxes, and other ad valorem taxes affecting the Properties that become first due and payable (and with respect to assessment installments, were scheduled to be paid) prior to the Current Tax Year. Purchaser shall be solely responsible for all general real estate taxes, personal property taxes, and other ad valorem taxes affecting the Property that become first due and payable (and with respect to assessment installments, are scheduled to be paid, regardless of when levied) after the Closing. In no event will any Seller be charged with or be responsible for any increase in the taxes or assessments on the Property resulting from the sale of the Property or from any improvements made or leases entered into at any time or for any reason. All net tax refunds and credits attributable to any period prior to the Closing Date which Seller has paid or for which Seller has given a credit to Buyer will belong to and be the property of Sellers. All net tax refunds and credits attributable to any period on or subsequent to the Closing Date will belong to and be the property of Purchaser. Notwithstanding anything to the contrary contained in this Agreement, Sellers will have no obligation to pay or discharge any assessments (special or general), or the liens arising in connection therewith, except (I) those installments scheduled to be paid prior to the Current Tax Year, and (II) with respect to current installments of assessments, as prorated hereunder;

 

(iv)        Current general real estate taxes, personal property taxes, other ad valorem taxes and installments of assessments affecting the Properties located in Illinois shall be prorated as of the Closing Date on the basis of the most recent ascertainable amounts of each such item, with adjustments made at closing. Purchaser and Seller agree to prorate real estate taxes for the Properties located in Illinois assessed during calendar year 2013, which are payable in calendar year 2014, as of the Closing Date on a "cash basis". There shall be no proration of real estate taxes assessed during calendar year 2014 which are payable in calendar year 2015, the payment of which shall be Purchaser's responsibility. Seller shall be responsible for real estate taxes assessed during calendar year 2012 which were payable in calendar year 2013 and real estate taxes for all years prior thereto. Real estate taxes assessed for calendar year 2013 (which are payable in calendar year 2014) shall be prorated between Seller and Purchaser. Seller's allocable share of such real estate taxes shall be determined by multiplying the amount of such real estate taxes by a fraction, the numerator of which is the number of days in the calendar year for the period commencing on January 1, 2014 and ending on the Closing Date, and the denominator of which is 365. Purchaser responsible for the remainder of the 2013 real estate taxes and real estate taxes for all subsequent years. To the extent that prior to Closing Seller has paid real estate taxes for calendar year 2013 for which Purchaser is responsible, Seller shall receive a credit at Closing. If at Closing, the real estate tax rate assessments have not been set for calendar year 2013, then the proration of such taxes shall be based upon the most recent real estate tax bill, and such proration shall be adjusted between Seller and Purchaser after Closing upon issuance of the final tax bill for calendar year 2013;

 

(v)         amounts payable under the Contracts and the equipment and automobile leases to be assumed by Purchaser (if any);

 

(vi)        any other expenses normal to the operation and maintenance of the Properties; all installments of special assessments payable prior to the Current Tax Year shall be paid exclusively by Seller and all installments of special assessments payable after the Closing

 

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shall be paid exclusively by Purchaser, with current installments prorated as set forth in Section 12(a)(iii) above;

 

(vii)       Notwithstanding any provision of this Agreement to the contrary, Purchaser shall pay the sum of (x) fifty percent (50%) of all actual prepayment fees, penalties and premiums (collectively the “ HUD Prepayment Fees ”) due to the U.S. Department of Housing and Urban Development (“ HUD ”) and the applicable mortgagee (“ HUD Lender ”) in connection with the prepayment of the existing HUD insured loans (the “ HUD Loans ”), encumbering the properties known as Golden Orchards, Liberty Court, Crystal Springs, Lakeside Vista, Whispering Woods and Prestige Way, plus (y) One Hundred Thousand Dollars ($100,000.00) toward the HUD Prepayment Fees for the HUD Loans encumbering the Properties known as Lakeside Vista, Whispering Woods and Prestige Way. Notwithstanding the foregoing, in no event shall Purchaser’s obligation to pay a portion of the HUD Prepayment Fees with respect to the Properties known as Golden Orchards, Liberty Court, and Crystal Springs exceed the aggregate amount of Five Hundred Forty-Eight Thousand Dollars ($548,000.00) and in no event shall Purchaser’s obligation to pay a portion of the HUD Prepayment Fees with respect to the Properties known as Lakeside Vista, Whispering Woods and Prestige Way exceed the aggregate amount of Seven Hundred Fifty Thousand Dollars ($750,000.00). In connection with the prepayment of the HUD Loans, Seller shall have the right to receive the balance of any FF&E replacement reserves (the “ Reserves ”) held by the applicable HUD Lender under the HUD Loans, whether such Reserves are applied to the prepayment balance of the HUD Loans or remitted separately from the HUD Lender; and

 

(viii)      Notwithstanding any provision of this Agreement to the contrary, Purchaser shall pay fifty percent (50%) of all actual prepayment fees, penalties and premiums due to GE Capital in connection with the prepayment of the existing GE Capital loan encumbering the Properties (collectively the “ GE Prepayment Fees ”), provided, however, in no event shall Purchaser’s obligation to pay a portion of the GE Prepayment Fees exceed the aggregate amount of Two Hundred Two Thousand Dollars ($202,000.00).

 

(b)          On the date of the Closing, the amount of prorations and adjustments as aforesaid shall be determined or estimated to the extent practicable, and monetary adjustment shall be made between Sellers and Purchaser (or, provided that the parties agree, some of the prorations and adjustments may be made between Sellers and New Operator). If any prorations or adjustments are based on estimates as of Closing, when the amount of such costs, expenses, charges or amounts upon which such prorations or adjustments are finally known, Sellers and Purchaser shall make a recalculation of the apportionment of the same, and Sellers or Purchaser, as the case may be, shall make an appropriate payment to the other based on such recalculation. Subject to the prorations to be made pursuant to this Section 12(b) , if any resident sends payments to a Seller after the Closing, such Seller shall promptly deliver such payment to Purchaser. As soon as reasonably practicable following the Closing Date, but not more than ten (10) days following the Closing Date, Seller Representative shall provide Purchaser a schedule of all unpaid accounts receivable relating to the period prior to the Closing Date. Sellers shall have the right to pursue such delinquent amounts following the Closing; provided that Sellers shall not have the right to cause any eviction or to terminate any Residency Agreement following the Closing on account of any delinquent amounts. Other than invoicing such past due amounts, Purchaser shall have no obligation to pursue any such delinquent amounts. To the extent such

 

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delinquent rents and other amounts are collected by Purchaser, Purchaser may deduct from the amount owed to Sellers an amount equal to the attorneys’ fees and other reasonable costs of collection and out of pocket costs actually incurred by Purchaser in collecting such rents, as well as any other amounts due to Purchaser. Subject to the foregoing sentence, any rent or other payment collected after the Closing from any resident which owed a payment that was delinquent as of the Closing Date shall be applied first to the applicable party’s unpaid monetary obligations with respect to any periods from and after the Closing Date through the end of the month in which such payment is made, in such order as Purchaser may elect, until such monetary obligations have been paid in full; any remaining amount of such payment shall be paid over to Sellers, for application against such party’s delinquent monetary obligations with respect to any periods before the Closing Date, in such order as Seller Representative may elect, until such delinquent monetary obligations have been paid in full, and any remaining amount of such payment shall be retained by Purchaser for application against such party’s future obligations. In addition, in calculating the prorations pursuant to this Section 12(b) , Seller shall receive a credit in the amount of any utility, municipality or other deposits relating to the Properties made by Sellers and which are assigned to Purchaser at the Closing. Sellers shall be entitled to a refund from the utility or the municipality of any such deposits not assigned to Purchaser.

 

(c)          If any refund of real property taxes or personal property taxes regarding any of the Properties is made after the date of the Closing for a period prior to the Closing, after deducting Purchaser’s reasonable out-of-pocket costs, if any, in obtaining such refund, the amount of such refund that is on account of the period prior to Closing shall be paid to Sellers as Seller Representative directs. The balance, if any, of such refund that is on account of the period following Closing shall be paid to Purchaser. In addition, to the extent any income relating to the period prior to the Closing Date is paid to Purchaser, Purchaser shall promptly notify Seller Representative and remit such amount as directed by Seller Representative, to the extent Sellers are entitled to the same pursuant to the terms of this Agreement.

 

(d)          At Closing, Sellers shall transfer the following sums or give Purchaser a credit against the Aggregate Purchase Price in the amount of all (i) security deposits (together with any interest earned thereon or otherwise due to the residents under the terms of any Residency Agreement or applicable law); (ii) last months’ rents, and other prepaid rent or fees (together with any interest earned thereon or otherwise due to the residents under the terms of any Residency Agreements or applicable law); and (iii) any amounts held by Sellers in trust for the residents of the Facilities.

 

(e)          Any party hereto shall be entitled to a post-Closing adjustment for any incorrect proration or adjustment or if information was not available prior to or on the Closing Date to finalize any proration, provided such adjustment is claimed by such party within ninety (90) days after the Closing Date or, with respect to real estate taxes, within sixty (60) days after the information necessary to finalize the proration becomes available. The provisions of this Section 12(e) shall survive Closing for the longer of (i) a period of ninety (90) days after Closing or (ii) sixty (60) days after the information necessary to finalize the proration with respect to real estate taxes becomes available.

 

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13.          Closing Costs .

 

(a)          Sellers shall be responsible for the payment of (i) the fees and costs of Sellers’ counsel and investment advisors, if any, representing it in connection with the Transaction, and (ii) the Applicable Seller Transfer Taxes; (iii) the costs for the owner’s title policy with standard and extended coverage and any endorsements to cure any title defects that Seller is required to cure hereunder; (iv) one-half (1/2) of the sales and use taxes relating to the transfer of vehicles and other Personal Property; (v) the commission due to the Broker; (vi) one-half (1/2) of all escrow fees of the Title Company; and (vii) and all other fees, costs and expenses incurred by Sellers in connection with the Transaction not specifically provided for herein. The “ Applicable Seller Transfer Taxes ” shall mean, with respect to the Properties located in Michigan, Seller shall pay all recording and transfer taxes, and with respect to the Properties located in Illinois, Seller shall pay all state and county recording and transfer taxes.

 

(b)          Purchaser shall be responsible for the payment of (i) the fees and costs of Purchaser’s counsel and investment advisors representing it in connection with the Transaction; (ii) survey costs, environmental inspection costs and all due diligence costs and expenses; (iii) except for the costs paid by Seller pursuant to Section 13(a) above, the costs for any owner’s title policy endorsements requested by Purchaser or Purchaser’s lender and all title insurance costs in connection with the lender’s title policy; (iv) all taxes on any new mortgages to be placed upon the Properties by Purchaser’s lender; (v) one-half (1/2) of all escrow and closing fees of the Title Company; (vi) one-half (1/2) of the sales and use taxes relating to the transfer of vehicles and other Personal Property; (vii) with respect to the Properties located in Illinois, all local/municipal transfer and recording taxes; and (viii) all other fees, costs and expenses incurred by Purchaser in connection with the Transaction not specifically provided for herein.

 

14.          Remedies for Pre-Closing Defaults .

 

(a)           Purchaser Default . If Purchaser shall default under this Agreement and Sellers are not then in default under this Agreement, then subject to the rights of Purchaser set forth in Section 4(d)(iii) hereof, Seller Representative may elect to cancel this Agreement by giving notice to Purchaser and Escrow Agent. The parties hereto agree that the damages that Sellers will sustain as a result of such default will be substantial but will be difficult to ascertain. Accordingly, the parties agree that in the event that Seller Representative shall elect to terminate this Agreement as a result of such default, and this Agreement shall not have terminated or be deemed terminated pursuant to the provisions of Section 4(d)(iii) hereof, Escrow Agent is hereby directed to pay the Deposit to Seller Representative, who shall retain the Deposit as and for its liquidated damages and sole remedy hereunder, in which event this Agreement shall be null and void and of no further force or effect except for those provisions expressly stated to survive the termination of this Agreement.

 

(b)           Seller Default . If, due to Sellers’ default, Sellers shall fail to convey title subject to, and in accordance with, the terms of this Agreement, Purchaser’s sole remedy for such Seller’s default shall be to elect either (i) enforce specific performance of this Agreement, (ii) waive such default(s) and proceed to Closing or (iii) terminate this Agreement and receive a return of the Deposit, and in the event of such termination Sellers shall reimburse Purchaser for all out-of-pocket costs and expenses incurred by Purchaser in respect of this Agreement and the

 

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Transaction, including, without limitation, Purchaser’s legal fees and expenses, due diligence costs and title examination and survey expenses, in an amount not to exceed $25,000 per Property for each Property, and, thereafter, Seller Parties and Purchaser shall be relieved of all obligations and liabilities under this Agreement except under those provisions of this Agreement that are expressly stated to survive the termination of this Agreement. Purchaser hereby waives all other rights and remedies that it might have, including but not limited to, the right to sue for damages.

 

(c)           Collection Costs . If any legal action, arbitration or other similar proceeding is commenced to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to an award of its attorneys’ fees and expenses. The phrase “prevailing party” shall include a party who receives substantially the relief desired whether by dismissal, summary judgment, judgment or otherwise. If either party is entitled to an award of its attorneys’ fees and expenses pursuant to the terms of this Section 14(c) , such award shall be available notwithstanding the limitations on remedies set forth in Sections 14(a) and (b) above.

 

(d)           Survival .

 

(i)           Closing . None of the terms and conditions of this Agreement shall survive the Closing, except for the following Sections: 4(d)(ii) , 7 (subject to the limitations set forth therein and in Section 15 ), 9 (subject to the limitations set forth therein), 11(d), 12 (subject to the limitations set forth in Section 12(e) ), 14(c), 14(d), 15, 16, 18 (subject to the limitations set forth in Section 15 ) , 19 (solely for purposes of interpreting any provision of this Agreement that is the subject of a dispute or to the extent applicable to any other surviving provision of this Agreement), 23, 26, 28, 29, 30 and 32 .

 

(ii)          Termination . None of the terms and conditions of this Agreement shall survive the termination of this Agreement, except for the following Sections: 2(c) , 4(d)(ii), 4(d)(iii) (with respect to Purchaser’s obligations to deliver to Sellers copies of reports), 14, 16, 19 (solely for purposes of interpreting any provision of this Agreement that is the subject of a dispute or to the extent applicable to any other surviving provision of this Agreement) , 21, 28, 29, and 30.

 

15.          Remedies for Post-Closing Defaults .

 

(a)          At Closing, an amount equal to two and 25/100ths percent (2.25%) of the Aggregate Purchase Price paid at such Closing (the “ Escrow Amount ”) will be withheld from Sellers’ closing proceeds and placed into an account agreed to by the parties and designated by Escrow Agent, and Escrow Agent shall hold the same in escrow (the “ Seller Escrow ”) pursuant to an escrow agreement in form attached hereto as Exhibit K (the “ Post Closing Escrow Agreement ”), as security for any liability of Seller arising in connection with any Claims with respect to any of Sellers’ representations and warranties, covenants and indemnities contained in this Agreement or in any Closing Document. On the date that is 425 days following the Closing Date, the remaining portion of the Escrow Amount less the good-faith and reasonable estimate of the amount sufficient to pay any Claim with respect to any of the representations and warranties, covenants and indemnities contained in this Agreement or in any Closing Document that that has

 

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not yet been fully agreed or adjudicated but that has been made by Purchaser prior to the date that is 425 days following the Closing Date shall be released to Seller.

 

(b)           Indemnification by Seller . Following the Closing, each Seller shall jointly and severally indemnify, hold harmless and defend Purchaser and the Purchaser Indemnification Parties from and against any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (including, without limitation, reasonable attorneys’ fees and other legal costs and expenses) (collectively, “ Losses ”) which Purchaser and/or the Purchaser Indemnification Parties may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

(1)         any breach or inaccuracy of any of the representations and warranties made by Seller in Section 7 of this Agreement;

 

(2)         any failure by Seller to carry out, perform, satisfy and discharge any of its express covenants, agreements, or obligations under this Agreement in any material respect;

 

(3)         the Excluded Liabilities; or

 

(4)         any federal, state, or local income, payroll, sales and use, ad valorem or other taxes payable by Seller or Operators or for which Seller or Operators are liable in connection with any period prior to the Closing Date, and any interest or penalties thereon.

 

(c)           Indemnification by Purchaser . Following the Closing, Purchaser and all of the Purchaser Designees who take title to the Properties at Closing (all of the foregoing, jointly and severally, being collectively referred to as the “ Purchaser Indemnification Parties ”), shall indemnify and hold harmless each Seller Party from and against, and reimburse each Seller Party for, any and all Losses which any Seller Party may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

(1)         any breach or inaccuracy of any representations and warranties made by Purchaser in or pursuant to Section 8 of this Agreement;

 

(2)         any failure by any Purchaser Indemnification Parties to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement; or

 

(3)         the Assumed Liabilities.

 

(d)           Purchaser Indemnification Limits; Survival . The Purchaser Indemnification Parties shall not be entitled to any indemnification from Seller under Sections 15(b)(1) or 15(b)(2) unless and until the aggregate amount of indemnifiable claims of the Purchaser Indemnification Parties under Sections 15(b)(1) or 15(b)(2) exceeds One Hundred Thousand and No/100 U.S. Dollars ($100,000) (the “ Seller Threshold ”), at which point Seller shall be liable for all indemnifiable claims of the Purchaser Indemnification Parties under Section 15(b)(1) or 15(b)(2) . Seller’s liability for indemnification under Section 15(b)(1) or

 

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15(b)(2) shall not in any case exceed Three Million Five Hundred Thousand and No/100 th Dollars ($3,500,000), inclusive of the Seller Escrow, for Claims for which Purchaser gives notice to Seller during the period commencing with the Closing Date and ending 425 days following the Closing Date, and shall not exceed One Million Five Hundred Thousand and No/100 th Dollars ($1,500,000) for Claims for which Purchaser gives notice to Seller during the period commencing on the date that is 426 days following the Closing Date through the date that is 545 days following the Closing Date (as applicable, the “ Indemnification Cap ”); provided, however , that neither the Seller Threshold nor the Indemnification Cap shall apply in the case of: (i) fraud on the part of Seller; (ii) any claims arising under Section 15(b)(1) with respect to the representations and warranties contained in Sections 7(a)(i), 7(a)(ii), 7(a)(iii), 7(a)(xiv) or 16 ; or (iii) any claims arising under Sections 15(b)(3) or 15(b)(4) . Sellers shall not be obligated to indemnify the Purchaser Indemnification Parties pursuant to Section 15(b) for any amounts of indemnifiable Losses in excess of the Aggregate Purchase Price. All of Seller’s representations and warranties under this Agreement shall survive for a period of 545 days following the Closing Date. Purchaser waives and releases any and all Claims for breach of representation or warranty or for indemnifiable Losses for which Purchaser did not give notice of a Claim to Seller prior to 545 days following the Closing Date.  

 

(e)           Seller Indemnification Limits; Survival . Seller shall not be entitled to any indemnification from the Purchaser Indemnification Parties under Section 15(c) unless and until the aggregate amount of indemnifiable claims of Seller under Section 15(c)(1) or 15(c)(2) exceeds One Hundred Thousand and No/100 U.S. Dollars ($100,000) (the “ Purchaser Threshold ”), at which point the Purchaser Indemnification Parties shall be liable for all indemnifiable claims of Seller under Section 15(c)(1) or 15(c)(2) . The liability of the Purchase Indemnification Parties for indemnification under Section 15(c)(1) or 15(c)(2) shall not in any case exceed Three Million Five Hundred Thousand and No/100 th Dollars ($3,500,000) for Claims for which Seller gives notice to Purchaser during the period commencing with the Closing Date and ending with the date that is 425 days following the Closing Date, and shall not exceed One Million Five Hundred Thousand and No/100 th Dollars ($1,500,000) for Claims for which Seller gives notice to Purchaser during the period commencing on the date that 426 days following the Closing Date through the following the date that is 545 days following the Closing Date (as applicable, the “ Purchaser Indemnification Cap ”); provided, however , that neither the Purchaser Threshold nor the Purchaser Indemnification Cap shall apply in the case of: (i) fraud on the part of any of the Purchaser Indemnification Parties; (ii) any claims arising under Section 15(c)(1) with respect to the representations and warranties contained in Sections 9(a) and 9(b) , or (iii) any claims under Section 15(c)(3) . The Purchaser Indemnification Parties shall not be obligated to indemnify Sellers pursuant to Section 15(c) for any amounts of indemnifiable Losses in excess of the Aggregate Purchase Price. All of Purchaser’s representations and warranties under this Agreement shall survive for a period of 545 days following the Closing Date. Seller waives and releases any and all Claims for breach of representation or warranty or for indemnifiable Losses for which the Seller did not give notice of a Claim to Purchaser prior to 545 days following the Closing Date.

 

(f)           Determination of Losses . For purposes of determining the amount of Losses that are subject to indemnification hereunder with respect to any events, facts or circumstances, after determining whether or not such facts, events or circumstances give rise to a breach of a representation or warranty (after giving full effect to any qualifications as to

 

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materiality or similar standards, or of lack of “material adverse effect,” contained in such representation and warranty), the determination of the amount of Losses for such breach of representation and warranty, as it relates to such facts, events or circumstances, shall be made without giving effect to any qualifications as to materiality or similar standards, or the lack of “material adverse effect” contained in such representation or warranty.

 

(g)           Tax Treatment . Any payments made pursuant to Section 15 of this Agreement shall be treated as a purchase price adjustment for income tax purposes.

 

(h)           Calculation of Aggregate Purchase Price . For purposes of Section 15 the total Aggregate Purchase Price shall be deemed to mean the Aggregate Purchase Price, as adjusted in accordance with the terms of this Agreement, for each Facility for which Closing has occurred hereunder.

 

(i)           Procedures Regarding Third Party Claims . The procedures to be followed by Purchaser and Seller with respect to indemnification hereunder regarding claims by third parties shall be as follows:

 

(i)          Promptly after receipt by Purchaser or Seller, as the case may be, of notice of the commencement of any action or proceeding or the assertion of any claim by a third person, which the party receiving such notice has reason to believe may result in a claim by it for indemnity pursuant to this Agreement, such person (the “ Indemnified Party ”) shall give notice of such action, proceeding or claim to the party against whom indemnification is sought (the “ Indemnifying Party ”), setting forth in reasonable detail the nature of such action or claim, including copies of any written correspondence from such third person to such Indemnified Party.

 

(ii)         The Indemnifying Party shall be entitled, at its own expense, to assume and control such defense with counsel chosen by the Indemnifying Party and approved by the Indemnified Party, which approval shall not be unreasonably withheld or delayed. The Indemnified Party shall be entitled to participate in such defense after such assumption at the Indemnified Party’s own expense. Upon assuming such defense, the Indemnifying Party shall have full rights to enter into any monetary compromise or settlement which is dispositive of the matters involved; provided that such settlement is paid in full by the Indemnifying Party and will not have any continuing material adverse effect upon the Indemnified Party.

 

(iii)        With respect to any action, proceeding or claim as to which the Indemnifying Party shall not have exercised its right to assume the defense, the Indemnified Party may assume and control the defense of and contest such action, proceeding or claim with counsel chosen by the Indemnified Party. The Indemnifying Party shall be entitled to participate in defense at the Indemnifying Party’s own expense. The Indemnifying Party shall be obligated to pay the reasonable attorneys’ fees and expenses of the Indemnified Party to the extent that such fees and expenses relate to claims as to which indemnification is due under this Section 15 . The Indemnified Party shall have full rights to dispose of such action and enter into any monetary compromise or settlement which is dispositive of the matters involved; provided, however , in the

 

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event that the Indemnified Party shall settle or compromise any claims involved in the action insofar as they relate to, or arise out of, the same facts as gave rise to any claim for which indemnification is due under this Section 15 , it shall act reasonably and in good faith in doing so and in consultation with the Indemnifying Party.

 

(iv)        Both the Indemnifying Party and the Indemnified Party shall cooperate fully with one another in connection with the defense, compromise or settlement of any such claim, proceeding or action, including, without limitation, by making available to the other all pertinent information and witnesses within its control.

 

(j)           General Qualifications on Indemnification . Notwithstanding any provision to the contrary, the indemnification rights set forth in this Section 15 shall be subject to the following:  

 

(i)          The liability of an Indemnifying Party with respect to any indemnification claim shall be reduced by the amount of any tax benefit actually realized or any insurance proceeds received by Indemnified Party as a result of any damages, upon which such claim is based, and shall include any tax detriment actually suffered by the Indemnified Party as a result of such damages. The amount of such tax benefit or detriment shall be determined by taking into account the effect, if any, and to the extent determinable, of timing differences resulting from the acceleration or deferral of items of gain or loss resulting from such damages.

 

(ii)         Damages shall include actual damages and shall not include any special, punitive, multiplied, incidental, indirect or consequential damages, or lost profits, except to the extent the same are included in a third-party judgment against the Indemnified Party.

 

(iii)        Upon payment in full of any indemnification claim, the Indemnifying Party shall be subrogated to the extent of such payment to the rights of the Indemnified Party against any person or entity with respect to the subject matter of such indemnification claim.

 

(iv)        Any amounts due to Purchaser from Seller pursuant to this Section 15 shall be paid first from the Escrow Amount in accordance with the Post Closing Escrow Agreement, until the Escrow Amount has been exhausted or released.

 

(v)         If there is a failure of any condition precedent to Closing hereunder, as set forth in Section 6 hereof, then, unless such failure is caused by the default of a party of a covenant or other obligation under this Agreement, such failure shall not constitute a default hereunder and the sole and exclusive remedy of the applicable party whose condition to Closing was not satisfied shall be to terminate this Agreement by giving written notice thereof to the other party prior to or at the Closing, in which event the Deposit shall be returned to Purchaser, and, after the return to Purchaser of the Deposit, neither the Seller Parties nor Purchaser will have any further rights or obligations under this Agreement, except for any obligations that expressly survive termination.

 

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(vi)        Notwithstanding anything herein to the contrary, Purchaser hereby expressly waives, relinquishes and releases any right or remedy available to Purchaser at law, in equity or under this Agreement to make a claim against any Seller Parties or Operators for Losses that Purchaser may incur, or to rescind this Agreement and the transactions contemplated hereby, as the result of any of Seller’s representations or warranties being untrue, inaccurate or incorrect if Purchaser actually knew or is deemed to have known (as defined below) that such representation or warranty was untrue, inaccurate or incorrect at the time of the Closing and Purchaser nevertheless closes title hereunder. Purchaser shall be “ deemed to have known” at the time of Closing that a representation or warranty was untrue, inaccurate or incorrect if the due diligence information that is either (i) provided by Seller to Purchaser in written or electronic form either in the Schedules hereto, or in the electronic data room used by the parties for the Transaction, or (ii) is obtained by Purchaser as a result of the Tests and investigations performed by Purchaser, is inconsistent with such representation or warranty.

 

(k)           Effective Upon Closing . The provisions of this Section 15 shall become effective upon completion of the Closing, and shall have no force and effect prior to the Closing or if this Agreement is terminated prior to Closing.

 

(l)            Exclusive Remedy . From and after the Closing, the rights of the parties to indemnification relating to this Agreement and the transactions contemplated hereby shall be strictly limited to those contained in this Article 8 , and such rights shall be the exclusive remedies of the parties subsequent to the Closing, except that the foregoing shall not limit any claim under this Agreement with respect to fraud or wilful misconduct or to specifically enforce covenants under this Agreement or in the event of any party’s breach of any covenants or obligations first accruing after Closing under any documents executed and delivered at Closing with ongoing obligations after Closing, or with respect to obligations under this Agreement that survive Closing and for which a Claim first accrues after Closing.

 

16.          Broker . Seller Parties and Purchaser represent to each other that neither party has dealt with any broker or real estate consultant in connection with the Transaction contemplated by this Agreement. Notwithstanding the foregoing, Seller Parties and Purchaser acknowledge that Seller Parties have engaged Houlihan Lokey Real Estate Group, Inc. (“ Broker ”) as its investment advisor and the Sellers shall pay the fees due to Broker in accordance with a separate agreement between Seller Representative and Broker. Sellers and Purchaser shall indemnify and hold the other free and harmless from and against any liabilities, damages, costs or expenses (including, but not limited to, reasonable attorneys’ fees and disbursements) suffered by the indemnified party arising from a misrepresentation or a breach of any covenant made by the indemnifying party pursuant to this Section 16 . The provisions of this Section 16 shall survive the Closing or termination of this Agreement.

 

17.          Risk of Loss .

 

(a)           Condemnation .

 

(i)          If, at any time prior to the Closing Date, all or a Substantial Portion of a Property shall be taken in the exercise of the power of condemnation or eminent domain by any sovereign, municipality or other public or private authority or shall be the subject of a duly

 

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noticed hearing held by any such authority relating to a pending taking in the exercise of the power of condemnation or eminent domain (a “ Taking ”), then this Agreement shall remain in full force and effect (provided that the occurrence of such Taking shall not be deemed to cause a breach of any provisions of this Agreement, and Sellers shall not be obligated to transfer to Purchaser the Property (or Substantial Portion of the Property) subject to such condemnation or taking by eminent domain) and on the Closing either (A) Purchaser shall be entitled to any condemnation award to be granted with respect to the remaining Properties and Sellers shall assign all of its right, title and interest to such award to Purchaser, less such sums, if any, actually and reasonably expended by Sellers to prosecute such claim and restore the Properties, or (B) Purchaser shall have the right to not close on the applicable Property and the Aggregate Purchase Price shall be reduced by the applicable Property Purchase Price, and the portion of the Deposit attributable to such Property shall be returned to Purchaser. Sellers agree to deliver promptly after receipt thereof any and all written notices of a Taking received by Sellers after the date hereof. In addition, Seller shall have the right to terminate this Agreement with respect to all of the Properties if a sufficient number of Properties are terminated from this Agreement as a result of a Taking and/or Material Casualty so that the aggregate resident census for all of the Properties that were not terminated from this Agreement as a result of a Taking and/or Material Casualty is ninety percent (90%) or less than the aggregate resident census for the Properties as of the Effective Date of this Agreement

 

(ii)         As used herein, a Taking of a “ Substantial Portion of a Property ” shall mean a Taking which (a) results in an award reasonably estimated to exceed $125,000 with respect to any Facility, (b) adversely affects access to, egress from or operation of such Property, (c) reduces the number of residential beds in such Property by 5% or more, (d) materially reduces the common areas or amenity space at such Property or results in Purchaser not being able to operate the Property as an integrated economically viable whole, or (e) results in such Property being in violation of any applicable law or any Contract.

 

(b)           Destruction or Damage .

 

(i)          In the event that a Property, shall be damaged or destroyed by fire or any other casualty (“ Casualty ”) that constitutes a Material Casualty prior to the Closing Date, Seller Representative shall give Purchaser prompt written notice of such event together with an estimate of the cost and time to restore prepared by an independent insurance examiner or engineer selected by Seller Representative and reasonably satisfactory to Purchaser. If the Casualty is a Material Casualty, then this Agreement shall remain in full force and effect (provided that the occurrence of such Material Casualty shall not be deemed to cause a breach of any provisions of this Agreement) and on the Closing either, (A) Purchaser shall be entitled to any insurance proceeds payable to such Seller on account of such Casualty as well as the amount of any policy deductibles applicable to such Seller’s insurance, less such sums, if any, as shall have been actually and reasonably incurred by such Seller or expended by such Seller in connection with the repair or restoration of such Casualty or the prosecution of such claim, or (B) Purchaser shall have the right to not close on the applicable Property and the Aggregate Purchase Price shall be reduced by the applicable Property Purchase Price , and the portion of the Deposit attributable to such Property shall be returned to Purchaser.

 

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(ii)         As used herein, a “ Material Casualty ” shall mean a Casualty which (a) the cost of repairs and/or restoration are reasonably estimated to exceed $125,000 per Facility, (b) adversely affects access to, egress from or operation of such Property, (c) reduces the number of residential beds in such Property by five percent (5%) or more, (d) materially reduces the common areas or amenity space at such Property or results in Purchaser not being able to operate the Property as an integrated economically viable whole, or (e) results in such Property being in violation of any applicable law or any Contract.

 

18.          Limited Warranties; Disclaimer .

 

(a)           Limited Warranties . Notwithstanding anything to the contrary contained in this Agreement, the purchase, sale and conveyance of the Properties shall be made with the limited warranties from Sellers to Purchaser contained in Section 7 of this Agreement and the documents to be delivered by Sellers at Closing.

 

(b)           Disclaimer . Purchaser agrees that, except as and to the extent provided in the representations and warranties contained in Section 7 of this Agreement or in the documents to be delivered by Sellers at Closing, Purchaser is purchasing the Properties in “AS IS”, “WHERE IS”, “WITH ALL FAULTS” condition, and without any other warranties, representations or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of, Sellers.

 

(i)          Except as and to the extent provided in the representations and warranties contained in Section 7 of this Agreement and in the documents to be delivered by Sellers at Closing, each of the Seller Parties and their Affiliates, and its and their officers, directors, employees and agents, expressly disclaims, has not made, will not make, and does not make, any warranties or representations, express or implied, with respect to the Properties or any portion thereof, the physical condition or repair or disrepair thereof (whether patent or latent), the value, profitability or marketability thereof or the title thereto, or of any of the appurtenances, facilities or equipment thereon;

 

(ii)         Except as and to the extent provided in the representations and warranties contained in Section 7 of this Agreement and in the documents to be delivered by Sellers at Closing, each of Seller Parties and their Affiliates, and its and their officers, directors, employees and agents, expressly disclaims, has not made, will not, and does not, make, any warranties, express or implied, of merchantability, habitability or fitness for a particular use;

 

(iii)        Purchaser has not relied upon any statement or representation by or on behalf of Sellers unless such statement or representation is specifically set forth in Section 7 of this Agreement or in the documents to be delivered by Seller Parties at Closing;

 

(iv)        As of the date hereof and through the end of the Due Diligence Period, Purchaser has made and will make such legal, factual and other inquiries and investigations as Purchaser has deemed necessary, desirable or appropriate with respect to the Properties and the value and marketability thereof and of the appurtenances, facilities and equipment thereof. Such inquiries and investigations of Purchaser are hereby deemed to include, without limitation, the physical components of all portions of the Improvements, the condition of

 

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repair of the Property or any portion thereof, such state of facts as a current title report and/or an accurate survey, environmental examinations, and flood plain examinations would show or disclose, and the present and future zoning, ordinances, resolutions and regulations of the city, county and state where the Improvements are located.

 

(c)          Except as specifically set forth in Section 7 of this Agreement or in the documents to be executed and delivered by Seller Parties at Closing, each of Seller Parties and their Affiliates, and its and their officers, directors, members, managers, partners, principals, employees and agents, expressly disclaims, has not made, will not make, and does not make, any warranties or representations, express or implied, that relate to, arise out of or with respect to (1) Purchaser’s ability, or inability, to obtain or maintain temporary or final certificates of occupancy or other licenses for the use or operation of the Improvements, and/or certificates of compliance for the Improvements, (2) the actual or potential income, or profits, to be derived from the Properties, (3) the real estate, or other, taxes or special assessments, now or hereafter payable on account of, or with respect to, the Properties, (4) Purchaser’s ability or inability to demolish the Improvements or otherwise develop the Properties, (5) the environmental condition of the Properties, (6) the fitness of the Properties for a particular purpose, or (7) any other matter relating to the Properties.

 

(d)          Neither this Section 18 nor any other provision of this Agreement shall be deemed to excuse or otherwise limit Purchaser’s recourse against Seller in the event of any fraud by any Seller Party.

 

19.          General Provisions .

 

(a)           Entire Agreement . This Agreement and exhibits hereto constitute the entire agreement of Seller Parties and Purchaser with respect to sale of the Properties and supersedes all prior or contemporaneous written or oral agreements, whether express or implied, related to the subject matter hereof.

 

(b)           Amendments . This Agreement may be amended only by a written agreement executed and delivered by Seller Representative and Purchaser.

 

(c)           Waivers . No waiver of any provision or condition of, or default under, this Agreement by any party shall be valid unless in writing signed by such party. No such waiver shall be taken as a waiver of any other or similar provision or of any future event, act, or default.

 

(d)           Time . Time is of the essence of this Agreement. In the computation of any period of time provided for in this Agreement or by law, the day of the act or event from which the period of time runs shall be excluded, and the last day of such period shall be included, unless it is not a Business Day, in which case it shall run to the next day which is a Business Day.

 

(e)           Assignment . This Agreement may not be assigned by Purchaser without the consent of Seller Representative. A direct or indirect transfer, sale or assignment of the majority stock interest in a corporate purchaser or the majority membership interest in a limited liability company purchaser or the majority or any general partnership interest of a partnership

 

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purchaser shall constitute an assignment of this Agreement, which assignment or attempted assignment shall be void if made without the written consent of Seller Representative. Notwithstanding the foregoing, (i) concurrently with Closing, Purchaser may assign its rights under this Agreement, without the consent of Seller Representative, to one or more Purchaser Designees, provided that such Purchaser Designees assume in writing all of the obligations of Purchaser to be performed under this Agreement in a form reasonably acceptable to Seller Representative and an original of such fully executed assignment and assumption agreement is delivered to Seller Representative at least five (5) Business Days prior to the Closing; (ii) Purchaser may designate (without assigning this Agreement) one or more Purchaser Designees to take title to one or more of the Properties at Closing; and (iii) Purchaser may assign certain of its rights under this Agreement relating to the Personal Property, without the consent of Seller Representative, to New Operator. Purchaser shall not assign this Agreement, in whole or in part, or name as a Purchaser Designee, to an entity or individual which would make any of the statements, representations or warranties set forth in Section 9 of this Agreement untrue or incorrect in any material respect. No assignment of this Agreement, in whole or in part, or designation of a Purchaser Designee, shall relieve Purchaser from any of its obligations set forth herein arising prior to or after the effective date of the assignment. Any assignment in violation of this Section shall be null and void and without force and effect.

 

(f)           Notices . Any notices or other communications permitted or required to be given hereunder shall be in writing, shall be delivered (i) personally, in which case notice shall be deemed delivered upon receipt or refusal of delivery, (ii) by reputable overnight delivery service, in which case notice shall be deemed delivered on the date of deposit with such courier, or (iii) by fax, in which case notice shall be deemed delivered upon the mechanical confirmation of delivery, and shall be addressed to the respective party as set forth in this subsection (f). Notices on behalf of the respective parties may be given by their attorneys and such notices shall have the same effect as if in fact subscribed by the party on whose behalf it is given.

 

To Seller Representative: c/o WCP Investment Manager LLC
  40 Danbury Road
  Wilton, CT  06897-4406
  Attn: Jordan S. Socaransky & Marc Porosoff, Esq.
  Facsimile: 203-429-8599
   
with a copy to: Rowan Farber
  LifeHouse Health Services
  300 Corporate Pointe, Suite 550
  Culver City, CA 90230
  Facsimile: 310-388-3061
   
with a copy to: DLA Piper LLP (US)
  500 8th Street, NW
  Washington, DC 20004
  Attention: Rick Marks, Esquire
  Facsimile: 202-799-5202

 

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With a copy to: Morris, Manning & Martin, LLP
  1401 I Street, NW
  Suite 600
  Washington, DC  20008
  Attention:  Elizabeth A. Karmin
  Facsimile:  202-408-5146
   
To Purchaser: American Realty Capital Healthcare Trust Operating Partnership, L.P.
  405 Park Avenue
  15 th Floor
  New York, NY  10022
  Attention:  Edward M Weil., Jr.
  Facsimile:  212-415-6542

 

with a copy (which will not constitute notice) to:
   
  Jesse Galloway
  American Realty Capital Healthcare Trust Operating Partnership,  L.P.
  405 Park Avenue, 15 th Floor
  New York, New York 10022
  Facsimile:  212-415-6542
   
with a copy (which will not constitute notice) to:
   
  Foley & Lardner LLP
  111 North Orange Avenue
  Suite 1800
  Orlando, Florida  32801
  Attention: Michael A. Okaty
  Facsimile: 407-648-1743

 

(g)           Governing Law and Waiver of Jury Trial . This Agreement shall be governed in all respects by the internal laws of the State of Michigan without regard to the laws regarding conflicts of laws. The parties hereto waive trial by jury in any action, proceeding or counterclaim brought by any party against any other party on any matter arising out of or in any way connected with this Agreement. Notwithstanding the foregoing, solely to the extent a dispute or matter involves real estate conveyancing law pertaining to the Properties located in Illinois, then such matter or dispute shall be governed by the internal laws of the State of Illinois without regard to the principles of conflicts of laws.

 

(h)           Counterparts . This Agreement may be executed in any number of identical counterparts, any or all of which may contain the signatures of less than all of the parties, and all of which shall be construed together as a single instrument.

 

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(i)           Construction . Seller Parties and Purchaser agree that each party and its counsel have reviewed and approved this Agreement, and that any rules of construction that provide that ambiguities be resolved against the drafting party shall not be used in the interpretation of this Agreement or any amendments or exhibits hereto. The words “include”, “including”, “includes” and any other derivation of “include” means “including, but not limited to” unless specifically set forth to the contrary. As used in this Agreement, the neuter shall include the feminine and masculine, the singular shall include the plural, and the plural shall include the singular, except where expressly provided to the contrary. The words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section, subsection or other subdivision. Headings of sections herein are for convenience of reference only, and shall not be construed as a part of this Agreement. Except to the extent expressly provided otherwise in this Agreement, references to “sections” or “subsections” in this Agreement shall refer to sections and subsections of this Agreement, and references to “exhibits” in this Agreement shall mean exhibits attached to this Agreement.

 

(j)            No Recording . Purchaser shall not, and shall not cause or permit any other person to, record this Agreement or any memorandum or other evidence thereof in any public records. If Purchaser violates the terms of this subsection (j) , then this Agreement shall be deemed ipso facto terminated.

 

(k)           Public Announcement . Seller Representative and Purchaser agree to cooperate with each other to make joint and/or coordinated public announcements disclosing this Agreement and the Transaction contemplated hereby.

 

20.          Interest in Bed of Streets . Title to the Properties shall be conveyed together with all rights, title and interest, if any, of Sellers in and to land lying in the bed of any streets, roads, avenues, alleys or passageways, opened or proposed, bounding or abutting any Property, and all rights, title and interest of Sellers, if any, in and to any award(s) made or to be made in lieu thereof and in and to any unpaid award(s) for damage to any Property by reason of change of grade of any street, and Sellers will execute and deliver to Purchaser, at Closing, or thereafter, on demand, a quitclaim conveyance of such titles and the assignment and collection of any such award(s), together with all rights, title and interest, if any, of Sellers in and to any easements, rights of way or passageways appurtenant to such Property.

 

21.          Diligence Materials . If Closing is not completed (as to any one or more Properties) Purchaser shall return to Seller Representative or shall destroy all applicable plans, maps, descriptions, permits, certifications, licenses, approvals, environmental audits, and other diligence materials respecting the applicable Properties (“ Diligence Materials ”) to the extent such materials have been provided by or on behalf of Seller, except to the extent that Purchaser is advised by legal counsel that complying with this provision would be prohibited by law or regulatory authority. Notwithstanding the foregoing, Purchaser may keep archived copies of the Diligence Materials (but expressly excluding any records, including medical records, pertaining to individual residents at the Properties) in the ordinary course of business in accordance with Purchaser’s document retention policies. If Closing is not completed (as to any one or more Properties) for any reason other than Seller’s default under this Agreement, Purchaser shall deliver to Seller Representative copies of any Phase I and/or Phase II environmental report, zoning reports, title reports, surveys, appraisals and/or property condition reports commissioned

 

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by or on behalf of Purchaser relating to such Properties, without representation or warranty whatsoever as to the completeness or accuracy thereof, and without liability for any amounts which Purchaser may owe in connection therewith.

 

22.          Waiver . By proceeding with the Closing, Seller Parties and Purchaser shall be deemed to have waived, and so covenant to waive, any claims of defaults or breaches by the other party existing on or as of the Closing Date whether under this Agreement or any other document or instrument executed by the other party in connection with the Transaction, of which the waiving party was made aware by written notice given in accordance with Section 19(f) of this Agreement from the defaulting or breaching party prior to the Closing Date for which the other party shall have no liability.

 

23.          Non-compete . Sellers agree that, for a period of two (2) years following the applicable Closing Date, Sellers shall not have any other direct or indirect interest whatsoever in, any business enterprise that develops, owns, operates or manages any facility that is used or intended for use, in whole or in part, for occupancy as an assisted living facility and that is located within eight (8) miles of the applicable Properties that were sold on the applicable Closing Date (the “ Restricted Area ”); provided, however , that the foregoing shall not restrict (A) passive investments in securities of a publicly-held entity, (B) investments of not more than 20% of the equity interests in a privately-held entity, (C) any new investments in a portfolio of assets where not more than 25% of such acquired portfolio constitutes senior facilities that compete with the Properties, (D) investments in debt securities that are secured by or relate to assets, services, operations or other businesses that compete with the Properties within the Restricted Area.

 

24.          Facsimile/Electronic Signatures .

 

(a)          The execution of this Agreement and all notices given hereunder and all amendments hereto, may be effected by facsimile signatures, all of which shall be treated as originals; provided, however, that the party receiving a document with a facsimile signature may, by notice to the other, require the prompt delivery of an original signature to evidence and confirm the delivery of the facsimile signature. Purchaser and Seller Parties each intend to be bound by its respective facsimile transmitted signature, and is aware that the other party will rely thereon, and each party waives any defenses to the enforcement of the Agreement, and documents, and any notices delivered by facsimile transmission.

 

(b)          Furthermore, the execution of this Agreement and all amendments hereto, may be effected by electronic signatures, all of which shall be treated as originals. Purchaser and Seller Parties each intend to be bound by its respective electronic transmitted signature, and is aware that the other party will rely thereon, and each party waives any defenses to the enforcement of the Agreement, and any amendments delivered by electronic transmission.

 

25.          Severability . If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be

 

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affected thereby, and each such term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

 

26.          Assumed Liabilities . Except as expressly set forth herein, Purchaser shall not assume, in connection with the Transaction, any liability or obligation of Sellers whatsoever, and, to this end, Sellers shall retain responsibility for all liabilities and obligations accrued or incurred from its operations prior to Closing and all liabilities and obligations arising from its operations prior to Closing, whether or not accrued and whether or not disclosed.

 

27.          Calculation of Time Periods . Unless otherwise specified, in computing any period of time described herein, the day of the act or event on which the designated period of time begins to run shall not be included and the last day of the period so computed shall be included, unless such last day is not a Business Day, in which event the period shall run until the next day which is a Business Day.

 

28.          Seller Representative . Each Seller, by signing this Agreement, designates Seller Representative as the representative of the Sellers for purposes of this Agreement and all agreements contemplated hereby or delivered in connection herewith. The Sellers shall be bound by any and all actions taken by Seller Representative on their behalf. Purchaser shall be entitled to rely upon any communication or writing given by or to, or executed by, Seller Representative. All notices to be sent to any Seller pursuant to this Agreement or any other agreement contemplated hereby or delivered in connection herewith may be addressed to Seller Representative and any notice so sent shall be deemed notice to each Seller hereunder. The Sellers hereby consent and agree that Seller Representative is authorized to accept and deliver notice on behalf of the Sellers pursuant hereto and pursuant to all other agreements contemplated hereby or delivered in connection herewith and to deliver waivers and consents on behalf of the Sellers pursuant hereto. Seller Representative is hereby appointed and constituted the true and lawful attorney-in-fact of each Seller with respect to all matters pertaining to this Agreement and the transactions contemplated hereby, with full power in its name and on its behalf to act according to the terms of this Agreement and all other agreements contemplated hereby or delivered in connection herewith in the absolute discretion of Seller Representative, and to do all things and to perform all acts contemplated by or deemed advisable in connection with this Agreement and the distribution of the Aggregate Purchase Price payable to the Sellers. This power of attorney and all authority hereby conferred is granted in consideration of the mutual covenants and agreements made herein, and shall be irrevocable and shall not be terminated by any act of any one or more Sellers, or by operation of law. Each Seller hereby irrevocably agrees that it shall be bound to the terms of any settlement of any dispute under this Agreement entered into by Seller Representative.

 

29.          Exculpation . Notwithstanding anything appearing to the contrary in this Agreement, no direct or indirect partner, member or shareholder of the Sellers, Seller Representative or Purchaser (or any officer, director, agent, member, manager, personal representative, trustee or employee of any such direct or indirect partner, member or shareholder) shall be personally liable for the performance of the obligations of, or in respect of any claims against, any Sellers, Seller Representative or Purchaser arising under this Agreement. No personal judgment shall be sought or obtained against any of the foregoing (other than Sellers and Purchaser) in connection with this Agreement. In furtherance of the foregoing, Seller

 

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Representative shall not have any liability or responsibility for any of the respective Sellers’ obligations under this Agreement or any of the documents executed and delivered by the Sellers at Closing.

 

30.          Joint and Several Liability . Each Seller shall be jointly and severally liable for the obligations and liabilities of each and every Seller under this Agreement.

 

31.          Illinois Bulk Sales Clearances . Seller shall promptly request after the expiration of the Due Diligence Period, and on or before the Closing Date Seller shall deliver to Purchaser, a release letter or certificate from the Illinois Department of Revenue indicating that Purchaser has no obligation to withhold any amounts from the Purchase Price for the Illinois Properties upon transfer of such Properties pursuant to Section 902(d) of the Illinois Income Tax Act, as amended or 35 ILCS 120/5j of the Illinois Compiled Statutes, as amended, or specifying the holdback amount which will satisfy Purchaser’s obligations under Section 9.02(d) and 35 ILCS 201/5j (collectively, the “ Bulk Sale Clearances ”). If the Bulk Sale Clearances are so delivered and require that funds be withheld pursuant to the terms thereof, then Purchaser may, at the Closing, deduct and withhold from the proceeds that are due to Seller the amount necessary to comply with the withholding requirements imposed by the Bulk Sale Clearances so received and the related statutes. Purchaser shall deposit the amounts withheld in escrow with the Escrow Agent, pursuant to an escrow agreement with terms and conditions reasonably acceptable to Seller and Purchaser, but in any event complying with the Bulk Sale Clearances so received and the related statutes. Notwithstanding the foregoing provisions of this Section 31 , in the event the Bulk Sale Clearances are not available at Closing, at Seller’s option, Seller may either (1) proceed with Closing and provide Purchaser with an indemnity agreement, in form and substance reasonably satisfactory to Purchaser, pursuant to which Seller indemnifies Purchaser with respect to all liabilities which may be imposed upon Purchaser as a result of not having received one or more Bulk Sale Clearances and the effects of any statutes related to bulk sales and attendant obligations; provided , that when the Bulk Sale Clearances are delivered indicating that no assessed but unpaid tax or penalty is due, then the aforementioned indemnity agreement shall be null and void or (2) adjourn the Closing for a period not greater than thirty (30) days until the Bulk Sale Clearances have been received.

 

32.         Purchaser Records Rights. Upon Purchaser’s request, for a period of one (1) year after Closing, Seller shall make the operating statements and any and all books, records, correspondence, financial data, leases, delinquency reports and all other documents and matters maintained by Seller or its agents and relating to receipts and expenditures reasonably necessary to complete an audit pertaining to each purchased Facility for the three (3) most recent full calendar years and the interim period of the current calendar year (collectively, the “ Records ”) available to Purchaser for inspection, copying and audit by Purchaser’s designated accountants, and at Purchaser’s expense. Seller shall provide Purchaser, but without expense to Seller, with copies of, or access to, such factual and financial information as may be reasonably requested by Purchaser or its designated accountants, and in the possession or control of Seller, to enable Purchaser to file any filings required by the Securities and Exchange Commission (the “ SEC ”) in connection with the purchase of each purchased Facility. Seller understands and acknowledges that Purchaser is required to file audited financial statements related to the Purchased Property with the SEC within seventy-one (71) days of the Closing Date and agrees to provide any records

 

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on a timely basis to facilitate Purchaser’s timely submission of such audited financial statements. The provisions of this section shall survive Closing.

 

33.         Exhibits and Schedules . The parties acknowledge that the Applicable Exhibits and Applicable Schedules (each defined below) have not been attached to this Agreement as of the Effective Date. The parties shall agree upon the Applicable Exhibits prior to the Due Diligence Deadline. In addition, Seller shall deliver to Purchaser the Applicable Schedules within ten (10) Business Days after the Effective Date. In the event Seller fails to provide to Purchaser all of the Applicable Schedules within such ten (10) Business Days, then the Due Diligence Deadline shall be extended, on a day for day basis, for each day after such ten (10) Business Day period until Seller provides all of the Applicable Schedules to Purchaser. In addition, in the event the parties have not agreed upon the Applicable Exhibits prior to the Due Diligence Deadline, which agreement shall be evidenced by an executed amendment to this Agreement or by copies of the Applicable Exhibits to be attached hereto initialed by both Purchaser and Seller Representative, then either party shall have the right to terminate this Agreement by notice to the other party given prior to the Due Diligence Deadline. The parties agree to negotiate the Applicable Exhibits in good faith.

 

The “ Applicable Exhibits ” are:  
Exhibit B Aggregate Purchase Price Allocation
Exhibit B-1 Purchase Price Allocation
Exhibit B-2 Deposit Allocation
Exhibit G Certain Purchaser Designees
Exhibit J Form of Bridging Documents
Exhibit L Form of Temporary License Agreement
Exhibit N Form of Membership Interest Purchase Agreement
Exhibit O Form of Guaranty of New Operator’s Obligations
   
The “ Applicable Schedules ” are:
Schedule 3(a) Domain Names included in Intangibles
Schedule 3(b)(iv) Excluded Personal Property
Schedule 3(b)(vi) Excluded Computer Software
Schedule 7(a) General Disclosures
Schedule 7(a)(vi) Liens on Personal Property
Schedule 7(a)(x) Litigation
Schedule 7(a)(xi) Material Contracts
Schedule 7(a)(xii) Rent Roll
Schedule 7(a)(xix) Environmental Reports
Schedule 7(a)(xxvii) List of Seller’s property and liability insurance and claims thereunder

 

[Signatures on following pages]

 

- 50 -
 

  

IN WITNESS WHEREOF, Purchaser has executed this Agreement on the date first above written.

 

  PURCHASER:
   
  AMERICAN REALTY CAPITAL HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
       
  By: American Realty Capital
    Healthcare Trust, Inc.,
    a Maryland corporation,
    its general partner
       
    By: /s/ Edward M. Weil, Jr.
      Name: Edward M. Weil, Jr.
      Title: President

 

 
 

  

IN WITNESS WHEREOF, Seller Parties have executed this Agreement on the date first above written.

 

  SELLER REPRESENTATIVE:
   
  LIFEHOUSE Holdings, LLC,
  a Delaware limited liability company
   
  By: LifeHouse Investors I, LLC,
    a Delaware limited liability company, its Sole Member
   
  By: /s/ Marc Porosoff
  Name:  Marc Porosoff
  Title:    Authorized Signatory
   
  By: /s/ Jordan Socaransky
  Name:  Jordan Socaransky
  Title:   Authorized Signatory
   
  SELLERS:
   
  LEISURE LIVING PROPERTIES - HOLT, LLC,
  a Delaware limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory

 

 
 

  

  LEISURE LIVING PROPERTIES - DEWITT, LLC,
  a Delaware limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff  
      Title:   Authorized Signatory  
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky  
      Title:   Authorized Signatory  
         
  LIFEHOUSE CRYSTAL MANOR PROPERTY, LLC,  
  a Michigan limited liability company  
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member  
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member  
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff  
      Title:   Authorized Signatory  
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky  
      Title:   Authorized Signatory  

 

 
 

 

  LIFEHOUSE WALDON WOODS PROPERTY, LLC,
  a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory
         
  LIFEHOUSE - GOLDEN ACRES PROPERTIES, LLC,
  a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosof
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory

 

 
 

  

  LIFEHOUSE – GOLDEN ACRES PROPERTIES II, LLC, a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory
         
  LIFEHOUSE GRAND BLANC PROPERTIES, LLC,
  a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory

 

 
 

 

  LIFEHOUSE CLARE PROPERTIES, LLC,
  a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory
         
  LIFEHOUSE MT. PLEASANT PROPERTIES, LLC,
  a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory

 

 
 

  

  LIFEHOUSE MT. PLEASANT PROPERTIES II, LLC,
  a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory
         
  LIFEHOUSE - OAKRIDGE MANOR DIXON PROPERTIES, LLC,
  an Illinois limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory

 

 
 

  

  LIFEHOUSE - OAKRIDGE MANOR ROCKFORD PROPERTIES, LLC,
  an Illinois limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory
         
  LIFEHOUSE PRESTIGE COMMONS PROPERTIES, LLC, a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory

 

 
 

  

  LEISURE LIVING PROPERTIES – BUCHANAN, LLC,
  a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory
         
  LIFEHOUSE BUCHANAN PROPERTY-II, LLC,
  a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory

 

 
 

  

  LEISURE LIVING PROPERTIES – GRAND RAPIDS, LLC, a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory
         
  LEISURE LIVING PROPERTIES – HOLLAND, LLC, a Michigan limited liability company
         
  By: LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member
         
    By: LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
         
      By: /s/ Marc Porosoff
      Name: Marc Porosoff
      Title:   Authorized Signatory
         
      By: /s/ Jordan Socaransky
      Name:  Jordan Socaransky
      Title:    Authorized Signatory

 

 
 

  

ACCEPTANCE AND APPROVAL BY ESCROW AGENT

 

Escrow Agent hereby (i) acknowledges receipt of a fully executed copy or counterpart copies of the foregoing Agreement on this 17th day of June, 2014, and (ii) agrees to establish an escrow and act as the Escrow Agent in accordance with the provisions of the Agreement. Escrow Agent further agrees to deliver immediately to Purchaser and Seller Representative fully executed copies of the Agreement.

 

  STEWART TITLE GUARANTY COMPANY
     
  By: /s/ Annette M. Comer
  Name: Annette M. Comer
  Title: Vice President

 

Escrow Agent and

Address for Notices:

 

Wire Transfer Information: Bank Name: Wells Fargo Bank, N.A.
  Bank Address: 420 Montgomery Street
    San Francisco, CA 94101-1205
     
  ABA #: 121 000 248
  For credit to the  
  Account of: Stewart Title Guaranty Company
    National Title Service – Boston
     
  Account No.: 412166 5830
  ATTN: Amy Wright
     
  Reference:  

 

 
 

  

Exhibits and Schedules to the Agreement

 

Exhibit A Description of Land
Exhibit B Aggregate Purchase Price Allocation
Exhibit B-1 Purchase Price Allocation
Exhibit B-2 Deposit Allocation
Exhibit C-1 Form of Deed for Michigan Property
Exhibit C-2 Form of Deed for Illinois Property
Exhibit D FIRPTA Affidavit
Exhibit E Form of Assignment of Contracts
Exhibit F Form of Owner’s Affidavit
Exhibit G Certain Purchaser Designees
Exhibit H Form of Assignment of Residency Agreements
Exhibit I Form of Bill of Sale and General Assignment
Exhibit J Form of Bridging Documents
Exhibit K Form of Post-Closing Escrow Agreement for Seller Escrow
Exhibit L Form of Temporary License Agreement
Exhibit M [Reserved]
Exhibit N Form of Membership Interest Purchase Agreement
Exhibit O Form of Guaranty of New Operator’s Obligations
   
Schedule 3(a) Domain Names included in Intangibles
Schedule 3(b)(iv) Excluded Personal Property
Schedule 3(b)(vi) Excluded Computer Software
Schedule 7(a) General Disclosures
Schedule 7(a)(vi) Liens on Personal Property
Schedule 7(a)(x) Litigation
Schedule 7(a)(xi) Material Contracts
Schedule 7(a)(xii) Rent Roll
Schedule 7(a)(xix) Environmental Reports
Schedule 7(a)(xxvii) List of Seller’s property and liability insurance and claims thereunder

 

Exhibits and Schedules
 

  

EXHIBIT A

 

DESCRIPTION OF LAND

 

 
 

  

EXHIBIT "A-01"

 

LEISURE LIVING PROPERTIES - HOLT, LLC

 

That part of the Northwest 1/4 of Section 14, Town 3 North, Range 2 West, Delhi Township, Ingham County, Michigan, described as: Commencing at the West 1/4 corner of Section 14; thence South 89 degrees 43 minutes 30 seconds East, 2015.58 feet along the East-West1/41ine of Section 14 to the point of beginning of the following described parcel; thence North 00 degrees 20 minutes 30 seconds East, 640.31 feet; thence South 89 degrees 43 minutes 30 seconds East, 140.70 feet parallel with the East-West 1/4 line of Section 14; thence North 00 degrees 29 minutes 05 seconds East, 175.00 feet; thence North 89 degrees 43 minutes 30 seconds West, 79.55 feet parallel with the East-West 1/4 line of Section 14; thence North 00 degrees 56 minutes 24 seconds East, 499.52 feet parallel with the West line of The Park, a subdivision recorded in Liber 35 of Plats, Pages 29 and 30, Ingham County Records, to the North line of the Southeast 1/4 of the Northwest 1/4 of Section 14; thence South 89 degrees 32 minutes 06 seconds East, 136.00 feet along the North line of the Southeast 1/4 of the Northwest 1/4 of Section 14 to the West line of The Park; thence South 00 degrees 56 minutes 24 seconds West, 529.68 feet along the West line of The Park, as monumented, to the Southwest corner of The Park, also being the Northwest corner of NORTH PARK SUBDIVISION NO.2, a subdivision recorded in Liber 32 of Plats, Pages 45 and 46, Ingham County Records; thence South 00 degrees 13 minutes 06 seconds West, 784.70 feet along the West line of NORTH PARK SUBDIVISION NO.2, as monumented, to the East-West 1/4 line of Section 14; thence North 89 degrees 43 minutes 30 seconds West, 198.88 feet along the East-West 1/4 line of Section 14 to the point of beginning.

 

 
 

  

EXHIBIT "A-02"

 

LEISURE LIVING PROPERTIES - DEWITT, LLC

 

Beginning at the Northwest corner of the Northeast 1/4 of the Southeast 1/4 of Section 21, Town 5 North, Range 2 West, DeWitt Township, Clinton County, Michigan, running thence East 49.5 feet; thence South 198 feet; thence East 328 feet; thence South 460 feet; thence West, 377.5 feet to the West line of the Northeast 1/4 of the Southeast 1/4 of Section 21; thence North 658 feet to the Point of Beginning. EXCEPT the following: The North 90 feet of a parcel described as: Beginning at a point 41.5 feet East from the Northwest corner of the Northeast 1/4 of the Southeast 1/4 of Section 21, Town 5 North, Range 2 West, DeWitt Township, Clinton County, Michigan, at a point which is located on the center line of Solon Road; thence South 198 feet; thence East 8 feet; thence North 198 feet; thence West B feet to the point of beginning,

 

Together with the perpetual right of Ingress and egress over the following parcels of land:

No.1: Beginning at a point 658 feet South of the northwest corner of the Northeast 1/4 of the Southeast 1/4 of Section 21, Town 5 North, Range 2 West, and running thence South SO feet; thence East to U.S. Highway 27; thence North 50 feet; thence West to the place of beginning.

No.2: Beginning at a point 198 feet South and 377.5 feet East of the Northwest corner of the Northeast 1/4 of the Southeast 1/4 of said Section 21; thence north of the center of Solon Road; thence West 50 feet; thence South 198 feet; thence East 50 feet to the point of beginning.

 

 
 

  

EXHIBIT "A-03"

 

LIFEHOUSE CRYSTAL MANOR PROPERTY, LLC

 

That part of the Southwest 1/4, Section 5, Town 5 North, Range 11 West, Gaines Township, Kent County, Michigan, described as: Beginning at a point on the South line of said Southwest 1/4, which is South 89 degrees 02 minutes 13 seconds West 170.00 feet from the South 1/4 corner of said Section 5; thence South 89 degrees 02 minutes 13 seconds West 161.84 feet along said South line; thence North 00 degrees 32 minutes 51 seconds West 1670.00 feet along the West line of the East 1/8 of said Southwest 1/4; thence North 70 degrees 38 minutes 20 seconds East 348.56 feet; thence South 00 degrees 36 minutes 31 seconds East 1540.00 feet along the East line of said Southwest 1/4; thence South 89 degrees 02 minutes 13 seconds West 170.00 feet; thence South 00 degrees 36 minutes 31 seconds East 240.00 feet to the place of beginning.

 

 
 

  

EXHIBIT "A-04"

 

LIFEHOUSE WALDON WOODS PROPERTY, LLC

 

Situated in the County of Kent, City of Wyoming, State of Michigan, is described as follows:

 

PARCEL 1 - Kent County:

That part of the Southeast Quarter of Section 16. Town 6 North, Range 12 West, City of Wyoming, Kent County, Michigan, described as: Commencing at the Southeast corner of said Section; thence North 00 degrees 00 minutes East 1334.14 feet, along the East line of said Section; thence South 89 degrees 57 minutes West 962.07 feet, along the South line of the North Half of said Southeast Quarter to the place of beginning of this description; thence North 19 degrees 00 minutes West 267.52 feet; thence Northerly 85.03 feet, along a 50 foot radius curve to the left, the chord of which bears North 22 degrees 17 minutes East 75.15 feet; thence Northerly 39.13 feet, along a 50 foot radius curve to the right, the chord of which bears North 04 degrees 00 minutes 51 seconds West 38.14 feet; thence Easterly 370.27 feet, along a 160 foot radius curve to the right, the chord of which bears North 84 degrees 42 minutes 10 seconds East 293.01 feet; thence Southeasterly 57,86 feet, along a 195.0 foot radius curve to the left, the chord of which bears South 37 degrees 30 minutes East 57.65 feet; thence South 44 degrees 00 minutes West 102.28 feet; thence South 48 degrees 50 minutes East 30.15 feet; thence South 41 degrees10 minutes West 330.0 feet to the place of beginning.

 

PARCEL 2 - Kent County:

Part of the Southwest Quarter of Section 16, Town 6 North, Range 12 West, City of Wyoming, Kent County, Michigan. described as: Commencing at the Southeast corner of said Section; thence North 00 degrees 00 minutes East 1334.14 feet. along the East line of said Section; thence South 89 degrees 57 minutes West 593.93 feet. along the South line of the North Half of said Southeast Quarter to the place of beginning of this description; thence South 89 degrees 57 minutes West 368.14 feet, along said South line; thence North 41 degrees 10 minutes East 330.0 feet; thence North 48 degrees 50 minutes West 30.15 feet; thence North 44 degrees 00 minutes East 102.28 feet; thence Southeasterly 116.44 feet. along the Southerly line of Waldon Woods Drive (60 feet wide), on a 195.0 foot radius curve to the left, the chord of which bears South 63 degrees 06 minutes 22 seconds East 114.72 feet; thence South 00 degrees 03 minutes East 289.63 feet to the place of beginning.

 

PARCEL 3:

That part of Southeast Quarter of Section 16, Town 6 North, Range 12 West, City of Wyoming, Kent County, Michigan, described as: Commencing at the Southeast corner of said Section; thence North 00 degrees 00 minutes East 1334.14 feet, along the East line of said Section; thence South 89 degrees 57 minutes West 272.00 feet, along the South line of the North Half of said Southeast Quarter to the place of beginning of this description; thence South 89 degrees 57 minutes West 321.93 feet, along said South line; thence North 00 degrees 03 minutes 00 seconds West 289.63 feet; thence Easterly 86.06 feet, along Southerly line of Waldon Woods Drive (60

 

 
 

  

feet wide), on a 195.0 food radius curve to the left, the chord of which bears North 87 degrees 08 minutes 38 seconds East 85.27 feet; thence Easterly 120,38 feet, along said Southerly line on a 445.0 foot radius curve to the right, the chord of which bears North 82 degrees 15 minutes 00 seconds East 120.02 feet; thence South 90 degrees 00 minutes East 118.0 feet; thence South 00 degrees 00 minutes West 309.70 feet to the place of beginning.

 

OVERALL PARCEL - Kent County:

That part of the Southeast Quarter of Section 16. Town 6 North, Range 12 West, City of Wyoming, Kent County, Michigan, described as: Commencing at the Southeast corner of said Section; thence North 00 degrees 00 minutes East 1334.14 feet, along the East line of said Section; thence South 89 degrees 57 minutes West 272.0 feet, along the South line of the North Half of said Southeast Quarter to the place of beginning of this description; thence South 89 degrees 57 minutes West 690.07 feet, along said South line; thence North 19 degrees 00 minutes West 267.52 feet; thence Northerly 85.03 feet, along a 50 feet radius curve to the left, the chord of which bears North 22 degrees 17 minutes East 75.15 feet; thence Northerly 39.13 feet, along a 50 foot radius curve to the right, the chord of which bears North 04 degrees 00 minutes 51 seconds West 38.14 feet; thence Easterly 370.27 feet, along a 160 foot radius curve to the right, the chord of which bears North 84 degrees 42 minutes 10 seconds East 293.01 feet; thence Easterly 260.36 feet, along a 195 foot radius curve to the left. the chord of which bears South 67 degrees 15 minutes East 241.45 feet; thence Easterly 120.38 feet. along a 445 foot radius curve to the right, the chord of which bears North 82 degrees 15 minutes East 120.02 feet; thence North 90 degrees 00 minutes East 118.0 feet; thence South 00 degrees 00 minutes West 209.79 feet to the place of beginning.

 

 
 

  

EXHIBIT "A-05"

 

LIFEHOUSE - GOLDEN ACRES PROPERTIES, LLC

 

PARCEL 4:

 

The South 1/2 of the South 1/2 of the Northeast 1/4 of the Southwest 1/4 of Section 33, Town 3 North, Range 15 West.

 

PARCEL 4 (AS SURVEYED)

The South 1/2 of the South 1/2 of the Northeast 1/4 of the Southwest 1/4 of Section 33, Town 3 North, Range 15 West, Manlius Township, Allegan County, Michigan, being more particularly described as follows; Commencing the South 1/4 Cotner of Section 33 thence N00°11 '17"E, 1319.96 feet along the North-South 1/4 Line of Section 33, to the Point of Beginning of the following described Parcel; thence N89°48'38"W, 1326.41 feet along the North Line of "Apple View Estates No.2" as recorded in Liber 12 of Plats, Pages 8-10, Allegan County Records, also being the South line of the Northeast 1/4 of the Southwest 1/4, of Section 33; thence N00°05 1 36"E, 331.86 feet along the West line of the Northeast 1/4 of the Southwest 1/4, of Section 33; thence S89°43'48"E, 1326.96 feet along the North Line of the South 1/2 of the South 1/2 of the Northeast 1/4 of the Southwest 1/4 of Section 33; thence S00°1 1 1 17"W, 329.99 feet along the North-South 1/4 line of Section 33 to the Point of Beginning.

 

 
 

  

EXHIBIT "A-06"

 

LIFEHOUSE - GOLDEN ACRES PROPERTIES II, LLC

 

PARCEL 1

 

The north 1/2 of the northwest V4 of the southwest, Section 33 T3N, R15W, except any portion thereof owned by the C&O Railroad and all lands lying northwesterly of the C&O Railroad.

 

PARCEL 2

The south 1/2 of the north 1 /2 of the northeast 1 /4 of the southwest 1 /4 of Section 33, T3N, R15W.


PARCEL 3

 

That part of Section 33, T3N, R15W, described as beginning on the north and south 1 /4 at a point 330.33 feet north 01 degree 44 minutes 03 seconds east 'A post of the southwest 1/4 ; thence north 88 degrees 10 minutes 57 seconds west 1327.04 feet to the north and south 1 /4 line of the southwest 1/4; thence north 01 degree 37 minutes 23 seconds east on said 1 /8 line 332.03 feet; thence south 87 degrees 57 minutes 19 seconds east 1327.69 feet to the north and south 1 /4 line; thence south 01 degree 44 minutes 03 seconds west on said 1 /4 line 330.03 feet to the point of beginning.

 

 
 

  

EXHIBIT "A-07"

 

LIFEHOUSE GRAND BLANC PROPERTIES, LLC

 

Part of the Southwest 1/4 of Section 22, Town 6 North, Range 7 East, Township of Grand Blanc, Genesee County, Michigan, more particularly described as beginning at a point on the South line of said Section that is South 88 degrees 33 minutes 30 seconds West, 968.30 feet from the South 1/4 corner of said Section; thence continuing along said South line, South 88 degrees 33 minutes 30 seconds West, 414.11 feet; thence North 07 degrees 09 minutes 40 seconds East, 301.39 feet; thence North 88 degrees 33 minutes 30 seconds East, 369.03feet; thence South 01 degrees 26 minutes 30 seconds East, 298.00 feet to the point of beginning.

 

Together with the perpetual right of ingress and egress as set forth in that certain Easement Agreement for ingress and Egress and the terms conditions and provisions as recorded In Deed Liber 2551, Page 599.

 

 
 

  

EXHIBIT "A-08"

 

LIFEHOUSE CLARE PROPERTIES, LLC

 

Part of the West 1/2 of the Northwest 1/4 of Section 34, Town 17 North, Range 4 West, City of Clare, County of Clare, State of Michigan, described as beginning South 00 degrees 08'00" East along the West Section line 1054.30 feet and South 72 degrees 48'00" East, parallel to and 99 feet Northerly of the center line of the Ann Arbor Railroad, 689.63 feet from the Northwest corner of said Section 34; thence continuing South 72 degrees 48'00" East, parallel to and 99 feet Northerly of the center line of the Ann Arbor Railroad, 210.39 feet; thence North 00 degrees 54'26" West, parallel to the West 1/8 line, 362.2.2 feet; thence West 200.00 feet; thence South 00 degrees 54'26" East, parallel to the West 1/8 line, 300.00 feet back to the place of beginning.

 

 
 

  

EXHIBIT "A-09"

 

LIFEHOUSE MT. PLEASANT PROPERTIES, LLC

 

PARCEL 1: Union Township, Isabella County, Michigan

 

Part ofthe South 1/2 of the NE 114 of Section 13, Town 14 North, Range 4 West, described as: Beginning at a point on the East-West 1/4 line which is North 88 degrees 57 minutes 50 seconds West, 961 feet from the East 1/4 corner of said Section 13; thence North 88 degrees 57 minutes 50 seconds West, 389.0 feet; thence North 0 degrees 08 minutes East, 250.0 feet; thence South 88 degrees 57 minutes 50 seconds East, 386.69 feet; thence South 0 degrees 23 minutes 50 seconds East, 250.0 feet to the point of beginning.

 

 
 

  

EXHIBIT "A-I0"

 

LIFEHOUSE MT. PLEASANT PROPERTIES II, LLC

 

PARCEL 2: Union Township, Isabella County, Michigan

 

Part of the Northeast 1/4 of Section 13, Town 14 North, Range 4 West, described as: Beginning at a point on the East-West 1/4 line of said Section 13 which is North 88 degrees 57 minutes 50 seconds West, 695.00 feet from the East 1/4 corner of said Section 13; thence continuing along said 1/4 line, North 88 degrees 57 minutes 50 seconds West, 266.00 feet; thence North 00 degrees 24 minutes 25 seconds West, 250.00 feet; thence North 88 degrees 57 minutes 24 seconds West, 386.64 feet (previously North 88 degrees 57 minutes 50 seconds West, 386.69 feet); thence North 00 degrees 08 minutes 06 seconds East, 205.00 feet; thence South 88 degrees 56 minutes 38 seconds Bast, 330.91 feet; thence North 00 degrees 25 minutes 45 seconds West, 55.85 feet; thence South 88 degrees 56 minutes 38 seconds East, 319.90 feet; thence South 00 degrees 23 minutes 50 seconds East, 510.71 feet to the point of beginning.

 

 
 

  

EXHIBIT "A- 1 1"

 

LIFEHOUSE - OAKRIDGE MANOR DIXON PROPERTIES, LLC

 

Lots 20, 21 and 22 in Independence Courts Phase Two, a Subdivision located in part of the Southeast X of Section 30, Township 22 North, Range 9 East of the Fourth Principal Meridian, according to the Plat thereof recorded in the Recorder's Office of Lee County, Illinois in Book "J" of Plats on Page 14, all situated in the County of Lee and State of Illinois.

 

 
 

  

EXHIBIT "A-12"

 

LIFEHOUSE OAKRIDGE MANOR ROCKFORD PROPERTIES, LLC

 

PARCEL 1

 

LOT 21 AS DESIGNATED UPON PLAT NO. 4 OF PERRY CREEK CENTRE, BEING A SUBDIVISION OF LOT 17, PLAT OF PERRY CREEK CENTRE AND A PART OF THE WEST 1 /2 OF THE SOUTHWEST 'A OF SECTION 11, TOWNSHIP 44 NORTH, RANGE 2 EAST OF THE THIRD PRINCIPAL MERIDIAN, THE PLAT OF WHICH SUBDIVISION IS RECORDED IN BOOK 41 OF PLATS ON PAGE 69A IN THE RECORDER'S OFFICE OF WINNEBAGO COUNTY, ILLINOIS; SITUATED IN THE COUNTY OF WINNEBAGO AND STATE OF ILLINOIS.

 

 
 

  

EXHIBIT "A-13"

 

LIFEHOUSE - PRESTIGE COMMONS PROPERTIES, LLC

 

Part of the Southwest 1/4 of Section 14, Town 3 North, Range 14 East, Chesterfield Township, Macomb County, Michigan, and being more particularly described as follows: Commencing at a point 1237.98 feet North 89 degrees 48 minutes 40 seconds East from the Southwest corner of said Section 14 to the point of beginning; thence extending North 00 degrees 20 minutes 40 seconds East, 325.49 feet; thence North 80 degrees 59 minutes 20 seconds West, 85.92 feet; thence North 01 degrees 14 minutes 00 seconds East, 206,22 feet; thence North 89 degrees 48 minutes 40 seconds East, 208.00 feet; thence along the Salt River, South 47 degrees 35 minutes 59 seconds East, 407.03 feet and South 01 degrees 34 minutes 55 seconds East, 270,00 feet to the South Section line; thence South 89 degrees 48 minutes 40 seconds West, 437.56 feet along said line to the point of beginning.

 

 
 

  

EXHIBIT "A-14"

 

LEISURE LIVING PROPERTIES - BUCHANAN, LLC

 

PARCEL NO.1:

 

That part of the Northwest Quarter of Section 36, Town 7 South, Range 18 West, described as follows: Commencing at the West Quarter corner of said Section 36, thence North 89 degrees 44 minutes 49 seconds East along the East and West Quarter line of said Section 36, a distance of 1923.87 feet to the Southeast corner of the recorded plat of Parkridge No.1, according to the plat thereof, recorded in Liber 14 of Plats, page 24, thence North 00 degrees 15 minutes 50 seconds East along the Easterly line of said Plat, 191.30 feet to the true point of beginning of the land herein described, thence continuing North 00 degrees 15 minutes 50 seconds East along said Easterly plat line 315.60 feet, thence South 89 degrees 47 minutes 47 seconds East 214.00 feet, thence South 00 degrees 15 minutes 50 seconds West 313.88 feet, thence South 89 degrees 44 minutes 49 seconds West 214.01 feet to the point of beginning; TOGETHER WITH a 30 foot wide easement for ingress and egress parallel, adjacent to and South of the South line of the above described parcel of land;

ALSO TOGETHER WITH an easement for parking described as follows: Commencing at the Southeast corner of the above described parcel of land, thence North 00 degrees 15 minutes 50 seconds East 30 feet to the point beginning of this description, thence continuing North 00 degrees 15 minutes 50 seconds East 89.01 feet, thence North 89 degrees 44 minutes 49 seconds East 71.03 feet, thence South 00 degrees 15 minutes 50 seconds West 89.01 feet, thence South 89 degrees 44 minutes 49 seconds West 71.03 feet to the point of beginning.

 

PARCEL NO.2:

 

That part of the Northwest Quarter of section 36, Town 7 South, Range 18 West, described as follows: Commencing at the West Quarter corner of said Section 36, thence North 89 degrees 44 minutes 49 seconds East along the East and West Quarter line of said Section 36 a distance of 1923.87 feet to the Southeast corner of the recorded plat of Parkridge No.1, according to the plat thereof, recorded in Liber 14 of Plats, page 24, thence North 00 degrees 15 minutes 50 seconds East along the Easterly line of said Plat, 506.90 feet to the true point of beginning of the land herein described, thence continuing North 00 degrees 15 minutes 50 seconds East along said Easterly plat line 151.94 feet, thence South 89 degrees 47 minutes 47 seconds East

 

 
 

  

213.08 feet, thence South 00 degrees 05 minutes 05 seconds East 151.94 feet, thence North 89 degrees 47 minutes 47 seconds West 214.00 feet to the point of beginning.

 

 
 

  

EXHIBIT "A-15"

 

LIFEHOUSE BUCHANAN PROPERTY-TI, LLC

 

PARCEL NO.3:

 

That part of the Northwest Quarter of Section 36, Town 7 South, Range 18 West, described as follows: Commencing at the West Quarter corner of said Section 36, thence North 89 degrees 44 minutes 49 seconds East along the East and West Quarter line of said Section 36, a distance of 1923.87 feet to the Southeast corner of the recorded plat of Parkridge No.1, according to the plat thereof, recorded in Liber 14 of Plats, page 24, thence North 00 degrees 15 minutes 50 seconds East along the Easterly line of said Plat 191.30 feet, thence North 89 degrees 44 minutes 49 seconds East 214.01 feet to the true point of beginning of the land herein described, thence North 00 degrees 15 minutes 50 seconds East 313.88 feet, thence South 89 degrees 47 minutes 47 seconds East 197.69 feet, thence South 00 degrees 22 minutes 41 seconds West 312.31 feet, thence South 89 degrees 44 minutes 49 seconds West 197.01 feet to the point of beginning; TOGETHER WITH 30 foot wide easement for ingress and egress parallel, adjacent to and South of the South line of the above described parcel of land.

 

PARCEL NO.4:

 

That part of the Northwest Quarter of section 36, Town 7 South, Range 18 West, described as follows: Commencing at the West Quarter corner of said Section 36, thence North 89 degrees 44 minutes 49 seconds East along the East and West Quarter line of said Section 36, a distance of 1923.87 feet to the Southeast corner of the recorded plat of Parkridge No.1, according to the plat thereof, recorded in Liber 14 of Plats, page 24, thence North 00 degrees 15 minutes 50 seconds East along the Easterly line of said Plat, 161.30 feet, thence North 89 degrees 44 minutes 49 seconds East 411.02 feet, thence North 00 degrees 22 minutes 41 seconds East 342.31 feet to the true point of beginning of the land herein described, thence North 89 degrees 47 minutes 47 seconds West 197.69 feet, thence North 00 degrees 05 minutes 05 seconds West 151.94 feet, thence North 75 degrees 20 minutes 11 seconds East 205.97 feet, thence South 00 degrees 22 minutes 41 seconds West 204.79 feet to the point of beginning.

 

 
 

  

EXHIBIT "A-16"

 

LEISURE LIVING PROPERTIES - GRAND RAPIDS, LLC

 

PARCEL 1: That part of the South 1/2 of the Northeast Y4 of Section 11, Town 6 North, Range 11 West, City of Grand Rapids, Kent County, Michigan, described as: Commencing on the East Section line North 00 degrees 00 minutes East, 1113.23 feet from the East 1/4 corner of said Section 11, said place of commencing being South 00 degrees 00 minutes West, 207.70 feet from the Northeast corner of said South 1/2 of the Northeast 1/4; thence North 87 degrees 34 minutes West, 303.84 feet along the South line of the North 207.70 feet of said South 1/2 of the Northeast 1/4; thence South 03 degrees 56 minutes West, 20.00 feet; thence South 17 degrees 14 minutes 58 seconds West, 23.02 feet to the point of beginning; thence South 17 degrees 14 minutes 58 seconds West, 144.22 feet; thence South 00 degrees 00 minutes West, 238.17 feet; thence North 87 degrees 34 minutes West, 261.15 feet along the South line of the North 627.70 feet of said South 1/2 of the Northeast 1 /4; thence North 02 degrees 26 minutes East, 242.36 feet; thence South 89 degrees 37 minutes 52 seconds West, 257.57 feet; thence Southwesterly 51.49 feet on a 59.0 foot radius curve to the left, the chord of which bears South 64 degrees 37 minutes 52 seconds West, 49.89 feet; thence South 39 degrees 37 minutes 52 seconds West, 141.00 feet; thence Southwesterly 52.31 feet on an 88.00 foot radius curve to the right, the chord of which bears South 56 degrees 39 minutes 37 seconds West, 51.54 feet; thence Southwesterly 92.02 feet on a 50.0 foot radius curve to the right, the chord of which bears South 30 degrees 54 minutes 19 seconds West, 79.57 feet; thence North 06 degrees 22 minutes 08 seconds West, 60.00 feet; thence Southwesterly 84.36 feet on a 560.00 foot radius curve to the left, the chord of which bears South 79 degrees 18 minutes 56 seconds West, 84.28 feet; thence North 02 degrees 26 minutes East, 360.00 feet; thence North 87 degrees 34 minutes West, 785.94 feet; thence North 26 degrees 04 minutes West, 93.65 feet along the Easterly line of Rowland Drive (a 60.0 foot wide public street); thence Northwesterly 74.61 feet along the Easterly line of Rowland Drive on a 150.00 foot radius curve to the right, the chord of which bears North 11 degrees 49 minutes 00 seconds West, 73.85 feet; thence North 02 degrees 26 minutes East, 79.00 feet along the East line of Rowland Drive; thence South 87 degrees 34 minutes East, 1706.25 feet along the North line of said South 1 /2 of the Northeast 1/4; thence South 03 degrees 56 minutes West, 227.58 feet; thence South 17 degrees 14 minutes 58 seconds West, 23.02 feet to the point of beginning.

 

PARCEL 2: Subject to and together with the non-exclusive easements contains in the Easement and Maintenance Agreement dated March 9, 1995 and recorded March 23, 1995 in Liber 3622, Page 1039.

 

PARCEL 3: Also subject to and together with a non-exclusive easement for ingress and egress described and contained in the Easement dated January 23, 1997 and recorded January 27, 1997 in Liber 4001, Page 742.

 

 
 

  

PARCEL 4: Together with a non-exclusive easement for ingress and egress and access to utilities as described and contained in the Easement Agreement dated May 26, 1981 and recorded May 27, 1981 in Liber 2354, Page 854.

 

 
 

  

EXHIBIT "A-17"

 

LEISURE LIVING PROPERTIES - HOLLAND, LLC

 

The North 11.29 acres of the East 1/2 of the Northwest 1/4 of the Southeast 1/4 of Section 6, Town 4 North, Range 15 West, City of Holland, Allegan County, Michigan.

 

ALSO DESCRIBED AS: The North 716.0 feet of the East 1/2 of the Northwest 1/4 of the Southeast 1/4 of Section 6, Town 4 North, Range 15 West, Fillmore Township, now City of Holland, Allegan County, Michigan. Subject to a right of way for highway purposes over the North 33 feet thereof.

 

ALSO DESCRIBED AS: That part of the East 1/2 of the Northwest 1/4 of the Southeast 1/4 of Section 6, Town 4 North, Range 15 West, Fillmore Township, City of Holland, Allegan County, Michigan, described as: Beginning at the Northeast corner of the Northwest 1/4 of the Southeast 1/4 of said Section 6; thence South 00 degrees 52 minutes 49 seconds East, 716.00 feet along the East line of said Northwest 1/4 of the Southeast 1/4; thence North 89 degrees 46 minutes 35 seconds West, 660.83 feet along the South line of the North 716.00 feet of said East 1/2 of the Northwest 1/4 of the Southeast 1/4; thence North 00 degrees 51 minutes 51 seconds West, 716.00 feet along the West line of said East 1/2 of the Northwest 1/4 of the Southeast 1/4; thence South 89 degrees 45 minutes 35 seconds East, 660.63 feet along the North line of said Southeast 1/4 to the point of beginning. Subject to a right of way for highway purposes over the North 33 feet thereof.

 

 
 

  

EXHIBIT B

 

AGGREGATE PURCHASE PRICE ALLOCATION

 

Exhibit to be completed and attached during Due Diligence Period pursuant to Section 33.

 

Buchanan Meadows $___________
   
Crystal Springs $___________
   
Golden Orchards $___________
   
Lakeside Vista $___________
   
Liberty Court $___________
   
Prestige Centre $___________
   
Prestige Commons $___________
   
Prestige Pines $___________
   
Prestige Place $___________
   
Prestige Pointe $___________
   
Prestige Way $___________
   
The Atrium $___________
   
Waldon Woods $___________
   
Whispering Woods $___________
   
TOTAL $90,200,000

 

Exhibit B
 

  

EXHIBIT B-1

 

PURCHASE PRICE ALLOCATION

 

Exhibit to be completed and attached during Due Diligence Period pursuant to Section 33.

 

Buchanan Meadows  
   
Real Estate associated with the Facility:   $__________
   
Furniture Fixtures & Equipment: $__________
   
Intangible Personal Property: $__________
   
Goodwill: $__________
   
Crystal Springs  
   
Real Estate associated with the Facility:   $__________
   
Furniture Fixtures & Equipment: $__________
   
Intangible Personal Property: $__________
   
Goodwill: $__________
   
Golden Orchards  
   
Real Estate associated with the Facility:   $__________
   
Furniture Fixtures & Equipment: $__________
   
Intangible Personal Property: $__________
   
Goodwill: $__________
   
Lakeside Vista  
   
Real Estate associated with the Facility:   $__________
   
Furniture Fixtures & Equipment: $__________
   
Intangible Personal Property: $__________
   
Goodwill: $__________

 

Exhibit B-1 – Page 1
 

  

Liberty Court  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
Prestige Centre  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
Prestige Commons  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
Prestige Pines  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
Prestige Place  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________

 

Exhibit B-1 – Page 2
 

  

Prestige Pointe  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
Prestige Way  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
The Atrium  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
Waldon Woods  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
Whispering Woods  
   
Real Estate associated with the Facility:   $________
   
Furniture Fixtures & Equipment: $________
   
Intangible Personal Property: $________
   
Goodwill: $________
   
TOTAL $90,200,000

 

Exhibit B-1 – Page 3
 

  

EXHIBIT B-2

 

DEPOSIT ALLOCATION

 

Exhibit to be completed and attached during Due Diligence Period pursuant to Section 33.

 

Buchanan Meadows $________
   
Crystal Springs $________
   
Golden Orchards $________
   
Lakeside Vista $________
   
Liberty Court $________
   
Prestige Centre $________
   
Prestige Commons $________
   
Prestige Pines $________
   
Prestige Place $________
   
Prestige Pointe $________
   
Prestige Way $________
   
The Atrium $________
   
Waldon Woods $________
   
Whispering Woods $________
   
TOTAL $3,000,000

   

Exhibit B-2 – Page 1
 

 

EXHIBIT C-1

 

FORM OF DEED FOR MICHIGAN PROPERTY

 

COVENANT DEED

 

KNOW ALL MEN BY THESE PRESENTS: This COVENANT DEED is made as of the ____ day of ______________, 20__, by ______________________, a _____________________ (“ Grantor ”), having an address at c/o ________________________________, in favor of _______________________________, a __________________________ (“ Grantee ”), having an address at c/o __________________________________________.

 

WITNESSETH:

 

That for the full consideration of the sum of ________________________ Dollars ($________________), Grantor does hereby grant, bargain, sell and convey, unto said Grantee, that certain property located in _________________Michigan, as is more particularly described in Exhibit A attached hereto and made a part hereof for all purposes, together with all of Grantor’s right, title and interest in and to all appurtenances thereof (collectively, the “Property” ), subject to the easements, conditions, encumbrances, restrictions and other matters set forth on Exhibit B .

 

TO HAVE AND TO HOLD the Property, as aforesaid, unto Grantee, its successors and assigns, forever; and Grantor covenants with Grantee that Grantor has not heretofore done, committed or wittingly or willingly suffered to be done or committed any act, matter, or thing whatsoever, whereby the Property, or any part thereof, is, or shall or may be charged or encumbered in title, estate or otherwise, except for the easements, conditions, encumbrances, restrictions and other matters set forth on Exhibit B .

 

[include the following provisions for unplatted property:

 

This property may be located within the vicinity of farmland or a farm operation. Generally accepted agricultural and management practices which may generate noise, dust, odors and other associated conditions may be used and are protected by the Michigan right to farm act.

 

Grantor grants to Grantee the right to make all divisions under Section 108 of the Land Division Act, Act No. 288 of the Public Acts of 1967.]

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

Exhibit C-1 – Page 1
 

  

IN WITNESS WHEREOF , Grantor has hereunto set his hand this ______ day of ________________, 2014

 

  GRANTOR
   
  __________, LLC, a ______________ limited liability company
       
  By: LifeHOUSE Holdings, LLC, a Delaware
    limited liability company, its sole member
     
    By:  
    Name:
    Title:    Authorized Signatory

 

Exhibit C-1 – Page 2
 

  

STATE OF )
  ) SS.
COUNTY OF __________________ )

 

Before me, on ________________ 2014, personally appeared ___________________________, as an Authorized Signatory of ____________, LLC, a ________________ limited liability company, the sole member of____________, LLC, a _____________ limited liability company, who acknowledged that he executed the same on behalf of and as the act and deed of said company.

 

  _______________________________________________
  Print Name:
  Notary Public, __________ County, __________________
  Acting in the County of ____________________________
  My commission expires: ____________________________

 

This Instrument prepared by:  
   
   
   
   
When recorded, return to:  
   
   
   
   

 

Exhibit C-1 – Page 3
 

  

EXHIBIT A

 

All that certain piece or parcel of land with the improvements situated thereon, as shown on a survey entitled, “___________,” more particularly bounded and described as follows:

 

Address:    
Tax Parcel No.:    

 

Exhibit C-1 – Page 4
 

  

EXHIBIT B

 

Easements, Conditions, Encumbrances,

Restrictions and Other Matters

 

Exhibit C-1 – Page 5
 

  

EXHIBIT C-2

 

Prepared by:

______________________

______________________

______________________

 

After Recording Mail To:

_____________________

_____________________

_____________________

 

Mail Tax Bills To :

______________________

This space reserved for Recorder’s use only

______________________

______________________

 

  

SPECIAL WARRANTY DEED

 

This Indenture, made this ___ day of _______________, _____, between ________________________________, a(n) ____________________ created and existing under and by virtue of the laws of the State of ______________and duly authorized to transact business in the State of ______________, party of the first part, and ____________________, a(n) _____________________________, having an address of _______________________________________, party of the second part , WITNESSETH, that the party of the first part, for and in consideration of the sum of Ten and 00/100 Dollars ($10.00) and other good and valuable consideration in hand paid, by the party of the second part, the receipt of which is hereby acknowledged, and pursuant to authority of the ______________________, by these presents does REMISE, RELEASE, ALIENATE AND CONVEY unto the party of the second part, FOREVER, the real estate described on Exhibit A attached hereto, situated in the County of ___________ and State of _____________.

 

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

 

TO HAVE AND TO HOLD the said premises as described above, with the appurtenances, unto the party of the second part, forever.

 

And the party of the first part, for itself and its successors, does covenant, promise and agree to and with the party of the second part and its successors that it has not done or suffered to be done, anything whereby the said premises hereby granted are, or may be, in any manner encumbered or charged, except as herein recited; and that it WILL WARRANT AND DEFEND, said premises against all persons lawfully claiming, or to claim the same, by, through or under it, subject only to those matters described on Exhibit B attached hereto.

 

Exhibit C-2 – Page 1
 

  

IN WITNESS WHEREOF, said party of the first part has caused these presents to be executed, the day and year first above written.

 

  [INSERT SIGNATURE BLOCK]

 

STATE OF ________ )
  ) SS.
COUNTY OF _______ )

 

 

I, the undersigned, a Notary Public in and for said County, in the State aforesaid, CERTIFY THAT___________________________ as ________________________ of ____________________________, a(n) _________________________________, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he/she signed, sealed and delivered the instrument pursuant to the authority given to him/her by said limited liability company as his/her free and voluntary act and voluntary act of said limited liability company, for the uses and purposes therein set forth.

 

Given under my hand and notarial seal, this ____ day of ______________, _____.

 

   
  Notary Public

 

My commission expires on  
   
_______________________  

 

Exhibit C-2 – Page 2
 

  

EXHIBIT A

Legal Description

 

Address: _____________________________________

 

PIN: _________________________________________

 

Exhibit C-2 – Page 3
 

  

EXHIBIT B

Permitted Exceptions

 

Exhibit C-2 – Page 4
 

  

EXHIBIT D

 

CERTIFICATION OF NON-FOREIGN STATUS

 

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform the transferee that withholding of tax is not required upon the disposition of a U.S. real property interest by _____________________________, LLC , a Delaware limited liability company (“ Seller ”), the undersigned hereby certifies the following:

 

1. Seller is a “United States Person” and is not a “foreign person” in accordance with and for the purpose of the provisions of Sections 7701 and 1445 (as may be amended) of the Internal Revenue Code of 1986 (the “Code”), as amended, and any regulations promulgated thereunder.

 

2. Seller’s U. S. Employer Identification Number is [________________ ].

 

3. Seller is not a disregarded entity as defined in Section 1.1445-2(b)(2)(iii) of the Code.

 

4. Seller’s office address is [_________________ ].

 

The undersigned and Seller understand that this certification may be disclosed to the Internal Revenue Service by transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

 

[Remainder of Page Left Blank/

Signatures on next page]

 

Exhibit D – Page 1 of 2
 

  

Under penalties of perjury, the undersigned declares that it have examined this certification and to the best of its knowledge and belief it is true, correct and complete, and the undersigned further declare that it have authority to sign this document.

 

Dated: ______________, 2014.

  

  ___________, LLC, a ___________ limited liability company
     
  By: LifeHOUSE Holdings, LLC, a Delaware limited
    liability company, its sole member

 

    By:  
Name:   Name:  
[Print Name of Witness]   Title: Authorized Signatory

 

Sworn to and subscribed before me this _____ day of ________, 2014, in the state and county aforesaid.

 

   
  Notary Public
   
  [Notarial Seal]

 

My Commission Expires:  

 

Exhibit D – Page 2 of 2
 

  

EXHIBIT E

 

FORM OF ASSIGNMENT OF CONTRACTS

 

KNOW ALL MEN that ______________________________ (“Assignor”), in consideration of Ten and 00/100 ($10.00) Dollars and other good and valuable consideration, received from _________________________________ (“Assignee”), does hereby assign, transfer and deliver onto Assignee, all of its right, title and interest in and to those certain service contracts , leases of furniture, fixtures and equipment and other agreements relating to the ownership, operation or maintenance of the premises known as “____________,” (together with all related written warranties and guaranties, the “Contracts”).

 

TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns, forever, from and after the date hereof, subject to the terms, covenants, conditions and provisions contained in the Contracts and subject aforesaid.

 

AND Assignee does hereby acknowledge receipt of the Contracts so delivered, and does hereby (a) accept the within assignment and (b) assume the performance of all the terms, covenants and conditions of the Contracts on the Assignor’s part to be performed thereunder accruing from and after the date hereof.

 

Without limiting the express terms of the Agreement of Sale by and between Assignor and Assignee dated ________, 2014 this assignment is made without warranty or representation by Assignor and without recourse to Assignor in any manner whatsoever, express or implied.

 

Assignor agrees to indemnify, defend and hold Assignee harmless from and against any and all losses, costs, claims, damages, liabilities and expenses, including, without limitation, reasonable attorneys’ fees and expenses, accruing prior to the date hereof with respect to the Contracts.

 

Assignee agrees to indemnify, defend and hold Assignor harmless from and against any and all losses, costs, claims, damages, liabilities and expenses, including, without limitation, reasonable attorneys’ fees and expenses, accruing on or after the date hereof with respect to the Contracts.

 

This assignment and assumption agreement shall inure to the benefit of Assignee and Assignor and their respective successors and assigns, and shall be governed by the laws of the State of [Michigan]/[Illinois]. This assignment and assumption agreement may not be modified, altered or amended, or its terms waived, except by an instrument in writing signed by the parties hereto.

 

None of the provisions of this instrument are intended to be, nor shall they be construed to be, for the benefit of any third party.

 

[SIGNATURES ON FOLLOWING PAGE]

 

Exhibit E – Page 1 of 3
 

  

IN WITNESS WHEREOF , Assignor and Assignee have executed this agreement this _____ day of _______________.

 

  ASSIGNOR
   
  ________, LLC, a ___________ limited liability company
       
  By: LifeHOUSE Holdings, LLC, a Delaware limited
    liability company, its sole member
       
    By:  
    Name:
    Title: Authorized Signatory
       
  ________, LLC, a __________ limited liability company
       
  By: LifeHOUSE Holdings, LLC, a Delaware limited
    liability company, its sole member
       
    By:  
    Name:
    Title: Authorized Signatory

 

Exhibit E – Page 2 of 3
 

 

  ASSIGNEE:
   
  [INSERT PARTY]
   
  By:  
  Name:
  Title:

 

Exhibit E – Page 3 of 3
 

  

EXHIBIT F

 

FORM OF OWNER’S AFFIDAVIT

 

[Subject to such modifications as may be required by title company]

 

The undersigned, a [STATE and FORM OF ENTITY], hereby certifies to [______________], as agent for [______________] (the “Insurer”) the following:

 

1.          The undersigned is the owner (“Owner”) of certain property (the “Property”) situated in [________________], described in title commitment No. ________ (the “Title Commitment”) issued by Insurer.

 

2.          The only tenants of the undersigned are tenants under the leases (the “Leases”) set forth on the rent roll annexed hereto as Exhibit A.

 

3.          During the period of 120 days immediately preceding the date of this certification no improvements or alterations have been made to the Property by or on behalf of Owner that have not been paid for (or if unpaid will be paid in the ordinary course of business) and that no claims against Owner of laborers or materialmen remain unpaid (or if unpaid will be paid in the ordinary course of business) for work performed by or on behalf of Owner and that no material incorporated into the Property by Owner is subject to a security interest (other than in connection with any mortgage described in the Title Commitment, which mortgages shall be satisfied on the date of recording of the deed to the Insured).

 

4.          No proceedings in bankruptcy or receivership have been instituted by or against Owner which are now pending, nor has the Owner made any assignment for the benefit of creditors which is in effect as to the Property.

 

5.          Owner agrees not to cause any lien or encumbrance to be filed against the Property between the date hereof and the earlier of (a) the date the documents creating the interest being insured pursuant to the Title Commitment have been filed of record and (b) three (3) days following the date hereof.

 

6.          This certification is made for the purpose of inducing Insurer to issue its title policy insuring the Property.

 

Dated this _____ day of _______, 2014.

 

[SIGNATURES ON FOLLOWING PAGE]

 

Exhibit F – Page 1 of 2
 

  

IN WITNESS WHEREOF, the undersigned has executed this instrument as of the date set forth above.

   

  ________, LLC, a _____________ limited liability company
     
  By: LifeHOUSE Holdings, LLC, a Delaware limited
    liability company, its sole member
       
    By:  
    Name:
    Title: Authorized Signatory

 

  ________, LLC, a ________________ limited liability company
     
  By: LifeHOUSE Holdings, LLC, a Delaware limited
    liability company, its sole member
       
    By:  
    Name:
    Title: Authorized Signatory

 

Sworn to and Subscribed before me  
on _____/_____/2014  
   
____________________________________  
Notary Public  

 

Exhibit F – Page 2 of 2
 

  

EXHIBIT G

 

CERTAIN PURCHASER DESIGNEES

 

(See Attached)

 

Exhibit to be completed and attached during Due Diligence Period pursuant to Section 33.

 

Exhibit G – Page 1 of 1
 

  

EXHIBIT H

 

FORM OF ASSIGNMENT OF RESIDENCY AGREEMENTS

 

THIS ASSIGNMENT AND ASSUMPTION OF RESIDENCY AGREEMENTS (this “ Assignment Agreement ”) is made and entered into as of this _____ day of __________, 2014 (the “ Transfer Date ”), by and between ___________________________ (the “ Assignor ”), and _____________________________ , LLC , a Delaware limited liability company (the “ Assignee ”). Each party hereto is referred to individually as a “Party” and collectively as the “Parties.”

 

BACKGROUND:

WHEREAS , the Assignor and Assignee have entered into that Agreement of Sale dated as ________, 2014 (the “ Agreement of Sale ”), providing for, among other things, the transfer by the Assignor to the Assignee of the memory care facility identified on Exhibit A hereto (the “ Facility ”), all upon the terms and conditions contained in the Settlement Agreement; and

 

WHEREAS , pursuant to the terms of the Agreement of Sale, the Assignor shall assign to Assignee all of its right, title and interest in and to all “Residency Agreements” (as defined in the Agreement of Sale).

 

NOW, THEREFORE , in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Parties hereto, the Parties hereto, intending to be bound, hereby agree as follows:

 

1.           Assignment . Assignor hereby assigns, transfers and conveys all of its right, title and interest in, to, and under the Residency Agreements to Assignee.

 

2.           Assumption . Assignee hereby accepts all of the Assignor’s right, title and interest in, to, and under the Residency Agreements and assumes all of the Assignor’s obligations accruing thereunder from and after the Transfer Date.

 

3.           Miscellaneous. Capitalized terms used but not defined in this Assignment Agreement have the meaning given to them in the Agreement of Sale. Nothing contained herein is intended to amend, modify or affect the rights and obligations of the Parties under the Agreement of Sale. This Assignment Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall be considered one and the same instrument. This Assignment Agreement shall be governed by the laws of the State of [Michigan][Illinois].

 

Exhibit H – Page 1
 

  

IN WITNESS WHEREOF , the parties hereto, intending to be legally bound hereby, have duly executed this Assignment Agreement on the date first above written.

 

  ASSIGNOR:
   
  ________, LLC, a Delaware limited liability company
     
  By: LifeHOUSE Holdings, LLC, a Delaware limited
    liability company, its sole member
     
    By:  
    Name:
    Title: Authorized Signatory
     
  ASSIGNEE:
   
   
   
  By:  
    Name:
    Title:

 

Exhibit H – Page 2
 

  

EXHIBIT I

 

FORM OF BILL OF SALE AND GENERAL ASSIGNMENT

 

KNOW ALL MEN that __________________________ (“ Assignor ”), in consideration of Ten ($10.00) Dollars and other good and valuable consideration, receipt whereof is hereby acknowledged from __________________, a _______________ (“ Assignee ”), does hereby assign, transfer and deliver unto Assignee, all of its right, title and interest in and to any and all Personal Property and Intangibles (each as defined in that certain Agreement of Sale by and between Assignor and Assignee dated as of ______, 2014 (the “ Agreement of Sale ”), presently held by Assignor affecting the premises commonly known as _________, located at __________________ (the “ Premises ”).

 

TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns, forever, from and after the date hereof.

 

Assignor warrants that, except as otherwise expressly provided in the Agreement of Sale, it is the lawful owner of the Personal Property and Intangibles, that Assignor has the good and lawful right to sell and convey the Personal Property and Intangibles, that the Personal Property and Intangibles are free from encumbrances or rightful claims of others (with the exception of any leased Personal Property as to which obligations Assignee agrees to assume from and after the date hereof), and that it will defend Assignee’s title to the Personal Property and Intangibles against all persons whomsoever, subject as aforesaid. EXCEPT AS AFORESAID, BUT WITHOUT LIMITING THE EXPRESS TERMS OF THE AGREEMENT OF SALE, ALL OF THE PERSONAL PROPERTY AND INTANGIBLES ARE USED AND ARE CONVEYED AND ACCEPTED “AS IS” WITHOUT ANY WARRANTIES OR REPRESENTATIONS OF WHATSOEVER KIND OR NATURE, INCLUDING, WITHOUT LIMITATION, AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WHETHER EXPRESS OR IMPLIED, OR WHETHER WRITTEN OR ORAL CONCERNING ANY AND ALL DEFECTS OF A PHYSICAL NATURE, WHETHER IN MATERIAL OR WORKMANSHIP, WHETHER OR NOT ANY SUCH DEFECTS WOULD BE VISIBLE AND APPARENT UPON OWNER’S FULL INSPECTION AND EXAMINATION THEREOF.

 

This assignment agreement shall inure to the benefit of Assignee and its successors and assigns and shall be governed by the laws of the State of [Michigan][Illinois]. This assignment agreement may not be modified, altered or amended, or its terms waived, except by an instrument in writing signed by the parties hereto.

 

None of the provisions of this instrument are intended to be, nor shall they be construed to be, for the benefit of any third party.

 

[SIGNATURES ON FOLLOWING PAGE]

 

Exhibit I – Page 1
 

 

IN WITNESS WHEREOF , Assignor has executed this agreement this _____ day of ___________, 2014.

 

  ASSIGNOR [PROPCO]:
   
  ________, LLC, a Delaware limited liability company
       
  By: LifeHOUSE Holdings, LLC, a Delaware limited
    liability company, its sole member
       
    By:  
    Name:
    Title: Authorized Signatory
       
  ASSIGNOR [OPCO]:
   
  ________, LLC, a Delaware limited liability company
       
  By: LifeHOUSE Holdings, LLC, a Delaware limited
    liability company, its sole member
       
    By:  
    Name:
    Title: Authorized Signatory
       
  ASSIGNEE:
   
   
   
  By:  
    Name:
    Title:
     

 

Exhibit I – Page 2
 

  

EXHIBIT J

 

FORM OF BRIDGING DOCUMENTS

 

Exhibit to be completed and attached during Due Diligence Period pursuant to Section 33.

 

Exhibit J – Page 1 of 1
 

  

EXHIBIT K

 

POST-CLOSING ESCROW AGREEMENT

 

THIS POST-CLOSING ESCROW AGREEMENT (this “ Agreement ”) is entered into as of ___________, 2014 by and among LIFEHOUSE HOLDINGS, LLC, a Delaware limited liability company (“ Seller Representative ”), and _____________________, a _____________________ (“ Purchaser ”), and Stewart Title Guaranty Company (the “ Escrow Agent ”). Seller Representative and Purchaser may each be referred to as a “ Party ” and collectively as “ Parties ” to this Agreement.

 

Recitals :

 

A.           Pursuant to the Agreement of Sale dated as of _______, 2014 (“ Purchase Agreement ”), by and between Seller Representative, the “Sellers” party thereto and Purchaser, Sellers are conveying to Purchaser the certain land and improvements as described on Exhibit A of the Purchase Agreement and by this reference incorporated herein (the “ Properties ”). Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement.

 

B.           The Purchase Agreement requires Sellers to deposit the Escrow Funds (as defined below) with Escrow Agent in order to ensure that Purchaser will have a means to recover from Sellers amounts due with respect to successful Claims under any of Sellers’ representations and warranties, covenants and indemnities contained in the Purchase Agreement or in any closing document (collectively, the “ Seller Obligations ”).

 

C.           Pursuant to Section 15 of the Purchase Agreement, to secure and facilitate payment of the Seller Obligations, the Escrow Funds are being deposited in escrow to be held by Escrow Agent as hereinafter provided.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual promises of the Parties herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

 

1.            Establishment of Escrow; Investment . Seller Representative, on behalf of Sellers, has deposited with the Escrow Agent, and the Escrow Agent acknowledges receipt of a portion of the Aggregate Purchase Price equal to _______________ Dollars ($___,000,000). Such funds shall be held in an interest-bearing escrow account (the “ Escrow Account ”) in the name of [Seller Representative], upon receipt of completed W-9 forms, subject to the terms and conditions set forth in this Agreement. All amounts held by Escrow Agent from time to time in the Escrow Account are hereinafter referred to as the “ Escrow Funds .” Unless directed in writing by Seller Representative and Purchaser, and subject to the following sentence, the Escrow Agent shall invest the Escrow Funds held in the Escrow Account in one or more of the investments (each individually, an “ Investment ,” and collectively, the “ Investments ”) that satisfies the definition of “Permitted Investments” set forth on Exhibit B attached hereto and incorporated herein by this reference. Unless otherwise directed in writing by Seller Representative and Purchaser, in no event shall the Escrow Agent invest all or any portion of the

 

Exhibit K – Page 1 of 11
 

  

Escrow Funds in any Investment if the maturity date of such Investment is a date which is later than the date that is 425 days after the Closing Date under the Purchase Agreement.

 

2.            Amounts Earned on Escrow Funds; Tax Matters . All amounts earned on the Escrow Funds (interest, dividends or otherwise), shall become a part of the Escrow Account and shall be held hereunder upon the same terms as the original Escrow Funds. The Parties agree that to the extent permitted by applicable law, including Section 468B(g) of the Internal Revenue Code of 1986, as amended, Seller will include all amounts earned on the Escrow Funds in its gross income for federal, state and local income tax purposes and pay any income tax resulting therefrom.

 

3.            Disbursement of Escrow Funds . The Escrow Funds shall be held by the Escrow Agent in the Escrow Account and not disbursed until one of the following events has occurred, in which event the Escrow Agent is authorized and directed to disburse the Escrow Funds, or a portion thereof, in the manner indicated:

 

(a)          As soon as practicable after receipt of a written direction signed jointly by Seller Representative and Purchaser, the Escrow Agent is authorized and directed to disburse such portion of the Escrow Funds as directed in such joint direction.

 

(b)          As soon as practicable after receipt of a written direction or order issued by a court of competent jurisdiction, the Escrow Agent is authorized and directed to disburse the Escrow Funds as provided in such direction or order.

 

(c)          In accordance with Section 4 of this Agreement.

 

4.            Time Release/ Set Aside Amounts .

 

(a)          Subject to Section 3(a) and 3(b) of this Agreement, on the date that is 425 days after the Closing Date under the Purchase Agreement (the “ Holdback Survival Date ”), Escrow Agent shall pay to Seller, in immediately available federal funds, within five (5) business days after a request from Seller an amount equal to the positive difference, if any, between (i) __________________ Dollars ($__,000,000)[total amount of Holdback Escrow]; minus (ii) the sum of (x) the aggregate value, as of such date, of all amounts previously disbursed to Purchaser under Section 3 of this Agreement (the “ Previously Disbursed Amounts ”) and (y) the aggregate value, as of such date, of all Set Aside Amounts (as defined in paragraph (d) below). For Example: if, on the Holdback Survival Date, the aggregate value of the Previously Disbursed Amounts, as of such date, is $25,000 and the aggregate value of the Set Aside Amounts, as of such date, is $100,000, then Escrow Agent shall pay Seller an amount equal to $_____ (i.e. $_______ - $___________). Escrow Agent shall have no responsibility to determine the amount of any Set Aside Amounts. If no Pending Claim is outstanding as of the Holdback Survival Date, then Escrow Agent shall pay to Seller Representative, in immediately available federal funds, an amount equal to the entire Escrow Funds less any Previously Disbursed Amounts within five (5) business days after request from Seller Representative.

 

(b)          At any time or times prior to the Holdback Survival Date, Purchaser may submit a notice of a Claim with respect to a Property (a “ Claim Notice ”) against the Escrow Funds for indemnification or payment pursuant to and in accordance with the provisions of the

 

Exhibit K – Page 2 of 11
 

  

Purchase Agreement (any Claim that Purchaser may have against Sellers for a breach of Sellers’ representations and warranties, covenants and indemnities contained in the Purchase Agreement or in any closing document with respect to which a Claim Notice has been delivered to Seller Representative prior to the Holdback Survival Date shall hereinafter be referred to as a “ Pending Claim ”). Purchaser shall provide a copy of any Claim Notice to Seller Representative and the Escrow Agent prior to the Holdback Survival Date, including a reasonably-detailed description of the nature of the Claim (based on information then available) and Purchaser’s good-faith and reasonable estimate of the amount sufficient to pay the Claim in full (together with reasonable expenses and reserves relating thereto, to the extent such amounts constitute Seller Obligations) (“ Purchaser’s Pending Claim Estimate ”). The description on the Claim Notice shall include Purchaser’s method for calculating Purchaser’s Pending Claim Estimate. If Seller Representative objects to the amount of Purchaser’s Pending Claim Estimate, Seller Representative may deliver notice of the objection to Purchaser and Escrow Agent within ten (10) business days. Such notice shall include an alternate amount to be withheld for the Pending Claim (“ Seller’s Alternate Estimate ”), but shall not be deemed to be an admission of the validity of the Pending Claim or any obligations on the part of Seller Representative. If Purchaser objects to the amount of Seller Representative’s Alternate Estimate, Purchaser may deliver notice of the objection to Seller Representative and Escrow Agent within five (5) business days. If Purchaser fails to object to the amount of Seller Representative’s Alternate Estimate within the required time period set forth above, Purchaser shall be deemed to have approved Seller Representative’s Alternate Estimate. If Purchaser rejects Seller Representative’s Alternate Estimate and Seller Representative and Purchaser cannot agree upon an amount to withhold for the Pending Claim, either party may submit the dispute to arbitration pursuant to Section 10 of this Agreement. Whichever of Seller Representative’s Alternative Estimate, Purchaser’s Pending Claim Estimate, the amount finally determined by arbitration or such other amount agreed upon by Purchaser and Seller Representative is approved in accordance with this subsection (b) shall hereinafter be referred to as the “ Claim Estimate ”.

 

(d)          If any Pending Claim is outstanding as of the Holdback Survival Date, an amount equal to the lesser of (i) the then-balance of the Escrow Funds or (ii) the Claim Estimate (the “ Set Aside Amount ”) shall continue to be held by Escrow Agent in accordance with the terms hereof; provided, however, if a Pending Claim is outstanding as of the Holdback Survival Date for which a Claim Estimate has not been determined, the then-balance of the Escrow Funds shall continue to be held by Escrow Agent and shall constitute the “ Set Aside Amount .” In the event Purchaser notifies the Escrow Agent and Seller Representative in writing that it has made out-of-pocket expenditures in connection with any Claim, an amount equal to such out-of-pocket expenditures, to the extent such amounts constitute Seller Obligations, shall be added to and become a part of the Set Aside Amount. If Escrow Agent receives from Purchaser a written request for distribution from the Escrow Funds pursuant to this Section 4 (a “ Request for Payment ”), and if Purchaser has not already provided a copy of such written request for distribution to Seller with evidence of such delivery to Escrow Agent, Escrow Agent shall promptly forward such Request for Payment to Seller Representative. Unless Escrow Agent receives a written objection from Seller within ten (10) business days after delivery of such notice to Seller Representative, Escrow Agent shall within five (5) business days after such ten business day period release the amount specified in the Request for Payment to Purchaser. In the event Escrow Agent receives a written objection from Seller Representative within such ten (10) business day period, Escrow Agent shall hold such Escrow Funds until (i) receipt by Escrow

 

Exhibit K – Page 3 of 11
 

  

Agent of joint written directions from Purchaser and Seller directing Escrow Agent to disburse such Escrow Funds to Purchaser or Seller Representative, as applicable, or (ii) receipt by Escrow Agent of a written direction or order issued by a court of competent jurisdiction directing Escrow Agent to disburse such Escrow Funds to Seller Representative or Purchaser, as applicable. The parties shall have a period expiring sixty (60) days after the Second Survival Date to resolve any Pending Claim, if the Pending Claim is not resolved during such time period; the parties agree to promptly submit the dispute to binding arbitration pursuant to Section 10 of this Agreement.

 

5.            Termination . This Agreement shall continue in effect until all Escrow Funds have been disbursed in accordance with Section 3 of this Agreement.

 

6.            The Escrow Agent .

 

(a)          There shall be no fees due to Escrow Agent in connection with its performance of this Agreement. However, if there are any unexpected charges or expenses due to Escrow Agent in connection with its performance of this Agreement, such charges or expenses shall be paid one-half (1/2) by Sellers and one-half (1/2) by Purchaser. The Escrow Agent shall not be liable for any act or omission to act under this Escrow Agreement, except for its own gross negligence or willful misconduct. The Escrow Agent may act upon any instrument or signature believed by it to be genuine and may assume that any person purporting to give any notice or instruction hereunder, reasonably believed by it to be authorized, has been duly authorized to do so. The Escrow Agent’s duties shall be determined only with reference to this Escrow Agreement and applicable laws, and the Escrow Agent is not charged with knowledge of or any duties or responsibilities in connection with any other document or agreement.

 

(b)          The Escrow Agent shall have the right at any time to resign hereunder by giving written notice of its resignation to the Parties hereto, at least thirty (30) days prior to the date specified for such resignation to take effect. If the Parties hereto do not designate a successor escrow agent within said thirty (30) days, the Escrow Agent may appoint a nationally recognized bank or trust company as successor escrow agent. Upon the effective date of such resignation, and provided that the successor escrow agent agrees in writing to be bound by the terms hereof, all cash and other payments and all other property then held by the Escrow Agent hereunder shall be delivered by it to such successor escrow agent or as otherwise shall be designated in writing by both Seller Representative and Purchaser.

 

(c)          In the event that the Escrow Agent should at any time be confronted with inconsistent or conflicting Claims or demands by the Parties hereto, the Escrow Agent shall have the right to interplead said Parties in any court of competent jurisdiction and request that such court determine such respective rights of the Parties with respect to this Escrow Agreement, and upon doing so, the Escrow Agent shall be released from any obligations or liability to either party as a consequence of any Claims or demands.

 

7.            Governing Law . This Agreement shall be governed in all respects by the internal laws of the State of New York without regard to the laws regarding conflicts of laws.

 

8.            Notice . Any notice pursuant to this Agreement shall be given in writing and given (a) by hand, (b) by overnight courier service guaranteeing next business day delivery postage

 

Exhibit K – Page 4 of 11
 

  

prepaid or U.S. mail postage prepaid, registered or certified with return receipt requested or (c) by telecopy or facsimile transmission. All notices shall be delivered as follows:

 

To Seller Representative: c/o ___________ LLC
  40 Danbury Road
  Wilton, CT  06897-4406
  Attention: Jordan S. Socaransky and Marc Porosoff, Esq.
  Facsimile: 203-429-8599
   
with a copy to: Rowan Farber
  [_______________]
  [_______________]
  Facsimile:
   
with a copy to: DLA Piper LLP (US)
  500 8th Street, NW
  Washington, DC 20004
  Attention: Rick Marks, Esquire
  Facsimile: 202-799-5202
   
with a copy to: Morris, Manning & Martin, LLP
  1401 I Street, NW
  Suite 600
  Washington, DC  20005
  Attn:  Elizabeth A. Karmin
   
To Purchaser: American Realty Capital Healthcare Trust Operating Partnership, L.P.
   Attn: Edward M Weil., Jr.
   405 Park Avenue, 15 th Floor
   New York, New York 10022
   
with a copy (which will not constitute notice) to:
   
  Jesse Galloway
  American Realty Capital Healthcare Trust Operating Partnership, L.P.
  405 Park Avenue, 15 th Floor
  New York, New York 10022
   
with a copy (which will not constitute notice) to:
   
  Foley & Lardner LLP
  111 North Orange Avenue
  Suite 1800
  Orlando, Florida  32801

 

Exhibit K – Page 5 of 11
 

  

  Attention: Michael A. Okaty
  Facsimile: 407-648-1743

 

To Escrow Agent:

 

with a copy delivered to Purchaser or to Seller Representative, as applicable.

 

Either party may designate by notice given to the other party a new address to which notices hereunder shall thereafter be sent. All notices hereunder shall be deemed to have been delivered (i) upon actual receipt or refusal by the party to whom intended, or (ii) with respect to any telecopy or facsimile transmission, when sent subject to receipt of written confirmation.

 

9.            Miscellaneous .

 

(a)           Partial Invalidity . If any term or provision of this Agreement or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

(b)           Waiver of Jury Trial . Each party to this Agreement waives trial by jury in any action, proceeding or counterclaim brought by any party to this Agreement against any other party to this Agreement on any matter arising out of or in any way connected with this Agreement.

 

(c)           Interpretation . Paragraph headings shall not be used in construing this Agreement. Each party acknowledges that such party and its counsel, after negotiation and consultation, have reviewed and revised this Agreement. As such, the terms of this Agreement shall be fairly construed and the usual rule of construction, to the effect that any ambiguities herein should be resolved against the drafting party, shall not be employed in the interpretation of this Agreement or any amendments, modifications or exhibits hereto or thereto.

 

(d)           Counterparts and Signatures . This Agreement may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an original and all of which shall constitute one and the same instrument. The Parties stipulate that facsimile signatures to this Agreement or any amendment hereto shall be treated as originals for all purposes.

 

10.          Arbitration .

 

(a)          Any dispute with respect to the matters described in Section 4(b) of this Agreement for which arbitration is expressly provided shall be determined by binding arbitration proceeding (the “ Arbitration Proceeding ”) administered by the American Arbitration Association (“ AAA ”) under its Commercial Arbitration Rules and Expedited Procedures, in effect at the time of the demand for arbitration, provided, however , that to the extent any provision of this Section modifies, adds to, or is inconsistent with any provisions of those rules

 

Exhibit K – Page 6 of 11
 

  

and procedures, the provisions of this Section shall control. Arbitration will be conducted before a single arbitrator in New York, New York (the “ Venue ”). The choice of law provisions set forth in Section 7 shall apply in any such Arbitration Proceeding. Any dispute, disagreement, or controversy arising out of or relating to this Agreement for which arbitration is not expressly provided as the means of resolution may be resolved by litigation or by other lawful means.

 

(b)          The party desiring arbitration shall provide written notice in accordance with the requirements of Section 8 to the other party (the “ Arbitration Notice ”) indicating (i) the matter in controversy and (ii) the name, contact information and professional resume of the proposed arbitrator meeting the requirements for a qualified and independent arbitrator set forth in Section 10(c) (“ Initial Arbitrator ”) to arbitrate such matter in controversy. If the party receiving the Arbitration Notice rejects the Initial Arbitrator set forth in the Arbitration Notice it shall object by written notice in accordance with the requirements of Section 8 (“ Objection Notice ”) delivered to the other party within seven (7) business days of the receipt of the Arbitration Notice. The Objection Notice shall contain the name, contact information and professional resume of a different arbitrator meeting the requirements for a qualified and independent arbitrator set forth in Section 10(c) (“ Secondary Arbitrator ”) to arbitrate the matter in controversy set forth in the Arbitration Notice. If the party receiving the Objection Notice rejects the Secondary Arbitrator, it shall object in writing (“ Secondary Objection Notice ”) to the other party within seven (7) business days after the receipt of the Objection Notice. If neither the Initial Arbitrator nor the Secondary Arbitrator is accepted by the parties, the party which delivered the Arbitration Notice shall instruct the Initial Arbitrator and the Secondary Arbitrator to agree, within five (5) business days after receipt of the Secondary Objection Notice, upon an arbitrator (“ Appointed Arbitrator ”) meeting the requirements for a qualified and independent arbitrator set forth in Section 10(c). If they agree upon an Appointed Arbitrator who is prepared to act as the Appointed Arbitrator, the Initial Arbitrator and Secondary Arbitrator shall deliver written notice of the name, contact information and professional resume of the Appointed Arbitrator to each party simultaneously. The appointment of the Appointed Arbitrator shall be a final decision, which shall not be subject to objection by either party, unless either party to this Agreement within five (5) business days after such selection of an Appointed Arbitrator, gives written notice in accordance with the requirements of Section 8 of this Agreement to the other party, in writing, that such Appointed Arbitrator fails to meet the requirements for a qualified and independent arbitrator set forth in Section 10(c) and provides specific information in such written notice as to the reasons why such failure exists.

 

(c)          In the event the Initial Arbitrator and the Secondary Arbitrator cannot agree on an Appointed Arbitrator or if such appointed Arbitrator is unwilling to act as the Appointed Arbitrator or if either party objects to the Appointed Arbitrator within five (5) business days after the selection of such Appointed Arbitrator, as permitted in this Section 10, then either party may petition the AAA (or any successor body of similar function) to appoint an arbitrator within five (5) business days of such petition using the following criteria: such arbitrator shall be (i) with respect to physical property matters, a licensed professional engineer or registered architect having at least ten (10) years’ experience in the design or construction of similar senior housing facilities, (ii) with respect to financial matters, a partner in a “Big Four Accounting Firm” with at least ten (10) years’ experience with the type of matter in dispute, (iii) with respect to property management issues, an individual who shall have had at least ten (10) years’ experience managing similar senior housing facilities in the market place for the matter in

 

Exhibit K – Page 7 of 11
 

  

dispute and (iv) be neutral and shall have had no prior notice, information or discussions concerning such controversy and shall not be employed by or associated with either party or any Affiliate of either of them, or any of their respective agents or Affiliates at such time or for the previous ten (10) years. If the dispute involves more than one type of matter, then the Appointed Arbitrator may be (v) an individual with expertise in any one of the types of matters in dispute, or (vi) a retired judge.

 

(d)         The Arbitration Proceedings shall commence fifteen (15) business days after the engagement or appointment of the appropriate arbitrator pursuant to this Section 10. The arbitrator shall make a determination within ten (10) business days after conclusion of the Arbitration Proceeding.

 

(e)          Seller Representative and Purchaser shall each be liable for fifty percent (50%) of the costs and expenses of an Arbitration Proceeding including administrative fees and costs, expert fees and the arbitrator’s fees and cost. Seller Representative and Purchaser shall be responsible for the fees and costs of its respective legal counsel.

 

(f)          Any arbitrator’s final decision and award shall be in writing, shall be binding on the parties and shall be non-appealable, and counterpart copies thereof shall be delivered to both parties. A judgment or order based upon such award may be entered in any court of competent jurisdiction. All actions necessary to implement the decision of the arbitrator shall be undertaken as soon as possible, but in no event later than five (5) business days after the rendering of such decision.

 

[The Remainder of this Page is Intentionally Left Blank]

 

Exhibit K – Page 8 of 11
 

  

IN WITNESS WHEREOF, the Parties have executed this Post-Closing Escrow Agreement as of the date first above written.

 

  SELLER REPRESENTATIVE :
   
  LIFEHOUSE HOLDINGS, LLC, a Delaware limited
  liability company
       
    By:  
    Name:
    Title: Authorized Signatory
       
  PURCHASER :
   
  American Realty Capital Healthcare Trust Operating Partnership, L.P ,
  a Delaware limited partnership
       
    By:  
    Name:
    Title: Authorized Signatory
       
  ESCROW AGENT :
   
  [TITLE INSURANCE COMPANY]
       
  By:  
  Name:
  Title:

 

Exhibit K – Page 9 of 11
 

  

EXHIBIT “A”

 

PROPERTY

 

Exhibit K – Page 10 of 11
 

 

Exhibit B

 

Definition of “Permitted Investments”

 

“ Permitted Investments ”: Any one or more of the following obligations or securities payable on demand and having at all times the required ratings, if any, provided for in this definition, unless each Rating Agency shall have confirmed in writing to the Servicer that a lower rating would not, in and of itself, have resulted in the withdrawal, downgrading or qualification of the ratings initially assigned to the Certificates:

 

(i)          direct obligations of, or guaranteed as to full and timely payment of principal and interest by, the United States or any agency or instrumentality thereof provided that such obligations are backed by the full faith and credit of the United States of America;

 

(ii)         demand and time deposits, or demand notes of; in or certificates of deposit of, or bankers’ acceptances issued by, any bank or trust company, savings and loan association or savings bank, provided that the commercial paper or long-term unsecured debt obligations of such depository institution or trust company (or in the case of the principal depository institution in a holding company system, the commercial paper or long-term unsecured debt obligations of such holding company) have, in the case of commercial paper, a rating of “AAA”; or

 

(iii)        an interest-bearing Money Market Account at Citibank, N.A.

 

provided , however , that such instrument continues to qualify as a “cash flow investment” pursuant to Code Section 860G(a)(6) earning a passive return in the nature of interest and that no instrument or security shall be a Permitted Investment if (i) such instrument or security evidences a right to receive only interest payments or (ii) the right to receive principal and interest payments derived from the underlying investment provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment. The term “ Rating Agency ” as used herein means each of Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc., Moody’s Investors Service, Inc., and Fitch, Inc.

 

Exhibit K – Page 11 of 11
 

  

EXHIBIT L

 

FORM OF TEMPORARY LICENSE AGREEMENT

 

Exhibit to be completed and attached during Due Diligence Period pursuant to Section 33.

 

Exhibit L – Page 1
 

  

EXHIBIT M

 

[RESERVED]

 

Exhibit M – Page 1
 

  

EXHIBIT N

 

FORM OF MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

Exhibit to be completed and attached during Due Diligence Period pursuant to Section 33.

 

Exhibit N – Page 1
 

 

EXHIBIT O

 

FORM OF GUARANTY OF NEW OPERATOR’S OBLIGATIONS

 

Exhibit to be completed and attached during Due Diligence Period pursuant to Section 33.

 

Exhibit N – Page 2
 

  

SCHEDULE 3(a)

 

DOMAIN NAMES INCLUDED

IN INTANGIBLES

 

Schedule to be provided by Seller pursuant to Section 33.

 

Schedule 3(a)
 

  

SCHEDULE 3(b)(iv)

 

EXCLUDED PERSONAL PROPERTY

 

Schedule to be provided by Seller pursuant to Section 33

 

Schedule 3(b)(iv)
 

  

SCHEDULE 3(b)(vi)

 

EXCLUDED COMPUTER SOFTWARE

 

Schedule to be provided by Seller pursuant to Section 33

 

Schedule 3(b)(vi)
 

  

SCHEDULE 7(a)

 

GENERAL DISCLOSURES

 

Schedule to be provided by Seller pursuant to Section 33.

 

Schedule 7(a)
 

  

SCHEDULE 7(a)(vi)

 

LIENS ON PERSONAL PROPERTY

 

Schedule to be provided by Seller pursuant to Section 33

 

Schedule 7(a)(vi)
 

  

SCHEDULE 7(a)(x)

 

LITIGATION

 

Schedule to be provided by Seller pursuant to Section 33

 

Schedule 7(a)(x)
 

  

SCHEDULE 7(a)(xi)

 

MATERIAL CONTRACTS

 

(See Attached)

 

Schedule to be provided by Seller pursuant to Section 33

 

Schedule 7(a)(xi)
 

  

SCHEDULE 7(a)(xii)

 

RENT ROLL

 

(See Attached)

 

Schedule to be provided by Seller pursuant to Section 33

 

Schedule 7(a)(xii)
 

  

SCHEDULE 7(a)(xix)

 

ENVIRONMENTAL REPORTS

 

Schedule to be provided by Seller pursuant to Section 33

 

Schedule 7(a)(xix)
 

  

SCHEDULE 7(a)(xxvii)

 

LIST OF SELLER’S PROPERTY AND LIABILITY INSURANCE
AND CLAIMS THEREUNDER

 

Schedule to be provided by Seller pursuant to Section 33

 

Schedule 7(a)(xxvii)

 

Exhibit 10.34

FIRST AMENDMENT TO AGREEMENT OF SALE
THIS FIRST AMENDMENT TO AGREEMENT OF SALE (this “ Amendment ”) is made and entered effective as of July 20, 2014 (the “ Effective Date ”), by and by and among LEISURE LIVING PROPERTIES - HOLT, LLC , a Delaware limited liability company, LEISURE LIVING PROPERTIES - DEWITT, LLC , a Delaware limited liability company, LIFEHOUSE CRYSTAL MANOR PROPERTY, LLC , a Michigan limited liability company, LIFEHOUSE WALDON WOODS PROPERTY, LLC , a Michigan limited liability company, LIFEHOUSE - GOLDEN ACRES PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE – GOLDEN ACRES PROPERTIES II, LLC , a Michigan limited liability company, LIFEHOUSE GRAND BLANC PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE CLARE PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE MT. PLEASANT PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE MT. PLEASANT PROPERTIES II, LLC , a Michigan limited liability company, LIFEHOUSE - OAKRIDGE MANOR DIXON PROPERTIES, LLC , an Illinois limited liability company, LIFEHOUSE - OAKRIDGE MANOR ROCKFORD PROPERTIES, LLC , an Illinois limited liability company, LIFEHOUSE PRESTIGE COMMONS PROPERTIES, LLC , a Michigan limited liability company, LEISURE LIVING PROPERTIES – BUCHANAN, LLC , a Michigan limited liability company, LIFEHOUSE BUCHANAN PROPERTY-II, LLC , a Michigan limited liability company, LEISURE LIVING PROPERTIES – GRAND RAPIDS, LLC , a Michigan limited liability company, and LEISURE LIVING PROPERTIES – HOLLAND, LLC , a Michigan limited liability company (collectively, “ Sellers ” and individually, a “ Seller ”, as the context requires), LIFEHOUSE HOLDINGS, LLC , a Delaware limited liability company (the “ Seller Representative ”) and AMERICAN REALTY CAPITAL HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P ., a Delaware limited partnership (“ Purchaser ”).
WHEREAS , Seller and Purchaser entered into that certain Agreement of Sale dated June 16, 2014 (the “ Agreement ”), and Seller and Purchaser desire to further 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, Seller and Purchaser 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.
Extension of Due Diligence Period . The “ Due Diligence Deadline ” (as defined in the Definitions section of the Agreement) shall extend for all purposes under the Agreement through 5:59 P.M. Eastern Time on August 6, 2014.

3.
Agreement Remains In Effect . The Agreement, as previously amended and modified by this Amendment, is hereby ratified and affirmed as binding and in full force and effect.



4.
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.]





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

PURCHASER:

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

By: American Realty Capital Healthcare Trust, Inc.,
   a Maryland corporation,
   its general partner
 
By:     /s/ Thomas D’Arcy              
Name: Thomas D’Arcy
Title: Chief Executive Officer
      

SELLER REPRESENTATIVE:
LIFEHOUSE Holdings, LLC,
a Delaware limited liability company

By:
LifeHouse Investors I, LLC,
a Delaware limited liability company, its Sole Member


By:     /s/ Marc Porosof                
Name: Marc Porosoff
Title:     Authorized Signatory


By:     /s/ Jordan Socaransky                
Name: Jordan Socaransky
Title:      Authorized Signatory






SELLERS:
LEISURE LIVING PROPERTIES - HOLT, LLC,
a Delaware limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory


LEISURE LIVING PROPERTIES - DEWITT, LLC,
a Delaware limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
    
    
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory







ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE




LIFEHOUSE CRYSTAL MANOR PROPERTY, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory


LIFEHOUSE WALDON WOODS PROPERTY, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory








ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE





LIFEHOUSE - GOLDEN ACRES PROPERTIES, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory



LIFEHOUSE – GOLDEN ACRES PROPERTIES II, LLC, a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory




ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE







LIFEHOUSE GRAND BLANC PROPERTIES, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory


LIFEHOUSE CLARE PROPERTIES, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory



ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE







LIFEHOUSE MT. PLEASANT PROPERTIES, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory


LIFEHOUSE MT. PLEASANT PROPERTIES II, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory



ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE








LIFEHOUSE - OAKRIDGE MANOR DIXON PROPERTIES, LLC,
an Illinois limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory


LIFEHOUSE - OAKRIDGE MANOR ROCKFORD PROPERTIES, LLC,
an Illinois limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky

ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE


Title:     Authorized Signatory






LIFEHOUSE PRESTIGE COMMONS PROPERTIES, LLC, a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

            
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory



LEISURE LIVING PROPERTIES – BUCHANAN, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

            
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory


ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE










LIFEHOUSE BUCHANAN PROPERTY-II, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory



LEISURE LIVING PROPERTIES – GRAND RAPIDS, LLC, a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

            
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory

ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE











LEISURE LIVING PROPERTIES – HOLLAND, LLC, a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof            
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky            
Name: Jordan Socaransky
Title:     Authorized Signatory

ADDITIONAL SIGNATURE PAGES TO
FIRST AMENDMENT TO AGREEMENT OF SALE

Exhibit 10.35

SECOND AMENDMENT TO AGREEMENT OF SALE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE (this “ Amendment ”) is made and entered effective as of August 7, 2014 (the “ Effective Date ”), by and by and among LEISURE LIVING PROPERTIES - HOLT, LLC , a Delaware limited liability company, LEISURE LIVING PROPERTIES - DEWITT, LLC , a Delaware limited liability company, LIFEHOUSE CRYSTAL MANOR PROPERTY, LLC , a Michigan limited liability company, LIFEHOUSE WALDON WOODS PROPERTY, LLC , a Michigan limited liability company, LIFEHOUSE - GOLDEN ACRES PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE – GOLDEN ACRES PROPERTIES II, LLC , a Michigan limited liability company, LIFEHOUSE GRAND BLANC PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE CLARE PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE MT. PLEASANT PROPERTIES, LLC , a Michigan limited liability company, LIFEHOUSE MT. PLEASANT PROPERTIES II, LLC , a Michigan limited liability company, LIFEHOUSE - OAKRIDGE MANOR DIXON PROPERTIES, LLC , an Illinois limited liability company, LIFEHOUSE - OAKRIDGE MANOR ROCKFORD PROPERTIES, LLC , an Illinois limited liability company, LIFEHOUSE PRESTIGE COMMONS PROPERTIES, LLC , a Michigan limited liability company, LEISURE LIVING PROPERTIES – BUCHANAN, LLC , a Michigan limited liability company, LIFEHOUSE BUCHANAN PROPERTY-II, LLC , a Michigan limited liability company, LEISURE LIVING PROPERTIES – GRAND RAPIDS, LLC , a Michigan limited liability company, and LEISURE LIVING PROPERTIES – HOLLAND, LLC , a Michigan limited liability company (collectively, “ Sellers ” and individually, a “ Seller ”, as the context requires), LIFEHOUSE HOLDINGS, LLC , a Delaware limited liability company (the “ Seller Representative ”) and AMERICAN REALTY CAPITAL HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P ., a Delaware limited partnership (“ ARC OP I ”).
WHEREAS , Seller and ARC OP I entered into that certain Agreement of Sale dated June 16, 2014, as amended by that certain First Amendment to Agreement of Sale dated July 20, 2014 (the “ Agreement ”), and Seller and ARC OP I desire to further 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, Seller, ARC OP I and Purchaser (as herein defined) agree as follows:

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


1



2.
Assignment . ARC OP I hereby assigns the Agreement and all of its rights and obligations thereunder to AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P ., a Delaware limited partnership (the “ Purchaser ”); and Purchaser hereby accepts and acknowledges such assignment and assumes and agrees to perform such obligations. Seller acknowledges and consents to such assignment and acknowledges and agrees that, notwithstanding the requirements and provisions of Section 19(e) of the Agreement, (i) ARC OP I retains no rights or obligations under the Agreement, and (ii) AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P ., a Delaware limited partnership is hereafter, the “Purchaser” for all purposes of the Agreement. By its signature below, Purchaser acknowledges that all knowledge of ARC OP I shall be imputed to Purchaser for all purposes of the Agreement, and Purchaser affirms and makes to Seller all of the representations and warranties of “Purchaser” set forth in Section 9 of the Agreement.

3.
Purchaser Credit . Without limitation of any other credits provided in the Agreement, at Closing Seller will provide a credit to Purchaser in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00).

4.
Closing Date . Notwithstanding anything in the Agreement to the contrary, the parties agree that (i) the Closing for all Properties located in the State of Michigan will occur on August 28, 2014 or such later date as to which the parties may otherwise mutually agree upon, and (ii) the Closing for all Properties located in the State of Illinois will occur on the date which is thirty-one (31) days following the submission by Sellers of notice to residents of such Properties of the change of ownership occurring with respect to such Properties required by applicable regulations.

5.
Estoppel Certificates . Seller will make commercially reasonable efforts to have estoppels previously provided on behalf of Purchaser relating to certain easements and other third-party rights identified in the Title Commitments executed by applicable third-parties prior to Closing. For the avoidance of doubt, the receipt of executed copies of such estoppels is not a condition to Closing that would otherwise allow Purchaser to delay Closing. For purposes of the foregoing, if (i) the applicable Seller sends the proposed estoppel certificates to the applicable easement party using the notice address provided in the applicable easement document (if any), or using the address of the benefitted parcel in the applicable easement document, (ii) the applicable Seller sends a follow up notice to such address, and the applicable Seller receives no response, then the foregoing efforts shall be deemed to satisfy the requirement to use “commercially reasonable efforts” to obtain the estoppel.

2




6.
Title Objections . Purchaser previously delivered its notice of title and survey objections to Seller in accordance with Section 4(a) of the Agreement. Such notice included objections to the Chesterfield, Michigan title commitment File No. 14000070840 issued by Stewart Title Guaranty Company (the “ Commitment ”) and the related survey relating to a certain Facility known as Prestige Commons located in Chesterfield, Michigan (the “ Chesterfield Property ”). In particular, Purchaser specifically objected to an encroachment of the building into a Detroit Edison Underground Easement recorded in Book 16223, page 822 of the public records (the “ Applicable Easement ”), as described in the Commitment, and as depicted on the survey. Seller indicated in its Seller’s Response Notice that Seller will not cure this objection. Accordingly, Purchaser hereby reserves its right to terminate the Agreement solely with respect to the Chesterfield Property, unless at or prior to Closing, Purchaser or Seller is able to obtain one of the following (hereinafter, the “ Chesterfield Title Condition ”): (i) written evidence, in recordable form, that Detroit Edison has permanently abandoned the use of the Applicable Easement, or (ii) a title insurance commitment issued by either Stewart Title, First American Title Insurance Company, or another title insurance company reasonably acceptable to Purchaser, with an endorsement in the form of Exhibit A attached hereto or a similar endorsement containing substantially similar coverage for Purchaser. In the event the foregoing Chesterfield Title Condition has not been satisfied at the time for the scheduled Closing to occur under the Agreement, then (w) Purchaser shall be obligated to proceed to Closing (on the schedule date for Closing) with respect to all of the other Properties other than the Chesterfield Property, (x) the applicable portion of the Purchase Price allocable to the Chesterfield Property shall not be paid unless and until a closing occurs with respect to the Chesterfield Property, (y) the applicable portion of the Deposit allocable to the Chesterfield Property shall be retained by the Escrow Agent, and (z) the closing solely with respect to the Chesterfield Property shall be delayed and shall occur ten (10) business days after the Chesterfield Title Condition has been satisfied, provided, however, that in the event the closing on the Chesterfield Property has not occurred on or before sixty (60) days after the closing occurs on the remainder of the Properties, then either party shall have the right to terminate the Agreement solely with respect to the Chesterfield Property.
7.
Excluded Liabilities . Sellers and Purchaser hereby acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, the term “Excluded Liabilities” shall include all liabilities of the Operators arising prior to Closing. Neither New Operator nor Purchaser shall be deemed to assume any of the liabilities of the Operators arising prior to Closing.


3



8.
Due Diligence Notice . The Due Diligence Notice required by Section 4(d)(iii) of the Agreement is hereby deemed to have been given by Purchaser indicating Purchaser’s election to consummate the purchase of the Properties in accordance with the terms of the Agreement.

9.
Agreement Remains In Effect . The Agreement, as previously amended and modified by this Amendment, is hereby ratified and affirmed as binding and in full force and effect.

10.
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.]



4



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

ARC OP I:
AMERICAN REALTY CAPITAL HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P., a Delaware limited partnership

By: American Realty Capital Healthcare Trust, Inc.,
   a Maryland corporation,
   its general partner
 
By:        /s/ Edward M. Weil, Jr.          
Name: Edward M. Weil, Jr.
Title: President
      

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 PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




SELLER REPRESENTATIVE:

LIFEHOUSE Holdings, LLC,
a Delaware limited liability company

By:
LifeHouse Investors I, LLC,
a Delaware limited liability company, its Sole Member


By:     /s/ Marc Porosof                    
Name: Marc Porosoff
Title:     Authorized Signatory


By:     /s/ Jordan Socaransky                    
Name: Jordan Socaransky
Title:      Authorized Signatory

ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




SELLERS:
LEISURE LIVING PROPERTIES - HOLT, LLC,
a Delaware limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


LEISURE LIVING PROPERTIES - DEWITT, LLC,
a Delaware limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
    
    
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory



ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE



LIFEHOUSE CRYSTAL MANOR PROPERTY, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


LIFEHOUSE WALDON WOODS PROPERTY, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory

ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




LIFEHOUSE - GOLDEN ACRES PROPERTIES, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory



LIFEHOUSE – GOLDEN ACRES PROPERTIES II, LLC, a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory

ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




LIFEHOUSE GRAND BLANC PROPERTIES, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


LIFEHOUSE CLARE PROPERTIES, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




LIFEHOUSE MT. PLEASANT PROPERTIES, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


LIFEHOUSE MT. PLEASANT PROPERTIES II, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory

ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




LIFEHOUSE - OAKRIDGE MANOR DIXON PROPERTIES, LLC,
an Illinois limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


LIFEHOUSE - OAKRIDGE MANOR ROCKFORD PROPERTIES, LLC,
an Illinois limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory

ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




LIFEHOUSE PRESTIGE COMMONS PROPERTIES, LLC, a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

            
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory



LEISURE LIVING PROPERTIES – BUCHANAN, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

            
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




LIFEHOUSE BUCHANAN PROPERTY-II, LLC,
a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member
    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory



LEISURE LIVING PROPERTIES – GRAND RAPIDS, LLC, a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

            
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE




LEISURE LIVING PROPERTIES – HOLLAND, LLC, a Michigan limited liability company

By:
LifeHouse Holdings, LLC, a Delaware limited liability company, its Sole Member

By:
LifeHouse Investors I, LLC, a Delaware limited liability company, its Sole Member

    
        
By:     /s/ Marc Porosof        
Name: Marc Porosoff
Title: Authorized Signatory

By:     /s/ Jordan Socaransky        
Name: Jordan Socaransky
Title:     Authorized Signatory


ADDITIONAL SIGNATURE PAGES TO
SECOND AMENDMENT TO AGREEMENT OF SALE

 

Exhibit 10.36

 

ASSET PURCHASE AGREEMENT

 

By and Among

 

AMERICAN REALTY CAPITAL HEALTHCARE
TRUST II OPERATING PARTNERSHIP, L.P.

 

as “ Purchaser ”

 

and

 

PHBC REALTY, LLC,

PHDC REALTY, LLC,

PHMC REALTY, LLC,

PHCA REALTY, LLC,

PHEM REALTY, LLC,

PHGG REALTY, LLC,

PHBS REALTY, LLC,

PHGY REALTY, LLC,

PHKC CLEVELAND REALTY, LLC, and

PHKC SWOPE REALTY, LLC,

as “ Seller ”

 

Property Names and Locations:

 

Cassville Health Care and Rehab – Cassville, Missouri
Big Spring Care Center – Humansville, Missouri
Country Aire Retirement Estates – Lewistown, Missouri
Buffalo Prairie Care Center – Buffalo, Missouri
Edgewood Manor Nursing Home – Raytown, Missouri
Georgian Gardens – Potosi, Missouri
Golden Years – Harrisonville, Missouri
Gregory Ridge Living Center – Kansas City, Missouri
Parkway Health and Rehab – Kansas City, Missouri
Marshfield Care Center – Marshfield, Missouri

 

Dated as of July 2, 2014

 

 
 

  

Table of contents

 

    Page
     
ARTICLE 1 Definitions and Certain Rules of Construction 1
     
Section 1.1 Defined Terms 1
Section 1.2 Certain Definitions . 6
Section 1.3 Rules of Construction 6
     
ARTICLE 2 Purchase and Sale of the Purchased Property 7
     
Section 2.1 Sale of Purchased Property 7
Section 2.2 Purchased Property 7
Section 2.3 Excluded Property 8
Section 2.4 Title to Real Property and Surveys 8
Section 2.5 Assumed Liabilities 11
Section 2.6 Excluded Liabilities 11
     
ARTICLE 3 Purchase Price; Payment of Purchase Price; Allocation 12
     
Section 3.1 Purchase Price and Deposit 12
Section 3.2 Payment of Purchase Price. 13
Section 3.3 Allocation of Purchase Price 13
Section 3.4 Prorations 14
     
ARTICLE 4 Certain Other Covenants and Agreements 16
     
Section 4.1 Inspection and Due Diligence 16
Section 4.2 Conduct of Business Prior to the Closing Date 18
Section 4.3 Notification of Certain Matters 19
Section 4.4 Employees; Accrued Vacation, Sick Pay, etc. 20
Section 4.5 Confidentiality 20
Section 4.6 Expenses and Taxes 21
Section 4.7 Waiver of Bulk Sales and Indemnification 22
Section 4.8 Exclusivity 22
Section 4.9 Anti-Trust Review 22
Section 4.10 Fines and Penalties 22
Section 4.11 Further Assurances 23
Section 4.12 Delivery of Schedules 23
     
ARTICLE 5 Closing 24
     
Section 5.1 Closing 24
Section 5.2 Conditions to Seller’s Obligations 24
Section 5.3 Conditions to Purchaser’s Obligations 24
Section 5.4 Deliveries by Seller 26
Section 5.5 Deliveries by Purchaser 27
Section 5.6 Non-Fulfillment of Closing Conditions 28
Section 5.7 Post-Closing Actions 29
Section 5.8 Termination During Due Diligence 29
     
ARTICLE 6 Representations and Warranties of Seller 30
     
Section 6.1 Organization and Standing 30
Section 6.2 Valid and Binding Obligations 30
Section 6.3 Title; Purchased Property Complete 30
Section 6.4 Taxes and Tax Returns 30
Section 6.5 Execution and Delivery 31
Section 6.6 Contracts and Leases 31
Section 6.7 Residency Agreements and Related Matters 31

 

 
 

   

Section 6.8 Permits and Licenses 32
Section 6.9 Insurance 32
Section 6.10 Employees 32
Section 6.11 Litigation 33
Section 6.12 Compliance with Laws 33
Section 6.13 Financial Statements 34
Section 6.14 Real Property 34
Section 6.15 Environmental Matters 35
Section 6.16 Brokers, Finders 35
Section 6.17 FIRPTA 35
Section 6.18 Solvency 35
Section 6.19 Consent of Third Parties 36
Section 6.20 No Governmental Approvals; Permits 36
Section 6.21 Assessments 36
Section 6.22 Title Encumbrances 36
Section 6.23 Affordable Housing Units 36
Section 6.24 Loans 37
Section 6.25 No Other Warranties 37
     
ARTICLE 7 Representations and warranties of Purchaser 37
     
Section 7.1 Organization and Standing 37
Section 7.2 Execution and Delivery 37
Section 7.3 Solvency 38
Section 7.4 Consent of Third Parties 38
Section 7.5 No Governmental Approvals 38
Section 7.6 Brokers, Finders 38
     
ARTICLE 8 I ndemnification 38
     
Section 8.1 Indemnification by Seller 38
Section 8.2 Indemnification by Purchaser 39
Section 8.3 Indemnification Limits; Survival 39
Section 8.4 Procedures Regarding Third Party Claims 40
Section 8.5 General Qualifications on Indemnification 41
Section 8.6 Exclusivity 42
Section 8.7 Effective Upon Closing 42
     
ARTICLE 9 Termination 43
   
ARTICLE 10 Miscellaneous 43
     
Section 10.1 Access to Books and Records after Closing 43
Section 10.2 Notices 44
Section 10.3 Good Faith; Cooperation 45
Section 10.4 Assignment; Exchange Cooperation; Successors in Interest 45
Section 10.5 No Third Party Beneficiaries 45
Section 10.6 Severability 45
Section 10.7 Purchaser Records Rights 45
Section 10.8 Controlling Law; Integration; Amendment; Waiver 46
Section 10.9 Time 46
Section 10.10 Survival 46
Section 10.11 Eminent Domain - Condemnation 46
Section 10.12 Risk of Loss 47
Section 10.13 Attorneys’ Fees 47
Section 10.14 Covenant Not to Compete 47
Section 10.15 Waiver of Jury Trial 47
Section 10.16 Construction 47
Section 10.17 Execution in Counterparts 48

 

- ii -
 

  

Exhibits

 

Exhibit   Description
     
Exhibit A   Escrow Agreement
Exhibit B   Post-Closing Escrow Agreement
Exhibit C   Deed
Exhibit D   Bill of Sale and Assignment
Exhibit E   Property Leases
Exhibit F   Assumption Agreement

 

- iii -
 

  

Schedules

 

Schedule   Title
     
Schedule 1.1(a)   Assumed Liabilities
     

Schedule 1.1(c)(i) and Schedule 1.1(c)(ii)

 

 

 

Legal Description of Purchased Real Property

 

     
Schedule 2.4(a)   Permitted Title Exceptions
     
Schedule 2.4(g)   Licenses, Leases Easements and Other Rights Related to Real Property
     
Schedule 4.1(a)   Due Diligence Information
     
Schedule 5.4(m)   Third Party Consents
     
Schedule 6.3   Material Assets or Rights Not Included in Purchased Property
     
Schedule 6.5   Execution and Delivery – No Contravention
     
Schedule 6.6   Contracts and Leases
     
Schedule 6.7   Permits and Licenses
     
Schedule 6.8   Insurance; Three Year Claim History
     
Schedule 6.09   Employee Claims
     
Schedule 6.11   Litigation, etc.
     
Schedule 6.12   Compliance with Laws
     
Schedule 6.13   Financial Statements
     
Schedule 6.14   Real Property Compliance
     
Schedule 6.15   Environmental Matters
     
Schedule 6.19   Third Party Consents

 

- iv -
 

  

Schedule 6.20   Government Approvals
     
Schedule 6.21   Assessments
     
Schedule 6.22   Title Encumbrances
     
Schedule 6.24   Loans

 

- v -
 

  

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (the “ Agreement ”) is made and entered into this 2nd day of July, 2014 (the “ Effective Date ”), by and among AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P. , a Delaware limited partnership (“ Purchaser ”) and PHBC REALTY, LLC, PHDC REALTY, LLC, PHMC REALTY, LLC, PHCA REALTY, LLC, PHEM REALTY, LLC, PHGG REALTY, LLC, PHBS REALTY, LLC, PHGY REALTY, LLC, PHKC CLEVELAND REALTY, LLC, and PHKC SWOPE REALTY, LLC , each a Delaware limited liability company (collectively, the “ Seller ”).

 

Recitals:

 

Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires to purchase from Seller, the Real Property (as defined herein) along with certain other related assets consisting of the Purchased Property described herein.

 

This Agreement sets forth the terms and conditions to which the parties have agreed.

 

Agreements:

 

NOW, THEREFORE , in consideration of the premises and the mutual promises set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

 

ARTICLE 1
Definitions and
Certain Rules of Construction

 

Section 1.1   Defined Terms.  The following capitalized terms shall have the meanings specified in this section. Other terms are defined in the text of this Agreement, and throughout this Agreement, those terms shall have the meanings respectively ascribed to them.

 

“ Assumed Liabilities ” means only the Seller’s obligations and liabilities listed on Schedule 1.1(a) attached hereto and only to the extent such obligations and liabilities arise or accrue at any time after 11:59 PM on the date immediately preceding the Closing Date.

 

“ Business ” means all aspects of the operation of each Facility as a skilled nursing facility.

 

“ Closing ” means the consummation of the transactions contemplated by this Agreement with respect to the Facilities. Neither party will need to be present at Closing, it being anticipated that the parties will deliver all Closing documents and deliverables in escrow to the

 

 
 

 

Escrow Agent (as defined herein) (or if both Purchaser and Seller agree, to Purchaser’s and/or Seller’s counsel) prior to the date of Closing.

 

“ Closing Date ” shall have the meaning set forth in Section 5.1 hereof.

 

“ Environmental Laws ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. , Hazardous Materials Transportation Act, 49 U.S.C. § 1802, the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. , the Toxic Substance Control Act of 1976, as amended, 15 U.S.C. § 2601 et seq. , or any other federal, state, local or other governmental legislation, statute, law, code, rule, regulation or ordinance identified by its terms as pertaining to the protection of the environment, including laws relating to the treatment, storage or disposal of Hazardous Substances, in each case as in effect on the Effective Date.

 

“ Facilities ” means collectively the facilities known as:

 

(i)          Cassville Health Care and Rehab located in Cassville, Missouri and consisting of sixty (60) skilled nursing units (also individually referred to as the Cassville Facility ”); and

 

(ii)         Big Spring Care Center located in Humansville, Missouri and consisting of sixty (60) skilled nursing units (also individually referred to as the “ Big Spring Facility ”); and

 

(iii)        Country Aire Retirement Estates located in Lewistown, Missouri and consisting of sixty (60) skilled nursing units and sixteen (16) licensed residential care beds (also individually referred to as the “ Country Aire Facility ”); and

 

(iv)        Buffalo Prairie Care Center located in Buffalo, Missouri and consisting of sixty (60) skilled nursing units (also individually referred to as the “ Buffalo Facility ”); and

 

(v)         Edgewood Manor Nursing Home located in Raytown, Missouri and consisting of sixty-six (66) skilled nursing units (also individually referred to as the “ Edgewood Manor Facility ”); and

 

(vi)        Georgian Gardens located in Potosi, Missouri and consisting of one-hundred twenty (120) skilled nursing units (also individually referred to as the “ Georgian Gardens Facility ”); and

 

(vii)       Golden Years located in Harrisonville, Missouri and consisting of one-hundred thirty-two (132) skilled nursing units (also individually referred to as the “ Golden Years Facility ”); and

 

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(viii)      Gregory Ridge Living Center located in Kansas City, Missouri and consisting of one-hundred sixteen (116) skilled nursing units (also individually referred to as the “ Gregory Ridge Facility ”); and

 

(ix)         Parkway Health and Rehab located in Kansas City, Missouri and consisting of ninety-seven (97) skilled nursing units, (also individually referred to as the “ Parkway Facility ”); and

 

(x)          Marshfield Care Center located in Marshfield, Missouri and consisting of seventy-seven (77) skilled nursing units (also individually referred to as the “ Marshfield Facility ”) The Marshfield Facility includes both a Facility known as the Marshfield Care Center and a facility known as Marshfield Place.

 

Each of the Facilities is referred to individually herein as a “ Facility .”

 

“Government Program ” means the federal Medicare program, any state Medicaid program, and such other similar federal, state, or local reimbursement or governmental programs for which any Facility is eligible.

 

“ Hazardous Substance ” means petroleum, including crude oil or any fraction thereof, flammable explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, any material containing polychlorinated biphenyls, and any of the substances defined as “hazardous substances” or “toxic substances” or otherwise identified and regulated under any Environmental Laws.

 

“ Holdback Amount ” means an amount equal to four percent (4.0%) of the Purchase Price paid at Closing for each Facility.

 

“Improvements” means all buildings, facilities, and other improvements constructed on the Purchased Property as of the date of Closing.

 

“ IRC ” means the Internal Revenue Code of 1986, as amended, and any regulations or guidance issued thereunder.

 

“ Lien ” means any mortgage, deed to secure debt, deed of trust, pledge, hypothecation, title defect, right of first refusal, security or other adverse interest, encumbrance, claim, option, lien, lease or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, affecting any assets or property, including any agreement to give or grant any of the foregoing, any conditional sale or other title retention agreement, and the filing of or agreement to give any financing statement with respect to any assets or property under the Uniform Commercial Code or comparable law of any jurisdiction.

 

“ Material Adverse Change ” means any occurrence between the Effective Date and the Closing Date which results in a material adverse change in the Purchased Assets or the financial condition or results of operations of the Facilities, taken as a whole; provided, however , that

 

3
 

  

none of the following shall in any event be deemed a Material Adverse Change: (i) any change resulting from changes in any law of regulation following the Effective Date; (ii) any change resulting from announcement or pendency of the transactions contemplated herein; (iii) any change made pursuant to the terms of this Agreement or with Purchaser’s express written consent; or (iv) changes, events or conditions affecting the United States economy as a whole or affecting the industry in which the Seller operates, solely to the extent that Seller is not materially disproportionately and adversely affected by such changes, events or conditions as compared to other similarly situated operators in the state of Missouri.

 

“ Operator ” means the current, licensed operator of each Facility, specifically,

 

(i)           PHBC, LLC , a Delaware limited liability company, with respect to the Cassville Facility; and

 

(ii)          PHBS, LLC , a Delaware limited liability company, with respect to the Big Spring Facility; and

 

(iii)         PHCA, LLC , a Delaware limited liability company, with respect to the Country Aire Facility; and

 

(iv)         PHDC, LLC , a Delaware limited liability company, with respect to the Buffalo Facility; and

 

(v)          PHEM, LLC , a Delaware limited liability company, with respect to the Edgewood Manor Facility; and

 

(vi)         PHGG, LLC , a Delaware limited liability company, with respect to the Georgian Gardens Facility; and

 

(vii)        PHGY, LLC , a Delaware limited liability company, with respect to the Golden Years Facility; and

 

(viii)       PHKC CLEVELAND, LLC , a Delaware limited liability company, with respect to the Gregory Ridge Facility; and

 

(ix)          PHKC SWOPE, LLC , a Delaware limited liability company, with respect to the Parkway Facility; and

 

(x)           PHMC, LLC , a Delaware limited liability company, with respect to the Marshfield Care Center portion of the Marshfield Facility; and

 

(xi)          PHMP, LLC , a Delaware limited liability company, with respect to the Marshfield Place portion of the Marshfield Facility.

 

“ Permitted Encumbrances ” means (i) liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings and which are satisfied or discharged of

 

4
 

  

record at or prior to Closing pursuant to Section 2.4(f) below; (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar liens arising through Seller in the ordinary course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings and which are satisfied or discharged of record at or prior to Closing pursuant to Section 2.4(f) below, and (iii) the Permitted Title Exceptions.

 

“ Purchased Personal Property ” is the Purchased Property other than the Real Property, including intangible Purchased Property.

 

“ Purchased Property ” is the property of Seller to be sold to Purchaser pursuant to this Agreement as set forth in Section 2.2 hereof.

 

“ Real Property ” shall mean,

 

(i)          with respect to the Cassville Facility, that certain parcel of real property located at 1300 Country Farm Road, Cassville, Missouri and more particularly described in Schedule 1.1(c)(i) attached hereto; and

 

(ii)         with respect to the Big Spring Facility, that certain parcel of real property located at 202 East Mill Street, Humansville, Missouri and more particularly described in Schedule 1.1(c)(ii) attached hereto; and

 

(iii)        with respect to the Country Aire Facility, that certain parcel of real property located at 18540 State Highway 16, Lewistown, Missouri and more particularly described in Schedule 1.1(c)(iii) attached hereto; and

 

(iv)        with respect to the Buffalo Facility, that certain parcel of real property located at 631 West Main Street, Buffalo, Missouri and more particularly described in Schedule 1.1(c)(iv) attached hereto; and

 

(v)         with respect to the Edgewood Manor Facility, that certain parcel of real property located at 11900 Jessica Lane, Raytown, Missouri and more particularly described in Schedule 1.1(c)(v) attached hereto; and

 

(vi)        with respect to the Georgian Gardens Facility, that certain parcel of real property located at 1 Georgian Gardens, Potosi, Missouri and more particularly described in Schedule 1.1(c)(vi) attached hereto; and

 

(vii)       with respect to the Golden Years Facility, that certain parcel of real property located at 2001 Jefferson Parkway, Harrisonville, Missouri and more particularly described in Schedule 1.1(c)(vii) attached hereto; and

 

(viii)      with respect to the Gregory Ridge Facility, that certain parcel of real property located at 7001 Cleveland Avenue, Kansas City, Missouri and more particularly described in Schedule 1.1(c)(viii) attached hereto; and

 

5
 

  

(ix)         with respect to the Parkway Facility, that certain parcel of real property located at 2323 Swope Parkway, Kansas City, Missouri and more particularly described in Schedule 1.1(c)(ix) attached hereto; and

 

(x)          with respect to the Marshfield Facility, that certain parcel of real property located at 820 South White Oak Road, Marshfield, Missouri and more particularly described in Schedule 1.1(c)(x) attached hereto.

 

in each instance together with all the buildings, fixtures, structures, and improvements thereon, and all easements and rights of way serving or benefiting such property.

 

“ Residency Agreement ” means any agreement between Seller and an individual contracting for such individual’s residency at a Facility, including without limitation any admissions agreements for residents. The parties hereby acknowledge that Seller is not a party to any Residency Agreement and has no intention to become a party to any Residency Agreement.

 

“ Seller’s Knowledge ” means the actual knowledge of Ben Klein following reasonable inquiry of and consultation with the Administrator of each Facility, in connection with the execution of this Agreement and the preparation of Schedules to this Agreement prior to Closing.

 

“ Seller Parties ” means collectively the Seller and the Operators.

 

Section 1.2  Certain Definitions . For purposes of this Agreement:

 

“ herein, ” “ hereunder, ” “ hereof, ” “ hereinbefore, ” “ hereinafter ” and other equivalent words refer to this Agreement in its entirety and not solely to the particular portion of this Agreement in which such word is used, and references to “ this article, ” “ this section, ” “ this paragraph, ” “ this subparagraph ” or similar references to a specific part of this Agreement shall refer to the particular article, section, paragraph, subparagraph or specific part in which such reference appears;

 

“ party ” or “ parties ” means each or all, as appropriate, of the entities who have executed and delivered this Agreement, each permitted successor or assign of a party, and when appropriate to effect the binding nature of this Agreement for the benefit of another party, any other successor or assign of a party; and

 

“ person ” means any individual, sole proprietorship, partnership, joint venture, corporation, estate, trust, unincorporated organization, association, limited liability company, institution or other entity, including any that is a governmental authority.

 

Section 1.3  Rules of Construction .  For purposes of this Agreement:

 

(a)          “ including ” and any other words or phrases of inclusion shall not be construed as terms of limitation, so that references to “included” matters shall be regarded as non

 

6
 

  

exclusive, non-characterizing illustrations; “ copy ” or “ copies ” means that the copy or copies of the material to which it relates are true, correct and complete;

 

(b)          “ shall, ” “ will, ” and “ agrees ” are mandatory, and “ may ” is permissive;

 

(c)          titles and captions of or in this Agreement are inserted only as a matter of convenience and in no way define, limit, extend or describe the scope of this Agreement or the intent of any of its provisions;

 

(d)          whenever the context so requires, the singular includes the plural and the plural includes the singular, and the gender of any pronoun includes the other gender;

 

(e)          each Exhibit and Schedule referred to in this Agreement and each attachment to any of them or this Agreement is hereby incorporated by reference into this Agreement and is made a part of this Agreement as if set out in full in the first place that reference is made to it; and

 

(f)          every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party hereto, regardless of which party was more responsible for the preparation of this Agreement.

 

ARTICLE 2
Purchase and Sale of the Purchased Property

 

Section 2.1  Sale of Purchased Property.   Subject to the provisions of this Agreement, Seller shall sell all of the Purchased Property to Purchaser, free and clear of all Liens and liabilities whatsoever, except for the Assumed Liabilities and the Permitted Encumbrances.

 

Section 2.2  Purchased Property.   The Purchased Property shall include the following:

 

(a)          all equipment, furniture, fixtures and signage of Seller affixed to the Real Property;

 

(b)          the Real Property as more particularly described on Schedule 1.1(c) attached hereto;

 

(c)          subject to applicable laws and regulations, all transferable licenses, permits, certificates, approvals, and other governmental or regulatory authorizations necessary for or incident to the ownership of the Real Property;

 

(d)          all warranties and guarantees regarding the installation, application, manufacture, composition and/or inspection of the Real Property, and all other manufacturer and third-party warranties and guarantees relating to any of the Real Property, to the extent such warranties and guarantees remain in effect and are assignable by Seller; and

 

7
 

  

(e)          all rights in and to any claims or causes of action to the extent they are in the nature of enforcing a guaranty, warranty, or a contract obligation to complete the Improvements, make repairs, or deliver services to the Real Property other than (i) claims for damages or other monetary loss incurred by Seller prior to the Closing Date and (ii) claims relating to Excluded Liabilities or Excluded Property.

 

To the extent any of the foregoing Purchased Property is available in electronic format, Seller shall provide Purchaser with same in such electronic format, in addition to physical copies of same.

 

Section 2.3  Excluded Property. “ Excluded Property ” means any and all assets of the Seller not constituting the Purchased Assets, including without limitation the following categories of properties:

 

(a)          cash, cash equivalents or other investments;

 

(b)          Seller’s accounts receivable for rent or services, whether provided prior to or after the Closing Date;

 

(c)          Seller’s operating agreements, minute books, membership ledgers and income tax records;

 

(d)          any rights of Seller with respect to federal, state or local tax refunds or credits;

 

(e)          any Seller plans, the assets and insurance policies relating to any Seller plans, and any records relating thereto;

 

(f)          all contracts of insurance and claims and interests in any insurance, insurance claims, escrows, revenues, refunds or right to indemnity from third parties or other rights relating to the Excluded Liabilities;

 

(g)          Seller’s rights and interests under this Agreement;

 

(h)          security deposits and utility deposits, to the extent not added to the Purchase Price at Closing pursuant to Section 3.2 ; and

 

(i)          all Residency Agreements, if any.

 

Section 2.4  Title to Real Property and Surveys.   At Closing, Seller agrees to convey marketable and insurable fee simple title to the applicable Real Property to Purchaser by special warranty deed (the “ Deed ”), subject only to the Permitted Encumbrances. The legal description of the Real Property to be contained in the Deed shall be the same legal description as is attached hereto in the applicable subsection of Schedule 1.1(c ) . In the event the legal description as disclosed by the Survey, as defined in Section 5.4(a) , differs from the legal description in the applicable subsection of Schedule 1.1(c) , or the Initial Commitment reveals

 

8
 

  

any errors or omissions in the legal descriptions, then Seller shall also provide a quitclaim deed utilizing such Survey legal description.

 

(a)          Purchaser shall promptly order from Stewart Title Guaranty Company (“ Title Company ”), an ALTA Form 2006 Commitment (or such other form as is acceptable to Purchaser), with such endorsements as Purchaser shall reasonably require and with insurance coverage over any “gap” period (the “ Initial Commitment ”) for an owner’s title insurance policy (the “ Title Policy ”) in an amount no less than the Purchase Price allocated to the Real Property evidencing that Seller is vested with fee simple title to the Real Property, free and clear of all liens, encumbrances, exceptions or qualifications whatsoever save and except for (a) those exceptions specified as permitted exceptions listed on Schedule 2.4(a) attached hereto (the “ Permitted Title Exceptions ”), (b) those exceptions evidenced in writing as being otherwise acceptable to Purchaser in its sole discretion which shall thereafter be deemed Permitted Title Exceptions, and (c) those exceptions to title which are to be discharged by Seller at or before closing. The Initial Commitment shall also evidence that upon the execution, delivery and recordation of the deeds to be delivered at Closing and the satisfaction of all requirements specified in Schedule B, Section 1 of the Initial Commitment, Purchaser shall acquire fee simple title to the Real Property, subject only to the Permitted Title Exceptions. The cost of the Title Policy shall be shared equally by the parties provided, however, that Seller shall bear the entire costs of any endorsements obtained at Purchaser’s election to address Title Defects and Purchaser shall bear the entire cost of all other title endorsements.

 

(b)          If Purchaser or its attorneys shall determine that the Initial Commitment does not meet the requirements specified above, or that title to the Real Property is unsatisfactory to Purchaser for reasons other than the existence of Permitted Title Exceptions or exceptions which are to be discharged by Seller at or before Closing, then Purchaser shall notify Seller within forty-five (45) days after the Effective Date of those liens, encumbrances, exceptions or qualifications to title which either are not Permitted Title Exceptions, are unsatisfactory to Purchaser or are not contemplated by this Agreement to be discharged by Seller at or before Closing, and any such liens, encumbrances, exceptions or qualifications shall be hereinafter referred to as “Title Defects.”

 

(c)          Purchaser, at Purchaser’s expense, may order surveys of the Real Property (the “ Surveys ”) and Seller hereby grants Purchaser and Purchaser’s agents the right to access the Real Property as may be reasonably required to perform such work. The Surveys shall be prepared by a land surveyor duly licensed and registered as such in the state the Real Property is located, (i) shall be certified by such surveyor to Purchaser, Seller, each parties’ legal counsel and the Title Company, (ii) shall reference the Initial Commitment file number, (iii) shall set forth the legal description of the Real Property precisely as it appears in the Initial Commitment (or the Initial Commitment must be endorsed so that the insured legal description mirrors the legal description in the Surveys, if applicable), (iv) shall identify whether or not each matter referenced in the Initial Commitment applies to the Real Property, (v) shall depict the boundaries of each such item that is capable of being depicted on the Surveys, (v) shall depict any Improvements located upon the Real Property, (vi) shall show all easements, rights-of-way,

 

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setback lines, encroachments and other matters affecting the use or development of the Real Property (vii) shall include the original signature and seal of the surveyor, and (viii) shall be in a form satisfactory to the Title Company to eliminate the standard survey exceptions from the title insurance policy to be issued at Closing. Purchaser shall notify Seller in writing within ten (10) business days after receipt of the Surveys of any Title Defects identified on the Surveys specifying any matters shown on the Surveys which was not set forth on any survey previously delivered to Purchaser and which adversely affect the title to the Real Property and the same shall thereupon be deemed to be Title Defects hereunder.

 

(d)          Within ten (10) business days of receipt from Purchaser of a written notice of any Title Defects, together with a copy thereof, Seller shall notify Purchaser as to whether it will cure such objection, and if it elects to cure any such objection, it shall in good faith diligently endeavor to satisfy or correct, at Seller’s expense, such objection on or before the date of Closing to the satisfaction of Purchaser and the Title Company in such manner to permit the Title Company to either endorse the Initial Commitment or to issue a replacement commitment to eliminate the Title Defect therefrom. If Purchaser identifies more than one Title Defect, Seller shall elect to cure or not to cure as to each individual Title Defect and need not elect to cure all or refuse to cure all. Failure of Seller to give such notice as to a particular Title Defect within such ten (10) business day period shall be deemed to be an election not to cure such objection. In the event Seller does not elect to satisfy or cure any objection of which it is notified, then within five (5) business days after receipt of written notice of Seller’s election, or within five (5) business days after the expiration of Seller’s ten (10) business day notification period if Seller fails to give any such notice, Purchaser shall by written notice to Seller elect one of the following:

 

(i)          to accept Seller’s interest in the applicable Real Property subject to such objections, in which event such title and survey objections shall become part of the Permitted Title Exceptions, and to close the transaction contemplated hereby in accordance with the terms of this Agreement; or

 

(ii)         to terminate this Agreement in its entirety and receive a refund of the Deposit.

 

The failure of Purchaser to give written notice of its election to either accept the Real Property subject to such objections or to terminate this Agreement within the applicable five (5) business day period shall be deemed an election to terminate this Agreement and to receive a refund of the Deposit.

 

(e)          In the event Seller elects in writing to cure any title or survey objection and thereafter is unable, after acting diligently and in good faith, to effect such cure, on or before the date of Closing, then Purchaser shall have, as its sole remedy, the options described in Section 2.4(d) above. Seller shall have no obligation under this Section 2.4(e) to expend monies or to institute litigation to cure Title Defects except those which may be satisfied solely by the payment of money prior to or at Closing.

 

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(f)            Notwithstanding anything in this Agreement to the contrary, Seller covenants and agrees that at or prior to Closing, Seller shall (i) pay in full and cause to be canceled and discharged or otherwise bond and discharge as liens against the Real Property all mechanics’ materialmen’s, repairmen’s, contractors’ or other similar Liens which encumber the Real Property as of the date hereof created by, through or under Seller or which may be filed against the Real Property after the date hereof created by, through or under Seller and on or prior to the Closing Date (ii) pay in full all past due ad valorem taxes and assessments of any kind constituting a lien against the Real Property which are due and payable, and (iii) pay in full or cause to be canceled and discharged all security deeds or other security instruments encumbering the property and all judgments which have attached to and become a lien against the Real Property by, through or under Seller. In the event Seller fails to cause such liens and encumbrances to be paid and canceled at or prior to Closing, Purchaser shall be entitled to pay such reasonable amount to the holder thereof as may be required to pay and cancel same, and to credit against the Purchase Price the amount so paid.

 

(g)          Except as set forth on Schedule 2.4(g) , Seller has not granted any license, lease, easement or other right relating to the use or possession of the Real Property (except (i) under the Residency Agreements previously entered into by Seller and the Residency Agreements entered into by Seller in the ordinary course of business between the Effective Date and the Closing Date; or (ii) as may be set forth in the Title Commitment), and Seller agrees that it shall not grant any such right prior to Closing (other than Residency Agreements in the ordinary course of business, which shall not require Purchaser approval) without the prior written approval of Purchaser, which may be withheld in Purchaser’s absolute discretion.

 

Section 2.5           Assumed Liabilities.   Subject to the terms and conditions of this Agreement, on the Closing Date, Purchaser shall assume and agrees to pay, perform or discharge only the Assumed Liabilities. Other than the Assumed Liabilities, Purchaser shall not assume any of Seller’s debts, obligations or liabilities, of any kind or nature, including without limitation any civil claims or other legal proceedings or legal or regulatory investigations or actions arising out of or during Seller’s ownership, use, operation or management of any of the Purchased Property or the Excluded Property, all of which Seller shall pay, perform and discharge when due. Nothing in this Section 2.5 shall be deemed to preclude either party from contesting any liability or obligation in good faith through the appropriate process.

 

Section 2.6           Excluded Liabilities .

 

All of Seller’s debts, obligations and liabilities, other than the Assumed Liabilities, including any liability, obligation, claim, action, suit, or proceeding pending as of the Closing Date, or any subsequent claim, action, suit, or proceeding arising out of or relating to any such other event occurring (i) prior to the Closing with respect to ownership of the Real Property, and/or (ii) prior to or after the Closing with respect to the operation of the Facilities, including, without limitation, any obligation of the Seller Parties for compliance with applicable federal, state, county, and local tax laws or regulations, including the obligations under such laws for the payment of taxes and the filing of tax returns, under Part 6 of Title I of ERISA and Section 4980B of the IRC, as amended (commonly known as “ COBRA ”), any “employee benefit

 

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plan,” as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ( “ERISA” ) regardless of whether such plan is subject to ERISA, and each bonus, deferred, or incentive compensation, stock purchase, stock option, severance, and termination pay plan or program (the “Plans”) maintained by or on behalf of any Seller Party, the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Occupational Safety and Health Act, the Age Discrimination in Employment Act of 1967, the Americans With Disabilities Act, the Family and Medical Leave Act, or state worker’s compensation and unemployment compensation laws, as now or hereafter amended, and any liabilities related to any overpayment (regardless of reason for such overpayment), adjustment of payments received or non-compliance under any Government Program, are collectively referred to herein as the “ Excluded Liabilities ;” provided, however , that actions commenced following the Closing under the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et. seq. or similar state law seeking remedial action with regard to the Purchased Property, shall not be deemed an Excluded Liability and Seller shall have no liability with respect to any such action.

 

ARTICLE 3
Purchase Price; Payment of Purchase Price; Allocation

 

Section 3.1           Purchase Price and Deposit.

 

(a)           Purchase Price. Subject to any adjustments and prorations expressly provided for in this Agreement, including those described in Section 3.4 (collectively, “ Adjustments ”), the purchase price (the “ Purchase Price ”) for the Purchased Property shall be a total of Fifty-Two Million and No / 100 U.S. Dollars ($52,000,000).

 

(b)           Deposit. The parties acknowledge that within three (3) business days after the Effective Date, Purchaser shall deliver to Stewart Title Guaranty Company (or any other mutually acceptable escrowee) (the “ Escrow Agent ”) One Million and No/100 U.S. Dollars ($1,000,000) (the “ Deposit ”). The term “Deposit” shall mean the Deposit, if and when the Deposit is made, plus any additional amounts deposited as a result of the requirements of Section 5.1 hereof. The Escrow Agent shall hold the Deposit in a non-interest bearing account pursuant to an escrow agreement in the form attached hereto as Exhibit A .

 

(c)          The Deposit shall be paid and returned to Purchaser upon the occurrence of the circumstances described in Section 2.4(d)(ii) , Section 5.6(b) , Section 5.6(c) , Section 5.6(d) , Section 5.8 , ARTICLE 9(a) , ARTICLE 9(b) , ARTICLE 9(d) , ARTICLE 9(e) , Section 10.11 and Section 10.12 in each instance, upon proper written demand of Purchaser to Seller and the Escrow Agent stating the reason for such termination and referencing the section of this Agreement providing Purchaser with the right to do so. Upon receipt of such written demand by Seller, Seller and Purchaser shall direct the Escrow Agent , in writing, to pay and disburse the Deposit immediately to Purchaser (whereupon this Agreement shall terminate and neither party shall have any further rights or obligations hereunder, except as otherwise expressly provided herein).

 

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(d)          The Deposit shall be paid to Seller: (i) at the Closing, should the Closing occur, in partial satisfaction of the Purchase Price as provided in Section 3.2(b) hereof; or (ii) as liquidated damages (and not as a penalty) under the circumstances described in Section 5.6(a) . In each such instance, Seller and Purchaser shall direct the Escrow Agent, in writing, to pay and disburse the Deposit immediately to Seller (whereupon this Agreement shall terminate and neither party shall have any further right or obligations hereunder, except as otherwise expressly provided herein). The parties hereby agree that the Deposit amount constitutes a reasonable forecast of the damages that would be sustained by Seller in such event.

 

(e)          Without limiting Purchaser’s other rights and remedies hereunder, Purchaser may terminate this Agreement for any reason or for no reason whatsoever during the Due Diligence Period (as herein defined) and upon any such termination the Deposit shall be returned to Purchaser.

 

Section 3.2  Payment of Purchase Price.   The Purchase Price shall be paid by Purchaser, at Closing, as follows:

 

(a)          The Purchase Price, as adjusted for any prorations pursuant to Section 3.4 below, and credits and additions described in Section 3.2(b) below, shall be paid at Closing by wire transfer in accordance with wire instructions provided by Seller at least three (3) business days before Closing.

 

(b)          Purchaser shall receive a credit against payment of the Purchase Price by the amount of (i) the Deposit, (ii) unless otherwise paid by Seller, the amounts to be paid by Seller under Section 2.4(a) and Section 4.6(b) of this Agreement. If, at Purchaser’s request, Seller leaves any of Seller’s security deposits or utility deposits in place following Closing, then the amount of any such security deposit or utility deposit shall be added to the Purchase Price and paid to Seller pursuant to Section 3.2(a) .

 

(c)          Purchaser shall deposit the Holdback Amount into an interest-bearing escrow account with the Escrow Agent pursuant to an Escrow Agreement in substantially the form attached hereto as Exhibit B (the “ Post-Closing Escrow Agreement ”). The funds held pursuant to the Post-Closing Escrow Agreement shall be available according to the terms of the Post-Closing Escrow Agreement to secure any obligations of Seller to Purchaser pursuant to Section 3.4(d) and Section 8.1 hereof. The Holdback Amount shall be released to Seller at the end of the fourteenth (14 th ) calendar month following the Closing Date, less any amounts claimed by Purchaser prior to such distribution dates, which shall be held in accordance with the terms of the Post-Closing Escrow Agreement until finally adjudicated.

 

(d)          Purchaser shall assume the Assumed Liabilities.

 

Section 3.3   Allocation of Purchase Price.  With respect to the individual Facilities, the Purchase Price shall be allocated as follows:

 

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Facility   Purchase Price Allocation
     
Cassville Facility   $3,500,000.00
Big Spring Facility   $5,700,000.00
Country Aire Facility   $5,300,000.00
Buffalo Facility   $5,300,000.00
Edgewood Manor Facility   $2,300,000.00
Georgian Gardens Facility   $7,300,000.00
Golden Years Facility   $10,900,000.00
Gregory Ridge Facility   $3,100,000.00
Parkway Facility   $6,000,000.00
Marshfield Facility   $2,600,000.00
Total:   $52,000,000.00

 

Any adjustments to the Purchase Price provided herein that are attributable solely to a particular Facility shall result in an adjustment of the Purchase Price allocated to such Facility. Any adjustments to the Purchase Price provided herein that are attributable to one or more Facilities shall result in a pro-rata adjustment (determined in accordance with the proportional amount of Purchase Price allocated to each Facility) of the Purchase Price allocated to each Facility with respect to which such adjustment is attributable.

 

(b)          Additionally, the parties acknowledge that the transactions contemplated hereunder must be reported in accordance with Section 1060 of the IRC. The parties shall report the transactions contemplated hereunder for all purposes in accordance with the purchase price allocation set forth in Section 3.3 hereto. The parties shall share information and cooperate to the extent necessary to permit the transactions to be properly, timely, and consistently reported.

 

Section 3.4  Prorations.

 

(a)          The following items shall be prorated between Seller and Purchaser as of 11:59 p.m. on the date immediately preceding the Closing Date; prorations credited to Purchaser shall reduce the Purchase Price and pro-rations credited to Seller shall increase the Purchase Price at Closing as follows:

 

(i)          city, state, and county ad valorem taxes for the year in which the Closing occurs based on the ad valorem tax bills for the Real Property, if then available for such year, or if not, then on the basis of the ad valorem tax bill for the Real Property for the immediately preceding year. (If such proration is based on an ad valorem tax bill for the immediately preceding year and should such proration prove to be inaccurate on receipt of the ad valorem tax bill for the Real Property for the year of Closing, then either Seller or Purchaser, as applicable, may demand at any time after Closing a payment from the other party in an amount sufficient to correct such malapportionment); and

 

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(ii)         sanitary sewer taxes and utility charges, if any except to the extent that any such accounts remain in the name of and are the responsibility of any one or more Seller Parties following Closing; provided, however , that Purchaser may elect, prior to Closing, to require that the meters for all utility charges be read and terminated as of the end of the last business day preceding the Closing Date, in which case Seller shall be responsible for and shall pay for all such charges first accruing or relating to the period prior to the Closing Date.

 

Purchaser and Seller shall direct the Escrow Agent to prepare a proposed schedule (the “ Proration Schedule ”) prior to Closing, including the items listed above and any other items the parties determine necessary. Such Proration Schedule shall include all applicable expenses with regard to the Purchased Property. Seller and Purchaser will use all reasonable efforts to finalize and agree upon the Proration Schedule at least two (2) business days prior to Closing.

 

(b)          Seller shall receive all income from the Purchased Property attributable to the period prior to the Proration Date and shall, unless otherwise provided for in this Agreement, be responsible for all expenses of the Purchased Property attributable to the period prior to 11:59 P.M. on the date immediately preceding the Closing Date (the “ Proration Date ”). To the extent any payments from residents are the property of the Seller, in the event Purchaser receives any payment from a resident for rent or other amounts due for any period prior to or after Closing or payment of any other receivable of Seller, Purchaser shall forward such payment to Seller.

 

(c)          Purchaser shall receive all income from the Purchased Property attributable to the period from and after the Proration Date and shall, except as otherwise provided for in this Agreement, be responsible for all expenses of the Purchased Property attributable to the period from and after the Proration Date.

 

(d)          The parties agree that any amounts that may become due under this Section 3.4 shall be paid at Closing as can best be determined. A post-Closing reconciliation of prorated items shall be made by the parties within ninety (90) days after the Closing Date and any amounts due at that time shall be promptly forwarded to the respective party to whom such amounts are due in a lump sum payment. Any additional amounts which may become due after such determination shall be forwarded at the time they are received. Any amounts due under this Section 3.4 which cannot be determined within ninety (90) days after the Closing Date (such as, for example, fiscal year-end real estate taxes) shall be reconciled as soon thereafter as such amounts can be determined. Purchaser and Seller agree that each shall have the right to audit the records of the other in connection with any such post-Closing reconciliation. Any payments made pursuant to this Section 3.4 shall be treated as a purchase price adjustment for income tax purposes.

 

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ARTICLE 4
Certain Other Covenants and Agreements

 

Section 4.1  Inspection and Due Diligence.

 

(a)          Prior to Closing, Purchaser (including its agents and representatives) shall be permitted to inspect the Facility and the Purchased Property. The “ Due Diligence Period ” for purposes of this Agreement means a period commencing on the Effective Date an extending until 5:00 p.m. Eastern on the forty-fifth (45 th ) day following the Effective Date, or if such day is not a business day, on the next business day following such day. The Purchaser shall be entitled to continue all such inspections during and after the Due Diligence Period. Such inspections may include an independent appraisal and environmental assessments (including Phase I assessments and Phase II assessments if Seller consents to any such Phase II assessment which consent shall not be unreasonably withheld, conditioned or delayed), impact study and detailed architectural and engineering inspections of buildings and mechanical systems located on the Real Property and any other inspections which may reasonably be required by potential lenders or investors. Purchaser shall not conduct any drilling, boring, soil testing or other physically intrusive inspections without Seller’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, if done in connection with any Phase II assessment. Seller shall allow Purchaser and its authorized representatives reasonable access upon prior notice during normal business hours and until the Closing to Seller’s executive personnel, properties and records, shall permit examination and testing, and shall furnish Purchaser and its authorized representatives such information concerning the Purchased Property and the Facility as Purchaser reasonably requests. Purchaser and its authorized representatives shall have the right to review and copy all such books, accounts, records, agreements or other documents as it may reasonably deem advisable. Seller shall, upon reasonable request by Purchaser, make available to Purchaser by electronic data room or otherwise, copies of all records, files, correspondence, invoices, resident lists, supplier lists, blueprints, specifications, designs, drawings, business records and plans, operating and financial data, environmental assessments, property reports, permits and regulatory files and other data associated with or used by Seller in connection with its operation of the Business or its ownership or operation of the Purchased Property, including without limitation all of the information requested on attached Schedule 4.1(a) of this Agreement to the extent Seller Parties has possession and control of such information, and in the form in which Seller maintains such information in the ordinary course of its business. Seller shall have no obligation to prepare any summaries, abstracts, compilations or reports in connection with Purchaser’s investigation that Seller Parties do not maintain or compile in the ordinary course of any Seller Party’s business. For purposes of this Agreement, documents or information shall be deemed to have been “made available” to Purchaser if copies have been delivered or viewed by Purchaser in tangible or electronic form, or if such documents or information have been made available at the Facility or on an internet or electronic data site to which Seller has granted Purchaser or its representatives access. Purchaser shall notify Seller in advance of any site visits by Purchaser or its contractors or representatives. All site visits and contacts with Seller personnel shall be coordinated through Ben Klein, or Seller’s counsel, and Purchaser shall not contact any Seller

 

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personnel, residents or service providers directly. If any inspection or test disturbs the Purchased Property, Purchaser will restore the Property to the same condition as existed prior to any such inspection or test, and such obligation to restore the Property shall survive any termination of this Agreement.

 

(b)          Within five (5) business days of the Effective Date (the “ Diligence Materials Due Date ”), Seller shall provide Purchaser with all of the materials in possession or control of the Seller Parties listed on attached Schedule 4.1(a) of this Agreement (collectively, the “ Requested Diligence Materials ”). In the event that Seller’s delivery of any Requested Diligence Materials is delayed beyond the Diligence Materials Due Date, or in the event Purchaser has provided notice to Seller within give (5) business days of receipt that any purported response to the requirements of this Section 4.1(b) is insufficient in Purchaser’s reasonable discretion, the Due Diligence Period shall be extended by the total number of days which elapse between the Diligence Materials Due Date and the date upon which all Requested Diligence Materials have actually been provided to Purchaser or Purchaser has been advised by Seller that such Diligence Materials are not available to Seller, or, as applicable, any insufficient response to the requirements of this Section 4.1(b) has been corrected to Purchaser’s reasonable satisfaction (inclusive of the Diligence Materials Due Date and the last applicable date of delivery or correction, as applicable).

 

(c)          Intentionally omitted.

 

(d)          Purchaser shall pay all costs incurred for any such inspections of the Facilities and the Purchased Property initiated by Purchaser. Purchaser shall indemnify and hold Seller harmless from and against any and all claims for death of or injury to persons or damage to property to the extent arising out of or as a result of the acts or omissions of Purchaser, Purchaser’s authorized representatives, or designees of Purchaser pursuant to the provisions of this Section 4.1 . Purchaser, as well as its consultants and contractors, shall at Seller’s request provide evidence of insurance, sufficient in Seller’s reasonable discretion, to protect Seller from any losses it might incur as a result of Purchaser’s activities incurred in connection with such inspections.

 

(e)          The parties hereto acknowledge that Seller may possess or have access to certain information subject to the Health Insurance Portability and Accountability Act of 1996 and any regulations promulgated thereunder (“ HIPAA ”). Notwithstanding any other provision of this Agreement, Seller shall have no obligation under this Agreement to disclose to Purchaser any information which would violate or put Seller in a position of noncompliance with any city, county, state or federal privacy or security act, law, or regulation or the provisions of HIPAA or which would result in Seller breaching any contractual provisions imposed on Seller with respect to the requirements of HIPAA and/or any such city, county, state, or federal act, law or regulation.

 

(f)          Purchaser may perform or cause to be performed a Phase I Environmental Site Assessment of any portion of the Real Property (the “ Phase I ESA ”). Purchaser shall provide Seller with a copy of the Phase I ESAs within five (5) business days of completion and receipt

 

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of each by Purchaser. Any subsequent amendments thereto will also be provided to Seller within five (5) business days after completion and receipt by Purchaser thereof.

 

(g)          If the Phase I ESA, or any update thereof, reveals areas of environmental concern that, in Purchaser’s sole opinion, warrant further investigation, Purchaser may, at its discretion, request Seller’s consent to commence a Phase II Environmental Site Assessment of the applicable portion of the Real Property (“ Phase II ESA ”; collectively, the “ ESAs ”). A Phase II ESA consists of further investigation of recognized environmental conditions identified in the Phase I ESA including sampling and analysis of soil and groundwater necessary to determine whether or not contamination has occurred. Seller’s consent to conduct a Phase II ESA shall not be unreasonably withheld, conditioned or delayed. If Seller permits Purchaser to conduct a Phase II ESA, Seller will be provided a copy of the Phase II ESA within five (5) business days of completion and receipt by Purchaser. Any subsequent amendments and/or reports relating to the Phase II ESA shall also be delivered to Seller and Purchaser.

 

(h)          The costs of the Phase I ESA and the costs of the Phase II ESA and any updates thereof shall be paid by Purchaser.

 

Section 4.2 Conduct of Business Prior to the Closing Date.   Seller covenants and agrees with Purchaser that from the Effective Date hereof through the Closing Date, except as otherwise expressly contemplated in this Agreement, unless Purchaser otherwise consents in writing (which consent shall not be unreasonably withheld, conditioned or delayed) Seller shall, and shall cause the Operators in their capacities as the operators of the Facilities to:

 

(a)          Use good faith efforts to operate the Facilities in all material respects in the ordinary course of business in a commercially reasonable manner, including (i) incurring expenses consistent with the Seller Parties’ past practices in the operation of the Facilities and (ii) using commercially reasonable efforts to preserve the present business operations of each Facility and the applicable goodwill and relationships with customers, employees, advertisers, suppliers and other contractors related to each Facility.

 

(b)          Operate the Facilities and otherwise conduct business in all material respects in accordance with the terms or conditions of all applicable licenses and permits, all applicable rules and regulations of the State of Missouri, and all other rules, regulations, laws, and orders of all governmental authorities having jurisdiction over any aspect of the operation of the Facilities and all applicable insurance requirements; provided, however , that the foregoing shall not impose on Seller any obligation to make unbudgeted capital improvements or repairs, or to incur any cost or expense in order to comply with any of the foregoing to the extent a Seller Party was not in compliance as of the Effective Date, except to the extent a Seller Party is ordered to do so by a governmental authority having jurisdiction over the Seller Parties.

 

(c)          Maintain the books, records, and financial statements of the Seller Parties consistent with past practices.

 

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(d)          Timely comply in all material respects with all contracts and agreements with third-parties related to the operation of the Facilities.

 

(e)          Not sell, lease, grant any rights in or to or otherwise dispose of or otherwise relinquish control of, or agree to sell, lease or otherwise dispose of, the Purchased Property in whole or in part except for Residency Agreements entered into in the ordinary course, dispositions of assets that are in the ordinary course of business, and if material, are replaced by similar assets of substantially equal or greater value and utility.

 

(f)          Take commercially reasonable efforts to maintain the Purchased Property in the same condition as it exists as of the Effective Date, except for ordinary wear and tear, in a manner consistent with past practices.

 

(g)          Not default on any loans to Seller which are not fully cured or satisfied at Closing.

 

(h)          Not enter into any material contracts outside the ordinary course of business (other than contracts approved by Purchaser or Residency Agreements in the ordinary course of business); provided that Seller shall not enter into any contract which would survive Closing and be binding on the Purchaser or represent a financial obligation of any Operator in excess of in excess of $10,000 per year (other than Residency Agreements in the ordinary course of business), whether or not material, without the consent of Purchaser as provided above.

 

(i)          Not make any alterations or improvements to the Real Property or make any capital expenditure with respect to the Real Property in excess of $10,000 other than those that are currently budgeted for completion, or are required by law, necessary to preserve the coverage under or comply with the terms of any insurance policy with respect to the Purchased Property or are in Seller’s business judgment necessary to address emergency conditions or to maintain the goodwill and competitive standing of the Business.

 

(j)          Maintain normal levels of inventory and supplies on hand for each Facility (including medical supplies, food, beverages, office and kitchen supplies), consistent with past practices and as necessary to comply with applicable laws and regulations.

 

(k)          Make available to Purchaser copies of all internally generated monthly financial reports.

 

(l)          Inform Purchaser promptly regarding the resignation, termination or hiring of the Executive Director or Assistant Director, if any, of any Facility.

 

Section 4.3  Notification of Certain Matters. Seller shall give prompt written notice to Purchaser, and Purchaser shall give prompt written notice to Seller, to the extent either such party becomes aware of (i) the occurrence, or failure to occur, of any event that

 

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would be reasonably likely to cause any of their respective representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Closing Date, and (ii) any failure on their respective parts to comply with or satisfy, in any material respect, any covenant, condition, or agreement to be complied with or satisfied by any of them under this Agreement.

 

Section 4.4  Employees; Accrued Vacation, Sick Pay, etc.

 

(a)          At the Closing, Operator shall, at Operator’s expense, continue the employment to at least ninety percent (90%) of the active and full-time employees who perform services for the Facility (collectively, the “ Employees ”) for at least a thirty (30) day period following the Closing Date (subject to the Operator’s right to terminate an individual for cause) on terms substantially equivalent or better in the aggregate to the compensation and benefit levels provided to such Employees as of the Closing Date.

 

(b)          Seller shall be responsible for complying with the continuation health care coverage requirements of COBRA with respect to any individual who became a “qualified beneficiary” as of or prior to the Closing Date, including as a result of this transaction.

 

(c)          Seller shall pay any severance costs payable with respect to the termination of employment by (or on behalf of) Seller of any Employee, including Employees whose employment is continued by the Operator, pursuant to any severance policies or plans or required by law, including the WARN Act (if applicable).

 

(d)          Seller and Operator shall refrain from taking any action following the Closing with respect to any employees that are terminated or otherwise not retained post-Closing that would subject Purchaser or Operator to liability under the WARN Act and shall fully indemnify Purchaser from any such liability.

 

Section 4.5  Confidentiality .

 

(a)           Confidential Information. Any and all non-public information of any type or description, including, but not limited to, financial statements and projections of Seller, proprietary or trade secret information, whether written or verbal, or any information given to Purchaser by Seller in connection with the transactions contemplated by this Agreement, is proprietary to Seller and confidential in nature, and shall be treated as such by Purchaser, except with the prior written consent of Seller and except to the extent enforcement of its terms and applicable law require public disclosure. This provision shall not apply following the Closing to any such information pertaining to the Purchased Property, nor to any information that is or becomes publicly available through no fault of Purchaser. Purchaser shall have the right to disclose any such information to its professional advisors, lenders, investors and other third parties who need to know such information for the purposes of assisting Purchaser with the negotiation and consummation of this Agreement, provided Purchaser advises such parties of their confidential obligations under this Agreement, and provided Purchaser remains responsible for any violations by such parties.

 

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(b)         Confidentiality of Agreement. The terms of this Agreement shall remain confidential, except with the prior written consent of Seller and Purchaser and except to the extent that enforcement of its terms or applicable law require public disclosure. Neither party shall make any public announcement of the transactions contemplated herein without the express written approval of the other party, which approval shall not be unreasonably withheld. This provision will not apply to Purchaser following any Closing. Purchaser shall permit Seller to review in advance and comment on any public announcement of the Closing of the transactions contemplated herein.

 

(c)         Return of Confidential Information. Purchaser agrees that promptly upon the termination of this Agreement, whether by mutual termination or otherwise (other than upon Closing), Purchaser shall cause all materials and property (originals and copies) of Seller to be immediately returned to Seller, or, at Purchaser’s election, destroyed provided Purchaser provides written certification of such destruction, provided that Purchaser shall be entitled to retain such information to the extent required in order to comply with applicable law, regulation, bona fide document retention policy of Purchaser, or any public disclosure obligations promulgated by the Securities and Exchange Commission any applicable to Purchaser, or until any litigation between Purchaser and Seller arising out of the termination of this Agreement has been finally resolved.

 

(d)         Survival of Confidentiality. This Section 4.5 shall survive the Closing to the extent provided above and shall survive in the event this Agreement is terminated prior to Closing.

 

(e)         Supersedes Previous Agreements. The provisions of this Section 4.5 supersede any prior agreements between the parties relating to confidentiality.

 

Section 4.6  Expenses and Taxes.

 

(a)        Each party shall pay its own expenses and costs incurred in connection with the negotiation and consummation of this Agreement and the transactions contemplated by this Agreement.

 

(b)        Notwithstanding the foregoing:

 

(i)           Seller shall pay one hundred percent (100%) of the real estate transfer tax (other than any applicable city transfer taxes) and the costs of recording any title clearing instruments and fifty percent (50%) of any charge of the Escrow Agent for their services as escrow agent;

 

(ii)         Seller shall pay one hundred percent (100%) of any applicable city transfer taxes, if any;

 

(iii)        The cost of the issuance of the title commitment and the Title Policy or other costs attributable to the title search shall be shared equally by Seller and Purchaser,

 

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provided, however, that Seller shall bear the entire costs of any endorsements obtained at Seller’s election to address Title Defects and Purchaser shall bear the entire cost of all other title endorsements;

 

(iv)        Purchaser shall pay one hundred percent (100%) of any costs attributable the Surveys and fifty percent (50%) of any charge of the Escrow Agent for their services as escrow agent; and

 

(v)         Seller shall pay any person who is entitled to any brokerage commission or finder’s fee in connection with any of the transactions contemplated by this Agreement by reason of any act or omission of Seller, and shall indemnify Purchaser and hold Purchaser harmless against any claims for such commissions or finder’s fees as provided in Section 8.1 . Purchaser shall pay any person who is entitled to any brokerage commission or finder’s fee in connection with any of the transactions contemplated by this Agreement by reason of any act or omission of Purchaser, and shall indemnify Seller and hold Seller harmless against any claims for such commissions or finder’s fees.

 

Section 4.7 Waiver of Bulk Sales and Indemnification.   Purchaser hereby waives compliance by Seller and Seller hereby waives compliance by Purchaser, with the requirements of any applicable bulk sales laws and similar laws, if and to the extent applicable. Seller shall indemnify and hold harmless Purchaser from any and all claims, liabilities, or costs, including reasonable attorneys’ fees, arising out of the parties’ failure to comply with any bulk sales laws and similar laws applicable to the transactions contemplated hereby as provided in Section 8.1 . The foregoing indemnification shall survive the Closing.

 

Section 4.8 Exclusivity.   During the period from the Effective Date to the Closing Date or termination of this Agreement according to the terms hereof, Seller shall not take any action, directly or indirectly, to encourage, initiate or engage or participate in discussions or negotiations with, or provide any information to, any party other than Purchaser, concerning a potential transaction involving the purchase and sale of the Business, any one or more Facilities or any of Purchased Property, the purchase and sale of all or substantially all of the ownership interest of any one or more entities comprising the Seller, or any transaction similar to the foregoing.

 

Section 4.9 Anti-Trust Review.  Each of the parties have independently determined, based upon the advice of their own respective counsel, that the pre-merger filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“ HSR Act ”), do not apply to the transactions contemplated under this Agreement.

 

Section 4.10  Fines and Penalties.

 

Seller covenants and agrees to cure all violations and other deficiencies with scope or severity equal or greater than a “G” level identified in writing by any federal, state, municipal, local or other governmental or quasi-governmental authority (all such matters collectively the “ Violations ”) relating to the Facilities, pay all penalties associated therewith and prepare and

 

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implement any plan of correction required by any such authority. The Purchaser may stay any otherwise pending Closing in the event any material, uncured Violations exist until such time as Seller has corrected any such material Violations in full compliance with applicable laws, orders and directions.

 

Section 4.11 Further Assurances. Each party covenants and agrees that, following the Closing, it will execute, deliver and acknowledge (or cause to be executed, delivered and acknowledged), from time to time, at the reasonable request of the other party and without further consideration, all such further instruments and take all such further action as may be reasonably necessary or appropriate to transfer more effectively to Purchaser, or to perfect or record Purchaser’s title to or interest in the Purchased Property or to enable Purchaser to use or otherwise to confirm or carry out the provisions and intent of this Agreement.

 

Section 4.12 Delivery of Schedules. Seller shall provide all Schedules required by this Agreement (other than those required by ARTICLE 7 hereof, which will be provided by Purchaser by the Schedule Due Date) within ten (10) days following the Effective Date (the “ Schedule Due Date ”). If applicable, the Due Diligence Period shall be extended by the total number of days which elapse between the Schedule Due Date and the date upon which all required Schedules have actually been provided to Purchaser, or, as applicable, any insufficiently completed Schedules have been corrected to Purchaser’s reasonable satisfaction (inclusive of the Schedule Due Date and the last applicable date of delivery or correction, as applicable). Any fact or item disclosed on any Schedule to this Agreement shall be deemed disclosed with regard to all other representations and warranties to which such fact or item may reasonably apply to the extent such disclosure would provide notice to a reasonable person that the information disclosed would also qualify, or constitute an exception to, such other representations and warranties. Seller may from time to time supplement and update such Schedules to reflect any changes since the date of delivery of the original Schedules or any matters of which Seller first acquires Knowledge following the original delivery date of such Schedules. Any such updates or supplements shall be deemed to amend the Schedules for all purposes retroactively to the Effective Date, except that (i) no amendment to Schedules 1.1(a) and 2.4(a) may be made without Purchaser’s written consent, and (ii) any amendments permitted above shall be disregarded (x) in determining whether the conditions to Closing set forth in Section 5.3(a) or Section 5.3(e) below have been satisfied, and (y) for all purposes under this Agreement if Seller intentionally omitted such information from the original Schedules. Notwithstanding the foregoing, if Purchaser has the right to terminate this Agreement pursuant to Sections 5.6(b), (c) or (d) and does not exercise such right as a result of such update to such schedules within ten (10) business days thereof, then such update to the disclosure schedules shall be deemed to have amended the appropriate schedule as of the Effective Date, to have qualified the representations and warranties contained in Section 6 as applicable, as of the Effective Date, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the existence of such matter.

 

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ARTICLE 5
Closing

 

Section 5.1   Closing.   The Closing of the transactions contemplated by this Agreement shall occur remotely, upon the exchange of signatures to the documents contemplated by this Agreement and the other required deliveries of each party hereto described below on such date as mutually agreed by the parties, or the date that is the later of (i) five (5) business days following the expiration of the Due Diligence Period, or (ii) ten (10) business days following the execution of a Property Leases between the applicable Operators and Purchaser unless extended by mutual agreement of Purchaser and Seller or pursuant to Section 5.6 , Section 10.11 , or Section 10.12 . Additionally, Purchaser shall be entitled in its sole discretion to adjourn the scheduled date of Closing with respect to the Facilities by written notice to Seller for up to thirty (30) business days. The date on which the Closing is scheduled to occur (as such date may be extended from time to time pursuant to this Agreement) shall be the “ Scheduled Closing Date ” hereunder. The date on which the Closing actually occurs for each Facility shall be the “ Closing Date ” for purposes of this Agreement with respect to such Facility.

 

Section 5.2   Conditions to Seller’s Obligations.   Except as may be waived in writing by Seller, Seller’s obligation to make its deliveries at the Closing and to effect and consummate the transactions contemplated hereby shall be subject to the following conditions:

 

(a)           Representations and Warranties True and Correct . Each of Purchaser’s representations and warranties contained in this Agreement, taken as whole, shall be true in all material respects as of the Closing Date (except for representations and warranties made as of a specified date, which shall have been true and correct as of such date with the same effect as though made on such date), and Purchaser shall have executed and delivered to Seller at Closing a certificate confirming the foregoing.

 

(b)           Agreements Complied With . Each of Purchaser’s covenants and agreements contained in this Agreement to be performed at or prior to the Closing shall have been performed in all material respects at or prior to the Closing.

 

(c)           Deliveries Made . At or prior to Closing, Purchaser shall have delivered to Seller or to the Escrow Agent for release to Seller upon Closing, and where applicable shall have duly executed, all the documents, certificates and other instruments required to be delivered at Closing in accordance with Section 5.5 or any other express provision of this Agreement.

 

Section 5.3  Conditions to Purchaser’s Obligations.   Subject to Section 5.6 , except as may be waived in writing by Purchaser, Purchaser’s obligation to make its deliveries at the Closing and to effect and consummate the transactions contemplated hereby shall be subject to the following conditions:

 

(a)           Representations and Warranties True and Correct . Each of Seller’s representations and warranties contained in this Agreement, taken as a whole, shall be true in

 

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all material respects as of the Closing Date with the same effect as though made on such date (except for representations and warranties made as of a specified date, which shall have been true and correct as of such date), and Seller shall have executed and delivered to Purchaser at Closing a certificate confirming the foregoing.

 

(b)           Agreements Complied With . Each of Seller’s covenants and agreements contained in this Agreement to be performed at or prior to the Closing shall have been performed in all material respects at or prior to the Closing, and Seller shall have executed and delivered to Purchaser at Closing a certificate confirming the foregoing.

 

(c)           Deliveries Made. At or prior to Closing, Seller shall have delivered to Purchaser or to the Escrow Agent for release to Purchaser upon Closing, and where applicable shall have duly executed, all the documents, certificates and other instruments required to be delivered at Closing in accordance with Section 5.4 or any other express provision of this Agreement.

 

(d)           Licenses and Permits. Purchaser shall have obtained any governmental licenses, permits or approvals required for Purchaser to own the Real Property and lease the Facilities to the Operators.

 

(e)           No Material Adverse Change. (i) No Material Adverse Change shall have occurred during the period between the Effective Date and the Closing Date, (ii) the occupancy for the Facilities shall not have decreased by more than eight percent (8%) below occupancy thereof (considered in the aggregate) as of the end of the Due Diligence Period, and (iii) the occupancy for any Facility shall not have decreased by more than twelve percent (12%) below occupancy thereof as of the end of the Due Diligence Period.

 

(f)           Termination of Existing Leases . Any existing real property leases, if any, relating to the Purchased Property which are not Residency Agreements or which have not otherwise been approved by Purchaser in writing to continue post-Closing shall have been terminated without fee or cost to Purchaser, and Seller shall have provided Purchaser reasonable evidence of same.

 

(g)           No Injunctions or Restraints . No temporary restraining order, preliminary or permanent injunction, or other order issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect. No action shall have been taken nor any statute, rule, or regulation shall have been enacted by any governmental agency that makes the consummation of the transactions contemplated hereby illegal.

 

(h)           Planned Capital Expenditures and Renovations . During the Due Diligence Period Seller and Purchaser shall agree upon the capital expenditure and renovation projects for the Facilities that must be completed prior to Closing. For the avoidance of doubt, all such capital expenditures and renovation projects shall be completed at Seller’s expense prior to Closing.

 

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Section 5.4   Deliveries by Seller.   Seller shall deliver to Purchaser on or before the Closing the following:

 

(a)           Deed. The Deed substantially in the form of Exhibit C attached hereto, duly executed by Seller. In addition, in the event Purchaser elects to have a new survey of the applicable Real Property (the “ Survey ”) prepared, Seller agrees to provide a quitclaim deed at closing conveying title to the applicable Real Property based on the metes and bounds description shown on the Survey.

 

(b)           Bill of Sale and Assignment. A bill of sale and assignment in the form of Exhibit D attached hereto (the “ Bill of Sale and Assignment ”) with respect to the Purchased Personal Property located at the Facilities, if any, duly executed by Seller.

 

(c)           Other Instruments. Such further instruments of conveyance and transfer as Purchaser may reasonably require to consummate the transactions contemplated by this Agreement to vest all of the Purchased Property in Purchaser and to facilitate the transfer of such Purchased Property from Seller to Purchaser, in form and substance reasonably acceptable to Purchaser.

 

(d)           Owner’s Affidavit. An Owner’s Affidavit in a form acceptable to the Title Company to the extent required to issue the Title Policy.

 

(e)           Releases. Documents releasing or nullifying any title exceptions (or providing reasonable evidence of such release or nullification) (relating to the applicable Real Property) which Seller is obligated to release or nullify pursuant to Section 2.4 hereof or, with respect to liens held by institutional lenders, a written payoff letter with the release or discharge of such lien to be provided after Closing in accordance with customary conveyancing practices.

 

(f)           Resolutions. A certified copy of the company resolutions authorizing consummation of this Agreement and authorizing each entity comprising Seller to execute all documents necessary for Closing as provided herein.

 

(g)           Closing Certificate. The certificates required pursuant to Section 5.3(a) and Section 5.3(b) .

 

(h)           1099S. A completed Form 1099S, or effective equivalent thereof, describing the sale of the applicable Purchased Property.

 

(i)           Withholding Affidavit . If a Withholding Affidavit is required by the Escrow Agent, Seller shall deliver the Withholding Affidavit to the Escrow Agent prior to Closing.

 

(j)           Non-Foreign Status Affidavit . A certificate of non-foreign status pursuant to Treasury Regulation Section 1.1445-2(b)(2) signed by Seller under penalties of perjury stating Seller’s name, address and US taxpayer identification number and stating that Seller is not a foreign person as defined by Section 1445(f)(3) of the IRC.

 

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(k)           Good Standing Certificate . A certificate of existence, certified by the Secretary of State of Missouri as of a date which is within fifteen (15) days of Closing, reflecting each Seller’s good standing as a limited liability company.

 

(l)           Rent Roll . A true, correct, and complete rent roll for the applicable Facility listing each resident as of a date which is within three (3) business days prior to the Closing Date, the unit, bed or room number of such resident, and the amount of the monthly fees to be paid by such resident (including room, meal and other applicable monthly fees), the amount of security deposit, if any, date of Residency Agreement and the expiration date of such Residency Agreement, if applicable.

 

(m)           Executed Property Leases . Lease Agreements, in form and substance attached as Exhibit E for each Facility (each a “ Property Lease ” and together the “ Property Leases ”) duly executed by the applicable Operator.

 

(n)           Third Party Consents . The third party consents listed on Schedule 5.4(m) .

 

(o)           Books and Records . Possession and control of books and records included as part of the Purchased Property, if any, which are not physically located at the Real Property as of the Closing Date.

 

(p)           Opinion of Counsel. An opinion of Seller’s counsel confirming the issued and valid status of any governmental licenses, permits or approvals required for each Operator to operate the applicable Facility and compliance with any governmental and/or regulatory licensing, notice and/or approval requirements applicable to the transactions contemplated by this Agreement (including the change in ownership of the Real Property and the Purchaser’s lease of the Real Property to the Operators post-Closing) (provided that Purchaser shall pay one-half (50%) of Seller’s actual costs to deliver such opinions up to a total maximum amount of $5,000.00).

 

(q)           Title Commitment . A title commitment in accordance with Section 2.4(a) , subject only to the Permitted Title Exceptions and endorsed by the Title Company.

 

(r)           Escrow Agreement . The Post-Closing Escrow Agreement, duly executed by Seller.

 

Section 5.5   Deliveries by Purchaser. Purchaser shall deliver to Seller on or before the Closing the following:

 

(a)           Payment Items. The items described in Section 3.2 hereof representing payment of the Purchase Price.

 

(b)           Assumption Agreement. If applicable, a n instrument of assumption of the Assumed Liabilities, substantially the form attached as Exhibit F .

 

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(c)           Escrow Agreement . The Post-Closing Escrow Agreement, duly executed by Seller.

 

(d)           Property Leases . The Property Leases executed by each Purchaser.

 

(e)           Good Standing Certificate . A certificate of existence, certified by the applicable Secretary of State as of a date which is within fifteen (15) days of Closing; reflecting each Purchaser's good standing as a limited liability company.

 

(f)           Closing Certificate. The certificates required pursuant to Section 5.3(a) and Section 5.3(b) .

 

Section 5.6   Non-Fulfillment of Closing Conditions. Notwithstanding anything in this Agreement to the contrary, the following shall apply exclusively if any of the conditions in Sections Section 5.2 and Section 5.3 are not fulfilled as of the Scheduled Closing Date:

 

(a)          If any of the conditions set forth in Section 5.2 have not been fulfilled as of the Scheduled Closing Date, but all the conditions set forth in Section 5.3 have been fulfilled or expressly waived by Purchaser, Seller may elect (i) to proceed to Closing and waive such failure for all purposes hereunder; or (ii) terminate this Agreement, in which case the Deposit shall be disbursed to Seller as liquidated damages, and Purchaser shall have no further liability to Seller except with respect to the surviving provisions described in ARTICLE 9 . If Seller elects to terminate this Agreement, Seller hereby waives any right to recover the balance of the Purchase Price, or any part thereof, and the right to pursue any other remedy permitted at law or in equity against Purchaser. In no event under this Section 5.6 or otherwise shall Purchaser be liable to Seller for any punitive, speculative or consequential damages.

 

(b)          If the conditions set forth in Section 5.3(a), Section 5.3(b) , Section 5.3(c) , Section 5.3(d), Section 5.3(f) , Section 5.3(g) or Section 5.3(h) have not been fulfilled as of the Scheduled Closing Date, but all the conditions set forth in Section 5.2 have been fulfilled or expressly waived by Purchaser (other than those conditions that would be fulfilled upon Closing, including without limitation payment of Purchase Price by Purchaser, provided Purchaser is otherwise able to fulfill such conditions upon Closing), Purchaser may elect: (i) to proceed with the Closing and waive any such failure to fulfill one or more of such requirements for all purposes hereunder; or (ii) to extend the Scheduled Closing Date for an additional thirty (30) days in order to provide Seller the opportunity to fulfill such condition and if such condition is not fulfilled within such thirty (30) day additional period Purchaser may terminate this Agreement, in which case the Deposit shall be returned to Purchaser and Seller shall reimburse Purchaser for Purchaser’s actual third party expenses incurred by Purchaser in connection with its due diligence on the Purchased Property; provided, however, such reimbursements shall not exceed One-Hundred Fifty Thousand and No/100 U.S. Dollars ($150,000), and after which Seller shall have no additional liability to Purchaser for such failure, except for the surviving provisions described in ARTICLE 9 . In no event under this

 

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Section 5.6 or otherwise shall Seller be liable to Purchaser for any punitive, speculative or consequential damages.

 

(c)          If the conditions set forth in or Section 5.3(e) have not been fulfilled as of the Scheduled Closing Date, but all the conditions set forth in Section 5.2 have been fulfilled or expressly waived by Purchaser (other than those conditions that would be fulfilled upon Closing, including without limitation payment of Purchase Price by Purchaser, provided Purchaser is otherwise able to fulfill such conditions upon Closing), Purchaser may elect (i) to proceed with Closing and waive such failure for all purposes hereunder; (ii) to immediately terminate this Agreement, in which case the Deposit shall be returned to Purchaser and Seller shall reimburse Purchaser for Purchaser’s actual third party expenses incurred by Purchaser in connection with its due diligence on the Purchased Property; provided, however, such reimbursements shall not exceed One-Hundred Fifty Thousand and No/100 U.S. Dollars ($150,000), and after which Seller shall have no additional liability to Purchaser for such failure, except for the surviving provisions described in ARTICLE 9 ; (iii) extend the Scheduled Closing Date for an additional thirty (30) days in order to provide Seller the opportunity to fulfill such condition and if such condition is not fulfilled within such thirty (30) day additional period, the entire Deposit shall be returned to Purchaser and Seller shall reimburse Purchaser for Purchaser’s actual third party expenses incurred by Purchaser in connection with its due diligence on the applicable Purchased Property; provided, however, such reimbursements shall not exceed One-Hundred Fifty Thousand and No/100 U.S. Dollars ($150,000), and after which Seller shall have no additional liability to Purchaser for such failure, except for the surviving provisions described in ARTICLE 9 . In no event under this Section 5.6 or otherwise shall Seller be liable to Purchaser for any punitive, speculative or consequential damages.

 

(d)          If the Closing Conditions set forth in Section 5.3 have not been satisfied before December 1, 2014, Purchaser shall have the absolute right to terminate this Agreement, in which case the Deposit shall be returned to Purchaser.

 

Section 5.7   Post-Closing Actions.   Seller shall promptly deliver to Purchaser the original of any mail or other communication received by it after the Closing Date pertaining to the Purchased Property, and any payments to which Purchaser is entitled. Purchaser shall promptly deliver to Seller the original of any mail or other communication received by Purchaser after the Closing Date and addressed to Seller which does not pertain to the Purchased Property, and any payments to which Seller is entitled.

 

Section 5.8   Termination During Due Diligence.   Notwithstanding anything herein to the contrary, Purchaser shall have the right to terminate this Agreement in its entirety at any time during the Due Diligence Period for any reason or for no reason whatsoever. Upon any such termination, the Deposit shall be returned to Purchaser, and the parties shall have no further liability or obligation to one another arising from such termination except for the surviving provisions described in ARTICLE 9 .

 

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ARTICLE 6
Representations and Warranties of Seller

 

The following representations and warranties are given by the Seller and, as applicable, each representation and warranty related to Seller below shall be deemed to have been given individually on behalf of each entity comprising the Seller. Each entity comprising the Seller hereby represents and warrants, jointly and severally, to Purchaser that as of the Effective Date:

 

Section 6.1  Organization and Standing.   Each entity comprising the Seller is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware and has the requisite power and authority to own, sell, lease and operate its properties and to carry on its businesses as now being conducted. Each entity comprising the Seller has the company power and authority to execute and deliver this Agreement and to consummate the transactions and perform the obligations contemplated by the Agreement. Each entity comprising the Seller is duly qualified to do business as a foreign limited liability company in the State of Missouri.

 

Section 6.2  Valid and Binding Obligations. The execution, delivery and performance of this Agreement and all other agreements and instruments to be executed and delivered by Seller hereunder, and the consummation of the transactions contemplated by this Agreement, have been duly authorized by all necessary company action of Seller. This Agreement constitutes, and all instruments required to be executed and delivered by Seller before or at the Closing will constitute, the valid and binding obligations of Seller, enforceable against Seller, in accordance with their respective terms. All persons who have executed this Agreement on behalf of Seller have been duly authorized to do so by all necessary company action of Seller and all persons who execute instruments required to be executed and delivered by Seller before or at the Closing shall have been duly authorized to do so by all necessary company action of Seller.

 

Section 6.3  Title; Purchased Property Complete.   Seller has good title to all of the Purchased Personal Property, and at the Closing, Seller shall transfer the Purchased Property to Purchaser, free and clear of all liabilities, liens and, encumbrances except for the Assumed Liabilities and the Permitted Encumbrances. Seller has the unrestricted right to convey and assign the Purchased Property. Purchaser acknowledges with respect to the Real Property, that Purchaser will rely solely upon (i) Seller’s warranties contained in the Deed and (ii) Purchaser’s owner’s policy of title insurance, and that Seller gives no other warranty regarding title to the Real Property.

 

Section 6.4  Taxes and Tax Returns.   All Seller Parties have filed when due or will file when due in correct form all federal and state income tax returns for all periods ending on or prior to the Closing Date which are required to be filed by the applicable Seller Party on or prior to the Closing Date. Other than extensions to file any Seller Party’s tax returns, there are no agreements by any Seller Party for the extension of time for the assessment of any tax. All federal, state, county and local taxes due and payable by any Seller Party on or before the Effective Date have been paid and any taxes due and payable at any time between the

 

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Effective Date through the Closing will be paid prior to Closing, and there are no federal, state or local tax liens pending or threatened against Seller Party or the Purchased Property. There is no open audit of any of Seller Party’s federal, state, local income, sales use or property tax returns pending, and no Seller Party has received notice of the pendency of any such audit or examination. No Seller Party holds a certificate or other authorization issued by any tax collection body for the purpose of avoiding the payment by such Seller Party of sales and use taxes upon such Seller Party’s purchases of goods and services, nor has any Seller Party applied for such a certificate or other authorization.

 

Section 6.5   Execution and Delivery.   Except as set forth in Schedule 6.5 , neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will:

 

(a)          violate any provisions of the certificates of formation or operating agreements of Seller;

 

(b)          violate any contract or agreement relating to borrowed money, or any judgment, order, injunction, decree or award against, or binding upon Seller or upon the property or business of Seller, which violation would prevent, delay or materially hinder consummation of the transactions contemplated by this Agreement;

 

(c)          result in the creation of any material lien, charge or encumbrance upon any of the Purchased Property pursuant to the terms of any agreement or instrument to which Seller is a party or by or to which Seller or any of the Purchased Property may be bound, subject or affected;

 

(d)          violate any judgment, order, injunction, decree or award against, or binding upon, Seller or upon the Purchased Property; or

 

(e)          result in any breach, violation, default or cancellation of any contract, agreement, mortgage, deed to secure debt, or lease to which Seller is a party or by which Seller is bound or the Purchased Property is subject that could have a Material Adverse Effect on the Purchased Property.

 

Section 6.6  Contracts and Leases.   Schedule 6.6 hereto sets forth all contracts, leases or agreements to which Seller is a party, written or oral, currently in effect that are material to the ownership and use of the Purchased Property, other than the Residency Agreements, in each case identifying the applicable Facility to which such agreements relate. Each of such contracts is in full force and effect in accordance with its terms. Seller is not in material breach, default or violation of any such contracts and, to Seller’s Knowledge, no other party to any such contract or lease is in material breach, default or violation thereof.

 

Section 6.7    Residency Agreements and Related Matters. Schedule 6.7 contains a list of all of the Residency Agreements currently in effect.   Each of the Residency Agreements is in full force and effect in accordance with its terms. Seller has made available to

 

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Purchaser true and correct copies of all Residency Agreements, including all material amendments or modifications to same. No Seller Party is in material breach, default or violation of any Residency Agreement and, to Seller’s Knowledge, no other party to any such contract is in material breach, default or violation thereof. No event has occurred and no condition exists that, with the passage of time or the giving of notice, or both, would constitute a material default by any Seller Party or, to Seller’s Knowledge, any other party to any Residency Agreement. Except as otherwise noted on Schedule 6.7, Seller has no obligation with respect to refund of any deposits, interest on deposits or similar obligations with respect to any Residency Agreement. The rent roll provided pursuant to Section 5.4(l) is true and correct in all material respects as of the date thereof.

 

Section 6.8  Permits and Licenses.   Schedule 6.8 contains a complete list of all material governmental permits, licenses, certificates and authorizations held by any Seller Party that relate to the ownership, use, operation or management of the Purchased Property (the “Permits and Licenses”).   Seller shall make available to Purchaser true and correct copies of all Permits and Licenses before the end of the Diligence Materials Due Date. The Permits and Licenses are in full force and effect, and have not been revoked or rescinded, nor to Seller’s Knowledge has any governmental agency or authority threatened to revoke or rescind any such Permit or License. To Seller’s Knowledge, each Seller Party is using, operating and managing the Purchased Property in material compliance with the terms and conditions of the Permits and Licenses, and except as noted in periodic inspection or survey reports by agencies having jurisdiction over the Seller Parties, copies of which shall be made available to Purchaser before the end of the Diligence Materials Due Date and promptly when received thereafter, no Seller Party has received no written notice of any uncured deficiency or violation of any such term or condition from any applicable government body or agency. Except for the Permits and Licenses shown on said Schedule 6.8 , there are to Seller’s Knowledge no other material governmental permits, licenses, certificates or authorizations required for Seller to own, use, operate or manage the Purchased Property as currently operated by the Seller Parties.

 

Section 6.9  Insurance.   Schedule 6.9 lists all of Seller’s policies of property and casualty insurance and liability insurance currently in effect and covering the Facilities and operation thereof by the Seller Parties, copies of which will be made available for review by Purchaser prior to the end of the Diligence Materials Due Date.   Each such policy currently is in full force and effect and, to Seller’s Knowledge, no Seller Party has not taken or failed to take any action which would limit or impair any Seller Party’s rights thereunder with respect to any matter for which Purchaser could be held liable as a successor to Seller. Schedule 6.9 lists any pending, unresolved claims under Seller Party’s policies of property and casualty or liability insurance, as well as all claims made and resolved within the past three (3) years. Seller has not received written, or to Seller’s Knowledge, oral, notice of any pending cancellation or nonrenewal of such policies.

 

Section 6.10  Employees.

 

Seller and Operator have complied in all material respects with all laws and regulations dealing with employment of Employees. Schedule 6.10 provides a list and brief description of all

 

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litigation or administrative claims filed by Employees or former employees who performed services for the Business against Seller or Operator during the past three (3) years, if any.

 

Section 6.11  Litigation. Except as described on Schedule 6.11 , there is no litigation, action, suit, or other proceeding currently pending, or to Seller’s Knowledge, threatened against any Seller Party, at law or in equity, or before any federal, state, municipal, local or other governmental or quasi-governmental authority, or before any arbitrator. To Seller’s Knowledge, there is no pending investigation outside the ordinary course of business of any Seller Party or Facility by any governmental or quasi-governmental authority. Seller is not subject to any judgment, injunction, order, writ or decree of any court or other governmental authority or agency relating specifically to Seller or to the ownership, operation or management of the Purchased Property and/or the operations of the Business.

 

Section 6.12  Compliance with Laws. Except as otherwise noted on Schedule 6.12 :  

 

(a)          Each Seller Party is in compliance in all material respects with all applicable laws, rules or regulations in connection with its ownership, use, operation or management of the applicable Facility, including without limitation all laws, rules and regulations related to Government Programs and has not received notice of any violation thereof which has not been cured as of the Effective Date.

 

(b)           There are no pending or threatened (i) civil monetary penalties, terminations or exclusions from participation in any Government Programs for any Facility, (ii) material payment denials, or (iii) other sanctions of a governmental authority against any Seller Party or the Facilities. Seller and Business are in good standing in all applicable Government Programs. No Seller Party nor the Business has any material liabilities to any third-party fiscal intermediary or carrier administering the Government Programs, directly to the Government Programs or any Governmental Authority, or to any other third-party payor for the recoupment of any amounts previously paid by any such third-party fiscal intermediary, carrier, Government Program, or other third-party payor. Except for industry standard reviews and audits, no Seller Party nor the Business has any pending or, to Seller’s knowledge, threatened investigations, audits, or other actions by any third-party fiscal intermediary or carrier administering the Government Programs or any Governmental Authority, by the United States Department of Health and Human Services, any state Medicaid agency, intermediary or carrier, or any third party to recoup, set-off, or suspend payments to, or demand a refund from, or terminate provider agreements with, or asserting any claim, demand, penalty, fine, or other sanction with respect to any of the activities, practices, policies, or claims of any Seller Party or the Business. To Seller’s Knowledge, no Seller Party, nor any party on behalf of any Seller Party or any Facility has received any over-payment or unearned payment from any Government Program or, to Seller’s Knowledge, submitted to any Government Program any false or fraudulent claim for payment.

 

(c)          No Seller Party nor the Business has, to Seller’s Knowledge, engaged in any activities which are prohibited, or are cause for civil penalties or mandatory or permissive

 

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exclusion from Medicare, Medicaid, or any other State Health Care Program or Federal Health Care Program (as those terms are defined in 42 C.F.R. Section 1001.2) under 42 U.S.C. Sections 1320a-7, 1320-7a, 1320a-7b, or 1395nn, or the Federal False Claims Act, 31 U.S.C. Section 3729, or the regulations promulgated pursuant to such statutes, nor has any Seller Party, any Facility, or any employees or contractors of Seller or any Facility been excluded from participation in any such program.

 

(d)           Each Seller Party has, and the Facilities have, complied with all applicable security and privacy standards regarding protected health information under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act provisions of the American Recovery and Reinvestment Act of 2009, all applicable state privacy laws, and with all applicable regulations promulgated under any such legislation.

 

(e)           No Seller Party nor any Facility has submitted any claim to any Government Program in connection with any referrals that violated any applicable self-referral Law, including the Federal Ethics in Patient Referrals Act, 42 U.S.C. Section 1395nn (the “S tark Law ”) or any applicable state self-referral Law.

 

(f)           Each Seller Party has, and the Facilities have, complied with all disclosure requirements of all applicable self-referral Laws, including the Stark Law and any applicable state self-referral law.

 

(g)           No Seller Party nor any Facility has knowingly or willfully solicited, received, paid, or offered to pay any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, for the purpose of making or receiving any referral which violated any applicable anti-kickback law, including the federal Anti-Kickback Statute, 42 U.S.C. Section 1320-7b(b) (known as the “ Anti-Kickback Statute ”).

 

Section 6.13  Financial Statements.  The financial statements of the Seller Parties for the period ended December 31, 2013 and for the five (5) months ended May 31, 2014 are attached hereto as Schedule 6.13 (the “Financial Statements”) .   Except as otherwise set forth on Schedule 6.13, the Financial Statements have been prepared consistently applied throughout the periods indicated and present fairly in all material respects the results of operations and financial condition of the Seller for the respective periods indicated. The monthly financial reports to be provided to Purchaser pursuant to Section 4.2(k) will be based upon the books and records of the Seller Parties consistent with Seller’s current reporting practice, and will present fairly in all material respects the information purported to be presented therein.

 

Section 6.14  Real Property.   To Seller’s Knowledge, and except as may be disclosed on Schedule 6.14 , the current use of the Real Property by the Seller Parties complies in all material respects with applicable zoning and land use laws, rules and regulations and with all applicable building codes, and no Seller Party has received written notice of any

 

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zoning, land use or building code violation relative to the Real Property which has not been cured prior to the date hereof. To Seller’s Knowledge (unless Seller is a party thereto), there is no pending litigation or dispute concerning the location of the lines and corners of the Real Property. No Seller Party has received written notice of, and has no other Knowledge of, pending, threatened or contemplated actions by any governmental authority or agency having the power of eminent domain, which might result in any part of the Real Property being taken by condemnation or conveyed in lieu thereof. To Seller’s Knowledge, there is no claim of adverse possession with respect to any part of the Real Property.

 

Section 6.15 Environmental Matters.   Except as disclosed on Schedule 6.15, or in any environmental audit or inspection report made available by Seller before the end of the Diligence Materials Due Date to Purchaser or the ESAs generated by Purchaser’s environmental consultants, to Seller’s Knowledge: (a) no areas exist on the Real Property where Hazardous Substances have been generated, disposed of, released, stored or found in violation of any Environmental Laws, and Seller has no Knowledge and has received no notice of the existence of any such areas for the generation, storage or disposal of any Hazardous Substances on the Real Property in violation of any Environmental Laws; (b) neither any Seller Party nor any of their respective agents has violated in any material respect any of the applicable Environmental Laws relating to or affecting the Real Property; (c) the Real Property is presently in compliance in all material respects with all Environmental Laws; (d) the Seller Parties have obtained all material licenses, permits and/or other governmental or regulatory approvals necessary to comply with Environmental Laws relating to their respective use of the Real Property, and the Seller Parties are in compliance in all material respects with the terms and provisions of all such licenses, permits and/or other governmental or regulatory approvals; (e) no underground storage tanks are currently located on the Real Property; (f) the Real Property has not been previously used as a landfill or as a dump for garbage or refuse; and (g) no asbestos containing building material or lead based paint are present in any structures located on the Real Property. Notwithstanding the generality of any of the other representations and warranties in this ARTICLE 6 , this Section 6.15 contains the exclusive representations and warranties of Seller with respect to compliance with Environmental Laws and the presence or absence of Hazardous Substances.

 

Section 6.16  Brokers, Finders.  Seller has not retained any broker or finder in connection with the transactions contemplated hereby so as to give rise to any claim against Purchaser for any brokerage or finder’s commissions, fee, or similar compensation.

 

Section 6.17  FIRPTA.   Seller is not a “foreign person” as that term is defined in the Internal Revenue Code of 1986, as amended, and the regulations promulgated pursuant thereto, and Purchaser has no obligation under Internal Revenue Code Section 1445 to withhold and pay over to the Internal Revenue Service any part of the amount realized by Seller in the transaction contemplated hereby (as such term is defined in the regulations issued under IRC Section 1445).

 

Section 6.18  Solvency.   Seller is not now insolvent, and will not be rendered insolvent by completion of the transactions contemplated herein. For purposes of the

 

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preceding sentence, “insolvent” means, upon completion of the Closing, (i) that the fair market value of Seller’s assets is less than the sum of Seller’s debts and other liabilities or (ii) Seller has inadequate cash flow to service its debts as they come due. Upon the completion of the transactions contemplated herein, Seller will have adequate capital for the purposes of engaging in any business or transaction in which Seller is or will engage.

 

Section 6.19  Consent of Third Parties.   Except as otherwise set forth on Schedule 6.19 , no consent of any third party is required as a condition to the entering into, performance or delivery of this Agreement by Seller, other than such consents as would not, in any individual case or in the aggregate, have a material adverse effect upon Purchaser’s ability to complete the purchase of the Purchased Property or the ability of the Operators to operate the Facilities post-Closing in substantially the manner the Facilities are currently being operated.

 

Section 6.20  No Governmental Approvals; Permits.   Except as set forth in on Schedule 6.20 , no order, permission, consent, approval, license, authorization, registration or validation of, or filing with, or exemption by, any governmental agency, commission, board or public authority is required to authorize, or is required in connection with the execution, delivery and performance by Seller of this Agreement or the taking of any action contemplated by this Agreement, which has not been obtained.

 

Section 6.21  Assessments. Except as described in Schedule 6.21 , to Seller’s Knowledge, there are no (i) special or other assessments for public improvements or otherwise now affecting any of the Purchased Property, (ii) any pending or threatened special assessments affecting the Purchased Property, or (iii) any contemplated improvements affecting any of the Purchased Property that may result in special assessments affecting any of the Purchased Property. Each of the Facilities is appropriately licensed, taking into account the levels of care and services provided at such Facility and the requirements of applicable laws and regulations where the Facility is located. Each of the Facilities is certified and participates as a provider in the Medicare and Medicaid reimbursement programs. The Operators have all permits, licenses and authorizations necessary for the conduct of, or relating to the legal use, ownership and operation of, the Facilities as now operated. All permits, licenses and authorizations of the Seller Parties are valid and in full force and effect.

 

Section 6.22  Title Encumbrances.   Except as described on Schedule 6.22 , Seller is not in default under any of its material obligations under any recorded agreement, easement or instrument encumbering title to the Real Property, and to Seller’s Knowledge, there is no default on the part of any other party thereto.

 

Section 6.23 Affordable Housing Units.   No bedroom or unit at any Facility is leased or reserved for lease as an affordable housing unit or for low or moderate income residents. No Facility is required to lease or reserve any unit or bedroom as an affordable housing unit or bedroom or for low or moderate income residents pursuant to a presently existing agreement or requirement of law.

 

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Section 6.24  Loans. There are no loans or debts secured by any of the Purchased Property except for (ii) loans and debts described on Schedule 6.24 , or (iii) loans and debts reflected on the Title Policy.

 

Section 6.25   No Other Warranties.  

Except for the express representations and warranties of Seller contained in this ARTICLE 6 or in the Deed or Bill of Sale and Assignment, Purchaser acknowledges that Seller has not made, and Purchaser has not relied upon, any other representation or warranty, express or implied, with respect to Seller, the Business, the Purchased Property or the transactions contemplated herein.

 

ARTICLE 7
Representations and warranties of Purchaser

 

Purchaser hereby represents and warrants to Seller as follows:

 

Section 7.1   Organization and Standing.   Purchaser is a limited partnership organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Purchaser has the partnership power and authority to execute and deliver this Agreement and to consummate the transactions and to perform its obligations contemplated by this Agreement. Purchaser is, or on or prior to the Closing will be, duly qualified to do business as a foreign limited liability company in the State of Missouri.

 

Section 7.2   Execution and Delivery.   The execution and delivery of this Agreement, and the consummation of the transactions contemplated by this Agreement, have been duly authorized by all necessary partnership action of Purchaser. This Agreement constitutes, and all instruments required to be executed and delivered by Purchaser before or at the Closing will constitute, the valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms. All persons who have executed this Agreement on behalf of Purchaser have been duly authorized to do so by all necessary company action of Purchaser and all persons who execute instruments required to be executed and delivered by Purchaser before or at the Closing shall have been duly authorized to do so by all necessary company action of Purchaser. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will:

 

(a)          violate any provisions of the certificate of partnership or partnership agreement of Purchaser;

 

(b)          violate any contract or agreement relating to borrowed money, or any judgment, order, injunction, decree or award against, or binding upon Purchaser or upon the property or business of Purchaser, which violation would prevent, delay or materially hinder consummation of the transactions contemplated by this Agreement;

 

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(c)          violate any judgment, order, injunction, decree or award against, or binding upon, Purchaser; or

 

(d)          result in any breach, violation, default or cancellation of any contract, agreement, mortgage, deed to secure debt, or lease to which Purchaser is a party or by which Seller is bound and that could have a material adverse effect upon Purchaser’s ability to consummate the transactions described herein.

 

Section 7.3  Solvency.   Purchaser is not now insolvent, and will not be rendered insolvent by completion of the transactions contemplated herein. For purposes of the preceding sentence, “insolvent” means, upon completion of the Closing, (i) that the fair market value of Purchaser’s assets is less than the sum of Purchaser’s debts and other liabilities or (ii) Purchaser has inadequate cash flow to service its debts as they come due. Upon the completion of the transactions contemplated herein, Purchaser will have adequate capital for the purposes of any business or transaction in which Purchaser is or will engage.

 

Section 7.4  Consent of Third Parties.   Except for the licenses and permits described in Section 5.3(d), no consent of any third party is required as a condition to the entering into, performance or delivery or this Agreement by Purchaser, other than such consents as would not, in any individual case or in the aggregate, have a material adverse effect upon Purchaser’s ability to consummate the transactions contemplated by this Agreement.

 

Section 7.5   No Governmental Approvals.   To Purchaser’s knowledge, except for the requirement for Purchaser to obtain the licenses and permits described in Section 5.3(d) , no order, permission, consent, approval, license, authorization, registration or validation of, or filing with, or exemption by, any governmental agency, commission, board or public authority is required to authorize, or is required in connection with the execution, delivery and performance by Purchaser of this Agreement or the taking of any action contemplated by this Agreement, which has not been obtained.

 

Section 7.6   Brokers, Finders.   Purchaser has not retained any broker or finder in connection with the transactions contemplated hereby so as to give rise to any valid claim against Seller for any brokerage or finder’s commission, fee, or similar compensation.

 

ARTICLE 8
I ndemnification

 

Section 8.1   Indemnification by Seller. Following the Closing, each entity comprising the Seller shall jointly and severally indemnify, hold harmless and defend Purchaser from and against any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (including, without limitation, reasonable attorneys’ fees and other legal costs and expenses) (collectively, “ Losses ”) which Purchaser may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

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(a)          any breach or inaccuracy of any of the representations and warranties made by Seller in this Agreement;

 

(b)          any failure by Seller to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement;

 

(c)          the Excluded Liabilities;

 

(d)          the failure to comply with applicable bulk sales laws; or

 

(e)          any federal, state, or local income, payroll, sales and use, ad valorem or other taxes payable by Seller or for which Seller is liable in connection with any period prior to the Closing Date, and any interest or penalties thereon.

 

Section 8.2  Indemnification by Purchaser.  Following the Closing, Purchaser shall indemnify and hold harmless Seller from and against, and reimburse Seller for, any and all Losses which Seller may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

(a)          any breach or inaccuracy of any representations and warranties made by Purchaser in or pursuant to this Agreement;

 

(b)          any failure by Purchaser to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement; or

 

(c)          the Assumed Liabilities.

 

Section 8.3  Indemnification Limits; Survival.   Purchaser Indemnification Limits; Survival . Purchaser shall not be entitled to any indemnification from Seller under Section 8.1(a) or Section 8.1(b) unless and until the aggregate amount of indemnifiable claims of Purchaser under this Agreement exceeds Twenty-Five Thousand Dollars ($25,000) (the “ Seller Threshold ”), at which point Seller shall be liable for all indemnifiable claims of Purchaser under Section 8.1(a) and Section 8.1(b) . Seller’s liability for indemnification under Section 8.1(a) and Section 8.1(b) shall not in any case exceed five percent (5%) of the total Purchase Price (the “ Indemnification Cap ”); provided, however , that neither the Seller Threshold nor the Indemnification Cap shall apply in the case of: (i) fraud on the part of Seller; (ii) any claims arising under Section 8.1(a) with respect to the representations and warranties contained in Section 6.1 , Section 6.2 , Section 6.3 , Section 6.5 , Section 6.16 , or Section 6.17 (which shall be limited to the Purchase Price); or (iii) any claims arising under Sections Section 8.1(c) , Section 8.1(d) , or Section 8.1(e) . All of Seller’s representations and warranties under this Agreement shall survive for a period of twenty-four (24) months following the Closing Date. Purchaser’s right to make any claim for indemnification against Seller under Section 8.1(a), Section 8.1(b) and Section 8.1(d ) shall expire at the end of the twenty-fourth (24 th ) month following the Closing; provided, however , that any claim for which Purchaser has given written notice prior to expiration of such twenty-four (24) month

 

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anniversary shall survive until finally adjudicated; and further provided that Purchaser’s right to make any claim for indemnification pursuant to Section 8.1(c ) and/or Section 8.1(e) shall survive for the applicable statute of limitations period for collection of the applicable tax.

 

(b)           Seller Indemnification Limits; Survival. Seller shall not be entitled to any indemnification from Purchaser under Sections Section 8.2(a) or Section 8.2(b) unless and until the aggregate amount of indemnifiable claims of Seller under this Agreement, Twenty-Five Thousand Dollars ($25,000) (the “ Purchaser Threshold ”), at which point Purchaser shall be liable for all indemnifiable claims of Seller under Section 8.2(a) and Section 8.2(b) . Purchaser’s liability for indemnification under Section 8.2(a) and Section 8.2(b) shall not in any case exceed five percent (5%) of the total Purchase Price (the “ Purchaser Indemnification Cap ”); provided, however , that neither the Purchaser Threshold nor the Purchaser Indemnification Cap shall apply in the case of: (i) fraud on the part of Purchaser; (ii) any claims arising under Section 8.2(a) with respect to the representations and warranties contained in Sections Section 7.1 , Section 7.2 , and Section 7.6 (which shall be limited to the Purchase Price); or (iii) any claims arising under Section 8.2(c) . All of Purchaser’s representations and warranties under this Agreement shall survive for a period of twenty-four (24) months following the Closing Date.

 

(c)          For purposes of determining the amount of Losses that are subject to indemnification hereunder with respect to any events, facts or circumstances, after determining whether or not such facts, events or circumstances give rise to a breach of a representation or warranty (after giving full effect to any qualifications as to materiality or similar standards, or of lack of “material adverse effect,” contained in such representation and warranty), the determination of the amount of Losses for such breach of representation and warranty, as it relates to such facts, events or circumstances, shall be made without giving effect to any qualifications as to materiality or similar standards, or the lack of “material adverse effect” contained in such representation or warranty.

 

(d)          Any payments made pursuant to ARTICLE 8 of this Agreement shall be treated as a purchase price adjustment for income tax purposes.

 

(e)          For purposes of this Section 8.3, the total Purchase Price shall be deemed to mean the Purchase Price, as adjusted in accordance with the terms of this Agreement, for each Facility for which a Closing has occurred hereunder.

 

Section 8.4   Procedures Regarding Third Party Claims.   The procedures to be followed by Purchaser and Seller with respect to indemnification hereunder regarding claims by third parties shall be as follows:

 

(a)          Promptly after receipt by Purchaser or Seller, as the case may be, of notice of the commencement of any action or proceeding or the assertion of any claim by a third person, which the party receiving such notice has reason to believe may result in a claim by it for indemnity pursuant to this Agreement, such person (the “ Indemnified Party ”) shall give notice of such action, proceeding or claim to the party against whom indemnification is sought (the

 

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“ Indemnifying Party ”), setting forth in reasonable detail the nature of such action or claim, including copies of any written correspondence from such third person to such Indemnified Party.

 

(b)          The Indemnifying Party shall be entitled, at its own expense, to assume and control such defense with counsel chosen by the Indemnifying Party and approved by the Indemnified Party, which approval shall not be unreasonably withheld or delayed. The Indemnified Party shall be entitled to participate in such defense after such assumption at the Indemnified Party’s own expense. Upon assuming such defense, the Indemnifying Party shall have full rights to enter into any monetary compromise or settlement which is dispositive of the matters involved; provided that such settlement is paid in full by the Indemnifying Party and will not have any continuing material adverse effect upon the Indemnified Party.

 

(c)          With respect to any action, proceeding or claim as to which the Indemnifying Party shall not have exercised its right to assume the defense, the Indemnified Party may assume and control the defense of and contest such action, proceeding or claim with counsel chosen by it. The Indemnifying Party shall be entitled to participate in the defense of such action, the cost of such participation to be at its own expense. The Indemnifying Party shall be obligated to pay the reasonable attorneys’ fees and expenses of the Indemnified Party to the extent that such fees and expenses relate to claims as to which indemnification is due under Section 8.1 or Section 8.2 hereof, as the case may be. The Indemnified Party shall have full rights to dispose of such action and enter into any monetary compromise or settlement; provided, however , in the event that the Indemnified Party shall settle or compromise any claims involved in the action insofar as they relate to, or arise out of, the same facts as gave rise to any claim for which indemnification is due under Section 8.1 or Section 8.2 hereof, as the case may be, it shall act reasonably and in good faith in doing so.

 

(d)          Both the Indemnifying Party and the Indemnified Party shall cooperate fully with one another in connection with the defense, compromise or settlement of any such claim, proceeding or action, including, without limitation, by making available to the other all pertinent information and witnesses within its control.

 

Section 8.5   General Qualifications on Indemnification.   Notwithstanding any provision to the contrary, the indemnification rights set forth in Section 8.1 and Section 8.2 shall be subject to the following:

 

(a)          The liability of an Indemnifying Party with respect to any indemnification claim shall be reduced by the amount of any tax benefit actually realized received by Indemnified Party as a result of any damages, upon which such claim is based, and shall include any tax detriment actually suffered by the Indemnified Party as a result of such damages. The amount of such tax benefit or detriment shall be determined by taking into account the effect, if any, and to the extent determinable, of timing differences resulting from the acceleration or deferral of items of gain or loss resulting from such damages.

 

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(b)          In no event shall any Indemnifying Party be liable to any Indemnified Party for (nor shall any claimed indemnification amounts include) any punitive, incidental, consequential, special or indirect damages, including loss of future revenue or income, loss of business reputation or opportunity or lost profits relating to the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple.

 

(c)          Payments by an Indemnifying Party pursuant to this Section 8.4 pursuant to Section 8.1 or Section 8.2 shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment received or reasonably expected to be received by the Indemnified Party in respect of any such claim. The Indemnified Party shall use its commercially reasonable efforts to recover under insurance policies or indemnity, contribution or other similar agreements for any losses prior to seeking indemnification under this Agreement.

 

(d)          Upon payment in full of any indemnification claim, the Indemnifying Party shall be subrogated to the extent of such payment to the rights of the Indemnified Party against any person or entity with respect to the subject matter of such indemnification claim.

 

(e)          An Indemnified Party may not recover for any losses otherwise indemnifiable under Section 8.1(a) , Section 8.1(b) , Section 8.2(a) or Section 8.2(b) if such Indemnified Party had actual (and not imputed) knowledge prior to Closing of the breach, inaccuracy or failure giving rise to such losses.

 

(f)          An Indemnifying Party shall be relieved of its duty to indemnify an Indemnified Party hereunder if and to the extent the Indemnified Party fails to use commercially reasonable efforts in good faith to mitigate its damages, including, but not limited to, failure to give timely notice to its insurance carriers and to pursue recovery under applicable policies of insurance.

 

(g)          Any amounts due to Purchaser from Seller pursuant to this ARTICLE 8 shall be paid first from the Holdback Amount in accordance with the Escrow Agreement, until the Holdback Amount has been exhausted or released.

 

Section 8.6   Exclusivity.   Following the Closing, in the absence of actual fraud on the part of Seller (in which case Purchaser may avail itself of statutory and common law remedies for fraud), the right to receive indemnification under this ARTICLE 8 shall be the sole and exclusive remedy of Purchaser or Seller for monetary damages of any kind with respect to this Agreement (including any certificate certifying compliance with, or the truth or accuracy of, any provision of this Agreement) or conduct otherwise relating to the negotiation and consummation of the purchase and sale of the Purchased Property hereunder.

 

Section 8.7   Effective Upon Closing.   The provisions of this ARTICLE 8 shall become effective upon completion of the Closing, and shall have no force and effect prior to the Closing or if this Agreement is terminated prior to Closing.

 

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ARTICLE 9
Termination

 

This Agreement and the transactions contemplated hereby may be terminated at any time prior to Closing as follows:

 

(a)          in its entirety by mutual written agreement of Seller and Purchaser;

 

(b)          by Purchaser as and to the extent permitted pursuant to Section 2.4(d)(ii) , Section 5.6(b) , Section 5.6(c) , Section 5.6(d) , Section 5.8 , Section 10.11 and Section 10.12 ;

 

(c)          by Seller as and to the extent permitted pursuant to Section 5.6(a) ;

 

(d)          if a court of competent jurisdiction or other governmental agency shall have issued an order, decree, or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, enjoining, or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling, or other action shall have become final and nonappealable; or

 

(e)          by the Purchaser in its entirety if the Seller shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement (other than the conditions contained in Section 5.2 hereof), which breach cannot be or has not been cured within five (5) business days after the giving of written notice by the Purchaser to the Seller specifying such breach.

 

Upon termination of this Agreement prior to Closing, except as otherwise expressly provided herein, the parties shall have no further liability hereunder except that the following provisions shall survive any such termination: Section 4.1(d) , Section 4.5 , Section 4.6(b)(v) and Section 4.7 . In the event of any termination of this Agreement pursuant to subsection ARTICLE 9(e) above, the Deposit shall be returned to Purchaser and Purchaser shall be entitled to reimbursement by Seller of all of its costs and expenses related to the potential acquisition of the Facilities, including without limitation legal fees and fees paid to third parties related to Purchaser’s due diligence review of the Facilities provided, however, such reimbursements shall not exceed One-Hundred Fifty Thousand and No/100 U.S. Dollars ($150,000).

 

ARTICLE 10
Miscellaneous

 

Section 10.1   Access to Books and Records after Closing.   Following the Closing, Purchaser shall give Seller or its authorized representatives access, during normal business hours and upon prior notice, to such books and records constituting or relating to the Purchased Property as shall be reasonably requested by Seller in connection with the preparation and filing of the party’s tax returns, to comply with regulatory requirements, to defend or

 

43
 

  

discharge the Excluded Liabilities, or for any other valid business purpose, and to make extracts and copies of such books and records. Purchaser agrees to retain all books and records included as part of the Purchased Property for at the later of (a) one (1) year following the Closing Date, or (b) as required by applicable law.

 

Section 10.2   Notices.   All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, or if sent via electronic mail ( e.g . email), (iii) on the day after delivery to FedEx or similar overnight courier, or (iv) on the tenth (10 th ) day after mailing, if mailed to the party to whom notice is to be given, by first-class mail, registered or certified, return receipt requested, postage prepaid and properly addressed, to the party as follows:

 

If to Purchaser:

American Realty Capital Healthcare Trust II Operating Partnership, L.P.

Attn: Edward M Weil., Jr.

405 Park Avenue, 2nd Floor

New York, New York 10022

Email: mweil@arlcap.com

 

With a copy (which will not constitute notice) to:

Jesse Galloway

American Realty Capital Healthcare Trust II Operating Partnership, L.P.

405 Park Avenue, 14th Floor

New York, New York 10022

Email: jgalloway@arlcap.com

 

With a copy (which will not constitute notice) to:

Foley & Lardner LLP

Attn: Michael A. Okaty

Taylor C. Pancake

111 North Orange Avenue

Suite 1800

Orlando, Florida 32801

Email: tpancake@foley.com

 

 

If to Seller:

c/o Platinum Health Care, LLC

Attn: Ben Klein

7444 Long Avenue  

Skokie, IL 60077

Email: bklein@plthc.com

 

 

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With a copy (which will not constitute notice) to:

Gutnicki LLP

Attn: Abraham A. Gutnicki

Stacy J. Flanigan

4711 Golf Road, Suite 200

Skokie, IL 60076

Email: sflanigan@gutnicki.com

 

Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other parties in the manner herein provided for giving notice.

 

Section 10.3   Good Faith; Cooperation.   The parties shall in good faith undertake to perform their obligations in this Agreement, to satisfy all conditions and to cause the transactions contemplated by this Agreement to be carried out promptly in accordance with its terms. The parties shall cooperate fully with each other and their respective representatives in connection with any actions required to be taken as part of their respective obligations under this Agreement.

 

Section 10.4   Assignment; Exchange Cooperation; Successors in Interest.   Neither Purchaser nor Seller may assign any of their respective rights hereunder, except with the prior written consent of the other (which shall not be unreasonably withheld or delayed); provided, however , that prior to the Closing Purchaser may assign its rights under this Agreement, in whole or in part, to any affiliate or related entity of Purchaser, including without limitation the special purpose entities identified in Schedule 10.4 attached hereto. Any such assignee shall be deemed to have made the same representations to Seller. This Agreement is binding upon the parties and their respective successors or assigns and inures to the benefit of the parties and their permitted successors and assigns.

 

Section 10.5   No Third Party Beneficiaries. The parties do not intend to confer any benefit under this Agreement on anyone other than the parties, and nothing contained in this Agreement shall be deemed to confer any such benefit on any other person, including any current or former employee or agent of Seller or any dependent or beneficiary of any of them.

 

Section 10.6   Severability. Any determination by any court of competent jurisdiction of the invalidity of any provision of this Agreement that is not essential to accomplishing its purposes shall not affect the validity of any other provision of this Agreement, which shall remain in full force and effect and which shall be construed as to be valid under applicable law.

 

Section 10.7   Purchaser Records Rights.   Upon Purchaser’s request, for a period of one (1) year after Closing, Seller shall make the operating statements and any and all books, records, correspondence, financial data, leases, delinquency reports and all other documents and matters maintained by Seller or its agents and relating to receipts and expenditures reasonably necessary to complete an audit pertaining to the Purchased Property for

 

45
 

  

the three (3) most recent full calendar years and the interim period of the current calendar year (collectively, the “ Records ”) available to Purchaser for inspection, copying and audit by Purchaser’s designated accountants, and at Purchaser’s expense. Seller shall provide Purchaser, but without expense to Seller, with copies of, or access to, such factual and financial information as may be reasonably requested by Purchaser or its designated accountants, and in the possession or control of Seller, to enable Purchaser to file any filings required by the Securities and Exchange Commission (the “ SEC ”) in connection with the purchase of the Purchased Property. Seller understands and acknowledges that Purchaser is required to file audited financial statements related to the Purchased Property with the SEC within seventy-one (71) days of the Closing Date and agrees to provide any records on a timely basis to facilitate Purchaser’s timely submission of such audited financial statements. The provisions of this Section 10.7 shall survive Closing .

 

Section 10.8    Controlling Law; Integration; Amendment; Waiver.

 

(a)          This Agreement shall be governed by and construed in accordance with the laws and case decisions of the State of Missouri applicable to contracts made and to be performed therein.

 

(b)          This Agreement and the other contracts, documents and instruments to be delivered pursuant to this Agreement supersede all prior negotiations, agreements, information memoranda, letters of intent and understandings between the parties with respect to their subject matter, whether written or oral, constitute the entire agreement of the parties with respect to their subject matter, and may not be altered or amended except in writing signed by Purchaser and Seller. Neither of the parties has made or relied upon any representation, warranty or assurances in connection with the transactions contemplated hereunder other than those expressly made herein.

 

(c)          The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect its right to enforce the same, and no waiver by any party of any provision (or of a breach of any provision) of this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision (or of a breach of any other provision) of this Agreement.

 

Section 10.9     Time.   Time is of the essence with respect to this Agreement.

 

Section 10.10  Survival.   For the avoidance of doubt and notwithstanding anything contrary in this Agreement, Section 1.3 , Section 4.5 , Section 4.6 , Section 4.7 , Section 4.9 , Section 4.11 , Section 5.7 , ARTICLE 8 , and ARTICLE 10 of this Agreement shall survive the Closing of this Agreement.

 

Section 10.11   Eminent Domain - Condemnation. If, prior to Closing, all or portion of Real Property comprising at least five percent (5%) of the Real Property

 

46
 

  

associated with any Facility is subject to an eminent domain or condemnation proceeding, Seller, immediately upon learning thereof, shall give written notice to Purchaser. Thereafter, Purchaser shall have a period of thirty (30) days within which to elect, by written notice to Seller, to terminate this Agreement in its entirety. Upon any such termination the Deposit shall be returned to Purchaser, and the Agreement shall become null and void in its entirety. If no such election is timely made, Purchaser shall be deemed to have waived its rights under this paragraph, except that, if the transaction contemplated hereby closes, Purchaser shall be entitled to the proceeds or the right to negotiate, settle and collect the proceeds of such condemnation award, and Seller shall execute and deliver all documents reasonably requested of Seller in order to effectuate this section.

 

Section 10.12  Risk of Loss.   Seller assumes all risks and liability for loss, damage, destruction or injury by fire, storm, accident or any other casualty to the Real Property from all causes until the Closing has been consummated. In the event of any damage or destruction prior to Closing with an estimated repair cost of greater than Fifty Thousand and No/100 U.S. Dollars ($50,000) for any Facility, Purchaser shall have the option exercisable by written notice to Seller within thirty (30) days after Purchaser is notified of such casualty, to terminate this Agreement in which case the parties shall have no further rights or obligations under the Agreement and the Deposit shall be returned to Purchaser; or Purchaser may elect to close this transaction and, in such event Purchaser shall be entitled to receive the full amount of any proceeds of such insurance payable on account of loss, damage or destruction after the date hereof and Seller shall be liable for the payment to Purchaser of all deductibles under applicable insurance policies. Seller covenants to execute such assignments, drafts and other instruments as may be required to effectuate this section.

 

Section 10.13  Attorneys’ Fees.   In the event either party brings an action to enforce or interpret any of the provisions of this Agreement, the “prevailing party” in such action shall, in addition to any other recovery, be entitled to its reasonable attorneys’ fees and expenses arising from such action and any appeal or any bankruptcy action related thereto, whether or not such matter proceeds to court. For purposes of this Agreement, “ prevailing party ” shall mean, in the case of a person asserting a claim, such person is successful in obtaining substantially all of the relief sought, and in the case of a person defending against or responding to a claim, such person is successful in denying substantially all of the relief sought.

 

Section 10.14   Intentionally Omitted .   Waiver of Jury Trial.

 

The parties agree that no party to this Agreement shall seek a jury trial in any lawsuit, proceeding, counterclaim or other litigation based upon, or arising out of, this Agreement or the dealings or the relationship between them.

 

Section 10.16    Construction.

 

This Agreement shall not be construed more strictly against one party than against the other merely by virtue of the fact that it may have been prepared by counsel for one of the parties, it

 

47
 

  

being recognized that both Seller and Purchaser have contributed with the advice of counsel to the preparation of this Agreement.

 

Section 10.17  Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement 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.

 

[ Signatures contained on the following page . ]

 

48
 

  

IN WITNESS WHEREOF , each of the parties hereto has signed and sealed this Asset Purchase Agreement as of the day and year first above written.

 

  SELLER :
   
  PHBC REALTY, LLC,
     
  By: /s/ Benjamin M. Klein
  Title: Manager
     
  PHDC REALTY, LLC,
   
  By: /s/ Benjamin M. Klein
  Title: Manager
     
  PHMC REALTY, LLC,
     
  By: /s/ Benjamin M. Klein
  Title: Manager
     
  PHCA REALTY, LLC,
     
  By: /s/ Benjamin M. Klein
  Title: Manager
     
  PHEM REALTY, LLC,
     
  By: /s/ Benjamin M. Klein
  Title: Manager
     
  PHGG REALTY, LLC
     
  By: /s/ Benjamin M. Klein
  Title: Manager
     
  PHBS REALTY, LLC
     
  By: /s/ Benjamin M. Klein
  Title: Manager

 

 
 

  

  PHGY REALTY, LLC,
     
  By: /s/ Benjamin M. Klein
  Title: Manager
     
  PHKC CLEVELAND REALTY, LLC
     
  By: /s/ Benjamin M. Klein
  Title: Manager
     
  PHKC SWOPE REALTY, LLC,
     
  By: /s/ Benjamin M. Klein
  Title: Manager

 

  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
ASSET PURCHASE AGREEMENT

 

2
 

 

Exhibit A

 

Escrow Agreement

 

[ See attached. ]

 

3
 

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made effective _______ __, 2014, by and between by [________] ASSISTED LIVING LLC , an Iowa limited liability company (the “ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain affiliates of Seller, dated as of August 1, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

RECITALS

 

A.           Seller or its predecessors-in-title have heretofore entered into certain leases with tenants permitting occupancy or use of residential units or other space located on that certain real property (the “ Property ”), being more particularly described on Exhibit ”A” attached hereto and made a part hereof for all purposes, which leases in effect as of the date hereof are listed on Exhibit B attached hereto (the “ Leases ”);

 

C.           Seller or its predecessors-in-title have heretofore entered into certain contracts and agreements relating to the operation and maintenance of the Property that Purchaser has agreed to assume, which contracts and agreements (the “ Contracts ”) are listed on Exhibit “C” attached hereto and made a part hereof for all purposes; and

 

D.           Subject to the terms of this Agreement, Purchaser desires to purchase and assume from Seller, and Seller desires to sell and assign to Purchaser, (i) Seller’s right, title and interest as lessor under the Leases, (ii) all right, title and interest of Seller in, to and under the Contracts and (iii) all other Assumed Liabilities related to the Property (the “ Property Assumed Liabilities ”.

 

AGREEMENT :

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the parties hereto agree as follows:

 

1.          Subject to the terms of this Agreement, Seller does hereby assign, transfer, set over, deliver and convey unto Purchaser, and the Purchaser, for itself and for its successors and assigns, hereby accepts, assumes and agrees to pay, perform or discharge, as the case may be, (a) all of Seller’s right, title and interest under (i) the Leases, all guaranties of such Leases, and all rents, revenues, income, profits, and receipts due under the Leases or otherwise receivable by the owner of the Property for use or occupancy of any of the Property allocable to the period from and after the date hereof and (ii) the Contracts and (b) all other Property Assumed Liabilities.

 

4
 

  

2.          Except for the Property Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

3.          The undertakings of the Purchaser referred to in this Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Property Assumed Liabilities.

 

4.          This Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall prevail.

5.          EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE LEASES, CONTRACTS AND OTHER PROPERTY ASSUMED LIABILITIES WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

[Signature Page Follows]

 

5
 

  

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to be executed and delivered under seal as of the day and year first above written. This Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

  SELLER :
    [____________] ASSISTED LIVING, LLC , an Iowa limited liability company
     
  By:  
  Title:  
     
  PURCHASER :
   
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Title:  

 

[signatures continue on next page]

 

6
 

   

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]

 

 
 

  

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

2
 

  

EXHIBIT B

 

Post-Closing Escrow Agreement

 

[ See attached. ]

 

3
 

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made effective _______ __, 2014, by and between by [________] ASSISTED LIVING LLC , an Iowa limited liability company (the “ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain affiliates of Seller, dated as of August 1, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

RECITALS

 

A.           Seller or its predecessors-in-title have heretofore entered into certain leases with tenants permitting occupancy or use of residential units or other space located on that certain real property (the “ Property ”), being more particularly described on Exhibit ”A” attached hereto and made a part hereof for all purposes, which leases in effect as of the date hereof are listed on Exhibit B attached hereto (the “ Leases ”);

 

C.           Seller or its predecessors-in-title have heretofore entered into certain contracts and agreements relating to the operation and maintenance of the Property that Purchaser has agreed to assume, which contracts and agreements (the “ Contracts ”) are listed on Exhibit “C” attached hereto and made a part hereof for all purposes; and

 

D.           Subject to the terms of this Agreement, Purchaser desires to purchase and assume from Seller, and Seller desires to sell and assign to Purchaser, (i) Seller’s right, title and interest as lessor under the Leases, (ii) all right, title and interest of Seller in, to and under the Contracts and (iii) all other Assumed Liabilities related to the Property (the “ Property Assumed Liabilities ”.

 

AGREEMENT :

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the parties hereto agree as follows:

 

1.          Subject to the terms of this Agreement, Seller does hereby assign, transfer, set over, deliver and convey unto Purchaser, and the Purchaser, for itself and for its successors and assigns, hereby accepts, assumes and agrees to pay, perform or discharge, as the case may be, (a) all of Seller’s right, title and interest under (i) the Leases, all guaranties of such Leases, and all rents, revenues, income, profits, and receipts due under the Leases or otherwise receivable by the owner of the Property for use or occupancy of any of the Property allocable to the period from and after the date hereof and (ii) the Contracts and (b) all other Property Assumed Liabilities.

 

4
 

  

2.          Except for the Property Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

3.          The undertakings of the Purchaser referred to in this Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Property Assumed Liabilities.

 

4.          This Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall prevail.

5.          EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE LEASES, CONTRACTS AND OTHER PROPERTY ASSUMED LIABILITIES WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

[Signature Page Follows]

 

5
 

  

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to be executed and delivered under seal as of the day and year first above written. This Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

  SELLER :
    [____________] ASSISTED LIVING, LLC , an Iowa limited liability company
     
  By:  
  Title:  
     
  PURCHASER :
   
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Title:  

 

[signatures continue on next page]

 

6
 

   

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]

 

 
 

  

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

2
 

  

EXHIBIT C

 

Special Warranty Deed

 

[ See attached. ]

 

3
 

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made effective _______ __, 2014, by and between by [________] ASSISTED LIVING LLC , an Iowa limited liability company (the “ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain affiliates of Seller, dated as of August 1, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

RECITALS

 

A.           Seller or its predecessors-in-title have heretofore entered into certain leases with tenants permitting occupancy or use of residential units or other space located on that certain real property (the “ Property ”), being more particularly described on Exhibit ”A” attached hereto and made a part hereof for all purposes, which leases in effect as of the date hereof are listed on Exhibit B attached hereto (the “ Leases ”);

 

C.           Seller or its predecessors-in-title have heretofore entered into certain contracts and agreements relating to the operation and maintenance of the Property that Purchaser has agreed to assume, which contracts and agreements (the “ Contracts ”) are listed on Exhibit “C” attached hereto and made a part hereof for all purposes; and

 

D.           Subject to the terms of this Agreement, Purchaser desires to purchase and assume from Seller, and Seller desires to sell and assign to Purchaser, (i) Seller’s right, title and interest as lessor under the Leases, (ii) all right, title and interest of Seller in, to and under the Contracts and (iii) all other Assumed Liabilities related to the Property (the “ Property Assumed Liabilities ”.

 

AGREEMENT :

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the parties hereto agree as follows:

 

1.          Subject to the terms of this Agreement, Seller does hereby assign, transfer, set over, deliver and convey unto Purchaser, and the Purchaser, for itself and for its successors and assigns, hereby accepts, assumes and agrees to pay, perform or discharge, as the case may be, (a) all of Seller’s right, title and interest under (i) the Leases, all guaranties of such Leases, and all rents, revenues, income, profits, and receipts due under the Leases or otherwise receivable by the owner of the Property for use or occupancy of any of the Property allocable to the period from and after the date hereof and (ii) the Contracts and (b) all other Property Assumed Liabilities.

 

4
 

  

2.          Except for the Property Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

3.          The undertakings of the Purchaser referred to in this Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Property Assumed Liabilities.

 

4.          This Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall prevail.

5.          EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE LEASES, CONTRACTS AND OTHER PROPERTY ASSUMED LIABILITIES WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

[Signature Page Follows]

 

5
 

  

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to be executed and delivered under seal as of the day and year first above written. This Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

  SELLER :
    [____________] ASSISTED LIVING, LLC , an Iowa limited liability company
     
  By:  
  Title:  
     
  PURCHASER :
   
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Title:  

 

[signatures continue on next page]

 

6
 

   

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]

 

 
 

  

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

2
 

  

EXHIBIT D

 

Bill of Sale and Assignment

 

[ See attached. ]

 

3
 

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made effective _______ __, 2014, by and between by [________] ASSISTED LIVING LLC , an Iowa limited liability company (the “ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain affiliates of Seller, dated as of August 1, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

RECITALS

 

A.           Seller or its predecessors-in-title have heretofore entered into certain leases with tenants permitting occupancy or use of residential units or other space located on that certain real property (the “ Property ”), being more particularly described on Exhibit ”A” attached hereto and made a part hereof for all purposes, which leases in effect as of the date hereof are listed on Exhibit B attached hereto (the “ Leases ”);

 

C.           Seller or its predecessors-in-title have heretofore entered into certain contracts and agreements relating to the operation and maintenance of the Property that Purchaser has agreed to assume, which contracts and agreements (the “ Contracts ”) are listed on Exhibit “C” attached hereto and made a part hereof for all purposes; and

 

D.           Subject to the terms of this Agreement, Purchaser desires to purchase and assume from Seller, and Seller desires to sell and assign to Purchaser, (i) Seller’s right, title and interest as lessor under the Leases, (ii) all right, title and interest of Seller in, to and under the Contracts and (iii) all other Assumed Liabilities related to the Property (the “ Property Assumed Liabilities ”.

 

AGREEMENT :

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the parties hereto agree as follows:

 

1.          Subject to the terms of this Agreement, Seller does hereby assign, transfer, set over, deliver and convey unto Purchaser, and the Purchaser, for itself and for its successors and assigns, hereby accepts, assumes and agrees to pay, perform or discharge, as the case may be, (a) all of Seller’s right, title and interest under (i) the Leases, all guaranties of such Leases, and all rents, revenues, income, profits, and receipts due under the Leases or otherwise receivable by the owner of the Property for use or occupancy of any of the Property allocable to the period from and after the date hereof and (ii) the Contracts and (b) all other Property Assumed Liabilities.

 

4
 

  

2.          Except for the Property Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

3.          The undertakings of the Purchaser referred to in this Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Property Assumed Liabilities.

 

4.          This Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall prevail.

5.          EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE LEASES, CONTRACTS AND OTHER PROPERTY ASSUMED LIABILITIES WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

[Signature Page Follows]

 

5
 

  

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to be executed and delivered under seal as of the day and year first above written. This Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

  SELLER :
    [____________] ASSISTED LIVING, LLC , an Iowa limited liability company
     
  By:  
  Title:  
     
  PURCHASER :
     
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Title:  

 

[signatures continue on next page]

 

6
 

   

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]

 

 
 

  

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  

 

2
 

  

EXHIBIT E

 

Form of Property Leases

 

[ See attached. ]

 

3
 

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made effective _______ __, 2014, by and between by [________] ASSISTED LIVING LLC , an Iowa limited liability company (the “ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain affiliates of Seller, dated as of August 1, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

RECITALS

 

A.           Seller or its predecessors-in-title have heretofore entered into certain leases with tenants permitting occupancy or use of residential units or other space located on that certain real property (the “ Property ”), being more particularly described on Exhibit ”A” attached hereto and made a part hereof for all purposes, which leases in effect as of the date hereof are listed on Exhibit B attached hereto (the “ Leases ”);

 

C.           Seller or its predecessors-in-title have heretofore entered into certain contracts and agreements relating to the operation and maintenance of the Property that Purchaser has agreed to assume, which contracts and agreements (the “ Contracts ”) are listed on Exhibit “C” attached hereto and made a part hereof for all purposes; and

 

D.           Subject to the terms of this Agreement, Purchaser desires to purchase and assume from Seller, and Seller desires to sell and assign to Purchaser, (i) Seller’s right, title and interest as lessor under the Leases, (ii) all right, title and interest of Seller in, to and under the Contracts and (iii) all other Assumed Liabilities related to the Property (the “ Property Assumed Liabilities ”.

 

AGREEMENT :

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the parties hereto agree as follows:

 

1.          Subject to the terms of this Agreement, Seller does hereby assign, transfer, set over, deliver and convey unto Purchaser, and the Purchaser, for itself and for its successors and assigns, hereby accepts, assumes and agrees to pay, perform or discharge, as the case may be, (a) all of Seller’s right, title and interest under (i) the Leases, all guaranties of such Leases, and all rents, revenues, income, profits, and receipts due under the Leases or otherwise receivable by the owner of the Property for use or occupancy of any of the Property allocable to the period from and after the date hereof and (ii) the Contracts and (b) all other Property Assumed Liabilities.

 

4
 

  

2.          Except for the Property Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

3.          The undertakings of the Purchaser referred to in this Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Property Assumed Liabilities.

 

4.          This Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall prevail.

5.          EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE LEASES, CONTRACTS AND OTHER PROPERTY ASSUMED LIABILITIES WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

[Signature Page Follows]

 

5
 

  

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to be executed and delivered under seal as of the day and year first above written. This Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

  SELLER :
    [____________] ASSISTED LIVING, LLC ,
an Iowa limited liability company
     
  By:  
  Title:  
     
  PURCHASER :
   
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Title:  

 

[signatures continue on next page]

 

6
 

   

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]

 

 
 

  

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

2
 

 

EXHIBIT F

 

Assumption Agreement

 

[ See attached ]

 

3
 

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made effective _______ __, 2014, by and between by [________] ASSISTED LIVING LLC , an Iowa limited liability company (the “ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain affiliates of Seller, dated as of August 1, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

RECITALS

 

A.           Seller or its predecessors-in-title have heretofore entered into certain leases with tenants permitting occupancy or use of residential units or other space located on that certain real property (the “ Property ”), being more particularly described on Exhibit ”A” attached hereto and made a part hereof for all purposes, which leases in effect as of the date hereof are listed on Exhibit B attached hereto (the “ Leases ”);

 

C.           Seller or its predecessors-in-title have heretofore entered into certain contracts and agreements relating to the operation and maintenance of the Property that Purchaser has agreed to assume, which contracts and agreements (the “ Contracts ”) are listed on Exhibit “C” attached hereto and made a part hereof for all purposes; and

 

D.           Subject to the terms of this Agreement, Purchaser desires to purchase and assume from Seller, and Seller desires to sell and assign to Purchaser, (i) Seller’s right, title and interest as lessor under the Leases, (ii) all right, title and interest of Seller in, to and under the Contracts and (iii) all other Assumed Liabilities related to the Property (the “ Property Assumed Liabilities ”.

 

AGREEMENT :

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the parties hereto agree as follows:

 

1.          Subject to the terms of this Agreement, Seller does hereby assign, transfer, set over, deliver and convey unto Purchaser, and the Purchaser, for itself and for its successors and assigns, hereby accepts, assumes and agrees to pay, perform or discharge, as the case may be, (a) all of Seller’s right, title and interest under (i) the Leases, all guaranties of such Leases, and all rents, revenues, income, profits, and receipts due under the Leases or otherwise receivable by the owner of the Property for use or occupancy of any of the Property allocable to the period from and after the date hereof and (ii) the Contracts and (b) all other Property Assumed Liabilities.

 

4
 

  

2.          Except for the Property Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

3.          The undertakings of the Purchaser referred to in this Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Property Assumed Liabilities.

 

4.          This Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall prevail.

5.          EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE LEASES, CONTRACTS AND OTHER PROPERTY ASSUMED LIABILITIES WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

[Signature Page Follows]

 

5
 

  

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to be executed and delivered under seal as of the day and year first above written. This Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

  SELLER :  
    [____________] ASSISTED LIVING, LLC , an Iowa limited liability company
     
  By:  
  Title:  
     
  PURCHASER :
   
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Title:  

 

[signatures continue on next page]

 

6
 

   

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]

 

 
 

  

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

 
 

  

SCHEDULE 1.1(A)

Assumed Liabilities

 

None.

 

 
 

  

SCHEDULE 1.1(C)(I)

Legal Description of Cassville Facility

 

1300 Country Farm Road
Cassville, MO

CASSVILLE HEALTHCARE AND REHAB

 

A tract of land described as follows: Beginning at a point 60 feet West of the Northeast corner of the Northeast Quarter of the Northwest Quarter, Section 29, Township 23. Range 27, thence West 440 feet, thence South 575 feet, thence East 440 feet, thence North 575 feet to the point of beginning all in the Northeast Quarter of the Northwest Quarter of Section 29, Township 23, Range 27, Barry County, Missouri, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

 
 

  

SCHEDULE 1.1(C)(II)

Legal Description of Big Spring Facility

 

202 East Mill Street
Humansville, MO

BIG SPRING CARE CENTER

 

A part of the Northeast Quarter of the Southeast Quarter of Section 16 and part of the Northwest Quarter of the Southwest Quarter of Section 15 in Township 35 Range 24 being also a part of Block 13 of Fisher and Beaty's Addition to the Town of Humansville, Polk County Missouri being more particularly described as follows:

 

Commencing at the Southeast corner of the Northeast Quarter of the Southeast Quarter of said Section 16, thence North along the East line of said Section 16, 755.1 feet to the South line of Mill Street thence South 79 degrees 23 minutes 00 seconds West along the South line of Mill Street 62.8 feet to the point of beginning of the tract herein described, thence South 79 degrees 23 minutes 00 seconds West continuing along the South line of Mill Street 420.14 feet, thence South 12 degrees 19 minutes 00 seconds East 449.10 feet to the centerline of Brush Creek, thence South 85 degrees 28 minutes 00 seconds East along said centerline 194.00 feet, thence North 87 degrees 46 minutes 37 seconds East continuing along said centerline 234.63 feet, thence North 11 degrees 57 minutes 50 seconds West 534.00 feet to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

 
 

  

SCHEDULE 1.1(C)(III)

Legal Description of Country Aire Facility

 

18540 State Highway 16
Lewistown, MO

COUNTRY AIRE RETIREMENT ESTATES

 

A tract of land situated in the Northeast Quarter of Section Sixteen (16), Township Sixty-one (61) North, Range Eight (8) West, Lewis County, Missouri, and being more particularly described as follows:

 

Commencing at a found iron pipe marking the Northwest corner of said Northeast Quarter; thence along the West line of said Northeast Quarter, South 01 degree 03 minutes East, a distance of 1536.17 feet to a found rod, said rod being the the true point of beginning of the description herein; to wit: thence continuing along said West line, South 01 degree 03 minutes East, a distance of 1040.52 feet to the North line of Missouri Route 16; thence along said North line, North 87 degrees 57 minutes East, a distance of 400.00 feet thence leaving said North line, North 01 degree 03 minutes West, a distance of 1033.52 feet thence South 88 degrees 57 minutes West, a distance of 400.0 feet to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

 
 

  

SCHEDULE 1.1(C)(IV)

Legal Description of Buffalo Facility

 

631 West Main Street
Buffalo, MO

 

BUFFALO PRAIRIE CARE CENTER

 

TRACT I:

 

Commencing at the Southeast Corner of Lot 13, WILLIAMS ADDITION TO THE CITY OF BUFFALO, Missouri; thence along the South line of said Lot 13, North 88 degrees 13 minutes 40 seconds West 175.00 feet to the point of beginning; thence continuing along the said South line North 88 degrees 13 minutes 40 seconds West 219.00 feet; thence North 4 degrees 05 minutes 00 seconds West 456.41 feet to the North line of Lot 14 of Williams Addition; thence along said North line South 88 degrees 13 minutes 40 second East 335.73 feet; thence parallel with the East line of said Lot 13, South 1 degree 09 minutes 40 seconds West 304.05 feet to the Northeast Corner of a tract described in Book 221, Page 1381, Dallas County Recorder's office; thence along the North line of said tract North 88 degrees 13 minutes 40 seconds West 75.00 feet; thence along the West line of said tract South 1 degree 09 minutes 40 seconds West 150.00 feet to the point of beginning, except any part thereof deeded, taken or used for road or highway purposes. All in Dallas County, Missouri.

 

TRACT II:

 

All of Lot 12 of MADDUX RE-SURVEY OF WILLIAMS ADDITION TO THE CITY OF BUFFALO, Dallas County, Missouri, except any part thereof deeded, taken, or used for road or street purposes.

 

TRACT III:

 

The East 335.73 feet of the following described tract, being that part of the South Half of Benton Street as shown on the plat of WILLIAMS ADDITION, lying East of a line drawn from the Southwest Corner of Lot 12 MADDUX RESURVEY to the Northwest Corner of that certain tract of land described in Book 247, at Page 1560:Commencing at the Southeast Corner of Lot 13 WILLIAMS ADDITION to Buffalo, Missouri, thence along the South Line of said Lot 13 North 88 degrees 13 minutes 40 seconds West 394.00 feet; thence North 4 degrees 05 minutes West 456.41 feet to the North Line of Lot 14 Williams Addition; thence along said North Line South 88 degrees 13 minutes 40 seconds East 335.73 feet, for a true point of beginning, thence North 1 degree 09 minutes 40 seconds East 20.00 feet to the South Line of MADDUX RESURVEY; thence North 88 degrees 13 minutes 40 seconds West, along the South Line of MADDUX RESURVEY, 607.32 feet to the East Right-of-Way of Hickory Street, thence along said Right-of-Way South 1 degree 09 minutes 40 seconds West 20.00 feet to the Northwest Corner of said Lot 14 Williams Addition; thence South 88 degrees 13 minutes 40 seconds East along said North Line 607.32 feet to the point of beginning.

 

 
 

  

SCHEDULE 1.1(C)(V)

Legal Description of Edgewood Manor Facility

11900 Jessica Lane
Raytown, MO

 

EDGEWOOD MANOR NURSING HOME

 

All that part of the Northwest Quarter of the Southwest Quarter of Section 15, Township 48, Range 32, in Raytown, Jackson County, Missouri, described as follows: Commencing at the Northeast corner of said Quarter Quarter Section; thence South 2 degrees 05 minutes 05 seconds East along the East line of said Quarter Quarter Section, a distance of 344.10 feet; thence North 90 degrees 00 minutes 00 seconds West, parallel to the North line of said Quarter Quarter Section, a distance of 33.02 feet to a point on the West line of Westridge Road, as now established, and the true point of beginning of the tract of land to be herein described; thence continuing South 90 degrees 00 minutes 00 seconds West parallel to said North line, a distance of 428.00 feet; thence South 0 degrees 00 minutes 00 seconds West, a distance of 295.79 feet, to a point on the North line of Jessica Lane, as now established; thence Southeasterly along the North line of said Jessica Lane, along a curve to the right having an initial tangent bearing of South 73 degrees 05 minutes 11 seconds East and a radius of 950.00 feet, an arc distance of 43.58 feet; thence South 70 degrees 27 minutes 28 seconds East continuing along the North line of said Jessica Lane a distance of 98.49 feet; thence Southeasterly continuing along the North line of said Jessica Lane, along a curve to the right, tangent to the last described course, having a radius of 525.00 feet, an arc distance of 251.61 feet; thence South 42 degrees 59 minutes 54 seconds East, continuing along the North line of said Jessica Lane, a distance of 37.12 feet; thence Southeasterly continuing along the North line of said Jessica Lane, along a curve to the left, tangent to the last described course, having a radius of 100.00 feet, an arc distance of 85.67 feet; thence North 87 degrees 54 minutes 55 seconds East, continuing along the North line of said Jessica Lane, a distance of 2.92 feet to a point on the West line of said Westridge Road; thence North 2 degrees 05 minutes 05 seconds West along the West line of said Westridge Road, a distance of 538.22 feet, to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

Also described as:

 

All that part of the Northwest Quarter of the Southwest Quarter of Section 15, Township 48, Range 32, in Raytown, Jackson County, Missouri, described as follows: Commencing at the Northeast corner of said Quarter Quarter Section; thence South 2 degrees 05 minutes 05 seconds East along the East line of said Quarter Quarter Section, a distance of 344.10 feet; thence South 90 degrees 00 minutes 00 seconds West, parallel to the North line of said Quarter Quarter Section, a distance of 33.02 feet, to a point on the West right-of-way line of Westridge Road, as now established, and the true point of beginning of the tract of land to be herein described; thence continuing South 90 degrees 00 minutes 00 seconds West parallel to said North line, a distance of 428.00 feet; thence South 0 degrees 00 minutes 00 seconds West, a distance of 295.79 feet, to a point on the North right-of-way line of Jessica Lane, as now established; thence Southeasterly along the North right-of-way line of said Jessica Lane, along a curve to the right having an initial tangent bearing of South 73 degrees 05 minutes 11 seconds East and a radius of 950.00 feet, a central angle of 2 degrees 37 minutes 41 seconds, an arc distance of 43.58 feet; thence South 70 degrees 27 minutes 28 seconds East, continuing along the North right-of-way line of said Jessica Lane, a distance of 98.49 feet; thence

 

 
 

  

Southeasterly continuing along the North right-of-way line of said Jessica Lane, along a curve to the right, tangent to the last described course, having a radius of 525.00 feet, a central angle of 27 degrees 27 minutes and 34 seconds, an arc distance of 251.61 feet; thence South 42 degrees 59 minutes 54 seconds East, continuing along the North right-of-way line of said Jessica Lane, a distance of 37.12 feet; thence Southeasterly continuing along the North right-of-way line of said Jessica Lane, along a curve to the left, tangent to the last described course, having a radius of 100.00 feet, a central angle of 49 degrees 05 minutes and 11 seconds, an arc distance of 85.67 feet; thence North 87 degrees 54 minutes 55 seconds East, continuing along the North right-of-way line of said Jessica Lane, a distance of 2.92 feet to a point on the West right-of-way line of said Westridge Road; thence North 2 degrees 05 minutes 05 seconds West along the West right-of-way line of said Westridge Road, a distance of 538.22 feet, to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

 
 

  

SCHEDULE 1.1(C)(VI)

Legal Description of Georgian Gardens Facility

 

1 Georgian Gardens
Potosi, MO

 

GEORGIAN GARDENS

 

TRACT I:

 

All that part of U.S. Survey No. 3311, described as follows: Commencing at the Northeast corner of U.S. Survey 3311, Township 37 North, Range 2 East, said corner presently marked by a M.S.L.S. Aluminum Monument and more particularly located by Missouri State Coordinates 763,522.489 N and 422,296.400 E; thence West 285.47 feet; thence South 1023.13 feet to an iron rod set on the South right-of-way line of Missouri Route A "8", being the true point of beginning; thence along said right-of-way line, North 83 degrees 06 minutes 54 seconds West 200.00 feet to a point from which an old iron rod within the right-of-way of Missouri Route A "8" bears North 12 degrees 31 minutes 06 seconds East 3.90 feet; thence leaving said right-of-way line South 12 degrees 31 minutes 06 seconds West 665.58 feet to an iron rod with cap set in concrete; thence South 77 degrees 39 minutes 37 seconds East 500.00 feet to a point from which as iron rod with cap set in concrete bears South 77 degrees 39 minutes 37 seconds East 180.00 feet; thence North 12 degrees 20 minutes 23 seconds East 200.00 feet to a point; thence North 19 degrees 19 minutes 24 seconds West 569.30 feet to the true point of beginning, being and situated in Washington County, Missouri, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

TRACT II:

 

A portion of USS 3311, Township 37 North, Range 2 East, 5th PM, lying and situated in Washington County, Missouri and more particularly described as follows, to-wit: Commencing at the Northeast corner of USS #3311, Township 37 North, Range 2 East, said corner presently marked by a stone pile and more particularly located by Missouri State Coordinates 763522.489 and 422296.400 East; thence East 189.15 feet to a point thence South 1098.44 feet to the point of beginning the land hereby surveyed, being also the Northeast corner of said land and marked by an iron pin with cap which was set on the South Right of Way Line of Missouri Rt. "A" (8) and more particularly located by Missouri State Coordinates 76242,050 North and 422485.548 East; thence along said Right of Way Line North 80 degrees 20 minutes 07 seconds West, 382.53 feet to a point; thence North 82 degrees 20 minutes 20 seconds West, 298.88 feet to an iron pin; thence leaving said South Right of Way Line, South 12 degrees 20 minutes 23 seconds West, 669.46 feet to an iron pin with cap; thence South 77 degrees 39 minutes 37 seconds East, 680.00 feet to an iron pin with cap; thence North 12 degrees 20 minutes 23 seconds East, 711.69 feet to the True Point of Beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

EXCEPTING all that part conveyed to Mid-America Georgian Nursing L.P. by a Special Warranty Deed recorded in Book 235 Page 235.

 

 
 

  

TRACT II BEING ALSO DESCRIBED AS:

 

Commencing at the Northeast corner of USS #3311, Township 37 North, Range 2 East, said corner presently marked by a stone pile and more particularly located by Missouri State Coordinates 763,522.489 N and 422,296.400 E; thence East 189.15 feet and South 1098.44 feet to the point of beginning, being presently marked by an iron rod on the South Right of Way line of Missouri Route (A) 8 and more particularly located by Missouri State Coordinates 762,424.050 N and 422,485.548 E; thence along said Right of Way Line North 80 degrees 20 minutes 07 seconds West 382.53 feet to a point; thence North 82 degrees 20 minutes 20 seconds West 98.88 feet to a point; thence leaving said South Right of Way, South 19 degrees 19 minutes 24 seconds East, 569.30 feet to a point; thence South 12 degrees 20 minutes 23 seconds West, 200.00 feet to a point; thence South 77 degrees 39 minutes 37 seconds East, 180.00 feet to an iron rod with cap, set in concrete; thence North 12 degrees 20 minutes 23 seconds East, 711.69 feet to the true point of beginning, being situated in Washington County, Missouri, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

SURVEYOR'S DESCRIPTION OF TRACTS I & II, MORE PARTICULARLY DESCRIBED AS:

 

A portion of USS 3311, Township 37 North, Range 2 East, 5th PM, lying and situated in Washington County, Missouri and more particularly described as follows, to-wit; Commencing at the Northeast Corner of USS #3311, Township 37 North, Range 2 East, said corner presently marked by a stone pile and more particularly located by Missouri State Coordinates 763522.489 and 422296.400 East: thence East 189.15 feet to a point thence South 1098.44 feet to the point of beginning the land hereby surveyed. Being also the Northeast Corner of said land and marked by an iron pin with cap which was set on the South Right of Way line of Missouri Route "A" (8) and more particularly located by Missouri State Coordinates 76242.050 North and 422485.548 East; thence along said Right of Way line North 80 degrees 20 minutes 07 seconds West, 382.53 feet to a point; thence North 82 degrees 20 minutes 20 seconds West 299.37 feet to an iron pin; thence leaving said South Right of Way line, South 12 degrees 31 minutes 06 seconds West, 665.58 feet to an iron pin with cap; thence South 77 degrees 39 minutes 37 seconds East, 680.00 feet to an iron pin with cap; thence North 12 degrees 20 minutes 23 seconds East, 711.69 feet to the true point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

The above description described the same property in Warranty Deed recorded in Book 256, Page 935, Book 256, Page 937, and Book 235, Page 235 of the Washington County, Missouri Records.

 

 
 

  

SCHEDULE 1.1(C)(VII)

Legal Description of Golden Years Facility

 

2001 Jefferson Parkway
Harrisonville, MO

 

GOLDEN YEARS

 

TRACT I:

 

Part of the West half of the Southwest Quarter of Section 34, Township 45, Range 31, in the City of Harrisonville, Cass County, Missouri, described as follows: From the Southwest corner of the Southwest Quarter of Section 34, aforesaid, run thence North along the West line of Section 34, 1795.65 feet; thence South 89 degrees 33 minutes 13 seconds East, along the South line of the Cass County Rest Home 40 acre tract, 591.27 feet to the true point of beginning of the tract to be described; continuing thence South 89 degrees 33 minutes 13 seconds East, 413.26 feet to the Southeast corner of said Cass County 40 acre tract; thence North 0 degrees 21 minutes 00 seconds West along the East line thereof, 531.23 feet; thence West 410 feet; thence South 528 feet to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

Also an easement for access over a strip of land 50 feet in width and 25 feet either side of the following described centerline:From the Southwest corner of the Southwest Quarter of Section 34, Township 45, Range 31, in Cass County, Missouri, run thence North along the West line of Section 34, 2179.77 feet to the true point of beginning of the centerline to be described; thence South 87 degrees 22 minutes 00 seconds East, 591.88 feet to a point on the West line of the above described tract, said centerline following the approximate location of the existing driveway centerline.

 

TRACT II:

 

Part of the West half of the Southwest Quarter of Section 34, Township 45, Range 31, in the City of Harrisonville, Cass County, Missouri, described as follows: From the Southwest corner of the Southwest Quarter of Section 34, aforesaid run thence North, along the West line of Section 34, 1795.65 feet; thence South 89 degrees 33 minutes 13 seconds East, 1004.53 feet to the Southeast corner of that tract conveyed to the County of Cass in Deed Book 187, Page 216, of the County Records; thence North 0 degrees 21 minutes 00 seconds West, along the East line of said tract, 531.23 feet to the true point of beginning of the tract to be described; continuing thence North 0 degrees 21 minutes 00 seconds West, 200 feet; thence West 408.78 feet; thence South 200 feet; thence East 410 feet to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

 
 

 

SCHEDULE 1.1(C)(VIII)

Legal Description of Gregory Ridge Facility

7001 Cleveland Avenue
Kansas City, MO

GREGORY RIDGE LIVING CENTER

TRACT I:

Part of the Southeast Quarter of the Northeast Quarter of Section 10, Township 48, Range 33, in Kansas City, Jackson County, Missouri, described as follows: Commencing at a point 792 feet North and 30 feet East of the Southwest corner of the Southeast Quarter of the Northeasterly Quarter of Section 10, Township 48, Range 33, said point being the intersection of the East line of Cleveland Avenue and the South line of vacated 70th Street, run South along said East line of Cleveland Avenue 284 feet to a point that is 120 feet North of the North line of Gregory Boulevard, thence East parallel with the South line of said Quarter Quarter Section 100 feet to the point of beginning; thence South 120 feet to the North line of Gregory Boulevard; thence East along said North Boulevard line 84.50 feet to the point of its intersection with the West line of vacated Mersington Avenue; thence North along said vacated street line 120 feet; and thence West 84.50 feet to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

TRACT II:

Part of the Southeast Quarter of the Northeast Quarter of Section 10, Township 48, Range 33, in Kansas City, Jackson County, Missouri, described as follows: Beginning at a point 792 feet North and 30 feet East of the Southwest corner of the Southeast Quarter of the Northeast Quarter of Section 10, Township 48, Range 33, said point being the intersection of the East line of Cleveland Avenue and the South line of vacated 70th Street, run South along said East line of Cleveland Avenue 284 feet to a point that is 120 feet North of the North line of Gregory Boulevard; thence East parallel with the South line of said Quarter Quarter Section 184.50 feet to the West line of vacated Mersington Avenue; thence North along said vacated street 284 feet to the point of its intersection with the South line of vacated 70th Street; and thence West along said vacated street line 184.50 feet to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

TRACT III:

Lots 118, 119, 120, 121, 122, 123, 124, 125 and 126, SWOPELAND, a subdivision of land in Kansas City, Jackson County, Missouri, together with all of vacated 70th Street, to the full width thereof, lying South of Lot 118, Swopeland, and East of the Southward prolonged West line of Lot 118, Swopeland, and all of vacated Mersington Avenue to the full width thereof, lying West of Lots 119 to 126 inclusive, Swopeland, and North of the North line of Gregory Boulevard, said streets were vacated by Ordinance No. 32471 passed April 7, 1966 and recorded as Document No. 1966B0548942 in Book B5889 at Page 94.

TRACT IV:

Lot 116, SWOPELAND, a subdivision in Kansas City, Jackson County, Missouri.

TRACT V:

Lot 117, SWOPELAND, a subdivision in Kansas City, Jackson County, Missouri.

TRACT VI:

Lot 115, SWOPELAND, a subdivision in Kansas City, Jackson County, Missouri.

TRACT VII:

 

 
 

  

All of vacated 70th Street to the full width thereof lying South of Lot 117, SWOPELAND, from the Southward prolongation of the East line of Lot 117, to the East line of Cleveland Avenue, said vacated 70th Street located in Kansas City, Jackson County, Missouri and vacated by Ordinance 32471 passed 04/07/1966, as Document No. 1966B0548942 in Book B5889 at Page 94.

 

 
 

   

SCHEDULE 1.1(C)(IX)

Legal Description of Parkway Facility

2323 Swope Parkway
Kansas City, MO

PARKWAY HEALTH AND REHAB.

Part of Lots 11 through 19, both inclusive; part of Lots 96 through 99, both inclusive, and Lots 113 and 114, PROSPECT HILL, a subdivision in Kansas City, Jackson County, Missouri, together with part of vacated 48th Street adjacent to said Lots, all being more particularly described as follows: Beginning at the Northeast corner of said Lot 11; thence North 59 degrees 48 minutes 34 seconds West along the Northeasterly line of said Lots 11 through 18, a distance of 420.00 feet to the Northwesterly corner of said Lot 18, said point also being on the Easterly right-of-way line of the Bruce R. Watkins Drive (U.S. Highway No. 71) as established; thence North 88 degrees 25 minutes 11 seconds West along said Easterly right-of-way line, a distance of 62.65 feet to a point on the Westerly line of said Lot 19 that is 30.00 feet South of the Northwest corner thereof, as measured along said Westerly line; thence South 30 degrees 11 minutes 26 seconds West, continuing along said Easterly right-of-way line and along the Northwesterly line of said Lot 19, a distance of 54.75 feet; thence South 22 degrees 06 minutes 51 seconds East, continuing along said Easterly right-of-way line, a distance of 40.90 feet; thence Southeasterly continuing along said Easterly right-of-way line; along a curve to the left having a initial tangent bearing of South 31 degrees 29 minutes 31 seconds East, a radius of 944.93 feet, and a central angle of 7 degrees 59 minutes 49 seconds, an arc distance of 131.89 feet; thence South 86 degrees 47 minutes 43 seconds East, continuing along said Easterly right-of-way line, a distance of 52.12 feet; thence South 48 degrees 36 minutes 47 seconds East continuing along said Easterly right-of-way line, a distance of 193.76 feet, thence South 43 degrees 22 minutes 23 seconds East, continuing along said Easterly right-of-way line, a distance of 73.11 feet, thence South 46 degrees 25 minutes 38 seconds East, continuing along said Easterly right-of-way line, a distance of 173.66 feet, to its intersection with the Westerly right-of-way line of Wabash Avenue, as now established; thence Northeasterly along said Westerly right-of-way line, along a curve to the right, having an initial tangent bearing of North 21 degrees 26 minutes 11 seconds East, a radius of 250.00 feet and a central angle of 8 degrees 45 minutes 15 seconds, an arc distance of 38.20 feet; thence North 30 degrees 11 minutes 26 seconds East, continuing along said Westerly right-of-way line, a distance of 35.83 feet, to a point on the centerline of vacated 48th Street; thence North 59 degrees 48 minutes 34 seconds West, along said centerline, a distance of 127.37 feet; thence Northwesterly, continuing along said centerline along a curve to the left, tangent to the last described course, having a radius of 125.00 feet and a central angle of 8 degrees 43 minutes 26 seconds, an arc distance of 19.03 feet, to a point that is 25.00 feet Southwesterly of the Southeast corner of said Lot 11, as measured radially to said centerline; thence North 21 degrees 28 minutes 00 seconds East, along said radial line a distance of 25.00 feet to the Southeast corner of said Lot 11; thence North 30 degrees 11 minutes 26 seconds East, along the Southeasterly line of said Lot 11, a distance of 141.74 feet (Plat 141.68 feet) to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

 
 

 

SCHEDULE 1.1(C)(X)

Legal Description of Marshfield Facility

800 South White Oak Road
Marshfield, MO

MARSHFIELD CARE CENTER

All of the South-half of the following described property: A part of the Northwest Quarter of the Southwest Quarter of Section 10, Township 30 North, Range 18 West described as beginning at a point 20 rods South of the Northwest corner of the Northwest Quarter of the Southwest Quart, running thence East 40 rods; thence South 40 rods; thence West 40 rods; thence North 40 rods to the place of beginning all being in Webster County, Missouri, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

Being also:

A part of the Northwest Quarter of the Southwest Quarter of Section 10, Township 30 North, Range 18 West, City of Marshfield, Webster County, Missouri, being more particularly described as follows: Commencing at the Northwest corner of the Northwest Quarter of the Southwest Quarter of said Section 10; thence along the West line of said Southwest Quarter, South 00 degrees 00 minutes 00 seconds West, a distance of 660.00 feet to the point of beginning; thence South 89 degrees 25 minutes 54 seconds East, a distance of 659.61 feet; thence South 00 degrees 00 minutes 00 seconds West, a distance of 330.03 feet; thence North 89 degrees 25 minutes 54 seconds West, a distance of 659.61 feet to a point on the West line of the Southwest Quarter of said Section 10; thence along said West line, North 00 degrees 00 minutes 00 seconds East, a distance of 330.03 feet to the point of beginning, subject to that part, if any, in streets, roadways, highways or other public right-of-ways.

 

 
 

 

SCHEDULE 2.4(A)

Permitted Title Exceptions

Permitted Encumbrances for Cassville Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Deed in favor of Barry Electric Cooperative, as more fully set forth in the instrument recorded in Book 196 at Page 111.

3.          Right of Way Easement granted to The Gas Service Company as more fully set forth in the instrument recorded in Book 232, Page 178.

4.          Right of Way Agreement granted to The Gas Service Company as more fully set forth in the instrument recorded in Book 232 at Page 179.

5.          Right of Way granted to Southwestern Bell Telephone as more fully set forth in the instrument recorded in Book 251 at Page 29E.

6.          Easement granted to Southwestern Bell Telephone Company as more fully set forth in the instrument recorded in Book 251 at Page 33.

7.          Commissioner’s Deed, as more fully set forth in the instrument recorded in Book 273 at Page 203.

8.          Easement granted to Southwestern Bell Telephone as more fully set forth in the instrument recorded in Book 279 at Page 320.

9.          Sewer Agreement, as more fully set forth in the instrument recorded in Book 296 at Page 193.

10.        Easement granted to J.L. Jackson and Elma Jackson, his wife as more fully set forth in the instrument recorded in Book 334 at Page 71.

11.         Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

Permitted Encumbrances for Big Spring Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Building lines, easements and restrictions shown on the plat of Fisher and Beaty’s Addition to the Town of Humansville.

3.          Easement granted to The Empire District Electric Company as more fully set forth in the instrument recorded in Book 565 at Page 1019.

4.          The following matters regarding the watercourse known as Brush Creek:

a.           Any past or future change in the bed or banks of said watercourse which forms a boundary of the land.

b.           Any dispute arising over the location of the old bed or banks of said watercourse.

c.           Any variance between the boundary line of said watercourse as originally conveyed and the current boundary thereof as now located, used or occupied.

d.           Rights of upper and/or lower riparian owners in and to the free and unobstructed flow of water of said watercourse and other riparian rights, whether or not shown by the public records, such as fishing, boating, swimming or other similar activity.

e.           Riparian water rights.

5.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may

 

 
 

  

be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

Permitted Encumbrances for Country Aire Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Right of Way granted to State of Missouri as more fully set forth in the instrument recorded in Book 177 at Page 146.

3.          Easement granted to Northeast Missouri Electric Power Cooperative as more fully set forth in the instrument recorded in Book 194 at Page 314.

4.          Easement granted to Southwestern Bell Telephone Company as more fully set forth in the instrument recorded in Book 217, at Page 47.

5.          Easement granted to Great River Gas Company as more fully set forth in the instrument recorded in Book 253 at Page 617.

6.          Right of Way Easement granted to Northeast Missouri Electric Power Cooperative as more fully set forth in the instrument recorded in Book 273 at Page 3264.

7.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

8.          Those matters found on plan of land prepared by American Surveying & Mapping, Inc. dated July 9, 2014, last revised July 24, 2014, identified as Drawing Name: 18450 State Route 16, Lewistown, MO.dwg as follows:

a.           Subject’s wood fence crosses northerly property line by a width of 31.19’ for a length of 311.73’ as shown.

Permitted Encumbrances for Buffalo Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Building lines, easements and restrictions shown on the plat of WILLIAMS ADDITION.

3.          Building lines, easements and restrictions shown on the plat of MADDRUX RE-SURVEY OF WILLIAMS ADDITION.

4.          Easement granted to City of Buffalo, Missouri as more fully set forth in the instrument recorded in Book 266 at Page 88.

5.          Easement reservation granted to the City of Buffalo, Missouri as more fully set forth in the instrument recorded in Book 268 at Page 1797.

6.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

7.          Those matters found on plan of land prepared by American Surveying & Mapping Inc. dated July 9, 2014, last revised July 25, 2014 and identified as Drawing Name: 631 W. Main St., Buffalo, MO, as follows:

a.           Neighbor’s building crosses the easterly line of tract II of subject property by a width of 3.91’ for a length of 12.24’ as shown.

b.           Subject’s asphalt drive crosses the northerly line of tract III by a width of 7.46’ for a length of 53.73’ as shown.

c.           Public sidewalk crosses the southerly line of Tract I by a width of 1.46’ for a length of 219.00’ as shown.

 

 
 

  

Permitted Encumbrances for Edgewood Manor Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Easement granted to Missouri Public Service, a division of Utilicorp United, Inc., a Delaware corporation as more fully set forth in the instrument recorded as Document No. 199810007389 in Book 13136 at Page 2185.

3.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

Permitted Encumbrances for Georgian Gardens Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Abutter’s rights of direct to Highway relinquished by instrument recorded in Book 116 at Page 16.

3.          Ordinance/Resolution by the City of Potosi establishing a benefit district for Ordinance No. 667.

4.          Right of way Agreement to Arkansas-Missouri Power Company, as more fully set forth in the instrument recorded in Book 161, Page 203.

5.          Private Survey Record Page 415 and recorded on 9/5/1980.

6.          Roadway Easement granted to Mid-America Georgian Nursing LP as more fully set forth in the instrument recorded in Book 174 at Page 747 and Book 235 at Page 235 and in Book 256 at Page 937.

7.          Easement for a gas line granted to the City of Potosi, Mo. as more fully set forth in the instrument recorded in Book 178, Page 71.

8.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

Permitted Encumbrances for Golden Years Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Electrical line Easement granted to the City of Harrisonville, Missouri as more fully set forth in the instrument recorded in Book 870 at Page 187.

3.          Easement for ingress and egress, as more fully set forth in the instrument recorded as Document No. 09654 in Book 958 at Page 44.

4.          Utility Easement granted to City of Harrisonville, Missouri as more fully set forth in the instrument recorded as Document No. 03475 in Book 1032 at Page 263.

5.          Utility Easement granted to City of Harrisonville, Missouri as more fully set forth in the instrument recorded as Document No. 007065 in Book 1088 at Page 251.

6.          Any inaccuracy in the area, square footage, or acreage of land described in Schedule A or attached plat, if any.

7.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

 

 
 

  

8.          Those matters found on plan of land prepared by American Surveying & Mapping Inc. dated July 9, 2014, last revised July 28, 2014 and identified as Drawing Name: 2001 Jefferson Parkway Harrisonville, MO.dwg, as follows:

a.           Building resides on a portion of an electrical easement for a length of 133.69 feet as shown.

Permitted Encumbrances for Gregory Ridge Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Building lines, easements and restrictions shown on the plat SWOPELAND recorded 08/12/1924 in Plat Book K22 and Page 4.

3.          Sewer Easement granted to Kansas City as more fully set forth in the instrument recorded as Document No. 1923A0103071 in Book B-2379 at Page 127.

4.          Restrictions as set forth in Warranty Deed, as more fully set forth in the instrument recorded as Document No. 1924A0196716 in Book B-2471 at Page 507.

5.          Restrictions as set forth in Warranty Deed, as more fully set forth in the instrument recorded as Document No. 1925A0236178 in Book B-2557 at Page 354 and recorded as Document No. 1925A0250927 in Book B-2642 at Page 18 and recorded as Document No. 1925A0251923 in Book B-2643 at Page 17.

6.          Easement granted to Kansas City Power and Light Company as more fully set forth in the instrument recorded as Document No. 1964B0478743 in Book B5689 at Page 90.

7.          Easements, if any, for public utilities, pipelines or facilities installed in any portion of the vacated street or alley, lying within the land, together with the right of ingress and egress to repair, maintain, replace and remove the same, as reserved in ordinance no. 32471 recorded 04/07/1966, as Document No. 1966B0548942 in Book B5889 at Page 94.

8.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

Permitted Encumbrances for Parkway Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Building lines, easements and restrictions shown on the plat of PROSPECT HILL recorded 05/08/1906 in Plat Book K13 and Page 89.

3.          Abutters’ Rights and easements as conveyed to the State of Missouri, acting by and through the Missouri Highway and Transportation Commission, as more fully set forth in the instrument designated “General Warranty Deed” recorded as Document No. 1992K1006560 in Book K2202 at Page 24 and in instrument recorded as Document No. 1992K1006561 in Book K2202 at Page 27.

4.          Easements, if any, for public utilities, pipelines or facilities installed in any portion of the vacated street or alley, lying within the land, together with the right of ingress and egress to repair, maintain, replace and remove the same, as reserved in ordinance number 920842 recorded 08/10/1992, as Document No. 1992K1037054 in Book K2276 at Page 2079.

5.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

 

 
 

  

6.          Those matters on a plan of land prepared by American Surveying & Mapping Inc. dated July 16, 2014, last revised July 24, 2014 and identified as Project No. 1400826 as follows:

a.           Chain link fencing crosses boundary by at most 2.7’.

b.           Building encroaches over rear building set back by at most 9.1’.

c.           Building encroaches over front building setback at most 2.4’.

Permitted Encumbrances for Marshfield Facility

1.          Taxes 2014 and subsequent years, which are not yet due and payable.

2.          Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records.

 

 
 

  

SCHEDULE 2.4(G)

Licenses, Leases Easements and Other Rights Related to Real Property

None.

 

 
 

 

SCHEDULE 4.1(A)

Due Diligence Information

Provided directly to Seller.

 

 
 

  

SCHEDULE 5.4(M)

Third Party Consents

None.

 

 
 

  

SCHEDULE 6.5

Execution and Delivery – No Contravention

None.

 

 
 

  

SCHEDULE 6.6

Contracts and Leases

None.

 

 
 

  

SCHEDULE 6.7

Residency Agreements and Related Matters

None.

 

 
 

 

 

SCHEDULE 6.8

Permits and Licenses

A.           Medicare enrollment confirmation;

B.           Medicaid enrollment confirmation; and

C.           Licenses from the State of Missouri to operate each of the following facilities:

(i)          facility with sixty (60) skilled nursing beds commonly known as Cassville Health Care and Rehab, located in Cassville, Missouri;

(ii)         facility with sixty (60) skilled nursing beds commonly known as Big Spring Care Center, located in Humansville, Missouri;

(iii)        facility with sixty (60) skilled nursing beds and sixteen (16) licensed residential care beds commonly known as Country Aire Retirement Estates, located in Lewistown, Missouri;

(iv)        facility with sixty (60) skilled nursing beds commonly known as Buffalo Prairie Care Center, located in Buffalo, Missouri;

(v)         facility with sixty-six (66) skilled nursing beds commonly known as Edgewood Manor Nursing Home, located in Raytown, Missouri;

(vi)        facility with one-hundred twenty (120) skilled nursing beds commonly known as Georgian Gardens, located in Potosi, Missouri;

(vii)       facility with one-hundred thirty-two (132) skilled nursing beds commonly known as Golden Years, located in Harrisonville, Missouri;

(viii)      facility with one-hundred sixteen (116) skilled nursing beds commonly known as Gregory Ridge Living Center, located in Kansas City, Missouri;

(ix)         facility with ninety-seven (97) skilled nursing units commonly known as Parkway Health and Rehab, located in Kansas City, Missouri; and

(x)          facility with seventy-seven (77) skilled nursing beds commonly known as Marshfield Care Center, located in Marshfield, Missouri.

 

 
 

   

SCHEDULE 6.9

Insurance; Three Year Claim History

 

See attached.

 

 
 

 

Schedule 6.10

Employee Claims

 

(i) Edgewood Manor Facility:
a. Debra Hawthorne, June 2013, filed with Missouri Commission on Human Rights: Alleged termination based on age, race and retaliation

 

 

(ii) Gregory Ridge Facility:
a. Tammy Thomas, January 2013, filed with Missouri Commission on Human Rights: Alleged termination based on sex/pregnancy and retaliation
b. Ebele Egbuniwe, November 2011, filed with EEOC: Alleged termination based on pregnancy/sex

 

 

(iii) Parkway Facility:
a. Robbe Turner, May 2013, filed with Missouri Commission on Human Rights: Alleged termination based on sex and sexual orientation.
b. Shamone Hill, May 2013, filed with EEOC: Alleged termination based on disability and religion

 

 

(iv) Cassville Facility:
a. Maria Benetiz, February 2012, filed with EEOC: Alleged failure to accommodate disability and discrimination based on national origin

 

 
 

 

SCHEDULE 6.11

Litigation, etc.

 

(i) Pending law suit against PHCA, LLC – Lewis County Circuit Court, filed on 10/20/2011 (CC Wrongful Death)

 

 

(ii) Pending law suit against PHKC Cleveland, LLC – Jackson County Circuit Court, filed on 11/19/2013 (CC Employment Discrimination 213.111)

 

 

(iii) Pending law suit against PHKC Swope, LLC – Jackson County Circuit Court, filed on 08/13/2013 (CC Wrongful Death)

 

 

(iv) Pending law suit against PHGG, LLC and PHGG Realty, LLC – Washington County Circuit Court, filed on 10/21, 2013; transferred to St. Francois County Circuit Court, filed 05/22/2014 (CC Wrongful Death)

 

 
 

   

SCHEDULE 6.12

Compliance with Laws

None.

 

 
 

  

SCHEDULE 6.13

Financial Statements

See attached.

 

 
 

 

SCHEDULE 6.14

Real Property Compliance

None.

 

 
 

  

SCHEDULE 6.15

Environmental Matters

None.

 

 
 

  

SCHEDULE 6.19

Third Party Consents

None.

 

 
 

  

SCHEDULE 6.20

Government Approvals

(i)          A submission of a notice letter to the Missouri Department of Health and Senior Services notifying it of all changes in the licensure materials and information currently on file for each Facility (i.e., change in ownership of the Real Property; names of new holders of liens on the Real Property; list of Purchaser’s affiliates; and lease terminations).

(ii)         Amendments to Medicare enrollment materials including disclosure of information about any new lenders (including mortgage lenders) with a five percent (5%) or more security interest in the Medicare provider or any of its property or assets.

 

 
 

   

SCHEDULE 6.21

Assessments

None.

 

 
 

  

SCHEDULE 6.22

Title Encumbrances

None.

 

 
 

 

 

SCHEDULE 6.24

Loans

None.

 

 
 

  

SCHEDULE 10.4

Purchaser’s Special Purpose Entities

 

Purchased Real Property   Special Purpose Entity
     
Cassville Health Care and Rehab   ARHC CHCASMO01, LLC
     
Buffalo Prairie Care Center   ARHC BPBUFMO01, LLC
     
Marshfield Care Center   ARHC MCMSHMO01, LLC
     
Country Aire Retirement Estates   ARHC CALEWMO01, LLC
     
Edgewood Manor Nursing Home   ARHC EMRAYMO01, LLC
     
Georgian Gardens   ARHC GGPOTMO01, LLC
     
Big Spring Care Center   ARHC BSHUMMO01, LLC
     
Golden Years   ARHC GYHSVMO01, LLC
     
Gregory Ridge Living Center   ARHC GRKCYMO01, LLC
     
Parkway Health and Rehab   ARHC PHKCYMO01, LLC

 

 

Exhibit 10.37

FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

This First Amendment to Asset Purchase Agreement (the “ Amendment ”) is made and entered into as of this 30th day of July 2014, by and among PHBC REALTY, LLC, PHDC REALTY, LLC, PHMC REALTY, LLC, PHCA REALTY, LLC, PHEM REALTY, LLC, PHGG REALTY, LLC, PHBS REALTY, LLC, PHGY REALTY, LLC, PHKC CLEVELAND REALTY, LLC, and PHKC SWOPE REALTY, LLC (collectively, “ Seller ”), and AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, as Purchaser (“ Purchaser ”), and is effective as of the last date of signature below (“ Effective Date ”).

WHEREAS, Seller and Purchaser entered into that certain Asset Purchase Agreement dated as of July 4, 2014 (the “ APA ”) (capitalized terms used herein and not otherwise defined shall have the definitions ascribed to them in the APA).

WHEREAS, the parties hereto desire to amend the APA in accordance with the terms and conditions provided herein.

THEREFORE, the Seller and Purchaser agree to amend the APA as follows:

1. In Section 1.1 of the APA (Defined Terms), a defined term “ Facilities ” is hereby deleted in its entirety and replaced with the following:

““ Facilities ” means collectively the facilities known as:
(i)
Cassville Health Care and Rehab located in Cassville, Missouri and consisting of sixty (60) skilled nursing units (also individually referred to as the Cassville Facility ”); and
(ii)
Big Spring Care Center located in Humansville, Missouri and consisting of sixty (60) skilled nursing units (also individually referred to as the “ Big Spring Facility ”); and
(iii)
Country Aire Retirement Estates located in Lewistown, Missouri and consisting of sixty (60) skilled nursing units and sixteen (16) licensed residential care beds (also individually referred to as the “ Country Aire Facility ”); and
(iv)
Buffalo Prairie Care Center located in Buffalo, Missouri and consisting of sixty (60) skilled nursing units (also individually referred to as the “ Buffalo Facility ”); and
(v)
Edgewood Manor Nursing Home located in Raytown, Missouri and consisting of sixty-six (66) skilled nursing units (also individually referred to as the “ Edgewood Manor Facility ”); and

-1-



(vi)
Georgian Gardens located in Potosi, Missouri and consisting of one-hundred twenty (120) skilled nursing units (also individually referred to as the “ Georgian Gardens Facility ”); and
(vii)
Golden Years located in Harrisonville, Missouri and consisting of one-hundred thirty-two (132) skilled nursing units (also individually referred to as the “ Golden Years Facility ”); and
(viii)
Gregory Ridge Living Center located in Kansas City, Missouri and consisting of one-hundred sixteen (116) skilled nursing units (also individually referred to as the “ Gregory Ridge Facility ”); and
(ix)
Parkway Health and Rehab located in Kansas City, Missouri and consisting of ninety-seven (97) skilled nursing units, (also individually referred to as the “ Parkway Facility ”); and
(x)
Marshfield Care Center located in Marshfield, Missouri and consisting of seventy-seven (77) skilled nursing units (also individually referred to as the “ Marshfield Facility ”); for the avoidance of doubt, the Marshfield Facility includes only a facility known as the Marshfield Care Center and does not include a facility known as the Marshfield Place.
Each of the Facilities is referred to individually herein as a “ Facility .””
2. In Section 1.1 of the APA (Defined Terms), a defined term “ Operator ” is hereby deleted in its entirety and replaced with the following:

““ Operator ” means the current, licensed operator of each Facility, specifically,
 

-2-


(i)      PHBC, LLC, a Delaware limited liability company, with respect to the Cassville Facility; and
(ii)      PHBS, LLC , a Delaware limited liability company, with respect to the Big Spring Facility; and
(iii)      PHCA, LLC, a Delaware limited liability company, with respect to the Country Aire Facility; and
(iv)      PHDC, LLC, a Delaware limited liability company, with respect to the Buffalo Facility; and
(v)      PHEM, LLC, a Delaware limited liability company, with respect to the Edgewood Manor Facility; and
(vi)      PHGG, LLC, a Delaware limited liability company, with respect to the Georgian Gardens Facility; and
(vii)      PHGY, LLC, a Delaware limited liability company, with respect to the Golden Years Facility; and
(viii)      PHKC CLEVELAND, LLC, a Delaware limited liability company, with respect to the Gregory Ridge Facility; and
(ix)      PHKC SWOPE, LLC, a Delaware limited liability company, with respect to the Parkway Facility; and
(x)      PHMC, LLC, a Delaware limited liability company, with respect to the Marshfield Facility.”

3. In Section 1.1 of the APA (Defined Terms), a defined term “ Real Property ” is hereby deleted in its entirety and replaced with the following:

““ Real Property ” shall mean:

-3-


(i)      with respect to the Cassville Facility, that certain parcel of real property located at 1300 Country Farm Road, Cassville, Missouri and more particularly described in Schedule 1.1(c)(i) attached hereto; and
(ii)      with respect to the Big Spring Facility, that certain parcel of real property located at 202 East Mill Street, Humansville, Missouri and more particularly described in Schedule 1.1(c)(ii) attached hereto; and
(iii)      with respect to the Country Aire Facility, that certain parcel of real property located at 18540 State Highway 16, Lewistown, Missouri and more particularly described in Schedule 1.1(c)(iii) attached hereto; and
(iv)      with respect to the Buffalo Facility, that certain parcel of real property located at 631 West Main Street, Buffalo, Missouri and more particularly described in Schedule 1.1(c)(iv) attached hereto; and
(v)      with respect to the Edgewood Manor Facility, that certain parcel of real property located at 11900 Jessica Lane, Raytown, Missouri and more particularly described in Schedule 1.1(c)(v) attached hereto; and
(vi)      with respect to the Georgian Gardens Facility, that certain parcel of real property located at 1 Georgian Gardens, Potosi, Missouri and more particularly described in Schedule 1.1(c)(vi) attached hereto; and
(vii)      with respect to the Golden Years Facility, that certain parcel of real property located at 2001 Jefferson Parkway, Harrisonville, Missouri and more particularly described in Schedule 1.1(c)(vii) attached hereto; and
(viii)      with respect to the Gregory Ridge Facility, that certain parcel of real property located at 7001 Cleveland Avenue, Kansas City, Missouri and more particularly described in Schedule 1.1(c)(viii) attached hereto; and
(ix)      with respect to the Parkway Facility, that certain parcel of real property located at 2323 Swope Parkway, Kansas City, Missouri and more particularly described in Schedule 1.1(c)(ix) attached hereto; and
(x)      with respect to the Marshfield Facility, that certain parcel of real property located at 800 South White Oak Road, Marshfield, Missouri and more particularly described in Schedule 1.1(c)(x) attached hereto.
in each instance together with all the buildings, fixtures, structures, and improvements thereon, and all easements and rights of way serving or benefiting such property.”

-4-


4. Partial Closing .

a.
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 Golden Years Facility to allow additional time for the conditions to Closing for the Golden Years Facility to be met. Accordingly, the parties acknowledge and agree that the Due Diligence Period (as extended below) has not been terminated with respect to the Golden Years Facility and continues on in accordance with the terms of the Agreement, and all other provisions of the Agreement which apply to Seller, the Purchased Property and the Business relating to the Golden Years Facility shall continue in full force and effect notwithstanding the Closing of the other Facilities. For the avoidance of doubt, Purchaser may terminate the Agreement with respect to the Golden Years Facility during the Due Diligence Period (without effect on the portions of the Agreement related to the Seller and other Facilities, which remain in effect post-Closing), and upon any such termination any portion of the Deposit remaining shall be returned to Purchaser and the parties shall have no further liability or obligation to one another relating to the Golden Years Facility except for the surviving provisions of ARTICLE 9.

b.
Notwithstanding the foregoing, the parties acknowledge that Seller may determine it does not desire to satisfy the outstanding conditions for Closing for the Golden Years Facility during the Due Diligence Period, and in such case, Seller has the right to notify Purchaser prior to the expiration of the Due Diligence period of such determination, at what point (a) the Agreement will be terminated as to the Golden Years Facility and the Deposit shall be returned to the Purchaser, and there shall be no liability between the parties for such termination or further liabilities of either party as to the Golden Years Facility except as provided in Article 9, or (b) Purchaser may elect to waive the condition precedent and proceed with Closing.   The parties hereby agree that the Due Diligence Period with respect to the Golden Years Facility is extended for a period of ninety (90) days from the date hereof.

5. In the event that any of the terms of this Amendment shall be inconsistent or contradict the terms of the APA, the terms of this Amendment shall control.

6. Except as explicitly amended and modified by this Amendment, all other terms and conditions of the APA remain unchanged and in full force and effect, and the APA shall not be further amended or modified unless agreed to in writing by the parties thereto.

-5-



7. This Amendment shall be governed by the internal laws of the State of Missouri.

8. The APA, as amended and modified by this Amendment, is hereby ratified and confirmed.

9. This Amendment may be executed in counterparts, each of which shall be deemed an original and, taken together, shall constitute one and the same instrument. This Amendment may be executed by the parties by facsimile or email transmission with the same force and effect as original signatures


[Signature Page Follows]


-6-


The parties execute this Amendment with the present intent to be bound as of the Effective Date.

PURCHASER:
SELLER:
AMERICAN REALTY
PHBC REALTY, LLC,
CAPITAL HEALTHCARE TRUST II
a Delaware limited liability company
OPERATING PARTNERSHIP, L.P. ,     
a Delaware limited partnership        
By: /s/ Benjamin M. Klein
Name: Benjamin M. Klein, Manager        
By:
American Realty Capital Healthcare     
Trust II, Inc., a Maryland corporation,
its general partner

PHDC REALTY, LLC,
By: ____ /s/ W. Todd Jensen ____________            a Delaware limited liability company
Name: ___ W. Todd Jensen ____________        
Its: __ EVP and Chief Investment Officer _
By: /s/ Benjamin M. Klein ________

Name: Benjamin M. Klein, Manager


PHMC REALTY, LLC,
a Delaware limited liability company

By: /s/ Benjamin M. Klein ________
Name: Benjamin M. Klein, Manager



-7-




PHCA REALTY, LLC,
a Delaware limited liability company

By: /s/ Benjamin M. Klein ________
Name: Benjamin M. Klein, Manager


PHEM REALTY, LLC,
a Delaware limited liability company

By: /s/ Benjamin M. Klein ________
Name: Benjamin M. Klein, Manager


SIGNATURE PAGE TO APA AMENDMENT
1 OF 2


PHGG REALTY, LLC,
a Delaware limited liability company

By: /s/ Benjamin M. Klein ________
Name: Benjamin M. Klein, Manager


PHBS REALTY, LLC,
a Delaware limited liability company

By: /s/ Benjamin M. Klein ________
Name: Benjamin M. Klein, Manager


PHGY REALTY, LLC,
a Delaware limited liability company

By: /s/ Benjamin M. Klein ________
Name: Benjamin M. Klein, Manager





-9-



PHKC CLEVELAND REALTY, LLC,
a Delaware limited liability company

By: /s/ Benjamin M. Klein ________
Name: Benjamin M. Klein, Manager


PHKC SWOPE REALTY, LLC,
a Delaware limited liability company

By: /s/ Benjamin M. Klein ________
Name: Benjamin M. Klein, Manager

SIGNATURE PAGE TO APA AMENDMENT
2 OF 2

 

Exhibit 10.38

 

ASSET PURCHASE AGREEMENT

 

By and Among

 

AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P.

 

as “ Purchaser ”

 

and

 

ECI Acquisition I , 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, and

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

BURLINGTON INDEPENDENT LIVING, LLC , an Iowa limited liability company

 

as “ Seller ”

 

Property Names and Locations:

 

Sunnybrook of Burlington – Burlington, Iowa
Sunnybrook of Carroll - Carroll, Iowa
Sunnybrook of Fairfield – Fairfield, Iowa
Sunnybrook of Ft. Madison – Fort Madison, Iowa
Sunnybrook of Mt. Pleasant – Mount Pleasant, Iowa
Sunnybrook of Muscatine – Muscatine, Iowa
Prairie Hills at Cedar Rapids – Cedar Rapids, Iowa
Prairie Hills at Clinton – Clinton, Iowa
Prairie Hills at Des Moines – Des Moines, Iowa
Prairie Hills at Independence – Independence, Iowa
Prairie Hills at Ottumwa - Ottumwa, Iowa
Pennsylvania Place – Ottumwa, Iowa
Prairie Hills at Tipton – Tipton, Iowa

 

Dated as of August 1, 2014

 

 
 

 

Table of contents

 

    Page
     
ARTICLE 1 Definitions and Certain Rules of Construction 1
     
Section 1.1 Defined Terms 1
Section 1.2 Certain Definitions 9
Section 1.3 Additional Defined Terms 9
Section 1.4 Rules of Construction 11
     
ARTICLE 2 Purchase and Sale of the Purchased Property 11
     
Section 2.1 Sale of Purchased Property 11
Section 2.2 Purchased Property 11
Section 2.3 Excluded Property 13
Section 2.4 Title to Real Property and Surveys 14
Section 2.5 Assumed Liabilities 16
Section 2.6 Excluded Liabilities 17
     
ARTICLE 3 Purchase Price; Payment of Purchase Price; Allocation 17
     
Section 3.1 Purchase Price and Deposit 17
Section 3.2 Payment of Purchase Price 18
Section 3.3 Allocation of Purchase Price 19
Section 3.4 Prorations 19
     
ARTICLE 4 Certain Other Covenants and Agreements 21
     
Section 4.1 Inspection and Due Diligence 21
Section 4.2 Conduct of Business Prior to the Closing Date 23
Section 4.3 Notification of Certain Matters 25
Section 4.4 Employees; Accrued Vacation, Sick Pay, etc. 25
Section 4.5 Confidentiality 27
Section 4.6 Expenses and Taxes 28
Section 4.7 Waiver of Bulk Sales and Indemnification 28
Section 4.8 Exclusivity 29
Section 4.9 Consents; Cooperation 29
Section 4.10 Fines and Penalties 29
Section 4.11 Further Assurances 30
Section 4.12 Non-Solicitation of Employees 30
Section 4.13 Delivery of Schedules 30
Section 4.14 Delivery of Evidence of Ability to Complete Transaction 30
     
ARTICLE 5 Closing 31
     
Section 5.1 Closing 31
Section 5.2 Conditions to Seller’s Obligations 31
Section 5.3 Conditions to Purchaser’s Obligations 32
Section 5.4 Deliveries by Seller 33
Section 5.5 Deliveries by Purchaser 35
Section 5.6 Non-Fulfillment of Closing Conditions 35
Section 5.7 Post-Closing Actions 36
Section 5.8 Termination During Due Diligence 36
     
ARTICLE 6 Representations and Warranties of Seller 37
     
Section 6.1 Organization; Good Standing 37
Section 6.2 Consent of Third Parties 37
Section 6.3 Authority; Enforceability 37
Section 6.4 Absence of Conflicts 37

 

- i -
 

 

Section 6.5 No Judgments 38
Section 6.6 No Governmental Approvals 38
Section 6.7 Insurance 38
Section 6.8 Litigation 38
Section 6.9 Compliance with Laws 39
Section 6.10 Environmental Matters 39
Section 6.11 Assessments 39
Section 6.12 Contracts and Leases 40
Section 6.13 Licenses 40
Section 6.14 Residency Agreements 40
Section 6.15 Medicare; Medicaid and Compliance with Healtcare Laws 41
Section 6.16 Real Property 43
Section 6.17 Condition of Purchased Property 43
Section 6.18 Full Disclosure 43
Section 6.19 Access 43
Section 6.20 FIRPTA 43
Section 6.21 Interests; Title 44
Section 6.22 Title Encumbrances 44
Section 6.23 Affordable Housing Units 44
Section 6.24 Loans 44
Section 6.25 Intellectual Property 44
Section 6.26 Patriot Act Compliance 44
Section 6.27 Broker’s or Finder’s Fees 45
Section 6.28 Insolvency 45
Section 6.29 Employees 45
Section 6.30 Seller Benefit Plans 46
Section 6.31 Financial Statements 47
Section 6.32 Taxes and Tax Returns 47
Section 6.33 No Other Representations or Warranties 47
     
ARTICLE 7 Representations and warranties of Purchaser 48
     
Section 7.1 Organization and Standing 48
Section 7.2 Execution and Delivery 49
Section 7.3 Solvency 49
Section 7.4 Consent of Third Parties 49
Section 7.5 No Governmental Approvals 50
Section 7.6 Available Funds 50
Section 7.7 Brokers, Finders 50
Section 7.8 Patriot Act Compliance 50
Section 7.9 Certain Proceedings 51
     
ARTICLE 8 Indemnification 51
     
Section 8.1 Indemnification by Seller 51
Section 8.2 Indemnification by Purchaser 51
Section 8.3 Indemnification Limits; Survival 52
Section 8.4 Procedures Regarding Third Party Claims 53
Section 8.5 General Qualifications on Indemnification 54
Section 8.6 Exclusivity 55
Section 8.7 Effective Upon Closing 55
     
ARTICLE 9 Default and Termination 55
     
Section 9.1 Right of Termination 55
Section 9.2 Remedies upon Default 56
Section 9.3 Obligations Upon Termination 57
Section 9.4 Termination Notice 57
Section 9.5 Sole and Exclusive Remedy 57

 

- ii -
 

 

ARTICLE 10 Miscellaneous 57
     
Section 10.1 Access to Books and Records after Closing 57
Section 10.2 Notices 57
Section 10.3 Good Faith; Cooperation 58
Section 10.4 Assignment; Exchange Cooperation; Successors in Interest 59
Section 10.5 No Third Party Beneficiaries 59
Section 10.6 Severability 59
Section 10.7 Purchaser Records Rights 59
Section 10.8 Controlling Law; Integration; Amendment; Waiver 60
Section 10.9 Time 60
Section 10.10 Survival 60
Section 10.11 Eminent Domain - Condemnation 60
Section 10.12 Risk Of Loss 61
Section 10.13 Attorneys’ Fees 62
Section 10.14 Covenant Not to Compete 62
Section 10.15 Waiver of Jury Trial 62
Section 10.16 Construction 62
Section 10.17 Execution in Counterparts 63

 

Exhibits

 

Exhibit   Description
     
Exhibit A   Escrow Agreement
     
Exhibit B   Post-Closing Escrow Agreement
     
Exhibit C   Deed
     
Exhibit D   Bill of Sale and Assignment
     
Exhibit E   Transition Period Sublease
     
Exhibit F   Assumption Agreement
     
Exhibit G   Due Diligence Materials

 

- iii -
 

 

Schedules

 

Schedule   Title
     
Schedule 1.1(a)   Assumed Contracts and Leases
     
Schedule 1.1(c)   Legal Description of Purchased Real Property
     
Schedule 2.2(c)   Prepaids and Deposits
     
Schedule 2.2(l)   Facility Trade Names
     
Schedule 2.3   Excluded Property
     
Schedule 2.4(a)   Permitted Title Exceptions
     
Schedule 2.4(g)   Licenses, Leases Easements and Other Rights Related to Real Property
     
Schedule 3.3   Purchase Price Allocation
     
Schedule 4.4(g)   Obligations to Hired Employees
     
Schedule 6.2   Third Party Consents
     
Schedule 6.4   Conflicts
     
Schedule 6.5   Judgments
     
Schedule 6.6   Governmental Approvals
     
Schedule 6.7   Insurance Summary
     
Schedule 6.8   Litigation
     
Schedule 6.9   Notices of Non-Compliance with Laws
     
Schedule 6.12   Contracts and Leases

 

- iv -
 

 

Schedule 6.13   Licenses and Healthcare Licenses
     
Schedule 6.14   Disclosures Regarding Residency Agreements
     
Schedule 6.15   Government Payor Programs
     
Schedule 6.17   Excluded Intellectual Property
     
Schedule 6.22   Real Property Compliance
     
Schedule 6.24   Loans
     
Schedule 6.25   Intellectual Property
     
Schedule 6.27   Brokers
     
Schedule 6.29   Employees
     
Schedule 6.31   Financial Statements
     
Schedule 10.4   Permitted Special Purpose Entity Assignees

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (the “ Agreement ”) is made and entered into this 1st day of August, 2014 (the “ Effective Date ”), by and between AMERICAN REALTY CAPITAL HEALTHCARE TRUST IIOPERATING PARTNERSHIP, L.P. , a Delaware limited partnership (“ Purchaser ”) and ECI Acquisition I , 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 ”).

 

Recitals:

 

Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires to purchase from Seller, substantially all of the assets, properties and business of Seller, consisting of the Purchased Property described herein.

 

This Agreement sets forth the terms and conditions to which the parties have agreed.

 

Agreements:

 

NOW, THEREFORE , in consideration of the premises and the mutual promises set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

 

ARTICLE 1
Definitions and
Certain Rules of Construction

 

Section 1.1            Defined Terms.     The following capitalized terms shall have the meanings specified in this section. Other terms are defined in the text of this Agreement, and throughout this Agreement, those terms shall have the meanings respectively ascribed to them.

 

“ Access Agreement ” means that certain Access Agreement dated June ___, 2014 by and between Sunnybrook Senior Living, LLC and Purchaser related and facilitating certain due diligence investigation of the Facilities and the Business by Purchaser.

 

“Accrued Employee Vacation” means any accrued vacation or other accrued paid time off (but shall exclude accrued wages, salary or other benefits) for the employees of any Facility that accept an offer of employment by Purchaser (as contemplated by Section 3.4(e) ), including,

 

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without limitation, those employees who will continue to be employed at any Facility after the closing.

 

“ Assumed Contracts and Leases ” are those contracts, leases and agreements listed on Schedule 1.1(a) attached hereto (including without limitation the Escrow Agreement dated May 29, 2014 by and among Prairie Hills at Penn Place, LLC, RRL Ottumwa, LLC and West Bank (the “Pennsylvania Facility Escrow Agreement”), to the extent assignable and for which applicable third party consents have been obtained or waived by Purchaser to the extent such consents are required under such contracts, leases and agreements.

 

“ Assumed Liabilities ” are (i) all of Seller’s obligations and liabilities under the Assumed Contracts and Leases which arise or accrue at any time after 11:59 PM on the date immediately preceding the Closing Date; (ii) the EFR Liability (as defined in Section 4.15) and the obligations of Prairie Hills at Penn Place, LLC under the Escrow Agreement dated May 29, 2014 by and among Prairie Hills at Penn Place, LLC, RRL Ottumwa, LLC and West Bank in each case only to the extent funds in an amount sufficient to pay the EFR Liability are transferred to Purchaser with the assignment of the Pennsylvania Facility Escrow Agreement; (iii) all of Seller’s obligations with respect to accrued vacation and other paid time off for employees to the extent of Purchaser’s obligations pursuant to Section 4.4(g) ; and (iv) the Prepaids and Deposits described on Schedule 2.2(c) .

 

“ Average Occupancy ” means the trailing 30-day average occupancy of all of the available units within a Facility or all of the Facilities, as applicable.

 

“ Business ” means all aspects of the operation of each Facility as an assisted living facility, memory care facility and/or independent living facility, as applicable.

 

“ CHOW Approvals ” means approvals required in connection with the issuance of new Healthcare Licenses for each Facility due to the change in ownership of the Facilities, Current Operating Tenant and/or the Current Manager.

 

“ Closing ” means the consummation of the transactions contemplated by this Agreement with respect to the Facilities. Neither party will need to be present at Closing, it being anticipated that the parties will deliver all Closing documents and deliverables in escrow to the Escrow Agent (as defined herein) (or if both Purchaser and Seller agree, to Purchaser’s and/or Seller’s counsel) prior to the date of Closing.

 

“ Closing Date ” shall have the meaning set forth in Section 5.1 hereof.

 

“ Current Manager ” means the Person specified below which acts as the current manager that operates aspects of the Facility specified below on Seller’s behalf:

 

(i)          Sunnybrook Senior Living, LLC, an Iowa limited liability company, with respect to the Burlington Facility (as herein defined);

 

(ii)         Sunnybrook Senior Living, LLC, an Iowa limited liability company, with respect to the Carroll Facility (as herein defined);

 

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(iii)        Sunnybrook Senior Living, LLC, an Iowa limited liability company, with respect to the Fairfield Facility (as herein defined);

 

(iv)        Sunnybrook Senior Living, LLC, an Iowa limited liability company, with respect to the Fort Madison Facility (as herein defined);

 

(v)         Sunnybrook Senior Living, LLC, an Iowa limited liability company, with respect to the Mount Pleasant Facility (as herein defined);

 

(vi)        Sunnybrook Senior Living, LLC, an Iowa limited liability company, with respect to the Muscatine Facility (as herein defined);

 

“ Current Operating Tenant ” means the current, licensed operating tenant of the Facility specified below:

 

(i)          Brook View Operations, LLC, with respect to the Cedar Rapids Facility (as herein defined);

 

(ii)         Prairie Hills at Clinton Operations, LLC, with respect to the Clinton Facility (as herein defined);

 

(iii)        Prairie Hills Des Moines Operations, LLC, with respect to the Des Moines Facility (as herein defined);

 

(iv)        Prairie Hills Management, LLC, with respect to the Independence Facility (as herein defined);

 

(v)         Prairie Hills at Ottumwa Operations, LLC, with respect to the Prairie Hills Ottumwa Facility (as herein defined);

 

(vi)        Prairie Hills at Penn Place Operations, LLC, with respect to the Pennsylvania Facility (as herein defined); and

 

(vii)       Prairie Hills at Tipton Operations, LLC, with respect to the Tipton Facility (as herein defined).

 

“ Documents ” means this Agreement, all Exhibits and Schedules hereto, and each other agreement, certificate or instrument to be delivered pursuant to this Agreement.

 

“ ECI Purchase Agreement ” means that certain Purchase and Sale Agreement dated March 14, 2014 by and among ECI Acquisition I, LLC, a Delaware limited liability company as purchaser and the ECI Sellers, with respect to the ECI Portfolio.

 

“ECI Portfolio” means, collectively, the Cedar Rapids Facility, the Clinton Facility, the Des Moines Facility, the Independence Facility, the Prairie Hills Ottumwa Facility, the Pennsylvania Facility and the Tipton Facility.

 

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“ ECI Sellers ” the parties to the ECI Purchase Agreement other than ECI Acquisition I, LLC.

 

“ Environmental Laws ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. , Hazardous Materials Transportation Act, 49 U.S.C. § 1802, the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. , the Toxic Substance Control Act of 1976, as amended, 15 U.S.C. § 2601 et seq. , or any other federal, state, local or other governmental legislation, statute, law, code, rule, regulation or ordinance identified by its terms as pertaining to the protection of the environment, including laws relating to the treatment, storage or disposal of Hazardous Substances, in each case as in effect on the Effective Date.

 

“ Facilities ” means collectively the facilities known as:

 

(viii)      Sunnybrook of Burlington located in Burlington, Iowa and consisting of approximately 46 assisted living units and 20 memory care units (also individually referred to as the “ Burlington Facility ”);

 

(ix)         Sunnybrook of Carroll located in Carroll, Iowa and consisting of approximately 34 assisted living units and 12 memory care units (also individually referred to as the “ Carroll Facility ”);

 

(x)          Sunnybrook of Fairfield located in Fairfield, Iowa and consisting of approximately 51 assisted living units and 12 memory care units (also individually referred to as the “ Fairfield Facility ”);

 

(xi)         Sunnybrook of Ft. Madison located in Fort Madison, Iowa and consisting of approximately 34 assisted living units and 12 memory care units (also individually referred to as the “ Fort Madison Facility ”);

 

(xii)        Sunnybrook of Mt. Pleasant located in Mount Pleasant, Iowa and consisting of approximately 34 assisted living units and 12 memory care units (also individually referred to as the “ Mount Pleasant Facility ”);

 

(xiii)       Sunnybrook of Muscatine located in Muscatine, Iowa and consisting of approximately 46 assisted living units and 20 memory care units (also individually referred to as the “ Muscatine Facility ”);

 

(xiv)      Prairie Hills at Cedar Rapids located in Cedar Rapids, Iowa and consisting of approximately 45 assisted living units (also individually referred to as the “ Cedar Rapids Facility ”);

 

(xv)       Prairie Hills at Clinton located in Clinton, Iowa and consisting of approximately 62 assisted living units and 12 memory care units (also individually referred to as the “ Clinton Facility ”);

 

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(xvi)      Prairie Hills at Des Moines located in Des Moines, Iowa and consisting of approximately 66 assisted living units and 8 memory care units (also individually referred to as the “ Des Moines Facility ”);

 

(xvii)     Prairie Hills at Independence located in Independence, Iowa and consisting of approximately 46 assisted living units and 12 memory care units (also individually referred to as the “ Independence Facility ”);

 

(xviii)    Prairie Hills at Ottumwa located in Ottumwa, Iowa and consisting of approximately 42 assisted living units and 8 memory care units (also individually referred to as the “ Prairie Hills Ottumwa Facility ”);

 

(xix)       Pennsylvania Place located in Ottumwa, Iowa and consisting of approximately 91 independent living units, 51 assisted living units and 16 memory care units (also individually referred to as the “ Pennsylvania Facility ”); and

 

(xx)        Prairie Hills at Tipton located in Tipton, Iowa and consisting of approximately 38 assisted living units and 8 memory care units (also individually referred to as the “ Tipton Facility ”).

 

Each of the Facilities is referred to individually herein as a “ Facility .”

 

“Government Program ” means the federal Medicare program, any state Medicaid program, and such other similar federal, state, or local reimbursement or governmental programs for which any Facility is eligible.

 

“ Hazardous Substance ” means petroleum, including crude oil or any fraction thereof, flammable explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, any material containing polychlorinated biphenyls, and any of the substances defined as “hazardous substances” or “toxic substances” or otherwise identified and regulated under any Environmental Laws.

 

“Healthcare Licenses” means with respect to any Facility or Person operating such Facility, as the case may be, the certificate of need, permit or license to operate as an assisted living or memory care facility, as applicable

 

“ Holdback Amount ” means an amount equal to two and one-half percent (2.5%) of the Purchase Price paid at Closing.

 

“Improvements” means all buildings, fixtures, structures, facilities, and other improvements constructed on the Real Property as of the date of Closing.

 

“ Intellectual Property ” means all trademarks, trademark applications, service marks, trade names, copyrights, trade secrets, licenses, domain names, mask works, patents, patent applications, information and proprietary rights and processes.

 

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“ IRC ” means the Internal Revenue Code of 1986, as amended, and any regulations or guidance issued thereunder.

 

“Licenses” means all certificates, licenses, approvals and permits issued by governmental authorities which are required to be held by an owner or tenant in connection with the ownership, use, occupancy, operation, and maintenance of the Facilities as assisted living and memory care facilities, other than the Healthcare Licenses.

 

“ Lien ” means any mortgage, deed to secure debt, deed of trust, pledge, hypothecation, title defect, right of first refusal, security or other adverse interest, encumbrance, claim, option, lien, lease or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, affecting any assets or property, including any agreement to give or grant any of the foregoing, any conditional sale or other title retention agreement, and the filing of or agreement to give any financing statement with respect to any assets or property under the Uniform Commercial Code or comparable law of any jurisdiction.

 

“ Material Adverse Change ” means the Average Occupancy at any time prior to the Closing Date decreases by more than (i) eight percent (8%) or more from the Average Occupancy as of June 30, 2014 with respect to all the Facilities in the aggregate, or (ii) sixteen percent (16%) or more from the Average Occupancy as of June 30, 2014 with respect to any individual Facility.

 

“ Operating Leases ” means the lease agreements executed by the ECI Seller and the Current Operating Tenant with respect to the ECI Portfolio.

 

“ Other Assets ” means the Residency Agreements, Prepaids and Deposits, Assumed Contracts and Leases and all other property and assets included within the definition of “Purchased Property” in Section 2.2 of this Agreement other than Real Property and Purchased Personal Property.

 

“ Permitted Encumbrances ” means (i) liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings and which are satisfied or discharged of record at or prior to Closing pursuant to Section 2.4(f) below; (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar liens arising in the ordinary course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings and which are satisfied or discharged of record at or prior to Closing pursuant to Section 2.4(f) below; and (iii) the Permitted Title Exceptions.

 

“Permitted Title Exceptions” shall have the meaning set forth in Section 2.4(a) .

 

“ Plans ” means “employee benefit plan,” as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) regardless of whether such plan is subject to ERISA, and each bonus, deferred, or incentive compensation, stock purchase, stock option, severance, and termination pay plan or program, that is maintained or contributed to by any Seller Party, the Current Manager for the benefit of Employees or

 

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pursuant to which any Seller Party or the Current Manager has any liability with respect to Employees.

 

“ Post-Closing Manager ” means the contemplated manager of the Business on the Purchaser’s behalf following the Closing. The Post-Closing Manager shall be identified by Purchaser prior to expiration of the Due Diligence Period.

 

“ Purchased Personal Property ” is the Purchased Property other than the Real Property, including intangible Purchased Property.

 

“ Purchased Property ” is the property of Seller to be sold to Purchaser pursuant to this Agreement as set forth in Section 2.2 hereof.

 

“ Real Property ” shall mean:

 

(xxi)       with respect to the Burlington Facility that certain parcel of real property located at 5175 West Avenue, Burlington, Iowa and more particularly described in Schedule 1.1(c)(i) attached hereto;

 

(xxii)      with respect to the Carroll Facility that certain parcel of real property located at 1214 East 18 th Street, Carroll, Iowa and more particularly described in Schedule 1.1(c)(ii) attached hereto;

 

(xxiii)     with respect to the Fairfield Facility that certain parcel of real property located at 3000 W. Madison Avenue, Fairfield, Iowa and more particularly described in Schedule 1.1(c)(iii) attached hereto;

 

(xxiv)    with respect to the Fort Madison Facility that certain parcel of real property located at 5025 River Valley Road, Fort Madison, Iowa and more particularly described in Schedule 1.1(c)(iv) attached hereto;

 

(xxv)     with respect to the Mount Pleasant Facility that certain parcel of real property located at 1406 East Linden Drive, Mount Pleasant, Iowa and more particularly described in Schedule 1.1(c)(v) attached hereto;

 

(xxvi)    with respect to the Muscatine Facility that certain parcel of real property located at 3515 Diana Queen Drive, Muscatine, Iowa and more particularly described in Schedule 1.1(c)(vi) attached hereto;

 

(xxvii)   with respect to the Cedar Rapids Facility that certain parcel of real property located at 2903 F. Avenue NW, Cedar Rapids, Iowa and more particularly described in Schedule 1.1(c)(vii) attached hereto;

 

(xxviii)    with respect to the Clinton Facility that certain parcel of real property located at 1701 13 th Avenue North, Clinton, Iowa and more particularly described in Schedule 1.1(c)(viii) attached hereto;

 

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(xxix)      with respect to the Des Moines Facility that certain parcel of real property located at 26 East Payton Avenue, Des Moines, Iowa and more particularly described in Schedule 1.1(c)(ix) attached hereto;

 

(xxx)        with respect to the Independence Facility that certain parcel of real property located at 505 Enterprise Drive SW, Independence, Iowa a and more particularly described in Schedule 1.1(c)(x) attached hereto;

 

(xxxi)      with respect to the Prairie Hills Ottumwa Facility that certain parcel of real property located at 173 East Rochester, Ottumwa, Iowa and more particularly described in Schedule 1.1(c)(xi) attached hereto;

 

(xxxii)     with respect to the Pennsylvania Facility that certain parcel of real property located at 1 Pennsylvania Place, Ottumwa, Iowa and more particularly described in Schedule 1.1(c)(xii) attached hereto;

 

(xxxiii)    with respect to the Tipton Facility that certain parcel of real property located at 219 South Cedar Street, Tipton, Iowa and more particularly described in Schedule 1.1(c)(xiii) attached hereto; and

 

(xxxiv)     those certain parcels of real property located at 912 Monticello Drive, Burlington, Iowa and at 12431 West Avenue Road, Burlington, Des Moines County, Iowa and more particularly described in Schedule 1.1(c)(xiv) attached hereto,

 

in each instance together with all easements and rights of way serving or benefiting such property.

 

“ Residency Agreement ” means any agreement between Seller or a Current Operating Tenant, as applicable, and an individual contracting for such individual’s residency at a Facility, including without limitation any admissions agreements for residents.

 

“ Seller ” has the meaning provided in the preamble. For purposes of Sections 2.2 and 2.3 below, “Seller” shall also include the ECI Sellers.

 

“ Seller’s Knowledge ” means the knowledge of James T. Elliott IV following reasonable inquiry of and consultation with (i) Steve Gordon, Dave McGinnis and Joanie McGinnis with respect to the Facilities in the ECI Portfolio and (ii) Kumar Wickramasingha, Lidia Bryant, Ben Daniels and John Dockendorff with respect to the Facilities not in the ECI Portfolio (with such inquiry and consultation conducted by Mr. Elliott or his designees), in connection with the execution of this Agreement and the preparation of Schedules to this Agreement prior to Closing.

 

“ Seller Parties ” means collectively each party comprising the Seller. For purposes of Section 2.6, Section 4.5 and ARTICLE 6 below, “Seller Parties” shall also include the ECI Sellers.

 

“ Transition Period Management Agreement ” means a management agreement, in form and substance reasonably satisfactory to Transition Period Manager and Purchaser, to be

 

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executed by Transition Period Manager and the tenant under the Transition Period Sublease, with respect to those Facilities for which a replacement manager is not in place as of the Closing Date.

 

“ Transition Period Manager ” means Sunnybrook Senior Living, LLC, an Iowa limited liability company.

 

Section 1.2            Certain Definitions .  For purposes of this Agreement:

 

“ herein, ” “ hereunder, ” “ hereof, ” “ hereinbefore, ” “ hereinafter ” and other equivalent words refer to this Agreement in its entirety and not solely to the particular portion of this Agreement in which such word is used, and references to “ this article, ” “ this section, ” “ this paragraph, ” “ this subparagraph ” or similar references to a specific part of this Agreement shall refer to the particular article, section, paragraph, subparagraph or specific part in which such reference appears;

 

“ party ” or “ parties ” means each or all, as appropriate, of the entities who have executed and delivered this Agreement, each permitted successor or assign of a party, and when appropriate to effect the binding nature of this Agreement for the benefit of another party, any other successor or assign of a party; and

 

“ person ” or “ Person ” means any individual, sole proprietorship, partnership, joint venture, corporation, estate, trust, unincorporated organization, association, limited liability company, institution or other entity, including any that is a governmental authority.

 

Section 1.3            Additional Defined Terms .  As used herein, the following terms shall have the meanings defined in the recitals or Section indicated below:

 

Defined Term Section Reference
“Adjustments” Section 3.1(a)
“Agreement” Preamble
“Asset Acquisition Statement” Section 3.3(b)
“Assignment and Assumption” Section 5.4(c)
“Bill of Sale and Assignment Section 5.4(b)
“CERCLA” Section 6.10
“Changed Condition” Section 4.3(a)
“CHOW Closing Condition” Section 5.3(d)
“Closing Date” Section 5.1
“COBRA” Section 2.6
“Deed” Section 2.4
“Deposit” Section 3.1(b)
“Due Diligence Period” Section 4.1(a)
“Effective Date” Preamble
“EFR Liability” Section 4.15
“Employees” Section 6.29
“Escrow Agent” Section 3.1(b)
“Excluded Liabilities” Section 2.6

 

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“Excluded Property” Section 2.3
“Financial Statements” Section 6.31
“Governmental Payor Programs Section 6.15
“HIPPA” Section 4.1(e)
“Hired Employees” Section 4.4(c)
“HSR Act” Section 4.9
“HUD Loans” Section 4.6(b)(vi)
“Indemnification Cap” Section 8.3(a)
“Indemnified Party” Section 8.4(a)
Indemnifying Party” Section 8.4(a)
“Initial Commitment” Section 2.4(i)
“Losses” Section 8.1
“material” Section 10.11
“Monetary Liens” Section 2.4(f)
“Notice of Changed Condition” Section 4.3(a)
“OFAC” Section 6.26
“Outside Date” Section 5.6(c)
“Patriot Act” Section 6.26
“Phase I ESA” Section 4.1(f)
“Phase II ESA” Section 4.1(g)
“Post-Closing Escrow Agreement” Section 3.2(b)
“Potential Breach” Section 4.3(a)
“Prepaids and Deposits” Section 2.2(c)
“prevailing party” Section 10.13
“Proration Date” Section 3.4(b)
“Proration Schedule” Section 3.4(a)
“Purchase Price” Section 3.1(a)
“Purchaser” Preamble
“Purchaser Indemnification Cap” Section 8.3(b)
“Purchaser Threshold” Section 8.3(ii)
“Records” Section 10.7
“Rent Roll” Section 6.14
“Requested Diligence Materials” Section 4.1(b)
“Revised Statements” Section 3.3(b)
“Scheduled Closing Date” Section 5.1
“Schedule Due Date” Section 4.13
“SEC” Section 10.7
“Seller Plans” Section 6.30
“Seller Representations” Section 6.33
“Seller Threshold” Section 8.3(a)
“Survey” Section 5.4(a)
“Surveys” Section 2.4(c)
“Title Company” Section 2.4(a)

 

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“Title Defects” Section 2.4(b)
“Title Policy” Section 2.4(a)
“Transition Period Sublease” Section 5.4(m)
“Violations” Section 4.10

 

Section 1.4            Rules of Construction .   For purposes of this Agreement:

 

(a)          “ including ” and any other words or phrases of inclusion shall not be construed as terms of limitation, so that references to “included” matters shall be regarded as non-exclusive, non-characterizing illustrations; “ copy ” or “ copies ” means that the copy or copies of the material to which it relates are true, correct and complete in all material respects;

 

(b)          “ shall, ” “ will, ” and “ agrees ” are mandatory, and “ may ” is permissive;

 

(c)          titles and captions of or in this Agreement are inserted only as a matter of convenience and in no way define, limit, extend or describe the scope of this Agreement or the intent of any of its provisions;

 

(d)          whenever the context so requires, the singular includes the plural and the plural includes the singular, and the gender of any pronoun includes the other gender;

 

(e)          each Exhibit and Schedule referred to in this Agreement and each attachment to any of them or this Agreement is hereby incorporated by reference into this Agreement and is made a part of this Agreement as if set out in full in the first place that reference is made to it; and

 

(f)          every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party hereto, regardless of which party was more responsible for the preparation of this Agreement.

 

ARTICLE 2
Purchase and Sale of the Purchased Property

 

Section 2.1            Sale of Purchased Property.    Subject to the provisions of this Agreement, Seller shall sell all of the Purchased Property to Purchaser and Purchaser will purchase the Purchased Property, free and clear of all Liens and liabilities whatsoever, except for the Assumed Liabilities and the Permitted Encumbrances.

 

Section 2.2            Purchased Property.

 

The Purchased Property shall include the following:

 

(a)          all inventory and supplies present at the Real Property and owned by Seller on the Closing Date (including food, beverages, office and kitchen supplies);

 

(b)          all of Seller’s right, title and interest in and to the Assumed Contracts and Leases, to the extent assignable;

 

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(c)          all of Seller’s right, title and interest in the Residency Agreements, together with all pre-paid amounts paid by a resident pursuant to any Residency Agreement for or attributable to the periods from and after the Closing Date as well as any security deposits paid to Seller as of the Closing Date under the Residency Agreements (to the extent such deposits can be transferred in accordance with applicable law) together with any interest thereon to the extent such interest is or may be payable to the residents (or their respective representatives, successors, heirs or assigns) at any time following the Closing Date each as more particularly described on Schedule 2.2(c) (collectively “ Prepaids and Deposits ”);

 

(d)          all tangible personal property present at the Real Property and owned by Seller (including without limitation equipment, furniture, fixtures, signage and vehicles used in, arising from or related to the Business as of the Closing Date);

 

(e)          the Real Property as more particularly described on Schedule 1.1(c) attached hereto and the Improvements located thereon;

 

(f)          subject to applicable laws and regulations, all transferable Licenses;

 

(g)          all original books, records, accounts, files, logs, ledgers, journals, and other documents and other materials of Seller (or copies thereof) including any electronic data stored on disc, tape or other electronic format relating to the ownership, use, operation or management of the Business, to the extent within the possession or control of Seller (although Seller may retain copies thereof for the preparation of tax returns, compliance with applicable laws, and other business purposes);

 

(h)          all marketing and promotional materials in Seller’s possession or control, which relate exclusively to the Business, if any, or the services they provide, to the extent of Seller’s rights in such materials, including without limitation brochures, renderings, photographs and signage (although Seller may retain copies thereof for compliance with applicable laws);

 

(i)          all warranties and guarantees regarding the installation, application, manufacture, composition and/or inspection of the Purchased Property, and all other manufacturer and third-party warranties and guarantees relating to any of the Purchased Property, to the extent such warranties and guarantees remain in effect and are assignable by Seller, without cost to Seller;

 

(j)          all telephone and facsimile numbers of each Facility, and any email addresses used by the Facilities;

 

(k)          Intentionally Deleted;

 

(l)          all rights to the trade names of the Facilities, including those names listed in Schedule 2.2(l) attached hereto, and all derivations thereof, including without limitation all Intellectual Property related to such name and all derivations thereof, and all other Intellectual Property owned by Seller and necessary to the conduct of the Business as now conducted by Seller;

 

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(m)          all records of all residents at each Facility, whether or not such resident was in occupancy prior to or on the Closing Date to the extent in the possession or control of Seller or the Current Manager, to the extent transfer to Purchaser is not prohibited, and subject to Section 4.1(e) and Section 10.1 ;

 

(n)          all intangible personal property of Seller, including all registrations, applications and licenses therefor, that is not specifically included in the Excluded Property, to the extent assignable, without cost to Seller, and for which any third party consents required for such assignment have been obtained;

 

(o)          all rights in and to any claims or causes of action to the extent they are in the nature of enforcing a guaranty, warranty, or a contract obligation to complete the Improvements, make repairs, or deliver services to the Purchased Property other than (i) claims for damages or other monetary loss incurred by Seller prior to the Closing Date and (ii) claims relating to Excluded Liabilities or Excluded Property; and

 

(p)          any other tangible or intangible assets, property or rights of any kind or nature not otherwise described above in this Section 2.2 and now owned or hereafter acquired between the Effective Date and the Closing Date by Seller and used in connection with the operation of the Business (other than Excluded Property and rights relating solely to the Excluded Liabilities).

 

To the extent any of the foregoing Purchased Property is available in electronic format, Seller shall provide Purchaser with same in such electronic format, in addition to physical copies of same.

 

Section 2.3            Excluded Property.

 

“ Excluded Property ” means the following categories of properties, which although they may currently form part of the Business, are excluded from the Purchased Property:

 

(a)          cash, cash surplus, cash equivalents or other investments of Seller, Current Manager and Current Operating Tenant (other than the Prepaids and Deposits);

 

(b)          Seller’s accounts receivable for rent or services provided prior to 11:59 p.m. on the date immediately preceding the Closing Date;

 

(c)          all operating agreements, minute books, membership ledgers and income tax records of Seller Parties;

 

(d)          any rights of Seller with respect to federal, state or local tax refunds or credits;

 

(e)          the Seller Plans, the assets and insurance policies relating to the Seller Plans, and any records relating thereto;

 

(f)          all contracts of insurance and claims and interests in any insurance, insurance claims, escrows, revenues or right to indemnity from third parties or other rights relating to the Excluded Liabilities;

 

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(g)          Seller’s rights and interests under this Agreement;

 

(h)          security deposits and utility deposits, to the extent not added to the Purchase Price at Closing pursuant to Section 3.2 ;

 

(i)          the shares of capital stock of any Seller, Current Operating Tenant or Current Manager;

 

(j)          those rights relating to deposits and prepaid expenses listed specifically on Schedule 2.3 and claims for refunds and rights to offset in respect thereof pertaining to the operations of the Purchased Property prior to the Closing Date;

 

(k)          contracts to which any Seller, Current Operating Tenant or Current Manager is a party or otherwise bound that are listed specifically on Schedule 2.3 ;

 

(l)          all personnel records that any Seller, Current Operating Tenant or Current Manager is required by applicable law to retain in their possession;

 

(m)          all rights of any Seller, Current Operating Tenant or Current Manager under this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, and the Escrow Agreement; and

 

(n)          any other asset listed specifically on Schedule 2.3 .

 

Section 2.4            Title to Real Property and Surveys.

 

At Closing, Seller agrees to convey insurable fee simple title to the applicable Real Property to Purchaser by special warranty deed (the “ Deed ”), subject only to the Permitted Encumbrances. The legal description of the Real Property to be contained in the Deed shall be the same legal description as is attached hereto in the applicable subsection of Schedule 1.1(c ) ; provided, if the legal description as disclosed by the Survey, as defined in Section 5.4(a) , differs from the legal description in the applicable subsection of Schedule 1.1(c) , or the Initial Commitment reveals any errors or omissions in the legal descriptions, then Seller shall also provide a quitclaim deed utilizing such Survey legal description.

 

(a)          Purchaser shall promptly order (but in no event later than three (3) business days following the Effective Date), at Seller’s expense, from Stewart Title Guaranty Company (“ Title Company ”), an ALTA Form 2006 Commitment (or such other form as is acceptable to Purchaser), with such customary endorsements as Purchaser shall reasonably require and with insurance coverage over any “gap” period (the “ Initial Commitment ”) for an owner’s title insurance policy (the “ Title Policy ”), in an amount no less than the Purchase Price allocated to the Real Property evidencing that Seller or the ECI Seller, as applicable, is vested with fee simple title to the Real Property. Seller shall convey fee simple title to the Real property, free and clear of all liens, encumbrances, exceptions or qualifications whatsoever save and except for (i) those exceptions specified as permitted exceptions listed on Schedule 2.4(a) attached hereto (the “ Permitted Title Exceptions ”), (ii) those exceptions evidenced in writing as being otherwise acceptable to Purchaser in its sole discretion which shall thereafter be deemed Permitted Title

 

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Exceptions, and (iii) those exceptions to title which are to be discharged by Seller at or before Closing. The Initial Commitment shall also evidence that upon the execution, delivery and recordation of the deeds to be delivered at Closing and the satisfaction of all requirements specified in Schedule B, Section 1 of the Initial Commitment, Purchaser shall acquire fee simple title to the Real Property, subject only to the Permitted Title Exceptions.

 

(b)          If Purchaser or its attorneys shall determine that title to the Real Property is unsatisfactory to Purchaser for reasons other than the existence of Permitted Title Exceptions or exceptions which are to be discharged by Seller at or before Closing, then Purchaser shall notify Seller prior to the end of the Due Diligence Period (as herein defined) of those liens, encumbrances, exceptions or qualifications to title listed in the Initial Commitment which either are not Permitted Title Exceptions, are unsatisfactory to Purchaser or are not contemplated by this Agreement to be discharged by Seller at or before Closing, and any such liens, encumbrances, exceptions or qualifications shall be hereinafter referred to as “ Title Defects .”

 

(c)          Purchaser, at Purchaser’s expense, may order an update to the surveys of the Real Property (the “ Surveys ”) previously provided to Purchaser and Seller hereby grants Purchaser and Purchaser’s agents the right to access the Real Property as may be reasonably required to perform such work. Purchaser shall notify Seller in writing within five (5) business days after receipt of the Surveys (copies of which will be provided simultaneously to Seller) of any Title Defects identified on the Surveys specifying any matters shown on the Surveys which was not set forth on the survey previously delivered to Purchaser and which adversely affect the title to the Real Property and the same shall thereupon be deemed to be Title Defects hereunder.

 

(d)          Within five (5) business days of receipt from Purchaser of a written notice of any Title Defects, together with a copy thereof, Seller shall notify Purchaser as to whether it will cure such Title Defect, and if it elects to cure any such Title Defect, it shall in good faith diligently endeavor to satisfy or correct, at Seller’s expense, such Title Defect on or before the date of Closing in such manner as to permit the Title Company to either endorse the Initial Commitment or to issue a replacement commitment to eliminate the Title Defect therefrom. Failure of Seller to give such notice within such five (5) business day period shall be deemed to be an election not to cure such objection. In the event Seller does not elect to satisfy or cure any Title Defect of which it is notified, then within five (5) business days after receipt of written notice of Seller’s election, or within five (5) business days after the expiration of Seller’s five (5) business day notification period if Seller fails to give any such notice, Purchaser shall by written notice to Seller elect one of the following:

 

(i)          to accept Seller’s interest in the applicable Purchased Property subject to such Title Defect, in which event such Title Defect shall become part of the Permitted Title Exceptions, and to close the transaction contemplated hereby in accordance with the terms of this Agreement; or

 

(ii)         to terminate this Agreement in its entirety and receive a refund of the Deposit.

 

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The failure of Purchaser to give written notice of its election to either accept the Purchased Property subject to such Title Defect(s) or to terminate this Agreement within the applicable five (5) business day period shall be deemed an election by Purchaser to terminate this Agreement and to receive a refund of the Deposit.

 

(e)          In the event Seller elects in writing to cure any Title Defect and thereafter is unable, after acting diligently and in good faith, to effect such cure, on or before the date of Closing, then Purchaser shall have, as its sole remedy, the options described in Section 2.4(d) above. Seller shall have no obligation under this Section 2.4(e) to expend monies or to institute litigation to cure Title Defects except those described in Section 2.4(f) below.

 

(f)          Notwithstanding anything in this Agreement to the contrary, Seller covenants and agrees that at or prior to Closing, Seller shall (i) pay in full and cause to be canceled and discharged or otherwise bond and discharge as liens against the Purchased Property all mechanics’ materialmen’s, repairmen’s, contractors’ or other similar Liens which encumber the Purchased Property as of the date hereof created by, through or under Seller or which may be filed against the Purchased Property after the date hereof created by, through or under Seller and on or prior to the Closing Date, (ii) pay in full all past due ad valorem taxes and assessments of any kind constituting a lien against the Purchased Property which are due and payable, and (iii) pay in full or cause to be canceled and discharged all security deeds or other security instruments encumbering the property and all judgments which have attached to and become a lien against the Purchased Property by, through or under Seller (collectively, the “ Monetary Liens ”). If Seller fails to cause such Monetary Liens to be paid and canceled at or prior to Closing, Purchaser shall be entitled to pay such reasonable amount to the holder thereof as may be required to pay and cancel same, and to credit against the Purchase Price the amount so paid.

 

(g)          Except as set forth on Schedule 2.4(g) , Seller has not granted any license, lease, easement or other right relating to the use or possession of the Real Property, except (i) under the Residency Agreements entered into by Seller in the ordinary course of business between the Effective Date and the Closing Date and the Operating Leases); or (ii) as may be set forth in the Initial Commitment, and Seller agrees that it shall not grant any such right prior to Closing without the prior written approval of Purchaser, which may be withheld in Purchaser’s sole and absolute discretion.

 

Section 2.5            Assumed Liabilities.

 

Subject to the terms and conditions of this Agreement, on the Closing Date, Purchaser shall assume and agrees to pay, perform or discharge only the Assumed Liabilities. Other than the Assumed Liabilities, Purchaser shall not assume any of Seller’s debts, obligations or liabilities, of any kind or nature, including without limitation any civil claims or other legal proceedings or legal or regulatory investigations or actions arising out of or during Seller’s ownership, use, operation or management of the Business or any of the Purchased Property or the Excluded Property, all of which Seller shall pay, perform and discharge when due. Nothing in this Section 2.5 shall be deemed to preclude either party from contesting any liability or obligation in good faith through the appropriate process.

 

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Section 2.6            Excluded Liabilities .

 

All of Seller’s debts, obligations and liabilities, other than the Assumed Liabilities, including any liability, obligation, claim, action, suit, or proceeding pending as of the Closing Date, or any subsequent claim, action, suit, or proceeding arising out of or relating to any such other event occurring prior to the Closing, with respect to the ownership or operation of the Business prior to the Closing Date, including without limitation any obligations of the Seller Parties for compliance with applicable federal, state, county, and local tax laws or regulations, including the obligations under such laws for the payment of taxes and the filing of tax returns, under Part 6 of Title I of ERISA and Section 4980B of the IRC, as amended (commonly known as “ COBRA ”), the Seller Plans, the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Occupational Safety and Health Act, the Age Discrimination in Employment Act of 1967, the Americans With Disabilities Act, the Family and Medical Leave Act, or state worker’s compensation and unemployment compensation laws, as now or hereafter amended, are collectively referred to herein as the “ Excluded Liabilities. ”

 

ARTICLE 3
Purchase Price; Payment of Purchase Price; Allocation

 

Section 3.1            Purchase Price and Deposit.

 

(a)           Purchase Price. Subject to any adjustments and prorations expressly provided for in this Agreement, including those described in Section 3.4 (collectively, “ Adjustments ”), the purchase price (the “ Purchase Price ”) for the Purchased Property shall be a total of One Hundred Seventy-Five Million Five Hundred Seventy Five Thousand and No / 100 U.S. Dollars ($175,575,000).

 

(b)           Deposit. The parties acknowledge that within three (3) business days after the Effective Date, if the Closing has not occurred and this Agreement has not been terminated in accordance with its terms, if Purchaser does not elect to terminate this Agreement pursuant to Section 4.1, Purchaser shall deliver to Stewart Title Guaranty Company (or any other mutually acceptable escrowee) (the “ Escrow Agent ”) Three Million and No/100 U.S. Dollars ($3,000,000) (the “ Deposit ”). The term “Deposit” shall mean the Deposit, if and when the Deposit is made. The Escrow Agent shall hold the Deposit in a non-interest bearing account pursuant to an escrow agreement in the form attached hereto as Exhibit A .

 

(c)          The Deposit shall be paid and returned to Purchaser upon the termination of this Agreement by Purchaser pursuant to the right to so terminate granted to Purchaser under Section 2.4(d)(ii) , Section 4.3 , Section 5.6(b) , Section 5.6(c) , Section 5.8 , Section 9.1(a) , Section 9.1(b) , Section 9.1(d) , Section 9.1(e) , Section 10.11 and Section 10.12 in each instance, upon proper written demand of Purchaser to Seller and the Escrow Agent stating the reason for such termination and referencing the section of this Agreement providing Purchaser with the right to do so. Upon receipt of such written demand by Seller, Seller and Purchaser shall direct the Escrow Agent , in writing, to pay and disburse the Deposit immediately to Purchaser (whereupon this Agreement shall terminate and neither party shall have any further rights or obligations hereunder, except as otherwise expressly provided herein).

 

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(d)          The Deposit shall be paid to Seller: (i) at the Closing, should the Closing occur, in partial satisfaction of the Purchase Price as provided in Section 3.2(b) hereof; or (ii) as liquidated damages (and not as a penalty) upon the termination of this Agreement by Seller under Section 5.6(a) . In each such instance, Seller and Purchaser shall direct the Escrow Agent, in writing, to pay and disburse the Deposit immediately to Seller (whereupon this Agreement shall terminate and neither party shall have any further right or obligations hereunder, except as otherwise expressly provided herein).

 

(e)          Without limiting Purchaser’s other rights and remedies hereunder, Purchaser may terminate this Agreement for any reason or for no reason whatsoever during the Due Diligence Period (as herein defined) with respect to all (but not less than all) of the Facilities and upon any such termination the Deposit shall be returned to Purchaser.

 

Section 3.2            Payment of Purchase Price.

 

The Purchase Price shall be paid by Purchaser, at Closing, as follows:

 

(a)          The Purchase Price, as adjusted for any prorations pursuant to Section 3.4 below, and credits and additions described in Section 3.2(b) below, shall be paid at Closing by wire transfer in accordance with wire instructions provided by Seller at least three (3) business days before Closing.

 

(b)          Purchaser shall receive a credit against payment of the Purchase Price by the amount of (i) the Deposit, (ii) the accrued vacation and sick pay amounts included in the Assumed Liabilities, and (iii) unless otherwise paid by Seller, the amounts to be paid by Seller under Section 2.4(a) and Section 4.6(b) of this Agreement. If, at Purchaser’s request, Seller leaves any of Seller’s security deposits or utility deposits in place following Closing, then the amount of any such security deposit or utility deposit shall be added to the Purchase Price and paid to Seller pursuant to Section 3.2(a) .

 

Purchaser shall deposit the Holdback Amount into an interest-bearing escrow account with the Escrow Agent pursuant to an Escrow Agreement in substantially the form attached hereto as Exhibit B (the “ Post-Closing Escrow Agreement ”). The funds held pursuant to the Post-Closing Escrow Agreement shall be available according to the terms of the Post-Closing Escrow Agreement to secure any obligations of Seller to Purchaser pursuant to Section 3.4(iv)(d) and Section 8.1 hereof. Fifty percent (50%) of the Holdback Amount shall be released to Seller at the end of the sixth (6th) calendar month following the Closing Date, less any amounts claimed by Purchaser prior to such distribution date, which shall be held in accordance with the terms of the Post-Closing Escrow Agreement until finally adjudicated, and the remainder of the Holdback Amount shall be released to Seller at the end of the twelfth (12th) calendar month following the Closing Date, less any amounts claimed by Purchaser prior to such distribution date, which shall be held in accordance with the terms of the Post-Closing Escrow Agreement until finally adjudicated.

 

(c)          Purchaser shall assume the Assumed Liabilities.

 

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Section 3.3            Allocation of Purchase Price.

 

(a)          With respect to the individual Facilities, the Purchase Price shall be allocated as set forth on Schedule 3.3 , which will be provided by Seller at least ten (10) days prior to the end of the Due Diligence Period. Any adjustments to the Purchase Price provided herein that are attributable solely to a particular Facility shall result in an adjustment of the Purchase Price allocated to such Facility. Any adjustments to the Purchase Price provided herein that are attributable to one or more Facilities shall result in a pro-rata adjustment (determined in accordance with the proportional amount of Purchase Price allocated to each Facility) of the Purchase Price allocated to each Facility with respect to which such adjustment is attributable.

 

(b)          Additionally, the parties acknowledge that the transactions contemplated hereunder must be reported in accordance with Section 1060 of the IRC. The parties shall report the transactions contemplated hereunder for all purposes in accordance with the purchase price allocation set forth on Schedule 3.3 hereto, which schedule the parties acknowledge and agree will be completed during the Due Diligence Period. The parties shall share information and cooperate to the extent necessary to permit the transactions to be properly, timely, and consistently reported. Prior to the expiration of the Due Diligence Period, Purchaser and Seller shall agree upon an allocation of the Purchase Price for local, state and federal tax purposes, which allocation will specify the Purchase Price for the Purchased Property by each parcel of Real Property (and the related Facility), Personal Property and Other Assets. The agreed allocation will be attached to this Agreement in the form shown on Schedule 3.3 and will be used by the parties to determine the amount of Purchase Price payable to each Seller (or its constituent members hereunder). In accordance with such allocation, Purchaser shall prepare and deliver to the Seller copies of Form 8594 and any required exhibits thereto (the “ Asset Acquisition Statement ”). Purchaser shall prepare and deliver to the Seller from time to time revised copies of the Asset Acquisition Statement (the “ Revised Statements “) so as to report any matters on the Asset Acquisition Statement that need updating (including purchase price adjustments, if any) as agreed to by Purchaser and Seller. The Purchase Price for the Purchased Property shall be allocated in accordance with the Asset Acquisition Statement or, if applicable, the last Revised Statements, provided by Purchaser to Seller, and all income Tax Returns and reports filed by Purchaser or the Seller (whether together or independently) shall be prepared consistently with such Allocation.

 

Section 3.4            Prorations.

 

(a)          The following items shall be prorated between Seller and Purchaser as of 11:59 p.m. on the date immediately preceding the Closing Date; prorations credited to Purchaser shall reduce the Purchase Price and prorations credited to Seller shall increase the Purchase Price at Closing as follows:

 

(i)          city, state, and county ad valorem taxes for the year in which the Closing occurs based on the ad valorem tax bills for the Purchased Property, if then available for such year, or if not, then on the basis of the ad valorem tax bill for the Purchased Property for the immediately preceding year. (If such proration is based on an ad valorem tax bill for the immediately preceding year and should such proration prove to be inaccurate on

 

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receipt of the ad valorem tax bill for the Purchased Property for the year of Closing, then either Seller or Purchaser, as applicable, may demand at any time after Closing a payment from the other party in an amount sufficient to correct such malapportionment);

 

(ii)         sanitary sewer taxes and utility charges, if any; provided, however , that Purchaser may elect, prior to Closing, to require that the meters for all utility charges be read and terminated as of the end of the last business day preceding the Closing Date, in which case Seller shall be responsible for and shall pay for all such charges first accruing or relating to the period prior to the Closing Date;

 

(iii)        all payment obligations under the Assumed Contracts and Leases; and

 

(iv)        resident rents and other revenues (including Prepaids and Deposits, if any).

 

Purchaser and Seller shall prepare a proposed schedule (the “ Proration Schedule ”) not later than two (2) business days prior to Closing, including the items listed above and any other items the parties determine necessary. Such Proration Schedule shall include all applicable income and expenses with regard to the Purchased Property. Seller and Purchaser will use all reasonable efforts to finalize and agree upon the Proration Schedule at least two (2) business days prior to Closing.

 

(b)          Seller shall receive all income from the Purchased Property attributable to the period prior to the Proration Date (as defined below) and shall, unless otherwise provided for in this Agreement, be responsible for all expenses of the Purchased Property attributable to the period prior to 11:59 P.M. on the date immediately preceding the Closing Date (the “ Proration Date ”). In the event Purchaser receives any payment from a resident for rent due for any period prior to the Proration Date or payment of any other receivable of Seller, Purchaser shall forward such payment to Seller. Payments received from a resident shall be allocated first to any current balances due from such resident.

 

(c)          Purchaser shall receive all income from the Purchased Property attributable to the period from and after the Proration Date and shall, except as otherwise provided for in this Agreement, be responsible for all expenses of the Purchased Property attributable to the period from and after the Proration Date. In the event Seller or Seller’s affiliates receive any payment from a resident for rent due for any period from and after the Proration Date, Seller shall forward such payment to Purchaser.

 

(d)          The parties agree that any amounts that may become due under this Section 3.4 shall be paid at Closing as can best be determined. A post-Closing reconciliation of prorated items shall be made by the parties within ninety (90) days after the Closing Date and any amounts due at that time shall be promptly forwarded to the respective party to whom such amounts are due in a lump sum payment. Any additional amounts which may become due after such determination shall be forwarded at the time they are received. Any amounts due under this Section 3.4 which cannot be determined within ninety (90) days after the Closing Date (such as, for example, fiscal year-end real estate taxes) shall be reconciled as soon thereafter as such amounts can be determined. Purchaser and Seller agree that each shall have the right to audit the

 

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records of the other in connection with any such post-Closing reconciliation. Any payments made pursuant to this Section 3.4 shall be treated as a purchase price adjustment for income tax purposes.

 

(e)          Purchaser shall receive a credit towards the Purchase Price for the Accrued Employee Vacation and any other obligations as otherwise expressly agreed by Purchaser and Seller.

 

(f)          This Section 3.4 shall survive the Closing for a period of one (1) year following the Closing Date.

 

ARTICLE 4
Certain Other Covenants and Agreements

 

Section 4.1            Inspection and Due Diligence.

 

(a)          Prior to Closing, Purchaser (including its agents and representatives) shall be permitted to inspect the Facility and the Purchased Property. The “ Due Diligence Period ” for purposes of this Agreement means a period extending until 5:00 p.m. Eastern on August 7, 2014, or on such earlier day as Purchaser expressly confirms in writing that it has completed its diligence review and waived the remainder of the Due Diligence Period. The Purchaser shall be entitled to continue all such inspections during and after the Due Diligence Period. Such inspections may include an independent appraisal and environmental assessments (including Phase I assessments and Phase II assessments if Seller consents to any such Phase II assessment which consent shall not be unreasonably withheld, conditioned or delayed), impact study and detailed architectural and engineering inspections of buildings and mechanical systems located on the Real Property and any other inspections which may reasonably be required by potential lenders or investors. Purchaser shall not conduct any drilling, boring, soil testing or other physically intrusive inspections without Seller’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, if done in connection with any Phase II assessment. Seller shall allow Purchaser and its authorized representatives reasonable access upon prior notice during normal business hours and until the Closing to Seller’s executive personnel and records, shall permit examination and testing, and shall furnish Purchaser and its authorized representatives such information concerning the Purchased Property and the Facility as Purchaser reasonably requests, to the extent within the possession and control of Seller or Current Manager. Purchaser and its authorized representatives shall have the right to review and copy, at Purchaser’s expense, all such books, accounts, records, agreements or other documents as it may reasonably deem advisable. Seller shall, upon reasonable request by Purchaser, make available to Purchaser by electronic data room or otherwise, copies of all records, files, correspondence, invoices, resident lists, supplier lists, blueprints, specifications, designs, drawings, business records and plans, operating and financial data, environmental assessments, property reports, permits and regulatory files and other data associated with or used by Seller in connection with its operation of the Business or its ownership or operation of the Purchased Property, including without limitation all of the information requested in Exhibit G of this Agreement to the extent Seller Parties or the Current Manager has possession and control of such information, and in the form in which Seller maintains such information in the ordinary course of

 

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its business. Seller shall have no obligation to prepare any summaries, abstracts, compilations or reports in connection with Purchaser’s investigation that Seller Parties or the Current Manager do not maintain or compile in the ordinary course of Seller Parties’ or the Current Manager’s business. For purposes of this Agreement, documents or information shall be deemed to have been “made available” to Purchaser if copies have been delivered or viewed by Purchaser in tangible or electronic form, or if such documents or information have been made available at the Facility or on an internet or electronic data site to which Seller has granted Purchaser or its representatives access. Purchaser shall notify Seller in advance of any site visits by Purchaser or its contractors or representatives. All site visits and contacts with Seller personnel shall be coordinated through James T. Elliott IV or Seller’s counsel, and Purchaser shall not contact any Seller personnel, residents or service providers directly.

 

(b)          Purchaser hereby acknowledges receipt of each of the materials in Seller’s or Current Manager’s possession and listed in Exhibit G (the “ Requested Diligence Materials ”).

 

(c)          If the Requested Diligence Materials disclose any matters which need correction, such matters shall be corrected by Seller to the extent within Seller’s reasonable control.

 

(d)          In conducting any inspections, investigations or tests of the Purchased Property, Purchaser shall (i) not unreasonably disturb the tenants or interfere with their use of the Purchased Property; (ii) not materially or unreasonably interfere with the operation and maintenance of the Purchased Property; (iii) not materially damage any part of the Purchased Property or any personal property owned or held by any tenant or any third party; (iv) not injure or otherwise cause bodily harm to Sellers’ agents, guests, invitees, contractors and employees or any tenants or their guests or invitees; (v) comply in all material respects with all applicable laws; and (vi) not permit any Liens to attach to the Purchased Property by reason of the exercise of its rights hereunder. Purchaser agrees to indemnify and save and hold Seller harmless from and against any and all claims, suits, liabilities, costs and expenses incurred due to personal injury or damage to the Purchased Property or sustained by Seller arising from or in connection with inspection of the Purchased Property by Purchaser and its employees, agents, engineers, consultants, contractors and representatives; provided , however , the foregoing shall exclude any claims, suits, liabilities, costs and expenses incurred or sustained by Sellers arising from (i) the negligence or willful misconduct of Sellers or their agents, representatives, employees or contractors or (ii) any pre-existing conditions not exacerbated by Purchaser. Before entering the Real Property for the purpose of inspection, testing or investigations, Purchaser shall furnish Seller a certificate of insurance issued by an insurance company licensed to transact business in the State of Iowa evidencing the existence of a policy of commercial general liability insurance and, if necessary, commercial umbrella insurance, insuring Seller and Purchaser against any and all liability for injury to or death of a person or persons, or damage to property, occasioned by or arising out of or in connection with Purchaser’s and such other person’s entry onto the Real Property, the combined limit of such policies to be in an amount not less than $1,000,000 each occurrence and $2,000,000 in the aggregate. The provisions of this Section 4.1(d) shall survive the Closing or the termination of this Agreement pursuant to any provision hereof. In the event that the Purchased Property is disturbed or altered (reasonable wear and tear excepted) as a result of Purchaser’s activities under this Section 4.1(d) , Purchaser shall promptly restore such disturbed or altered areas of the

 

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Purchased Property to substantially its condition existing prior to the commencement of such activities which disturb or alter the Purchased Property.

 

(e)          The parties hereto acknowledge that Seller may possess or have access to certain information subject to the Health Insurance Portability and Accountability Act of 1996 and any regulations promulgated thereunder (“ HIPAA ”). Notwithstanding any other provision of this Agreement, Seller shall have no obligation under this Agreement to disclose to Purchaser any information which would violate or put Seller in a position of noncompliance with any city, county, state or federal privacy or security act, law, or regulation or the provisions of HIPAA or which would result in Seller breaching any contractual provisions imposed on Seller with respect to the requirements of HIPAA and/or any such city, county, state, or federal act, law or regulation.

 

(f)          Purchaser may perform or cause to be performed a Phase I Environmental Site Assessment of any portion of the Real Property (the “ Phase I ESA ”). Purchaser shall provide Seller with a copy of each Phase I ESA prepared on Purchaser’s (or its lender’s) behalf within five (5) business days of completion and receipt of each by Purchaser. Any subsequent amendments thereto will also be provided to Seller within five (5) business days after completion and receipt by Purchaser thereof.

 

(g)          If any Phase I ESA, or any update thereof, reveals areas of environmental concern that, in the opinion of the consultant who prepared the Phase I ISA, warrant further investigation, Purchaser may, at its discretion, request Seller’s consent to commence a Phase II Environmental Site Assessment of the applicable portion of the Real Property (“ Phase II ESA ”). A Phase II ESA consists of further investigation of recognized environmental conditions identified in the Phase I ESA including sampling and analysis of soil and groundwater necessary to determine whether or not contamination has occurred. Seller’s consent to conduct a Phase II ESA may be withheld in Seller’s sole discretion. If Seller permits Purchaser to conduct a Phase II ESA, upon Seller’s request, Purchaser will provide to Seller a copy of the Phase II ESA within five (5) days of completion and receipt by Purchaser and any subsequent amendments and/or reports relating to the Phase II ESA.

 

(h)          The costs of the Phase I ESA and the costs of the Phase II ESA and any updates thereof shall be paid by Purchaser.

 

Section 4.2            Conduct of Business Prior to the Closing Date.

 

Seller covenants and agrees with Purchaser that from the Effective Date hereof through the Closing Date, except as otherwise expressly contemplated in this Agreement, unless Purchaser otherwise consents in writing (which consent shall not be unreasonably withheld, conditioned or delayed) Seller shall, and shall cause the Current Operating Tenant and Current Managers in their capacities as operators and managers of the Business to:

 

(a)          Use good faith efforts to operate the Business in all material respects in the ordinary course of business in a commercially reasonable manner, including (i) incurring expenses consistent with Seller Parties’ past practices in the operation of the Business and

 

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(ii) using commercially reasonable efforts to preserve the Business’ present business operations, organization and goodwill and their relationships with customers, employees, advertisers, suppliers and other contractors.

 

(b)          Operate the Business and otherwise conduct business in all material respects in accordance with the terms or conditions of all applicable Healthcare Licenses and Licenses, and all other rules, regulations, laws, and orders of all governmental authorities having jurisdiction over any aspect of the operation of the Business and all applicable insurance requirements.

 

(c)          Maintain the books, records, and financial statements for the Business consistent with past practices.

 

(d)          Timely comply in all material respects with the Assumed Contracts and Leases.

 

(e)          Not sell, lease, grant any rights in or to or otherwise dispose of or otherwise relinquish control of, or agree to sell, lease or otherwise dispose of, the Purchased Property in whole or in part except for Residency Agreements entered into in the ordinary course and dispositions of assets that are in the ordinary course of business, and if material, are replaced by similar assets of substantially equal or greater value and utility.

 

(f)          Take commercially reasonable efforts to maintain the Purchased Property in the same condition as it exists as of the Effective Date, except for ordinary wear and tear, in a manner consistent with past practices.

 

(g)          Not default on any loans to Seller or secured by any Purchased Property which are not fully cured or satisfied at Closing.

 

(h)          Not enter into any contracts (other than contracts which impose no obligation on Purchaser following the Closing or can be terminated upon not more than thirty (30) days’ notice or Residency Agreements in the ordinary course of business), whether or not material, without the consent of Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.

 

(i)          Not make any alterations or improvements to the Real Property or make any capital expenditure with respect to the Real Property in excess of $100,000 other than those that (i) are currently budgeted for completion, (ii) are required by law, (iii) are necessary to preserve the coverage under or comply with the terms of any insurance policy with respect to the Business or (iv) are in Seller’s business judgment necessary to address emergency conditions or to maintain the goodwill and competitive standing of the Business.

 

(j)          Maintain normal levels of inventory and supplies on hand for the Business (including medical supplies, food, beverages, office and kitchen supplies), consistent with past practice and as necessary to comply with applicable laws and regulations.

 

(k)          Make available to Purchaser copies of all internally generated monthly financial reports.

 

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(l)          Provide Purchaser, through each applicable Current Manager or otherwise, with a Rent Roll on the tenth (10 th ) day of each calendar month, that will be current through the last day of the previous calendar month.

 

(m)          Inform Purchaser promptly regarding the resignation, termination or hiring of an Administrator, Executive Director or Assistant Director, as applicable (if any), of any Facility.

 

Section 4.3            Notification of Certain Matters.

 

(a)          Seller shall give prompt written notice to Purchaser, and Purchaser shall give prompt written notice to Seller (each, a “ Notice of Changed Condition ”), to the extent either such party becomes aware of (i) the occurrence, or failure to occur, of any event (a “ Changed Condition ”) that would be likely to cause any of their respective representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Closing Date, and (ii) any failure on their respective parts to comply with or satisfy, in any material respect, any covenant, condition, or agreement to be complied with or satisfied by any of them under this Agreement (a “ Potential Breach ”). Any Notice of Changed Condition shall specify that it is being provided to Purchaser pursuant to this Section 4.3.

 

(b)          Upon receipt of any such Notice of Changed Condition, if Purchaser does not approve of the Changed Condition, Purchaser may elect, by written notice given to Seller on or prior to the earlier of (a) five (5) business days after receipt of notice of the Changed Condition or (b) the Closing Date, to terminate this Agreement, in which event the Deposit shall be refunded to Purchaser. Upon such termination, neither party hereto shall have any further rights against, or obligations to, the other under this Agreement except those obligations expressly surviving a termination of this Agreement. If after receipt of notice from Seller of any Changed Condition or if after Purchaser otherwise obtains actual knowledge of a Changed Condition, Purchaser does not elect to terminate the Agreement as provided above, Purchaser shall be deemed to have waived any claim hereunder with respect to the Changed Condition. Anything herein to the contrary notwithstanding, Purchaser acknowledges and agrees that changes to the Rent Roll during the term of this Agreement will not be deemed a Changed Condition.

 

(c)          For the avoidance of doubt, no Notice of a Changed Condition describing a Potential Breach shall be subject to Section 4.3(b) above, and this Section 4.3 shall not limit Purchaser’s rights and remedies contained in ARTICLE 9 hereof in the event of a breach of this Agreement by Seller.

 

Section 4.4            Employees; Accrued Vacation, Sick Pay, etc.

 

(a)          For purposes of this Section 4.4 , all references to employment by an entity include both direct employment by such entity, employment by an affiliate of such entity, or employment through one or more employee leasing or similar arrangements that such entity or its affiliate has entered into with a third party and all references to Plans includes any such Plan provided directly by the applicable entity, by their respective affiliates, or by any such employee leasing company under an agreement with the above.

 

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(b)          Seller shall pay any severance costs payable with respect to the termination of employment by Seller, Current Operating Tenant or the Current Manager (as applicable) of any Employee (as defined below in Section 6.29), including Employees who are offered post-Closing employment at the Facility, pursuant to any severance policies or plans or required by law, including the WARN Act (if applicable). Seller shall be solely responsible for WARN Act compliance for all Employees.

 

(c)          Effective as of 11:59 PM on the date immediately preceding the Closing Date, all Employees hired by Post-Closing Manager (the “ Hired Employees ”) shall cease to be active participants in the Seller Plans in accordance with the terms of the Seller Plans and applicable law, including ERISA. Seller, Current Operating Tenant or the Current Manager, as applicable, shall retain liability for all claims incurred by the Employees (and their enrolled dependents) under the Seller Plans prior to the Closing Date or if later, the date coverage under the Seller Plans ceases in accordance with the terms of such Seller Plans.

 

(d)          Seller shall be responsible for complying with the continuation health care coverage requirements of COBRA with respect to any individual who became a “qualified beneficiary” as of or prior to the Closing Date, including as a result of this transaction. Purchaser shall be responsible for complying with all requirements of COBRA with respect to any Hired Employee (or enrolled dependent) who becomes a “qualified beneficiary” on or after the Closing Date.

 

(e)          Seller shall be responsible for payment of all short- and long-term disability claims of Employees from disabilities arising prior to the Closing Date, to the extent covered by Seller Plans. Purchaser shall be responsible for payment of all short- and long-term disability claims from disabilities of Hired Employees incurred on or after the Closing Date to the extent covered by the Purchaser Plans.

 

(f)          As to any Hired Employee, Seller shall cause the release of such Hired Employee from any contractual provision with Seller to the extent that such provision would impair the utility of such Hired Employee’s services the Post-Closing Manager in conducting the Business following the Closing in substantially the same manner it is conducted by Seller, Current Operating Tenant or the Current Manager immediately prior to the Closing Date, or to the extent that such provision would impose upon such Hired Employee any monetary or other obligation to Seller for violation of restrictive covenants or confidentiality provisions with respect to the Business (other than any such restrictive covenants or confidentiality provisions contained in Assumed Contracts and Leases being transferred to Purchaser or any such covenant mandating the return to Seller or the Current Manager of property not being transferred to Purchaser hereunder).

 

(g)          Post-Closing Manager, at Purchaser’s expense, shall be responsible for all obligations to Hired Employees with respect to vacation pay and sick pay accrued with respect to Hired Employees for services rendered to Seller through the date preceding the Closing Date, to the extent described on Schedule 4.4(g) , as updated by the Seller through 11:59 PM on the date preceding the Closing Date, and in accordance with Seller’s vacation and sick pay policies as of the Effective Date. There shall be a clean cut-off of payroll on the date preceding the Closing

 

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Date with respect to the Hired Employees. Seller shall be responsible for, and shall pay at Closing, all salary, wages, and other compensation, accrued with respect to Hired Employees and other Employees who are terminated in connection with the transaction for services rendered to Seller through 11:59 P.M. on the date preceding the Closing Date, other than the Accrued Employee Vacation.

 

Section 4.5            Confidentiality .

 

(a)           Confidential Information. Any and all non-public information of any type or description, including, but not limited to, financial statements and projections, proprietary or trade secret information, whether written or verbal, or any information pertaining to any Seller Party, Current Operating Tenant or Current Manager or their respective businesses given to Purchaser or its agents by or on behalf of Seller in connection with the transactions contemplated by this Agreement, is proprietary to Seller and confidential in nature, and shall be treated as such by Purchaser, except with the prior written consent of Seller and except to the extent enforcement of its terms and applicable law require public disclosure. Notwithstanding any other provision of this Agreement, Purchaser shall not, and shall not permit it Affiliates to, disclose information related to the transactions contemplated by the Agreement under its filings with the Securities and Exchange Commission until after the expiration of the Due Diligence Period.. This provision shall not apply following the Closing to any such information pertaining to the Purchased Property or the Business, nor to any information that is or becomes publicly available through no fault of Purchaser. Purchaser shall have the right to disclose any such information to its professional advisors, lenders, investors and other third parties who need to know such information for the purposes of assisting Purchaser with the negotiation and consummation of this Agreement, provided Purchaser advises such parties of their confidential obligations under this Agreement, and provided Purchaser remains responsible for any violations by such parties. Purchaser shall also have the right to discuss the possibility of future employment with all active and full-time employees of the Business, provided that such discussions are coordinated through James T. Elliott IV.

 

(b)           Confidentiality of Agreement. The terms of this Agreement shall remain confidential, except with the prior written consent of Seller and Purchaser and except to the extent that enforcement of its terms or applicable law require public disclosure. Neither party shall make any public announcement of the transactions contemplated herein without the express written approval of the other party, which approval shall not be unreasonably withheld. This provision will not apply to Purchaser following any Closing. Purchaser shall permit Seller to review in advance and comment on any public announcement of the Closing of the transactions contemplated herein.

 

(c)           Return of Confidential Information. Purchaser agrees that promptly upon the termination of this Agreement, whether by mutual termination or otherwise (other than upon Closing), Purchaser shall cause all materials and property (originals and copies) of Seller to be immediately returned to Seller, or, at Purchaser’s election, destroyed provided Purchaser provides written certification of such destruction, provided that Purchaser shall be entitled to retain such information to the extent required in order to comply with applicable law, regulation, bona fide document retention policy of Purchaser, or any public disclosure obligations

 

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promulgated by the Securities and Exchange Commission any applicable to Purchaser, or until any litigation between Purchaser and Seller arising out of the termination of this Agreement has been finally resolved.

 

(d)           Survival of Confidentiality. This Section 4.5 shall survive the Closing to the extent provided above and shall survive in the event this Agreement is terminated prior to Closing.

 

(e)           Supersedes Previous Agreements. The provisions of this Section 4.5 supersede any prior agreements between the parties relating to confidentiality.

 

Section 4.6            Expenses and Taxes.

 

(a)          Each party shall pay its own expenses and costs incurred in connection with the negotiation and consummation of this Agreement and the transactions contemplated by this Agreement.

 

(b)          Notwithstanding the foregoing:

 

(i)          Seller shall pay fees and costs relating to the transfer of motor vehicles included in the Purchased Property;

 

(ii)         Seller shall pay the real estate transfer tax, mansion taxes (if applicable) costs of recording the Deeds and all other filing and recording costs;

 

(iii)        Seller shall pay the premiums or other costs attributable to the issuance of the Title Policy;

 

(iv)        Seller shall pay any person who is entitled to any brokerage commission or finder’s fee in connection with any of the transactions contemplated by this Agreement by reason of any act or omission of Seller, including the fees and commissions due to HFF, LP and shall indemnify Purchaser and hold Purchaser harmless against any claims for such commissions or finder’s fees;

 

(v)         Purchaser shall pay any person who is entitled to any brokerage commission or finder’s fee in connection with any of the transactions contemplated by this Agreement by reason of any act or omission of Purchaser, and shall indemnify Seller and hold Seller harmless against any claims for such commissions or finder’s fees; and

 

(vi)        Purchaser shall pay one-half (50%) of the pre-payment premium required for Seller to pre-pay existing loans guaranteed by HUD and secured by a mortgage upon one or more of the Facilities at Closing (the “ HUD Loans ”), up to a maximum amount to be paid by Purchaser of Two Million and No/100 U.S. Dollars ($2,000,000.00).

   

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Section 4.7            Waiver of Bulk Sales and Indemnification.

 

Purchaser hereby waives compliance by Seller and Seller hereby waives compliance by Purchaser, with the requirements of any applicable bulk sales laws and similar laws, if and to the extent applicable. Seller shall indemnify and hold harmless Purchaser from any and all claims, liabilities, or costs, including reasonable attorneys’ fees, arising out of the parties’ failure to comply with any bulk sales laws and similar laws applicable to the transactions contemplated hereby as provided in Section 8.1 . The foregoing indemnification shall survive the Closing.

 

Section 4.8            Exclusivity.

 

During the period from the Effective Date to the Closing Date or termination of this Agreement according to the terms hereof, Seller shall not take any action, directly or indirectly, to encourage, initiate or engage or participate in discussions or negotiations with, or provide any information to, any party other than Purchaser, concerning a potential transaction involving the purchase and sale of the Business, any one or more Facilities or any of Purchased Property, the purchase and sale of all or substantially all of the ownership interest of any one or more entities comprising the Seller, or any transaction similar to the foregoing.

 

Section 4.9            Consents; Cooperation.

 

Seller will use its reasonable best efforts prior to the Closing to obtain all consents that may be required from third parties with respect to the Assumed Contracts and Leases and any of the other Purchased Property and Purchaser shall cooperate with Seller in connection therewith. Purchaser shall use its reasonable best efforts to diligently pursue the issuance or transfer of any of the Licenses or Healthcare Licenses required for Purchaser to operate the Business following the Closing, and Seller agrees to provide reasonable cooperation and assistance to Purchaser in obtaining such Licenses or Healthcare Licenses. Notwithstanding the foregoing, neither party will be required to pay or commit to pay any amount to (or incur any liability or obligation to) a person or entity from whom or which a consent may be required (other than payment by Seller of past due amounts under Assumed Contracts and Leases or past due taxes, or payment by Purchaser of any fees or other costs imposed by governmental authorities with respect to the Licenses or Healthcare Licenses, or transfer fees, if any, required by the express terms of any Assumed Contracts and Leases) or otherwise enter into or modify any agreement with such person or entity that involves any cost, liability or obligation. Each of the parties have independently determined, based upon the advice of their own respective counsel, that the pre-merger filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“ HSR Act ”), do not apply to the transactions contemplated under this Agreement.

 

Section 4.10          Fines and Penalties.

 

At or prior to Closing, Seller covenants and agrees to cure all violations and other deficiencies identified in writing by any federal, state, municipal, local or other governmental or quasi-governmental authority (all such matters collectively the “ Violations ”) relating to the Business and the Facilities, pay all penalties associated therewith and prepare and implement any plan of correction required by any such authority. Either Purchaser or Seller may stay any otherwise pending Closing in the event any uncured Violations exist until such time as Seller has corrected any such Violations in full compliance with applicable laws, orders and directions;

 

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provided, however , that this provision shall not diminish the right of any party to terminate this Agreement in accordance with the terms hereof following the Outside Date.

 

Section 4.11          Further Assurances.

 

Each party covenants and agrees that, following the Closing, it will execute, deliver and acknowledge (or cause to be executed, delivered and acknowledged), from time to time, at the reasonable request of the other party and without further consideration, all such further instruments and take all such further action as may be reasonably necessary or appropriate to transfer more effectively to Purchaser, or to perfect or record Purchaser’s title to or interest in the Purchased Property or to enable Purchaser to use or otherwise to confirm or carry out the provisions and intent of this Agreement.

 

Section 4.12          Non-Solicitation of Employees.

 

For a period of one (1) year following the Closing Date, no Seller Party nor any affiliate under the control of, or commonly controlled with, any Seller Party shall attempt, directly or indirectly, to solicit any Hired Employee to leave the employ of Purchaser or its operator in order to take employment with any Seller Party or any affiliate thereof or any other party. This Section 4.12 shall survive Closing.

 

Section 4.13          Delivery of Schedules.

 

Seller shall provide all Schedules required by this Agreement (other than those required by ARTICLE 7 hereof, which will be provided by Purchaser by the Schedule Due Date) within three (3) days following the Effective Date (the “ Schedule Due Date ”). If applicable, the Due Diligence Period shall be extended by the total number of days which elapse between the Schedule Due Date and the date upon which all required Schedules have actually been provided to Purchaser, or, as applicable, any insufficiently completed Schedules have been corrected to Purchaser’s reasonable satisfaction (inclusive of the Schedule Due Date and the last applicable date of delivery or correction, as applicable). Any fact or item disclosed on any Schedule to this Agreement shall be deemed disclosed with regard to all other representations and warranties to which such fact or item may reasonably apply to the extent such disclosure would provide notice to a reasonable person that the information disclosed would also qualify, or constitute an exception to, such other representations and warranties. Seller may from time to time supplement and update such Schedules to reflect any changes since the date of delivery of the original Schedules or any matters of which Seller first acquires Knowledge following the original delivery date of such Schedules, each of which shall be deemed a Changed Condition and subject to the terms of Section 4.3 . Any such updates or supplements shall be deemed to amend the Schedules for all purposes retroactively to the Effective Date, except that (i) no amendment to Schedules 1.1(a) , 1.1(c) , 2.4(a) , and 4.4(b) may be made without Purchaser’s written consent, and (ii) any amendments permitted above shall be disregarded for all purposes under this Agreement if Seller intentionally omitted such information from the original Schedules.

 

Section 4.14          Delivery of Evidence of Ability to Complete Transaction. Purchaser and Seller acknowledge that the ECI Sellers (other than persons who are passive owners of the real property

 

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included in the ECI Portfolio to the extent such persons’ consents are not required in order for the ECI Sellers to cooperate as contemplated by this Section 4.14 ) have agreed with Seller to cooperate as reasonably requested by Purchaser and Seller as it relates to (i) closing deliveries, (ii) the transfer of healthcare and other licenses to the Seller, Purchaser or its designee, as applicable, (iii) any instruments, agreements and other documents required of the passive owners of the real property included in the ECI Portfolio to complete the transactions under the ECI Purchase Agreement; and (iv) any other deliveries reasonably requested by the Purchaser relating to the CHOW Approvals. Seller agrees to (A) enforce the such obligations of each such ECI Seller, to the extent reasonably requested by Purchaser and (B) provide updates on the status of the agreement of the passive owners of the real property included in the ECI Portfolio to such matters prior to the expiration of the Due Diligence Period and from time to time thereafter upon the request of Purchaser. Purchaser acknowledges that Seller has provided evidence acceptable to Purchaser in its reasonable discretion that (x) such ECI Sellers have consented to Purchaser’s submission of the application necessary for Purchaser or its designees to obtain the CHOW Approvals, and (y) that such ECI Sellers have been informed that Purchaser and its designees will be the ultimate purchasers of the ECI Portfolio.

 

Section 4.15          Entrance Fee Refunds at Pennsylvania Facility .

 

Purchaser agrees that the Entrance Fee Refunds (as such term is defined in the Escrow Agreement dated May 29, 2014 by and among Prairie Hills at Penn Place, LLC, RRL Ottumwa, LLC and West Bank) shall be used for the sole purpose of repayment of any Entrance Fee Refunds payable to residents pursuant to the terms of entrance fee agreements executed by the residents of the Pennsylvania Facility upon their admission (the “ EFR Liability ”). The interest or other earnings on the Entrance Fee Refunds, if any, shall be disbursed to Purchaser upon satisfaction of the EFR Liability. Any remaining balance in Entrance Fee Refunds in the escrow after satisfaction of the obligations set forth in the Escrow Agreement shall be paid to Purchaser.

 

ARTICLE 5
Closing

 

Section 5.1            Closing.

 

The Closing of the transactions contemplated by this Agreement shall occur remotely, upon the exchange of signatures to the documents contemplated by this Agreement and the other required deliveries of each party hereto described below on the later of (i) August 14, 2014 or (ii) five (5) business days following the satisfaction of the CHOW Closing Condition, unless an earlier or later day for Closing is established by mutual agreement of Purchaser and Seller or as otherwise extended pursuant to Section 5.6 , Section 10.11 , or Section 10.12 ; provided, however, if as of the Closing, the new manager for the ECI Portfolio is not able to take over management of such Facilities, the parties will nonetheless proceed to Closing and will enter into a Transition Period Management Agreement. The date on which the Closing is scheduled to occur (as such date may be extended from time to time pursuant to this Agreement) shall be the “ Scheduled Closing Date ” hereunder. The date on which the Closing actually occurs shall be the “ Closing Date ” for purposes of this Agreement.

   

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Section 5.2            Conditions to Seller’s Obligations.

 

Except as may be waived in writing by Seller, Seller’s obligation to make its deliveries at the Closing and to effect and consummate the transactions contemplated hereby shall be subject to the following conditions:

 

(a)           Representations and Warranties True and Correct . Subject to Section 4.3 , each of Purchaser’s representations and warranties contained in this Agreement, taken as whole, shall be true in all material respects as of the Closing Date (except for representations and warranties made as of a specified date, which shall have been true and correct as of such date with the same effect as though made on such date), and Purchaser shall have executed and delivered to Seller at Closing a certificate confirming the foregoing.

 

(b)           Agreements Complied With . Each of Purchaser’s covenants and agreements contained in this Agreement to be performed at or prior to the Closing shall have been performed in all material respects at or prior to the Closing.

 

(c)           Deliveries Made . At or prior to Closing, Purchaser shall have delivered to Seller or to the Escrow Agent for release to Seller upon Closing, and where applicable shall have duly executed, all the documents, certificates and other instruments required to be delivered at Closing in accordance with Section 5.5 or any other express provision of this Agreement.

 

(d)           No Injunctions or Restraints . No temporary restraining order, preliminary or permanent injunction, or other order issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect. No action shall have been taken nor any statute, rule, or regulation shall have been enacted by any governmental agency that makes the consummation of the transactions contemplated hereby illegal.

 

Section 5.3            Conditions to Purchaser’s Obligations.

 

Except as may be waived in writing by Purchaser, Purchaser’s obligation to make its deliveries at the Closing and to effect and consummate the transactions contemplated hereby shall be subject to the following conditions:

 

(a)           Representations and Warranties True and Correct . Subject to Section 4.3 hereof, each of Seller’s representations and warranties contained in this Agreement, taken as a whole, shall be true in all material respects as of the Closing Date with the same effect as though made on such date (except for representations and warranties made as of a specified date, which shall have been true and correct as of such date), and Seller shall have executed and delivered to Purchaser at Closing a certificate confirming the foregoing.

 

(b)           Agreements Complied With . Each of Seller’s covenants and agreements contained in this Agreement to be performed at or prior to the Closing shall have been performed in all material respects at or prior to the Closing, and Seller shall have executed and delivered to Purchaser at Closing a certificate confirming the foregoing.

 

(c)           Deliveries Made. At or prior to Closing, Seller shall have delivered to Purchaser or to the Escrow Agent for release to Purchaser upon Closing, and where applicable shall have

 

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duly executed, all the documents, certificates and other instruments required to be delivered at Closing in accordance with Section 5.4 or any other express provision of this Agreement.

 

(d)           Licenses and Healthcare Licenses. Purchaser shall have (i) applied for the Licenses and Healthcare Licenses required for Purchaser to operate the Facilities as independent living, assisted living and memory care facilities in the same manner in which the Sellers and/or Current Operating Tenants, as applicable are currently operating the Business and (ii) shall have received verbal confirmation from the applicable licensing agencies to the effect that the applications have been processed and new licenses will be issued following delivery of evidence of Closing to the licensing agency (the condition described in this Section 5.3(d) is referred to as the “ CHOW Closing Condition ”).

 

(e)           No Material Adverse Change. No Material Adverse Change shall have occurred during the period between the Effective Date and the Closing Date.

 

(f)           Termination of Existing Leases and/or Management Agreements . Any existing real property leases and/or management agreements, if any, relating to the Purchased Property which are not Assumed Contracts and Leases or Residency Agreements shall have been terminated without fee or cost to Purchaser, and Seller shall have provided Purchaser reasonable evidence of same.

 

(g)           Pennsylvania Place Ground Lease . Seller shall have received an estoppel (the “ Ground Lease Estoppel ”) confirming the terms of the Agreement of Lease covering a portion of the Pennsylvania Facility (the “ Pennsylvania Facility Ground Lease ”), in the form required by Section 33 of the Pennsylvania Facility Ground Lease.

 

(h)           No Injunctions or Restraints . No temporary restraining order, preliminary or permanent injunction, or other order issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect. No action shall have been taken nor any statute, rule, or regulation shall have been enacted by any governmental agency that makes the consummation of the transactions contemplated hereby illegal.

 

Section 5.4            Deliveries by Seller.

 

Seller shall deliver to Purchaser on or before the Closing the following for each Facility:

 

(a)           Deed. The Deed substantially in the form of Exhibit C attached hereto, duly executed by Seller. In addition, in the event Purchaser elects to have a new survey of the applicable Real Property (the “ Survey ”) prepared, Seller agrees to provide a quitclaim deed at closing conveying title to the applicable Real Property based on the metes and bounds description shown on the Survey.

 

(b)           Bill of Sale and Assignment. A bill of sale and assignment in the form of Exhibit D attached hereto (the “ Bill of Sale and Assignment ”) with respect to the Purchased Personal Property located at the Facility, duly executed by Seller.

 

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(c)           Other Instruments. Such further instruments of conveyance and transfer as Purchaser may reasonably require to consummate the transactions contemplated by this Agreement to vest the Purchased Property in Purchaser and to facilitate the transfer of the Purchased Property from Seller to Purchaser, including the assignment of the applicable Assumed Contracts and Leases and the Pennsylvania Facility Ground Lease, in form and substance reasonably acceptable to Purchaser and Seller (the “ Assignment and Assumption ”).

 

(d)           Owner’s Affidavit. An Owner’s Affidavit in a form acceptable to the Title Company to the extent required to issue the Title Policy.

 

(e)           Releases. Documents releasing or nullifying any Title Defects (or providing reasonable evidence of such release or nullification) (relating to the applicable Real Property) which Seller is obligated to release or nullify pursuant to Section 2.4 hereof.

 

(f)           Resolutions. A certified copy of the company resolutions authorizing consummation of this Agreement and authorizing Seller’s to execute all documents necessary for Closing as provided herein.

 

(g)           Closing Certificate. The certificates required pursuant to Section 5.3(a) and Section 5.3(b) .

 

(h)           1099S. A completed Form 1099S, or effective equivalent thereof, describing the sale of the applicable Purchased Property.

 

(i)           Withholding Affidavit . If a Withholding Affidavit is required by the Escrow Agent, Seller shall deliver the Withholding Affidavit to the Escrow Agent prior to Closing.

 

(j)           Non-Foreign Status Affidavit . A certificate of non-foreign status pursuant to Treasury Regulation Section 1.1445-2(b)(2) signed by Seller under penalties of perjury stating Seller’s name, address and US taxpayer identification number and stating that Seller is not a foreign person as defined by Section 1445(f)(3) of the IRC.

 

(k)           Good Standing Certificates . Certificate of existence or good standing, certified by the Secretary of State of Delaware or Iowa, as applicable, as of a date which is within fifteen (15) days of Closing, reflecting each entity comprising the Seller’s good standing as a Delaware or Iowa limited liability company, as applicable and the authorization to do business in Iowa of any entity comprising the Seller that is not an Iowa limited liability company.

 

(l)           Rent Roll . A true, correct, and complete rent roll certified by an officer of Seller, for the applicable Facility listing each resident as of a date which is within three (3) business days prior to the Closing Date, the unit number of such resident, and the amount of the monthly fees to be paid by such resident (including room, meal and other applicable monthly fees), the amount of security deposit, if any, and the expiration date of such Residency Agreement, if applicable.

 

(m)           Transition Period Sublease . The Transition Period Sublease, if applicable, in form and substance attached as Exhibit E (the “ Transition Period Sublease ”).

 

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(n)           Third Party Consents . The third party consents listed on Schedule 5.4(n) .

 

(o)           Title Policy . An undertaking by the Title Company to issue the Title Policy in accordance with Section 2.4(a) , subject only to the Permitted Encumbrances.

 

(p)           Books and Records . Possession and control of books and records included as part of the Purchased Property which are not physically located at the Real Property as of the Closing Date.

 

(q)           Escrow Agreement . The Post-Closing Escrow Agreement, duly executed by Seller.

 

(r)           Ground Lease Estoppel . The Ground Lease Estoppel, duly executed by the tenant under the Pennsylvania Facility Ground Lease.

 

(s)          Transition Period Management Agreement. The Transition Period Management Agreement, executed by the Transition Period Manger, for all Facilities for which Purchaser determines such Transition Period Management Agreement is necessary.

 

Section 5.5            Deliveries by Purchaser.

 

Purchaser shall deliver to Seller on or before the Closing the following:

 

(a)           Payment Items. Payment of the Purchase Price.

 

(b)           Assumption Agreement. An instrument of assumption of the Assumed Liabilities, substantially the form attached as Exhibit F .

 

(c)           Post-Closing Escrow Agreement . The Post-Closing Escrow Agreement, duly executed by Purchaser.

 

(d)           Assignment and Assumption . The Assignment and Assumption, if applicable, executed by Purchaser.

 

(e)           Transition Period Sublease . The Transition Period Sublease, if applicable.

 

Section 5.6            Non-Fulfillment of Closing Conditions.

 

Notwithstanding anything in this Agreement to the contrary, the following shall apply exclusively if any of the conditions in Section 5.2 and Section 5.3 are not fulfilled as of the Scheduled Closing Date:

 

(a)          If any of the conditions set forth in Section 5.2 have not been satisfied as of the Scheduled Closing Date (and not waived in writing by Seller), but all of the conditions set forth in Section 5.3 have been fulfilled or expressly waived by Purchaser, Seller may elect to either (i) proceed to Closing and waive such failure to fulfill one or more of the requirements of Section 5.2 for all purposes hereunder; or (ii) terminate this Agreement in

 

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its entirety, in which case the Deposit shall be delivered to Seller as liquidated damages, and Purchaser and Seller shall have no further liability hereunder except with respect to the surviving provisions described in ARTICLE 9 . Waiver or termination of this Agreement in accordance with this Section 5.6(a) shall be Seller’s sole and exclusive remedy in the event there is a failure of conditions as provided above.

 

(b)          If the conditions set forth in Section 5.3 have not been satisfied as of the Scheduled Closing Date (and not waived in writing by Purchaser), but all of the conditions set forth in Section 5.2 have been fulfilled or expressly waived by Seller, then Purchaser shall give Seller written notice of such failure, which notice shall state Purchaser’s election: (i) to proceed with the Closing and waive any such failure to fulfill one or more of the requirements of Section 5.3 for all purposes hereunder; (ii) to terminate this Agreement in its entirety, in which case (A) the Deposit shall be returned to Purchaser; (B) to the extent such failure relates to or arises out of a default by any ECI Seller under the ECI Purchase Agreement (and Seller is provided a reasonable opportunity to effect cure of such default by enforcing its rights under the ECI Purchase Agreement or otherwise), Seller shall reimburse Purchaser for Purchaser’s actual third party expenses incurred by Purchaser in performing diligence on and pursuing the transactions contemplated by this Agreement, however, such reimbursements shall not exceed Three Hundred Thousand and No/100 U.S. Dollars ($300,000) in the aggregate (without duplication under Article 9 so that in no event under this Article 5 and Article 9 shall the amount of reimbursement by Seller exceed $300,000 in the aggregate); and (C) Purchaser and Seller shall have no further liability hereunder except with respect to the surviving provisions described in ARTICLE 9 . Waiver or termination of this Agreement in accordance with this Section 5.6(b) shall be Purchaser’s sole and exclusive remedy in the event there is a failure of conditions as provided above.

 

(c)          If the Closing Conditions as set forth in Section 5.3 have not been satisfied on or before September 30, 2014 (the “ Outside Date ”), either Purchaser or Seller shall have the absolute right to terminate this Agreement in its entirety, in which case the Deposit shall be returned to Purchaser.

 

Section 5.7            Post-Closing Actions.

 

Seller shall promptly deliver to Purchaser the original of any mail or other communication received by it after the Closing Date pertaining to the Purchased Property or the Business, and any payments to which Purchaser is entitled. Purchaser shall promptly deliver to Seller the original of any mail or other communication received by Purchaser after the Closing Date and addressed to Seller which does not pertain to the Purchased Property or the Business, or to any payments to which Seller is entitled.

 

Section 5.8            Termination During Due Diligence.

 

Notwithstanding anything herein to the contrary, Purchaser shall have the right to terminate this Agreement at any time during the Due Diligence Period for any reason or for no reason whatsoever with respect to all (but not less than all) of the Facilities. Upon any such termination, the Deposit shall be returned to Purchaser, and the parties shall have no further liability or obligation to one

 

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another arising from such termination except for the surviving provisions described in ARTICLE 9 .

 

ARTICLE 6
Representations and Warranties of Seller

 

The following representations and warranties are given by the Seller and, as applicable, each representation and warranty related to Seller below shall be deemed to have been given individually on behalf of each entity comprising the Seller. Each entity comprising the Seller hereby represents and warrants, jointly and severally, to Purchaser that as of the Effective Date:

 

Section 6.1            Organization; Good Standing.

 

ECI Acquisition I, LLC is a limited liability company, validly existing and in good standing under the laws of the State of Delaware. Each other entity comprising the Seller is a limited liability company, validly existing and in good standing under the laws of the State of Iowa. Each entity comprising the Seller has all requisite company power and authority to carry on its business in the manner and in the location in which such business has been and is now being conducted, to execute and deliver this Agreement and the other Documents, and to perform its obligations hereunder and thereunder. Each entity comprising Seller has the full right, power and authority and, subject to Schedule 6.2 , has obtained any and all consents required to enter into this Agreement, the other Documents and to consummate or cause to be consummated the transactions contemplated hereby and thereby.

 

Section 6.2            Consent of Third Parties.

 

Except for (a) the CHOW Approvals and (b) as otherwise set forth on Schedule 6.2 , no consent or approval of any third party is required as a condition to the entering into, performance or delivery of this Agreement and the other Documents by each Seller, other than such consent or approval as has been previously obtained.

 

Section 6.3            Authority; Enforceability.

 

Subject to Section 6.2 , the execution and delivery of this Agreement and the other Documents have been duly authorized by Seller, and this Agreement and each other Document each constitute the legal, valid and binding obligation and agreement of Seller enforceable against Seller in accordance with its and their terms, subject to the effect, if any, of (a) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar Laws affecting or relating to the rights of creditors generally and (b) rules of applicable law and equity governing specific performance, injunctive relief and other equitable remedies.

 

Section 6.4            Absence of Conflicts.

 

Except for (a) the CHOW Approvals and (b) as otherwise set forth on Schedule 6.4 , neither the execution, delivery or performance of this Agreement and the other Documents will (i) conflict with or result in any breach of any of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, (iv) give any third party the right to modify, terminate, or

 

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accelerate any obligation under, (A) the provisions of the Certificates of Organization or Operating Agreement of Seller, (B) any indenture, mortgage, lease, loan agreement or other agreement or instrument to which any Seller Party is bound or affected, (C) the Assumed Contracts and Leases, or (D) any applicable laws or any judgment, order, injunction, decree or award against, or binding upon, any Seller Party or upon the Purchased Property or Business of Seller, or (v) result in the creation of any material lien, charge or encumbrance upon any of the Purchased Property pursuant to the terms of any agreement or instrument to which any Seller Party is a party or by or to which Seller or any of the Purchased Property may be bound, subject or affected.

 

Section 6.5            No Judgments.

 

Except as set forth on Schedule 6.5 , there are no judgments presently outstanding and unsatisfied against the Purchased Property, Seller or any of Seller’s assets. Seller is not subject to any judgment, injunction, order, writ or decree of any court or other governmental authority or agency relating specifically to Seller or to the ownership, operation or management of the Purchased Property, and Facility and/or the operations of the Business.

 

Section 6.6            No Governmental Approvals.

 

Except (a) for the CHOW Approvals and (b) as described on Schedule 6.6 , no order, permission, consent, approval, license, authorization, registration or validation of, or filing with, or exemption by, any governmental agency, commission, board or public authority is required to authorize, or is required in connection with the execution, delivery and performance by Seller of this Agreement and the other Documents or the taking of any action contemplated by this Agreement or the other Documents, which has not been obtained.

 

Section 6.7            Insurance.

 

Schedule 6.7 sets forth an accurate summary of all general liability, fire, theft, professional liability and other insurance currently maintained with respect to the Purchased Property. None of Seller, nor to Seller’s Knowledge, any Seller Party, Current Operating Tenant or Current Manager, has taken any action or failed to act in a manner, including, without limitation, the failure of Seller, or any applicable Seller Party, Current Operating Tenant or Current Manager to give any notice or information, which would limit or impair the rights of Seller, any Seller Party, Current Operating Tenant or Current Manager under such insurance policies. Schedule 6.7 lists any pending, unresolved claims under each Seller Party’s and Current Operating Tenant’s policies of property and casualty or liability insurance related to the Purchased Property or the Business, as well as claims made and resolved within the past three (3) years with respect to the Facilities owned by Seller during such three-year period. Seller shall provide Purchaser with current loss runs for all such policies within fifteen (15) days after the end of each calendar month from the Effective Date until the Closing. Prior to the Closing, Seller will promptly notify Purchaser of any potential losses or claims that may be covered by such insurance policies.

   

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Section 6.8            Litigation.

 

(a)          Except as set forth on Schedule 6.8 , there is no pending or, to Seller’s Knowledge, threatened in writing, litigation, proceeding, investigation or inquiry (by any person, governmental or quasi-governmental agency or authority or otherwise) to which any Seller Party, Current Operating Tenant, Current Manager or the Purchased Property is a party, including, without limitation, litigation brought by any Seller Party, Current Operating Tenant or Current Manager against any third party.

 

(b)          Without limiting the foregoing, there is no pending proceeding that has been commenced against Seller, or to Seller’s Knowledge, against any other Seller Party, Current Operating Tenant or Current Manager that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with, the transaction contemplated by this Agreement. To Seller’s Knowledge, no such proceeding has been threatened.

 

Section 6.9            Compliance with Laws.

 

Except as provided on Schedule 6.9 , no Seller, or to Seller’s Knowledge, no other Seller Party, Current Operating Tenant or Current Manager has received any written notice of any violation of any applicable laws affecting the Purchased Property or any part thereof.

 

Section 6.10          Environmental Matters.

 

No Seller Party, or to Seller’s Knowledge, Current Operating Tenant or Current Manager has generated, stored or disposed of any hazardous substance at or on the Purchased Property and, to Seller’s Knowledge, there is no previous or present generation, storage, disposal or existence of any hazardous substance at or on the Purchased Property other than in accordance with all applicable laws. The term “hazardous substance” shall mean “hazardous waste,” “toxic substances,” “petroleum products,” “pollutants,” or other similar or related terms as defined or used from time to time in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“ CERCLA ”) (42 U.S.C. §§ 1801, et seq .), the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6921, et seq .) and similar state laws and regulations (collectively, the “ Environmental Laws ”) adopted thereunder . No Seller Party and, to Seller’s Knowledge, no Current Operating Tenant or Current Manager has filed or been required to file any notice reporting a release of any hazardous substance into the environment, and no notice pursuant to Section 103(a) or (c) of the CERCLA, 42 U.S.C. § 9601, et seq. or any other Environmental Law has been or was required to be filed. No Seller Party, Current Operating Tenant or Current Manager has received any notice letter under any Environmental Law or any written notice or claim, and there is no investigation pending, contemplated, or to Seller’s Knowledge threatened, to the effect that a Seller Party, Current Operating Tenant or Current Manager is or may be liable for or as a result of the release or threatened release of hazardous substance into the environment or for the suspected unlawful presence of any hazardous waste on the Purchased Property.

 

Section 6.11          Assessments.

 

Except as described in the Initial Commitment, there are no (i) special or other assessments for public improvements or otherwise now affecting the Purchased Property, (ii) any now pending or, to Seller’s Knowledge, threatened special assessments affecting the Purchased Property, or (iii)

 

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any contemplated improvements affecting the Purchased Property that may result in special assessments affecting the Purchased Property.

 

Section 6.12          Contracts and Leases.

 

Schedule 6.12 hereto sets forth all written contracts, leases or agreements, including the Assumed Contracts and Leases, to which any Seller Party, Current Operating Tenant or Current Manager is a party currently in effect that are material to the operation or management of the Business or the ownership and use of the Purchased Property, other than the Residency Agreements described Section 6.14 , in each case identifying the applicable Facility to which such agreements relate. Seller has made available to Purchaser true and correct copies of all Assumed Contracts and Leases, including all material amendments or modifications to same. No Seller Party and, to Seller’s Knowledge, no other party thereto is in default of any of its obligations under any of the Assumed Contracts and Leases.

 

Section 6.13          Licenses.

 

Schedule 6.13 attached hereto is a true and complete list of all Licenses and Healthcare Licenses held by each applicable Seller Party, Current Operating Tenant and/or Current Manager. The Licenses and Healthcare Licenses listed on Schedule 6.13 are valid and no material violations exist with respect to such Licenses and Healthcare Licenses. Each of the Facilities holds all necessary licenses to operate the Business at such Facility. No applications, complaints or proceedings are pending or, to Seller’s Knowledge, contemplated or threatened which may (i) result in the revocation, modification, non-renewal or suspension of any Healthcare License, (ii) the issuance of any cease and desist order with respect to the Healthcare Licenses, or (iii) the imposition of any fines, forfeitures, or other administrative actions with respect to the Purchased Property or its operation. A list of all unsatisfied or otherwise outstanding citations with respect to the Purchased Property or its operation is shown on Schedule 6.13 . To Seller’s Knowledge, no Seller Party, Current Operating Tenant or Current Manager has applied to reduce the number of licensed or certified beds of any of the Facilities or to move or transfer the right to any or all of the licensed or certified beds of the Facilities to any other location or to amend or otherwise change the Facilities and/or the number of beds approved by the applicable regulatory authorities, and, to Seller’s Knowledge, there are no proceedings or actions pending or contemplated to reduce the number of licensed or certified beds of any of the Facilities.

 

Section 6.14          Residency Agreements.

 

Except as otherwise noted on Schedule 6.14 , the rent rolls provided to Purchaser as part of the Requested Diligence Materials (collectively, the “ Rent Roll ”) is true and complete, and no Residency Agreement currently in effect with respect to the Purchased Property contains any material financial concession from the standard form of Residency Agreement for the Purchased Property provided to Purchaser as part of the Requested Diligence Materials. No Seller, Current Operating Tenant or Current Manager is in default under any of its material obligations under any Resident Agreement or any lease, and, except as set forth on the Rent Roll, to Seller’s Knowledge, there is no material default on the part of any other party thereto. All of the Resident Agreements identified on the Rent Roll are currently in full force and effect as of the date of the Rent Roll.

 

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Except for resident damage deposits for all of the Purchased Property detailed in Schedule 6.14 and the entrance fee refund liability under the Residency Agreements for the Pennsylvania Facility or as otherwise noted on Schedule 6.14, Seller has no obligation with respect to refund of any deposits, interest on deposits or similar obligations with respect to any Residency Agreement. All Residency Agreements are terminable by the respective residents thereunder on thirty (30) days’ notice or less.

 

Section 6.15          Medicare; Medicaid and Compliance with Healthcare Laws.

 

(a)          To Seller’s Knowledge, each Current Operating Tenant or Current Manager is receiving payment under Titles XIX of the Social Security Act and is certified for participation in those governmental payor programs identified on Schedule 6.15 (“ Governmental Payor Programs ”) for the Facilities identified on Schedule 6.15 only, and is a party to participation agreements for payment by the Governmental Payor Programs, which agreements are in full force and effect. No payments under any Governmental Payor Programs have been received by any Seller Party or to Seller’s Knowledge, any Current Manager or Current Operating Tenant with respect to the PH Portfolio. True and correct copies of such agreements have been delivered to Purchaser to the extent not prohibited by applicable laws. Without limiting the generality of the foregoing, the facilities, equipment, staffing and operations of each Seller Party, Current Operating Tenant and Current Manager satisfy all material conditions of participation in the Governmental Payor Programs. No Seller Party, or to Seller’s Knowledge, no Current Operating Tenant or Current Manager has received notice of pending, threatened or possible investigation by, or loss of participation in, any Governmental Payor Programs, and there is no basis for any such notice.

 

(b)          There are no pending or, to Seller’s Knowledge, threatened material claims (including potential penalties) by any of such Governmental Payor Programs against any Seller Party, Current Operating Tenant or Current Manager, and none of Seller, and to Seller’s Knowledge, any other Seller Party, Current Operating Tenant or Current Manager has been subject to loss of waiver of liability for utilization review denials with respect to any such Governmental Payor Programs during the past two (2) years. No Seller Party or to Seller’s Knowledge, any Current Manager or Current Operating Tenant has knowingly engaged in any activities which are in material violation of law, or, if proven, are cause for civil penalties or mandatory exclusion from Medicare, Medicaid, or any other State Health Care Program or Federal Health Care Program (as those terms are defined in 42 C.F.R. Section 1001.2) under 42 U.S.C. Sections 1320a-7, 1320-7a, 1320a-7b, or 1395nn, or the Federal False Claims Act, 31 U.S.C. Section 3729, or the regulations promulgated pursuant to such statutes, nor has any Seller Party, any Facility, or any employees or contractors of Seller or any Facility been excluded from participation in any such program.

 

(c)          To Seller’s Knowledge, (i) all billing practices of each Seller Party, Current Operating Tenant and/or Current Manager (as applicable) with respect to Governmental Payor Programs and private insurance companies have been in compliance with applicable laws, and (ii) no Seller Party, Current Operating Tenant or Current Manager has billed or received any payment or reimbursement in excess of amounts allowed by applicable laws. Neither Seller nor to Seller’s Knowledge any other Seller Party, Current Operating Tenant or Current Manager has

 

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conducted any such billing practices or billed or received any such payment. No Seller Party or to Seller’s Knowledge, any Current Manager or Current Operating Tenant has knowingly submitted any claim to any Government Program in connection with any referrals that violated the Federal Ethics in Patient Referrals Act, 42 U.S.C. Section 1395nn or any applicable state self-referral Law.

 

(d)          No Seller and, to Seller’s Knowledge, no other Seller Party, Current Operating Tenant or Current Manager has (i) offered or paid any remuneration, in cash or in kind, to, or made any financial arrangements with, any past, present or potential customers, past or present suppliers, patients, medical staff members, contractors or third-party payors of any Seller Party, Current Operating Tenant or Current Manager in order to obtain business or payments from such persons other than in the ordinary course of business; (ii) given or agreed to give, or is aware that there has been made or that there is any agreement to make, any gift or gratuitous payment of any kind, nature or description (whether in money, property or services) to any customer or potential customer, supplier or potential supplier, contractor, third-party payor or any other person other than in connection with promotional or entertainment activities in the ordinary course of business; (iii) made or agreed to make, or is aware that there has been made or that there is any agreement to make, any contribution, payment or gift of funds or property to, or for the private use of, any government official, employee or agent where either the contribution, payment or gift or the purpose of such contribution, payment or gift is or was illegal under applicable laws; (iv) established or maintained any unrecorded fund or asset for any purpose or made any misleading, false or artificial entries on any of its books or records for any reason; (v) made, or agreed to make, or is aware that there has been made or that there is any agreement to make, any payment to any person with the intention or understanding that any part of such payment would be used for any purpose other than that described in the documents supporting such payment; or (vi) otherwise knowingly violated the federal Anti-Kickback Statute, 42 U.S.C. Section 1320-7b(b).

 

(e)          None of the Seller, and to Seller’s Knowledge, any other Seller Party, Current Operating Tenant or Current Manager or any partner, member, director, officer or employee thereof, is a party to any contract, lease agreement or other arrangement (including any joint venture or consulting agreement) with any physician, health care facility, hospital, nursing facility, home health agency or other person who is in a position to make or influence referral to or otherwise generate business for any Seller Party, Current Operating Tenant or Current Manager, or otherwise influence the affairs of Seller, Current Operating Tenant or Current Manager, to provide services, lease space, lease equipment or engage in any other venture or activity that is prohibited by applicable laws or that did not provide commercially reasonable terms with fair market value consideration for the goods, property, services or use of money provided, exchanged or acquired thereunder at the time entered into.

 

(f)          Each Seller Party has complied in all material respects with all applicable security and privacy standards regarding protected health information under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act provisions of the American Recovery and Reinvestment Act of 2009, all applicable state privacy laws, and with all applicable regulations promulgated under any such legislation.

 

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Section 6.16          Real Property.

 

No Seller Party, Current Operating Tenant or Current Manager has received written notice of any zoning, land use or building code violation relative to the Real Property which has not been cured prior to the date hereof. To Seller’s Knowledge (unless Seller is a party thereto), there is no pending litigation or dispute concerning the location of the boundary lines of the Real Property. No Seller Party has received any written notice of any pending or contemplated condemnation, eminent domain or similar proceeding, with respect to all or any portion of the Purchased Property.

 

Section 6.17          Condition of Purchased Property.

 

(a)          Except for the Excluded Property: (i) the Purchased Personal Property comprises all material assets, rights or property used in the operation of the independent living, assisted living and memory care facilities located on the Real Property and constitutes all of the personal property used or reasonably required for the operation of the Purchased Property as an independent living, assisted living and/or memory care facility, and (ii) to Seller’s Knowledge, all of the Purchased Personal Property is in good condition, working order and repair (ordinary wear and tear excepted).

 

(b)          Seller has or prior to Closing will acquire good title to all of the Purchased Personal Property, and at the Closing, Seller shall transfer the Purchased Personal Property to Purchaser, free and clear of all liabilities, liens and, encumbrances except for the Assumed Liabilities and the Permitted Encumbrances. Subject to the rights of the lenders under the loan documents securing the loans described on Schedule 6.24 (which will not prevent Seller from conveying the Purchased Personal Property at Closing), Seller has the unrestricted right to convey and assign the Purchased Personal Property.

 

(c)          Except as described on Schedule 6.17 , to Seller’s Knowledge, the Intellectual Property comprises all material assets, rights or property used in operation of the Facilities located on the Real Property and constitutes all of the Intellectual Property used or required for the operation of the Facilities as assisted living facilities and/or memory care facilities.

 

Section 6.18          Full Disclosure.

 

None of the representations or warranties in this Agreement by Seller, as qualified by any Schedule or Exhibit attached hereto, contains any untrue statement of a fact or omits to state a fact necessary to make the statements of fact contained therein not misleading.

 

Section 6.19          Access.

 

To Seller’s Knowledge, there is no fact or condition existing that would result or could result in the termination or reduction of the current access from the Purchased Property to the existing roads and highways or to sewer or other utility services presently serving the Purchased Property.

   

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Section 6.20          FIRPTA.

 

No Seller Party, Current Operating Tenant or Current Manager is a “foreign person” within the meaning of Section 1445 of the Code and the Regulations issued thereunder, and Purchaser has no obligation under Internal Revenue Code Section 1445 to withhold and pay over to the Internal Revenue Service any part of the amount realized by Seller in the transaction contemplated hereby (as such term is defined in the regulations issued under IRC Section 1445).

 

Section 6.21          Interests; Title.

 

There are no outstanding options or other rights to purchase or otherwise acquire any ownership interest in the Purchased Property other than under the ECI Purchase Agreement.

 

Section 6.22          Title Encumbrances.

 

Except as described on Schedule 6.22 , no Seller Party is in default under any of its material obligations under any recorded agreement, easement or instrument encumbering title to the Real Property, and to Seller’s Knowledge, there is no material default on the part of any other party thereto.

 

Section 6.23          Affordable Housing Units.

 

No bedroom or unit at any Facility is leased or reserved for lease as an affordable housing unit or for low- or moderate-income residents. No Facility is required to lease or reserve any unit or bedroom as an affordable housing unit or bedroom or for low-income or moderate-income residents pursuant to a presently existing agreement or requirement of applicable laws.

 

Section 6.24          Loans.

 

Except for the loans described on Schedule 6.24 , there are no loans or other financing secured by the Purchased Property.

 

Section 6.25          Intellectual Property.

 

Schedule 6.25 is a true and complete list of all Intellectual Property held or owned by any Seller Party, Current Operating Tenant or Current Manager or in which it has any interest and is all the Intellectual Property necessary for use in the operation of the Purchased Property. The applicable Seller Party owns or has the perpetual right to use, without payment to or interference from any third party, all Intellectual Property listed (or required to be listed) in Schedule 6.25 . To Seller’s Knowledge, there is no conflict with the rights of others with respect to any Intellectual Property. The Seller has the full right without payment or interference from any third party to use the name “Prairie Hills Assisted Living” and all variations and derivations thereof to the full extent necessary for the operation of the Purchased Property and no Seller Party, Current Operating Tenant, Current Manager or affiliate of the foregoing has authorized any person in any jurisdiction, either within or outside the State of Iowa to use such Intellectual Property.

   

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Section 6.26          Patriot Act Compliance.

 

To the extent applicable to each Seller Party, Current Operating Tenant and Current Manager, to Seller’s Knowledge, each Seller Party, Current Operating Tenant and Current Manager have complied in all material respects with the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, which comprises Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “ Patriot Act ”) and the regulations promulgated thereunder, and the rules and regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“ OFAC ”), to the extent such laws are applicable to such Seller Party, Current Operating Tenant or Current Manager. No Seller Party, Current Operating Tenant or Current Manager is included on the List of Specially Designated Nationals and Blocked Persons maintained by the OFAC, nor is it a resident in, or organized or chartered under the laws of, (A) a jurisdiction that has been designated by the U.S. Secretary of the Treasury under Section 311 or 312 of the Patriot Act as warranting special measures due to money laundering concerns or (B) any foreign country that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur.

 

Section 6.27          Broker’s or Finder’s Fees.

 

Except as provided on Schedule 6.27 , no agent, broker, investment banker or other person or firm acting on behalf of or under the authority of any Seller Party or any affiliate of any Seller Party is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, in connection with the transactions contemplated by this Agreement. This Section 6.27 shall survive the Closing or the expiration or any termination of this Agreement.

 

Section 6.28          Insolvency.

 

No Seller Party, Current Operating Tenant or Current Manager has (i) commenced a voluntary case or had entered against it a petition for relief under any applicable laws relative to bankruptcy, insolvency, or other relief for debtors, (ii) caused, suffered or consented to the appointment of a receiver, trustee, administrator, conservator, liquidator, or similar official in any federal, state or foreign judicial or non-judicial proceeding to hold, administer, and/or liquidate all or substantially all of its respective assets, (iii) had filed against it any involuntary petition seeking relief under any applicable laws relative to bankruptcy, insolvency, or other relief to debtors which involuntary petition is not dismissed within sixty (60) days, or (iv) made a general assignment for the benefit of creditors.

 

Section 6.29          Employees.

 

Schedule 6.29 contains a complete and correct list of employees of Seller who perform services for the Business or at any Facility as of July 1, 2014 (collectively, the “ Employees ”), including their respective positions, the Facility where they are employed, pay rates, bonus arrangements (if any), and dates of hire (including any Administrator, Executive Director and any Assistant Director of each Facility, as applicable). Except as described on Schedule 6.29 , neither any Seller Party nor to Seller’s Knowledge, any Current Operating Tenant or Current Manager is a party to

 

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any employment contract or other written agreement with any Employee. Neither any Seller Party nor to Seller’s Knowledge, the Current Manager has made any binding promise or commitment to increase the compensation of any Employee after the Effective Date. Seller Parties, and to Seller’s Knowledge, each Current Operating Tenant and Current Manager has complied in all material respects with all laws and regulations dealing with employment of Employees. Schedule 6.29 provides a list and brief description of all pending litigation or administrative claims filed by Employees or former employees who performed services for the Business against any Seller Party or any Current Operating Tenant or Current Manager, if any, and all claims filed by Employees or former employees who performed services for the Business against any Seller or Current Manager within the past three (3) years with respect to the Facilities owned by Seller during such three-year period, if any. No Seller Party is a party to any collective bargaining agreement with respect to any employees, and to Seller’s Knowledge, there are no efforts to organize a collective bargaining agreement or any other type of union activity with respect to the employees of the Business or within the past three (3) years with respect to the Facilities owned by Seller during such three-year period.

 

Section 6.30          Seller Benefit Plans.

 

With respect to all Plans maintained or contributed to by any Seller Party, any Current Operating Tenant or Current Manager for the benefit of Employees or pursuant to which any Seller Party or the Current Manager has any liability with respect to Employees (“ Seller Plans ”):

 

(a)          Each Seller Plan has been administered and operated in material compliance with its terms and the applicable requirements of ERISA and the IRC, including the requirement to file an annual report. No Seller Plan is intended to be qualified under Section 401 of the IRC as a “multiemployer plan” (within the meaning of Section 3(37) of ERISA) or as a “multiple employer” plan (within the meaning of Section 4063 or 4064 of ERISA).

 

(b)          There are no pending or, to Seller’s Knowledge, threatened claims of any Employees (or former employees who provided services to the Business) against or otherwise involving any of the Seller Plans (other than routine claims for benefits).

 

(c)          Intentionally Deleted.

 

(d)          Neither any Seller Party, nor, to Seller’s Knowledge, any other person, including any fiduciary, has engaged in any “prohibited transaction” as defined in Section 4975 of the IRC or Section 406 of ERISA that could subject any Seller Party, or any person whom a Seller Party has an obligation to indemnify to any tax or penalty imposed under Section 4975 of the IRC or Section 502 of ERISA.

 

(e)          Neither any Seller Party nor any Current Operating Tenant nor any Current Manager has at any time (x) maintained, contributed to, or been required to contribute or had any liability (that has not been satisfied in full) to any Seller Plan subject to Title IV of ERISA, (y) incurred or expected to incur any liability to the Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA, or (z) incurred or expected to incur liability in connection

 

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with an “accumulated funding deficiency” within the meaning of Section 412 of the IRC, whether or not waived.

 

Section 6.31          Financial Statements.    Financial statements for the Facilities (other than the Pennsylvania Facility) pertaining to the operations of the Business at such Facilities for the period ended December 31, 2013 and for the five (5) months ended May 31, 2014 are attached hereto as Schedule 6.31 (the “Financial Statements”) . Except as otherwise set forth on Schedule 6.31, such Financial Statements have been prepared consistently applied throughout the periods indicated and present fairly in all material respects the results of operations and financial condition of the Business at the Facilities to which such Financial Statements pertain for the respective periods indicated. The monthly financial reports to be provided by Seller pursuant to Section 4.2(k) will based upon the books and records of the Seller Parties consistent with past practice of SunnyBrook Senior Living LLC with respect to all Facilities other than the ECI Portfolio and consistent with past practice of the ECI Sellers with respect to the Facilities in the ECI Portfolio, and will present fairly in all material respects the information purported to be presented therein.

 

Section 6.32          Taxes and Tax Returns.    Seller has filed when due or will file when due in correct form all federal and state income tax returns for all periods ending on or prior to the Closing Date which are required to be filed by Seller on or prior to the Closing Date. Other than extensions to file Seller’s tax returns, there are no agreements by Seller for the extension of time for the assessment of any tax. All federal, state, county and local taxes due and payable by any Seller Party relating to the operation of the Business on or before the Effective Date have been paid and any such taxes due and payable at any time between the Effective Date through the Closing will be paid prior to Closing, and there are no federal, state or local tax liens pending or threatened against Seller Party or the Purchased Property. There is no open audit of any of Seller Party’s federal, state, local income, sales use or property tax returns pending, and no Seller Party has received notice of the pendency of any such audit or examination. No Seller Party holds a certificate or other authorization issued by any tax collection body for the purpose of avoiding the payment by such Seller Party of sales and use taxes upon such Seller Party’s purchases of goods and services, nor has any Seller Party applied for such a certificate or other authorization.

 

Section 6.33          No Other Representations or Warranties .

 

Purchaser agrees that, except for the representations and warranties made by any one or more of the Seller, and expressly set forth in this Agreement and the representations and warranties contained in the documents delivered by Seller at Closing (collectively, the “ Seller Representations ”) no Seller, Current Operating Tenant or Current Manager or any of their respective representatives have made (and shall not be construed as having made) to Purchaser or any representatives thereof any representation or warranty of any kind, including, without limitation, any representation or warranty as to the truth, accuracy or completeness of any of the materials delivered to or received by Purchaser or any of Purchaser’s affiliates in connection with the transactions contemplated hereby. PURCHASER ACKNOWLEDGES AND AGREES THAT PURCHASER IS ACQUIRING THE PURCHASED PROPERTY “AS-IS, WHERE IS AND WITH ALL FAULTS” IN THE PRESENT CONDITION OF EACH FACILITY, SUBJECT TO REASONABLE USE, WEAR AND TEAR, CASUALTY AND CONDEMNATION, AS PROVIDED HEREIN, BETWEEN THE EFFECTIVE DATE AND

 

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THE CLOSING DATE. IT IS UNDERSTOOD AND AGREED THAT, EXCEPT FOR THE SELLER REPRESENTATIONS, NONE OF SELLER, CURRENT OPERATING TENANT OR CURRENT MANAGER, OR ANY OF THEIR RESPECTIVE AFFILIATES IS MAKING NOR HAS AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE PURCHASED PROPERTY OR SELLER, CURRENT OPERATING TENANT OR CURRENT MANAGER, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, OR THE COMPLIANCE OF SELLER OR THE PURCHASED PROPERTIES WITH APPLICABLE LAWS. PURCHASER AND ITS AFFILIATES HAVE HAD THE OPPORTUNITY TO CONDUCT ALL INSPECTIONS AND INVESTIGATIONS OF THE PURCHASED PROPERTY AND TO REVIEW OTHER MATERIALS RELATING TO THE OPERATION OF THE PURCHASED PROPERTY AND THE BUSINESS. NONE OF PURCHASER NOR ANY OF PURCHASER’S AFFILIATES HAS RELIED AND WILL NOT RELY ON, AND NONE OF SELLER, OR CURRENT MANAGER, OR ANY OF THEIR RESPECTIVE AFFILIATES ARE LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO ANY PURCHASED PROPERTY, CURRENT OPERATING TENANT OR SELLER OR ANYTHING RELATING THERETO MADE OR FURNISHED BY ANY REAL ESTATE BROKER, INVESTMENT BANKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, CURRENT OPERATING TENANT OR CURRENT MANAGER, OR ANY OF THEIR RESPECTIVE AFFILIATES, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS INCLUDED IN THE SELLER REPRESENTATIONS. NOTWITHSTANDING THE FOREGOING, SELLER’S LIABILITY SHALL NOT BE LIMITED BY THIS SECTION 6.33 IN THE EVENT THAT SELLER KNOWINGLY WITHHOLDS FROM PURCHASER ANY INFORMATION THAT IS IN SELLER’S POSSESSION OR UNDER SELLER’S CONTROL, THE DISCLOSURE OF WHICH IS REQUIRED TO MAKE ANY OF THE REPORTS OR OTHER WRITTEN MATERIALS PREPARED BY ANY SELLER PARTY, CURRENT OPERATING TENANT OR CURRENT MANAGER (INCLUDING ANY OF THEIR RESPECTIVE AFFILIATES) TRUE AND CORRECT IN ALL MATERIAL RESPECTS. THE PROVISIONS OF THIS SECTION 6.33 SHALL SURVIVE THE CLOSING.

 

ARTICLE 7
Representations and warranties of Purchaser

 

Purchaser hereby represents and warrants to Seller as follows:

 

Section 7.1            Organization and Standing.

 

Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Purchaser has the partnership

 

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power and authority to execute and deliver this Agreement and to consummate the transactions and to perform its obligations contemplated by this Agreement. Purchaser is, or on or prior to the Closing will be, duly qualified to do business as a foreign limited partnership in the State of Iowa.

 

Section 7.2            Execution and Delivery.

 

The execution and delivery of this Agreement, and the consummation of the transactions contemplated by this Agreement, have been duly authorized by all necessary company action of Purchaser. This Agreement constitutes, and all instruments required to be executed and delivered by Purchaser before or at the Closing will constitute, the valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms. All persons who have executed this Agreement on behalf of Purchaser have been duly authorized to do so by all necessary company action of Purchaser and all persons who execute instruments required to be executed and delivered by Purchaser before or at the Closing shall have been duly authorized to do so by all necessary company action of Purchaser. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will:

 

(a)          violate any provisions of the articles of organization or operating agreement of Purchaser;

 

(b)          violate any contract or agreement relating to borrowed money, or any judgment, order, injunction, decree or award against, or binding upon Purchaser or upon the property or business of Purchaser, which violation would prevent, delay or materially hinder consummation of the transactions contemplated by this Agreement;

 

(c)          violate any judgment, order, injunction, decree or award against, or binding upon, Purchaser; or

 

(d)          result in any breach, violation, default or cancellation of any contract, agreement, mortgage, deed to secure debt, or lease to which Purchaser is a party or by which Seller is bound and that could have a material adverse effect upon Purchaser’s ability to consummate the transactions described herein.

 

Section 7.3            Solvency.

 

Purchaser is not now insolvent, and will not be rendered insolvent by completion of the transactions contemplated herein. For purposes of the preceding sentence, “insolvent” means, upon completion of the Closing, (i) that the fair market value of Purchaser’s assets is less than the sum of Purchaser’s debts and other liabilities or (ii) Purchaser has inadequate cash flow to service its debts as they come due. Upon the completion of the transactions contemplated herein, Purchaser will have adequate capital for the purposes of engaging in the Business and any business or transaction in which Purchaser is or will engage.

 

Section 7.4            Consent of Third Parties.

 

Except for the licenses and permits described in Section 5.3(d), no consent of any third party is required as a condition to the entering into, performance or delivery or this Agreement by

 

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Purchaser, other than such consents as would not, in any individual case or in the aggregate, have a material adverse effect upon Purchaser’s ability to consummate the transactions contemplated by this Agreement.

 

Section 7.5            No Governmental Approvals.

 

To Purchaser’s knowledge, for the requirement for Purchaser or its designee to obtain the Licenses and Healthcare Licenses described in Section 5.3(d) , no order, permission, consent, approval, license, authorization, registration or validation of, or filing with, or exemption by, any governmental agency, commission, board or public authority is required to authorize, or is required in connection with the execution, delivery and performance by Purchaser of this Agreement or the taking of any action contemplated by this Agreement, which has not been obtained. Notwithstanding the foregoing, Purchaser makes no representation or warranty regarding applicability of the HSR Act to the transactions contemplated herein.

 

Section 7.6            Available Funds.

 

Purchaser has sufficient funds to permit Purchaser to consummate all the transactions contemplated hereby, including, without limitation, acquiring all the Purchased Property. Purchaser acknowledges that its obligations under this Agreement and the agreements contemplated hereby, including its obligation to pay the Purchase Price, are not conditioned upon or subject to the availability of funds to Purchaser.

 

Section 7.7            Brokers, Finders.

 

Purchaser has not retained any broker or finder in connection with the transactions contemplated hereby so as to give rise to any valid claim against Seller for any brokerage or finder’s commission, fee, or similar compensation.

 

Section 7.8            Patriot Act Compliance.

 

To the extent applicable to the Purchaser, to Purchaser’s actual knowledge upon reasonable inquiry, Purchaser has complied in all material respects with the Patriot Act and the regulations promulgated thereunder, and the rules and regulations administered by OFAC, to the extent such laws are applicable to Purchaser. Purchaser is not included on the List of Specially Designated Nationals and Blocked Persons maintained by the OFAC, nor is it a resident in, or organized or chartered under the laws of, (a) a jurisdiction that has been designated by the U.S. Secretary of the Treasury under Section 311 or 312 of the Patriot Act as warranting special measures due to money laundering concerns or (b) any foreign country that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur.

 

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Section 7.9            Certain Proceedings.

 

There is no pending proceeding that has been commenced against any Purchaser that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with, the transaction contemplated by this Agreement. To Purchaser’s knowledge, no such proceeding has been threatened.

 

ARTICLE 8
Indemnification

 

Section 8.1            Indemnification by Seller.

 

Following the Closing, each entity comprising the Seller shall jointly and severally indemnify, hold harmless and defend Purchaser from and against any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (including, without limitation, reasonable attorneys’ fees and other legal costs and expenses) (collectively, “ Losses ”) which Purchaser may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

(a)          any breach or inaccuracy of any of the representations and warranties made by Seller in this Agreement;

 

(b)          any failure by Seller to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement;

 

(c)          the Excluded Liabilities;

 

(d)          the failure to comply with applicable bulk sales laws;

 

(e)          any federal, state, or local income, payroll, sales and use, ad valorem or other taxes payable by Seller or for which Seller is liable in connection with any period prior to the Closing Date, and any interest or penalties thereon;

 

(f)          any claims made by any third party pursuant to or related to the ECI Purchase Agreement or the Pennsylvania Place PSA (as defined in the ECI Purchase Agreement).

 

Section 8.2            Indemnification by Purchaser.

 

Following the Closing, Purchaser shall indemnify and hold harmless Seller from and against, and reimburse Seller for, any and all Losses which Seller may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

(a)          any breach or inaccuracy of any representations and warranties made by Purchaser in or pursuant to this Agreement;

 

(b)          any failure by Purchaser to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement; or

 

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(c)          the Assumed Liabilities.

 

Section 8.3            Indemnification Limits; Survival.

 

(a)           Purchaser Indemnification Limits; Survival . Purchaser shall not be entitled to any indemnification from Seller under Section 8.1(a) or Section 8.1(b) unless and until the aggregate amount of indemnifiable claims of Purchaser under this Agreement exceeds Seventy-Five Thousand and No/100 U.S. Dollars ($45,000) (the “ Seller Threshold ”), at which point Seller shall be liable for all indemnifiable claims of Purchaser under Section 8.1(a) and Section 8.1(b) . The parties agree that the Holdback Amount shall, subject to the terms and conditions of the Post-Closing Escrow Agreement, be the sole source of recovery for claims for indemnification pursuant to indemnification under Section 8.1(a) and Section 8.1(b) (the “ Indemnification Cap ”); provided, however , that neither the Seller Threshold nor the Indemnification Cap shall apply in the case of: (i) fraud on the part of Seller; (ii) any claims arising under Section 8.1(a) with respect to the representations and warranties contained in Section 6.1 , Section 6.3 , Section 6.20 or Section 6.27 (which shall be limited to the Purchase Price); or (iii) any claims arising under Section 8.1(c) , Section 8.1(d) or Section 8.1(e) (which shall be limited to the Purchase Price). All of Seller’s representations and warranties under this Agreement shall survive for a period of twelve (12) months following the Closing Date. Purchaser’s right to make any claim for indemnification against Seller under Section 8.1(a) , Section 8.1(b) and Section 8.1(d) shall expire at the end of the twelfth (12 th ) month following the Closing; provided, however , that any claim for which Purchaser has given written notice prior to expiration of such twelve (12) month anniversary shall survive until finally adjudicated; and further provided that Purchaser’s right to make any claim for indemnification pursuant to Section 8.1(c) or Section 8.1(f) shall survive only for the applicable statute of limitations for the making of such claim with respect to any such Excluded Liability or under the ECI Purchase Agreement or the Pennsylvania Place PSA, as applicable (or, if shorter, the period under which claims can be made by the party making such claim under the applicable contract to the extent such limitations are enforceable in accordance with their terms) and any claim for indemnification pursuant to Section 8.1(e) shall survive only for the applicable statute of limitations period for collection of the applicable tax.

 

(b)           Seller Indemnification Limits; Survival. Seller shall not be entitled to any indemnification from Purchaser under Section 8.2(a) or Section 8.2(b) unless and until the aggregate amount of indemnifiable claims of Seller under this Agreement, exceeds Seventy-Five Thousand and No/100 U.S. Dollars ($45,000) (the “ Purchaser Threshold ”), at which point Purchaser shall be liable for all indemnifiable claims of Seller under Section 8.2(a) and Section 8.2(b) . Purchaser’s liability for indemnification under Section 8.2(a) and Section 8.2(b) shall not in any case exceed two and one-half percent (2.5%) of the total Purchase Price (the “ Purchaser Indemnification Cap ”); provided, however , that neither the Purchaser Threshold nor the Purchaser Indemnification Cap shall apply in the case of: (i) fraud on the part of Purchaser; (ii) any claims arising under Section 8.2(a) with respect to the representations and warranties contained in Section 7.1 , Section 7.2 , Section 7.7 (which shall be limited to the Purchase Price); or (iii) any claims arising under Section 8.2(c) . All of Purchaser’s representations and warranties under this Agreement shall survive for a period of twelve (12) months following the Closing Date; provided, however , that any claim for which Seller has given written notice prior to expiration of such twelve (12) month anniversary shall survive until finally adjudicated; and

 

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further provided that Seller’s right to make any claim for indemnification pursuant to Section 8.2(c) shall not be limited by this provision.

 

(c)          For purposes of determining the amount of Losses that are subject to indemnification hereunder with respect to any events, facts or circumstances, after determining whether or not such facts, events or circumstances give rise to a breach of a representation or warranty (after giving full effect to any qualifications as to materiality or similar standards, or of lack of “material adverse effect,” contained in such representation and warranty), the determination of the amount of Losses for such breach of representation and warranty, as it relates to such facts, events or circumstances, shall be made without giving effect to any qualifications as to materiality or similar standards, or the lack of “material adverse effect” contained in such representation or warranty.

 

(d)          Any payments made pursuant to ARTICLE 8 of this Agreement shall be treated as a purchase price adjustment for income tax purposes.

 

(e)          For purposes of this Section 8.3 , the total Purchase Price shall be deemed to mean the Purchase Price, as adjusted in accordance with the terms of this Agreement, for each Facility for which a Closing has occurred hereunder.

 

Section 8.4            Procedures Regarding Third Party Claims.

 

The procedures to be followed by Purchaser and Seller with respect to indemnification hereunder regarding claims by third parties shall be as follows:

 

(a)          Promptly after receipt by Purchaser or Seller, as the case may be, of notice of the commencement of any action or proceeding or the assertion of any claim by a third person, which the party receiving such notice has reason to believe may result in a claim by it for indemnity pursuant to this Agreement, such person (the “ Indemnified Party ”) shall give notice of such action, proceeding or claim to the party against whom indemnification is sought (the “ Indemnifying Party ”), setting forth in reasonable detail the nature of such action or claim, including copies of any written correspondence from such third person to such Indemnified Party.

 

(b)          The Indemnifying Party shall be entitled, at its own expense, to assume and control such defense with counsel chosen by the Indemnifying Party and approved by the Indemnified Party, which approval shall not be unreasonably withheld or delayed. The Indemnified Party shall be entitled to participate in such defense after such assumption at the Indemnified Party’s own expense. Upon assuming such defense, the Indemnifying Party shall have full rights to enter into any monetary compromise or settlement which is dispositive of the matters involved; provided that such settlement is paid in full by the Indemnifying Party and will not have any continuing material adverse effect upon the Indemnified Party.

 

(c)          With respect to any action, proceeding or claim as to which the Indemnifying Party shall not have exercised its right to assume the defense, the Indemnified Party may assume and control the defense of and contest such action, proceeding or claim with counsel chosen by it.

 

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The Indemnifying Party shall be entitled to participate in the defense of such action, the cost of such participation to be at its own expense. The Indemnifying Party shall be obligated to pay the reasonable attorneys’ fees and expenses of the Indemnified Party to the extent that such fees and expenses relate to claims as to which indemnification is due under Section 8.1 or Section 8.2 hereof, as the case may be. The Indemnified Party shall have full rights to dispose of such action and enter into any monetary compromise or settlement; provided, however , in the event that the Indemnified Party shall settle or compromise any claims involved in the action insofar as they relate to, or arise out of, the same facts as gave rise to any claim for which indemnification is due under Section 8.1 or Section 8.2 hereof, as the case may be, it shall act reasonably and in good faith in doing so.

 

(d)          Both the Indemnifying Party and the Indemnified Party shall cooperate fully with one another in connection with the defense, compromise or settlement of any such claim, proceeding or action, including, without limitation, by making available to the other all pertinent information and witnesses within its control.

 

Section 8.5            General Qualifications on Indemnification.

 

Notwithstanding any provision to the contrary, the indemnification rights set forth in Section 8.1 and Section 8.2 shall be subject to the following:

 

(a)          The liability of an Indemnifying Party with respect to any indemnification claim shall be reduced by the amount of any tax benefit actually realized or any insurance proceeds received by Indemnified Party as a result of any damages, upon which such claim is based, and shall include any tax detriment actually suffered by the Indemnified Party as a result of such damages. The amount of such tax benefit or detriment shall be determined by taking into account the effect, if any, and to the extent determinable, of timing differences resulting from the acceleration or deferral of items of gain or loss resulting from such damages.

 

(b)          Losses for any Indemnified Party shall include actual damages and shall not include any special, punitive, multiplied or consequential damages, or lost profits, except to the extent the same are included in a third-party judgment against the Indemnified Party.

 

(c)          Upon payment in full of any indemnification claim, the Indemnifying Party shall be subrogated to the extent of such payment to the rights of the Indemnified Party against any person or entity with respect to the subject matter of such indemnification claim.

 

(d)          An Indemnified Party may not recover for any Losses otherwise indemnifiable under Section 8.1(a) , Section 8.1(b) , Section 8.2(a) or Section 8.2(b) if such Indemnified Party had actual (and not imputed) knowledge prior to Closing of the breach, inaccuracy or failure giving rise to such Losses.

 

(e)          An Indemnifying Party shall be relieved of its duty to indemnify an Indemnified Party hereunder if and to the extent the Indemnified Party fails to use commercially reasonable efforts in good faith to mitigate its damages, including, but not limited to, failure to give timely notice to its insurance carriers and to pursue recovery under applicable policies of insurance.

 

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Without limiting the foregoing, to the extent that insurance proceeds are collected after amounts have been paid by an Indemnifying Party with respect to any claim hereunder, the Indemnified Party shall promptly pay over to the Indemnifying Party the amount of insurance proceeds actually received by the Indemnified Party in respect of such claim (net of the out-of-pocket costs reasonably incurred of pursuing or obtaining such insurance proceeds and any increased premium amounts directly attributable to such claim), such amount not to exceed the amount paid by the Indemnifying Party to the Indemnified Party in respect of such claim.

 

(f)          Any amounts due to Purchaser from Seller pursuant to this ARTICLE 8 shall be paid first from the Holdback Amount in accordance with the Escrow Agreement, until the Holdback Amount has been exhausted or released.

 

Section 8.6            Exclusivity.

 

Following the Closing, in the absence of actual fraud (in which case a party may avail itself of statutory and common law remedies for fraud), this ARTICLE 8 shall be the sole and exclusive basis for the assertion of claims by or imposition of liability on the parties hereto with respect to this Agreement (including any certificate certifying compliance with, or the truth or accuracy of, any provision of this Agreement), including any liability from claims for breach of contract, warranty, tortious conduct (including negligence) or otherwise and whether predicated on common law, statute, strict liability, or otherwise, or conduct otherwise relating to the negotiation and consummation of the purchase and sale of the Purchased Property and Business hereunder; provided, however , that nothing in this Section 8.6 shall limit (i) the remedy of specific performance for any breach of the provisions of Section 10.7 or (ii) any remedies available at law or equity (including without limitation specific performance) for any breach of the provisions of Section 10.14.

 

Section 8.7            Effective Upon Closing.

 

The provisions of this ARTICLE 8 shall become effective upon completion of the Closing, and shall have no force and effect prior to the Closing or if this Agreement is terminated prior to Closing.

 

ARTICLE 9
Default and Termination

 

Section 9.1            Right of Termination.

 

This Agreement and the transactions contemplated hereby may be terminated in its entirety at any time prior to Closing as follows:

 

(a)          by mutual agreement of Seller and Purchaser;

 

(b)          by Purchaser, as and to the extent permitted pursuant to Section 2.4(d)(ii) , Section 5.6(b) , Section 5.8 , Section 10.11 and Section 10.12 ;

 

(c)          by Seller, as and to the extent permitted pursuant to Section 5.6(a) ;

 

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(d)          by Seller or Purchaser, if a court of competent jurisdiction or other governmental agency shall have issued an order, decree, or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, enjoining, or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling, or other action shall have become final and nonappealable; or

 

(e)          by the Purchaser, if the Seller shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement (other than the conditions contained in Section 5.2 hereof), which breach cannot be or has not been cured within ten (10) days after the giving of written notice by the Purchaser to the Seller specifying such breach.

 

Upon termination of this Agreement prior to Closing, except as otherwise expressly provided herein, the parties shall have no further liability hereunder except that the following provisions shall survive any such termination: Section 4.1(b) , Section 4.5 , Section 4.6(iv) and Section 4.7 . In the event of any termination of this Agreement pursuant to subsection Section 9.1(e) above, the portion of the Deposit attributable to the applicable Facility or the entire deposit, as applicable, shall be returned to Purchaser and Purchaser shall be entitled to reimbursement by Seller of all of its costs and expenses related to the potential acquisition of the applicable Facility or Facilities, including without limitation legal fees and fees paid to third parties related to Purchaser’s due diligence review of the applicable Facility or Facilities.

 

Section 9.2            Remedies upon Default.

 

(a)          If Seller defaults on any of its obligations hereunder, and such default continues for ten (10) days after written notice thereof specifying such default, Purchaser may serve notice in writing to Seller in the manner provided in this Agreement, and either:

 

(i)          Terminate this Agreement, receive a refund of the Deposit and receive from Seller reimbursement of actual third-party out-of-pocket expenses incurred by Purchaser in pursuing the transactions contemplated by this Agreement; provided, however , in no event, shall the amount recoverable by Purchaser under this Section 9.2(a)(i) exceed the sum of Three Hundred Thousand and No/100 U.S. Dollars ($300,000) in the aggregate; or

 

(ii)         Waive any such defaults and consummate the transaction contemplated by this Agreement in the same manner as if there had been no defaults without any reduction in the Purchase Price and without any further claim against Seller therefor; or

 

(iii)        Pursue an action for specific performance.

 

(b)          If Purchaser defaults on any of its obligations hereunder, and such default continues for ten (10) days after written notice thereof specifying such default, Seller may serve notice in writing to Purchaser in the manner provided in this Agreement, and either:

 

(i)          Terminate this Agreement and receive the Deposit (as liquidated damages).

 

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(ii)         Waive any such defaults and consummate the transaction contemplated by this Agreement in the same manner as if there had been no defaults without any increase in the Purchase Price and without any further claim against Purchaser therefor.

 

Section 9.3            Obligations Upon Termination.

 

If this Agreement is terminated, each of the parties shall bear its own costs incurred in connection with the transactions contemplated by this Agreement and Purchaser shall return to Sellers all Requested Diligence Materials provided to Purchaser.

 

Section 9.4            Termination Notice.

 

Each notice given by a party to terminate this Agreement shall specify the Subsection of this ARTICLE 9 pursuant to which such notice is given. If at the time a party gives a termination notice, such party is entitled to give such notice pursuant to more than one Subsection of ARTICLE 9 , the Subsection pursuant to which such notice is given and termination is effected shall be deemed to be the section specified in such notice provided that the party giving such notice is at such time entitled to terminate this Agreement pursuant to the specified section.

 

Section 9.5            Sole and Exclusive Remedy.

 

Sellers and Purchaser each acknowledge and agree that prior to the Closing, such party’s sole and exclusive remedy with respect to any and all claims made prior to the Closing for any breach or liability under this Agreement or otherwise relating to the subject matter of this Agreement and the transactions contemplated hereby shall be solely in accordance with, and limited to Section 9.1 and Section 9.2 . The foregoing shall in no manner limit the rights and obligations of the parties provided in ARTICLE 8 from and after the Closing. In addition, in no event shall the provisions of this ARTICLE 11 limit the non-prevailing party’s obligation to pay the prevailing party’s attorneys’ fees and costs pursuant to Section 10.13 hereof.

 

ARTICLE 10
Miscellaneous

 

Section 10.1          Access to Books and Records after Closing.

 

Following the Closing, Purchaser shall give Seller or its authorized representatives access, during normal business hours and upon prior notice, to such books and records constituting or relating to the Purchased Property as shall be reasonably requested by Seller in connection with the preparation and filing of the party’s tax returns, to comply with regulatory requirements, to defend or discharge the Excluded Liabilities, or for any other valid business purpose, and to make extracts and copies of such books and records. Purchaser agrees to retain all books and records included as part of the Purchased Property for at least six (6) years following the Closing Date.

 

Section 10.2          Notices.

 

All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the

 

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party to whom notice is to be given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, or if sent via electronic mail ( e.g . email), (iii) on the day after delivery to FedEx or similar overnight courier, or (iv) on the tenth (10 th ) day after mailing, if mailed to the party to whom notice is to be given, by first-class mail, registered or certified, return receipt requested, postage prepaid and properly addressed, to the party as follows:

 

If to Purchaser:   American Realty Capital Healthcare
    Trust II Operating Partnership, L.P.
    Attn: Edward M Weil., Jr.
    405 Park Avenue, 15 th Floor
    New York, New York 10022
     
With a copy (which will not constitute   Jesse Galloway:
notice) to   American Realty Capital Healthcare
    Trust II Operating Partnership, L.P.
    405 Park Avenue, 15 th Floor
    New York, New York 10022
     
With a copy (which will not constitute   Michael A. Okaty
notice) to:   Foley & Lardner LLP
    111 North Orange Avenue
    Suite 1800
    Orlando, Florida  32801
     
If to Seller:   c/o Sunnybrook
    Attn:  James T. Elliott
    601 S. 23 rd Street, Suite 15
    Fairfield, Iowa 52556
    Telephone: (641) 209-9396
    Facsimile: (641) 209-9413
     
With a copy (which will not constitute   Locke Lord LLP
notice) to:   Attn: Whit Roberts, Esq.
    2200 Ross Avenue, Suite 2200
    Dallas, Texas 75201-6776
    Telephone: (214) 740-8659
    Facsimile: (214) 756-8659

 

Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other parties in the manner herein provided for giving notice.

 

Section 10.3          Good Faith; Cooperation.

 

The parties shall in good faith undertake to perform their obligations in this Agreement, to satisfy all conditions and to cause the transactions contemplated by this Agreement to be carried out

 

58
 

 

promptly in accordance with its terms. The parties shall cooperate fully with each other and their respective representatives in connection with any actions required to be taken as part of their respective obligations under this Agreement.

 

Section 10.4          Assignment; Exchange Cooperation; Successors in Interest.

 

Neither Purchaser nor Seller may assign any of their respective rights hereunder, except with the prior written consent of the other.

 

(a)          Notwithstanding the foregoing, prior to the Closing Purchaser may assign its rights under this Agreement in whole or in part, to any affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended) of Purchaser, including without limitation the special purpose entities identified in Schedule 10.4 attached hereto (but with respect to any such assignment Purchaser and the affiliate assignee shall be jointly and severally liable to Seller hereunder). Any such assignee shall be deemed to have made the same representations to Seller.

 

(b)          Notwithstanding the foregoing, following the Closing any entity constituting Seller may assign its rights under this Agreement in whole or in part, to any affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended) of Seller so long as such assignee also assumes all obligations of assignor under this Agreement and both assignee and assignor remain bound by the provisions of this Agreement and jointly and severally liable for the obligations of Seller hereunder.

 

(c)          This Agreement is binding upon the parties and their respective successors or assigns and inures to the benefit of the parties and their permitted successors and assigns.

 

Section 10.5          No Third Party Beneficiaries.

 

The parties do not intend to confer any benefit under this Agreement on anyone other than the parties, and nothing contained in this Agreement shall be deemed to confer any such benefit on any other person, including any current or former employee or agent of Seller or any dependent or beneficiary of any of them.

 

Section 10.6          Severability.

 

Any determination by any court of competent jurisdiction of the invalidity of any provision of this Agreement that is not essential to accomplishing its purposes shall not affect the validity of any other provision of this Agreement, which shall remain in full force and effect and which shall be construed as to be valid under applicable law.

 

Section 10.7          Purchaser Records Rights.

 

Upon Purchaser’s request, for a period of one (1) year after Closing, Seller shall make the operating statements and any and all books, records, correspondence, financial data, leases, delinquency reports and all other documents and matters maintained by Seller or its agents and relating to receipts and expenditures reasonably necessary to complete an audit pertaining to the Purchased Property for the three (3) most recent full calendar years and the interim period of the

 

59
 

 

current calendar year (collectively, the “ Records ”) available to Purchaser for inspection, copying and audit by Purchaser’s designated accountants, and at Purchaser’s expense. Seller shall provide Purchaser, but without expense to Seller, with copies of, or access to, such factual and financial information as may be reasonably requested by Purchaser or its designated accountants, and in the possession or control of Seller, to enable Purchaser to file any filings required by the Securities and Exchange Commission (the “ SEC ”) in connection with the purchase of the Purchased Property. Seller understands and acknowledges that Purchaser is required to file audited financial statements related to the Purchased Property with the SEC within seventy-one (71) days of the Closing Date and agrees to provide any records on a timely basis to facilitate Purchaser’s timely submission of such audited financial statements.. The provisions of this Section 10.7 shall survive Closing .

 

Section 10.8          Controlling Law; Integration; Amendment; Waiver.

 

(a)          This Agreement shall be governed by and construed in accordance with the laws and case decisions of the State of Iowa applicable to contracts made and to be performed therein.

 

(b)          This Agreement and the other contracts, documents and instruments to be delivered pursuant to this Agreement supersede all prior negotiations, agreements, information memoranda, letters of intent and understandings between the parties with respect to their subject matter, whether written or oral, constitute the entire agreement of the parties with respect to their subject matter, and may not be altered or amended except in writing signed by Purchaser and Seller. Without limiting the foregoing, this Agreement replaces in its entirety the Access Agreement and neither party shall have further rights or obligations pursuant to such Access Agreement. Neither of the parties has made or relied upon any representation, warranty or assurances in connection with the transactions contemplated hereunder other than those expressly made herein.

 

(c)          The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect its right to enforce the same, and no waiver by any party of any provision (or of a breach of any provision) of this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision (or of a breach of any other provision) of this Agreement.

 

Section 10.9          Time.

 

Time is of the essence with respect to this Agreement.

 

Section 10.10          Survival.

 

For the avoidance of doubt and notwithstanding anything contrary in this Agreement, Section 4.5 , Section 4.6 , Section 4.7 , Section 4.9 , Section 4.11 , Section 4.12 , Section 5.7 , ARTICLE 8 and ARTICLE 10 of this Agreement shall survive the Closing of this Agreement.

   

60
 

 

Section 10.11          Eminent Domain - Condemnation.

 

The risk of any loss or damage to the Purchased Property by condemnation before the Closing shall continue to be borne by Seller. In the event any condemnation proceeding is commenced or threatened, Sellers shall promptly give Purchaser written notice thereof (in any event within five (5) days after any Seller first has knowledge of the occurrence of same), together with such reasonable details with respect thereto as to which any Seller may have knowledge. If, prior to the Closing, there is a material taking by eminent domain at the Real Property, this Agreement shall become null and void at Purchaser’s option, and upon receipt by Seller of the written notice of an election by Purchaser to treat this Agreement as null and void, this Agreement shall be deemed null and void. If Purchaser elects to proceed and to consummate the purchase despite said material taking, or if there is less than a material taking prior to the Closing, there shall be no reduction in or abatement of the Purchase Price and Purchaser shall be required to purchase the Purchased Property in accordance with the terms of this Agreement, and Seller shall assign to Purchaser, without representation of warranty by or recourse against Seller, all of Seller’s right, title and interest in and to any award made or to be made in the condemnation proceeding (in which event Purchaser shall have the right to participate in such proceeding). For the purpose of this Section 10.11 , the term “material” shall mean any taking of in excess of five percent (5%) of the square footage of the Improvements or ten percent (10%) of the Real Property associated with the Property. The parties’ obligations, if any, under this Section 10.11 shall survive the expiration or any termination of this Agreement.

 

Section 10.12          Risk Of Loss.

 

The risk of any loss or damage to the Property by fire or other casualty before the Closing shall continue to be borne by Seller. Seller shall promptly give Purchaser written notice of any fire or other casualty (in any event within five (5) days after Seller first has knowledge of the occurrence of same), which notice shall include a description thereof in reasonable detail and an estimate of the cost of time to repair. If (i) any portion of the Purchased Property is damaged by fire or casualty after the Effective Date and is not repaired and restored substantially to its original condition prior to the Closing, or (ii) at the time of the Closing the estimated cost of repairs as to the Purchased Property is ONE HUNDRED THOUSAND AND NO/100 U.S. DOLLARS ($100,000.00) or less, as determined by an independent adjuster selected by Seller, Purchaser shall be required to purchase the Property in accordance with this Agreement, and Purchaser shall, at Purchaser’s option, either: (x) receive a credit at the Closing of the estimated cost or repairs to the Purchased Property, as determined by the aforesaid independent adjuster, plus any reasonably estimated lost revenue following the Closing arising from such fire or casualty; or (y) receive from Seller at Closing (I) an assignment, without representation or warranty by or recourse against Seller, of all insurance claims and proceeds with respect thereto, plus (II) an amount equal to Seller’s insurance deductible, plus (III) a credit for the amount of any reasonably estimated lost revenue following the Closing arising from such fire or casualty. If the estimated cost of repairing such damage to the Property is more than ONE HUNDRED THOUSAND AND NO/100 U.S. DOLLARS ($100,000.00), as determined by such independent adjuster, Purchaser may, at its sole option: (x) terminate this Agreement by notice to Sellers on or before the earlier of the Closing or the tenth (10th) day after receipt of such notice described above, in which event no party shall have any further liability to the party under this Agreement; or (y) proceed to Closing as provided in this Section 10.12 . In no event shall the amount of insurance proceeds assigned to Purchaser under this subparagraph (plus the amount of the deductible) exceed the lesser of (i) the cost of repair or (ii)

 

61
 

 

the Purchase Price. The parties’ obligations, if any, under this Section 10.12 shall survive the expiration or any termination of this Agreement.

 

Section 10.13          Attorneys’ Fees.

 

In the event either party brings an action to enforce or interpret any of the provisions of this Agreement, the “prevailing party” in such action shall, in addition to any other recovery, be entitled to its reasonable attorneys’ fees and expenses arising from such action and any appeal or any bankruptcy action related thereto, whether or not such matter proceeds to court. For purposes of this Agreement, “ prevailing party ” shall mean, in the case of a person asserting a claim, such person is successful in obtaining substantially all of the relief sought, and in the case of a person defending against or responding to a claim, such person is successful in denying substantially all of the relief sought.

 

Section 10.14          Covenant Not to Compete.

 

(i)          For a period of three (3) years following the Closing, each party comprising the Seller agrees that neither it nor any its affiliates, or other entities which any party comprising the Seller controls, is controlled by or is under common control with, shall, directly or indirectly, develop, own, invest in, finance, manage or franchise any facility similar to the Business within a radius of twenty (20) miles from any portion of the Real Property. For the avoidance of doubt and without limitation, any facility operating as an assisted living facility and/or memory care facility, an independent living facility, and/or a skilled nursing facility shall be deemed to be similar to the Business for purposes of this Section 10.14 . The provisions of this Section 10.14 shall survive Closing.

 

(ii)         Seller agrees to use all reasonable efforts following the Closing to enforce (at Purchaser’s expense) the non-compete obligations of any ECI Seller to the extent requested by Purchaser.

 

(iii)        Seller and Purchaser agree that SunnyBrook Living Care Center, a skilled nursing facility located at 400 Highland Street, Fairfield, IA 52556, is excluded from the covenant not to compete contained in Section 10.14(i) above.

 

Section 10.15         Waiver of Jury Trial .

 

The parties agree that no party to this Agreement shall seek a jury trial in any lawsuit, proceeding, counterclaim or other litigation based upon, or arising out of, this Agreement or the dealings or the relationship between them.

 

Section 10.16         Construction .

 

This Agreement shall not be construed more strictly against one party than against the other merely by virtue of the fact that it may have been prepared by counsel for one of the parties, it being recognized that both Seller and Purchaser have contributed with the advice of counsel to the preparation of this Agreement.

 

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Section 10.17          Execution in Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement 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.

 

[ Signatures commence on the following page . ]

 

63
 

 

IN WITNESS WHEREOF , each of the parties hereto has signed and sealed this Asset Purchase Agreement as of the day and year first above written.

 

  SELLER :
     
  ECI ACQUISITION I, LLC , a Delaware limited liability company
     
  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

 

[Signatures Continue on the Following Page]

 

 
 

 

  MUSCATINE 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
     
  CARROLL ASSISTED LIVING LLC, an Iowa limited liability company
     
  By: /s/ James T. Elliott IV
  Name: James T. Elliott IV
  Title: President

 

[Signatures Continue on the Following Page]

 

 
 

 

  PURCHASER :
       
  AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P. a Delaware limited partnership
       
  By:  American Realty Capital Healthcare Trust, Inc., a Maryland corporation, its general partner
       
    By: /s/ Edward M. Weil, Jr.
    Name: Edward M. Weil, Jr.
    Title: President

 

SIGNATURE PAGE TO

ASSET PURCHASE AGREEMENT

 

 
 

 

Exhibit A

 

Escrow Agreement

 

[ See attached. ]

 

 
 

 

ESCROW AGREEMENT

 

THIS ESCROW AGREEMENT (this “ Agreement ”) is made effective as of the ____ day of August, 2014 (the “ Effective Date ”), by and among 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 ”), and Stewart Title Guaranty Company , as escrow agent (“ Escrow Agent ”). Each party to this Agreement is sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

A.           Purchaser and Seller are parties to that certain Asset Purchase Agreement dated as of the 1st day of August, 2014 (the “ Purchase Agreement ”), pursuant to which Purchaser has agreed to purchase from Seller certain skilled nursing facilities and related assets located in the State of Iowa, as more particularly described therein.

 

B.           Purchaser has deposited with the Escrow Agent certain Escrowed Funds described herein. The Parties intend that the Escrow Agent shall hold and disburse the Escrowed Funds in accordance with the terms of this Agreement.

 

NOW THEREFORE , for and in consideration of the execution of this document and the mutual promises and covenants made herein, the receipt and sufficiency of which are hereby mutually acknowledged, the Parties agree as follows:

 

1.           Each of the Recitals above is true and correct and is hereby incorporated by reference.

 

2.           ESCROWED FUNDS

 

(a)           Escrowed Funds . Purchaser has deposited with the Escrow Agent and Escrow Agent hereby acknowledges receipt of Three Million and No/100 U.S. Dollars ($3,000,000) (the “ Escrowed Funds ”). The Escrow Agent shall hold and disburse the Escrowed Funds in accordance with the terms of this Agreement.

   

 
 

 

3.           ESCROW AGENT

 

(a)                     Appointment of Escrow Agent . Seller and Purchaser hereby appoint the Escrow Agent, with a mailing address of One Washington Mall, Suite 1400 Boston, MA 02108, as the Escrow Agent hereunder to receive, hold and disburse the Escrowed Funds, and to otherwise perform the duties of the Escrow Agent pursuant to this Agreement. Escrow Agent hereby accepts its appointment as the escrow agent and agrees to receive, hold and disburse the Escrowed Funds in accordance with the terms of this Agreement and will not disburse or otherwise transfer any portion of the Escrowed Funds to any person other than pursuant to the express provisions hereof.

 

(b)                     Escrow Agent Responsibilities . The Escrow Agent executes this Agreement solely for the purpose of accepting the escrow created hereby, on the terms and conditions set forth in it, and undertakes to perform the duties, but only the duties, specifically set forth herein. Escrow Agent shall hold the Escrowed Funds in a single non-interest bearing account with Stewart Title Guaranty Company. The account shall be in the name of Escrow Agent but shall not be the property of the Escrow Agent. Escrow Agent shall have no liability for any loss which may result from any failure of the institution in which the Escrowed Funds are placed; provided , however , that notwithstanding anything herein to the contrary, in the event of a loss resulting from the failure of the financial institution in which the Escrowed Funds are placed, Seller and Purchaser shall have the same remedies generally available to depositors of the financial institution, including, without limitation, all remedies available at law or in equity. The Escrow Agent is not required to secure the performance of its duties by bond or otherwise. Seller and Purchaser hereby release the Escrow Agent from all liability for any punitive, incidental, consequential, or other damages or obligations to them for any act or omission by the Escrow Agent or any of its agents, partners, or employees performed in good faith in the exercise of its or their best judgment and in a manner reasonably believed by it or them to be authorized or within the duties, rights, powers, privileges, or direction conferred on the Escrow Agent by this Agreement, except for willful misconduct, negligence, tortious conversion of any Escrowed Funds or documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or breach of this Agreement by the Escrow Agent. Without limiting the generality of the foregoing, the responsibilities of the Escrow Agent are further defined, limited, and qualified by the following:

 

(1)   the duties and obligations of the Escrow Agent will be determined solely by the express provisions of this Agreement, and this Agreement is not to be interpreted or construed to impose on the Escrow Agent any implied duties, covenants, or obligations;

 

(2)   the Escrow Agent may execute any of its rights, powers, or responsibilities under this Agreement either directly or by or through its agents, partners, employees, or attorneys, and it will not be liable for any error of judgment made in good faith by an authorized agent, partner, employee, or attorney of it, unless it is proven that the Escrow Agent was negligent in ascertaining the pertinent facts or in employing or supervising the agent, partner, or employee;

 

(3)   the Escrow Agent will not be liable to any person with respect to any action taken, suffered, or omitted by it in accordance with this Agreement or in accordance with written instructions signed by Seller and Purchaser or an order issued by a court of competent jurisdiction, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement;

 

 
 

 

(4)   the Escrow Agent may rely on any document given to it pursuant to this Agreement without verifying the authenticity of it, the genuineness of any signature on it, or the authority of the person signing the document or purporting to give it to the Escrow Agent, and the Escrow Agent is not obligated to examine or pass upon the validity, execution, binding effect, or sufficiency of either this Agreement or any amendment or supplement to it, so long as the Escrow Agent shall in good faith believe the same to be genuine, to have been signed or presented by the person or parties purporting to sign the same and to conform to the provisions of this Agreement;

 

(5)   the Escrow Agent will be free from any liability when acting in good faith in accordance with any written advice or opinion received from legal counsel, an independent certified public accountant, or other expert rendering advice or an opinion within his area of expertise, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement;

 

(6)   nothing in this Agreement will be deemed to impose on the Escrow Agent any liability to any person as a result of any failure of the Escrow Agent to qualify to do business or to act as a fiduciary or otherwise in any jurisdiction; and

 

(7)   the Escrow Agent is not under any duty to give the Escrowed Funds held in escrow by it pursuant to this Agreement any greater degree of care than it gives its own similar property, and the Escrow Agent makes no representation as to the value, validity or genuineness, of any document or instrument delivered to it.

 

(c)                     Disbursement of Escrowed Funds .

 

(1)    Upon Closing . Upon Closing (as defined in the Purchase Agreement) of the transactions contemplated by the Purchase Agreement, Purchaser and Seller shall jointly deliver to the Escrow Agent irrevocable wire transfer instructions and the Escrow Agent shall release and deliver the Escrowed Funds to the parties identified in such instructions in accordance with such instructions. Such instructions may be delivered via facsimile.

 

(2)    Upon Termination of Purchase Agreement . The Escrow Agent shall immediately disburse the Escrowed Funds (i) to Purchaser or Seller, as provided in joint written instructions from Purchaser and Seller to the Escrow Agent, which instructions are delivered pursuant to Section 3.1(c) or 3.1(d) of the Purchase Agreement or (ii) to Purchaser, in the event that Purchaser terminates the Purchase Agreement pursuant to Section 3.1(e) of the Purchase Agreement.

 

(3)    Pursuant to Court Order . The Escrowed Funds shall be paid in accordance with a final order of a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final.

 

(d)                     Escrow Controversy . If a controversy arises before, during, or after the term of this Agreement with respect to the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or the application of any of them, the Escrow Agent may do either or both of the following: (i) withhold further performance by it pursuant to Section 3(c)(1) or (2) above until the Escrow Agent receives the joint written instructions of Seller and Purchaser, in which case the Escrow Agent may act in accordance with such joint written

 

 
 

 

instructions, or (ii) commence or defend any action or proceeding for or in the nature of interpleader. If a suit or proceeding for or in the nature of interpleader is brought by or against it, the Escrow Agent may deliver all funds, if any, and other property held by it under this Agreement into the registry of the court and thereupon will be released and discharged from all further obligations and responsibilities under this Agreement.

 

(e)                     Reimbursement and Indemnification of Escrow Agent . Purchaser and Seller shall indemnify the Escrow Agent and hold it harmless, upon demand, from all cost, loss, damage, expense, and liability (including reasonable legal fees and expenses and amounts paid in settlement) suffered or incurred by it in connection with, or arising out of, the escrow under this Agreement, including any attributable to a suit or proceeding for or in the nature of interpleader brought by or against the Escrow Agent, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement. Other than the foregoing, Escrow Agent shall not be entitled to any fee or compensation for the services rendered hereunder.

 

(f)                     Discretion of Escrow Agent to File an Interpleader Action in the Event of Dispute . If any Parties to this Agreement shall be in disagreement about the interpretation of this Agreement, or about their rights and obligations, or the propriety of any action contemplated by the Escrow Agent hereunder, the Escrow Agent may, but shall not be required to, file an action of interpleader in a court of competent jurisdiction (as “Court”) and deposit the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder in the registry of the Court. The Escrow Agent shall be indemnified for all costs, including reasonable attorneys’ fees and costs incurred by it, in connecting with the aforesaid interpleader action, and the Escrow Agent shall be fully protected in suspending all or part of its activities under this Agreement until a final judgment or other appropriate order in the interpleader action is received.

 

The Escrow Agent, in the event it is in doubt about its duties and obligations hereunder as Escrow Agent, shall also have the right, but not the duty, to so notify in writing Seller and Purchaser and, thereafter, the Escrow Agent shall not be obligated to deliver or release any of the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder unless: (i) Seller and Purchaser have jointly directed the Escrow Agent to deliver the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or (ii) a final order by a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final, to which Escrow Agent, Purchaser and Seller are all parties, has been entered directing the Escrow Agent to take certain action with respect to the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder.

 

(g)                     Resignation of Escrow Agent . The Escrow Agent may resign upon thirty (30) days written notice to Seller and Purchaser. If a successor escrow agent is not appointed by Seller and Purchaser within this thirty (30) day period, the Escrow Agent may, but shall have no duty to, petition a Court to name a successor. If no successor escrow agent is appointed within thirty (30) days after such written notice, the Escrow Agent may withhold performance by it pursuant to Sections 3(c)(1) or (2) above until such time as a successor escrow agent is appointed and, at such time, the Escrow Agent shall deliver the Escrowed Funds or other documents,

 

 
 

 

instruments or items, if any, delivered to the Escrow Agent hereunder to any such successor escrow agent; provided, however, the Escrow Agent shall act in accordance with any joint written instructions from Seller and Purchaser. The Escrow Agent may be removed, with or without cause, by the Purchaser and Seller acting jointly at any time by providing written notice to the Escrow Agent.

 

4.           GENERAL PROVISIONS

 

(a)                     Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent via electronic mail ( e.g . email), (iii) on the day after (provided, however, with respect to notices, requests, demands and other communications given to Purchaser, five (5) days after) delivery to FedEx or similar overnight courier, or (iv) on the tenth day after (provided, however, with respect to notices, requests, demands and other communications given to Purchaser, fifteen (15) days after) mailing, if mailed to the party to whom notice is to be given, by first-class mail, registered or certified, return receipt requested (or, if to Purchaser, via airmail), postage prepaid and properly addressed, to the party as follows:

 

If to Purchaser:   American Realty Capital Healthcare Trust
    II Operating Partnership, L.P.
    Attn: Edward M Weil., Jr.
    405 Park Avenue, 2nd Floor
    New York, New York 10022
    Email: mweil@arlcap.com
     
With a copy (which will   American Realty Capital Healthcare Trust
not constitute notice) to:   II Operating Partnership, L.P.
  Attn: Jesse Galloway
    405 Park Avenue, 14th Floor
    New York, New York 10022
    Email: jgalloway@arlcap.com
     
With a copy (which will   Foley & Lardner LLP
not constitute notice) to:   Attn:  Michael A. Okaty
         Taylor C. Pancake
    111 North Orange Avenue
    Suite 1800
    Orlando, Florida  32801
    Email: tpancake@foley.com
     
If to Seller:   c/o Sunnybrook
    Attn:  James T. Elliott
    601 S. 23rd Street, Suite 15
    Fairfield, Iowa 52556
    Telephone: (641) 209-9396
    Facsimile: (641) 209-9413

 

 
 

 

With a copy   Locke Lord LLP
(which will not   Attn: Whit Roberts, Esq.
constitute notice) to:   2200 Ross Avenue, Suite 2200
    Dallas, Texas 75201-6776
    Telephone: (214) 740-8659
    Facsimile: (214) 756-8659
     
If to Escrow Agent:   Stewart Title Guaranty Company
    National Title Services
    One Washington Mall – Suite 1400
    Boston, MA 02108
    Telephone:  (607) 933-2415
    Facsimile:     (607) 727-8372

 

Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other parties in the manner herein provided for giving notice.

 

(b)                     Representations . The Parties do hereby expressly acknowledge, warrant and represent to one another that:

 

(1)         the terms and conditions of this Agreement were agreed to only after due consideration and consultation with their respective attorneys, or in the absence of consideration and consultation with an attorney, only after sufficient time to consider and consult an attorney;

 

(2)         the Parties are competent and were not fraudulently induced, coerced or intimidated to agree to the terms and conditions of this Agreement, and this Agreement is supported by good and sufficient consideration; and

 

(3)         no promise, representation, inducement, agreement or warranty other than those specifically set forth herein has been made or relied upon by the Parties in agreeing to the terms and conditions of this Agreement.

 

(c)                     Attorneys’ Fees and Costs . If subsequent to the effective date of this Agreement, litigation should arise among the Parties concerning this Agreement or its enforcement, the prevailing Party or Parties in such litigation shall be entitled to collect in such action from the non-prevailing Party or Parties all costs of such litigation, including reasonable attorney’s fees.

 

(d)                     Entire Agreement . This Agreement constitutes the entire and integrated agreement among the Parties and sets forth all promised, covenants, agreements, conditions and understandings among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, representations, understandings, inducements, conditions and agreements, expressed or implied, or written with respect to the subject matter thereof; provided, however, that as between Purchaser and Seller, this Agreement does not supersede or amend the Purchase Agreement or modify any of the rights and obligations of the parties thereunder. This Agreement may not be modified, amended, altered or supplemented, except by written instrument signed by the Parties or their successors in interest.

 

 
 

 

(e)                     Severability . If any provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any Party or substantially increase the burden of any Party (as determined by such Party), shall be held to be invalid or unenforceable to any extent, the same shall not affect in any respect whatsoever the validity or enforceability of the remainder of this Agreement.

 

(f)                     Counterparts . To facilitate execution, this Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement 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.

 

(g)                     Governing Law; Venue . This Agreement shall be interpreted and enforced under the laws of State of New York. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts in and for New York County, New York for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts in and for New York County, New York, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such courts.

 

(h)                     Successors/Assigns . This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto.

 

(i)                     No Assignment . This Agreement is not assignable by the Escrow Agent without the prior written consent of Seller and Purchaser.

 

[signatures on separate page]

 

 
 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

  SELLER :
   
  ECI ACQUISITION 1, LLC , a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  VILLAGE ASSISTED LIVING LLC , an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  MT. PLEASANT ASSISTED LIVING LLC , an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  BURLINGTON ASSISTED LIVING LLC , an Iowa limited liability company
     
  By:  
  Name:  
  Title:  

 

[Signatures Continue on the Following Page]

 

 
 

 

  MUSCATINE ASSISTED LIVING LLC , an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  FT. MADISON ASSISTED LIVING LLC , an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  CARROLL ASSISTED LIVING LLC, an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  BURLINGTON INDEPENDENT LIVING LLC , an Iowa limited liability company
     
  By: SunnyBrook Investment Company, LLC, its sole member
     
  By:  
  Name:  
  Title:  

 

 
 

 

  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:  
  Name:  
  Title:  
     
  Escrow Agent :
     
  Stewart Title Guaranty Company , as escrow agent
     
  By:  
  Name:  
  Title:  

 

 
 

 

EXHIBIT B

 

Post-Closing Escrow Agreement

 

[ See attached. ]

 

 
 

 

POST-CLOSING ESCROW AGREEMENT

 

This Post-Closing Escrow Agreement (“ Agreement ”) is entered into this ___ day of August, 2014 (the “ Effective Date ”), by and among (i) AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P. a Delaware limited partnership, (“ ARC ”) and its permitted assignees ARHC SBBURIA01, LLC , ARHC SCCRLIA01, LLC , ARHC SFFLDIA01, LLC , ARHC SMMDSIA01, LLC , ARHC SPPLSIA01, LLC, ARHC SMMTEIA01, LLC , ARHC PHCRPIA01, LLC , ARHC PHCTNIA01, LLC , ARHC PHDESIA01, LLC , ARHC PSINDIA01, LLC , ARHC PHOTTIA01, LLC , ARHC PHTIPIA01, LLC , ARHC SBBURIA01 TRS, LLC , ARHC SCCRLIA01 TRS, LLC , ARHC SFFLDIA01 TRS, LLC , ARHC SMMDSIA01 TRS, LLC , ARHC SPPLSIA01 TRS, LLC , ARHC SMMTEIA01 TRS, LLC , ARHC PHCRPIA01 TRS, LLC , ARHC PHCTNIA01 TRS, LLC , ARHC PHDESIA01 TRS, LLC , ARHC PSINDIA01 TRS, LLC , ARHC PHOTTIA01 TRS, LLC , and ARHC PHTIPIA01 TRS, LLC , each a Delaware limited liability company (ARC and all such parties collectively the “ Purchaser ”), (ii) 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 ”), and (iii) Stewart Title Guaranty Company , as escrow agent (“ Escrow Agent ”). Each party to this Agreement is sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

A.           Purchaser and Seller are parties to that certain Asset Purchase Agreement dated as of the 1st day of August, 2014, as amended (the “ Purchase Agreement ”), pursuant to which Purchaser has agreed to purchase from the Seller the assets comprising the assisted living facilities identified therein and located in the state of Iowa.

 

B.           Seller and Purchaser have agreed to deposit the Holdback Amount , as defined in the Purchase Agreement with the Escrow Agent to hold as Escrowed Funds described herein and pursuant to the terms of this Agreement.

 

NOW THEREFORE , for and in consideration of the execution of this document and the mutual promises and covenants made herein, the receipt and sufficiency of which are hereby mutually acknowledged, the Parties agree as follows:

 

 
 

 

Each of the Recitals above is true and correct and is hereby incorporated by reference.

 

Article I.
ESCROW AGENT

 

1.1.           Appointment of Escrow Agent             The Seller and Purchaser hereby appoint the Escrow Agent, with a mailing address One Washington Mall, Suite 1400 Boston, MA 02108 as the Escrow Agent hereunder to receive, hold and disburse the Escrowed Funds, and to otherwise perform the duties of the Escrow Agent pursuant to this Agreement. Escrow Agent hereby accepts its appointment as the escrow agent and agrees to receive, hold and disburse the Escrowed Funds (as defined below) in accordance with the terms of this Agreement and will not disburse or otherwise transfer any portion of the Escrowed Funds to any person other than pursuant to the express provisions hereof.

 

1.2.           Establishment of Escrow Fund             Contemporaneously with the execution of this Agreement, and as a requirement of the Closing (as defined in the Purchase Agreement), Purchaser shall deposit immediately available funds equal to the Holdback Amount (together with all earnings thereon, hereinafter referred to as the “ Escrowed Funds ”) with the Escrow Agent, in accordance with Section 3.2(c) of the Purchase Agreement.

 

1.3.           Escrow Agent Responsibilities             The Escrow Agent executes this Agreement solely for the purpose of accepting the escrow created hereby, on the terms and conditions set forth in it, and undertakes to perform the duties, but only the duties, specifically set forth herein. Escrow Agent shall hold the Escrowed Funds in an interest bearing account with Stewart Title Guaranty Company. The Escrowed Funds shall be kept invested in (a) direct thirty-day or less obligations of the United States of America or thirty-day or less obligations the principal of and the interest on which are unconditionally guaranteed by the United States of America, or (b) with the prior written consent of Seller and Purchaser, in any institutional money market fund or depository money market offered by the Escrow Agent, including any institutional money market fund or depository money market managed by the Escrow Agent or any of its affiliates. The account shall be in the name of Escrow Agent but shall not be the property of the Escrow Agent. Escrow Agent shall have no liability for any loss which may result from any failure of the institution in which the Escrowed Funds are placed; provided , however , that notwithstanding anything herein to the contrary, in the event of a loss resulting from the failure of the financial institution in which the Escrowed Funds are placed, Seller and Purchaser shall have the same remedies generally available to depositors of the financial institution, including, without limitation, all remedies available at law or in equity, and such loss shall not affect Purchaser’s obligations of payment pursuant to the Purchase Agreement. The Escrow Agent is not required to secure the performance of its duties by bond or otherwise. The Seller and Purchaser hereby release the Escrow Agent from all liability for any punitive, incidental or consequential damages to them for any act or omission by the Escrow Agent or any of its agents, partners, or employees performed in good faith in the exercise of its or

 

 
 

 

their best judgment and in a manner reasonably believed by it or them to be authorized or within the duties, rights, powers, privileges, or direction conferred on the Escrow Agent by this Agreement, except for willful misconduct, negligence, tortious conversion of any Escrowed Funds or documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or breach of this Agreement by the Escrow Agent. Without limiting the generality of the foregoing, the responsibilities of the Escrow Agent are further defined, limited, and qualified by the following:

 

(a)          the duties and obligations of the Escrow Agent will be determined solely by the express provisions of this Agreement, and this Agreement is not to be interpreted or construed to impose on the Escrow Agent any implied duties, covenants, or obligations;

 

(b)          the Escrow Agent may execute any of its rights, powers, or responsibilities under this Agreement either directly or by or through its agents, partners, employees, or attorneys, provided that the Escrow Agent will be liable for any act or omission by any such agent, partner, employee, or attorney of it to the same extent it would have been liable had it committed or allowed such act or omission;

 

(c)          the Escrow Agent will not be liable to any person with respect to any action taken, suffered, or omitted by it in accordance with this Agreement or in accordance with written instructions signed by the Seller and Purchaser or an order issued by a court of competent jurisdiction, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement;

 

(d)          the Escrow Agent may rely on any document given to it pursuant to this Agreement without verifying the authenticity of it, the genuineness of any signature on it, or the authority of the person signing the document or purporting to give it to the Escrow Agent, and the Escrow Agent is not obligated to examine or pass upon the validity, execution, binding effect, or sufficiency of either this Agreement or any amendment or supplement to it, so long as the Escrow Agent shall in good faith believe the same to be genuine, to have been signed or presented by the person or parties purporting to sign the same and to conform to the provisions of this Agreement;

 

(e)          the Escrow Agent will be free from any liability when acting in good faith in accordance with any written advice or opinion received from legal counsel, an independent certified public accountant, or other expert rendering advice or an opinion within his area of expertise, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement;

 

(f)          nothing in this Agreement will be deemed to impose on the Escrow Agent any liability to any person as a result of any failure of the Escrow Agent to qualify to do business or to act as a fiduciary or otherwise in any jurisdiction; and

 

(g)          the Escrow Agent is not under any duty to give the Escrowed Funds held in escrow by it pursuant to this Agreement any greater degree of care than it gives its own similar property, and the Escrow Agent makes no representation as to the value, validity or genuineness, of any document or instrument delivered to it.

 

 
 

 

1.4.           Disbursement of Escrowed Funds .

 

(a)          From time to time on or before the end of the day that is twelve (12) months after the Effective Date (provided, however, that if such date is a weekend day or a day on which banks in New York, New York are ordinarily closed, the next following day that is not a weekend day or a day on which banks in New York, New York are ordinarily closed (a “ Business Day ”)) (the applicable date, the “ Final Disbursement Date ”), Purchaser may give notice (a “ Notice ”) to Seller and the Escrow Agent specifying in reasonable detail the nature and dollar amount of any claim (a “ Claim ”) regarding which Purchaser is entitled to indemnification under Section 8.1 (subject to Section 8.3(a)) of the Purchase Agreement. Purchaser may only deliver a Notice if it determines in good faith that the Claim is adequately supported by fact and permitted under the Purchase Agreement. Within fifteen (15) Business Days after receipt by Seller and Escrow Agent of the Notice regarding such a Claim, Seller may give notice to Purchaser and Escrow Agent disputing any Claim (a “ Counter Notice ”), if Seller determines in good faith that Seller has objection to the Claim that is adequately supported by fact and permitted under the Purchase Agreement. If a Counter Notice is timely given, the Claim shall be resolved as provided in Section 1.4(b). If no Counter Notice is timely given, then at the end of such fifteen (15) day period, Escrow Agent shall pay to Purchaser the dollar amount of the Claim set forth in the Notice from (and only to the extent of) the Escrowed Funds. The Escrow Agent shall not inquire into or consider whether a Claim complies with the requirements of the Purchase Agreement.

 

(b)          If a Counter Notice is timely given with respect to a Claim, Escrow Agent shall make payment with respect to such claim only in accordance with (i) joint written instructions of Seller and Purchaser, or (ii) a final order of a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final.

 

(c)          On the date that is six (6) months after the Effective Date (the “ Six-Month Anniversary Date ”), the Escrow Agent shall pay and distribute to Seller from the Escrowed Funds fifty percent (50%) of the amount of Escrowed Funds then remaining after subtracting from the balance of the Escrowed Funds as of the Six-Month Anniversary Date (or if the Six-Month Anniversary Date is not a Business Day, the immediately preceding Business Day) the aggregate dollar amount of any Claims (as shown in the Notices of such Claims) timely delivered and remaining pending as of the Six-Month Anniversary Date.

 

(d)          On the first Business Day after the Final Disbursement Date, the Escrow Agent shall pay and distribute to the Seller the amount remaining after subtracting from the balance of the Escrowed Funds as of the end of the Final Disbursement Date (or if the Final Disbursement Date is not a Business Day, the immediately preceding Business Day) the aggregate dollar amount of any Claims (as shown in the Notices of such Claims) timely delivered and remaining pending as of the Final Disbursement Date.

 

(e)          At any time, the Escrow Agent shall pay part or all of the Escrowed Funds in accordance with a final order of a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final.

 

1.5.           Escrow Controversy      If a controversy arises before, during, or after the term of this Agreement with respect to the Escrowed Funds or other documents, instruments or items, if any,

 

 
 

 

delivered to the Escrow Agent hereunder, or the application of any of them, the Escrow Agent may do either or both of the following: (i) withhold further performance by it under Section 1.4(b), (c) or (d) above until the Escrow Agent receives the joint written instructions of Seller and Purchaser, in which case the Escrow Agent may act in accordance with such joint written instructions, or (ii) commence or defend any action or proceeding for or in the nature of interpleader. If a suit or proceeding for or in the nature of interpleader is brought by or against it, the Escrow Agent may deliver all funds, if any, and other property held by it under this Agreement into the registry of the court and thereupon will be released and discharged from all further obligations and responsibilities under this Agreement.

 

1.6.           Reimbursement and Indemnification of Escrow Agent             Purchaser and Seller shall indemnify the Escrow Agent and hold it harmless, upon demand, from all cost, loss, damage, expense, and liability (including reasonable legal fees and expenses and amounts paid in settlement) suffered or incurred by it in connection with, or arising out of, the escrow under this Agreement, including any attributable to a suit or proceeding for or in the nature of interpleader brought by or against the Escrow Agent, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement. Other than the foregoing, Escrow Agent shall not be entitled to any fee or compensation for the services rendered hereunder.

 

1.7.           Discretion of Escrow Agent to File an Interpleader Action in the Event of Dispute             If any Parties to this Agreement shall be in disagreement about the interpretation of this Agreement, or about their rights and obligations, or the propriety of any action contemplated by the Escrow Agent hereunder, the Escrow Agent may, but shall not be required to, file an action of interpleader in a Court (defined below) and deposit the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder in the registry of the Court. The Escrow Agent shall be indemnified for all costs, including reasonable attorneys’ fees and costs incurred by it, in connecting with the aforesaid interpleader action, and the Escrow Agent shall be fully protected in suspending all or part of its activities under this Agreement until a final judgment or other appropriate order in the interpleader action is received. The exclusive venue for all actions under this Agreement shall be a court of competent jurisdiction in New York County, New York (a “ Court ”).

 

The Escrow Agent, in the event it is in doubt about its duties and obligations hereunder as Escrow Agent, shall also have the right, but not the duty, to so notify in writing the Seller and Purchaser and, thereafter, the Escrow Agent shall not be obligated to deliver or release any of the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder unless: (i) the Seller and Purchaser have jointly directed the Escrow Agent to deliver the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or (ii) a final order by a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final, to which Escrow Agent, Purchaser and Seller are all parties, has been entered directing the Escrow Agent to take certain action with respect to

 

 
 

 

the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder.

 

1.8.           Resignation of Escrow Agent . The Escrow Agent may resign upon thirty (30) days written notice to the Seller and Purchaser. If a successor escrow agent is not appointed by the Seller and Purchaser within this thirty (30) day period, the Escrow Agent may, but shall have no duty to, petition a Court to name a successor. If no successor escrow agent is appointed within thirty (30) days after such written notice, the Escrow Agent may withhold performance by it under Section 1.4(b), (c) or (d) above until such time as a successor escrow agent is appointed and, at such time, the Escrow Agent shall deliver the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder to any such successor escrow agent; provided, however, the Escrow Agent shall act in accordance with any joint written instructions from the Seller and Purchaser. The Escrow Agent may be removed, with or without cause, by the Purchaser and Seller acting jointly at any time by providing written notice to the Escrow Agent.

 

Article II.
GENERAL PROVISIONS

 

2.1.           Notices             All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, (iii) on the day after delivery to FedEx or similar overnight courier, or (iv) on the tenth day after mailing, if mailed to the party to whom notice is to be given, by first-class mail, registered or certified, return receipt requested, postage prepaid and properly addressed, to the party as follows:

 

If to Purchaser: American Realty Capital VII, LLC
  c/o American Realty Capital
  Attn: Edward M Weil., Jr.
  405 Park Avenue, 2 nd Floor
  New York, New York 10022
     
With a copy (which will not Jesse C. Galloway, General Counsel
constitute notice) to: 405 Park Avenue, 14 th Floor
  New York, New York 10022
     
With a copy (which will not Taylor C. Pancake
constitute notice) to: Foley & Lardner LLP
  111 North Orange Avenue, Suite 1800
  Orlando, Florida  32801
  E-mail: tpancake@foley.com

 

 
 

 

If to Seller: c/o Sunnybrook
  Attn:  James T. Elliott
  601 S. 23rd Street, Suite 15
  Fairfield, Iowa 52556
  Telephone: (641) 209-9396
  Facsimile: (641) 209-9413
     
With a copy (which will not Locke Lord LLP
constitute notice) to: Attn: Whit Roberts, Esq.
  2200 Ross Avenue, Suite 2200
  Dallas, Texas 75201-6776
  Telephone: (214) 740-8659
  Facsimile: (214) 756-8659
     
If to Escrow Agent: Stewart Title Guaranty Company
  National Title Services
  One Washington Mall – Suite 1400
  Boston, MA 02108
  Attention: Annette Labrecque Comer
  Telephone: (607) 933-2415
  Facsimile: (607) 727-8372
  Email: acomer@stewart.com

 

Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other parties in the manner herein provided for giving notice.

 

2.2.           Representations             The Parties do hereby expressly acknowledge, warrant and represent to one another that:

 

(a)          the terms and conditions of this Agreement were agreed to only after due consideration and consultation with their respective attorneys, or in the absence of consideration and consultation with an attorney, only after sufficient time to consider and consult an attorney;

 

(b)          the Parties are competent and were not fraudulently induced, coerced or intimidated to agree to the terms and conditions of this Agreement, and the Escrow Agreement is supported by good and sufficient consideration; and

 

(c)          no promise, representation, inducement, agreement or warranty other than those specifically set forth herein has been made or relied upon by the Parties in agreeing to the terms and conditions of this Agreement.

 

2.3.         Attorneys’ Fees and Costs             If subsequent to the Effective Date, litigation should arise among the Parties concerning this Agreement or its enforcement, the prevailing Party or Parties in such litigation shall be entitled to collect in such action from the non-prevailing Party or Parties all costs of such litigation, including reasonable attorney’s fees.

 

 
 

 

2.4.                     Entire Agreement             This Agreement constitutes the entire and integrated agreement among the Parties and sets forth all promised, covenants, agreements, conditions and understandings among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, representations, understandings, inducements, conditions and agreements, expressed or implied, or written with respect to the subject matter thereof; provided, however, that as between Purchaser and Seller, this Agreement does not supersede or amend the Purchase Agreement or modify any of the rights and obligations of the parties thereunder. This Agreement may not be modified, amended, altered or supplemented, except by written instrument signed by the Parties or their successors in interest.

 

2.5.                     Severability             If any provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any Party or substantially increase the burden of any Party (as determined by such Party), shall be held to be invalid or unenforceable to any extent, the same shall not affect in any respect whatsoever the validity or enforceability of the remainder of this Agreement.

 

2.6.                     Counterparts             To facilitate execution, this Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement 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.

 

2.7.                     Governing Law; Venue             This Agreement shall be interpreted and enforced under the laws of the State of New York. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts in and for New York County, New York for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts in and for New York County, New York, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such courts.

 

 
 

 

2.8.                     Successors/Assigns             This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto, to the extent permitted by the Purchase Agreement.

 

2.9.                     No Assignment             This Agreement is not assignable by the Escrow Agent without the prior written consent of the Seller and Purchaser.

 

[signatures on following pages]

 

 
 

 

IN WITNESS WHEREOF , the Parties have caused this Post-Closing Escrow Agreement to be executed as of the date first set forth above.

 

  SELLER :
       
  ECI ACQUISITION 1, LLC , a Delaware limited liability company
       
  By: Elliott Company of Iowa, Inc.,
     its sole member
         
    By:  
    Name: James T. Elliott IV, President
       
  VILLAGE ASSISTED LIVING LLC , an Iowa limited liability company
       
  By:    
  Name: James T. Elliott IV, Manager
       
  MT. PLEASANT ASSISTED LIVING LLC , an Iowa limited liability company
       
  By:    
  Name: James T. Elliott IV, Manager
       
  BURLINGTON ASSISTED LIVING LLC , an Iowa limited liability company
       
  By:    
  Name: James T. Elliott IV, Manager

 

[Signatures Continue on the Following Page]

 

 
 

 

  MUSCATINE ASSISTED LIVING LLC , an Iowa limited liability company
     
  By:  
  Name: James T. Elliott IV, Manager
     
  FT. MADISON ASSISTED LIVING LLC , an Iowa limited liability company
     
  By:  
  Name: James T. Elliott IV, Manager
     
  CARROLL ASSISTED LIVING LLC, an Iowa limited liability company
     
  By:  
  Name: James T. Elliott IV, Manager
     
  BURLINGTON INDEPENDENT LIVING LLC , an Iowa limited liability company
     
  By: SunnyBrook Investment Company, LLC, its sole member
       
    By:  
    Name: James T. Elliott IV, President
   

[Signatures Continue on the Following Page]

 

 
 

 

  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:  
  Name:  
  Title:  
     
  ARHC SBBURIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SCCRLIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SFFLDIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SMMDSIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  

 

[Signatures Continue on the Following Page]

 

 
 

 

  ARHC SPPLSIA01, LLC ,
     
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SMMTEIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PHCRPIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PHCTNIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PHDESIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PSINDIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  

 

[Signatures Continue on the Following Page]

 

 
 

 

  ARHC PHOTTIA01, LLC ,
     
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PHTIPIA01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SBBURIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SCCRLIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SFFLDIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SMMDSIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  

 

[Signatures Continue on the Following Page]

 

 
 

 

  ARHC SPPLSIA01 TRS, LLC ,
     
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC SMMTEIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PHCRPIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PHCTNIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PHDESIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PSINDIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  

 

[Signatures Continue on the Following Page]

 

 
 

 

  ARHC PHOTTIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC PHTIPIA01 TRS, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  Escrow Agent :
     
  Stewart Title Guaranty Company , as escrow agent
     
  By:  
  Title:  

 

 
 

 

EXHIBIT C

 

Deed

 

[ See attached. ]

 

 
 

 

RECORDER’S COVER SHEET

 

Type of Document:   Special Warranty Deed  
       
Prepared By:      
       
Tax Statement Address:      
       
Return Document to:   Taylor Pancake, Esq., Foley & Lardner LLP  
       
Grantor:   [_______________] ASSISTED LIVING LLC  
       
Grantee:   ARHC [_________________] LLC  
       
Legal Description:   See Exhibit “A”  

 

 
 

 

Document Prepared by and

after Recording should be

returned to:

 

Taylor Pancake, Esq.

Foley & Lardner LLP

111 N. Orange Ave., Suite 1800

Orlando, FL 32801

 

SPECIAL WARRANTY DEED

 

This Special Warranty Deed (“Deed”) is made as of the ____ day of __________, 2014, by [_______________] ASSISTED LIVING LLC, an Iowa limited liability company, having a legal address at ___________________, in the City of ________, and the County of ______________, and the State of Iowa, as grantor (“Grantor”), and ARHC [________________] LLC, a Delaware limited liability company, having a legal address at 405 Park Avenue, 15 th floor, in the City of New York, and the County of New York, and the State of New York, as grantee (“Grantee”).

 

WITNESSETH, that said Grantor, for and in consideration of Ten and 00/100 Dollars ($10.00) and other good and valuable consideration, the adequacy, sufficiency and receipt of which are hereby acknowledged, has granted, bargained, sold and conveyed, and by these presents does grant, bargain, sell and convey and confirm unto the Grantee, its successors and assigns forever, all of the real property, together with improvements, if any, situated, lying and being in the said City of _______________, County of __________________ and State of Iowa described on Exhibit A attached hereto and hereby made a part hereof (the “Property”).

 

TOGETHER, with all and singular the hereditaments and appurtenances thereunto belonging, or in anywise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof; and all of the estate, right, title, interest, claim and demand whatsoever of Grantor, either in law or equity, of, in and to the Property,

 

TO HAVE AND TO HOLD the Property with the appurtenances, unto the Grantee, its successors and assigns forever and Grantor shall WARRANT AND DEFEND the Property against all and every person or persons lawfully claiming the whole or any part thereof by, through or under Grantor, but none other, subject to matters set forth on Exhibit B .

 

IN WITNESS WHEREOF, Grantor has caused its corporate name to be signed to this Special Warranty Deed on the day and year first above written.

 

  GRANTOR:
   
  [__________] ASSISTED LIVING, LLC,
  an Iowa limited liability company

 

 
 

 

  By:  
  Name:  
  Its:  

 

 
 

 

ACKNOWLEDGEMENT

 

STATE OF __________      )
  ss.
COUNTY OF ________________      )

 

Before me, a Notary Public in and for the state aforesaid, personally came this _____ day of _________________, 20__, the above named _______________, in his/her capacity as ________________ of _____________, a ____________________________, and to me known to be the person who executed and delivered the foregoing instrument and acknowledged the same in such capacity.

 

     
  Notary Public
     
  My commission expires on  

 

 
 

 

EXHIBIT A

TO SPECIAL WARRANTY DEED

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

Common Address:      
Permanent Index Numbers:    

 

 
 

 

EXHIBIT B

TO SPECIAL WARRANTY DEED

 

PERMITTED ENCUMBRANCES

 

Subject to: _______________________

 

 
 

 

EXHIBIT D

 

Bill of Sale and Assignment

 

[ See attached. ]

 

 
 

 

BILL OF SALE

 

THIS BILL OF SALE, effective as of ______ ___, 2014, is furnished by [________] ASSISTED LIVING LLC , an Iowa limited liability company (“ Seller ”), to ARHC [________] , LLC , a Delaware limited liability company (“ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL VII, LLC, a Delaware limited liability company (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain other parties, dated as of _______ ___, 2014 (the “ Purchase Agreement ”). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

In consideration of payment by ARC of the Purchase Price described in the Purchase Agreement and other good and valuable consideration, the receipt and sufficiency of which Seller hereby acknowledges, Seller hereby sells, conveys, transfers, assigns and delivers to Purchaser and its successors and assigns, all of Seller's right, title and interest in and to the Purchased Personal Property located on or relating to the Facility known as [_____________], free and clear of all Liens and liabilities whatsoever, except for the Assumed Liabilities and Permitted Encumbrances.

 

EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE PURCHASED PERSONAL PROPERTY "AS IS" WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

 

This Bill of Sale is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Bill of Sale, the terms of the Purchase Agreement shall prevail.

 

[Signature Page Follows]

 

 
 

 

IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed and delivered under seal as of the day and year first above written. This Bill of Sale may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

PURCHASER :   SELLER :  
       
ARHC [__________], LLC , a Delaware
limited liability company 		  [____________] ASSISTED LIVING, LLC ,
an Iowa limited liability company 		 
           
By:     By:    
           
Name:     Name:    
           
Title:     Title:    

 

[signatures continue on next page]

 

 
 

 

ACKNOWLEDGEMENT OF BILL OF SALE

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Bill of Sale by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Purchased Personal Property conveyed thereby.

 

  SELLER :
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
     
  Name:  
     
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
     
  Name:  
     
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
     
  Name:  
     
  Title:  

 

[signatures continue on next page]

 

 
 

 

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
     
  Name:  
     
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
     
  Name:  
     
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
     
  Name:  
     
  Title:  

 

 
 

 

EXHIBIT E

 

Transition Period Sublease

 

[ See attached. ]

 

 
 

 

INTERIM LEASE

 

THIS INTERIM LEASE (the “ Lease ”) dated this _____ day of _____, 2014 (the “ Effective Date ”), is made by and between ARHC [__________] TRS, LLC, a Delaware limited liability company (“ Landlord ”), and [_________________], LLC, an Iowa limited liability company (“ Tenant ”).

 

RECITALS

 

A.           Tenant was the [owner][operating tenant] and is the licensed operator of the [__]-unit assisted living facility known as “[________________]” located at [____________________, Iowa _____], as more particularly described in Exhibit A hereto (the “ Facility ”).

 

B.           As of the Effective Date, ARHC [__________], LLC, a Delaware limited liability company (the “ Owner ”) purchased the Facility (the “ Sale Transaction ”) from [Tenant][Tenant’s landlord], pursuant to the terms and conditions of a Purchase Agreement dated as of August 1, 2014 (the “ Purchase Agreement ”).

 

C.           Owner has leased the Premises to Landlord, as tenant, under a Lease dated as of the Effective Date (the “ Lease ”).

 

D.           As of the Effective Date Landlord has applied for, but Landlord has not yet been issued a license by the Iowa Department of Inspections and Appeals (“ DIA ”) to operate the Facility (the “ License ”).

 

E.           Accordingly, as an accommodation to Landlord and to allow both parties to benefit from closing of the Sale Transaction prior to issuance of the License, pending the issuance of the License to Landlord Tenant has agreed to continue to operate the Facility on behalf of Landlord during the interim period commencing on the Effective Date and ending on the expiration of the Lease Term defined below, pursuant to the terms and condition of this Lease.

 

F.           NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:

 

1.           The Leased Premises and Property .           Landlord does hereby lease to Tenant and Tenant does hereby lease from Landlord the real property on which the Facility is located and the improvements thereon and furniture, fixtures and equipment located therein which collectively comprise the Facility on the terms and conditions set forth herein. Notwithstanding the foregoing, Landlord and Owner and their respective officers, employees and agents shall have the right to enter the Facility at any time.

 

2.           Term .         The term of this Lease shall commence on the Effective Date and shall automatically terminate on the earlier to occur of (i) the date on which Landlord is licensed to operate the Facility as evidenced by the physical receipt by Landlord of the License or other confirmation acceptable to Landlord and Tenant that Landlord is duly licensed by DIA to operate

 

 
 

 

the Facility, or (ii) six (6) months from the Effective Date in the event of the failure of Landlord to secure the License (“ Lease Term ”). In the event of the termination of this Lease pursuant to clause (ii) Tenant shall have the right to close the Facility in accordance with the terms of applicable law and any and all costs incurred by Tenant in connection therewith shall be deemed an operating expense of the Facility. On the day upon which the Lease Term concludes, Tenant shall surrender the Facility to Landlord or to Landlord’s designee and shall assign all Resident Agreements to Landlord or Landlord’s designee.

 

3.           Rent; Shortfall .

 

(a)          In consideration for the leasing of the Facility, Tenant agrees to pay Landlord, at Landlord’s address set forth in Section 12 hereof or at such other place as Landlord may designate in writing, rent in an amount equal to the “ Net Operating Income ” of the Facility during the Lease Term. As used herein, the term “ Net Operating Income ” means the following, calculated in accordance with standard accounting principles on a modified accrual basis consistent with past practices, for the period consisting of the Lease Term: (i) the cash receipts of the Facility attributable to services provided at the Facility after the Effective Date, plus (ii) any accounts receivable which are generated from services performed after the Effective Date (the “ Post-Effective Date Receivables ”), less (iii) all Facility operating expenses and capital expenditures paid by Tenant, including a management fee in the amount of [______ ] percent (-[___%]) of the gross revenues of the Facility to Manager (as defined in Section 5(b) below), and a rental fee to Tenant as set forth below. The rental fee payable to Tenant shall be equal to Ten Dollars ($10) per month. Tenant shall be authorized to pay to itself the applicable rental fee from the Post Effective Date Receivables and/or the Shortfall funding provided by Landlord under 3(b) below.

 

(b)          Tenant shall assign to Landlord the Post-Effective Date Receivables promptly after the termination of this Lease. Tenant shall deliver a statement to Landlord within thirty (30) days following the end of each calendar month during the Lease Term, except that the final statement shall be due with sixty (60) days following termination of this Lease, reflecting the components of Net Operating Income for the Lease Term. If Tenant’s income statement reflects positive Net Operating Income for such components, Tenant shall pay such amount to Landlord (“ Additional Rent ”). Landlord and Tenant acknowledge and agree that it is the intent of the parties that Tenant shall have no obligation for the payment of any Facility operating expenses or capital expenditures other than from the cash receipts of the Facility. If Tenant’s income statement, exclusive of the Post-Effective Date Receivables, reflects negative Net Operating Income, then Landlord shall pay such amount to Tenant (the “ Shortfall ”). If Tenant’s income statement, exclusive of the Post-Effective Date Receivables, reflects zero Net Operating Income, no Additional Rent or Shortfall shall be due or payable by Tenant or Landlord, respectively. Except as otherwise provided herein, the Additional Rent or Shortfall, as applicable, shall be paid within two (2) business days after Tenant’s delivery to Landlord of the income statement provided for herein. Notwithstanding the foregoing, Landlord shall have the right, on written notice to Tenant, to request an advance on the Additional Rent if and to the extent necessary to pay the expenses for which Landlord is responsible under Section 4 hereof (an “ Advance ”). Landlord shall provide Tenant with a written request for an Advance setting forth in reasonable detail the amount needed, the nature of the expenses to be paid therefrom and the wiring instructions for the account into

 

 
 

 

which the Advance is to be funded (the “ Advance Request ”) and Tenant shall fund the Advance to Landlord within two (2) business days after Tenant’s receipt of the Advance Request; provided, however, in no event shall Tenant be required to fund an Advance in excess of the amount of Additional Rent then being held by Tenant for the account of Landlord. The aggregate amount of all Advances funded by Tenant shall be reflected on the income statement prepared by Tenant pursuant to this Section 4 and shall be included in the calculation of Additional Rent due from Tenant to Landlord or the Shortfall due from Landlord to Tenant pursuant to this Section 3.

 

(c)          The obligations imposed on Landlord and Tenant under this Section 3 shall survive expiration or earlier termination of this Lease.

 

(d)          Any amount not paid when due under this Lease by Landlord or Tenant shall bear interest at the rate of twelve percent (12%) per annum from the date due to the date paid in full.

 

4.           The Landlord’s Covenants .

 

(a)          Landlord shall be responsible for, and shall pay (to the extent Facility revenues are otherwise insufficient to pay) the cost of, all maintenance, repairs, alterations and improvements required to ensure that the Facility, including the real property and the fixtures, furniture and equipment, is in good operating condition and in compliance with all Legal Requirements. “Legal Requirements” shall include (i) all laws, ordinances and regulations applicable to the Facility, including without limitation all applicable operating license requirements, environmental laws, building codes and fire codes, and (ii) all physical plant repairs. If Tenant is not satisfied in its good faith judgment with the arrangements that Landlord is making to have any such maintenance, repairs, alterations or improvements completed, Landlord hereby authorizes Tenant to have such maintenance, repairs, alterations or improvements undertaken for Landlord’s account. Landlord acknowledges that Tenant shall have no obligation to undertake or to pay for such maintenance, repairs, alterations or improvements and that Landlord’s failure to do so may result in liens being filed against the Facility.

 

(b)          Landlord shall pay when due, from Landlord’s funds and not from Facility receipts, all real and personal property taxes and any assessments against the Facility and all taxes due on the income or gross receipts of the Facility. Tenant shall pay any taxes due with respect to the rental fee paid to Tenant under the terms of this Agreement.

 

(c)          Landlord shall obtain, and Tenant shall pay as an operating expense of the Facility, property insurance on the Facility with full replacement value limits. Landlord and Tenant agree that Tenant shall have no liability for loss or damage to the Facility. Landlord shall maintain, as an expense of the Facility, property insurance on the Facility with full replacement limits. Landlord and Tenant agree that except as otherwise expressly provided herein Tenant shall have no liability for loss or damage to the Facility.

 

5.           The Tenant’s Covenants .

 

(a)          Tenant acknowledges and agrees that throughout the Lease Term, Tenant shall (i) maintain in full force and effect a license from the State to operate the Facility as an ______-unit

 

 
 

 

assisted living facility, and shall not take or permit any action to be taken to reduce, expand or otherwise change the licensed capacity or use of the Facility, (ii) collect all receipts and, subject to the provisions of Section 4(b), pay all operating expenses with respect to the Facility from the available cash receipts of the Facility collected by Tenant, (iii) apply any collections on accounts receivables attributable to services provided on and prior to the Effective Date in accordance with the provisions of the Purchase Agreement; (iv) maintain the books and records of account for the Facility and make copies of all remittance advices, posting information, bills, invoices, checks and other evidence of receipts and expenses received or paid by Tenant, (v) conduct the business of the Facility and the management of the Facility Property in a reasonable and prudent manner in accordance with past practices and in substantial compliance with all applicable laws and regulations; (vi) engage in no transactions out of the ordinary course of business; (vii) make no substantial change to the methods of management, purchase, sale, accounting, or operation of the Facility, (viii) use its good faith efforts to preserve the Facility’s existing business organizations and relations with employees, customers, suppliers, and others with whom the Facility has a business relationship; (ix) preserve and protect the Assets, ordinary wear and tear excepted; (x) make no disposal of any of any of the Facility assets, except those that are retired and replaced in the ordinary course of business. The costs incurred by Tenant in complying with this Section 5(a) shall be included in the Facility expenses paid by Tenant from the cash receipts of the Facility or reimbursed by Landlord to Tenant, all as set forth more fully in Section 3. Any defined terms in this paragraph not otherwise defined herein shall have the meaning as defined in the Purchase Agreement.

 

(b)          The day to day operations of the Facility shall be performed by [____________________________] (the “ Manager ”) pursuant to the existing [Management Agreement] between Tenant, as the licensed operator of the Facility, and Manager attached as Exhibit B hereto (the “ Management Agreement ”). All costs incurred by Tenant and Manager in connection with the Management Agreement shall be deemed an operating expense of the Facility. The Tenant shall not terminate the Manager and/or the Management Agreement during the Lease Term, and shall not take any action that would result in termination of the Manager and/or the Management Agreement during the Lease Term without Landlord’s consent, which shall not be unreasonably withheld, conditioned or delayed. Tenant further agrees that it will not consent to any material amendment to the Management Agreement without Landlord’s consent, which may not be unreasonably withheld, conditioned or delayed. [TO BE DETERMINED WHETHER EXISTING MANAGEMENT WILL REMAIN DURING SUBLEASE PERIOD OR WHETHER NEW MANAGER WILL COMMENCE SERVICES AT CLOSING.]

 

(c)          Tenant shall cause to be maintained, as an expense of the Facility, workmen’s compensation insurance with respect to Manager’s employees at the Facility in amounts required by law. Tenant shall also maintain, as an expense of the Facility, professional liability insurance with respect to Tenant’s operations at the Facility in amounts and with limits consistent with Tenant’s operations at other senior living facilities. Tenant shall also maintain as an expense of the Facility, general liability insurance with limits of no less than $1,000,000/$3,000,000. Tenant shall direct the insurer to name Landlord and Owner as additional named insured on all insurance policies obtained by Tenant relating to the Facility. All costs incurred by Tenant in connection with maintaining such insurance shall be deemed an operating expense of the Facility.

 

 
 

 

Tenant understands and acknowledges that Landlord may wish to add additional insurance coverage for the Facility in addition to or excess of the coverage carried currently. Any additional or increased insurance requested by the Landlord for the Facility and/or Tenant’s operation and management thereof from any insurance carrier or provider specified by Landlord, shall be obtained by Landlord or Tenant, as the case may be, provided in each instance that the premiums and costs of any such additional insurance shall be deemed an operating expense of the Facility.

 

6.           [RESERVED] .

 

7.           Default by Landlord .         Each of the following shall constitute a “Landlord Event of Default” hereunder:

 

(a)          A default in the payment by Landlord of any amount when due and payable under this Lease, which default remains uncured for a period of five (5) business days; or

 

(b)          Other than a matter for which a separate cure period is applicable under Section 7 (a) above, a default in the due observance or performance by Landlord of any applicable term, covenant or agreement contained in this Lease, which default remains uncured for a period of thirty (30) days after written notice of the default from Tenant; provided, however, that if such default is of a nature that it cannot be cured within the thirty (30) day period, then Landlord shall not be in default if it commences good faith efforts to cure the default within the thirty (30) day period, demonstrates continuous diligent efforts to cure the default in a manner satisfactory to Tenant and, within a reasonable period, not to exceed sixty (60) days after the date of the original written notice of the default, completes the cure of such default.

 

8.           Default by Tenant .         The following shall constitute a “Tenant Event of Default” hereunder:

 

(a)          A default in the due observance or performance by Tenant of any applicable term, covenant or agreement contained in this Lease, which default remains uncured for a period of thirty (30) days after written notice of the default from Landlord; provided, however, that if such default is of a nature that it cannot be cured within the thirty (30) day period, then Tenant shall not be in default if it commences good faith efforts to cure the default within the thirty (30) day period, demonstrates continuous diligent efforts to cure the default in a manner satisfactory to Landlord and, within a reasonable period, not to exceed sixty (60) days after the date of the original written notice of the default, completes the cure of such default.

 

9.           Remedies .

 

(a)          Upon the occurrence of a Landlord Event of Default, Tenant shall have as its available remedies the right to terminate this Lease and either close the Facility in accordance with applicable law and/or to seek to recover any damages suffered by Tenant as a result thereof.

 

(b)          Upon the occurrence of a Tenant Event of Default, Landlord shall have as its sole remedy the right to terminate this Lease (other than in case of the failure of Tenant to pay the Rent when due, in which case the provisions of the last sentence of this Section shall control); provided,

 

 
 

 

however, in such event Landlord shall be required to make such arrangements as may be necessary for the lawful operation of the Facility by Landlord or its designee under its own license and/or provider agreements, it being understood and agreed that Tenant has specifically advised Landlord that it is not, as a matter of law, permitted to allow Landlord to operate the Facility under Tenant’s license or provider agreements. In the event of a Tenant Default resulting from the failure of Tenant to pay the Rent when due, Landlord shall be entitled to seek to exercise such rights and remedies as may be necessary to recover the delinquent Rent from Tenant.

 

10.          Employees .         Notwithstanding the provisions of the Purchase Agreement, the parties acknowledge the employees at the Facility are the employees of Tenant or Manager and that all provisions of the Purchase Agreement regarding the termination, rehiring of, and responsibility for, employees shall be extended to the end of the term of this Lease. Tenant shall terminate, or cause to be terminated, all employees of the Facility effective as of the termination date of this Lease. Tenant shall pay, or cause to be paid, to the employees at the Facility an amount equal to all employee salaries, wages, sick leave pay, vacation pay, severance pay and other compensation which have accrued or are due and payable through close of business on the termination date but are not yet paid, and any applicable federal, state and local taxes due to the appropriate governmental agency related thereto (the “ Employee Payments ”) as an operating expense of the Facility except for any portion of such Employee Payments which accrued prior to the Effective Date (the “ Tenant Portion Employee Payment ”), which shall be allocated to Tenant and paid by or on behalf of Tenant. For the avoidance of doubt, the Tenant Portion Employee Payments shall not be an operating expense of the Facility that will reduce the amount of Net Operating Income paid to Landlord hereunder.

 

11.          Indemnity .         

 

(a)          Tenant will indemnify and hold Landlord and Owner (the “ Indemnified Parties ”) harmless against any and in respect of any and all liability, damage, loss, cost, and expenses arising out of or otherwise in respect of any breach by Tenant of its obligations under this Lease, provided, however, Tenant shall not be deemed to be in breach of its obligations hereunder if it is unable to perform the same due to a lack of availability of Facility funds, it being understood and agreed that, as set forth more fully in Section 4, Tenant has no obligation to advance its own funds in connection with the operation of the Facility during the Lease Term. Tenant will further indemnify and hold the Indemnified Parties harmless against any loss, claim or damage which such parties may suffer or sustain by reason of the Manager’s knowingly wrongful or grossly negligent acts or omissions in managing the Facility.

 

(b)          Landlord will indemnify, defend and hold harmless Tenant against any and in respect of any and all liability, damage, loss, cost and expense, arising out of or otherwise in respect of any breach by Landlord of its obligations under this Lease, of any obligations of Tenant as “landlord” under the Resident Agreements, or of any other matter arising from or related to the operation of the Facility other than those for which Tenant has an indemnification obligation to the Indemnified Parties under this Section 11.

 

12.          Notice .         Any notice, request or other communication to be given by either 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 in writing as aforesaid), to the following addresses:

 

To Landlord:   ARHC [__________] TRS, LLC
    c/o American Realty Capital VII, LLC
    405 Park Avenue, 2 nd Floor
    New York, NY  10022
    Attn: Edward M. Weil, Jr.
    President  
    Telephone: 212-415-6500
    Facsimile: 212-421-5799
       
with a copy (which will not   Foley & Lardner LLP
constitute notice) to:   111 North Orange Avenue
    Suite 1800
    Orlando, Florida  32801
    Attention: Taylor C. Pancake
    Telephone: 407-423-7656
    Facsimile: 407-648-1743

 

To Tenant: [ ], LLC
  c/o [   ]
       
       
  Attn:    
  Phone:    
  Facsimile:  
       
With copies to: [   ], LLC
  c/o [   ]
       
       
  Attn:    
  Phone:    
  Facsimile:  

 

Notice shall be deemed given on actual receipt or refusal of receipt regardless of the method of delivery used.

 

13.          Successors and Assigns .         Neither Landlord nor Tenant shall have the right to assign its respective rights or obligations under this Lease it being understood and agreed that the rights and obligations imposed on the parties hereunder are personal to Landlord and Tenant, except as set forth in Section 5(d) above with regard to the continued engagement of the Manager pursuant to the Management Agreement.

 

 
 

 

14.          Amendment .         This Lease may not be amended or modified except by written instrument signed by the parties hereto.

 

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

 

16.          Counterparts .         This Lease may be executed in multiple counterparts, each of which shall be deemed an original.

 

17.          Construction .         Each of the parties acknowledges and agrees that it has participated in the drafting and negotiation of this Lease. Accordingly, in the event of a dispute between the parties hereto with respect to the interpretation or enforcement of the terms hereof, no provision shall be construed so as to favor or disfavor either party hereto.

 

18.          Severability .         Should any one or more of the provisions of this Lease 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.

 

19.          Integration .         This Lease constitutes the entire agreement of the parties hereto regarding the subject matter hereof and supersedes all prior representations, warranties, agreements, arrangements, understandings and negotiations between the parties regarding the subject matter hereof.

 

20.          Attorneys’ Fees .         In the event of litigation or other proceedings involving the parties to this Lease to enforce any provision of this Lease, to enforce any remedy available upon a breach of this Lease, or seeking a declaration of the rights of either party under this Lease, the prevailing party shall be entitled to recover from the other such reasonable attorneys’ fees and costs as may be actually incurred, including its costs and fees on appeal.

 

[ REMAINDER OF PAGE IS LEFT INTENTIONALLY BLANK- SIGNATURE PAGE FOLLOWS]

 

 
 

 

IN WITNESS WHEREOF, the parties hereby execute this INTERIM LEASE as of the day and year first set forth above.         

 

  LANDLORD:
       
    ARHC [__________] TRS, LLC, a Delaware
limited liability company
       
    By:  
    Name:  
    Title:  
       
  TENANT:
       
    [___________] ASSISTED LIVING LLC, an
Iowa limited liability company
       
    By:  
    Name:  
    Title:  

 

 
 

 

ACKNOWLEDGEMENT OF MANAGER
FOR [___________________] Assisted Living INTERIM LEASE

 

The undersigned Manager, who is a party with the Tenant to that certain Management Agreement attached hereto as Exhibit “B”, acknowledges and consents to the terms of the foregoing Interim Lease. Additionally, the undersigned Manager acknowledges and agrees that, notwithstanding any provision of the Management Agreement to the contrary, the Management Agreement shall terminate without further notice to, or requirement of consent from, the Manager upon the expiration of the Lease Term specified in the foregoing Interim Lease.

 

  MANAGER:
       
    [___________________________]
       
    By:  
    Name:  
    Title:  

 

 
 

 

EXHIBIT “A’

 

Facility Description

 

 
 

 

 

EXHIBIT B

 

Management Agreement

 

 
 

 

EXHIBIT F

 

Assumption Agreement

 

[ See attached. ]

 

 
 

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made effective _______ __, 2014, by and between by [________] ASSISTED LIVING LLC , an Iowa limited liability company (the “ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain affiliates of Seller, dated as of August 1, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

RECITALS

 

A.           Seller or its predecessors-in-title have heretofore entered into certain leases with tenants permitting occupancy or use of residential units or other space located on that certain real property (the “ Property ”), being more particularly described on Exhibit ”A” attached hereto and made a part hereof for all purposes, which leases in effect as of the date hereof are listed on Exhibit B attached hereto (the “ Leases ”);

 

C.           Seller or its predecessors-in-title have heretofore entered into certain contracts and agreements relating to the operation and maintenance of the Property that Purchaser has agreed to assume, which contracts and agreements (the “ Contracts ”) are listed on Exhibit “C” attached hereto and made a part hereof for all purposes; and

 

D.           Subject to the terms of this Agreement, Purchaser desires to purchase and assume from Seller, and Seller desires to sell and assign to Purchaser, (i) Seller’s right, title and interest as lessor under the Leases, (ii) all right, title and interest of Seller in, to and under the Contracts and (iii) all other Assumed Liabilities related to the Property (the “ Property Assumed Liabilities ”.

 

AGREEMENT :

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the parties hereto agree as follows:

 

1.          Subject to the terms of this Agreement, Seller does hereby assign, transfer, set over, deliver and convey unto Purchaser, and the Purchaser, for itself and for its successors and assigns, hereby accepts, assumes and agrees to pay, perform or discharge, as the case may be, (a) all of Seller’s right, title and interest under (i) the Leases, all guaranties of such Leases, and all rents, revenues, income, profits, and receipts due under the Leases or otherwise receivable by the owner of the Property for use or occupancy of any of the Property allocable to the period from and after the date hereof and (ii) the Contracts and (b) all other Property Assumed Liabilities.

 

2.          Except for the Property Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

 
 

 

3.          The undertakings of the Purchaser referred to in this Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Property Assumed Liabilities.

 

4.          This Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall prevail.

 

5.          EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE LEASES, CONTRACTS AND OTHER PROPERTY ASSUMED LIABILITIES WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

 

[Signature Page Follows]

 

 
 

 

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to be executed and delivered under seal as of the day and year first above written. This Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

  SELLER :
  [____________] ASSISTED LIVING, LLC ,
an Iowa limited liability company
     
  By:  
  Title:  
     
  PURCHASER :
     
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Title:  

 

[signatures continue on next page]

 

 
 

 

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]

 
 

 

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
     
  By:  
  Name:  
  Title:  

 

 
 

 

EXHIBIT G

 

Due Diligence Materials

 

[ See attached. ]

 

 
 

 

Due Diligence Materials

 

1. A complete copy of all leases affecting the Properties and all amendments thereto and of all
material correspondence relating thereto.

 

2. A copy of all surveys and site plans of the Properties, including, without limitation, any as-built
surveys obtained or delivered to tenants of the Properties in connection with its construction.

 

3. A copy of all architectural plans and specifications and construction drawings for improvements
located on the Properties.

 

4. A copy of Seller's title insurance policies relating to the Properties.

 

5. A copy of the certificate of occupancy and zoning reports in Seller's possession for the Properties
and of all governmental permits and approvals.

 

6. A copy of all existing environmental, engineering and physical condition reports in Seller's
possession for the Properties.

 

7. The operating budgets and operating statements of the Properties for the thirty-six (36) month
period immediately preceding the Purchase and Sale Agreement effective date or such shorter period from the commencement of rent under the leases.

 

8. Copies of each Property's real estate tax bills and all utility bills for the current and prior two (2)
tax years.

 

9. All service contracts and insurance policies which affect the Properties, if any.

 

10. A copy of all inspections of and warranties relating to the improvements constructed on the
Properties and systems serving the Properties, including without limitation any structural slab, roof, electrical, plumbing, heating, air conditioning and elevator inspections and warranties.

 

11. A written inventory of all items of personal property, if any, to be conveyed to Buyer.

 

12. Updated set of financials to be provided through the Closing Date to extent reasonably available
to Seller.

 

13. Complete copy of any feasibility study completed by the senior housing operator, if any.

 

14. Operator records of payor-mix for patients/residents at the Properties.

 

15. A copy of all primary and secondary state licenses or regulatory permits for the Properties.

 

16. A copy of any third-party accreditation (i.e. Joint Commission) which affect the Properties, if

 

 
 

 

17. A copy of all Medicare and Medicaid provider agreements and provider numbers for the Properties.

 

18. A copy of all Medicare and Medicaid cost reports for the previous three years, if applicable.

 

19. A copy of any certificate of need documentation for each Property, if any.

 

20. A copy of all licensing inspection reports (whether performed on an annual basis or otherwise)
from state regulators related to operation of each Property as an assisted living facility for the past five (5) years, and a summary of actions taken to correct deficiencies identified in any such reports

 

21. A copy of all regulatory correspondence relating to enforcement actions imposed or threatened
for the past five (5) years.

 

22. A copy of any consent order imposed on the Properties.

 

21. A copy of all regulatory correspondence relating to any physical plant or life safety code

deficiencies for the Properties.

 

24. A copy of any documents relating to a waiver of life safety code or physical plant requirements
for the Properties.

 

25. Summary of all capital expenditures for the thirty-six (36) month period immediately preceding
the Purchase and Sale Agreement effective date.

 

26. All pest control inspection reports of the Properties for the preceding thirty-six (36) months.

 

27. Copy of any ADA Survey report for the Properties.

 

28. Copies of all maintenance and service reports for the Properties for the preceding thirty-six (36)
months.

 

 
 

 

SUNNYBROOK DISCLOSURE SCHEDULE TO

ASSET PURCHASE AGREEMENT

 

By and Among

 

American Realty Capital Healthcare Trust II Operating Partnership, L.P.

as “Purchaser”

 

and

 

ECI Acquisition I, LLC

Village Assisted Living, LLC

Mt. Pleasant Assisted Living, LLC

Burlington Assisted Living, LLC

Burling Independent Living, LLC

Muscatine Assisted Living, LLC

Carroll Assisted Living, LLC

Ft. Madison Assisted Living, LLC

 

This document constitutes the disclosure schedule, as it relates to Burlington Facility, Carroll Facility, Fairfield Facility, Fort Madison Facility, Mount Pleasant Facility, and Muscatine Facility (the “ SunnyBrook Disclosure Schedule ”). This SunnyBrook Disclosure Schedule, together with the Prairie Hills Disclosure Schedule, constitutes the disclosure schedule to that certain Asset Purchase Agreement by and between American Realty Capital Healthcare Trust II Operating Partnership, L.P. and ECI Acquisition I, LLC, Village Assisted Living, LLC, Mt. Pleasant Assisted Living, LLC, Burlington Assisted Living, LLC, Burlington Independent Living, LLC, Muscatine Assisted Living, LLC, Carroll Assisted Living, LLC, and Ft. Madison Assisted Living, LLC (the “ Asset Purchase Agreement ”).

 

The fact that any item of information is contained herein shall not, in and of itself, be construed to mean that such information is required to be disclosed in or by the Asset Purchase Agreement or that such item of information is “material” as such term is used in the Asset Purchase Agreement. Each section of this SunnyBrook Disclosure Schedule shall only apply to and qualify the corresponding section of the Asset Purchase Agreement, provided that any matter that is clearly disclosed in a particular section of this SunnyBrook Disclosure Schedule shall be deemed to have been disclosed in any other section of this SunnyBrook Disclosure Schedule to which it is reasonably apparent on the face of such disclosure (without further inquiry or investigation) that such disclosure applies, notwithstanding the omission of an explicit cross reference thereto. The headings in this SunnyBrook Disclosure Schedule are for convenience of reference only and shall not be deemed to alter or affect the express description of the sections of this SunnyBrook Disclosure Schedule as set forth in the Asset Purchase Agreement.  This SunnyBrook Disclosure Schedule includes descriptions of certain agreements or instruments.  The descriptions are qualified in their entirety by reference to the detailed terms of the applicable agreement or instrument.

 

 
 

 

All capitalized terms used but not otherwise defined in this SunnyBrook Disclosure Schedule shall have the meanings set forth in the Asset Purchase Agreement to which this SunnyBrook Disclosure Schedule is attached.

 

 
 

 

Schedule 1.1( a )

Assumed Contracts and Leases

 

1.      All contracts listed on Schedule 6.12, unless Purchaser provides Seller with written notice otherwise prior to the expiration of the due diligence period.

 

2.      See also Schedule 1.1(a) of Prairie Hills Disclosure Schedule.

 

 
 

 

Schedule 1.1( c )( i )

Legal Description of Purchased Real Property- Burlington Facility

 

Real property in the City of Burlington, County of Des Moines, State of Iowa, described as follows: Lot 1 of Stonegate Village Sunnybrook Addition located in the West Half of the Northeast Quarter of Section 11, Township 69 North, Range 3 West of the Principal Meridian, City of Burlington, Des Moines County, Iowa.

 

 
 

 

Schedule 1.1( c )( ii )

Legal Description of Purchased Real Property- Carroll Facility

 

Real property in the City of Carroll, County of Carroll, State of Iowa, described as follows: Lot 1, Block 5, Oak Park Subdivision – Plat No. 2 to the City of Carroll, Carroll County, Iowa.

 

APN: 0719203028

 

 
 

 

Schedule 1.1( c )( iii )

Legal Description of Purchased Real Property- Fairfield Facility

 

Real property in the City of Fairfield, County of Jefferson, State of Iowa, described as follows: That part of Auditor’s Parcel “C” in part of the NE 1/4 of NW 1/4 of Section 34-72-10, Jefferson County, Iowa, described as follows: Commencing at the northeast corner of said NW 1/4 of Section 34; thence South 89 degrees 41 minutes 21 seconds West, along the north line of said NW 1/4 of Section 34 and the centerline of the existing street, 644.00 feet; thence South 00 degrees 00 minutes 00 seconds West, 33.00 feet to the POINT OF BEGINNING; thence continuing South 00 degrees 00 minutes 00 seconds West, 461.44 feet; thence North 89 degrees 41 minutes 21 seconds East, 472.00 feet; thence North 00 degrees 00 minutes 00 seconds West, 461.44 feet; thence South 89 degrees 41 minutes 21 seconds West, along the south line of Madison Street, 472.00 feet to the POINT OF BEGINNING.

 

APN: 0634126002

 

 
 

 

Schedule 1.1( c )( iv )

Legal Description of Purchased Real Property- Fort Madison Facility

 

Real property in the City of Fort Madison, county of Lee, State of Iowa, described as follows: Lot 2 of River Bend Subdivision, Fort Madison, Lee County, Iowa, part of the East Half of Section 1, Township 67 North, Range 5 West of the 5th Principal Meridian, Lee County, Iowa, as shown by the official records of Lee County, Iowa.

 

APN: 024714012520040

 

 
 

 

Schedule 1.1( c )( v )

Legal Description of Purchased Real Property- Mount Pleasant Facility

 

Real property in the City of Mount Pleasant, County of Henry, State of Iowa, described as follows: Lot 3, Ashford Park Subdivision to the City of Mt. Pleasant, Henry County, Iowa.

 

 
 

 

Schedule 1.1( c )( vi )

Legal Description of Purchased Real Property- Muscatine Facility

 

Real property in the City of Muscatine, County of Muscatine, State of Iowa, described as follows: Lots 1 and 2, of Riverbend Fifth Addition to the City of Muscatine, in Muscatine County, Iowa.

 

APN: 0827101008

 

 
 

 

Schedule 1.1( c )( xiv )

Legal Description of Purchased Real Property- Burlington Land

 

Burlington Land, 12431 West Avenue Road, Burlington, Des Moines County, Iowa

Lot Number One (1) in Second Addition To Stonegate Village Sunnybrook Addition, a Subdivision in the City of Burlington, Des Moines, County, Iowa, according to the Plat recorded March 5, 2014, as Document No. 2014-000888.

 

 
 

 

Schedule 2.2( c )

Prepaids and Deposits

 

The below chart lists Prepaid Rent, where a resident has for one reason or another prepaid a portion of their rent.

 

SunnyBrook of Burlington

Unearned Rent

As of June 30, 2014

 

    Current     1 - 30     31 – 60     61 - 90     91 and over     Total  
Dunham, David                     3,490.68       3,490.68       3,908.36       10,889.72  
Osborne, Lois                     -3,323.84                       -3,323.84  
Raub, Butch                     -1,100.00                       -1,100.00  
Smith, Jerry and Helen                     -6,450.00       -6,450.00               -12,900.00  
TOTAL   $ 0.00     $ 0.00     -$ 7,383.16     -$ 2,959.32     $ 3,908.36     -$ 6,434.12  

 

The below chart lists waiting list fees paid.

 

SunnyBrook of Muscatine

Refundable Deposit

6/30/2014

 

Last Name   First Name   Date   Deposit  
                 
O'Brien   Char   07/31/2012     100.00  
Pelton   Bette   09/21/2012     100.00  
Fuhlman   Cecil   11/13/2012     150.00  
Joiner   T.E.   10/21/2013     150.00  
Barnes   Teresa   10/21/2013     150.00  
Marshall   Pat   10/21/2013     150.00  
Moser   Katherine   10/21/2013     150.00  
Furlong   Maurice   01/16/2014     150.00  
Forbes   Louise   01/30/2014     150.00  
Gaeta   Josie   03/31/2014     150.00  
Platt   Dorothy   04/10/2014     150.00  
                 
              1,550.00  

 

 
 

 

Schedule 2.2( l )

Facility Trade Names

SunnyBrook of Burlington

SunnyBrook of Carroll

SunnyBrook of Ft. Madison

SunnyBrook of Muscatine

SunnyBrook of Fairfield

SunnyBrook of Mt. Pleasant

 

 
 

 

Schedule 2.3

Excluded Property

 

The following vehicles that are titled and used by SunnyBrook Senior Living, LLC.

 

2009 Toyota Rav4 SUV JTMBF33V39D011130 Management
2009 Toyota Rav4 SUV JTMBF33V495009526 Management
2009 Ford Escape SUV 1FMCU93G09KC35011 Management
2011 Ford Escape SUV 1FMCU9DG0BKC10629 Management
2012 Ford Taurus 1FAHP2FW6CG143560 Management
2013 Ford Escape 1FMCU9HX5DUC15472 Management
2012 Ford Escape 1FMCU9DG1CKC54060 Management
2013 Cadillac ATS 1GGAL5SXXD0141136 Management
2014 Ford Escape   Management
2010 Ford Flex PP 2FMHK6CC5ABB28798 Management

 

The following personal property and any other personal property physically located at 601 S. 23rd Street in Fairfield, Iowa that is used exclusively by SunnyBrook Senior Living, LLC.

 

HP Computer    
HP Computer    
Computer    
Computer Equipment    
Computer Equipment    
Payroll computer system    
office furniture    
leasehold improvments    
Chairs for conference room    
printer    
computer and monitor    
artwork    
Laptop computer    
Printer    
Television stand    
conference room television    
2 Dell laptop computers    
Dell Laptop    
Laptop computer    
Furniture    

 

The following 6 pianos that are being leased pursuant to that certain Piano Lease effective as of 11/1/2013 by and between SPL Fine Musical Instruments, LLC and SunnyBrook of Muscatine,

 

 
 

 

SunnyBrook of Burlington, SunnyBrook of Fort Madison, SunnyBrook of Mt. Pleasant, SunnyBrook of Fairfield, and SunnyBrook of Carroll.

· 1924 Model B Steinway & Sons
· 1909 Model O Steinway & Sons
· 1910 Model AA Mason & Hamlin
· 1885 Model A Steinway & Sons
· 1960 Model M Steinway & Sons
· 1911 Model A Steinway & Sons

 

Any and all cash reserves, taxes, property insurance and/or mortgage insurance held in escrow pursuant to Mortgage Note dated March 23, 2012 and related documents for FHA Project No. 074-22019 between Village Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $7,888,800.00.

Any and all cash reserves, taxes, property insurance and/or mortgage insurance held in escrow pursuant to Mortgage Note dated March 22, 2012 and related documents for FHA Project No. 074-22026 between Mt. Pleasant Assisted Living, LLC as Maker and Greystone Funding Corporation as Holder with an original principal balance of $4,275,000.00.

Any and all cash reserves, taxes, property insurance and/or mortgage insurance held in escrow pursuant to Mortgage Note dated September 23, 2011 and related documents for FHA Project No. 074-43086 between Burlington Assisted Living LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $6,849,300.00.

Any and all cash reserves, taxes, property insurance and/or mortgage insurance held in escrow pursuant to Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22023 between Carroll Assisted Living, LLC as Maker and CWCapital LLC as Holder with an original principal balance of $5,273,600.00.

Any and all cash reserves, taxes, property insurance and/or mortgage insurance held in escrow pursuant to Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22025 between Ft. Madison Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $4,909,200.00.

Any and all cash reserves, taxes, property insurance and/or mortgage insurance held in escrow pursuant to Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22024 between Muscatine Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $6,955,700.00.

 

 
 

 

Schedule 2.4( a )

Permitted Title Exceptions

 

SunnyBrook of Carroll

· Real estate taxes for 2014 and subsequent years, not yet due or payable.
· Easements for drainage and utility purposes as shown on the recorded plat of Oak Park Subdivision Plat No. 2.
· Terms, conditions, restrictions, obligations and easements as contained in the Subdivision Agreement for Oak Park Subdivision—Plat No. 2 dated May 14, 2007, recorded June 20, 2007 in Book L, page 099.
· Terms, conditions and obligations as contained in Resolution No. 0719 dated May 14, 2007, recorded June 20, 2007 in Book L, page 099.
· Easement for road purposes in favor of Carroll County as contained in the Easement for Public Highway dated October 29, 1965, recorded November 15, 1965 in Book 49, page 258.
· Terms, conditions, restrictions and obligations as contained in the Urban Renewal Plan for Oak Park Subdivision Plat No. 2 Urban Renewal Project Area and Resolution No. 0740 dated September 24, 2007, recorded October 1, 2007 in Book 2007, page 3363.
· Terms and conditions of the Minimum Assessment Agreement dated September 24, 2007, recorded November 5, 2007 in Book 2007, page 3789.
· Easement for road and public highway purposes in favor of the City of Carroll as contained in the Easement for Public Highway dated September 7, 2007, recorded October 29, 2008 in Book 2008, page 3993.
· Easement for recreational trail purposes in favor of the City of Carroll as contained in the Easement for Recreational Trail dated October 22, 2009, recorded November 12, 2009 in Book 2009, page 4355.

 

SunnyBrook of Burlington

· Real estate taxes for 2014 and subsequent years, not yet due or payable.
· Terms, conditions, restrictions, covenants and provisions as contained in the Declaration of Protective Covenants recorded November 22, 2006 as Exhibit “C” in Document No. 2006-007204.

 

Burlington Land

· Real estate taxes for 2014 and subsequent years, not yet due or payable.
· Easements, restrictions, covenants and conditions as contained in the Declaration of Protective Covenants dated November 20, 2006, as contained in the Plat, recorded November 22, 2006, as Document No. 2006-007204.
· Easements, restrictions, covenants and conditions as contained in the Declaration of Protective Covenants dated March 5, 2014, as contained in the Plat, recorded March 5, 2014, as Document No. 2014-000888.

 

SunnyBrook of Fairfield

· Real estate taxes for 2014 and subsequent years, not yet due or payable.
· Utility easement for sewer and water purposes in favor of the City of Fairfield, Iowa, granted in corrective warranty deed dated February 26, 2002, recorded February 28, 2002, in Book 223, Page 580. (Original Deed recorded in Book 223, Page 411).

 

 
 

 

SunnyBrook of Ft. Madison

· Real estate taxes for 2014 and subsequent years, not yet due or payable.
· Undefined easement for electric transmission line purposes, together with any incidental rights, in favor of Union Electric Power Company, as contained in the Easement, dated June 10, 1954, recorded June 12, 1954 in Land Deed record 47, Page 161.
· Easement for water line purposes, together with any incidental rights, in favor of Rathbun Regional Water Association, Inc., as contained in the Right of Way Easement, dated August 19,, 1996, recorded September 16, 1996 on Microfiche Card 1996N-87, E-7.
· Easement for utility purposes and right of way for Bluff Road as shown on the Final Plat of River Bend Subdivision recorded August 1, 2007 in Book 07N, Page 1813.

 

SunnyBrook of Muscatine

· Real estate taxes for 2014 and subsequent years, not yet due or payable.
· Covenants, Conditions and Restrictions contained in Riverbend Addition Covenants dated November 6, 2001, recorded November 13, 2001, as Document No. 2001-08503.
· Easements created in Plat of Riverbend Fifth Addition to the City of Muscatine, recorded June 27, 2007, as Document No. 2007-04235 as follows:
     

a) Utility in varying widths abuting the boundary lines of said property.

· Easements created in Plat of Riverbend Third Addition to the City of Muscatine, recorded December 13, 2004, as Document No. 2004-10127 as follows:

a) 30 foot Sanitary Sewer

 

SunnyBrook of Mt. Pleasant

· Real estate taxes for 2014 and subsequent years, not yet due or payable.
· Terms, conditions, provisions, and rights, including the right to enter upon the land, in favor of the City of Mount Pleasant, Iowa, for electric transmission line purposes, as set forth and contained in Easement dated April 12, 1945, filed December 21, 1946 in Record Book 213 at Page 67, as shown on that certain ALTA/ACSM Land Title Survey prepared by Stephen W. Hausner, French-Reneker-Associates, Inc., dated August 25, 2005.
· Terms, conditions, provisions, and rights, including easement rights in favor of S.E. Iowa Cooperative Electric Association, to construct, operate, replace, repair, and maintain or remove an electric transmission line, together with the right to cut any trees or shrubbery necessary to keep them clear of such line, as set forth and contained in Right-of-Way Easement dated April 9, 1986, filed June 10, 1987 in Record Book 463 at Page 209, as shown on that certain ALTA/ACSM Land Title Survey prepared by Stephen W. Hausner, French-Reneker-Associates, Inc., dated August 25, 2005.
· Privileges, authorities, and easement rights, including the right of ingress and egress, in favor of Iowa Network Services, Inc., to install, maintain, and operate its buried telephone cables, as set forth and contained in Easement for Right-of-Way, dated November 27, 1996, filed December 2, 1996 in Record Book 677 at Page 87, as shown on that certain ALTA/ACSM Land Title Survey prepared by Stephen W. Hausner, French-Reneker-Associates, Inc., dated August 25, 2005.
· Easements, limitation of access, terms, conditions, provisions, restrictions, agreements, rights, including the right of entry, as set forth and contained in Partial Acquisition Contract by and between Rolling Hills Land Co., Inc., as Seller, and Iowa Department of Transportation, acting for

 

 
 

 

the State of Iowa, as Buyer, dated December 16, 1999, filed December 23, 1999 in Image Book 1999 at Page 4635 and in Warranty Deed dated April 26, 2001, filed May 24, 2001 in Image Book 2001 at Page 1615, as shown on that certain ALTA/ACSM Land Title Survey prepared by Stephen W. Hausner, French-Reneker-Associates, Inc., dated August 25, 2005.

· Terms, conditions, resolutions, agreements, exhibits, and provisions of Mount Pleasant Urban Renewal Plan, and all amendments thereto, as evidenced by Certifications dated September 27, 2002, filed September 30, 2002 in Image Book 2002 at Page 3634 and in Image Book 2002 at Page 3635.
· Terms, conditions, and provisions of Ordinance No. 1120 as evidenced by Certificate dated September 30, 2002, filed September 30, 2002 in Image Book 2002 at Page 3637.
· Terms, conditions, and provisions of Agreement for Private Development by and between the City of Mount Pleasant, Iowa and D & L Development, Inc., dated October 30, 2002, and Mortgage shown as Exhibit F, executed by and between D & L Development, Inc., to the City of Mount Pleasant, Iowa, dated November 13, 2002, as evidenced by that certain Certificate dated November 15, 2002, flied November 15, 2002 In Image Book 2002 at Page 4288; as amended by the Release of Real Estate Mortgage recorded December 4, 2007, In Book 2007 at Page 3544; as amended by the Certificate of Completion recorded January 13, 2004, in Book 2004 at Page 114; as amended by that certain Amendment recorded March 22, 2012, in Book 2012 at Page 0702.
· Restrictions on the right of direct access to, from, and across all primary roads In Henry County, Iowa as set forth and contained In Resolution adopted by the Iowa State Highway Commission on June 11, 1957 and as evidenced by Affidavit of the Highway State Highway Commission to the Public, dated June 28, 1957, filed July 1, 1957 In Record Book 244 at Page 307.
· Terms, conditions, provisions and easements for utility purposes as shown on the recorded plat of Ashford Park Subdivision recorded December 24, 2003, in Book 2003 at Page 5066; as amended by the revised Final Plat recorded January 12, 2004, in Book 2004 at Page 98.

 

 
 

 

Schedule 2.4( g )

Licenses, Leases Easements and Other Rights Related to Real Property

 

All items set forth on Schedule 2.4(a).

 

 
 

 

Schedule 3.3

Purchase Price Allocation

 

 

 
 

 

Schedule 4.4( g )

Obligations to Hired Employees

 

SCHEDULE 4.4(g) 

Employee
Number 		  Employee Name   Facility
Location 		  Pay
Rate/Hr 		    Date of Last
Pay 		  PTO Hrs
Balance 		    PTO Liability
Amount 		 
1012   Atteberry, Julia E   BURLINGTON     8.84     7/11/2014     15.56     $ 137.55  
1252   Autry, Monica N   BURLINGTON     10.00     7/11/2014     4.32     $ 43.20  
1197   Bandy, Patricia J   BURLINGTON     8.00     7/11/2014     13.21     $ 105.68  
904   Bolander, Madison E   BURLINGTON     15.00     7/11/2014     19.82     $ 297.30  
962   Boyd, Dorothea J   BURLINGTON     9.98     7/11/2014     85.87     $ 856.98  
167   Cary, James M   BURLINGTON     18.18     7/11/2014     30.83     $ 560.49  
1063   Clark, Corrie L   BURLINGTON     8.64     7/11/2014     6.48     $ 55.99  
1013   Coombs, Caitlinn A   BURLINGTON     8.75     7/11/2014     0     $ 0.00  
1244   Coulter, Chelsea S   BURLINGTON     9.50     7/11/2014     21.69     $ 206.06  
1106   Dalton, Jessica L   BURLINGTON     9.60     7/11/2014     6.61     $ 63.46  
1147   Derry, Angela R   BURLINGTON     9.50     7/11/2014     54.95     $ 522.03  
1233   Dunham, Nathan P   BURLINGTON     15.00     7/11/2014     18.41     $ 276.15  
1185   Fry, Linda Ann   BURLINGTON     9.50     7/11/2014     0     $ 0.00  
1046   Graham, Brenda S   BURLINGTON     9.33     7/11/2014     5.24     $ 48.89  
1195   Harden, Haylee M   BURLINGTON     9.50     7/11/2014     4.04     $ 38.38  
1223   Hartman, Rita R   BURLINGTON     10.00     7/11/2014     9.9     $ 99.00  
1064   Hawthorne, Dorothy J   BURLINGTON     9.66     7/11/2014     0     $ 0.00  
905   Hirte, Ella Joy   BURLINGTON     8.31     7/11/2014     42.24     $ 351.01  
889   Holloway, Roberta A   BURLINGTON     13.52     7/11/2014     21.29     $ 287.84  
175   Howard, Frederico Demarco   BURLINGTON     9.38     7/11/2014     3.51     $ 32.92  
871   Kastantin, Anthony J   BURLINGTON     13.70     7/11/2014     31.49     $ 431.41  
989   Kraisser, Jaime J   BURLINGTON     9.79     7/11/2014     43.28     $ 423.71  
874   Lamb, Trisha A   BURLINGTON     11.81     7/11/2014     5.03     $ 59.40  
1229   Lovett, Tamara F   BURLINGTON     8.50     7/11/2014     2.12     $ 18.02  
1142   Ludwick, Taylor A   BURLINGTON     9.50     7/11/2014     0.74     $ 7.03  
564   Lybarger-Adams, Valerie A   BURLINGTON     31.25     7/11/2014     42.2     $ 1,318.75  
1134   Macans, Heather S   BURLINGTON     9.50     7/11/2014     4.37     $ 41.52  
1210   McCane, Faith N   BURLINGTON     9.50     7/11/2014     27.9     $ 265.05  
1289   McCoy, Katherine G   BURLINGTON     9.50     7/11/2014     5.26     $ 49.97  

 

 
 

 

1184   Miller, Hannah L   BURLINGTON     9.75     7/11/2014     0.58     $ 5.66  
1000   Mortimer, Gail Lynn   BURLINGTON     12.60     7/11/2014     7.92     $ 99.79  
1199   Moser, Skye A   BURLINGTON     8.00     7/11/2014     23.57     $ 188.56  
1196   Mowen, Bradley D   BURLINGTON     10.50     7/11/2014     29.85     $ 313.43  
174   Pettis, Becky J   BURLINGTON     10.20     7/11/2014     0     $ 0.00  
951   Rankin, Kristen E   BURLINGTON     10.04     7/11/2014     19     $ 190.76  
1286   Reif, Sara J   BURLINGTON     8.50     7/11/2014     9.7     $ 82.45  
1246   Richter, Brenda G   BURLINGTON     9.50     7/11/2014     31.33     $ 297.64  
1236   Robinson, Taylor K   BURLINGTON     8.50     7/11/2014     21.05     $ 178.93  
974   Robinson, Victoriea L   BURLINGTON     10.30     7/11/2014     8.15     $ 83.95  
1112   Rosin-Atwood, Karin A   BURLINGTON     9.62     7/11/2014     5.18     $ 49.83  
832   Schmeiser, Debbie Sue   BURLINGTON     10.30     7/11/2014     6.9     $ 71.07  
1026.00   Schwartz, Jennifer   BURLINGTON     25.00     7/11/2014     16.6424     $ 416.06  
1291   Smith, Kaitlin H   BURLINGTON     9.50     7/11/2014     1.31     $ 12.45  
805   Stewart, Jasmine K   BURLINGTON     10.04     7/11/2014     7.63     $ 76.61  
779   Thomas, Janet L   BURLINGTON     8.32     7/11/2014     19.62     $ 163.24  
694   Thompson, Deborah E   BURLINGTON     8.93     7/11/2014     34.72     $ 310.05  
1290   Tisor, April L   BURLINGTON     8.00     7/11/2014     2.12     $ 16.96  
842   Trafton, Mandy R   BURLINGTON     10.30     7/11/2014     13.66     $ 140.70  
1036   Vallee, Morgan K   BURLINGTON     10.27     7/11/2014     4.58     $ 47.04  
1271   VandenBoom, Frances Dalen   BURLINGTON     10.25     7/11/2014     14.5     $ 148.63  
446   Vidal, Samantha J   BURLINGTON     20.07     7/11/2014     64.35     $ 1,291.50  
1118   Wagner, Pepper L   BURLINGTON     9.77     7/11/2014     9.18     $ 89.69  
868   Ward, Elizabeth N   BURLINGTON     8.82     7/11/2014     29.12     $ 256.84  
1173   Waterman, Susan J   BURLINGTON     26.44     7/11/2014     1.41     $ 37.28  
1159   Wilke, Kristina K   BURLINGTON     8.50     7/11/2014     24.5     $ 208.25  
462   Anderson, Hunter J   CARROLL     9.53     7/11/2014     36.87     $ 351.37  
1272   Babiker, Suiaad Galal   CARROLL     10.50     7/11/2014     5.81     $ 61.01  
1235   Becker, Nicole D   CARROLL     7.25     7/11/2014     0.74     $ 5.37  
482   Boehm, Bruce W   CARROLL     26.44     7/11/2014     63.19     $ 1,670.74  
907   Bolster, Teresa L   CARROLL     9.25     7/11/2014     14.81     $ 136.99  
638   Borkowski, Linda L   CARROLL     15.05     7/11/2014     6.46     $ 97.22  
1241   Doty, Ragina K   CARROLL     11.00     7/11/2014     4     $ 44.00  
1154   Eisenbacher, Durene K   CARROLL     10.00     7/11/2014     0     $ 0.00  

 

 
 

 

1221   Flattery, Linda M   CARROLL     10.50     7/11/2014     22.82     $ 239.61  
1266   Fordyce, Abbey K   CARROLL     9.50     7/11/2014     0     $ 0.00  
1125   Goodman, Barbara A   CARROLL     10.10     7/11/2014     19.05     $ 192.41  
216   Grade, Deborah A   CARROLL     13.27     7/11/2014     5.31     $ 70.46  
379   Grundmeier, Robbie Charle   CARROLL     10.11     7/11/2014     15.5     $ 156.71  
233   Hanson, Emilie Jean   CARROLL     24.76     7/11/2014     47.16     $ 1,167.68  
223   Horn, Judy A   CARROLL     11.67     7/11/2014     41.27     $ 481.62  
913   Irlmeier, Marie C   CARROLL     10.42     7/11/2014     26.42     $ 275.30  
234   Kaspersen, Kelly Lynn   CARROLL     10.51     7/11/2014     27.35     $ 287.45  
1250   Kelley, Elizabeth M   CARROLL     10.00     7/11/2014     34.04     $ 340.40  
1203   Kurth, Juanita F   CARROLL     10.00     7/11/2014     27.57     $ 275.70  
611   Lebeck, Nicole A   CARROLL     10.23     7/11/2014     4.23     $ 43.27  
1288   Lucy, Heather Nicole   CARROLL     9.50     7/11/2014     9.01     $ 85.60  
886   Magner, Cully D   CARROLL     24.05     7/11/2014     48.85     $ 1,174.84  
811   Mozena, Summer M   CARROLL     13.00     7/11/2014     5     $ 65.00  
228   Odendahl, Elizabeth V   CARROLL     8.45     7/11/2014     6.67     $ 56.36  
1178   Ott, Peggy J   CARROLL     9.50     7/11/2014     63.88     $ 606.86  
1257   Peckumn-Fiscus, Jane M   CARROLL     10.50     7/11/2014     6.66     $ 69.93  
225   Rose, Janet Kay   CARROLL     10.11     7/11/2014     0.24     $ 2.43  
1216   Schaal, Jackson M   CARROLL     7.25     7/11/2014     6.51     $ 47.20  
685   Schaal, Reagan A   CARROLL     9.82     7/11/2014     18.25     $ 179.22  
1048   Schmidt, Beth Ann L   CARROLL     10.25     7/11/2014     17.65     $ 180.91  
1245   Schmitz, Samantha Jo   CARROLL     10.25     7/11/2014     16.52     $ 169.33  
1263   Smith, Amy M   CARROLL     10.50     7/11/2014     7.38     $ 77.49  
232   Stevens, Sheila A   CARROLL     10.11     7/11/2014     17.26     $ 174.50  
1127   Sturm, Tess E   CARROLL     9.34     7/11/2014     69.31     $ 647.36  
1268   Tiefenthaler, Marlene H   CARROLL     9.25     7/11/2014     20.8     $ 192.40  
1294   Tunning, Mark G   CARROLL     19.00     7/11/2014     0     $ 0.00  
1208   Anderson, Angela K   FAIRFIELD     9.00     7/11/2014     5.47     $ 49.23  
1176   Besick, Donna J   FAIRFIELD     9.50     7/11/2014     33.26     $ 315.97  
88   Boese, Ruby Rana   FAIRFIELD     13.00     7/11/2014     76.83     $ 998.79  
57   Bucher, Rachel Aline   FAIRFIELD     10.93     7/11/2014     15.07     $ 164.72  
529   Conrad, Sara L   FAIRFIELD     9.67     7/11/2014     18.11     $ 175.12  
1002   Dimmitt, Micayla M   FAIRFIELD     9.00     7/11/2014     7.85     $ 70.65  
58   Elliott, Sharlene Lee   FAIRFIELD     14.00     7/11/2014     67.78     $ 948.92  

 

 
 

 

1213   Francisco, Brandon J   FAIRFIELD     8.00     7/11/2014     21.58     $ 172.64  
968   Garvey, Kitzi L   FAIRFIELD     9.00     7/11/2014     3.58     $ 32.22  
1082   Gillam, Brittany A   FAIRFIELD     9.00     7/11/2014     49.74     $ 447.66  
1226   Hird, Melody M   FAIRFIELD     12.00     7/11/2014     43.11     $ 517.32  
62   Hock, Sue Ann   FAIRFIELD     14.17     7/11/2014     48.41     $ 685.97  
1120   Howell, Andrew J   FAIRFIELD     15.15     7/11/2014     61.98     $ 939.00  
1018   Hughes, Nicole J   FAIRFIELD     9.18     7/11/2014     26.08     $ 239.41  
1214   Hurst, William L   FAIRFIELD     8.00     7/11/2014     15.1     $ 120.80  
1022   Johnson, Rachael A   FAIRFIELD     9.18     7/11/2014     47.21     $ 433.39  
1260   Kiesey, Sheila C   FAIRFIELD     24.00     7/11/2014     14.09     $ 338.16  
1220   Kirk, Alexander Charles   FAIRFIELD     9.00     7/11/2014     67.04     $ 603.36  
1151   LeMaster, Megan N   FAIRFIELD     9.00     7/11/2014     67.15     $ 604.35  
92   Lewman, Tara Lou   FAIRFIELD     10.79     7/11/2014     59.49     $ 641.90  
764   Logli, Brandi L   FAIRFIELD     25.60     7/11/2014     149.8     $ 3,834.88  
460   Loveland, Jennifer M   FAIRFIELD     10.75     7/11/2014     6.5     $ 69.88  
1239   McCoy, Cynthia L   FAIRFIELD     9.00     7/11/2014     39.81     $ 358.29  
1217   McElroy, Alexis S   FAIRFIELD     9.00     7/11/2014     18.51     $ 166.59  
402   Newlon, Hannah M   FAIRFIELD     9.00     7/11/2014     0.88     $ 7.92  
1077   Nicely, Jennifer A   FAIRFIELD     10.00     7/11/2014     64.4     $ 644.00  
1121   Nicely, Veronica C   FAIRFIELD     9.00     7/11/2014     59.26     $ 533.34  
430   Qualters, Judy Lucille   FAIRFIELD     26.45     7/11/2014     34.73     $ 918.60  
66   Schafer, Carrie Louise   FAIRFIELD     9.93     7/11/2014     52.86     $ 524.90  
68   Schafer, Nancy J   FAIRFIELD     9.11     7/11/2014     42.6     $ 388.09  
834   Sharp, Amber L   FAIRFIELD     9.18     7/11/2014     15.68     $ 143.94  
1240   Shreck, Flower F   FAIRFIELD     8.00     7/11/2014     13.47     $ 107.76  
580   Sisk, Michelle R   FAIRFIELD     11.01     7/11/2014     41.61     $ 458.13  
1126   Sutherland, Danielle L   FAIRFIELD     10.00     7/11/2014     2.54     $ 25.40  
80   Titus, Emily Sue   FAIRFIELD     9.79     7/11/2014     31     $ 303.49  
678   Vorhies, Douglas A   FAIRFIELD     10.00     7/11/2014     5.16     $ 51.60  
71   Watson, Stephanie Lynn   FAIRFIELD     10.51     7/11/2014     63.9     $ 671.59  
1238   Workman, Donna Mae   FAIRFIELD     8.00     7/11/2014     9.48     $ 75.84  
1224   Jenkins, Jenny   Fort Madison     21.63     7/11/2014     43.584     $ 942.72  
1119   Borjas, Vanessa M   FT MADISON     9.12     7/11/2014     15.45     $ 140.90  
1157   Burden, Samantha J   FT MADISON     9.00     7/11/2014     18.19     $ 163.71  
1089   Burdette, Brittany E   FT MADISON     9.30     7/11/2014     4.4     $ 40.92  

 

 
 

 

918   Cook, Joseph W   FT MADISON     9.25     7/11/2014     10.51     $ 97.22  
643   Daugherty, Echo M   FT MADISON     9.27     7/11/2014     6.53     $ 60.53  
1255   Derengowski, Brian E   FT MADISON     14.00     7/11/2014     5.14     $ 71.96  
725   Doherty, Emily Kay   FT MADISON     10.50     7/11/2014     6.43     $ 67.52  
246   Fedler, Summer Marie   FT MADISON     10.97     7/11/2014     16.86     $ 184.95  
183   Ferrell, Thomas Leroy   FT MADISON     10.23     7/11/2014     18.21     $ 186.29  
1284   Gilman, Stefany M   FT MADISON     9.50     7/11/2014     3.25     $ 30.88  
1170   Goebel, Daniel K   FT MADISON     8.50     7/11/2014     13.53     $ 115.01  
1247   Hoenig, Kara A   FT MADISON     9.00     7/11/2014     24.94     $ 224.46  
1285   Hoenig, Tabitha E   FT MADISON     9.00     7/11/2014     2.56     $ 23.04  
171   Holmes, Jeff L   FT MADISON     12.07     7/11/2014     40     $ 482.80  
274   Houston, Allison Lee   FT MADISON     9.15     7/11/2014     14.63     $ 133.86  
1042   Johnson, Corey R   FT MADISON     13.36     7/11/2014     9.74     $ 130.13  
267   Kent, Robin Kay   FT MADISON     9.66     7/11/2014     7.07     $ 68.30  
723   Kramer, Mary Elaine   FT MADISON     12.98     7/11/2014     21.27     $ 276.08  
947   LeMoyne, Mendy E   FT MADISON     9.14     7/11/2014     3.22     $ 29.43  
256   Londrigan, Margaret Louis   FT MADISON     9.57     7/11/2014     23.8     $ 227.77  
1171   Mann, Jason R   FT MADISON     8.50     7/11/2014     24.1     $ 204.85  
895   Moore, Michael R   FT MADISON     9.52     7/11/2014     61.72     $ 587.57  
266   Morrical, Ashley A   FT MADISON     9.47     7/11/2014     16.8     $ 159.10  
857   Muldoon, Holly A   FT MADISON     9.80     7/11/2014     2.45     $ 24.01  
249   Parks, Mary Ann   FT MADISON     9.51     7/11/2014     29.45     $ 280.07  
1108   Perez, Frank J   FT MADISON     8.67     7/11/2014     2.23     $ 19.33  
1274   Pruitt, Lexus M   FT MADISON     8.50     7/11/2014     6.76     $ 57.46  
1279   Puga-Olson, Tiana R   FT MADISON     8.50     7/11/2014     1.75     $ 14.88  
1273   Ruffcorn, Ashley A   FT MADISON     23.08     7/11/2014     -4.25     $ -98.09
1251   Scott, Carol A   FT MADISON     9.00     7/11/2014     23.76     $ 213.84  
1264   Simpson, Kea M   FT MADISON     22.84     7/11/2014     34.15     $ 779.99  
1037   Stewart, Erica Noelle   FT MADISON     9.41     7/11/2014     5     $ 47.05  
1287   Vincent, Dyre L   FT MADISON     8.00     7/11/2014     4.76     $ 38.08  
1276   Wellman, Lisa M   FT MADISON     12.00     7/11/2014     8.93     $ 107.16  
1060   Zipprich, Sean C   FT MADISON     8.78     7/11/2014     20.47     $ 179.73  
1254   McMurray, Shirley   MT PLEASANT     21.63     7/11/2014     37.71     $ 815.67  
1275   Adreon, Lacy C   MT PLEASANT     8.50     7/11/2014     5.63     $ 47.86  
2   Armstrong, Peggy L   MT PLEASANT     9.92     7/11/2014     2.1     $ 20.83  

 

 
 

 

1180   Aynes, Paige N   MT PLEASANT     8.50     7/11/2014     41.6     $ 353.60  
39   Bolin, Kelsey Rae   MT PLEASANT     20.20     7/11/2014     49.96     $ 1,009.41  
1267   Brown, Aaron E   MT PLEASANT     12.50     7/11/2014     9.92     $ 124.00  
514   Bryant, Thomas R   MT PLEASANT     13.48     7/11/2014     26.14     $ 352.37  
821   Buffington, Robin M   MT PLEASANT     10.14     7/11/2014     19.7     $ 199.76  
692   Dean, Breanne L   MT PLEASANT     9.18     7/11/2014     12.01     $ 110.25  
488   Dudley-Wagner, Emily K   MT PLEASANT     9.93     7/11/2014     10.04     $ 99.70  
1277   Durham, Leashia A   MT PLEASANT     9.00     7/11/2014     4.75     $ 42.75  
3   Edwards, Ginger Renee   MT PLEASANT     10.30     7/11/2014     52.48     $ 540.54  
551   Hamilton, Sandra J   MT PLEASANT     9.77     7/11/2014     40.25     $ 393.24  
1004   Holl, Ashley N   MT PLEASANT     9.36     7/11/2014     7.86     $ 73.57  
27   Holloway, Mary Ellen   MT PLEASANT     10.28     7/11/2014     13.51     $ 138.88  
6   Kruse, Melissa M   MT PLEASANT     14.88     7/11/2014     5.54     $ 82.44  
1080   Lambert, Jennifer R   MT PLEASANT     9.00     7/11/2014     7.43     $ 66.87  
79   Lanman, Jessica Renea   MT PLEASANT     9.62     7/11/2014     5.19     $ 49.93  
1232   Larson, Crystal N   MT PLEASANT     8.75     7/11/2014     29.63     $ 259.26  
759   Long, McKenzie S   MT PLEASANT     9.00     7/11/2014     56.36     $ 507.24  
1253   Marcos, Joey B   MT PLEASANT     9.25     7/11/2014     29.24     $ 270.47  
43   Martin, Sarah L   MT PLEASANT     19.50     7/11/2014     15.81     $ 308.30  
1051   McKinney, Alison D   MT PLEASANT     9.22     7/11/2014     10.54     $ 97.18  
7   Millard, Jennifer Jo   MT PLEASANT     11.70     7/11/2014     14.64     $ 171.29  
26   Mitchell, Krista Kay   MT PLEASANT     9.62     7/11/2014     4.37     $ 42.04  
667   Moeller, Denise L   MT PLEASANT     8.49     7/11/2014     0.23     $ 1.95  
752   Moorman, Lori L   MT PLEASANT     9.55     7/11/2014     57.03     $ 544.64  
1172   Parker, Sandra M   MT PLEASANT     9.00     7/11/2014     42.12     $ 379.08  
1261   Peiffer, Melissa N   MT PLEASANT     12.00     7/11/2014     5.81     $ 69.72  
1201   Pfeiffer, Baylee M   MT PLEASANT     9.25     7/11/2014     26.23     $ 242.63  
622   Rice, Debra K   MT PLEASANT     9.53     7/11/2014     12.65     $ 120.55  
1181   Ritchey, Natasha J   MT PLEASANT     9.00     7/11/2014     36.24     $ 326.16  
9   Ryan, Sharrie Lee   MT PLEASANT     10.56     7/11/2014     75.8     $ 800.45  
34   Schmitter, Douglas Eugene   MT PLEASANT     15.00     7/11/2014     39.95     $ 599.25  
1202   Shelledy, Taylor N   MT PLEASANT     9.00     7/11/2014     27.65     $ 248.85  
11   Starman, Alison D   MT PLEASANT     9.84     7/11/2014     47.67     $ 469.07  
1207   Warner, April D   MT PLEASANT     8.25     7/11/2014     28.98     $ 239.09  
1243   Allen, Wendy S   MUSCATINE     10.00     7/11/2014     7.24     $ 72.40  

 

 
 

 

963   Allison, Lorrie L   MUSCATINE     9.88     7/11/2014     21.69     $ 214.30  
1265   Armintrout, Rachel M   MUSCATINE     9.50     7/11/2014     4.98     $ 47.31  
879   Birkhofer, Sandra K   MUSCATINE     9.21     7/11/2014     51.43     $ 473.67  
1262   Blodgett, Rebecca S   MUSCATINE     10.00     7/11/2014     17.63     $ 176.30  
531   Botello, Maria Luisa   MUSCATINE     9.15     7/11/2014     33.36     $ 305.24  
1166   Chase, Lisa A   MUSCATINE     10.00     7/11/2014     67.63     $ 676.30  
299   Coram, Ashley Renee   MUSCATINE     9.20     7/11/2014     5.26     $ 48.39  
289   Coram, Heidi R   MUSCATINE     9.11     7/11/2014     14.49     $ 132.00  
1227   Davies, Facia D   MUSCATINE     10.25     7/11/2014     49.91     $ 511.58  
186   DeLeon, Dominick J   MUSCATINE     17.00     7/11/2014     63.94     $ 1,086.98  
607   Evans, Terry L   MUSCATINE     9.25     7/11/2014     4.89     $ 45.23  
634   Fox, Nancy D   MUSCATINE     9.88     7/11/2014     4.88     $ 48.21  
1280   Gaytan, Ana   MUSCATINE     8.25     7/11/2014     6.51     $ 53.71  
1281   Gonzalez-Ortega, Elza   MUSCATINE     8.25     7/11/2014     8.08     $ 66.66  
831   Grosse, William W   MUSCATINE     10.73     7/11/2014     0.36     $ 3.86  
1189   Hansford, Ashley N   MUSCATINE     10.25     7/11/2014     29.53     $ 302.68  
277   Hintermeister, Rhonda Sue   MUSCATINE     13.50     7/11/2014     41.17     $ 555.80  
1028   Holt, Beth Ann   MUSCATINE     9.98     7/11/2014     24.48     $ 244.31  
1258   Howard, Judith L   MUSCATINE     9.00     7/11/2014     1.3     $ 11.70  
278   Husband, Kendra Fay   MUSCATINE     9.89     7/11/2014     38.61     $ 381.85  
1156   Huthmacher, Angela R   MUSCATINE     14.43     7/11/2014     28.41     $ 409.96  
849   Jens, Dennis E   MUSCATINE     9.57     7/11/2014     -0.01     $ -0.10
1292   Johnson, Rebecca L   MUSCATINE     8.50     7/11/2014     1.32     $ 11.22  
400   Kapteina, Roy R   MUSCATINE     14.47     7/11/2014     29.73     $ 430.19  
1081   Keldgord, Tim C   MUSCATINE     9.21     7/11/2014     0     $ 0.00  
1040   Keller, Thomas R   MUSCATINE     8.22     7/11/2014     27.12     $ 222.93  
716   Kraklow, Melanie A   MUSCATINE     8.00     7/11/2014     -1.08     $ -8.64
1230   Lofgren, Maggie G   MUSCATINE     8.00     7/11/2014     0.59     $ 4.72  
1067   Lowe, Miranda G   MUSCATINE     9.77     7/11/2014     65.37     $ 638.66  
715   Marks, Lyle W   MUSCATINE     8.16     7/11/2014     0     $ 0.00  
286   Morales, Andreina   MUSCATINE     10.00     7/11/2014     32.75     $ 327.50  
619   Mullen, Susan K   MUSCATINE     25.00     7/11/2014     42.99     $ 1,074.75  
1259   Petersen, Sara A   MUSCATINE     9.75     7/11/2014     13.65     $ 133.09  
581   Reynolds, Julie Ann   MUSCATINE     20.99     7/11/2014     52.9     $ 1,110.37  
1293   Rife, Patti A   MUSCATINE     9.25     7/11/2014     0.16     $ 1.48  

 

 
 

 

789   Roberts, Mary B   MUSCATINE     8.80     7/11/2014     33.29     $ 292.95  
283   Sides, Michelle Marie   MUSCATINE     21.71     7/11/2014     91     $ 1,975.61  
633   Steinke, Margaret F   MUSCATINE     25.81     7/11/2014     -1.69     $ -43.62
1128   Thornton, Patti   MUSCATINE     9.60     7/11/2014     22.76     $ 218.50  
1225   Todd, Allison C   MUSCATINE     8.00     7/11/2014     3.81     $ 30.48  
785   Turner, Elisha A   MUSCATINE     8.65     7/11/2014     45.41     $ 392.80  
876   VanZandt, Cali E   MUSCATINE     9.79     7/11/2014     15.34     $ 150.18  
285   Wheeler, Marlene K   MUSCATINE     10.82     7/11/2014     27.15     $ 293.76  
631   Wiegle, Elizabeth J   MUSCATINE     9.98     7/11/2014     -0.01     $ -0.10
1282   Wilson, Sheli R   MUSCATINE     9.00     7/11/2014     12.37     $ 111.33  
1283   Wittenburg, Kathy A   MUSCATINE     9.50     7/11/2014     11.77     $ 111.82  
873   Woods, Brittany N   MUSCATINE     9.79     7/11/2014     38.96     $ 381.42  
973   Beach, Leslie   MT PLEASANT     15.00     7/11/2014     72.37     $ 1,085.55  

 

 
 

 

Schedule 6.2

Third Party Consents

 

None.

 

 
 

   

Schedule 6.4

Conflicts

 

Service Agreements

Agreement dated September 5, 2013 between SunnyBrook Senior Living and Hibu Inc. (or Hibutel Inc.) (Order Number 15953-1900371)

 

Agreement dated May 7, 2014 between SunnyBrook Senior Living and Hibu Inc. (or Hibutel Inc.) (Order Number 15953-3558605)

 

Agreement dated December 20, 2013 between SunnyBrook Senior Living and Hibu Inc. (or Hibutel Inc.) (Order Number 15953-3558605)

 

Agreement dated April 17, 2014 between SunnyBrook Senior Living and Hibu Inc. (or Hibutel Inc.) (Order Number 15953-3465169)

 

Basic Agreement dated March 4, 2014 between Sunnybrook Assisted Living- Burlington and PER MAR SECURITY and RESEARCH CORP.

 

Basic Agreement dated April 8, 2014 between Sunnybrook Assisted Living- Mount Pleasant and PER MAR SECURITY and RESEARCH CORP.

 

Lease Agreement dated June 17, 2009 between SunnyBrook Senior Living, LLC and GreatAmerica Leasing Corporation and related documents.

 

Lease Agreement dated September 30, 2011 between SunnyBrook Senior Living, LLC and GreatAmerica Leasing Corporation

 

Service Agreement effective as of July 28, 2008 between SunnyBrook of Carroll and SimplexGrinnell LP.

 

Piano Lease dated as of November 1, 2013 between SPL Fine Musical Instruments, LLC and SunnyBrook of Muscatine, SunnyBrook of Burlington, SunnyBrook of Fort Madison, SunnyBrook of Mt. Pleasant, SunnyBrook of Fairfield, and SunnyBrook of Carroll.

 

Loans

 

*The loans listed below will be prepaid at the time of Closing.

 

Mortgage Note dated March 23, 2012 and related documents for FHA Project No. 074-22019 between Village Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $7,888,800.00.

 

Mortgage Note dated March 22, 2012 and related documents for FHA Project No. 074-22026 between Mt. Pleasant Assisted Living, LLC as Maker and Greystone Funding Corporation as Holder with an original principal balance of $4,275,000.00.

 

 
 

  

Mortgage Note dated September 23, 2011 and related documents for FHA Project No. 074-43086 between Burlington Assisted Living LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $6,849,300.00.

 

Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22023 between Carroll Assisted Living, LLC as Maker and CWCapital LLC as Holder with an original principal balance of $5,273,600.00.

 

Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22025 between Ft. Madison Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $4,909,200.00.

 

Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22024 between Muscatine Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $6,955,700.00.

 

 
 

   

Schedule 6.5

Judgments

 

None.

 

 
 

   

Schedule 6.6

Governmental Approvals

 

All items listed in Schedule 6.13.

 

 
 

   

Schedule 6.7

Insurance Summary

 

· Commercial General Liability, Policy Number ACP GLDO 7115972066, Effective from 1/1/2014 – 1/1/2015 (all properties)
· Business Automobile Liability Insurance, Policy No. ACPBAPD7105972066, issued on 10/18/2013 (all properties)
· Commercial Property Insurance, Policy No. ACP 7105972066, issued on 10/18/2013 (all properties)
· Commercial Umbrella Insurance, Policy Number ACP 7115972066 issued on 10/18/2013 (all properties)
· Standard Workers Compensation and Employers Liability, Policy Number A1J 1831359-03, Effective from 1/1/2014 – 1/1/2015 (all properties)

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

Schedule 6.8

Litigation

 

For SunnyBrook of Fairfield, there is an on-going investigation by the Iowa Civil Rights Commission on an age discrimination claim filed by a former employee. We are waiting for final decision from commission.

 

 
 

 

Schedule 6.9

Notices of Non-Compliance with Laws

 

None.

 

 
 

 

Schedule 6.12

Contracts and Leases

 

Service Agreements

Agreement dated September 5, 2013 between SunnyBrook Senior Living and Hibu Inc. (or Hibutel Inc.) (Order Number 15953-1900371)

 

Agreement dated May 7, 2014 between SunnyBrook Senior Living and Hibu Inc. (or Hibutel Inc.) (Order Number 15953-3558605)

 

Agreement dated December 20, 2013 between SunnyBrook Senior Living and Hibu Inc. (or Hibutel Inc.) (Order Number 15953-3558605)

 

Agreement dated April 17, 2014 between SunnyBrook Senior Living and Hibu Inc. (or Hibutel Inc.) (Order Number 15953-3465169)

 

Basic Agreement dated March 4, 2014 between Sunnybrook Assisted Living- Burlington and PER MAR SECURITY and RESEARCH CORP.

 

Basic Agreement dated April 8, 2014 between Sunnybrook Assisted Living- Mount Pleasant and PER MAR SECURITY and RESEARCH CORP.

 

Lease Agreement dated June 17, 2009 between SunnyBrook Senior Living, LLC and GreatAmerica Leasing Corporation and related documents.

 

Lease Agreement dated September 30, 2011 between SunnyBrook Senior Living, LLC and GreatAmerica Leasing Corporation

 

Agreement dated September 16, 2013 between Sunnybrook Assisted Living and LISCO.

 

Terms and Conditions of Agreement with USCC Services, LLC on behalf of its operating licensed affiliates doing business as U.S. Cellular in your Home Market.

 

Service Agreement effective as of July 28, 2008 between SunnyBrook of Carroll and SimplexGrinnell LP.

 

Monitoring Service Agreement between SunnyBrook of Carroll and SimplexGrinnell LP dated August 26, 2008.

 

Piano Lease dated as of November 1, 2013 between SPL Fine Musical Instruments, LLC and SunnyBrook of Muscatine, SunnyBrook of Burlington, SunnyBrook of Fort Madison, SunnyBrook of Mt. Pleasant, SunnyBrook of Fairfield, and SunnyBrook of Carroll.

 

 
 

 

Schedule 6.13

Licenses and Healthcare Licenses

 

Holder of Certificate/License Certificate/License Type Certificate/License
No. 		Effective Date
SunnyBrook of Muscatine Assisted Living Program Certificate S0288 10/15/2012 – 10/14/2014
SunnyBrook of Muscatine Assisted Living & Memory Care Food Service/Restaurant License RSMU-2810448 11/25/2013 – 10/14/2014
SunnyBrook Assisted Living

Centers for Medicare & Medicaid Services Clinical Laboratory Improvement Amendments

 

Certificate of Waiver

16D1087851 08/12/2012 – 08/11/2014
SunnyBrook Assisted Living

Centers for Medicare & Medicaid Services Clinical Laboratory Improvement Amendments

 

Certificate of Waiver

16D1087851 08/12/2014 – 08/11/2016
SunnyBrook Assisted Living Mt. Pleasant, Inc. Assisted Living Program Certificate S0208 02/17/2013 – 02/16/2015

SunnyBrook of Mount Pleasant

Mount Pleasant Assisted Living LLC

Food Service/Restaurant License RS44-2961108 09/16/2013 – 09/16/2014
Sunny Brook Ashford Park

Centers for Medicare & Medicaid Services Clinical Laboratory Improvement Amendments

 

Certificate of Waiver

16D1061184 11/13/2012 – 11/12/2014
SunnyBrook of Fort Madison Assisted Living Program Certificate S0280 08/08/2012 – 08/07/2014

Sunny Brook

Fort Madison Assisted Living LLC

Food Service/Restaurant License RS56-8101687 08/06/2013 – 08/07/2014
Sunnybrook-Fort Madison

Centers for Medicare & Medicaid Services

16D1084991 06/09/2014 – 06/08/2016

 

 
 

 

Clinical Laboratory Improvement Amendments

 

Certificate of Waiver

SunnyBrook of Fairfield Assisted Living Program Certificate S0170 02/19/2013 – 02/18/2015
SunnyBrook of Fairfield Food Service Establishment License 11198 04/15/2014 – 03/04/2015
SunnyBrook Assisted Living

Centers for Medicare & Medicaid Services Clinical Laboratory Improvement Amendments

 

Certificate of Waiver

16D1093792 01/02/2013 – 01/01/2015
SunnyBrook of Carroll Assisted Living Program Certificate S0285 09/10/2012 – 09/09/2014
SunnyBrook of Carroll Food Service/Restaurant License RS00-2820284 09/11/2013 – 08/28/2014
SunnyBrook of Carroll

Centers for Medicare & Medicaid Services Clinical Laboratory Improvement Amendments

 

Certificate of Waiver

16D1088153 08/18/2012 – 08/17/2014
SunnyBrook of Burlington Assisted Living Program Certificate S0287 09/23/2012 – 09/22/2014

SunnyBrook Assisted Living

James Elliott & Jim Billilone

Food Service/Restaurant License RS29-2933063 09/12/2013 – 09/12/2014
SunnyBrook Assisted Living

Centers for Medicare & Medicaid Services Clinical Laboratory Improvement Amendments

 

Certificate of Waiver

16D1089320 09/16/2012 – 09/15/2014

 

 
 

 

Schedule 6.14

Disclosures Regarding Residency Agreements

Muscatine                            
                             
Current residents                           Resident Name(s)
                             
Apartment Size   Apt #     Rate     Actual Rate     Discount      
                             
Studio     201       3,100       3,100       -     Hinman, Vera
studio     202       3,100       3,090       10     Chelf, Verla
1 bedroom     203       3,550       3,550       -     O'Brien, Char
1 bedroom     204       3,550       3,487       63     Dwyer, Mary
2 bedroom     205       4,850       4,850       -     Reserved - Platt, Dorothy
2 bedroom     206       4,850       4,774       76     Werner, Bill and Gay Lee
1 bedroom deluxe     207       4,950       4,882       68     Drumm, Jennifer
1 bedroom     208       3,550       3,550       -     Krueger, Frances
studio     209       3,100       3,100       -     Eberle, Arlene
Studio     210       3,100       3,100       -     Bowman, Glenn
studio     211       3,100       3,100       -     Bryant, Robert
1 bedroom     212       3,550       3,487       63     Edgington, Phyllis
1 Bedroom     214       3,550       3,487       63     O'Reilly, Bea
garden 1 bedroom     301       4,950       3,487       1,463     Hetzler, Iris
garden 1 bedroom     302       4,950       4,950       -     Schnedler, Harry & Marcella
gardens     303       4,800       4,800       -     Purcell, Ethel
gardens     304       4,800       4,800       -     Bollinger, Bob
garden 1 bedroom     305       4,950               -     Baumgardner, Shirley
garden 1 bedroom     306       4,950       4,950       -     Chatfield, Pat
garden 1 bedroom     307       4,950       4,950       -     Cooney, Marilyn
garden 1 bedroom     308       4,950       4,950       -     Ruckles, C Jean
gardens     309       4,800       4,790       10     Thompson, Phyllis
gardens     310       4,800       4,774       26     Bosch, Miriam
gardens     311       4,800               -      
gardens     312       4,800       4,790       10     Harten, Bertha
gardens     313       4,800       2,996       1,804     Sinn, Delores
gardens     314       4,800       4,790       10     Hooks, Sophia
gardens     315       4,800       4,790       10     York, Mary
gardens     316       4,800       4,790       10     Blanchard, Margaret
gardens     317       4,800               -      
gardens     318       4,800       4,790       10     Rasmussen, Leo
gardens     319       4,800       4,774       26     Goldsmith, Hilda
gardens     320       4,800               -      
1 bedroom     401       3,550       3,487       63     Stalkfleet, Bernice
1 bedroom     402       3,550       3,487       63     Hudson, Jane
studio     403       3,100       3,090       10     Sterner, Irene
studio     404       3,100       2,998       102     Davis, Ethel
studio     405       3,100       3,068       32     Carter, Margie
studio     406       3,100       3,090       10     Hubbell, Grace
1 bedroom     407       3,550       3,550       -     Doyle, Betty
1 bedroom     408       3,550       3,487       63     Fisher, Kip
studio     409       3,100       3,090       10     Zoller, Mary
2 bedroom     410       4,850       4,850       -     Forbes, Louise
studio     411       3,100       3,090       10     Lorber, Joan
1 bedroom deluxe     412       4,950       4,882       68     Sprouse, Patricia
1 bedroom     413       3,550       3,550       -     Worrell, Gertrude
studio     414       3,100       3,100       -     Zinger, Randy

  

 
 

 

1 bedroom suite     415       4,400       4,400       -     Gaeta, Josie
studio     416       3,100       3,100       -     Tietje, Ellen
1 bedroom     418       3,550       3,550       -     Gauler, Bob
1 bedroom     501       3,550       3,487       63     Phillips, Evelyn
1 bedroom     502       3,550       3,550       -     Weggen, Dorothy
1 bedroom     503       3,550       3,550       -     Beckey, Theresa
1 bedroom     504       3,550       3,487       63     Fuller, Vera
1 bedroom     505       3,550       3,487       63     Milder, Phyllis
1 bedroom     506       3,550       3,487       63     McGill, Alberta
1 bedroom     507       3,550       3,550       -     Vetter, Nellie
1 bedroom     508       3,550       3,487       63     Schoemaker, Wilma
studio     509       3,100       2,802       298     Farless, Mary
1 bedroom     510       3,550       3,550       -     Kauffman, Cyndy
studio     511       3,100       3,023       77     Vetter, Dickie
1 bedroom     512       3,550       3,550       -     Guck, Virginia
1 bedroom deluxe     513       4,950       4,944       6     Rauch, Mary Jo
1 bedroom     514       3,550       3,487       63     Bright, Betty
studio     516       3,100       3,023       77     Howard, Dennis
                                     
              258,400       234,061       4,989      

 

 
 

 

Schedule 6.15

Governmental Payor Programs

 

Iowa Medicaid Program for Burlington Facility, Carroll Facility, Fairfield Facility, Fort Madison Facility, Mount Pleasant Facility, and Muscatine Facility.

 

 
 

 

Schedule 6.17

Excluded Intellectual Property

 

None.

 

 
 

 

Schedule 6.22

Real Property Compliance

 

The SunnyBrook of Burlington is in year six of a ten year sliding scale property tax abatement. We do not know if the abatement will transfer with a change of ownership.

 

 
 

   

Schedule 6.24

Loans

 

*The loans listed below will be prepaid at the time of Closing.

 

Mortgage Note dated March 23, 2012 and related documents for FHA Project No. 074-22019 between Village Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $7,888,800.00.

 

Mortgage Note dated March 22, 2012 and related documents for FHA Project No. 074-22026 between Mt. Pleasant Assisted Living, LLC as Maker and Greystone Funding Corporation as Holder with an original principal balance of $4,275,000.00.

 

Mortgage Note dated September 23, 2011 and related documents for FHA Project No. 074-43086 between Burlington Assisted Living LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $6,849,300.00.

 

Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22023 between Carroll Assisted Living, LLC as Maker and CWCapital LLC as Holder with an original principal balance of $5,273,600.00.

 

Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22025 between Ft. Madison Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $4,909,200.00

Mortgage Note dated June 1, 2012 and related documents for FHA Project No. 074-22024 between Muscatine Assisted Living, LLC as Maker and CWCapital, LLC as Holder with an original principal balance of $6,955,700.00

 

 
 

 

Schedule 6.25

Intellectual Property

 

sunnybrookseniorliving.com domain

The service mark for SUNNYBROOK, registration number 2916127

 

 
 

 

Schedule 6.27

Brokers

 

· HFF

 

 
 

 

 

 

Schedule 6.29

Employees

 

                                Bonus Descriptions at the bottom    
Employee
Number 		  First Name   Last Name   MI   Title   Facility
Location 		  Hire Date   Pay
Rate/Hr 		  Bonus 1   Bonus 2   Status
1012   Julia   Atteberry   E   Cook   BURLINGTON   7/19/2012   8.84       Anniversary Bonus   PT
1252   Monica   Autry   N   Universal Worker   BURLINGTON   1/29/2014   10.00       Anniversary Bonus   FT
1197   Patricia   Bandy   J   Server   BURLINGTON   9/12/2013   8.00       Anniversary Bonus   FT
904   Madison   Bolander   E   Licensed Practical Nurse   BURLINGTON   3/20/2012   15.00       Anniversary Bonus   FT
962   Dorothea   Boyd   J   Universal Worker   BURLINGTON   5/31/2012   9.98       Anniversary Bonus   FT
167   James   Cary   M   Maintenance   BURLINGTON   1/2/2009   18.18       Anniversary Bonus   FT
1063   Corrie   Clark   L   Server   BURLINGTON   10/18/2012   8.64       Anniversary Bonus   FT
1013   Caitlinn   Coombs   A   Cook   BURLINGTON   10/11/2013   8.75       Anniversary Bonus   PRN
1244   Chelsea   Coulter   S   Universal Worker   BURLINGTON   1/3/2014   9.50       Anniversary Bonus   PT
1106   Jessica   Dalton   L   Universal Worker   BURLINGTON   2/11/2013   9.60       Anniversary Bonus   PT
1147   Angela   Derry   R   Universal Worker   BURLINGTON   6/4/2013   9.50       Anniversary Bonus   PT
1233   Nathan   Dunham   P   Maintenance   BURLINGTON   12/16/2013   15.00       Anniversary Bonus   PT
1185   Linda   Fry   Ann   Universal Worker   BURLINGTON   8/21/2013   9.50       Anniversary Bonus   PRN
1046   Brenda   Graham   S   Laundry   BURLINGTON   9/20/2012   9.33       Anniversary Bonus   FT
1195   Haylee   Harden   M   Universal Worker   BURLINGTON   9/3/2013   9.50       Anniversary Bonus   PRN
1223   Rita   Hartman   R   Universal Worker   BURLINGTON   11/22/2013   10.00       Anniversary Bonus   PT
1064   Dorothy   Hawthorne   J   Universal Worker   BURLINGTON   10/24/2012   9.66       Anniversary Bonus   PRN
905   Ella   Hirte   Joy   Food Service Worker   BURLINGTON   3/22/2012   8.31       Anniversary Bonus   PT
889   Roberta   Holloway   A   Dementia Coordinator   BURLINGTON   2/17/2012   13.52       Anniversary Bonus   FT
175   Frederico   Howard   Demarco   Food Service Worker   BURLINGTON   6/15/2009   9.38       Anniversary Bonus   PT

 

 
 

  

871   Anthony   Kastantin   J   Culinary Coordinator   BURLINGTON   1/2/2012   13.70       Anniversary Bonus   PT
989   Jaime   Kraisser   J   Universal Worker   BURLINGTON   6/25/2012   9.79       Anniversary Bonus   FT
874   Trisha   Lamb   A   Culinary Aide   BURLINGTON   1/16/2012   11.81       Anniversary Bonus   FT
1229   Tamara   Lovett   F   Cook   BURLINGTON   12/4/2013   8.50       Anniversary Bonus   PT
1142   Taylor   Ludwick   A   Universal Worker   BURLINGTON   5/6/2013   9.50       Anniversary Bonus   PRN
564   Valerie   Lybarger-Adams   A   Manager   BURLINGTON   2/3/2014   31.25   Manager Bonus Program   Anniversary Bonus   FT
1134   Heather   Macans   S   Universal Worker   BURLINGTON   5/6/2013   9.50       Anniversary Bonus   FT
1210   Faith   McCane   N   Universal Worker   BURLINGTON   10/8/2013   9.50       Anniversary Bonus   PT
1289   Katherine   McCoy   G   Universal Worker   BURLINGTON   6/18/2014   9.50       Anniversary Bonus   PT
1184   Hannah   Miller   L   Universal Worker   BURLINGTON   8/16/2013   9.75       Anniversary Bonus   PT
1000   Gail   Mortimer   Lynn   Activities Coordinator   BURLINGTON   7/5/2012   12.60       Anniversary Bonus   FT
1199   Skye   Moser   A   Server   BURLINGTON   9/13/2013   8.00       Anniversary Bonus   PT
1196   Bradley   Mowen   D   Universal Worker   BURLINGTON   9/3/2013   10.50       Anniversary Bonus   FT
174   Becky   Pettis   J   Universal Worker   BURLINGTON   5/19/2009   10.20       Anniversary Bonus   PRN
951   Kristen   Rankin   E   Universal Worker   BURLINGTON   5/14/2012   10.04       Anniversary Bonus   PT
1286   Sara   Reif   J   Housekeeper   BURLINGTON   6/9/2014   8.50       Anniversary Bonus   FT
1246   Brenda   Richter   G   Universal Worker   BURLINGTON   1/7/2014   9.50       Anniversary Bonus   PT
1236   Taylor   Robinson   K   Cook   BURLINGTON   12/16/2013   8.50       Anniversary Bonus   FT
974   Victoriea   Robinson   L   Universal Worker   BURLINGTON   6/13/2012   10.30       Anniversary Bonus   PT
1112   Karin   Rosin-Atwood   A   Universal Worker   BURLINGTON   3/13/2013   9.62       Anniversary Bonus   FT
832   Debbie   Schmeiser   Sue   Universal Worker   BURLINGTON   11/11/2011   10.30       Anniversary Bonus   FT
1026   Jennifer   Schwartz   K   Support Nurse   BURLINGTON   8/22/2012   25.00       Anniversary Bonus   PT
1291   Kaitlin   Smith   H   Universal Worker   BURLINGTON   7/1/2014   9.50       Anniversary Bonus   PT
805   Jasmine   Stewart   K   Universal Worker   BURLINGTON   9/30/2011   10.04       Anniversary Bonus   FT
779   Janet   Thomas   L   Food Service Worker   BURLINGTON   8/22/2011   8.32       Anniversary Bonus   PT

 

 
 

  

694   Deborah   Thompson   E   Food Service Worker   BURLINGTON   6/6/2011   8.93       Anniversary Bonus   FT
1290   April   Tisor   L   Server   BURLINGTON   6/23/2014   8.00       Anniversary Bonus   PT
842   Mandy   Trafton   R   Universal Worker   BURLINGTON   11/23/2011   10.30       Anniversary Bonus   FT
1036   Morgan   Vallee   K   Universal Worker   BURLINGTON   9/20/2012   10.27       Anniversary Bonus   FT
1271   Frances   VandenBoom   Dalene   Universal Worker   BURLINGTON   5/2/2014   10.25       Anniversary Bonus   FT
446   Samantha   Vidal   J   Assistant Manager   BURLINGTON   11/3/2011   20.07   Manager Bonus Program   Anniversary Bonus   FT
1118   Pepper   Wagner   L   Universal Worker   BURLINGTON   3/19/2013   9.77       Anniversary Bonus   FT
868   Elizabeth   Ward   N   Cook   BURLINGTON   1/2/2012   8.82       Anniversary Bonus   FT
1173   Susan   Waterman   J   Health Care Coordinator   BURLINGTON   7/29/2013   26.44       Anniversary Bonus   FT
1159   Kristina   Wilke   K   Server   BURLINGTON   7/3/2013   8.50       Anniversary Bonus   PT
462   Hunter   Anderson   J   Food Service Worker   CARROLL   8/12/2010   9.53       Anniversary Bonus   PT
1272   Suiaad   Babiker   Galal   Universal Worker   CARROLL   5/5/2014   10.50       Anniversary Bonus   FT
1235   Nicole   Becker   D   Food Service Worker   CARROLL   12/16/2013   7.25       Anniversary Bonus   PT
482   Bruce   Boehm   W   Manager   CARROLL   9/8/2010   26.44   Manager Bonus Program   Anniversary Bonus   FT
907   Teresa   Bolster   L   Food Service Worker   CARROLL   4/14/2014   9.25       Anniversary Bonus   PT
638   Linda   Borkowski   L   Culinary Coordinator   CARROLL   3/28/2011   15.05   Marketing Bonus Program   Anniversary Bonus   FT
1241   Ragina   Doty   K   Universal Worker   CARROLL   12/30/2013   11.00       Anniversary Bonus   PT
1154   Durene   Eisenbacher   K   Universal Worker   CARROLL   6/18/2013   10.00       Anniversary Bonus   PRN
1221   Linda   Flattery   M   Universal Worker   CARROLL   11/11/2013   10.50       Anniversary Bonus   FT
1266   Abbey   Fordyce   K   Universal Worker   CARROLL   3/12/2014   9.50       Anniversary Bonus   PRN
1125   Barbara   Goodman   A   Universal Worker   CARROLL   4/24/2013   10.10       Anniversary Bonus   PT
216   Deborah   Grade   A   Activities Coordinator   CARROLL   8/25/2008   13.27   Marketing Bonus Program   Anniversary Bonus   FT
379   Robbie   Grundmeier   Charles   Food Service Worker   CARROLL   4/19/2010   10.11       Anniversary Bonus   FT
233   Emilie   Hanson   Jean   Health Care Coordinator   CARROLL   3/29/2010   24.76       Anniversary Bonus   FT

 

 
 

  

223   Judy   Horn   A   Administrative Assistant   CARROLL   1/5/2009   11.67       Anniversary Bonus   PT
913   Marie   Irlmeier   C   Universal Worker   CARROLL   3/30/2012   10.42       Anniversary Bonus   FT
234   Kelly   Kaspersen   Lynn   Universal Worker   CARROLL   7/21/2011   10.51       Anniversary Bonus   FT
1250   Elizabeth   Kelley   M   Universal Worker   CARROLL   1/20/2014   10.00       Anniversary Bonus   FT
1203   Juanita   Kurth   F   Universal Worker   CARROLL   9/18/2013   10.00       Anniversary Bonus   FT
611   Nicole   Lebeck   A   Universal Worker   CARROLL   2/25/2011   10.23       Anniversary Bonus   FT
1288   Heather   Lucy   Nicole   Universal Worker   CARROLL   6/11/2014   9.50       Anniversary Bonus   PT
886   Cully   Magner   D   Support Nurse   CARROLL   2/9/2012   24.05       Anniversary Bonus   PT
811   Summer   Mozena   M   Dementia Coordinator   CARROLL   10/3/2011   13.00       Anniversary Bonus   FT
228   Elizabeth   Odendahl   V   Housekeeper   CARROLL   8/2/2010   8.45       Anniversary Bonus   FT
1178   Peggy   Ott   J   Cook   CARROLL   8/7/2013   9.50       Anniversary Bonus   FT
1257   Jane   Peckumn-Fiscus   M   Laundry   CARROLL   2/10/2014   10.50       Anniversary Bonus   FT
225   Janet   Rose   Kay   Cook   CARROLL   4/17/2009   10.11       Anniversary Bonus   PT
1216   Jackson   Schaal   M   Food Service Worker   CARROLL   10/23/2013   7.25       Anniversary Bonus   PT
685   Reagan   Schaal   A   Universal Worker   CARROLL   6/6/2011   9.82       Anniversary Bonus   PT
1048   Beth Ann   Schmidt   L   Universal Worker   CARROLL   10/1/2012   10.25       Anniversary Bonus   FT
1245   Samantha   Schmitz   Jo   Universal Worker   CARROLL   12/23/2013   10.25       Anniversary Bonus   PT
1263   Amy   Smith   M   Universal Worker   CARROLL   2/17/2014   10.50       Anniversary Bonus   FT
232   Sheila   Stevens   A   Universal Worker   CARROLL   1/28/2010   10.11       Anniversary Bonus   FT
1127   Tess   Sturm   E   Food Service Worker   CARROLL   4/25/2013   9.34       Anniversary Bonus   PT
1268   Marlene   Tiefenthaler   H   Cook   CARROLL   3/26/2014   9.25       Anniversary Bonus   PT
1294   Mark   Tunning   G   Maintenance Supervisor   CARROLL   6/22/2014   19.00       Anniversary Bonus   FT
1208   Angela   Anderson   K   Housekeeper   FAIRFIELD   10/7/2013   9.00       Anniversary Bonus   FT
1176   Donna   Besick   J   Universal Worker   FAIRFIELD   8/2/2013   9.50       Anniversary Bonus   PT
88   Ruby   Boese   Rana   Administrative Assistant   FAIRFIELD   10/12/2009   13.00       Anniversary Bonus   FT

 

 
 

  

57   Rachel   Bucher   Aline   Universal Worker   FAIRFIELD   3/27/2008   10.93       Anniversary Bonus   FT
529   Sara   Conrad   L   Universal Worker   FAIRFIELD   10/29/2010   9.67       Anniversary Bonus   FT
1002   Micayla   Dimmitt   M   Cook   FAIRFIELD   7/7/2013   9.00       Anniversary Bonus   FT
58   Sharlene   Elliott   Lee   Universal Worker   FAIRFIELD   1/27/2004   14.00       Anniversary Bonus   PT
1213   Brandon   Francisco   J   Server   FAIRFIELD   10/4/2013   8.00       Anniversary Bonus   PT
968   Kitzi   Garvey   L   Universal Worker   FAIRFIELD   4/10/2013   9.00       Anniversary Bonus   FT
1082   Brittany   Gillam   A   Universal Worker   FAIRFIELD   12/16/2013   9.00       Anniversary Bonus   FT
1226   Melody   Hird   M   Activities Coordinator   FAIRFIELD   12/3/2013   12.00       Anniversary Bonus   FT
62   Sue Ann   Hock       Activities Coordinator   FAIRFIELD   11/4/2001   14.17       Anniversary Bonus   FT
1120   Andrew   Howell   J   Maintenance   FAIRFIELD   4/1/2013   15.15       Anniversary Bonus   FT
1018   Nicole   Hughes   J   Universal Worker   FAIRFIELD   8/9/2012   9.18       Anniversary Bonus   PT
1214   William   Hurst   L   Server   FAIRFIELD   10/19/2013   8.00       Anniversary Bonus   PT
1022   Rachael   Johnson   A   Universal Worker   FAIRFIELD   8/20/2012   9.18       Anniversary Bonus   PT
1260   Sheila   Kiesey   C   Health Care Coordinator   FAIRFIELD   2/11/2014   24.00       Anniversary Bonus   FT
1220   Alexander   Kirk   Charles   Cook   FAIRFIELD   11/6/2013   9.00       Anniversary Bonus   FT
1151   Megan   LeMaster   N   Universal Worker   FAIRFIELD   6/14/2013   9.00       Anniversary Bonus   FT
92   Tara   Lewman   Lou   Universal Worker   FAIRFIELD   11/23/2009   10.79       Anniversary Bonus   PT
764   Brandi   Logli   L   Manager   FAIRFIELD   8/31/2011   25.60   Manager Bonus Program   Anniversary Bonus   FT
460   Jennifer   Loveland   M   Culinary Aide   FAIRFIELD   8/11/2010   10.75       Anniversary Bonus   FT
1239   Cynthia   McCoy   L   Cook   FAIRFIELD   12/30/2013   9.00       Anniversary Bonus   FT
1217   Alexis   McElroy   S   Universal Worker   FAIRFIELD   10/22/2013   9.00       Anniversary Bonus   PT
402   Hannah   Newlon   M   Universal Worker   FAIRFIELD   1/10/2014   9.00       Anniversary Bonus   PRN
1077   Jennifer   Nicely   A   Universal Worker   FAIRFIELD   11/12/2012   10.00       Anniversary Bonus   FT
1121   Veronica   Nicely   C   Universal Worker   FAIRFIELD   4/15/2013   9.00       Anniversary Bonus   FT

 

 
 

  

430   Judy   Qualters   Lucille   Marketing Specialist   FAIRFIELD   7/6/2010   26.45       Anniversary Bonus   PT
68   Nancy   Schafer   J   Housekeeper   FAIRFIELD   11/10/2003   9.11       Anniversary Bonus   FT
66   Carrie   Schafer   Louise   Universal Worker   FAIRFIELD   6/20/2007   9.93       Anniversary Bonus   FT
834   Amber   Sharp   L   Cook   FAIRFIELD   11/8/2011   9.18       Anniversary Bonus   PT
1240   Flower   Shreck   F   Server   FAIRFIELD   12/30/2013   8.00       Anniversary Bonus   PT
580   Michelle   Sisk   R   Universal Worker   FAIRFIELD   1/13/2011   11.01       Anniversary Bonus   FT
1126   Danielle   Sutherland   L   Universal Worker   FAIRFIELD   4/19/2013   10.00       Anniversary Bonus   FT
80   Emily   Titus   Sue   Universal Worker   FAIRFIELD   4/28/2009   9.79       Anniversary Bonus   PT
678   Douglas   Vorhies   A   Cook   FAIRFIELD   12/14/2013   10.00       Anniversary Bonus   PT
71   Stephanie   Watson   Lynn   Universal Worker   FAIRFIELD   8/15/2007   10.51       Anniversary Bonus   FT
1238   Donna   Workman   Mae   Server   FAIRFIELD   12/30/2013   8.00       Anniversary Bonus   PT
1119   Vanessa   Borjas   M   Universal Worker   FT MADISON   4/1/2013   9.12       Anniversary Bonus   PT
1157   Samantha   Burden   J   Universal Worker   FT MADISON   6/28/2013   9.00       Anniversary Bonus   PT
1089   Brittany   Burdette   E   Universal Worker   FT MADISON   12/31/2012   9.30       Anniversary Bonus   FT
918   Joseph   Cook   W   Food Service Worker   FT MADISON   4/12/2012   9.25       Anniversary Bonus   FT
643   Echo   Daugherty   M   Universal Worker   FT MADISON   3/26/2011   9.27       Anniversary Bonus   PT
1255   Brian   Derengowski   E   Maintenance Technician   FT MADISON   2/3/2014   14.00       Anniversary Bonus   FT
725   Emily   Doherty   Kay   Dementia Lead Univ Worker   FT MADISON   7/15/2011   10.50       Anniversary Bonus   FT
246   Summer   Fedler   Marie   Universal Worker   FT MADISON   8/11/2008   10.97       Anniversary Bonus   FT
183   Thomas   Ferrell   Leroy   Cook   FT MADISON   8/24/2009   10.23       Anniversary Bonus   FT
1284   Stefany   Gilman   M   Universal Worker   FT MADISON   6/5/2014   9.50       Anniversary Bonus   PT
1170   Daniel   Goebel   K   Server   FT MADISON   7/22/2013   8.50       Anniversary Bonus   PT
1247   Kara   Hoenig   A   Universal Worker   FT MADISON   1/10/2014   9.00       Anniversary Bonus   PT
1285   Tabitha   Hoenig   E   Universal Worker   FT MADISON   6/3/2014   9.00       Anniversary Bonus   PT
171   Jeff   Holmes   L   Universal Worker   FT MADISON   3/13/2009   12.07       Anniversary Bonus   FT

 

 
 

  

274   Allison   Houston   Lee   Universal Worker   FT MADISON   4/18/2013   9.15       Anniversary Bonus   FT
1224   Jenny   Jenkins   L   Marketing Coordinator   FT MADISON   11/18/2013   21.63   Marketing Bonus Program   Anniversary Bonus   FT
1042   Corey   Johnson   R   Culinary Coordinator   FT MADISON   9/24/2012   13.36       Anniversary Bonus   FT
267   Robin   Kent   Kay   Cook   FT MADISON   12/8/2009   9.66       Anniversary Bonus   PT
723   Mary   Kramer   Elaine   Activities Coordinator   FT MADISON   7/13/2011   12.98       Anniversary Bonus   FT
947   Mendy   LeMoyne   E   Universal Worker   FT MADISON   5/4/2012   9.14       Anniversary Bonus   PT
256   Margaret   Londrigan   Louise   Universal Worker   FT MADISON   3/4/2009   9.57       Anniversary Bonus   FT
1171   Jason   Mann   R   Server   FT MADISON   7/22/2013   8.50       Anniversary Bonus   FT
895   Michael   Moore   R   Universal Worker   FT MADISON   3/13/2012   9.52       Anniversary Bonus   PT
266   Ashley   Morrical   A   Universal Worker   FT MADISON   12/3/2009   9.47       Anniversary Bonus   FT
857   Holly   Muldoon   A   Universal Worker   FT MADISON   12/6/2011   9.80       Anniversary Bonus   FT
249   Mary   Parks   Ann   Universal Worker   FT MADISON   8/21/2008   9.51       Anniversary Bonus   FT
1108   Frank   Perez   J   Food Service Worker   FT MADISON   2/25/2013   8.67       Anniversary Bonus   PT
1274   Lexus   Pruitt   M   Food Service Worker   FT MADISON   5/22/2014   8.50       Anniversary Bonus   PT
1279   Tiana   Puga-Olson   R   Server   FT MADISON   6/2/2014   8.50       Anniversary Bonus   PT
1273   Ashley   Ruffcorn   A   Manager   FT MADISON   5/1/2014   23.08   Manager Bonus Program   Anniversary Bonus   FT
1251   Carol   Scott   A   Universal Worker   FT MADISON   1/23/2014   9.00       Anniversary Bonus   FT
1264   Kea   Simpson   M   Health Care Coordinator   FT MADISON   2/19/2014   22.84       Anniversary Bonus   FT
1037   Erica   Stewart   Noelle   Universal Worker   FT MADISON   9/17/2012   9.41       Anniversary Bonus   FT
1287   Dyre   Vincent   L   Server   FT MADISON   6/10/2014   8.00       Anniversary Bonus   PT
1276   Lisa   Wellman   M   Administrative Assistant   FT MADISON   5/26/2014   12.00       Anniversary Bonus   PT
1060   Sean   Zipprich   C   Food Service Worker   FT MADISON   10/16/2012   8.78       Anniversary Bonus   FT
973   Leslie   Beach   A   Administrative Assistant   MT PLEASANT   6/14/2012   15.00       Anniversary Bonus   FT
1275   Lacy   Adreon   C   Cook   MT PLEASANT   5/27/2014   8.50       Anniversary Bonus   PT

 

 
 

  

2   Peggy   Armstrong   L   Food Service Worker   MT PLEASANT   8/1/2008   9.92       Anniversary Bonus   FT
1180   Paige   Aynes   N   Cook   MT PLEASANT   8/7/2013   8.50       Anniversary Bonus   PT
39   Kelsey   Bolin   Rae   Health Care Coordinator   MT PLEASANT   3/10/2010   20.20       Anniversary Bonus   FT
1267   Aaron   Brown   E   Maintenance   MT PLEASANT   3/24/2014   12.50       Anniversary Bonus   PT
514   Thomas   Bryant   R   Culinary Coordinator   MT PLEASANT   10/7/2010   13.48       Anniversary Bonus   FT
821   Robin   Buffington   M   Dementia Lead Univ Worker   MT PLEASANT   11/1/2011   10.14       Anniversary Bonus   FT
692   Breanne   Dean   L   Universal Worker   MT PLEASANT   6/3/2011   9.18       Anniversary Bonus   PT
488   Emily   Dudley-Wagner   K   Universal Worker   MT PLEASANT   9/16/2010   9.93       Anniversary Bonus   FT
1277   Leashia   Durham   A   Universal Worker   MT PLEASANT   5/27/2014   9.00       Anniversary Bonus   PT
3   Ginger   Edwards   Renee   Universal Worker   MT PLEASANT   9/5/2007   10.30       Anniversary Bonus   FT
551   Sandra   Hamilton   J   Universal Worker   MT PLEASANT   12/7/2010   9.77       Anniversary Bonus   FT
1004   Ashley   Holl   N   Universal Worker   MT PLEASANT   7/11/2012   9.36       Anniversary Bonus   FT
27   Mary   Holloway   Ellen   Housekeeper   MT PLEASANT   9/23/2009   10.28       Anniversary Bonus   FT
6   Melissa   Kruse   M   Activities Coordinator   MT PLEASANT   2/9/2005   14.88       Anniversary Bonus   FT
1080   Jennifer   Lambert   R   Universal Worker   MT PLEASANT   11/15/2012   9.00       Anniversary Bonus   PT
79   Jessica   Lanman   Renea   Universal Worker   MT PLEASANT   8/24/2012   9.62       Anniversary Bonus   FT
1232   Crystal   Larson   N   Cook   MT PLEASANT   12/10/2013   8.75       Anniversary Bonus   PT
759   McKenzie   Long   S   Cook   MT PLEASANT   8/11/2011   9.00       Anniversary Bonus   FT
1253   Joey   Marcos   B   Universal Worker   MT PLEASANT   1/22/2014   9.25       Anniversary Bonus   PT
43   Sarah   Martin   L   Manager   MT PLEASANT   4/19/2010   19.50   Manager Bonus Program   Anniversary Bonus   FT
1051   Alison   McKinney   D   Universal Worker   MT PLEASANT   10/8/2012   9.22       Anniversary Bonus   FT
1254   Shirley   McMurray   J   Dementia Coordinator/Support Nurse   MT PLEASANT   1/27/2014   21.63       Anniversary Bonus   FT
7   Jennifer   Millard   Jo   Universal Worker   MT PLEASANT   6/20/2005   11.70       Anniversary Bonus   PT
26   Krista   Mitchell   Kay   Universal Worker   MT PLEASANT   8/24/2009   9.62       Anniversary Bonus   PT
667   Denise   Moeller   L   Food Service Worker   MT PLEASANT   3/28/2011   8.49       Anniversary Bonus   PRN

 

 
 

  

752   Lori   Moorman   L   Universal Worker   MT PLEASANT   8/15/2011   9.55       Anniversary Bonus   FT
1172   Sandra   Parker   M   Universal Worker   MT PLEASANT   7/29/2013   9.00       Anniversary Bonus   PT
1261   Melissa   Peiffer   N   Administrative Assistant   MT PLEASANT   2/11/2014   12.00       Anniversary Bonus   FT
1201   Baylee   Pfeiffer   M   Universal Worker   MT PLEASANT   9/16/2013   9.25       Anniversary Bonus   PT
622   Debra   Rice   K   Universal Worker   MT PLEASANT   3/15/2011   9.53       Anniversary Bonus   FT
1181   Natasha   Ritchey   J   Universal Worker   MT PLEASANT   8/9/2013   9.00       Anniversary Bonus   FT
9   Sharrie   Ryan   Lee   Food Service Worker   MT PLEASANT   9/20/2007   10.56       Anniversary Bonus   FT
34   Douglas   Schmitter   Eugene   Maintenance   MT PLEASANT   1/18/2010   15.00       Anniversary Bonus   FT
1202   Taylor   Shelledy   N   Universal Worker   MT PLEASANT   9/16/2013   9.00       Anniversary Bonus   PT
11   Alison   Starman   D   Food Service Worker   MT PLEASANT   2/13/2008   9.84       Anniversary Bonus   FT
1207   April   Warner   D   Cook   MT PLEASANT   9/18/2013   8.25       Anniversary Bonus   PT
1243   Wendy   Allen   S   Universal Worker   MUSCATINE   1/2/2014   10.00       Anniversary Bonus   PT
963   Lorrie   Allison   L   Universal Worker   MUSCATINE   6/4/2012   9.88       Anniversary Bonus   PT
1265   Rachel   Armintrout   M   Universal Worker   MUSCATINE   2/21/2014   9.50       Anniversary Bonus   FT
879   Sandra   Birkhofer   K   Housekeeper   MUSCATINE   1/24/2012   9.21       Anniversary Bonus   FT
1262   Rebecca   Blodgett   S   Universal Worker   MUSCATINE   2/14/2014   10.00       Anniversary Bonus   FT
531   Maria   Botello   Luisa   Cook   MUSCATINE   10/28/2010   9.15       Anniversary Bonus   FT
1166   Lisa   Chase   A   Universal Worker   MUSCATINE   7/17/2013   10.00       Anniversary Bonus   FT
299   Ashley   Coram   Renee   Cook   MUSCATINE   11/16/2009   9.20       Anniversary Bonus   FT
289   Heidi   Coram   R   Cook   MUSCATINE   4/10/2009   9.11       Anniversary Bonus   PT
1227   Facia   Davies   D   Universal Worker   MUSCATINE   12/3/2013   10.25       Anniversary Bonus   FT
186   Dominick   DeLeon   J   Culinary Coordinator   MUSCATINE   2/9/2009   17.00       Anniversary Bonus   FT
607   Terry   Evans   L   Cook   MUSCATINE   2/25/2011   9.25       Anniversary Bonus   FT
634   Nancy   Fox   D   Universal Worker   MUSCATINE   3/23/2011   9.88       Anniversary Bonus   FT

 

 
 

 

1280   Ana   Gaytan       Server   MUSCATINE   5/30/2014   8.25       Anniversary Bonus   PT
1281   Elza   Gonzalez-Ortega       Server   MUSCATINE   5/30/2014   8.25       Anniversary Bonus   PT
831   William   Grosse   W   Maintenance   MUSCATINE   11/9/2011   10.73       Anniversary Bonus   PT
1189   Ashley   Hansford   N   Universal Worker   MUSCATINE   8/19/2013   10.25       Anniversary Bonus   FT
277   Rhonda   Hintermeister   Sue   Activities Coordinator   MUSCATINE   9/25/2008   13.50       Anniversary Bonus   FT
1028   Beth   Holt   Ann   Universal Worker   MUSCATINE   8/20/2012   9.98       Anniversary Bonus   FT
1258   Judith   Howard   L   Laundry   MUSCATINE   2/7/2014   9.00       Anniversary Bonus   PT
278   Kendra   Husband   Fay   Culinary Aide   MUSCATINE   11/12/2008   9.89       Anniversary Bonus   FT
1156   Angela   Huthmacher   R   Admin Coordinator   MUSCATINE   6/17/2013   14.43       Anniversary Bonus   FT
849   Dennis   Jens   E   Activities   MUSCATINE   11/28/2011   9.57       Anniversary Bonus   PRN
1292   Rebecca   Johnson   L   Food Service Worker   MUSCATINE   6/30/2014   8.50       Anniversary Bonus   PT
400   Roy   Kapteina   R   Maintenance   MUSCATINE   6/1/2010   14.47       Anniversary Bonus   FT
1081   Tim   Keldgord   C   Activities   MUSCATINE   12/7/2012   9.21       Anniversary Bonus   PRN
1040   Thomas   Keller   R   Food Service Worker   MUSCATINE   9/17/2012   8.22       Anniversary Bonus   PT
716   Melanie   Kraklow   A   Activities   MUSCATINE   2/19/2014   8.00       Anniversary Bonus   PT
1230   Maggie   Lofgren   G   Food Service Worker   MUSCATINE   12/4/2013   8.00       Anniversary Bonus   PT
1067   Miranda   Lowe   G   Universal Worker   MUSCATINE   10/30/2012   9.77       Anniversary Bonus   FT
715   Lyle   Marks   W   Activities   MUSCATINE   1/28/2014   8.16       Anniversary Bonus   PT
286   Andreina   Morales       Universal Worker   MUSCATINE   7/17/2013   10.00       Anniversary Bonus   FT
619   Susan   Mullen   K   Health Care Coordinator   MUSCATINE   7/29/2013   25.00       Anniversary Bonus   FT
1259   Sara   Petersen   A   Universal Worker   MUSCATINE   2/7/2014   9.75       Anniversary Bonus   FT
581   Julie   Reynolds   Ann   Dementia Coordinator   MUSCATINE   1/14/2011   20.99       Anniversary Bonus   FT
1293   Patti   Rife   A   Universal Worker   MUSCATINE   7/3/2014   9.25       Anniversary Bonus   FT
789   Mary   Roberts   B   Food Service Worker   MUSCATINE   9/13/2011   8.80       Anniversary Bonus   FT
283   Michelle   Sides   Marie   Manager   MUSCATINE   5/11/2009   21.71   Manager Bonus Program   Anniversary Bonus   FT

 

 
 

  

633   Margaret   Steinke   F   Support Nurse   MUSCATINE   3/23/2011   25.81       Anniversary Bonus   PT
1128   Patti   Thornton   B   Universal Worker   MUSCATINE   4/15/2013   9.60       Anniversary Bonus   FT
1225   Allison   Todd   C   Server   MUSCATINE   11/21/2013   8.00       Anniversary Bonus   PT
785   Elisha   Turner   A   Cook   MUSCATINE   9/6/2011   8.65       Anniversary Bonus   PT
876   Cali   VanZandt   E   Universal Worker   MUSCATINE   1/10/2012   9.79       Anniversary Bonus   FT
285   Marlene   Wheeler   K   Universal Worker   MUSCATINE   5/4/2009   10.82       Anniversary Bonus   FT
631   Elizabeth   Wiegle   J   Universal Worker   MUSCATINE   3/23/2011   9.98       Anniversary Bonus   PRN
1282   Sheli   Wilson   R   Universal Worker   MUSCATINE   5/27/2014   9.00       Anniversary Bonus   FT
1283   Kathy   Wittenburg   A   Universal Worker   MUSCATINE   5/30/2014   9.50       Anniversary Bonus   PT
873   Brittany   Woods   N   Universal Worker   MUSCATINE   1/10/2012   9.79       Anniversary Bonus   FT

 

Anniversary Bonus: All employees in good standing are entitled to a bonus due with the pay period following their yearly hire-date anniversary. The bonus is equal to $50 for each year of consecutive service. $50 on the first anniversary, $100 on the second, etc.

 

Manager Bonus Program: Building manager's are entitled to a $2,000 bonus for each quarter in which their property exceeds its budgeted NOI

 

Marketing Bonus Program: Some select employees are entitled to a referral bonus of $250 for each new resident they bring in.

 

 
 

 

SCHEDULE 6.31
Financial Statements

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

Schedule 10.4

Permitted Special Purpose Entity Assignees

[ To be provided by the Purchaser.]

 

 
 

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made effective _______ __, 2014, by and between by [________] ASSISTED LIVING LLC , an Iowa limited liability company (the “ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain affiliates of Seller, dated as of August 1, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

RECITALS

 

A.           Seller or its predecessors-in-title have heretofore entered into certain leases with tenants permitting occupancy or use of residential units or other space located on that certain real property (the “ Property ”), being more particularly described on Exhibit ”A” attached hereto and made a part hereof for all purposes, which leases in effect as of the date hereof are listed on Exhibit B attached hereto (the “ Leases ”);

 

C.           Seller or its predecessors-in-title have heretofore entered into certain contracts and agreements relating to the operation and maintenance of the Property that Purchaser has agreed to assume, which contracts and agreements (the “ Contracts ”) are listed on Exhibit “C” attached hereto and made a part hereof for all purposes; and

 

D.           Subject to the terms of this Agreement, Purchaser desires to purchase and assume from Seller, and Seller desires to sell and assign to Purchaser, (i) Seller’s right, title and interest as lessor under the Leases, (ii) all right, title and interest of Seller in, to and under the Contracts and (iii) all other Assumed Liabilities related to the Property (the “ Property Assumed Liabilities ”.

 

AGREEMENT :

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the parties hereto agree as follows:

 

1.          Subject to the terms of this Agreement, Seller does hereby assign, transfer, set over, deliver and convey unto Purchaser, and the Purchaser, for itself and for its successors and assigns, hereby accepts, assumes and agrees to pay, perform or discharge, as the case may be, (a) all of Seller’s right, title and interest under (i) the Leases, all guaranties of such Leases, and all rents, revenues, income, profits, and receipts due under the Leases or otherwise receivable by the owner of the Property for use or occupancy of any of the Property allocable to the period from and after the date hereof and (ii) the Contracts and (b) all other Property Assumed Liabilities.

 

2.          Except for the Property Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

 
 

  

3.          The undertakings of the Purchaser referred to in this Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Property Assumed Liabilities.

 

4.          This Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall prevail.

 

5.          EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE LEASES, CONTRACTS AND OTHER PROPERTY ASSUMED LIABILITIES WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

 

[Signature Page Follows]

 

 
 

  

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to be executed and delivered under seal as of the day and year first above written. This Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

  

  SELLER :
  [____________] ASSISTED LIVING, LLC , an Iowa limited liability company
     
  By:  
Title:
   
  PURCHASER :
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Title:  

 

[signatures continue on next page]

 

 
 

   

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [________] ASSISTED LIVING LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
   
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]  

 

 
 

   

  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  
     
  [________] ASSISTED LIVING LLC
  an Iowa limited liability company
   
  By:  
  Name:  
  Title:  

 

 

 

Exhibit 10.39

FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this “ Amendment ”) is made and entered effective as of August 7, 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 (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.
Due Diligence Period . The “Due Diligence Period” for purposes of the Agreement shall mean a period extending until 5:00 p.m. Eastern time on August 8, 2014.

3.
Agreement Remains In Effect . The Agreement, as modified by this Amendment, is hereby ratified and affirmed as binding and in full force and effect.

4.
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.]



1



IN WITNESS WHEREOF , the parties hereto have executed this First 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                    

 






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                    


PURCHASER :

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


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


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

1


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.]



2


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:                                  $70,500




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

1


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]

 

Exhibit 10.42

 

ASSET PURCHASE AGREEMENT

 

By and Among

 

AMERICAN REALTY CAPITAL VII, LLC

 

as “ Purchaser ”

 

and

 

THE ALLEGRO AT ABACOA, L.L.C. ,

THE ALLEGRO AT HELMWOOD, LLC ,

COLLEGE HARBOR PROPERTIES, L.L.C. ,

THE ALLEGRO AT WILLOUGHBY, L.L.C. ,

THE ALLEGRO AT EAST LAKE, L.L.C. , and

HARBOR TOWERS, L.L.C.

 

as “ Seller ”

 

Property Names and Locations:

 

Allegro Jupiter – Jupiter, Florida
Allegro Stuart – Stuart, Florida
Allegro Elizabethtown – Elizabethtown, Kentucky
Allegro Tarpon Springs – Tarpon Springs, Florida
Allegro St. Petersburg – St. Petersburg, Florida

 

Dated as of August 25, 2014

 

 
 

 

Table of contents

 

    Page
     
ARTICLE 1 Definitions and Certain Rules of Construction 1
     
Section 1.1 Defined Terms 1
Section 1.2 Certain Definitions 5
Section 1.3 Rules of Construction 5
     
ARTICLE 2 Purchase and Sale of the Purchased Property 6
     
Section 2.1 Sale of Purchased Property 6
Section 2.2 Purchased Property 6
Section 2.3 Excluded Property 8
Section 2.4 Title to Real Property and Surveys 8
Section 2.5 Assumed Liabilities 11
Section 2.6 Excluded Liabilities 11
     
ARTICLE 3 Purchase Price; Payment of Purchase Price; Allocation 12
     
Section 3.1 Purchase Price and Deposit 12
Section 3.2 Payment of Purchase Price 13
Section 3.3 Allocation of Purchase Price 13
Section 3.4 Prorations 14
     
ARTICLE 4 Certain Other Covenants and Agreements 16
     
Section 4.1 Inspection and Due Diligence 16
Section 4.2 Conduct of Business Prior to the Closing Date 18
Section 4.3 Notification of Certain Matters 19
Section 4.4 Employees; Accrued Vacation, Sick Pay, etc. 19
Section 4.5 Confidentiality 20
Section 4.6 Expenses and Taxes 21
Section 4.7 Waiver of Bulk Sales and Indemnification 22
Section 4.8 Exclusivity 22
Section 4.9 Consents; Cooperation 22
Section 4.10 Fines and Penalties 23
Section 4.11 Further Assurances 24
Section 4.12 Delivery of Schedules 24
     
ARTICLE 5 Closing 25
     
Section 5.1 Closing 25
Section 5.2 Conditions to Seller’s Obligations 25
Section 5.3 Conditions to Purchaser’s Obligations 25
Section 5.4 Deliveries by Seller 26
Section 5.5 Deliveries by Purchaser 28
Section 5.6 Failure to Obtain Licenses and Permits 28
Section 5.7 Non-Fulfillment of Closing Conditions 28
Section 5.8 Post-Closing Actions 29
Section 5.9 Termination During Due Diligence 29
Section 5.10 No Partial Closing 30
     
ARTICLE 6 Representations and Warranties of Seller 30
     
Section 6.1 Organization and Standing 30
Section 6.2 Valid and Binding Obligations 30
Section 6.3 Title; Purchased Property Complete 30
Section 6.4 Taxes and Tax Returns 31
Section 6.5 Execution and Delivery 31

 

i
 

 

Section 6.6 Contracts and Leases 31
Section 6.7 Residency Agreements and Related Matters 32
Section 6.8 Permits and Licenses 32
Section 6.9 Insurance 32
Section 6.10 Employees 33
Section 6.11 Seller Benefit Plans 33
Section 6.12 Litigation 34
Section 6.13 Compliance with Laws 34
Section 6.14 Financial Statements 35
Section 6.15 Real Property 35
Section 6.16 Environmental Matters 36
Section 6.17 Brokers, Finders 36
Section 6.18 FIRPTA 36
Section 6.19 Solvency 36
Section 6.20 Consent of Third Parties 37
Section 6.21 No Governmental Approvals; Permits 37
Section 6.22 Assessments 37
Section 6.23 Title Encumbrances 37
Section 6.24 Affordable Housing Units 37
Section 6.25 Loans 37
Section 6.26 No Other Warranties 37
     
ARTICLE 7 Representations and warranties of Purchaser 38
     
Section 7.1 Organization and Standing 38
Section 7.2 Execution and Delivery 38
Section 7.3 Solvency 38
Section 7.4 Consent of Third Parties 39
Section 7.5 No Governmental Approvals 39
Section 7.6 Brokers, Finders 39
     
ARTICLE 8 Indemnification 39
     
Section 8.1 Indemnification by Seller 39
Section 8.2 Indemnification by Purchaser 39
Section 8.3 Indemnification Limits; Survival 40
Section 8.4 Procedures Regarding Third Party Claims 41
Section 8.5 General Qualifications on Indemnification 42
Section 8.6 Exclusivity 42
Section 8.7 Effective Upon Closing 42
     
ARTICLE 9 Default and Termination 43
     
Section 9.1 No Default Termination 43
Section 9.2 Default by Purchaser 43
Section 9.3 Default by Seller 43
Section 9.4 Survival; No Right to Damages 44
     
ARTICLE 10 Miscellaneous 44
     
Section 10.1 Access to Books and Records after Closing 44
Section 10.2 Notices 45
Section 10.3 Good Faith; Cooperation 46
Section 10.4 Assignment; Exchange Cooperation; Successors in Interest 46
Section 10.5 No Third Party Beneficiaries 46
Section 10.6 Severability 46
Section 10.7 Purchaser Records Rights 46
Section 10.8 Controlling Law; Integration; Amendment; Waiver 47
Section 10.9 Time 47
Section 10.10 Survival 47

 

- ii -
 

 

Section 10.11 Eminent Domain - Condemnation 47
Section 10.12 Risk Of Loss 47
Section 10.13 Attorneys’ Fees 48
Section 10.14 Covenant Not to Compete 48
Section 10.15 Waiver of Jury Trial 48
Section 10.16 Construction 48
Section 10.17 Execution in Counterparts 48

 

Exhibits

 

Exhibit   Description
     
Exhibit A   Escrow Agreement
     
Exhibit B   Post-Closing Escrow Agreement
     
Exhibit C   Deed
     
Exhibit D   Bill of Sale and Assignment
     
Exhibit E-1   Post-Closing Management Agreement
     
Exhibit E-2   Transition Period Sublease
     
Exhibit E-3   Operations Transfer Agreement
       
Exhibit F   Assumption Agreement  
     
Exhibit G   Requested Diligence Materials

 

- iii -
 

 

Schedules

 

Schedule   Title
     
Schedule 1.1(a)   Assumed Contracts and Leases
     
Schedule 1.1(c)   Legal Description of Purchased Real Property
     
Schedule 2.2(c)   Prepaids and Deposits
     
Schedule 2.2(d)   Vehicles Included in Purchased Personal Property
     
Schedule 2.2(g)   Facility Trade Names
     
Schedule 2.4(a)   Permitted Title Exceptions
     
Schedule 2.4(g)   Licenses, Leases Easements and Other Rights Related to Real Property
     
Schedule 3.3   Purchase Price Allocation
     
Schedule 5.4(n)   Third Party Consents
     
Schedule 6.3   Material Assets or Rights Not Included in Purchased Property
     
Schedule 6.5   Execution and Delivery – No Contravention
     
Schedule 6.6   Contracts and Leases
     
Schedule 6.7   Residency Agreements; Refunds and Deposits; Resident Details
     
Schedule 6.8   Permits and Licenses
     
Schedule 6.9   Insurance; Three Year Claim History
     
Schedule 6.10   Employees, etc.
     
Schedule 6.11   Benefit Plans

 

- iv -
 

  

Schedule 6.12   Litigation, etc.
     
Schedule 6.13   Compliance with Laws
     
Schedule 6.14   Financial Statements
     
Schedule 6.15   Real Property Compliance
     
Schedule 6.16   Environmental Matters
     
Schedule 6.20   Third Party Consents
     
Schedule 6.21   Government Approvals
     
Schedule 6.22   Assessments
     
Schedule 6.23   Title Encumbrances
     
Schedule 6.25   Loans
     
Schedule 10.4   Permitted Special Purpose Entity Assignees

 

- v -
 

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (the “ Agreement ”) is made and entered into this 25th day of August, 2014 (the “ Effective Date ”), by and among AMERICAN REALTY CAPITAL VII, LLC , a Delaware limited liability company (“ Purchaser ”) and THE ALLEGRO AT ABACOA, L.L.C. , a Florida limited liability company, THE ALLEGRO AT HELMWOOD, LLC, a Kentucky limited liability company, COLLEGE HARBOR PROPERTIES, L.L.C. , a Florida limited liability company, THE ALLEGRO AT WILLOUGHBY, L.L.C. , a Florida limited liability company, THE ALLEGRO AT EAST LAKE, L.L.C. , a Florida limited liability company, and HARBOR TOWERS, L.L.C. , a Florida limited liability company (collectively, the “ Seller ”).

 

Recitals:

 

Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires to purchase from Seller, substantially all of the assets, properties and business of Seller, consisting of the Purchased Property described herein.

 

This Agreement sets forth the terms and conditions to which the parties have agreed.

 

Agreements:

 

NOW, THEREFORE , in consideration of the premises and the mutual promises set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

 

ARTICLE 1
Definitions and
Certain Rules of Construction

 

Section 1.1           Defined Terms. The following capitalized terms shall have the meanings specified in this section. Other terms are defined in the text of this Agreement, and throughout this Agreement, those terms shall have the meanings respectively ascribed to them.

 

“ Assumed Contracts and Leases ” are those contracts, leases and agreements listed on Schedule 1.1(a) attached hereto, to the extent assignable and for which any necessary third party consents have been obtained by Purchaser.

 

“ Assumed Liabilities ” are (i) all of Seller’s obligations and liabilities under the Assumed Contracts and Leases which arise or accrue at any time after 11:59 PM on the date immediately preceding the Closing Date; (ii) all of Seller’s obligations with respect to accrued vacation and sick pay for employees to the extent of Purchaser’s obligations pursuant to Section 4.4(d) ; (iii) all of Seller’s obligations and liabilities under Residency Agreements, which arise or accrue at any time after 11:59 PM on the date immediately preceding the Closing Date; and (iv) the Prepaids and Deposits described on Schedule 2.2(c) .

 

“ Average Occupancy ” means the trailing 30-day average occupancy of the available units within the Facilities.

 

1
 

 

“ Business ” means all aspects of the operation of each Facility as an assisted living facility, memory care facility, skilled nursing facility and/or independent living facility, as applicable.

 

“ Closing ” means the consummation of the transactions contemplated by this Agreement with respect to a Facility. Neither party will need to be present at Closing, it being anticipated that the parties will deliver all Closing documents and deliverables in escrow to the Escrow Agent (as defined herein) (or if both Purchaser and Seller agree, to Purchaser’s and/or Seller’s counsel) prior to the date of Closing.

 

“ Closing Date ” shall have the meaning set forth in Section 5.1 hereof.

 

“ Current Manager ” means the current manager of the Business which operates aspects of the Business on Seller’s behalf, specifically, Love Management Company, LLC, a Missouri limited liability company d/b/a ALLEGRO MANAGEMENT COMPANY.

 

“ Environmental Laws ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. , Hazardous Materials Transportation Act, 49 U.S.C. § 1802, the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. , the Toxic Substance Control Act of 1976, as amended, 15 U.S.C. § 2601 et seq. , or any other federal, state, local or other governmental legislation, statute, law, code, rule, regulation or ordinance identified by its terms as pertaining to the protection of the environment, including laws relating to the treatment, storage or disposal of Hazardous Substances, in each case as in effect on the Effective Date.

 

“ Facilities ” means collectively the facilities known as:

 

(i)           Allegro Jupiter located in Jupiter, Florida and consisting of approximately 79 independent living units, 42 assisted living units and 24 memory care units (also individually referred to as the “ Jupiter Facility ”);

 

(ii)          Allegro Stuart located in Stuart, Florida and consisting of approximately 106 independent living units, 53 assisted living units and 36 memory care units (also individually referred to as the “ Stuart Facility ”);

 

(iii)         Allegro Elizabethtown located in Elizabethtown, Kentucky and consisting of approximately 54 assisted living units and 13 memory care units (also individually referred to as the “ Elizabethtown Facility ”);

 

(iv)         Allegro Tarpon Springs located in Tarpon Springs, Florida and consisting of approximately 92 assisted living units (also individually referred to as the “ Tarpon Springs Facility ”); and

 

(v)          Allegro St. Petersburg located in St. Petersburg, Florida and consisting of approximately 81 independent living units, 73 assisted living units and 52 skilled nursing units (also individually referred to as the “ St. Petersburg Facility ”).

 

Each of the Facilities is referred to individually herein as a “ Facility .”

 

2
 

 

“Government Program ” means the federal Medicare program, any state Medicaid program, and such other similar federal, state, or local reimbursement or governmental programs for which any Facility is eligible.

 

“ Hazardous Substance ” means petroleum, including crude oil or any fraction thereof, flammable explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, any material containing polychlorinated biphenyls, and any of the substances defined as “hazardous substances” or “toxic substances” or otherwise identified and regulated under any Environmental Laws.

 

“ Holdback Amount ” means an amount equal to THREE MILLION DOLLARS ($3,000,000.00) at Closing, which is thereafter subject to reduction in accordance with the terms of Section 3.2(c) below.

 

“Improvements” means all buildings, facilities, and other improvements constructed on the Purchased Property as of the date of Closing.

 

“ Intellectual Property ” means all trademarks, trademark applications, service marks, trade names, copyrights, trade secrets, licenses, domain names, mask works, patents, patent applications, information and proprietary rights and processes.

 

“ IRC ” means the Internal Revenue Code of 1986, as amended, and any regulations or guidance issued thereunder.

 

“ Lien ” means any mortgage, deed to secure debt, deed of trust, pledge, hypothecation, title defect, right of first refusal, security or other adverse interest, encumbrance, claim, option, lien, lease or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, affecting any assets or property, including any agreement to give or grant any of the foregoing, any conditional sale or other title retention agreement, and the filing of or agreement to give any financing statement with respect to any assets or property under the Uniform Commercial Code or comparable law of any jurisdiction.

 

“ Material Adverse Change ” means any occurrence between the Effective Date and the Closing Date which results in a material adverse change in the assets, financial condition, or results of operations of any Facility or the St. Petersburg Raw Land, taken as a whole.

 

“ Operator ” means the current, licensed operator of each Facility, specifically,

 

(vi)         The Allegro at Abacoa, L.L.C. with respect to the Jupiter Facility;

 

(vii)        The Allegro at Willoughby, L.L.C. with respect to the Stuart Facility;

 

(viii)       The Allegro at Helmwood, LLC with respect to the Elizabethtown Facility;

 

(ix)          The Allegro at East Lake, L.L.C. with respect to the Tarpon Springs Facility;

 

(x)           The Allegro at College Harbor, L.L.C. with respect to the St. Petersburg Facility;

 

“ PEO ” means College Harbor Staffing, L.L.C., with whom Seller or the Current Manager has entered into an agreement covering one or more employees or workers providing services to the Facility.

 

3
 

 

“ Permitted Encumbrances ” means (i) liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings and which are satisfied or discharged of record at or prior to Closing pursuant to Section 2.4(f) below; (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar liens arising in the ordinary course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings and which are satisfied or discharged of record at or prior to Closing pursuant to Section 2.4(f) below; (iii) liens for property owner or shared facility assessments not yet due or which are being contested in good faith and by appropriate proceedings and which are satisfied or discharged of record at or prior to Closing pursuant to Section 2.4(f) below; and (iv) the Permitted Title Exceptions.

 

“ Plans ” shall have the meaning set forth in Section 6.11 .

 

“ Post-Closing Manager ” means the contemplated manager of the Business on the Purchaser’s behalf following the Closing. The Post-Closing Manager shall be Love Management Company, LLC, a Missouri limited liability company d/b/a ALLEGRO MANAGEMENT COMPANY.

 

“ Post-Closing Management Agreement ” means the management agreement entered into by Purchaser and the Post-Closing Manager for the management of each Facility from and after Closing each in substantially the form mutually agreed upon by the parties during the Due Diligence Period and attached hereto as Exhibit E-1 .

 

“ Purchased Personal Property ” is the Purchased Property other than the Real Property, including intangible Purchased Property.

 

“ Purchased Property ” is the property of Seller to be sold to Purchaser pursuant to this Agreement as set forth in Section 2.2 hereof.

 

“ Real Property ” shall mean:

 

(xi)          with respect to the Jupiter Facility that certain parcel of real property located at 1031 Community Drive, Jupiter, Florida and more particularly described in Schedule 1.1(c)(i) attached hereto;

 

(xii)         with respect to the Stuart Facility that certain parcel of real property located at 3400 Southeast Aster Lane, Stuart, Florida and more particularly described in Schedule 1.1(c)(ii) attached hereto;

 

(xiii)        with respect to the Elizabethtown Facility that certain parcel of real property located at 108 Diecks Drive, Elizabethtown, Kentucky and more particularly described in Schedule 1.1(c)(iii) attached hereto;

 

(xiv)       with respect to the Tarpon Springs Facility that certain parcel of real property located at 1755 East Lake Road, Tarpon Springs, Florida and more particularly described in Schedule 1.1(c)(iv) attached hereto;

 

(xv)        with respect to the St. Petersburg Facility that certain parcel of real property located at 4600 54 th Avenue South, St. Petersburg, Florida and more particularly described in Schedule 1.1(c)(v) attached hereto; and

 

4
 

 

(xvi)       that certain parcel of approximately 4.01 acres of unimproved real property located at 54 th Ave South, St. Petersburg, Florida, also identified in the Pinellas County, Florida property records as Parcel #10.32.16.24283.001.0101 and more particularly described in Schedule 1.1(c)(vi) attached hereto (the “ St. Petersburg Raw Land ”).

 

in each instance together with all the buildings, fixtures, structures, and improvements thereon, and all easements and rights of way serving or benefiting such property.

 

“ Residency Agreement ” means any agreement between Seller and an individual contracting for such individual’s residency at a Facility, including without limitation any admissions agreements for residents.

 

" Schedule " means any of the attachments to this Agreement now or hereafter made and identified as a Schedule on pages (iv) and (v) of this Agreement.

 

“ Seller’s Knowledge ” means (a) the knowledge of Laurence A. Schiffer, Robert B. Karn, Douglas S. Schiffer, and Mary F. Rieser, following reasonable inquiry, in connection with the execution of this Agreement and the preparation of Schedules to this Agreement prior to Closing; and (b) in preparation for and during the process of Closing, the knowledge of Laurence A. Schiffer, Robert B. Karn, Douglas S. Schiffer, and Mary F. Rieser, following reasonable inquiry of and consultation with the Community Director of each Facility.

 

“ Seller Parties ” means collectively the Seller, Current Manager and the Operators.

 

Section 1.2           Certain Definitions .   For purposes of this Agreement:

 

“ herein, ” “ hereunder, ” “ hereof, ” “ hereinbefore, ” “ hereinafter ” and other equivalent words refer to this Agreement in its entirety and not solely to the particular portion of this Agreement in which such word is used, and references to “ this article, ” “ this section, ” “ this paragraph, ” “ this subparagraph ” or similar references to a specific part of this Agreement shall refer to the particular article, section, paragraph, subparagraph or specific part in which such reference appears;

 

“ party ” or “ parties ” means each or all, as appropriate, of the entities who have executed and delivered this Agreement, each permitted successor or assign of a party, and when appropriate to effect the binding nature of this Agreement for the benefit of another party, any other successor or assign of a party; and

 

“ person ” means any individual, sole proprietorship, partnership, joint venture, corporation, estate, trust, unincorporated organization, association, limited liability company, institution or other entity, including any that is a governmental authority.

 

Section 1.3           Rules of Construction .  For purposes of this Agreement:

 

(a)           “ including ” and any other words or phrases of inclusion shall not be construed as terms of limitation, so that references to “included” matters shall be regarded as non-exclusive, non-characterizing illustrations; “ copy ” or “ copies ” means that the copy or copies of the material to which it relates are true, correct and complete;

 

(b)           “ shall, ” “ will, ” and “ agrees ” are mandatory, and “ may ” is permissive;

 

5
 

 

(c)           titles and captions of or in this Agreement are inserted only as a matter of convenience and in no way define, limit, extend or describe the scope of this Agreement or the intent of any of its provisions;

 

(d)           whenever the context so requires, the singular includes the plural and the plural includes the singular, and the gender of any pronoun includes the other gender;

 

(e)           each Exhibit and Schedule referred to in this Agreement and each attachment to any of them or this Agreement is hereby incorporated by reference into this Agreement and is made a part of this Agreement as if set out in full in the first place that reference is made to it; and

 

(f)           every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party hereto, regardless of which party was more responsible for the preparation of this Agreement.

 

ARTICLE 2
Purchase and Sale of the Purchased Property

 

Section 2.1           Sale of Purchased Property.    Subject to the provisions of this Agreement, Seller shall sell all of the Purchased Property to Purchaser, free and clear of all Liens and liabilities whatsoever, except for the Assumed Liabilities and the Permitted Encumbrances.

 

Section 2.2           Purchased Property.   The Purchased Property shall include all of the assets of Seller used in, arising from or related to the Business as of the Closing Date other than Excluded Property, including the following:

 

(a)           all inventory and supplies on hand at each Facility on the Closing Date (including food, beverages, office and kitchen supplies);

 

(b)           all of Seller’s right, title and interest in and to the Assumed Contracts and Leases, to the extent assignable;

 

(c)           all pre-paid amounts paid by a resident pursuant to any Residency Agreement for or attributable to the periods from and after the Closing Date as well as any security deposits paid to Seller as of the Closing Date under the Residency Agreements (to the extent such deposits can be transferred in accordance with applicable law) together with any interest thereon to the extent such interest is or may be payable to the residents (or their respective representatives, successors, heirs or assigns) at any time following the Closing Date each as more particularly described on Schedule 2.2(c) (collectively “ Prepaids and Deposits ”);

 

(d)           all of Seller’s tangible personal property (including without limitation equipment, furniture, fixtures, signage and vehicles used in, arising from or related to the Business (including without limitation the vehicles listed and described in Schedule 2.2(d ) , which schedule details the Facility where each vehicle is located and used ) as of the Closing Date;

 

(e)           the Real Property as more particularly described on Schedule 1.1(c) attached hereto and the Facilities described herein;

 

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(f)           subject to applicable laws and regulations, all transferable licenses, permits, certificates, approvals, and other governmental or regulatory authorizations necessary for or incident to the ownership or operation of the Purchased Property in the manner in which they are owned and operated by Seller as of the Closing Date;

 

(g)           to the extent the same (x) relate to the period from and after the date Seller commenced operations in the Facility and (y) are within the possession or reasonable control of Seller: all original books, records, accounts, files, logs, ledgers, journals, and other documents and other materials of Seller (or copies thereof) including any electronic data stored on disc, tape or other electronic format relating to the ownership, use, or management of the Facility or its operations (although Seller may retain copies thereof for the preparation of tax returns, compliance with applicable laws, and other business purposes) (and expressly excluding from such obligation to deliver any materials concerning Seller's organizational structure, financing, capitalization, balance sheet, and any proprietary information concerning the development decision making template utilized in selecting the site or establishing a unit mix prior to commencement of construction of the Facility);

 

(h)           all marketing and promotional materials in Seller’s possession or control, which relate exclusively to the Business, if any, or the services they provide, to the extent of Seller’s rights in such materials, including without limitation brochures, renderings, photographs and signage (although Seller may retain copies thereof for compliance with applicable laws), provided that such materials as may contain Intellectual Property described in Section 2.3(g) below may only be retained or utilized by Purchaser during the period set forth in the Post-Closing Management Agreement.

 

(i)           all warranties and guarantees regarding the installation, application, manufacture, composition and/or inspection of the Purchased Property, and all other manufacturer and third-party warranties and guarantees relating to any of the Purchased Property, to the extent such warranties and guarantees remain in effect and are assignable by Seller;

 

(j)           all telephone and facsimile numbers of each Facility;

 

(k)           all goodwill of the Business as a going concern;

 

(l)           all records of all residents at each Facility as of the Closing Date, whether or not such resident was in occupancy prior to or on the Closing Date in the possession or control of Seller or the Current Manager, to the extent transfer to Purchaser is not prohibited, and subject to Section 10.1 ;

 

(m)           all intangible personal property of Seller, including all registrations, applications and licenses therefor, that is not specifically included in the Excluded Property, to the extent assignable and for which any third party consents required for such assignment have been obtained;

 

(n)           all rights in and to any claims or causes of action to the extent they are in the nature of enforcing a guaranty, warranty, or a contract obligation to complete the Improvements, make repairs, or deliver services to the Purchased Property other than (i) claims for damages or other monetary loss incurred by Seller prior to the Closing Date and (ii) claims relating to Excluded Liabilities or Excluded Property; and

 

(o)           any other tangible or intangible assets, property or rights of any kind or nature not otherwise described above in this Section 2.2 and now owned or hereafter acquired between the Effective

 

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Date and the Closing Date by Seller and used in connection with the operation of the Business (other than Excluded Property and rights relating solely to the Excluded Liabilities).

 

To the extent any of the foregoing Purchased Property is available in electronic format, Seller shall provide Purchaser with same in such electronic format, in addition to physical copies of same.

 

Section 2.3           Excluded Property.          “ Excluded Property ” means the following categories of properties, which although they may currently form part of the Business, are excluded from the Purchased Property:

 

(a)           cash, cash equivalents or other investments (other than the Prepaids and Deposits);

 

(b)           Seller’s accounts receivable for rent or services provided prior to 11:59 p.m. on the date immediately preceding the Closing Date;

 

(c)           Seller’s operating agreements, minute books, membership ledgers and income tax records;

 

(d)           any rights of Seller with respect to federal, state or local tax refunds or credits;

 

(e)           the Seller Plans, the assets and insurance policies relating to the Seller Plans, and any records relating thereto;

 

(f)           all contracts of insurance and claims and interests in any insurance, insurance claims, escrows, revenues or right to indemnity from third parties or other rights relating to the Excluded Liabilities;

 

(g)           all rights to the trade names of the Facilities, including those names listed in Schedule 2.3(g) attached hereto, and all derivations thereof, including without limitation all Intellectual Property related to such name and all derivations thereof, and all other Intellectual Property owned by the Seller Parties and necessary to the conduct of the Business as now conducted by Seller (provided, however, that the Post-Closing Management Agreements shall provide for use of all such rights and Intellectual Property by Purchaser during the terms of such Post-Closing Management Agreements and for a period of three (3) months following termination thereof);

 

(h)           Seller’s rights and interests under this Agreement;

 

(i)           security deposits and utility deposits, to the extent not added to the Purchase Price at Closing pursuant to Section 3.2 , and any refunds due to Seller under its Agreement with its existing PEO.

 

Section 2.4           Title to Real Property and Surveys.    At Closing, Seller agrees to convey marketable and insurable fee simple title to the applicable Real Property to Purchaser by special warranty deed (the “ Deed ”), subject only to the Permitted Encumbrances. The legal description of the Real Property to be contained in the Deed shall be the same legal description as is attached hereto in the applicable subsection of Schedule 1.1(c ) . In the event the legal description as disclosed by the Survey, as defined in Section 5.4(a) , differs from the legal description in the applicable subsection of Schedule 1.1(c) , or the Initial Commitment reveals any errors or omissions in the legal descriptions, then Seller shall also provide a quitclaim deed utilizing such Survey legal description.

 

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(a)           Purchaser shall promptly order, at Seller’s expense, Stewart Title Guaranty Company (“ Title Company ”), an ALTA Form 2006 Commitment (or such other form as is acceptable to Purchaser), with such endorsements as Purchaser shall reasonably require and with insurance coverage over any “gap” period (the “ Initial Commitment ”) for an owner’s title insurance policy (the “ Title Policy ”) in an amount no less than the Purchase Price allocated to the Real Property evidencing that Seller is vested with fee simple title to the Real Property, free and clear of all liens, encumbrances, exceptions or qualifications whatsoever save and except for (a) those exceptions specified as permitted exceptions listed on Schedule 2.4(a) attached hereto (the “ Permitted Title Exceptions ”), (b) those exceptions evidenced in writing as being otherwise acceptable to Purchaser in its sole discretion which shall thereafter be deemed Permitted Title Exceptions, and (c) those exceptions to title which are to be discharged by Seller at or before closing. The Initial Commitment shall also evidence that upon the execution, delivery and recordation of the deeds to be delivered at Closing and the satisfaction of all requirements specified in Schedule B, Section 1 of the Initial Commitment, Purchaser shall acquire fee simple title to the Real Property, subject only to the Permitted Title Exceptions.

 

(b)           If Purchaser or its attorneys shall determine that the Initial Commitment does not meet the requirements specified above, or that title to the Real Property is unsatisfactory to Purchaser for reasons other than the existence of Permitted Title Exceptions or exceptions which are to be discharged by Seller at or before Closing, then Purchaser shall notify Seller by the end of the Due Diligence Period (as herein defined) of those liens, encumbrances, exceptions or qualifications to title which either are not Permitted Title Exceptions, are unsatisfactory to Purchaser or are not contemplated by this Agreement to be discharged by Seller at or before Closing, and any such liens, encumbrances, exceptions or qualifications shall be hereinafter referred to as “ Title Defects .”

 

(c)           Purchaser, at Purchaser’s expense, may order an update to the surveys of the Real Property (the “ Surveys ”) previously provided to Purchaser, and Seller hereby grants Purchaser and Purchaser’s agents the right to access the Real Property as may be reasonably required to perform such work upon reasonable advance notice to Seller. The Surveys shall be prepared by a land surveyor duly licensed and registered as such in the state the Real Property is located, (i) shall be certified by such surveyor to Purchaser, Seller, each parties’ legal counsel and the Title Company, (ii) shall reference the Initial Commitment file number, (iii) shall set forth the legal description of the Real Property precisely as it appears in the Initial Commitment (or the Initial Commitment must be endorsed so that the insured legal description mirrors the legal description in the Surveys, if applicable), (iv) shall identify whether or not each matter referenced in the Initial Commitment applies to the Real Property, (v) shall depict the boundaries of each such item that is capable of being depicted on the Surveys, (vi) shall depict any Improvements located upon the Real Property, (vii) shall show all easements, rights-of-way, setback lines, encroachments and other matters affecting the use or development of the Real Property (viii) shall include the original signature and seal of the surveyor, and (ix) shall be in a form satisfactory to the Title Company to eliminate the standard survey exceptions from the title insurance policy to be issued at Closing. Purchaser shall notify Seller in writing within ten (10) business days after receipt of the Surveys of any Title Defects identified on the Surveys specifying any matters shown on the Surveys which was not set forth on the survey previously delivered to Purchaser and which adversely affect the title to the Real Property and the same shall thereupon be deemed to be Title Defects hereunder.

 

(d)           Within five (5) business days of receipt from Purchaser of a written notice of any Title Defects, together with a copy thereof, Seller shall notify Purchaser as to whether it will cure such objection, and if it elects to cure any such objection, it shall in good faith diligently endeavor to satisfy or correct, at Seller’s expense, such objection on or before the date of Closing to the satisfaction of Purchaser and the Title Company in such a manner as to permit the Title Company to either endorse the

 

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Initial Commitment or to issue a replacement commitment to eliminate the Title Defect therefrom. Failure of Seller to give such notice within five (5) business day period shall be deemed to be an election not to cure such objection. In the event Seller does not elect to satisfy or cure any objection of which it is notified, then within five (5) business days after receipt of written notice of Seller’s election, or within five (5) business days after the expiration of Seller’s five (5) business day notification period if Seller fails to give any such notice, Purchaser shall by written notice to Seller elect one of the following:

 

(i)           to accept Seller’s interest in the applicable Purchased Property subject to such objections, in which event such title and survey objections shall become part of the Permitted Title Exceptions, and to close the transaction contemplated hereby in accordance with the terms of this Agreement;

 

(ii)          to terminate this Agreement in its entirety and receive a refund of the Deposit; or

 

(iii)         The failure of Purchaser to give written notice of its election to either accept the Purchased Property subject to such objections or to terminate this Agreement within the applicable five (5) business day period shall be deemed an election to terminate this Agreement and to receive a refund of the Deposit.

 

(e)           In the event Seller elects in writing to cure any title or survey objection and thereafter is unable, after acting diligently and in good faith, to effect such cure, on or before the date of Closing, then Purchaser shall have, as its sole remedy, the options described in Section 2.4(d) above. Seller shall have no obligation under this Section 2.4(e) to expend monies or to institute litigation to cure Title Defects except those which may be satisfied solely by the payment of money prior to or at Closing and arising by, through, or under Seller (and not as the result of Purchaser's actions or wrongful omissions).

 

(f)           Notwithstanding anything in this Agreement to the contrary, Seller covenants and agrees that at or prior to Closing, Seller shall (i) pay in full and cause to be canceled and discharged or otherwise bond and discharge as liens against the Purchased Property all mechanics’ materialmen’s, repairmen’s, contractors’ or other similar Liens which encumber the Purchased Property as of the date hereof created by, through or under Seller or which may be filed against the Purchased Property after the date hereof created by, through or under Seller and on or prior to the Closing Date (ii) except as set forth in Section 2.4(h) below pay in full all past due ad valorem taxes and assessments of any kind constituting a lien against the Purchased Property which are due and payable, and (iii) pay in full or cause to be canceled and discharged all security deeds or other security instruments encumbering the Purchased Property and all judgments which have attached to and become a lien against the Purchased Property by, through or under Seller. In the event Seller fails to cause such liens and encumbrances to be paid and canceled at or prior to Closing, Purchaser shall be entitled to pay such reasonable amount to the holder thereof as may be required to pay and cancel same, and to credit against the Purchase Price the amount so paid.

 

(g)           Except as set forth on Schedule 2.4(g) , Seller has not granted any license, lease, easement or other right relating to the use or possession of the Real Property, (except (i) under the Residency Agreements entered into by Seller in the ordinary course of business between the Effective Date and the Closing Date); or (ii) as may be set forth in the Title Commitment, and Seller agrees that it shall not grant any such right prior to Closing without the prior written approval of Purchaser, which may be withheld in Purchaser’s sole and absolute discretion.

 

(h)           Seller hereby discloses that it is currently contesting the ad valorem tax assessment for the Facility located in Jupiter, in accordance with applicable law (the “ Jupiter Tax Contest ”). In the

 

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event the Jupiter Tax Contest has not been resolved prior to Closing and to the extent the requirements of such proceeding did not require Seller make prepayment of the taxes being contested, Seller shall escrow with Seller's or Buyer's counsel (as may be agreed by the parties) an amount equal to 125% of the unpaid taxes at issue in the Jupiter Tax Contest (the “ Jupiter Tax Escrow ”) pending resolution of the Jupiter Tax Contest proceeding. The Jupiter Tax Escrow shall secure Seller’s obligation under this Agreement to satisfy taxes assessed against the Jupiter Facility with regard to tax periods prior to the year of Closing. Upon completion of the Jupiter Tax Contest and presentation to the escrow holder of the Jupiter Tax Escrow funds of reasonable evidence of the results thereof, the Jupiter Tax Escrow shall be disbursed within ten (10) days, first to satisfy any tax obligations to governmental authorities arising from the resolution of the Jupiter Tax Contest and then the remainder of the Jupiter Tax Escrow funds to Seller. For the avoidance of doubt, the Seller’s obligation to pay and indemnify Purchaser for ad valorem taxes for the Jupiter Facility for tax years other than the year of Closing shall not be limited to the amount of funds in the Jupiter Tax Escrow.

 

Section 2.5           Assumed Liabilities.    Subject to the terms and conditions of this Agreement, on the Closing Date, Purchaser shall assume and agrees to pay, perform or discharge only the Assumed Liabilities. Other than the Assumed Liabilities, Purchaser shall not assume any of Seller’s debts, obligations or liabilities, of any kind or nature, including without limitation any civil claims or other legal proceedings or legal or regulatory investigations or actions arising out of or during Seller’s ownership, use, operation or management of the Business or any of the Purchased Property or the Excluded Property, all of which Seller shall pay, perform and discharge when due. Nothing in this Section 2.5 shall be deemed to preclude either party from contesting any liability or obligation in good faith through the appropriate process.

 

Section 2.6           Excluded Liabilities .

 

All of Seller’s debts, obligations and liabilities, other than the Assumed Liabilities, including any liability, obligation, claim, action, suit, or proceeding pending as of the Closing Date, or any subsequent claim, action, suit, or proceeding arising out of or relating to any such other event occurring prior to the Closing, with respect to the ownership or operation of its businesses prior to the Closing Date, including, without limitation, any obligation of Seller described in Section 2.5 above and any obligations of the Seller Parties for compliance with applicable federal, state, county, and local tax laws or regulations, including the obligations under such laws for the payment of taxes and the filing of tax returns, under Part 6 of Title I of ERISA and Section 4980B of the IRC, as amended (commonly known as “ COBRA ”), the Seller Plans, the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Occupational Safety and Health Act, the Age Discrimination in Employment Act of 1967, the Americans With Disabilities Act, the Family and Medical Leave Act, or state worker’s compensation and unemployment compensation laws, as now or hereafter amended, and any liabilities related to any overpayment (regardless of reason for such overpayment), adjustment of payments received or non-compliance under any Government Program, are collectively referred to herein as the “ Excluded Liabilities. ”

 

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ARTICLE 3
Purchase Price; Payment of Purchase Price; Allocation

 

Section 3.1           Purchase Price and Deposit.

 

(a)           Purchase Price. Subject to any adjustments and prorations expressly provided for in this Agreement, including those described in Section 3.4 (collectively, “ Adjustments ”), the purchase price (the “ Purchase Price ”) for the Purchased Property shall be a total of One Hundred Seventy-Two Million Five Hundred Thousand and No / 100 U.S. Dollars ($172,500,000).

 

(b)           Deposit. The parties acknowledge that within three (3) business days after the Effective Date, if the Closing has not occurred and this Agreement has not been terminated in accordance with its terms, if Purchaser has not theretofore elected to terminate this Agreement pursuant to Section 4.1 , Purchaser shall deliver to Stewart Title Guaranty Company (or any other mutually acceptable escrowee) (the “ Escrow Agent ”) Three Million and No/100 U.S. Dollars ($3,000,000) (the “ Deposit ”). The term “Deposit” shall mean the Deposit, if and when the Deposit is made. The Escrow Agent shall hold the Deposit in a non-interest bearing account pursuant to an escrow agreement in the form attached hereto as Exhibit A .

 

(c)           The Deposit shall be paid and returned to Purchaser upon the occurrence of the circumstances described in Section 2.4(d)(ii) , Section 2.4(e) , Section 4.10(b) , Section 5.9 , Section 9.1 , Section 9.3(d) , Section 10.11 and Section 10.12 in each instance, upon proper written demand of Purchaser to Seller and the Escrow Agent stating the reason for such termination and referencing the section of this Agreement providing Purchaser with the right to do so. Upon receipt of such written demand by Seller, Seller and Purchaser shall direct the Escrow Agent , in writing, to pay and disburse the Deposit immediately to Purchaser (whereupon this Agreement shall terminate and neither party shall have any further rights or obligations hereunder, except as otherwise expressly provided herein).

 

(d)           The Deposit shall be paid to Seller: (i) at the Closing, should the Closing occur, in partial satisfaction of the Purchase Price as provided in Section 3.2(b) hereof; or (ii) as liquidated damages (and not as a penalty) under the circumstances described in Section 9.2 . In each such instance, Seller and Purchaser shall direct the Escrow Agent, in writing, to pay and disburse the Deposit immediately to Seller (whereupon this Agreement shall terminate and neither party shall have any further right or obligations hereunder, except as otherwise expressly provided herein).

 

(e)           Without limiting Purchaser’s other rights and remedies hereunder, Purchaser may terminate this Agreement for any reason or for no reason whatsoever during the Due Diligence Period (as herein defined) with respect to all (but not less than all) of the Facilities and the St. Petersburg Raw Land, and upon any such termination the Deposit shall be returned to Purchaser.

 

(f)           For all purposes under this Agreement, the portion of the Deposit attributable to each Facility (or, as applicable, the St. Petersburg Raw Land) shall be equal to the pro-rata portion of the Deposit determined proportionally with respect to the portion of the Purchase Price allocated to the applicable Facility or the St. Petersburg Raw Land pursuant to Section 3.3 below.

 

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Section 3.2           Payment of Purchase Price.   The Purchase Price shall be paid by Purchaser, at Closing, as follows:

 

(a)           The Purchase Price, as adjusted for any prorations pursuant to Section 3.4 below, and credits and additions described in Section 3.2(b) below, shall be paid at Closing by wire transfer in accordance with wire instructions provided by Seller at least three (3) business days before Closing.

 

(b)           Purchaser shall receive a credit against payment of the Purchase Price by the amount of (i) the Deposit, (ii) the accrued vacation and sick pay amounts included in the Assumed Liabilities, and (iii) unless otherwise paid by Seller, the amounts to be paid by Seller under Section 2.4(a) and Section 4.6(b) of this Agreement. If, at Purchaser’s request, Seller leaves any of Seller’s security deposits or utility deposits in place following Closing, then the amount of any such security deposit or utility deposit shall be added to the Purchase Price and paid to Seller pursuant to Section 3.2(a) .

 

(c)           Purchaser shall deposit the Holdback Amount into an interest-bearing escrow account with the Escrow Agent pursuant to an Escrow Agreement in substantially the form attached hereto as Exhibit B (the “ Post-Closing Escrow Agreement ”). The funds held pursuant to the Post-Closing Escrow Agreement shall be available according to the terms of the Post-Closing Escrow Agreement to secure any obligations of Seller to Purchaser hereunder, including without limitation Seller’s obligations pursuant to Section 3.4(d) and Section 8.1 hereof.

 

(i)           In the absence of claims for specific identified unpaid liabilities or obligations of Seller which are within the purview of the Post-Closing Escrow Agreement, the total anticipated unpaid exposure for which exceeds One Million Five Hundred Thousand Dollars ($1,500,000.00) in the aggregate, the Holdback Amount shall be reduced to One Million Five Hundred Thousand Dollars ($1,500,000.00) at the end of the ninth (9th) calendar month following the Closing Date and the remainder of the initial undisbursed Holdback Amount in excess of such amount shall be promptly released to Seller.

 

(ii)          The total amount of the Holdback Amount theretofore undisbursed pursuant to the terms of the Post-Closing Escrow Agreement shall be promptly released to Seller at the end of the fourteenth (14th) calendar month following the Closing Date, less any amounts claimed by Purchaser prior to such distribution date, which shall be held in accordance with the terms of the Post-Closing Escrow Agreement until finally adjudicated.

 

(d)           Purchaser shall assume the Assumed Liabilities and the parties shall indemnify each other from any liability or obligation in connection with the same in accordance with the terms of the assignment and assumption agreement attached hereto as Exhibit F .

 

Section 3.3           Allocation of Purchase Price.

 

(a)           With respect to the individual Facilities and the St. Petersburg Raw Land, the Purchase Price shall be allocated as follows:

 

Facility   Purchase Price Allocation  
Jupiter Facility   $ 53,755,132  
Stuart Facility     66,722,874  
Elizabethtown Facility     8,743,402  

  

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Tarpon Springs Facility     17,732,405  
St. Petersburg Facility     22,546,188  
St. Petersburg Raw Land     3,000,000  
Total:   $ 172,500,000  

 

Any adjustments to the Purchase Price provided herein that are attributable solely to one or more particular Facilities (or, as applicable, the St. Petersburg Raw Land) shall result in a pro rata adjustment of the Purchase Price allocated to such Facilities (or, as applicable, the St. Petersburg Raw Land).

 

(b)           Additionally, the parties acknowledge that the transactions contemplated hereunder must be reported in accordance with Section 1060 of the IRC. The parties shall report the transactions contemplated hereunder for all purposes in accordance with the purchase price allocation set forth on Schedule 3.3 hereto, which schedule the parties acknowledge and agree will be completed during the Due Diligence Period. The parties shall share information and cooperate to the extent necessary to permit the transactions to be properly, timely, and consistently reported.

 

(c)           During the Due Diligence Period and as a condition to Seller's obligation to proceed to Closing, the parties shall in good faith agree upon specific allocations of the Purchase Price amongst the following classifications of property and further allocated amongst the entities comprising Seller: (i) Real Property (land, buildings, fixtures), (ii) tangible personal property, other than motor vehicles, (iii) motor vehicles, and (iv) intangible personal property.

 

Section 3.4           Prorations.

 

(a)           The following items shall be prorated between Seller and Purchaser as of 11:59 p.m. on the date immediately preceding the Closing Date; prorations credited to Purchaser shall reduce the Purchase Price and prorations credited to Seller shall increase the Purchase Price at Closing as follows:

 

(i)           city, state, and county ad valorem taxes for the year in which the Closing occurs based on the ad valorem tax bills for the Purchased Property, if then available for such year, or if not, then on the basis of the ad valorem tax bill for the Purchased Property for the immediately preceding year. (If such proration is based on an ad valorem tax bill for the immediately preceding year and should such proration prove to be inaccurate on receipt of the ad valorem tax bill for the Purchased Property for the year of Closing, then either Seller or Purchaser, as applicable, may demand at any time after Closing a payment from the other party in an amount sufficient to correct such malapportionment);

 

(ii)          sanitary sewer taxes and utility charges, if any; provided, however , that Purchaser shall, prior to Closing, make arrangements for its own utility services and accounts to the extent reasonably possible and sufficiently in advance of Closing so as to allow the provider thereof to read all meters for utility charges as of the end of the last business day preceding the Closing Date and terminate Seller's service without interruption of service to the Facility, in which case Seller shall be responsible for and shall pay for all such charges first accruing or relating to the period prior to the Closing Date;

 

(iii)         all payment obligations under the Assumed Contracts and Leases; and

 

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(iv)         resident rents and other revenues (including Prepaids and Deposits, if any).

 

Purchaser and Seller shall prepare a proposed schedule (the “ Proration Schedule ”) prior to Closing, including the items listed above and any other items the parties determine necessary. Such Proration Schedule shall include all applicable income and expenses with regard to the Purchased Property. Seller and Purchaser will use all reasonable efforts to finalize and agree upon the Proration Schedule at least two (2) business days prior to Closing.

 

(b)           Seller shall receive all income from the Purchased Property attributable to the period prior to the Proration Date (as herein defined) and shall, unless otherwise provided for in this Agreement, be responsible for all expenses of the Purchased Property attributable to the period prior to 11:59 P.M. on the date immediately preceding the Closing Date (the “ Proration Date ”). In the event Purchaser receives any payment from a resident for rent due for any period prior to the Proration Date or payment of any other receivable of Seller, Purchaser shall forward such payment to Seller. For the first three (3) months following the Proration Date, any payments received from a resident shall be allocated first to any current balances due from such resident for the then-current month, and then toward the oldest sums due from such resident. After such three-month period, Purchaser may allocate the entire amount of any payments received from a resident to current balances from such resident that have accrued subsequent to the Proration Date and shall thereafter forward any additional amounts attributable to past-due amounts accruing prior to the Proration Date to Seller. For clarity's sake with respect to the St. Petersburg Facility, the parties agree that amounts received from third party payors such as Medicare and Medicaid shall be applied to the periods for which such payment is remitted as stated thereon, and the amount thereof promptly forwarded to the party (Seller or Purchaser) entitled to the benefit of income from such Facility for the period as to which such third party payment was paid.

 

(c)           Purchaser shall receive all income from the Purchased Property attributable to the period from and after the Proration Date and shall, except as otherwise provided for in this Agreement, be responsible for all expenses of the Purchased Property attributable to the period from and after the Proration Date. In the event Seller or Seller’s affiliates receive any payment from a resident for rent due (or any other payment due Purchaser) for any period from and after the Proration Date, Seller shall forward such payment to Purchaser.

 

(d)           The parties agree that any amounts that may become due under this Section 3.4 shall be paid at Closing as can best be determined. A post-Closing reconciliation of prorated items shall be made by the parties within ninety (90) days after the Closing Date and any amounts due at that time shall be promptly forwarded to the respective party to whom such amounts are due in a lump sum payment. Any additional amounts which may become due after such determination shall be forwarded at the time they are received. Any amounts due under this Section 3.4 which cannot be determined within ninety (90) days after the Closing Date (such as, for example, fiscal year-end real estate taxes) shall be reconciled as soon thereafter as such amounts can be determined. Purchaser and Seller agree that each shall have the right to audit the records of the other in connection with any such post-Closing reconciliation. Any payments made pursuant to this Section 3.4 shall be treated as a purchase price adjustment for income tax purposes.

 

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ARTICLE 4
Certain Other Covenants and Agreements

 

Section 4.1           Inspection and Due Diligence.

 

(a)           During the Due Diligence Period, Purchaser (including its agents and representatives) shall be permitted to inspect the Business, the Facilities, the St. Petersburg Raw Land and the Purchased Property. The “ Due Diligence Period ” for purposes of this Agreement means a period extending until 5:00 p.m. Eastern on the fortieth (40 th ) day following the Effective Date, or if such later day is not a business day, on the next business day following such day. The Purchaser shall not be entitled to continue inspections after the expiration of the Due Diligence Period. Such inspections may include an independent appraisal and environmental assessments (including Phase I assessments and Phase II assessments if Seller consents to any such Phase II assessment which consent shall not be unreasonably withheld, conditioned or delayed), impact study and detailed architectural and engineering inspections of buildings and mechanical systems located on the Real Property and any other inspections which may reasonably be required by potential lenders or investors. Purchaser shall not conduct any drilling, boring, soil testing or other physically intrusive inspections without Seller’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, if done in connection with any Phase II assessment. Seller shall allow Purchaser and its authorized representatives reasonable access upon prior notice during normal business hours and during the Due Diligence Period to Seller’s corporate level personnel, properties and records, shall permit examination and testing, and shall furnish Purchaser and its authorized representatives such information concerning the Business, the Purchased Property, the Facilities and the St. Petersburg Raw Land as Purchaser reasonably requests. Purchaser and its authorized representatives shall have the right to review and copy all such books, accounts, records, agreements or other documents as it may reasonably deem advisable. Seller shall, upon reasonable request by Purchaser, make available to Purchaser by electronic data room or otherwise, copies of all records, files, correspondence, invoices, resident lists, supplier lists, blueprints, specifications, designs, drawings, business records and plans, operating and financial data concerning the Seller's operations of the Facilities, environmental assessments, property reports, permits and regulatory files and other data associated with or used by Seller in connection with its operation of the Business or its operation of the Purchased Property, including without limitation all of the information requested in Exhibit G of this Agreement to the extent Seller Parties or the Current Manager has possession and control of such information, and in the form in which Seller maintains such information in the ordinary course of its business. Seller shall have no obligation to prepare any summaries, abstracts, compilations or reports in connection with Purchaser’s investigation that Seller Parties or the Current Manager do not maintain or compile in the ordinary course of Seller Parties’ or the Current Manager’s business. For purposes of this Agreement, documents or information shall be deemed to have been “made available” to Purchaser if copies have been delivered or viewed by Purchaser in tangible or electronic form, or if such documents or information have been made available at each Facility or on an internet or electronic data site to which Seller has granted Purchaser or its representatives access. Purchaser shall notify Seller in advance of any site visits by Purchaser or its contractors or representatives. With regard to site visits:

 

(i)           Prior to any site visits, Purchaser shall provide Seller with certificates of insurance evidencing the insurance coverage required pursuant to Section 4.1(c) below ;

 

(ii)          All site visits shall be coordinated not less than seventy-two (72) hours in advance if access to the interior of a Facility is requested, otherwise twenty-four (24) hours in advance;

 

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(iii)         All site visits shall be coordinated through Douglas S. Schiffer or Seller’s counsel;

 

(iv)         Purchaser shall not contact any Seller personnel, residents or service providers directly and Purchaser shall not discuss the Facility, the Business, the pendency of the transactions contemplated by this Agreement, or this Agreement with Facility-level staff, including without limitation the Community Director or Resident Services Director of any Facility; and

 

(v)          Seller shall have the right, but not the obligation, to accompany Purchaser and Purchaser's representatives on any site visit.

 

(b)           Within five (5) days of the Effective Date (the “ Diligence Materials Due Date ”), Seller shall provide (or shall have provided) Purchaser with all of the materials in Seller’s or Manager’s possession or control listed in Exhibit G of this Agreement (collectively, the “ Requested Diligence Materials ”).

 

(i)           In the event that Seller’s delivery of any Requested Diligence Materials is delayed beyond the Diligence Materials Due Date, or in the event Purchaser has provided notice to Seller that any purported response to the requirements of this Section 4.1(b) is insufficient in Purchaser’s reasonable discretion (which notice shall be specific in its description of allegedly missing materials), the Due Diligence Period shall be extended by the total number of days which elapse between:

 

(1) the last to occur of: (x) the Diligence Materials Due Date or (y) the date upon which Purchaser specifically identifies insufficiencies in the Requested Diligence Materials provided by Seller; and

 

(2) the first to occur of: (x) the date upon which all Requested Diligence Materials have actually been provided to Purchaser, or (y) the date upon which Purchaser has been advised by Seller that such Requested Diligence Materials are not reasonably available to Seller, as applicable).

 

(ii)          Seller's delivery to Purchaser of a certificate signed by its Chief Financial Officer under oath that to the best of Seller's knowledge all Requested Diligence Materials reasonably available to Seller have been made available to Purchaser shall be conclusive of the occurrence of the Diligence Materials Due Date, in the absence of a knowing misrepresentation by Seller.

 

(iii)         All adjustments to the Due Diligence Period in accordance with this Section 4.1(b) shall be inclusive of the Diligence Materials Due Date and the last applicable date of delivery, certification, or correction, as applicable.

 

(c)           Purchaser shall pay all costs incurred for any such inspections of the Facilities, the St. Petersburg Raw Land, and the Purchased Property initiated by Purchaser. Purchaser shall indemnify and hold Seller harmless from and against any and all claims for death of or injury to persons or damage to property to the extent arising out of or as a result of the negligent or wrongful acts or omissions of Purchaser, Purchaser’s contractors, agents, authorized representatives, or designees of Purchaser pursuant to the provisions of this Section 4.1 . Purchaser, as well as its consultants and contractors, shall at Seller’s

 

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request provide evidence of sufficient insurance to protect Seller from any losses it might incur as a result of Purchaser’s activities incurred in connection with such inspections.

 

(d)           The parties hereto acknowledge that Seller may possess or have access to certain information subject to the Health Insurance Portability and Accountability Act of 1996 and any regulations promulgated thereunder (“ HIPAA ”). Notwithstanding any other provision of this Agreement, Seller shall have no obligation under this Agreement to disclose to Purchaser any information which would violate or put Seller in a position of noncompliance with any city, county, state or federal privacy or security act, law, or regulation or the provisions of HIPAA or which would result in Seller breaching any contractual provisions imposed on Seller with respect to the requirements of HIPAA and/or any such city, county, state, or federal act, law or regulation.

 

(e)           Purchaser may perform or cause to be performed a Phase I Environmental Site Assessment of any portion of the Real Property (the “ Phase I ESA ”). Purchaser shall provide Seller with a copy of the Phase I ESAs within five (5) business days of completion and receipt of each by Purchaser. Any subsequent amendments thereto will also be provided to Seller within five (5) business days after completion and receipt by Purchaser thereof.

 

(f)           If the Phase I ESA, or any update thereof, reveals areas of environmental concern that, in Purchaser’s sole opinion, warrant further investigation, Purchaser may, at its discretion, request Seller’s consent to commence a Phase II Environmental Site Assessment of the applicable portion of the Real Property (“ Phase II ESA ”; collectively, the “ ESAs ”). A Phase II ESA consists of further investigation of recognized environmental conditions identified in the Phase I ESA including sampling and analysis of soil and groundwater necessary to determine whether or not contamination has occurred. Seller’s consent to conduct a Phase II ESA shall not be unreasonably withheld, conditioned or delayed. If Seller permits Purchaser to conduct a Phase II ESA, Seller will be provided a copy of the Phase II ESA within five (5) days of completion and receipt by Purchaser. Any subsequent amendments and/or reports relating to the Phase II ESA shall also be delivered to Seller and Purchaser.

 

(g)           The costs of the Phase I ESA and the costs of the Phase II ESA and any updates thereof shall be paid by Purchaser.

 

Section 4.2           Conduct of Business Prior to the Closing Date.   Seller covenants and agrees with Purchaser that from the Effective Date hereof through the Closing Date, except as otherwise expressly contemplated in this Agreement, unless Purchaser otherwise consents in writing (which consent shall not be unreasonably withheld, conditioned or delayed) Seller shall, and shall cause the Operators and Current Manager in their capacities as operators and managers of the Business to:

 

(a)           Use good faith efforts to operate the Business in all material respects in the ordinary course of business in a commercially reasonable manner, including (i) incurring expenses consistent with Seller Parties’ past practices in the operation of the Business and (ii) using commercially reasonable efforts to preserve the Business’ present business operations, organization and goodwill and its relationships with customers, employees, advertisers, suppliers and other contractors.

 

(b)           Operate the Business and otherwise conduct business in all material respects in accordance with the terms or conditions of all applicable licenses and permits, all applicable rules and regulations of the state or commonwealth in which each Facility is located, and all other rules, regulations, laws, and orders of all governmental authorities having jurisdiction over any aspect of the operation of the Business and all applicable insurance requirements.

 

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(c)           Maintain the books, records, and financial statements for the Business consistent with past practices.

 

(d)           Timely comply in all material respects with the Assumed Contracts and Leases.

 

(e)           Not sell, lease, grant any rights in or to or otherwise dispose of or otherwise relinquish control of, or agree to sell, lease or otherwise dispose of, the Purchased Property in whole or in part except for Residency Agreements entered into, amended, or terminated in the ordinary course of business, and dispositions of assets that are in the ordinary course of business, and if material, are replaced by similar assets of substantially equal or greater value and utility.

 

(f)           Take commercially reasonable efforts to maintain the Purchased Property in the same condition as it exists as of the Effective Date, except for ordinary wear and tear, in a manner consistent with past practices.

 

(g)           Not default on any loans to Seller or secured by any Purchased Property which are not fully cured or satisfied at Closing.

 

(h)           Not enter into any contracts (other than contracts which impose no obligation on Purchaser following the Closing or Residency Agreements in the ordinary course of business), whether or not material, without the consent of Purchaser.

 

(i)           Not make any alterations or improvements to the Real Property or make any capital expenditure with respect to the Real Property in excess of $10,000 other than those that are currently budgeted for completion, or are required by law, necessary to preserve the coverage under or comply with the terms of any insurance policy with respect to the Business or are in Seller’s business judgment necessary to address emergency conditions or to maintain the goodwill and competitive standing of the Business.

 

(j)           Maintain normal levels of inventory and supplies on hand for the Business (including medical supplies, food, beverages, office and kitchen supplies), consistent with past practice and as necessary to comply with applicable laws and regulations.

 

(k)           Make available to Purchaser copies of all internally generated monthly financial reports within a reasonable time following the close of each accounting period during the Due Diligence Period for which they are generated.

 

(l)           Inform Purchaser promptly regarding the resignation, termination or hiring of the Community Director or Resident Services Director, if any, of any Facility.

 

Section 4.3           Notification of Certain Matters.    Seller shall give prompt written notice to Purchaser, and Purchaser shall give prompt written notice to Seller, to the extent either such party becomes aware of (i) the occurrence, or failure to occur, of any event that would be likely to cause any of their respective representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Closing Date, and (ii) any failure on their respective parts to comply with or satisfy, in any material respect, any covenant, condition, or agreement to be complied with or satisfied by any of them under this Agreement.

 

Section 4.4           Employees; Accrued Vacation, Sick Pay, etc.

 

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(a)           For purposes of this Section 4.4 , all references to employment by an entity include both direct employment by such entity, employment by an affiliate of such entity, or employment through one or more employee leasing or similar arrangements that such entity or its affiliate has entered into with a third party or by the PEO, and all references to Plans includes any such Plan provided directly by the applicable entity, by their respective affiliates, or by any such employee leasing company under an agreement with the above.

 

(b)           It is anticipated by the parties that all Facility level employees of the Current Manager (who is also the Post-Closing Manager) shall (at least initially) remain employed by the same company following the Closing. Accordingly, it is anticipated that all Facility level employees shall remain participants in the current Seller Plans in accordance with the terms of the Seller Plans and applicable law, including ERISA pursuant to the terms of the Post-Closing Management Agreements. Seller, Operator or the Current Manager, as applicable, shall retain liability for all claims incurred by the Employees (and their enrolled dependents) under the Seller Plans prior to the Closing Date. In accordance with the terms of the Post-Closing Management Agreement, Purchaser shall be liable for all claims of the Employees (and their enrolled dependents) under the Seller Plans from and after the Closing Date.

 

(c)           Seller shall be responsible for payment of all short- and long-term disability claims of Employees from disabilities arising prior to the Closing Date, to the extent covered by Seller Plans. In accordance with the terms of the Post-Closing Management Agreement, Purchaser shall be responsible for payment of all short- and long-term disability claims from disabilities of Employees incurred on or after the Closing Date to the extent covered by the Seller Plans.

 

(d)           In accordance with the terms of the Post-Closing Management Agreement and as shown on the Prorations Schedule, Purchaser shall be responsible for all obligations to Employees with respect to vacation pay and sick pay accrued to the extent described on Schedule 6.10 , as updated by the Seller through 11:59 PM on the date preceding the Closing Date. There shall be a clean cut-off of payroll on the date preceding the Closing Date with respect to the Employees. Seller shall be responsible for, and shall pay at Closing, all salary, wages, and other compensation, accrued with respect to the Employees in connection with the transaction for services rendered to Seller through 11:59 P.M. on the date preceding the Closing Date.

 

Section 4.5           Confidentiality .

 

(a)           Confidential Information. Any and all non-public information of any type or description, including, but not limited to, financial statements and projections of Seller, proprietary or trade secret information, whether written or verbal, or any information given to Purchaser by Seller in connection with the transactions contemplated by this Agreement, is proprietary to Seller and confidential in nature, and shall be treated as such by Purchaser, except with the prior written consent of Seller and except to the extent enforcement of its terms and applicable law require public disclosure. This provision shall not apply following the Closing to any such information pertaining to the Purchased Property or the Business, nor to any information that is or becomes publicly available through no fault of Purchaser. Purchaser shall have the right to disclose any such information to its professional advisors, lenders, investors and other third parties who need to know such information for the purposes of assisting Purchaser with the negotiation and consummation of this Agreement, provided Purchaser advises such parties of their confidential obligations under this Agreement, and provided Purchaser remains responsible for any violations by such parties.

 

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(b)           Confidentiality of Agreement. The terms of this Agreement shall remain confidential, except with the prior written consent of Seller and Purchaser and except to the extent that enforcement of its terms or applicable law require public disclosure. Neither party shall make any public announcement of the transactions contemplated herein without the express written approval of the other party, which approval shall not be unreasonably withheld. This provision will not apply following the Closing; provided, however, that Seller shall coordinate the timing of any public announcement made by Seller with Purchaser to allow Purchaser to comply with Securities and Exchange Commission and other regulatory requirements applicable to Purchaser. Each party shall permit the other to review in advance and comment on any public announcement of the Closing of the transactions contemplated herein. Notwithstanding the foregoing to the contrary, Seller shall be permitted to disclose the existence of this Agreement and the pendency of the transactions contemplated hereby in general terms in Seller Parties' internal communications to employees, staff, officers, and contractors and to Seller Parties' then-current and prospective lenders and investors.

 

(c)           Return of Confidential Information. Purchaser agrees that promptly upon the termination of this Agreement, whether by mutual termination or otherwise (other than upon Closing), Purchaser shall cause all materials and property (originals and copies) of Seller to be immediately returned to Seller, or, at Purchaser’s election, destroyed provided Purchaser provides written certification of such destruction, provided that Purchaser shall be entitled to retain such information to the extent required in order to comply with applicable law, regulation, bona fide document retention policy of Purchaser, or any public disclosure obligations promulgated by the Securities and Exchange Commission applicable to Purchaser, or until any litigation between Purchaser and Seller arising out of the termination of this Agreement has been finally resolved.

 

(d)           Agreed Communication to Residents. Prior to Closing the parties shall agree in good faith upon the form of notice of the Closing and assignment of their respective Residency Agreements to be provided to residents of the Facilities.

 

(e)           Survival of Confidentiality. This Section 4.5 shall survive the Closing to the extent provided above and shall survive in the event this Agreement is terminated prior to Closing.

 

(f)           Supersedes Previous Agreements. The provisions of this Section 4.5 supersede any prior agreements between the parties relating to confidentiality.

 

Section 4.6           Expenses and Taxes.

 

(a)           Each party shall pay its own expenses and costs incurred in connection with the negotiation and consummation of this Agreement and the transactions contemplated by this Agreement.

 

(b)           Notwithstanding the foregoing:

 

(i)           Purchaser shall pay fees, sales and use taxes, and costs relating to the transfer of motor vehicles included in the Purchased Property;

 

(ii)          Seller shall pay the real estate transfer tax, mansion taxes (if applicable) costs of recording the Deeds and all other filing and recording costs unrelated to Purchaser's financing or ownership structure;

 

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(iii)         Seller shall pay the premiums or other costs attributable to the issuance of the Title Policy;

 

(iv)         Purchaser shall pay the cost of the Surveys;

 

(v)          Purchaser shall pay all costs and expenses of the Escrow Agent selected by Purchaser (in its capacity as Escrow Agent only, and for the avoidance of doubt, not in its capacity as the issuer of the Title Policy);

 

(vi)         Seller shall pay any person who is entitled to any brokerage commission or finder’s fee in connection with any of the transactions contemplated by this Agreement by reason of any act or omission of Seller, including the fees and commissions due to Vant-Age Pointe Capital Management and Advisory, Inc. and KeyBanc Capital Markets Inc. and shall indemnify Purchaser and hold Purchaser harmless against any claims for such commissions or finder’s fees; and

 

(vii)        Purchaser shall pay any person who is entitled to any brokerage commission or finder’s fee in connection with any of the transactions contemplated by this Agreement by reason of any act or omission of Purchaser, and shall indemnify Seller and hold Seller harmless against any claims for such commissions or finder’s fees.

 

Section 4.7           Waiver of Bulk Sales and Indemnification.   Purchaser hereby waives compliance by Seller and Seller hereby waives compliance by Purchaser, with the requirements of any applicable bulk sales laws and similar laws, if and to the extent applicable. Seller shall indemnify and hold harmless Purchaser from any and all claims, liabilities, or costs, including reasonable attorneys’ fees, arising out of the parties’ failure to comply with any bulk sales laws and similar laws applicable to the transactions contemplated hereby as provided in Section 8.1 . The foregoing indemnification shall survive the Closing.

 

Section 4.8           Exclusivity.    During the period from the Effective Date to the Closing Date or sooner termination of this Agreement according to the terms hereof, Seller shall not take any action, directly or indirectly, to encourage, initiate or engage or participate in discussions or negotiations with, or provide any information to, any party other than Purchaser, concerning a potential transaction involving the purchase and sale of the Business, any one or more Facilities, the St. Petersburg Raw Land, or any of the Purchased Property, the purchase and sale of all or substantially all of the ownership interest of any one or more entities comprising the Seller, or any transaction similar to the foregoing.

 

Section 4.9           Consents; Cooperation.   Seller will use its reasonable good faith efforts prior to the Closing to obtain all consents that may be required from third parties with respect to the Assumed Contracts and Leases and any of the other Purchased Property (other than transfer of motor vehicle licenses, registrations, and tags) and Purchaser shall cooperate therewith. In the event Purchaser desires any changes or modifications with regard to any of the Assumed Contacts or Leases, then Purchaser upon written notice to Seller shall assume all responsibility for negotiating such modifications and obtaining any required consents in connection therewith. Purchaser shall use its reasonable best efforts to diligently pursue the issuance or transfer of any of the governmental licenses or permits required for Purchaser to operate the Business following the Closing, and Seller agrees to provide reasonable cooperation and assistance to Purchaser in obtaining such licenses and permits. Notwithstanding the foregoing, (i) neither party will be required to pay or commit to pay any amount to (or incur any liability or obligation to) a person or entity from whom or which a consent may be required (other than payment by Seller of past due amounts under Assumed Contracts and Leases or past due taxes, or payment by Purchaser of any fees or

 

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other costs imposed by governmental authorities with respect to licenses and permits, or transfer fees, if any, required by the express terms of any Assumed Contracts and Leases) or otherwise enter into or modify any agreement with such person or entity that involves any cost, liability or obligation, and (ii) to the extent Purchaser determines, in its sole discretion, that the governmental licenses or permits required for the Purchaser or its designee to operate the Business following the Closing will not be obtained by Purchaser or its designee prior to Closing, Seller agrees to proceed to Closing and enter into a Transition Period Sublease (as defined herein) with Purchaser for the continued operation of the Business by Seller or its affiliates, as applicable, until Purchaser or its designee obtains such licenses and permits, and (iii) to the extent Purchaser has not obtained governmental licenses or permits required for the Purchaser or its designee to operate the Business following the Closing within ninety (90) days of the expiration of the Due Diligence Period, Seller and Purchaser agree to proceed to Closing and in connection therewith enter into a Transition Period Sublease for the continued operation of the Business by Seller or its affiliates, as applicable, until Purchaser or its designee obtains such licenses and permits, provided the term thereof shall not exceed the Post-Closing Management Agreement with the Post-Closing Manager for the relevant Facilities and provided such Transition Sublease is permitted by law for all of the Business operations of each Facility. Each of the parties have independently determined, based upon the advice of their own respective counsel, that the pre-merger filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“ HSR Act ”), do not apply to the transactions contemplated under this Agreement.

 

Section 4.10         Fines and Penalties.

 

Seller covenants and agrees to cure all violations and other deficiencies identified in writing by any federal, state, municipal, local or other governmental or quasi-governmental authority (all such matters collectively the “ Violations ”) relating to the Business, any Facility or Facilities, or the St. Petersburg Raw Land, pay all penalties associated therewith and prepare and implement any plan of correction required by any such authority. The Purchaser may stay any otherwise pending Closing in the event any uncured Violations exist until such time as Seller has corrected any such Violations in full compliance with applicable laws, orders and directions to the extent Seller is either obligated to cure or agrees in writing to cure the same in accordance with this Section 4.10. Penalties and fines noticed to, levied upon, or outstanding against any Seller and/or any of the Facilities as of the Effective Date (" Existing Fines ") shall be the absolute obligation of the Seller and shall be paid at Closing and as a condition to Purchaser's obligation to proceed to Closing. In the event the total to cure or discharge all Violations other than Existing Fines would exceed a total cost to Seller of $250,000.00 or more in the aggregate, then Seller shall have the right upon written notice to Purchaser to refuse to cure such Violations prior to Closing (other than the Existing Fines, if any), whereupon, Purchaser may elect within ten (10) days following such notice of refusal from Seller to elect either to:

 

(a)           Accept a credit of $250,000.00 at Closing from Seller for all Violations, other than the Existing Fines, have Seller pay the Existing Fines, and proceed to Closing with no further adjustment of the Purchase Price or claim to any portion of the Holdback in connection with such Violations, or

 

(b)           Elect to terminate this Agreement, in its entirety and receive a refund of the Deposit and, following any such termination, Seller shall reimburse Purchaser for Purchaser’s actual third party expenses incurred by Purchaser in connection with its due diligence on the Purchased Property; provided, however, such reimbursements shall not exceed Two Hundred Fifty Thousand and No/100 U.S. Dollars ($250,000.00) in the aggregate for all Purchased Property .

 

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The failure of Purchaser to give written notice of its election pursuant to Section 4.10(a) or Section 4.10(b) shall within the applicable ten (10) day period shall be deemed an election to proceed under Section 4.10(a) above.

 

Section 4.11         Further Assurances.   Each party covenants and agrees that, following the Closing, it will execute, deliver and acknowledge (or cause to be executed, delivered and acknowledged), from time to time, at the reasonable request of the other party and without further consideration, all such further instruments and take all such further action as may be reasonably necessary or appropriate to transfer more effectively to Purchaser, or to perfect or record Purchaser’s title to or interest in the Purchased Property or to enable Purchaser to use or otherwise to confirm or carry out the provisions and intent of this Agreement.

 

Section 4.12         Delivery of Schedules.    Seller shall provide all Schedules required by this Agreement (other than those required by ARTICLE 7 hereof, which will be provided by Purchaser by the Schedule Due Date) within ten (10) days following the Effective Date (the “ Schedule Due Date ”).

 

(a)           If applicable, the Due Diligence Period shall be extended by the total number of days which elapse between:

 

(i)           the last to occur of (x) the Schedule Due Date or (y) the date upon which Purchaser specifically identifies insufficiencies in the Schedules; and

 

(ii)          the first to occur of (x) the date upon which all required Schedules have actually been provided to Purchaser, (y) any insufficiently completed Schedules have been corrected to Purchaser’s reasonable satisfaction, or (z) Seller's delivery to Purchaser of a certificate signed by its Chief Financial Officer under oath that to the best of Seller's knowledge all Schedules have been completed with all information reasonably available to Seller and been made available to Purchaser, which certificate shall be conclusive of the occurrence of the Schedule Due Date, in the absence of a knowing misrepresentation by Seller.

 

All adjustments to the Due Diligence Period in accordance with this Section 4.12 shall be inclusive of the Schedule Due Date and the last applicable date of delivery, certification, or correction, as applicable.

 

(b)           Any fact or item disclosed on any Schedule to this Agreement shall be deemed disclosed with regard to all other representations and warranties to which such fact or item may reasonably apply to the extent such disclosure would provide notice to a reasonable person that the information disclosed would also qualify, or constitute an exception to, such other representations and warranties.

 

(c)           Seller may from time to time supplement and update such Schedules to reflect any changes since the date of delivery of the original Schedules or any matters of which Seller first acquires Knowledge following the original delivery date of such Schedules. Any such updates or supplements shall be deemed to amend the Schedules for all purposes retroactively to the Effective Date, except that (i) no amendment to Schedules 1.1(a), 1.1(c), 2.4(a), and 4.4(b) may be made without Purchaser’s written consent, and (ii) any amendments permitted above shall be disregarded (x) in determining if the conditions to Closing set forth in Section 5.3(a) or Section 5.3(d) below have been satisfied, and (y) for all purposes under this Agreement if Seller intentionally omitted such information from the original Schedules.

 

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ARTICLE 5
Closing

 

Section 5.1           Closing.   The Closing of the transactions contemplated by this Agreement shall occur remotely through escrow closing with Escrow Agent, upon the exchange of signatures to the documents contemplated by this Agreement and the other required deliveries of each party hereto described below on the later of (i) five (5) business days following the expiration of the Due Diligence Period, or (ii) ten (10) business days following Purchaser’s receipt (or, as applicable, receipt by its affiliate or designee) of all governmental approvals necessary for Purchaser to purchase and operate all of the Facilities, unless extended by mutual agreement of Purchaser and Seller or pursuant to Section 9.3(b) , Section 10.11 , or Section 10.12 .

 

Additionally, Purchaser shall be entitled in its sole discretion to adjourn the scheduled date of Closing with respect to all of the Facilities and the St. Petersburg Raw Land by up to thirty (30) calendar days. The date on which the Closing is scheduled to occur (as such date may be extended from time to time pursuant to this Agreement) shall be the “ Scheduled Closing Date ” hereunder. The date on which the Closing actually occurs shall be the “ Closing Date ” for purposes of this Agreement. Provided, however, in no event shall the Closing Date be later than January 27, 2015, after affording Purchaser all adjournments and extensions permitted in any provision of this Agreement (the " Outside Closing Date ") and any provision of this Agreement which would otherwise result in a Closing Date beyond the Outside Closing Date shall be automatically revised to result in a deadline for Purchaser's obligation to proceed to Closing equal to the Outside Closing Date.

 

Section 5.2           Conditions to Seller’s Obligations.   Except as may be waived in writing by Seller, Seller’s obligation to make its deliveries at the Closing and to effect and consummate the transactions contemplated hereby shall be subject to the following conditions:

 

(a)           Representations and Warranties True and Correct . Purchaser’s representations and warranties contained in this Agreement, taken as whole, shall be true in all material respects as of the Closing Date (except for representations and warranties made as of a specified date, which shall have been true and correct as of such date with the same effect as though made on such date), and Purchaser shall have executed and delivered to Seller at Closing a certificate confirming the foregoing.

 

(b)           Agreements Complied With . Each of Purchaser’s covenants and agreements contained in this Agreement to be performed at or prior to the Closing shall have been performed in all material respects at or prior to the Closing.

 

(c)           Deliveries Made . At or prior to Closing, Purchaser shall have delivered to Seller or to the Escrow Agent for release to Seller upon Closing, and where applicable shall have duly executed, all the documents, certificates and other instruments required to be delivered at Closing in accordance with Section 5.5 or any other express provision of this Agreement.

 

Section 5.3           Conditions to Purchaser’s Obligations.    Except as may be otherwise expressly set forth in this Agreement to the contrary and/or waived in writing by Purchaser, Purchaser’s obligation to make its deliveries at the Closing and to effect and consummate the transactions contemplated hereby shall be subject to the following conditions:

 

(a)           Representations and Warranties True and Correct . Each of Seller’s representations and warranties contained in this Agreement, taken as a whole, shall be true in all material respects as of the

 

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Closing Date with the same effect as though made on such date (except for representations and warranties made as of a specified date, which shall have been true and correct as of such date), and Seller shall have executed and delivered to Purchaser at Closing a certificate confirming the foregoing.

 

(b)           Agreements Complied With . Each of Seller’s covenants and agreements contained in this Agreement to be performed at or prior to the Closing shall have been performed in all material respects at or prior to the Closing, and Seller shall have executed and delivered to Purchaser at Closing a certificate confirming the foregoing.

 

(c)           Deliveries Made. At or prior to Closing, Seller shall have delivered to Purchaser or to the Escrow Agent for release to Purchaser upon Closing, and where applicable shall have duly executed, all the documents, certificates and other instruments required to be delivered at Closing in accordance with Section 5.4 or any other express provision of this Agreement.

 

(d)           No Material Adverse Change. No Material Adverse Change shall have occurred during the period between the Effective Date and the Closing Date, and the Average Occupancy for the Facilities shall not have decreased below eighty-seven and one-half percent (87.5%) of the total available units.

 

(e)           Termination of Existing Leases and/or Management Agreements . Any existing real property leases and/or management agreements, if any, relating to the Purchased Property which are not Assumed Contracts and Leases or Residency Agreements shall have been terminated without fee or cost to Purchaser, and Seller shall have provided Purchaser reasonable evidence of same.

 

(f)           No Injunctions or Restraints . No temporary restraining order, preliminary or permanent injunction, or other order issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect. No action shall have been taken nor any statute, rule, or regulation shall have been enacted by any governmental agency that makes the consummation of the transactions contemplated hereby illegal.

 

Section 5.4           Deliveries by Seller.   Seller shall deliver to Purchaser on or before the Closing the following for each Facility and (as applicable) the St. Petersburg Raw Land:

 

(a)           Deed. The Deed substantially in the form of Exhibit C attached hereto, duly executed by Seller. In addition, in the event Purchaser elects to have a new survey of the applicable Real Property (the “ Survey ”) prepared, Seller agrees to provide a quitclaim deed at closing conveying title to the applicable Real Property based on the metes and bounds description shown on the Survey.

 

(b)           Bill of Sale and Assignment. A bill of sale and assignment with Seller’s warranty of title in the form of Exhibit D attached hereto (the “ Bill of Sale and Assignment ”) with respect to the Purchased Personal Property located at the Facility, duly executed by Seller.

 

(c)           Other Instruments. Such further instruments of conveyance and transfer as Purchaser may reasonably require to consummate the transactions contemplated by this Agreement to vest all of the Business with respect to the applicable Facility in Purchaser and to facilitate the transfer of such Business from Seller to Purchaser, including the assignment of the applicable Assumed Contracts and Leases and of the Residency Agreements, in form(s) and substance reasonably acceptable to Purchaser and agreed upon by the parties during the Due Diligence Period.

 

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(d)           Owner’s Affidavit. An Owner’s Affidavit in a form acceptable to the Title Company to the extent required to issue the Title Policy.

 

(e)           Releases. Documents releasing or nullifying any title exceptions (or providing reasonable evidence of such release or nullification) (relating to the applicable Real Property) which Seller is obligated to release or nullify pursuant to Section 2.4 hereof.

 

(f)           Resolutions. A certified copy of the company resolutions authorizing consummation of this Agreement and authorizing Seller’s to execute all documents necessary for Closing as provided herein.

 

(g)           Closing Certificate. The certificates required pursuant to Section 5.3(a) and Section 5.3(b) .

 

(h)           1099S. A completed Form 1099S, or effective equivalent thereof, describing the sale of the applicable Purchased Property.

 

(i)           Withholding Affidavit . If a Withholding Affidavit is required by the Escrow Agent, Seller shall deliver the Withholding Affidavit to the Escrow Agent prior to Closing.

 

(j)           Non-Foreign Status Affidavit . A certificate of non-foreign status pursuant to Treasury Regulation Section 1.1445-2(b)(2) signed by Seller under penalties of perjury stating Seller’s name, address and US taxpayer identification number and stating that Seller is not a foreign person as defined by Section 1445(f)(3) of the IRC.

 

(k)           Good Standing Certificate . A certificate of existence, certified by the Secretary of State of Florida and Kentucky (as applicable) as of a date which is within fifteen (15) days of Closing, reflecting each entity comprising the Seller’s good standing as a Florida or Kentucky (as applicable) limited liability company.

 

(l)           Rent Roll . A true, correct, and complete updated Rent Roll certified by an officer of Seller, for the applicable Facility showing each resident (without listing resident names) as of a date which is within three (3) business days prior to the Closing Date, the unit, bed or room number of such resident, and the amount of the monthly fees to be paid by such resident (including room, meal and other applicable monthly fees), the amount of security deposit, if any, date of Residency Agreement and the expiration date of such Residency Agreement, if applicable.

 

(m)           Operations Transfer Agreement and Transition Period Sublease . An Operations Transfer Agreement, if applicable in form and substance mutually agreed upon by the parties during the Due Diligence Period and attached as Exhibit E-3 (the “ Operations Transfer Agreement ”) and the Transition Period Sublease, if applicable, in form and substance mutually agreed upon by the parties during the Due Diligence Period and attached as Exhibit E-2 (the “ Transition Period Sublease ”).

 

(n)           Third Party Consents . The third party consents listed on Schedule 5.4(n) .

 

(o)           Title Commitment . A title commitment in accordance with Section 2.4(a) , subject only to the Permitted Title Exceptions and endorsed by the Title Company.

 

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(p)           Books and Records . Possession and control of books and records included as part of the Purchased Property which are not physically located at the Real Property as of the Closing Date.

 

(q)           Escrow Agreement . The Post-Closing Escrow Agreement, duly executed by Seller.

 

(r)           Post-Closing Management Agreement . A Post-Closing Management Agreement duly executed by the applicable Post-Closing Manager.

 

Section 5.5           Deliveries by Purchaser.   Purchaser shall deliver to Seller on or before the Closing the following:

 

(a)           Payment Items. The items described in Section 3.2 hereof representing payment of the Purchase Price.

 

(b)           Assumption Agreement. An instrument of assumption of the Assumed Liabilities, substantially the form attached as Exhibit F .

 

(c)           Post-Closing Escrow Agreement . The Post-Closing Escrow Agreement, duly executed by Purchaser.

 

(d)           Operations Transfer Agreement and Transition Period Sublease . The Operations Transfer Agreement, if applicable, and the Transition Period Sublease, if applicable.

 

(e)           Post-Closing Management Agreement . A Post-Closing Management Agreement duly executed by the applicable Post-Closing Manager.

 

Section 5.6           Failure to Obtain Licenses and Permits .

 

In the event Purchaser shall not have obtained all governmental licenses and permits required for Purchaser to operate the Facilities as independent living, assisted living and memory care facilities, and skilled nursing facilities in the same manner in which the Seller Parties is currently operating the Business, then Purchaser may elect in writing at any time prior to the Outside Closing Date to either:

 

(a)           Identify with specificity which licenses or permits Purchaser lacks for each Facility and advise that Purchaser desires to terminate this Agreement and receive a refund of the Deposit, in which event Seller shall have up to sixty (60) days within which to attempt to obtain on behalf of Purchaser the identified licenses and permits with Purchaser's prompt and complete cooperation and at Purchaser's sole cost and expense. Upon Seller's notice to Purchaser that Seller is unable or unwilling to obtain such licenses and permits on Purchaser's behalf, this Agreement shall terminate and Purchaser shall be entitled to receive a refund of the Deposit.

 

(b)           Proceed to Closing whereupon Seller shall enter into a Transition Period Sublease for any or all of the Facilities, effective as of the Closing Date in accordance with Section 4.9 above (as requested by Purchaser).

 

Section 5.7           Non-Fulfillment of Closing Conditions.    Notwithstanding anything in this Agreement to the contrary, the following shall apply exclusively if any of the conditions in Section 5.2 or Section 5.3 are not fulfilled as of the Scheduled Closing Date:

 

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(a)           Except as otherwise provided in the last sentence of this Section 5.7(a) , if any of the conditions set forth in Section 5.2 have not been fulfilled as of the Scheduled Closing Date, but all the conditions set forth in Section 5.3 have been fulfilled or expressly waived by Purchaser, Seller may elect (i) to proceed to Closing and waive such failure for all purposes hereunder; or (ii) terminate this Agreement, in which case the Deposit shall be disbursed to Seller as liquidated damages, and Purchaser shall have no further liability to Seller except with respect to the surviving provisions described in ARTICLE 9 . Seller hereby waives any right to recover the balance of the Purchase Price, or any part thereof, and the right to pursue any other remedy permitted at law or in equity against Purchaser. In no event under this Section 5.7 or otherwise shall Purchaser be liable to Seller for any punitive, speculative or consequential damages. Notwithstanding the foregoing, if any of the conditions in Section 5.3 or Section 5.4 are not satisfied, then Seller’s rights under this Section 5.7(a) are subject to Purchaser’s rights under Section 5.7(b) below.

 

(b)           If any of the conditions set forth in Section 5.3 have not been fulfilled as of the Scheduled Closing Date, Purchaser may elect:

 

(i)           to proceed with Closing and waive such failure for all purposes hereunder;

 

(ii)          to extend the Scheduled Closing Date for an additional thirty (30) days in order to provide Seller the opportunity to fulfill such condition and if such condition is not fulfilled within such thirty (30) day additional period, Purchaser may terminate this Agreement, in which case the Deposit shall be returned to Purchaser and except as set forth below, Seller shall reimburse Purchaser for Purchaser’s actual third party expenses incurred by Purchaser in connection with its due diligence on the Purchased Property; provided, however, such reimbursements shall not exceed Two Hundred Fifty Thousand and No/100 U.S. Dollars ($250,000.00) in the aggregate for all Purchased Property, and after which Seller shall have no additional liability to Purchaser for such failure, except for the surviving provisions described in ARTICLE 9 ; or

 

(iii)         to enforce specific performance.

 

(c)           If the Closing Conditions as set forth in Section 5.3 have not been satisfied on or before the Outside Closing Date, Purchaser shall have the absolute right to terminate this Agreement, in which case the Deposit shall be returned to Purchaser.

 

(d)           Both parties hereby waive and release any right to special, punitive, multiplied or consequential damages, or lost profits, except to the extent the same are included in a third-party judgment against the other party.

 

Section 5.8           Post-Closing Actions.   Seller shall promptly deliver to Purchaser the original of any mail or other communication received by it after the Closing Date pertaining to the Purchased Property or the Business, and any payments to which Purchaser is entitled. Purchaser shall promptly deliver to Seller the original of any mail or other communication received by Purchaser after the Closing Date and addressed to Seller which does not pertain to the Purchased Property or the Business, or to any payments to which Seller is entitled.

 

Section 5.9           Termination During Due Diligence.   Notwithstanding anything herein to the contrary, Purchaser shall have the right to terminate this Agreement at any time during the Due Diligence Period for any reason or for no reason whatsoever with respect to all (but not less than all) of the Facilities and

 

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the St. Petersburg Raw Land. Upon any such termination, the Deposit shall be returned to Purchaser, and the parties shall have no further liability or obligation to one another arising from such termination except for the surviving provisions described in ARTICLE 9 .

 

Section 5.10         No Partial Closing.

 

For purposes of clarity, it is hereby agreed and acknowledged, that neither party shall have any obligation under any circumstances to proceed to Closing on less than all of the Facilities.

 

ARTICLE 6
Representations and Warranties of Seller

 

The following representations and warranties are given by the Seller and, as applicable, each representation and warranty related to Seller below shall be deemed to have been given individually on behalf of each entity comprising the Seller. Each entity comprising the Seller hereby represents and warrants, jointly and severally, to Purchaser that as of the Effective Date:

 

Section 6.1           Organization and Standing.   Each entity comprising the Seller other than THE ALLEGRO AT HELMWOOD, LLC is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Florida and has the requisite power and authority to own, sell, lease and operate its properties and to carry on its businesses as now being conducted. THE ALLEGRO AT HELMWOOD, LLC is a limited liability company duly organized, validly existing, and in good standing under the laws of the Commonwealth of Kentucky and has the requisite power and authority to own, sell, lease and operate its properties and to carry on its businesses as now being conducted. Each entity comprising the Seller has the company power and authority to execute and deliver this Agreement and to consummate the transactions and perform the obligations contemplated by the Agreement.

 

Section 6.2           Valid and Binding Obligations.   The execution, delivery and performance of this Agreement and all other agreements and instruments to be executed and delivered by Seller hereunder, and the consummation of the transactions contemplated by this Agreement, have been duly authorized by all necessary company action of Seller. This Agreement constitutes, and all instruments required to be executed and delivered by Seller before or at the Closing will constitute, the valid and binding obligations of Seller, enforceable against Seller, in accordance with their respective terms. All persons who have executed this Agreement on behalf of Seller have been duly authorized to do so by all necessary company action of Seller and all persons who execute instruments required to be executed and delivered by Seller before or at the Closing shall have been duly authorized to do so by all necessary company action of Seller.

 

Section 6.3           Title; Purchased Property Complete.   Seller has good title to all of the Purchased Personal Property, and at the Closing, Seller shall transfer the Purchased Personal Property to Purchaser, free and clear of all liabilities, liens and, encumbrances except for the Assumed Liabilities and the Permitted Encumbrances. Seller has the unrestricted right to convey and assign the Purchased Personal Property. Except for the Excluded Property or as otherwise set forth in Schedule 6.3 , (i) the Purchased Property comprises all material assets, rights or property used by the Seller Parties in the operation of the Business as currently conducted, and (ii) to Seller’s Knowledge, all of the Personal Property is in good condition, working order and repair (ordinary wear and tear excepted).

 

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Section 6.4           Taxes and Tax Returns.    All Seller Parties have filed when due or will file when due in correct form all federal and state income tax returns for all periods ending on or prior to the Closing Date which are required to be filed by the applicable Seller Party on or prior to the Closing Date. Other than extensions to file any Seller Party’s tax returns, there are no agreements by any Seller Party for the extension of time for the assessment of any tax. All federal, state, county and local taxes due and payable by any Seller Party on or before the Effective Date have been paid and any taxes due and payable at any time between the Effective Date through the Closing will be paid prior to Closing, and there are no federal, state or local tax liens pending or threatened against Seller Party or the Purchased Property. Except for the Parent Company Review, there is no open audit of any of Seller Party’s federal, state, local income, sales use or property tax returns pending, and no Seller Party has received notice of the pendency of any such audit or examination. No Seller Party holds a certificate or other authorization issued by any tax collection body for the purpose of avoiding the payment by such Seller Party of sales and use taxes upon such Seller Party’s purchases of goods and services, nor has any Seller Party applied for such a certificate or other authorization. As used herein, the " Parent Company Review ," shall mean a current, open and routine audit by the Internal Revenue Service of one or more recent federal tax filings by Allegro Senior Living, LLC, a Delaware limited liability company, which company is part of the consolidated federal tax return customarily filed by the Seller.

 

Section 6.5           Execution and Delivery.   Except as set forth in Schedule 6.5 , neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will:

 

(a)           violate any provisions of the Articles of Organization or operating agreements of any Seller;

 

(b)           violate any contract or agreement relating to borrowed money, or any judgment, order, injunction, decree or award against, or binding upon Seller or upon the property or business of Seller, which violation would prevent, delay or materially hinder consummation of the transactions contemplated by this Agreement;

 

(c)           result in the creation of any material lien, charge or encumbrance upon any of the Purchased Property pursuant to the terms of any agreement or instrument to which Seller is a party or by or to which Seller or any of the Purchased Property may be bound, subject or affected;

 

(d)           violate any judgment, order, injunction, decree or award against, or binding upon, Seller or upon the Purchased Property or Business of Seller; or

 

(e)           result in any breach, violation, default or cancellation of any contract, agreement, mortgage, deed to secure debt, or lease to which Seller is a party or by which Seller is bound or the Purchased Property is subject that could have a material adverse effect on the Purchased Property or the operations of the Business.

 

Section 6.6           Contracts and Leases.   Schedule 6.6 hereto sets forth all contracts, leases or agreements, including the Assumed Contracts and Leases, to which any Seller Party is a party, written or oral, currently in effect that are material to the operation or management of the Business or the ownership and use of the Purchased Property, other than the Residency Agreements described in Section 6.7 , in each case identifying the applicable Facility to which such agreements relate. Each of the Assumed Contracts and Leases is in full force and effect in accordance with its terms. Seller has made available to Purchaser true and correct copies of all Assumed Contracts and Leases, including all material amendments or

 

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modifications to same. Seller is not in material breach, default or violation of any of the Assumed Contracts and Leases and, to Seller’s Knowledge, no other party to any such contract or lease is in material breach, default or violation thereof. No event has occurred and no condition exists that with the passage of time or the giving of notice, or both, would constitute a material default by Seller or, to Seller’s Knowledge, by any other party to any Assumed Contracts and Leases.

 

Section 6.7           Residency Agreements and Related Matters.   Schedule 6.7 is a rent roll for each Facility and identifies all of the Residency Agreements currently in effect for said Facility (the “ Rent Roll ”). Except as noted on the Rent Roll to the contrary:

 

(a)           each of the Residency Agreements is in full force and effect in accordance with its terms;

 

(b)           no Seller Party is in material breach, default or violation of any Residency Agreement and, to Seller’s Knowledge, no other party to any such contract is in material breach, default or violation thereof;

 

(c)           no event has occurred and no condition exists that, with the passage of time or the giving of notice, or both, would constitute a material default by any Seller Party or, to Seller’s Knowledge, any other party to any Residency Agreement;

 

(d)           Seller has no obligation with respect to refund of any deposits, interest on deposits or similar obligations with respect to any Residency Agreement; and

 

(e)           the updated Rent Roll provided pursuant to Section 5.4(l) shall be true and correct in all material respects as of the date thereof.

 

Section 6.8           Permits and Licenses.   Schedule 6.8 contains a complete list of all material governmental permits, licenses, certificates and authorizations held by any Seller Party that relate to the ownership, use, operation or management of each Facility or the St. Petersburg Raw Land, the Purchased Property and/or the Business (the “Permits and Licenses”).   Seller has made available to Purchaser true and correct copies of all Permits and Licenses. The Permits and Licenses are in full force and effect, and have not been revoked or rescinded, nor to Seller’s Knowledge has any governmental agency or authority threatened to revoke or rescind any such Permit or License. To Seller’s Knowledge, each Seller Party is using, operating and managing the Business and the Purchased Property in compliance with the terms and conditions of the Permits and Licenses, and except as noted in periodic inspection or survey reports by agencies having jurisdiction over Seller, copies of which have been made available to Purchaser, no Seller Party has received any written notice of any uncured deficiency or violation of any such term or condition from any applicable government body or agency. Except for the Permits and Licenses shown on said Schedule 6.8 , there are no other material governmental permits, licenses, certificates or authorizations required for Seller to own, use, operate or manage the Business as currently operated by the Seller Parties.

 

Section 6.9           Insurance.   Schedule 6.9 lists all policies of property and casualty insurance and liability insurance currently in effect and covering each Facility, or the St. Petersburg Raw Land, the Business and/or the Purchased Property, copies of which have been made available for review by Purchaser. Each such policy currently is in full force and effect and, to Seller’s Knowledge, Seller has not taken or failed to take any action which would limit or impair any of Seller’s rights thereunder with respect to any matter for which Purchaser could be held liable as a successor to Seller. Schedule 6.9 lists any pending, unresolved claims under Seller’s policies of property and casualty or liability insurance, as well as all claims made and resolved within the past three (3) years. Neither Seller nor any applicable policy-holder

 

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has not received written, or to Seller’s Knowledge, oral, notice of any pending cancellation or nonrenewal of such policies.

 

Section 6.10         Employees.

 

All facility-level employees are employees of either the Current Manager or the PEO and no Seller has any employees. Schedule 6.10 contains a complete and correct list of Facility-level employees of the Current Manager or the PEO who perform services for the Business or any Facility as of June 30, 2014, (including their respective positions, the Facility where they are employed, pay rates, bonus arrangements (if any), dates of hire, and accrued vacation and sick pay as of June 30, 2014 (including the Community Director and any Resident Services Director of each Facility Business) (collectively, the “ Employees ”). Except as described on Schedule 6.10 , neither any Seller Party nor to Seller’s Knowledge, any Current Manager or the PEO, is a party to any employment contract or other written agreement with any Employee. Neither any Seller Party nor to Seller’s Knowledge, the Current Manager or the PEO, has made any binding promise or commitment to increase the compensation of any Employee after the Effective Date, except as otherwise set forth on Schedule 6.10 hereto. Seller Parties, and to Seller’s Knowledge, the Current Manager and PEO, have complied in all material respects with all laws and regulations dealing with employment of Employees. Schedule 6.10 provides a list and brief description of all litigation or administrative claims filed by Employees or former employees who performed services for the Business against any Seller Party or the Current Manager during the past three (3) years, if any. Except as otherwise set forth on Schedule 6.10 (i) no Seller Party is a party to any collective bargaining agreement with respect to any employees, and (ii) to Seller’s Knowledge, there have been no efforts to organize a collective bargaining agreement or any other type of union activity with respect to the employees of the Business within the last three (3) years.

 

Section 6.11         Seller Benefit Plans.

 

(a)           Schedule 6.11 sets forth a complete list of each “employee benefit plan,” as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ( “ERISA” ) regardless of whether such plan is subject to ERISA, and each bonus, deferred, or incentive compensation, stock purchase, stock option, severance, and termination pay plan or program (the “Plans”), that is maintained or contributed to by any Seller Party, the Current Manager [or PEO] for the benefit of Employees or pursuant to which any Seller Party or the Current Manager has any liability with respect to Employees ( “Seller Plans” ). With respect to each of the Seller Plans, Seller has or will make available to Purchaser (or will deliver to Purchaser prior to Closing) correct and complete copies of each of the following documents: (i) the Plans and related trust or other funding documents (including all amendments thereto), (ii) the most recent Form 5500 annual report, including all attachments thereto, filed with the Internal Revenue Service with respect to each such Plan, (iii) the most recent trust report, if any, prepared with respect to each such Plan, and (iv) the summary plan description prepared for each such Plan.

 

(b)           Each Seller Plan has been administered and operated in material compliance with its terms and the applicable requirements of ERISA and the IRC, including the requirement to file an annual report. No Seller Plan is intended to be qualified under Section 401 of the IRC as a “multiemployer plan” (within the meaning of Section 3(37) of ERISA).

 

(c)           Except as set forth on Schedule 6.11 , there are no pending or, to Seller’s Knowledge, threatened claims of any Employees (or former employees who provided services to the Business) against or otherwise involving any of the Seller Plans (other than routine claims for benefits).

 

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(d)           There are no Employees or former employees who provided services to the Business, who are entitled to (i) any pension benefit that is unfunded, or (ii) any benefit to be paid after termination of employment other than required by Section 601 of ERISA, pursuant to a Seller Plan intending to be qualified under Section 401(a) of the IRC, or identified as providing a benefit described in this Section 6.11 or Schedule 6.11 . Each Seller Plan that is an employee welfare benefit plan as defined in Section 3(1) of ERISA is either unfunded or funded through an insurance company contract. There is no liability in the nature of a retroactive rate adjustment or loss-sharing or similar arrangement with respect to any such Seller Plan.

 

(e)           Neither any Seller Party, nor, to Seller’s Knowledge, any other person, including any fiduciary, has engaged in any “prohibited transaction” as defined in Section 4975 of the IRC or Section 406 of ERISA that could subject any Seller Party, or any person whom a Seller Party has an obligation to indemnify to any tax or penalty imposed under Section 4975 of the IRC or Section 502 of ERISA.

 

(f)           Neither any Seller Party nor the Current Manager has at any time (x) maintained, contributed to, or been required to contribute or had any liability (that has not been satisfied in full) to any Seller Plan subject to Title IV of ERISA, (y) incurred or expected to incur any liability to the Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA, or (z) incurred or expected to incur liability in connection with an “accumulated funding deficiency” within the meaning of Section 412 of the IRC, whether or not waived.

 

Section 6.12         Litigation.   Except as described on Schedule 6.12 , there is no litigation, action, suit, or other proceeding currently pending, or to Seller’s Knowledge, threatened against any Seller Party, or pending or threatened against any Current Manager, at law or in equity, or before any federal, state, municipal, local or other governmental or quasi-governmental authority, or before any arbitrator. To Seller’s Knowledge, there is no pending investigation of any Seller Party, Current Manager and/or any one or more Facilities by any governmental or quasi-governmental authority. Seller is not subject to any judgment, injunction, order, writ or decree of any court or other governmental or quasi-governmental authority or agency relating specifically to Seller or to the ownership, operation or management of the Purchased Property, any Facility, the St. Petersburg Raw Land, and/or the operations of the Business.

 

Section 6.13         Compliance with Laws.      Except as otherwise noted on Schedule 6.13:

 

(a)           Each Seller Party is in compliance in all material respects with all applicable laws, rules or regulations in connection with its ownership, use, operation or management of the Purchased Property, each Facility, the St. Petersburg Raw Land, and the Business, including without limitation all laws, rules and regulations related to Government Programs, and has not received notice of any violation thereof which has not been cured as of the Effective Date.

 

(b)           There are no pending or threatened (i) civil monetary penalties, terminations or exclusions from participation in any Government Programs for any Facility, (ii) material payment denials, or (iii) other sanctions of a governmental authority against any Seller Party or the Facilities. Seller and Business are in good standing in all applicable Government Programs. No Seller Party nor the Business has any material liabilities to any third-party fiscal intermediary or carrier administering the Government Programs, directly to the Government Programs or any Governmental Authority, or to any other third-party payor for the recoupment of any amounts previously paid by any such third-party fiscal intermediary, carrier, Government Program, or other third-party payor. Except for industry standard reviews and audits, no Seller Party nor the Business has any pending or, to Seller’s Knowledge, threatened investigations, audits, or other actions by any third-party fiscal intermediary or carrier

 

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administering the Government Programs or any Governmental Authority, by the United States Department of Health and Human Services, any state Medicaid agency, intermediary or carrier, or any third party to recoup, set-off, or suspend payments to, or demand a refund from, or terminate provider agreements with, or asserting any claim, demand, penalty, fine, or other sanction with respect to any of the activities, practices, policies, or claims of any Seller Party or the Business. No Seller Party, nor any party on behalf of any Seller Party or any Facility has received any over-payment or unearned payment from any Government Program or knowingly submitted to any Government Program any false or fraudulent claim for payment.

 

(c)           No Seller Party nor the Business has knowingly engaged in any activities which are prohibited, or are cause for civil penalties or mandatory or permissive exclusion from Medicare, Medicaid, or any other State Health Care Program or Federal Health Care Program (as those terms are defined in 42 C.F.R. Section 1001.2) under 42 U.S.C. Sections 1320a-7, 1320-7a, 1320a-7b, or 1395nn, or the Federal False Claims Act, 31 U.S.C. Section 3729, or the regulations promulgated pursuant to such statutes, nor has any Seller Party, any Facility, or any employees or contractors of Seller or any Facility been excluded from participation in any such program.

 

(d)           Each Seller Party has, and the Facilities have, complied with all applicable security and privacy standards regarding protected health information under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act provisions of the American Recovery and Reinvestment Act of 2009, all applicable state privacy laws, and with all applicable regulations promulgated under any such legislation.

 

(e)           No Seller Party nor any Facility has submitted any claim to any Government Program in connection with any referrals that violated any applicable self-referral Law, including the Federal Ethics in Patient Referrals Act, 42 U.S.C. Section 1395nn (the “ Stark Law ”) or any applicable state self-referral Law.

 

(f)           Each Seller Party has, and the Facilities have, complied with all disclosure requirements of all applicable self-referral Laws, including the Stark Law and any applicable state self-referral law.

 

(g)           No Seller Party nor any Facility has knowingly or willfully solicited, received, paid, or offered to pay any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, for the purpose of making or receiving any referral which violated any applicable anti-kickback law, including the federal Anti-Kickback Statute, 42 U.S.C. Section 1320-7b(b) (known as the “ Anti-Kickback Statute ”).

 

Section 6.14         Financial Statements.   Financial statements pertaining to the operations of the Business for the period ended December 31, 2013 and for the six (6) months ended June 30, 2014 are attached hereto as Schedule 6.14 (the “Financial Statements”) . Except as otherwise set forth on Schedule 6.14, the Financial Statements have been prepared consistently applied throughout the periods indicated and present fairly in all material respects the results of operations and financial condition of the Business for the respective periods indicated. The monthly financial reports to be provided by Seller pursuant to Section 4.2(k) will be based upon the books and records of the Seller Parties consistent with Seller’s current reporting practice, and will present fairly in all material respects the information purported to be presented therein.

 

Section 6.15         Real Property.  To Seller’s Knowledge, and except as may be disclosed on Schedule 6.15 , use of the Real Property by the applicable Seller Parties complies in all material respects with

 

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applicable zoning and land use laws, rules and regulations and with all applicable building codes, and no Seller Party has received written notice of any zoning, land use or building code violation relative to the Real Property which has not been cured prior to the date hereof. To Seller’s Knowledge (unless Seller is a party thereto), there is no pending litigation or dispute concerning the location of the lines and corners of the Real Property. No Seller Party has received written notice of, and has no other Knowledge of, pending, threatened or contemplated actions by any governmental authority or agency having the power of eminent domain, which might result in any part of the Real Property being taken by condemnation or conveyed in lieu thereof. To Seller’s Knowledge, there is no claim of adverse possession with respect to any part of the Real Property.

 

Section 6.16         Environmental Matters.   Except as disclosed on Schedule 6.16, or in any environmental audit or inspection report made available by Seller to Purchaser before the end of the Diligence Materials Due Date to Purchaser or the ESAs generated by Purchaser’s environmental consultants, to Seller’s Knowledge: (a) no areas exist on the Real Property where Hazardous Substances have been generated, disposed of, released, stored or found in violation of any Environmental Laws, and Seller has no Knowledge and has received no notice of the existence of any such areas for the generation, storage or disposal of any Hazardous Substances on the Real Property in violation of any Environmental Laws; (b) neither any Seller Party nor any of their respective agents has violated in any material respect any of the applicable Environmental Laws relating to or affecting the Real Property; (c) the Real Property is presently in compliance in all material respects with all Environmental Laws; (d) the Seller Parties have obtained all material licenses, permits and/or other governmental or regulatory approvals necessary to comply with Environmental Laws relating to their respective use of the Real Property, and the Seller Parties are in compliance in all material respects with the terms and provisions of all such licenses, permits and/or other governmental or regulatory approvals; (e) no underground storage tanks are currently located on the Real Property; (f) the Real Property has not been previously used as a landfill or as a dump for garbage or refuse; and (g) no asbestos containing building material or lead based paint are present in any structures located on the Real Property. Notwithstanding the generality of any of the other representations and warranties in this ARTICLE 6 , this Section 6.16 contains the exclusive representations and warranties of Seller with respect to compliance with Environmental Laws and the presence or absence of Hazardous Substances.

 

Section 6.17         Brokers, Finders.   Other than Vant-Age Pointe Capital Management and Advisory, Inc. and KeyBanc Capital Markets Inc., whose commissions and other charges shall be the sole responsibility of Seller, Seller has not retained any broker or finder in connection with the transactions contemplated hereby so as to give rise to any claim against Purchaser for any brokerage or finder’s commissions, fee, or similar compensation.

 

Section 6.18         FIRPTA.   Seller is not a “foreign person” as that term is defined in the Internal Revenue Code of 1986, as amended, and the regulations promulgated pursuant thereto, and Purchaser has no obligation under Internal Revenue Code Section 1445 to withhold and pay over to the Internal Revenue Service any part of the amount realized by Seller in the transaction contemplated hereby (as such term is defined in the regulations issued under IRC Section 1445).

 

Section 6.19         Solvency.   Seller is not now insolvent, and will not be rendered insolvent by completion of the transactions contemplated herein. For purposes of the preceding sentence, “insolvent” means, upon completion of the Closing, (i) that the fair market value of Seller’s assets is less than the sum of Seller’s debts and other liabilities or (ii) Seller has inadequate cash flow to service its debts as they come due. Upon the completion of the transactions contemplated herein, Seller will have adequate capital for the purposes of engaging in any business or transaction in which Seller is or will engage.

 

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Section 6.20         Consent of Third Parties.   Except as otherwise set forth on Schedule 6.20 , no consent of any third party is required as a condition to the entering into, performance or delivery of this Agreement by Seller, other than such consents as would not, in any individual case or in the aggregate, have a material adverse effect upon Purchaser’s ability to complete the purchase of the Purchased Property and operate the Business in the manner in which it is currently being operated by the Seller Parties.

 

Section 6.21         No Governmental Approvals; Permits.   To Seller’s Knowledge, except as set forth on Schedule 6.21 , and the requirement for Purchaser to obtain the licenses and permits described in Schedule 6.8 , no order, permission, consent, approval, license, authorization, registration or validation of, or filing with, or exemption by, any governmental agency, commission, board or public authority is required to authorize, or is required in connection with the execution, delivery and performance by any Seller Party of this Agreement or the taking of any action contemplated by this Agreement, which has not been obtained. Each of the Facilities is appropriately licensed, taking into account the levels of care and services provided at such Facility and the requirements of applicable laws and regulations where the Facility is located. The Seller Parties have all permits, licenses and authorizations necessary for the conduct of, or relating to the legal use, ownership and operation of, the Facilities as now operated. All permits, licenses and authorizations of each Seller Party are valid and in full force and effect. No Seller Party has applied to reduce the number of licensed or certified beds of any of the Facilities or to move or transfer the right to any or all of the licensed or certified beds of the Facilities to any other location or to amend or otherwise change the Facilities and/or the number of beds approved by the applicable regulatory authorities, and there are no proceedings or actions pending or contemplated to reduce the number of licensed or certified beds of any of the Facilities.

 

Section 6.22         Assessments.   Except as described on Schedule 6.22 , to Seller’s Knowledge, there are no (i) special or other assessments for public improvements or otherwise now affecting any of the Purchased Property, (ii) any pending or threatened special assessments affecting the Purchased Property, or (iii) any contemplated improvements affecting any of the Purchased Property that may result in special assessments affecting any of the Purchased Property.

 

Section 6.23         Title Encumbrances.    Except as described on Schedule 6.23 , Seller is not in default under any of its material obligations under any recorded agreement, easement or instrument encumbering title to the Real Property, and to Seller’s Knowledge, there is no default on the part of any other party thereto.

 

Section 6.24         Affordable Housing Units.   No bedroom or unit at any Facility is leased or reserved for lease as an affordable housing unit or for low or moderate income residents. No Facility is required to lease or reserve any unit or bedroom as an affordable housing unit or bedroom or for low or moderate income residents pursuant to a presently existing agreement or requirement of law.

 

Section 6.25         Loans. 

 

  There are no loans or debts secured by any of the Purchased Property except for (i) loans and debts described on Schedule 6.25 , or (ii) loans and debts reflected on the Title Policy.

 

Section 6.26         No Other Warranties.   Except for the express representations and warranties of Seller contained in this ARTICLE 6 or in the Deed or Bill of Sale and Assignment, Purchaser acknowledges that Seller has not made, and Purchaser has not relied upon, any other representation or warranty, express or

 

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implied, with respect to Seller, the Business, the Purchased Property or the transactions contemplated herein.

 

ARTICLE 7
Representations and warranties of Purchaser

 

Purchaser hereby represents and warrants to Seller as follows:

 

Section 7.1           Organization and Standing.   Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Purchaser has the company power and authority to execute and deliver this Agreement and to consummate the transactions and to perform its obligations contemplated by this Agreement. Purchaser is, or on or prior to the Closing will be, duly qualified to do business as a foreign limited liability company in the State of Florida and the Commonwealth of Kentucky.

 

Section 7.2           Execution and Delivery.   The execution and delivery of this Agreement, and the consummation of the transactions contemplated by this Agreement, have been duly authorized by all necessary company action of Purchaser. This Agreement constitutes, and all instruments required to be executed and delivered by Purchaser before or at the Closing will constitute, the valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms. All persons who have executed this Agreement on behalf of Purchaser have been duly authorized to do so by all necessary company action of Purchaser and all persons who execute instruments required to be executed and delivered by Purchaser before or at the Closing shall have been duly authorized to do so by all necessary company action of Purchaser. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will:

 

(a)           violate any provisions of the articles of organization or operating agreement of Purchaser;

 

(b)           violate any contract or agreement relating to borrowed money, or any judgment, order, injunction, decree or award against, or binding upon Purchaser or upon the property or business of Purchaser, which violation would prevent, delay or materially hinder consummation of the transactions contemplated by this Agreement;

 

(c)           violate any judgment, order, injunction, decree or award against, or binding upon, Purchaser; or

 

(d)           result in any breach, violation, default or cancellation of any contract, agreement, mortgage, deed to secure debt, or lease to which Purchaser is a party or by which Seller is bound and that could have a material adverse effect upon Purchaser’s ability to consummate the transactions described herein.

 

Section 7.3           Solvency.   Purchaser is not now insolvent, and will not be rendered insolvent by completion of the transactions contemplated herein. For purposes of the preceding sentence, “insolvent” means, upon completion of the Closing, (i) that the fair market value of Purchaser’s assets is less than the sum of Purchaser’s debts and other liabilities or (ii) Purchaser has inadequate cash flow to service its debts as they come due. Upon the completion of the transactions contemplated herein, Purchaser will have adequate capital for the purposes of engaging in the Business and any business or transaction in which Purchaser is or will engage.

 

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Section 7.4           Consent of Third Parties.   Except for the licenses and permits described in Schedules 6.8 and 6.21 , no consent of any third party is required as a condition to the entering into, performance or delivery of this Agreement by Purchaser, other than such consents as would not, in any individual case or in the aggregate, have a material adverse effect upon Purchaser’s ability to consummate the transactions contemplated by this Agreement.

 

Section 7.5           No Governmental Approvals.   To Purchaser’s knowledge, for the requirement for Purchaser or its designee to obtain the licenses and permits described in Schedules 6.8 and 6.21 , no order, permission, consent, approval, license, authorization, registration or validation of, or filing with, or exemption by, any governmental agency, commission, board or public authority is required to authorize, or is required in connection with the execution, delivery and performance by Purchaser of this Agreement or the taking of any action contemplated by this Agreement, which has not been obtained. Notwithstanding the foregoing, Purchaser makes no representation or warranty regarding applicability of the HSR Act to the transactions contemplated herein.

 

Section 7.6           Brokers, Finders.  Purchaser has not retained any broker or finder in connection with the transactions contemplated hereby so as to give rise to any valid claim against Seller for any brokerage or finder’s commission, fee, or similar compensation.

 

ARTICLE 8
Indemnification

 

Section 8.1           Indemnification by Seller.  Following the Closing, each entity comprising the Seller shall jointly and severally indemnify, hold harmless and defend Purchaser from and against any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (including, without limitation, reasonable attorneys’ fees and other legal costs and expenses) (collectively, “ Losses ”) which Purchaser may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

(a)           any breach or inaccuracy of any of the representations and warranties made by Seller in this Agreement as of the date made or reaffirmed by Seller;

 

(b)           any failure by Seller to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement;

 

(c)           the Excluded Liabilities;

 

(d)           the failure to comply with applicable bulk sales laws; or

 

(e)           any federal, state, or local income, payroll, sales and use, ad valorem or other taxes payable by Seller or for which Seller is liable in connection with any period prior to the Closing Date, and any interest or penalties thereon.

 

Section 8.2           Indemnification by Purchaser.   Following the Closing, Purchaser shall indemnify and hold harmless Seller from and against, and reimburse Seller for, any and all Losses which Seller may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

(a)           any breach or inaccuracy of any representations and warranties made by Purchaser in or pursuant to this Agreement;

 

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(b)           any failure by Purchaser to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement; or

 

(c)           the Assumed Liabilities.

 

Section 8.3           Indemnification Limits; Survival.

 

(a)           Purchaser Indemnification Limits; Survival . Purchaser shall not be entitled to any indemnification from Seller under Section 8.1(a) or Section 8.1(b) unless and until the aggregate amount of indemnifiable claims of Purchaser under this Agreement exceeds Fifty Thousand and No/100 U.S. Dollars ($50,000), excluding attorneys’ fees and costs (the “ Seller Threshold ”), at which point Seller shall be liable for all indemnifiable claims of Purchaser under Section 8.1(a) and Section 8.1(b) . Seller’s liability for indemnification under Section 8.1(a) and Section 8.1(b) shall not in any case exceed Three Million and No/100 Dollars ($3,000,000.00), excluding attorneys’ fees and costs (the “ Indemnification Cap ”); provided, however , that neither the Seller Threshold nor the Indemnification Cap shall apply in the case of: (i) fraud on the part of Seller; (ii) any claims arising under Section 8.1(a) with respect to the representations and warranties contained in Section 6.1 , Section 6.2 , Section 6.3 , Section 6.5 , Section 6.17 , or Section 6.18 (Seller's liability for which shall be limited to the Purchase Price); or (iii) any claims arising under Section 8.1(c) , Section 8.1(d) , or Section 8.1(e) . All of Seller’s representations and warranties under this Agreement shall survive for a period of fourteen (14) months following the Closing Date. Purchaser’s right to make any claim for indemnification against Seller under Section 8.1(a) , Section 8.1(b) and Section 8.1(d) shall expire at the end of the fourteenth (14th) month following the Closing; provided, however , that any claim for which Purchaser has given written notice prior to expiration of such fourteenth (14th) month anniversary shall survive until finally adjudicated; and further provided that Purchaser’s right to make any claim for indemnification pursuant to Section 8.1(c) shall not expire and any claim for indemnification pursuant to Section 8.1(e) shall survive for the applicable statute of limitations period for collection of the applicable tax.

 

(b)           Seller Indemnification Limits; Survival. Seller shall not be entitled to any indemnification from Purchaser under Section 8.2(a) or Section 8.2(b) unless and until the aggregate amount of indemnifiable claims of Seller under this Agreement, exceeds Fifty Thousand and No/100 U.S. Dollars ($50,000), excluding attorneys’ fees and costs (the “ Purchaser Threshold ”), at which point Purchaser shall be liable for all indemnifiable claims of Seller under Section 8.2(a) and Section 8.2(b) . Purchaser’s liability for indemnification under Section 8.2(a) and Section 8.2(b) shall not in any case exceed Three Million and No/100 Dollars ($3,000,000.00), excluding attorneys’ fees and costs (the “ Purchaser Indemnification Cap ”); provided, however , that neither the Purchaser Threshold nor the Purchaser Indemnification Cap shall apply in the case of: (i) fraud on the part of Purchaser; (ii) any claims arising under Section 8.2(a) with respect to the representations and warranties contained in Section 7.1 , Section 7.2 , and Section 7.6 (Purchaser's liability for which shall be limited to the Purchase Price); or (iii) any claims arising under Section 8.2(c) . All of Purchaser’s representations and warranties under this Agreement shall survive for a period of fourteen (14) months following the Closing Date, provided, however , that any claim for which Seller has given written notice prior to expiration of such fourteen (14) month anniversary shall survive until finally adjudicated; and further provided that Purchaser’s right to make any claim for indemnification pursuant to Section 8.2(c) shall not expire.

 

(c)           For purposes of determining the amount of Losses that are subject to indemnification hereunder with respect to any events, facts or circumstances, after determining whether or not such facts, events or circumstances give rise to a breach of a representation or warranty (after giving full effect to any qualifications as to materiality or similar standards, or of lack of “material adverse effect,” contained in

 

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such representation and warranty), the determination of the amount of Losses for such breach of representation and warranty, as it relates to such facts, events or circumstances, shall be made without giving effect to any qualifications as to materiality or similar standards, or the lack of “material adverse effect” contained in such representation or warranty.

 

(d)           Any payments made pursuant to ARTICLE 8 of this Agreement shall be treated as a purchase price adjustment for income tax purposes.

 

Section 8.4           Procedures Regarding Third Party Claims.  The procedures to be followed by Purchaser and Seller with respect to indemnification hereunder regarding claims by third parties shall be as follows:

 

(a)           Promptly after receipt by Purchaser or Seller, as the case may be, of notice of the commencement of any action or proceeding or the assertion of any claim by a third person, which the party receiving such notice has reason to believe may result in a claim by it for indemnity pursuant to this Agreement, such person (the “ Indemnified Party ”) shall give notice of such action, proceeding or claim to the party against whom indemnification is sought (the “ Indemnifying Party ”), setting forth in reasonable detail the nature of such action or claim, including copies of any written correspondence from such third person to such Indemnified Party.

 

(b)           The Indemnifying Party shall be entitled, at its own expense, to assume and control such defense with counsel chosen by the Indemnifying Party and approved by the Indemnified Party, which approval shall not be unreasonably withheld or delayed. The Indemnified Party shall be entitled to participate in such defense after such assumption at the Indemnified Party’s own expense. Upon assuming such defense, the Indemnifying Party shall have full rights to enter into any monetary compromise or settlement which is dispositive of the matters involved; provided that such settlement is paid in full by the Indemnifying Party and will not have any continuing material adverse effect upon the Indemnified Party.

 

(c)           With respect to any action, proceeding or claim as to which the Indemnifying Party shall not have exercised its right to assume the defense, the Indemnified Party may assume and control the defense of and contest such action, proceeding or claim with counsel chosen by it. The Indemnifying Party shall be entitled to participate in the defense of such action, the cost of such participation to be at its own expense. The Indemnifying Party shall be obligated to pay the reasonable attorneys’ fees and expenses of the Indemnified Party to the extent that such fees and expenses relate to claims as to which indemnification is due under Section 8.1 or Section 8.2 hereof, as the case may be. The Indemnified Party shall have full rights to dispose of such action and enter into any monetary compromise or settlement; provided, however , in the event that the Indemnified Party shall settle or compromise any claims involved in the action insofar as they relate to, or arise out of, the same facts as gave rise to any claim for which indemnification is due under Section 8.1 or Section 8.2 hereof, as the case may be, it shall act reasonably and in good faith in doing so.

 

(d)           Both the Indemnifying Party and the Indemnified Party shall cooperate fully with one another in connection with the defense, compromise or settlement of any such claim, proceeding or action, including, without limitation, by making available to the other all pertinent information and witnesses within its control.

 

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Section 8.5           General Qualifications on Indemnification.   Notwithstanding any provision to the contrary, the indemnification rights set forth in Section 8.1 and Section 8.2 shall be subject to the following:

 

(a)           The liability of an Indemnifying Party with respect to any indemnification claim shall be reduced by the amount of any tax benefit actually realized or any insurance proceeds received by Indemnified Party as a result of any damages, upon which such claim is based, and shall include any tax detriment actually suffered by the Indemnified Party as a result of such damages. The amount of such tax benefit or detriment shall be determined by taking into account the effect, if any, and to the extent determinable, of timing differences resulting from the acceleration or deferral of items of gain or loss resulting from such damages.

 

(b)           Damages shall include actual damages and shall not include any special, punitive, multiplied or consequential damages, or lost profits, except to the extent the same are included in a third-party judgment against the Indemnified Party, the right to which is hereby waived by both parties.

 

(c)           Upon payment in full of any indemnification claim, the Indemnifying Party shall be subrogated to the extent of such payment to the rights of the Indemnified Party against any person or entity with respect to the subject matter of such indemnification claim.

 

(d)           An Indemnified Party may not recover for any losses otherwise indemnifiable under Section 8.1(a) , Section 8.1(b) , Section 8.2(a) or Section 8.2(b) if such Indemnified Party had actual (and not imputed) knowledge prior to Closing of the breach, inaccuracy or failure giving rise to such losses.

 

(e)           An Indemnifying Party shall be relieved of its duty to indemnify an Indemnified Party hereunder if and to the extent the Indemnified Party fails to use commercially reasonable efforts in good faith to mitigate its damages, including, but not limited to, failure to give timely notice to its insurance carriers and to pursue recovery under applicable policies of insurance.

 

(f)           Any amounts due to Purchaser from Seller pursuant to this ARTICLE 8 shall be paid first from the Holdback Amount in accordance with the Escrow Agreement, until the Holdback Amount has been exhausted or released.

 

Section 8.6           Exclusivity.   Following the Closing, in the absence of actual fraud on the part of either party (in which case the other party may avail itself of statutory and common law remedies for fraud), the right to receive indemnification under this ARTICLE 8 shall be the sole and exclusive remedy of Purchaser or Seller for monetary damages of any kind with respect to the representations and warranties contained in this Agreement (including any certificate certifying the truth or accuracy of any provision of this Agreement) or conduct otherwise relating to the negotiation and consummation of the purchase and sale of the Purchased Property and Business hereunder. This provision shall not, however, be deemed to limit either party's remedies for any breach of the other party's post-closing obligations under the Post-Closing Management Agreement or any other document or instrument executed at Closing which provides for performance by a party from and after Closing, including without limitation any breach of Section 10.7 hereof.

 

Section 8.7           Effective Upon Closing.   The provisions of this ARTICLE 8 shall become effective upon completion of the Closing, and shall have no force and effect prior to the Closing or if this Agreement is terminated prior to Closing.

 

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ARTICLE 9
Default and Termination

 

Section 9.1           No Default Termination .

 

This Agreement and the transactions contemplated hereby may be terminated at any time prior to Closing as follows:

 

(a)           in its entirety by mutual written agreement of Seller and Purchaser;

 

(b)           in its entirety if a court of competent jurisdiction or other governmental agency shall have issued an order, decree, or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, enjoining, or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling, or other action shall have become final and nonappealable; or

 

(c)           by the Purchaser in its entirety if any Seller representations, warranties, covenants or agreements contained in this Agreement (other than the conditions contained in Section 5.2 hereof) are untrue or become untrue in any material respect, which breach cannot be or has not been cured within five (5) business days after the giving of written notice by the Purchaser to the Seller specifying such breach.

 

Upon termination of this Agreement prior to Closing in accordance with this Section 9.1 , except as otherwise expressly provided herein, Purchaser shall be entitled to a refund of the Deposit and the parties shall have no further liability hereunder except that the following provisions of this Agreement shall survive any such termination: Section 4.1(c) , Section 4.5 , and Section 4.6(b)(vi) .

 

Section 9.2           Default by Purchaser .

 

If any time prior to Closing Purchaser defaults under this Agreement (and Seller has not defaulted under this Agreement) and all conditions precedent and contingencies to Purchaser’s obligation have been satisfied, then as Seller’s sole and exclusive remedy, Escrow Agent (after first giving Purchaser three (3) business days prior written notice) shall pay to Seller the Deposit. Purchaser and Seller acknowledge that it is impossible to estimate precisely the damages which might be suffered by Seller upon Purchaser’s default and that the Deposit represents a reasonable estimation of such damages. Seller’s retention of the Deposit is intended not as a penalty, but as full liquidated damages as provided under state law. The right to receive and retain the Deposit as full liquidated damages is Seller’s sole and exclusive remedy in the event of default hereunder by Purchaser (excluding, however, Purchaser’s indemnity under Section 4.1(c) above), and Seller (except with respect to such indemnity) hereby covenants that Seller shall not sue Purchaser: (a) for specific performance of this Agreement, or (b) to recover actual damages in excess of the Deposit. The Deposit shall constitute the stipulated damages of Seller, and Purchaser shall thereupon be relieved of all further obligations and liabilities arising out of this Agreement (except as otherwise specifically provided herein), it being agreed that the actual damages of Seller are impossible to ascertain and said amount represent the reasonable damages of Seller.

 

Section 9.3           Default by Seller .

 

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So long as Purchaser has not defaulted under this Agreement and all conditions precedent and contingencies to Seller’s obligations hereunder have been satisfied, in the event: (x) Seller breaches this Agreement in any material respect, or (y) any representation or warranty made by Seller in this Agreement is untrue, false or incorrect in any material respect when made or reaffirmed by Seller, or (z) Seller shall not have performed any of Seller’s obligations herein set forth in any material respect, then as Purchaser’s sole and exclusive remedy, Purchaser shall be entitled to elect either to:

 

(a)           close the transaction contemplated by this Agreement, thereby waiving such breach, default or failure, provided, however, Purchaser may cure any breach, default, or failure of Seller, which is susceptible to cure by the payment of money and deduct from the Purchase Price all sums so paid by Purchaser, together with all reasonable costs and expenses incurred by Purchaser in effecting such cure;

 

(b)           postpone Closing hereunder for thirty (30) days, or such longer period of time as Purchaser may designate (subject to Seller’s approval of such longer period, which approval shall not be unreasonably withheld or delayed), during which time any such breach, default or failure shall be cured by Seller and if not then cured, Purchaser may (and shall) elect either to proceed under Section 9.3(a) , Section 9.3(c) , or Section 9.3(d) hereof;

 

(c)           seek specific performance of this Agreement and of Seller’s obligations, duties and covenants hereunder; or

 

(d)           terminate this Agreement and receive a refund of the Deposit, thereby waiving any right hereunder to seek damages. Provided, however, in the event of a termination pursuant to this Section 9.3(d) , Seller shall reimburse Purchaser for Purchaser’s actual out of pocket third party expenses incurred by Purchaser in connection with its due diligence activities upon reasonable evidence thereof within fifteen (15) days following notice of Purchaser's termination of this Agreement pursuant to this Section 9.3(d) ; provided, however, such reimbursement by Seller shall not exceed a total of Two Hundred Fifty Thousand and No/100 U.S. Dollars ($250,000.00) in the aggregate.

 

Section 9.4           Survival; No Right to Damages .

 

(a)           Except as expressly set forth herein, upon termination of this Agreement prior to Closing in accordance with Section 9.1 , Section 9.2, or Section 9.3 above , and except as otherwise expressly provided herein, following which termination the parties shall have no further liability under this Agreement, provided, however, that the following provisions of this Agreement shall survive any such termination: Section 4.1(c) , Section 4.5 , and Section 4.6(b)(vi) .

 

(b)           Except as expressly set forth herein to the contrary, neither party shall have any right to seek damages for or on account of this Agreement or the breach hereof.

 

ARTICLE 10
Miscellaneous

 

Section 10.1         Access to Books and Records after Closing.  Following the Closing, Purchaser shall give Seller or its authorized representatives access, during normal business hours and upon prior notice, to such books and records constituting or relating to the Purchased Property as shall be reasonably requested by Seller in connection with the preparation and filing of the party’s tax returns, to comply with regulatory requirements, to defend or discharge the Excluded Liabilities, or for any other valid business purpose, and to make extracts and copies of such books

 

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and records. Purchaser agrees to retain all books and records included as part of the Purchased Property for at least two (2) years following the Closing Date.

 

Section 10.2         Notices.     All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and electronic confirmation of receipt is obtained promptly after completion of transmission, or if sent via electronic mail ( e.g . email) with receipted delivery, (iii) on the day after delivery to FedEx or similar overnight courier, or (iv) on the tenth (10 th ) day after mailing, if mailed to the party to whom notice is to be given, by first-class mail, registered or certified, return receipt requested, postage prepaid and properly addressed, to the party as follows:

 

 

If to Purchaser:   American Realty Capital VII, LLC
    Attn: Edward M Weil., Jr.
    405 Park Avenue, 2 nd Floor
    New York, New York 10022
    Email:  mweil@arlcap.com
     
With a copy (which will not constitute   Jesse Galloway
notice) to:   American Realty Capital VII, LLC
    405 Park Avenue, 14 th Floor
    New York, New York 10022
    Email: jgalloway@arlcap.com
     
With a copy (which will not constitute   Michael A. Okaty
notice) to:   Foley & Lardner LLP
    111 North Orange Avenue, Suite 1800
    Orlando, Florida  32801
    Email:  mokaty@foley.com
     
If to Seller:   Allegro
    c/o Allegro Senior Living, LLC
    212 South Central Avenue
    Suite 201
    Attention Laurence A. Schiffer, CEO
    St. Louis, MO 63105
    Email: lschiffer@lovesavings.net
     
With a copy (which will not constitute   Theresa Marie Kenney, Esq., B.C.S.
notice) to:   Duss, Kenney, Safer, Hampton & Joos, P.A.
    4348 Southpoint Boulevard, Suite 101
    Jacksonville, Florida 32216
    Email: tkenney@jaxfirm.com
     
    And
     
    Allegro
    c/o Allegro Senior Living, LLC
    212 South Central Avenue, Suite 301

 

45
 

  

    Attention Robert B. Karn, CFO
    St. Louis, MO 63105
    Email:  rkarn@allegroliving.com

 

Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other parties in the manner herein provided for giving notice. Notice given by a party's attorney in accordance with this Section 10.2 shall (a) constitute notice from said party, and (b) not be considered an improper direct contact from the sending attorney to a "person known to be represented by counsel".

 

Section 10.3         Good Faith; Cooperation.  The parties shall in good faith undertake to perform their obligations in this Agreement, to satisfy all conditions and to cause the transactions contemplated by this Agreement to be carried out promptly in accordance with its terms. The parties shall cooperate fully with each other and their respective representatives in connection with any actions required to be taken as part of their respective obligations under this Agreement.

 

Section 10.4         Assignment; Exchange Cooperation; Successors in Interest.  Neither Purchaser nor Seller may assign any of their respective rights hereunder, except with the prior written consent of the other (which shall not be unreasonably withheld or delayed); provided, however , that without additional consent from Seller prior to the Closing Purchaser may assign its rights under this Agreement in whole or in part, to any affiliate or related entity of Purchaser, including without limitation the special purpose entities identified in Schedule 10.4 attached hereto. Any such assignee shall be deemed to have made the same representations to Seller. This Agreement is binding upon the parties and their respective successors or assigns and inures to the benefit of the parties and their permitted successors and assigns. Any assignment of this Agreement shall not serve to release AMERICAN REALTY CAPITAL VII, LLC, a Delaware limited liability company from any obligation or liability hereunder nor shall any partial assignment of this Agreement serve to limit the Seller's rights or remedies hereunder or Seller's recourse to the entirety of the Deposit for and on account of any breach of this Agreement by any Purchaser.

 

Section 10.5         No Third Party Beneficiaries.  The parties do not intend to confer any benefit under this Agreement on anyone other than the parties, and nothing contained in this Agreement shall be deemed to confer any such benefit on any other person, including any current or former employee or agent of Seller or any dependent or beneficiary of any of them.

 

Section 10.6         Severability.  Any determination by any court of competent jurisdiction of the invalidity of any provision of this Agreement that is not essential to accomplishing its purposes shall not affect the validity of any other provision of this Agreement, which shall remain in full force and effect and which shall be construed as to be valid under applicable law.

 

Section 10.7         Purchaser Records Rights.  Upon Purchaser’s request, for a period of one (1) year after Closing, Seller shall make the financial statements, including balance sheets, income statements, stockholders’ equity statements and cash flow statements and related notes prepared in accordance with United States generally accepted accounting standards, and any and all books, records, correspondence, financial data, leases, delinquency reports and all other documents and matters maintained by Seller or its agents and relating to receipts, expenditures, contributions and distributions reasonably necessary to complete an audit pertaining to the Purchased Property for the three (3) most recent full calendar years and the interim period of the current calendar year (collectively, the “ Records ”) available to Purchaser and/or its auditors for inspection, copying and audit by Purchaser’s designated accountants, and at Purchaser’s expense. Seller shall provide Purchaser and/or its auditors, but without expense to Seller,

 

46
 

  

with copies of, or access to, such factual and financial information as may be reasonably requested by Purchaser or its designated accountants, and in the possession or control of Seller, to enable Purchaser to file any filings required by the Securities and Exchange Commission (the “ SEC ”) in connection with the purchase of the Purchased Property. Seller understands and acknowledges that Purchaser is required to file audited financial statements related to the Purchased Property with the SEC within seventy-one (71) days of the Closing Date and agrees to provide any records and requested reasonable representations and/or certifications to the Purchaser’s auditors, on a timely basis to facilitate Purchaser’s timely submission of such audited financial statements. The provisions of this Section 10.7 shall survive Closing .

 

Section 10.8         Controlling Law; Integration; Amendment; Waiver.

 

(a)           This Agreement shall be governed by and construed in accordance with the laws and case decisions of the State of Florida applicable to contracts made and to be performed therein.

 

(b)           This Agreement and the other contracts, documents and instruments to be delivered pursuant to this Agreement supersede all prior negotiations, agreements, information memoranda, letters of intent and understandings between the parties with respect to their subject matter, whether written or oral, constitute the entire agreement of the parties with respect to their subject matter, and may not be altered or amended except in writing signed by Purchaser and Seller. Neither of the parties has made or relied upon any representation, warranty or assurances in connection with the transactions contemplated hereunder other than those expressly made herein.

 

(c)           The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect its right to enforce the same, and no waiver by any party of any provision (or of a breach of any provision) of this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision (or of a breach of any other provision) of this Agreement.

 

Section 10.9        Time.  Time is of the essence with respect to this Agreement.

 

Section 10.10      Survival.  For the avoidance of doubt and notwithstanding anything contrary in this Agreement, Section 1.3 , Section 4.5 , Section 4.6 , Section 4.7 , Section 4.9 , Section 4.11 , Section 5.8 , ARTICLE 8 , and ARTICLE 10 of this Agreement shall survive the Closing of this Agreement.

 

Section 10.11     Eminent Domain - Condemnation.  If, prior to Closing, all or portion of Real Property comprising at least five percent (5%) of the Real Property associated with any Facility or the St. Petersburg Raw Land, as applicable, is subject to an eminent domain or condemnation proceeding, Seller, immediately upon learning thereof, shall give written notice to Purchaser. Thereafter, Purchaser shall have a period of thirty (30) days within which to elect, by written notice to Seller, to terminate this Agreement in its entirety. Upon any such termination, the entire Deposit shall be returned to Purchaser, and the Agreement shall become null and void in its entirety. If no such election is timely made, Purchaser shall be deemed to have waived its rights under this paragraph, except that, if the transaction contemplated hereby closes, Purchaser shall be entitled to the proceeds or the right to negotiate, settle and collect the proceeds of such condemnation award, and Seller shall execute and deliver all documents reasonably requested of Seller in order to effectuate this section.

 

Section 10.12      Risk Of Loss.  Seller assumes all risks and liability for loss, damage, destruction or injury by fire, storm, accident or any other casualty to the Real Property from all causes until the Closing

 

47
 

  

has been consummated. In the event of any damage or destruction prior to Closing at any Facility with an estimated repair cost of greater than one and one-half percent (1.5%) of the Purchase Price allocated to such Facility pursuant to Section 3.3(a) hereof, Purchaser shall have the option exercisable by written notice to Seller within thirty (30) days after Purchaser is notified of such casualty, to terminate this Agreement by notice thereof to Seller, in which case the parties shall have no further rights or obligations under the Agreement and the entire Deposit shall be returned to Purchaser; or Purchaser may elect to close this transaction and, in such event Purchaser shall be entitled to receive the full amount of any proceeds of such insurance payable on account of loss, damage or destruction after the date hereof and Seller shall be liable for the payment to Purchaser of all deductibles under applicable insurance policies. Seller covenants to execute such assignments, drafts and other instruments as may be required to effectuate this Section 10.12 hereof.

 

Section 10.13         Attorneys’ Fees.   In the event either party brings an action to enforce or interpret any of the provisions of this Agreement, the “prevailing party” in such action shall, in addition to any other recovery, be entitled to its reasonable attorneys’ fees and expenses arising from such action and any appeal or any bankruptcy action related thereto, whether or not such matter proceeds to court. For purposes of this Agreement, “ prevailing party ” shall mean, in the case of a person asserting a claim, such person is successful in obtaining substantially all of the relief sought, and in the case of a person defending against or responding to a claim, such person is successful in denying substantially all of the relief sought.

 

Section 10.14         Covenant Not to Compete.   For a period of three (3) years following the Closing, each party comprising the Seller agrees that neither it nor any its affiliates, or other entities which any party comprising the Seller controls, is controlled by or is under common control with, shall, directly or indirectly, develop, own, invest in, finance, manage or franchise any facility similar to the Business within a radius of five (5) miles from any portion of the Real Property. For the avoidance of doubt and without limitation, any facility operating as an assisted living facility and/or memory care facility, an independent living facility, and/or a skilled nursing facility shall be deemed to be similar to the Business for purposes of this Section 10.14 . The provisions of this Section 10.14 shall survive Closing.

 

Section 10.15         Waiver of Jury Trial.   The parties agree that no party to this Agreement shall seek a jury trial in any lawsuit, proceeding, counterclaim or other litigation based upon, or arising out of, this Agreement or the dealings or the relationship between them.

 

Section 10.16          Construction . This Agreement shall not be construed more strictly against one party than against the other merely by virtue of the fact that it may have been prepared by counsel for one of the parties, it being recognized that both Seller and Purchaser have contributed with the advice of counsel to the preparation of this Agreement.

 

Section 10.17         Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement 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.

 

[ Signatures commence on the following page . ]

 

48
 

 

IN WITNESS WHEREOF , each of the parties hereto has signed and sealed this Asset Purchase Agreement as of the day and year first above written.

 

  SELLER :
   
  THE ALLEGRO AT ABACOA, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , its sole
    managing member
       
    By: /s/ Laurence A. Schiffer
    Print Name: Laurence A. Schiffer
    Print Title: Chairman/CEO
       
  THE ALLEGRO AT HELMWOOD, LLC
  a Kentucky limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , its sole
    managing member
       
    By: /s/ Laurence A. Schiffer
    Print Name: Laurence A. Schiffer
    Print Title: Chairman/CEO
       
  COLLEGE HARBOR PROPERTIES, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC ,
    its sole managing member
       
    By: /s/ Laurence A. Schiffer
    Print Name: Laurence A. Schiffer
    Print Title: Chairman/CEO
       
  THE ALLEGRO AT WILLOUGHBY, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , its sole
    managing member
       
    By: /s/ Laurence A. Schiffer
    Print Name: Laurence A. Schiffer
    Print Title: Chairman/CEO

 

 
 

  

  THE ALLEGRO AT EAST LAKE, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC ,
    its sole managing member
       
    By: /s/ Laurence A. Schiffer
    Print Name: Laurence A. Schiffer
    Print Title: Chairman/CEO
       
  HARBOR TOWERS, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC
    its sole managing member
       
    By: /s/ Laurence A. Schiffer
    Print Name: Laurence A. Schiffer
    Print Title: Chairman/CEO
       
  PURCHASER:
       
  AMERICAN REALTY CAPITAL VII, LLC ,
  a Delaware limited liability company
       
    By: /s/ Edward M. Weil, Jr.
    Print Name: Edward M. Weil, Jr.
    Print Title: President

 

SIGNATURE PAGE TO

ASSET PURCHASE AGREEMENT

 

 
 

 

Exhibit A

 

Escrow Agreement

 

[ See attached. ]

 

 
 

  

ESCROW AGREEMENT

 

THIS ESCROW AGREEMENT (this “ Agreement ”) is made effective as of the ____ day of August, 2014 (the “ Effective Date ”), by and among AMERICAN REALTY CAPITAL VII, LLC , a Delaware limited liability company (“ Purchaser ”) and THE ALLEGRO AT ABACOA, L.L.C. , a Florida limited liability company, THE ALLEGRO AT HELMWOOD, LLC, a Kentucky limited liability company, COLLEGE HARBOR PROPERTIES, L.L.C. , a Florida limited liability company, THE ALLEGRO AT WILLOUGHBY, L.L.C. , a Florida limited liability company, THE ALLEGRO AT EAST LAKE, L.L.C. , a Florida limited liability company, and HARBOR TOWERS, L.L.C. , a Florida limited liability company (collectively, the “ Seller ”), and Stewart Title Guaranty Company , as escrow agent (“ Escrow Agent ”). Each party to this Agreement is sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

A.           Purchaser and Seller are parties to that certain Asset Purchase Agreement dated as of the ___ day of August, 2014 (the “ Purchase Agreement ”), pursuant to which Purchaser has agreed to purchase from Seller certain skilled nursing facilities and related assets located in the State of Florida and the State of Kentucky, as more particularly described therein.

 

B.           Purchaser has deposited with the Escrow Agent certain Escrowed Funds described herein. The Parties intend that the Escrow Agent shall hold and disburse the Escrowed Funds in accordance with the terms of this Agreement.

 

NOW THEREFORE , for and in consideration of the execution of this document and the mutual promises and covenants made herein, the receipt and sufficiency of which are hereby mutually acknowledged, the Parties agree as follows:

 

1.           Each of the Recitals above is true and correct and is hereby incorporated by reference.

 

2.           ESCROWED FUNDS

 

(a)         Escrowed Funds . Purchaser has deposited with the Escrow Agent and Escrow Agent hereby acknowledges receipt of Three Million and No/100 U.S. Dollars ($3,000,000) (the “ Escrowed Funds ”). The Escrow Agent shall hold and disburse the Escrowed Funds in accordance with the terms of this Agreement.

 

3.           ESCROW AGENT

 

(a)                     Appointment of Escrow Agent . Seller and Purchaser hereby appoint the Escrow Agent, with a mailing address of One Washington Mall, Suite 1400 Boston, MA 02108,

 

 
 

  

as the Escrow Agent hereunder to receive, hold and disburse the Escrowed Funds, and to otherwise perform the duties of the Escrow Agent pursuant to this Agreement. Escrow Agent hereby accepts its appointment as the escrow agent and agrees to receive, hold and disburse the Escrowed Funds in accordance with the terms of this Agreement and will not disburse or otherwise transfer any portion of the Escrowed Funds to any person other than pursuant to the express provisions hereof.

 

(b)           Escrow Agent Responsibilities . The Escrow Agent executes this Agreement solely for the purpose of accepting the escrow created hereby, on the terms and conditions set forth in it, and undertakes to perform the duties, but only the duties, specifically set forth herein. Escrow Agent shall hold the Escrowed Funds in a single non-interest bearing account with Stewart Title Guaranty Company. The account shall be in the name of Escrow Agent but shall not be the property of the Escrow Agent. Escrow Agent shall have no liability for any loss which may result from any failure of the institution in which the Escrowed Funds are placed; provided , however , that notwithstanding anything herein to the contrary, in the event of a loss resulting from the failure of the financial institution in which the Escrowed Funds are placed, Seller and Purchaser shall have the same remedies generally available to depositors of the financial institution, including, without limitation, all remedies available at law or in equity. The Escrow Agent is not required to secure the performance of its duties by bond or otherwise. Seller and Purchaser hereby release the Escrow Agent from all liability for any punitive, incidental, consequential, or other damages or obligations to them for any act or omission by the Escrow Agent or any of its agents, partners, or employees performed in good faith in the exercise of its or their best judgment and in a manner reasonably believed by it or them to be authorized or within the duties, rights, powers, privileges, or direction conferred on the Escrow Agent by this Agreement, except for willful misconduct, negligence, tortious conversion of any Escrowed Funds or documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or breach of this Agreement by the Escrow Agent. Without limiting the generality of the foregoing, the responsibilities of the Escrow Agent are further defined, limited, and qualified by the following:

 

(1)         the duties and obligations of the Escrow Agent will be determined solely by the express provisions of this Agreement, and this Agreement is not to be interpreted or construed to impose on the Escrow Agent any implied duties, covenants, or obligations;

 

(2)         the Escrow Agent may execute any of its rights, powers, or responsibilities under this Agreement either directly or by or through its agents, partners, employees, or attorneys, and it will not be liable for any error of judgment made in good faith by an authorized agent, partner, employee, or attorney of it, unless it is proven that the Escrow Agent was negligent in ascertaining the pertinent facts or in employing or supervising the agent, partner, or employee;

 

(3)         the Escrow Agent will not be liable to any person with respect to any action taken, suffered, or omitted by it in accordance with this Agreement or in accordance with written instructions signed by Seller and Purchaser or an order issued by a court of competent jurisdiction, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement;

 

 
 

  

(4)         the Escrow Agent may rely on any document given to it pursuant to this Agreement without verifying the authenticity of it, the genuineness of any signature on it, or the authority of the person signing the document or purporting to give it to the Escrow Agent, and the Escrow Agent is not obligated to examine or pass upon the validity, execution, binding effect, or sufficiency of either this Agreement or any amendment or supplement to it, so long as the Escrow Agent shall in good faith believe the same to be genuine, to have been signed or presented by the person or parties purporting to sign the same and to conform to the provisions of this Agreement;

 

(5)         the Escrow Agent will be free from any liability when acting in good faith in accordance with any written advice or opinion received from legal counsel, an independent certified public accountant, or other expert rendering advice or an opinion within his area of expertise, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement;

 

(6)         nothing in this Agreement will be deemed to impose on the Escrow Agent any liability to any person as a result of any failure of the Escrow Agent to qualify to do business or to act as a fiduciary or otherwise in any jurisdiction; and

 

(7)         the Escrow Agent is not under any duty to give the Escrowed Funds held in escrow by it pursuant to this Agreement any greater degree of care than it gives its own similar property, and the Escrow Agent makes no representation as to the value, validity or genuineness, of any document or instrument delivered to it.

 

(c)           Disbursement of Escrowed Funds .

 

(1)          Upon Closing . Upon Closing (as defined in the Purchase Agreement) of the transactions contemplated by the Purchase Agreement, Purchaser and Seller shall jointly deliver to the Escrow Agent irrevocable wire transfer instructions and the Escrow Agent shall release and deliver the Escrowed Funds to the parties identified in such instructions in accordance with such instructions. Such instructions may be delivered via facsimile.

 

(2)          Upon Termination of Purchase Agreement . The Escrow Agent shall immediately disburse the Escrowed Funds (i) to Purchaser or Seller, as provided in joint written instructions from Purchaser and Seller to the Escrow Agent, which instructions are delivered pursuant to Section 3.1(c) or 3.1(d) of the Purchase Agreement or (ii) to Purchaser, in the event that Purchaser terminates the Purchase Agreement pursuant to Section 3.1(e) of the Purchase Agreement.

 

(3)          Pursuant to Court Order . The Escrowed Funds shall be paid in accordance with a final order of a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final.

 

(d)           Escrow Controversy . If a controversy arises before, during, or after the term of this Agreement with respect to the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or the application of any of them, the Escrow Agent may do either or both of the following: (i) withhold further performance by it pursuant to Section 3(c)(1) or (2) above until the Escrow Agent receives the joint written

 

 
 

  

instructions of Seller and Purchaser, in which case the Escrow Agent may act in accordance with such joint written instructions, or (ii) commence or defend any action or proceeding for or in the nature of interpleader. If a suit or proceeding for or in the nature of interpleader is brought by or against it, the Escrow Agent may deliver all funds, if any, and other property held by it under this Agreement into the registry of the court and thereupon will be released and discharged from all further obligations and responsibilities under this Agreement.

 

(e)           Reimbursement and Indemnification of Escrow Agent . Purchaser and Seller shall indemnify the Escrow Agent and hold it harmless, upon demand, from all cost, loss, damage, expense, and liability (including reasonable legal fees and expenses and amounts paid in settlement) suffered or incurred by it in connection with, or arising out of, the escrow under this Agreement, including any attributable to a suit or proceeding for or in the nature of interpleader brought by or against the Escrow Agent, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement. Other than the foregoing, Escrow Agent shall not be entitled to any fee or compensation for the services rendered hereunder.

 

(f)           Discretion of Escrow Agent to File an Interpleader Action in the Event of Dispute . If any Parties to this Agreement shall be in disagreement about the interpretation of this Agreement, or about their rights and obligations, or the propriety of any action contemplated by the Escrow Agent hereunder, the Escrow Agent may, but shall not be required to, file an action of interpleader in a court of competent jurisdiction (as “Court”) and deposit the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder in the registry of the Court. The Escrow Agent shall be indemnified for all costs, including reasonable attorneys’ fees and costs incurred by it, in connecting with the aforesaid interpleader action, and the Escrow Agent shall be fully protected in suspending all or part of its activities under this Agreement until a final judgment or other appropriate order in the interpleader action is received.

 

The Escrow Agent, in the event it is in doubt about its duties and obligations hereunder as Escrow Agent, shall also have the right, but not the duty, to so notify in writing Seller and Purchaser and, thereafter, the Escrow Agent shall not be obligated to deliver or release any of the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder unless: (i) Seller and Purchaser have jointly directed the Escrow Agent to deliver the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or (ii) a final order by a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final, to which Escrow Agent, Purchaser and Seller are all parties, has been entered directing the Escrow Agent to take certain action with respect to the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder.

 

(g)           Resignation of Escrow Agent . The Escrow Agent may resign upon thirty (30) days written notice to Seller and Purchaser. If a successor escrow agent is not appointed by Seller and Purchaser within this thirty (30) day period, the Escrow Agent may, but shall have no duty to, petition a Court to name a successor. If no successor escrow agent is appointed within thirty (30) days after such written notice, the Escrow Agent may withhold performance by it

 

 
 

  

pursuant to Sections 3(c)(1) or (2) above until such time as a successor escrow agent is appointed and, at such time, the Escrow Agent shall deliver the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder to any such successor escrow agent; provided, however, the Escrow Agent shall act in accordance with any joint written instructions from Seller and Purchaser. The Escrow Agent may be removed, with or without cause, by the Purchaser and Seller acting jointly at any time by providing written notice to the Escrow Agent.

 

4.           GENERAL PROVISIONS

 

(a)                 Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent via electronic mail ( e.g . email), (iii) on the day after (provided, however, with respect to notices, requests, demands and other communications given to Purchaser, five (5) days after) delivery to FedEx or similar overnight courier, or (iv) on the tenth day after (provided, however, with respect to notices, requests, demands and other communications given to Purchaser, fifteen (15) days after) mailing, if mailed to the party to whom notice is to be given, by first-class mail, registered or certified, return receipt requested (or, if to Purchaser, via airmail), postage prepaid and properly addressed, to the party as follows:

 

  American Realty Capital VII, LLC
If to Purchaser: Attn: Edward M Weil., Jr.
  405 Park Avenue, 2nd Floor
  New York, New York 10022
  Email: mweil@arlcap.com
   
With a copy (which will not Jesse Galloway
constitute notice) to: American Realty Capital VII, LLC
  405 Park Avenue, 14th Floor
  New York, New York 10022
  Email: jgalloway@arlcap.com
   
With a copy (which will not Foley & Lardner LLP
constitute notice) to: Attn:  Michael A. Okaty
  Taylor C. Pancake
  111 North Orange Avenue
  Suite 1800
  Orlando, Florida  32801
  Email: tpancake@foley.com
   
If to Seller: Allegro
  c/o Allegro Senior Living, LLC
  212 South Central Avenue
  Suite 201
  Attention Laurence A. Schiffer, CEO

 

 
 

  

  St. Louis, MO 63105
   
With a copy Theresa Marie Kenney, Esq., B.C.S.
(which will not Duss, Kenney, Safer, Hampton & Joos,
constitute notice) to: P.A.
  4348 Southpoint Boulevard, Suite 101
  Jacksonville, Florida 32216
   
If to Escrow Agent: Stewart Title Guaranty Company
  National Title Services
  One Washington Mall – Suite 1400
  Boston, MA 02108
  Telephone: (607) 933-2415
  Facsimile: (607) 727-8372

 

Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other parties in the manner herein provided for giving notice.

 

(b)           Representations . The Parties do hereby expressly acknowledge, warrant and represent to one another that:

 

(1)         the terms and conditions of this Agreement were agreed to only after due consideration and consultation with their respective attorneys, or in the absence of consideration and consultation with an attorney, only after sufficient time to consider and consult an attorney;

 

(2)         the Parties are competent and were not fraudulently induced, coerced or intimidated to agree to the terms and conditions of this Agreement, and this Agreement is supported by good and sufficient consideration; and

 

(3)         no promise, representation, inducement, agreement or warranty other than those specifically set forth herein has been made or relied upon by the Parties in agreeing to the terms and conditions of this Agreement.

 

(c)           Attorneys’ Fees and Costs . If subsequent to the effective date of this Agreement, litigation should arise among the Parties concerning this Agreement or its enforcement, the prevailing Party or Parties in such litigation shall be entitled to collect in such action from the non-prevailing Party or Parties all costs of such litigation, including reasonable attorney’s fees.

 

(d)           Entire Agreement . This Agreement constitutes the entire and integrated agreement among the Parties and sets forth all promised, covenants, agreements, conditions and understandings among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, representations, understandings, inducements, conditions and agreements, expressed or implied, or written with respect to the subject matter thereof; provided, however, that as between Purchaser and Seller, this Agreement does not supersede or amend the Purchase Agreement or modify any of the rights and obligations of the

 

 
 

  

parties thereunder. This Agreement may not be modified, amended, altered or supplemented, except by written instrument signed by the Parties or their successors in interest.

 

(e)           Severability . If any provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any Party or substantially increase the burden of any Party (as determined by such Party), shall be held to be invalid or unenforceable to any extent, the same shall not affect in any respect whatsoever the validity or enforceability of the remainder of this Agreement.

 

(f)           Counterparts . To facilitate execution, this Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement 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.

 

(g)           Governing Law; Venue . This Agreement shall be interpreted and enforced under the laws of State of New York. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts in and for New York County, New York for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts in and for New York County, New York, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such courts.

 

(h)           Successors/Assigns . This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto.

 

(i)           No Assignment . This Agreement is not assignable by the Escrow Agent without the prior written consent of Seller and Purchaser.

 

[signatures on following pages]

 

 
 

  

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

  SELLER :
       
  THE ALLEGRO AT ABACOA, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , its
    sole managing member
       
    By:  
    Print Name:  
    Print Title:  
       
  THE ALLEGRO AT HELMWOOD, LLC
  a Kentucky limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , its
    sole managing member
       
    By:  
    Print Name:  
    Print Title:  
       
  COLLEGE HARBOR PROPERTIES, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , its
    sole managing member
       
    By:  
    Print Name:  
    Print Title:  
       
  THE ALLEGRO AT WILLOUGHBY, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , its
    sole managing member
       
    By:  
    Print Name:  
    Print Title:  

 

[Signatures Continue on the Following Page]

 

 
 

 

  THE ALLEGRO AT EAST LAKE, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC ,
    its sole managing member
       
    By:  
    Print Name:  
    Print Title:  
       
  HARBOR TOWERS, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC ,
    its sole managing member
       
    By:  
    Print Name:  
    Print Title:  

 

  PURCHASER:
     
  AMERICAN REALTY CAPITAL VII, LLC a
  Delaware limited liability company
     
  By:  
  Print Name:  
  Title:  
     
  Escrow Agent :
   
  Stewart Title Guaranty Company ,
  as escrow agent
     
  By:  
  Print Name:  
  Title:  

 

 
 

 

EXHIBIT B

 

Post-Closing Escrow Agreement

 

[ See attached. ]

 

 
 

  

POST-CLOSING ESCROW AGREEMENT

 

This Post-Closing Escrow Agreement (“ Agreement ”) is entered into this ___ day of September, 2014 (the “ Effective Date ”), by and among (i) AMERICAN REALTY CAPITAL VII, LLC , a Delaware limited liability company, (“ ARC ”) and its permitted assignees ARHC ALJUPFL01, LLC , ARHC ALSTUFL01, LLC , ARHC ALTSPFL01, LLC , ARHC ALSPGFL01, LLC , ARHC ALELIKY01, LLC , and ARHC LDSPGFL01, LLC each a Delaware limited liability company (ARC and all such parties collectively the “ Purchaser ”), (ii) THE ALLEGRO AT ABACOA, L.L.C. , a Florida limited liability company, THE ALLEGRO AT HELMWOOD, LLC, a Kentucky limited liability company, COLLEGE HARBOR PROPERTIES, L.L.C. , a Florida limited liability company, THE ALLEGRO AT WILLOUGHBY, L.L.C. , a Florida limited liability company, THE ALLEGRO AT EAST LAKE, L.L.C. , a Florida limited liability company, and HARBOR TOWERS, L.L.C. , a Florida limited liability company (collectively, the “ Seller ”), and (iii) Stewart Title Guaranty Company , as escrow agent (“ Escrow Agent ”). Each party to this Agreement is sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

A.           Purchaser and Seller are parties to that certain Asset Purchase Agreement dated as of the 25 th day of August, 2014, as amended (the “ Purchase Agreement ”), pursuant to which Purchaser has agreed to purchase from the Seller the assets comprising the assisted living facilities identified therein and located in Florida and Kentucky.

 

B.           Seller and Purchaser have agreed to deposit the Holdback Amount , as defined in the Purchase Agreement with the Escrow Agent to hold as Escrowed Funds described herein and pursuant to the terms of this Agreement.

 

NOW THEREFORE , for and in consideration of the execution of this document and the mutual promises and covenants made herein, the receipt and sufficiency of which are hereby mutually acknowledged, the Parties agree as follows:

 

Each of the Recitals above is true and correct and is hereby incorporated by reference.

 

Article I.
ESCROW AGENT

 

1.1.           Appointment of Escrow Agent . The Seller and Purchaser hereby appoint the Escrow Agent, with a mailing address One Washington Mall, Suite 1400 Boston, MA 02108 as

 

 
 

  

the Escrow Agent hereunder to receive, hold and disburse the Escrowed Funds, and to otherwise perform the duties of the Escrow Agent pursuant to this Agreement. Escrow Agent hereby accepts its appointment as the escrow agent and agrees to receive, hold and disburse the Escrowed Funds (as defined below) in accordance with the terms of this Agreement and will not disburse or otherwise transfer any portion of the Escrowed Funds to any person other than pursuant to the express provisions hereof.

 

1.2.           Establishment of Escrow Fund . Contemporaneously with the execution of this Agreement, and as a requirement of the Closing (as defined in the Purchase Agreement), Purchaser shall deposit immediately available funds equal to the Holdback Amount (together with all earnings thereon, hereinafter referred to as the “ Escrowed Funds ”) with the Escrow Agent, in accordance with Section 3.2(c) of the Purchase Agreement.

 

1.3.           Escrow Agent Responsibilities. The Escrow Agent executes this Agreement solely for the purpose of accepting the escrow created hereby, on the terms and conditions set forth in it, and undertakes to perform the duties, but only the duties, specifically set forth herein. Escrow Agent shall hold the Escrowed Funds in an interest bearing account with Stewart Title Guaranty Company. The Escrowed Funds shall be kept invested in (a) direct thirty-day or less obligations of the United States of America or thirty-day or less obligations the principal of and the interest on which are unconditionally guaranteed by the United States of America, or (b) with the prior written consent of Seller and Purchaser, in any institutional money market fund or depository money market offered by the Escrow Agent, including any institutional money market fund or depository money market managed by the Escrow Agent or any of its affiliates. The account shall be held in a national financial institution reasonably acceptable to both Seller and Purchaser in the name of Escrow Agent but shall not be the property of the Escrow Agent. Escrow Agent shall have no liability for any loss which may result from any failure of the institution in which the Escrowed Funds are placed; provided , however , that notwithstanding anything herein to the contrary, in the event of a loss resulting from the failure of the financial institution in which the Escrowed Funds are placed, Seller and Purchaser shall have the same remedies generally available to depositors of the financial institution, including, without limitation, all remedies available at law or in equity, and such loss shall not affect Purchaser’s obligations of payment pursuant to the Purchase Agreement. The Escrow Agent is not required to secure the performance of its duties by bond or otherwise. The Seller and Purchaser hereby release the Escrow Agent from all liability for any punitive, incidental or consequential damages to them for any act or omission by the Escrow Agent or any of its agents, partners, or employees performed in good faith in the exercise of its or their best judgment and in a manner reasonably believed by it or them to be authorized or within the duties, rights, powers, privileges, or direction conferred on the Escrow Agent by this Agreement, except for willful misconduct, negligence, tortious conversion of any Escrowed Funds or documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or breach of this Agreement by the Escrow Agent. Without limiting the generality of the foregoing, the responsibilities of the Escrow Agent are further defined, limited, and qualified by the following:

 

 
 

  

(a)          the duties and obligations of the Escrow Agent will be determined solely by the express provisions of this Agreement, and this Agreement is not to be interpreted or construed to impose on the Escrow Agent any implied duties, covenants, or obligations;

 

(b)          the Escrow Agent may execute any of its rights, powers, or responsibilities under this Agreement either directly or by or through its agents, partners, employees, or attorneys, provided that the Escrow Agent will be liable for any act or omission by any such agent, partner, employee, or attorney of it to the same extent it would have been liable had it committed or allowed such act or omission;

 

(c)          the Escrow Agent will not be liable to any person with respect to any action taken, suffered, or omitted by it in accordance with this Agreement or in accordance with written instructions signed by the Seller and Purchaser or an order issued by a court of competent jurisdiction, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement;

 

(d)          the Escrow Agent may rely on any document given to it pursuant to this Agreement without verifying the authenticity of it, the genuineness of any signature on it, or the authority of the person signing the document or purporting to give it to the Escrow Agent, and the Escrow Agent is not obligated to examine or pass upon the validity, execution, binding effect, or sufficiency of either this Agreement or any amendment or supplement to it, so long as the Escrow Agent shall in good faith believe the same to be genuine, to have been signed or presented by the person or parties purporting to sign the same and to conform to the provisions of this Agreement;

 

(e)          the Escrow Agent will be free from any liability when acting in good faith in accordance with any written advice or opinion received from legal counsel, an independent certified public accountant, or other expert rendering advice or an opinion within his area of expertise, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement;

 

(f)          nothing in this Agreement will be deemed to impose on the Escrow Agent any liability to any person as a result of any failure of the Escrow Agent to qualify to do business or to act as a fiduciary or otherwise in any jurisdiction; and

 

(g)          the Escrow Agent is not under any duty to give the Escrowed Funds held in escrow by it pursuant to this Agreement any greater degree of care than it gives its own similar property, and the Escrow Agent makes no representation as to the value, validity or genuineness, of any document or instrument delivered to it.

 

1.4.           Disbursement of Escrowed Funds .

 

(a)          From time to time on or before the end of the day that is fourteen (14) months after the Effective Date (provided, however, that if such date is a weekend day or a day on which banks in New York, New York are ordinarily closed, the next following day that is not a weekend day or a day on which banks in New York, New York are ordinarily closed (a

 

 
 

  

“ Business Day ”)) (the applicable date, the “ Final Disbursement Date ”), Purchaser may give notice (a “ Notice ”) to Seller and the Escrow Agent specifying in reasonable detail the nature and dollar amount of any indemnifiable claim (a “ Claim ”) Purchaser may have under the Purchase Agreement. Purchaser may only deliver a Notice if it determines in good faith that the Claim is adequately supported by fact and permitted under the Purchase Agreement. Within fifteen (15) Business Days after receipt by Seller and Escrow Agent of the Notice regarding such a Claim, Seller may give notice to Purchaser and Escrow Agent disputing any Claim (a “ Counter Notice ”), if Seller determines in good faith that Seller has objection to the Claim that is adequately supported by fact and permitted under the Purchase Agreement. If a Counter Notice is timely given, the Claim shall be resolved as provided in Section 1.4(b). If no Counter Notice is timely given, then at the end of such fifteen (15) day period, Escrow Agent shall pay to Purchaser the dollar amount of the Claim set forth in the Notice from (and only to the extent of) the Escrowed Funds. The Escrow Agent shall not inquire into or consider whether a Claim complies with the requirements of the Purchase Agreement.

 

(b)          If a Counter Notice is timely given with respect to a Claim, Escrow Agent shall make payment with respect to such claim only in accordance with (i) joint written instructions of Seller and Purchaser, or (ii) a final order of a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final.

 

(c)          On the first Business Day after the Final Disbursement Date, the Escrow Agent shall pay and distribute to the Seller the amount remaining after subtracting from the balance of the Escrowed Funds as of the end of the Final Disbursement Date (or if the Final Disbursement Date is not a Business Day, the immediately preceding Business Day) the aggregate dollar amount of any Claims (as shown in the Notices of such Claims) timely delivered and remaining pending as of the Final Disbursement Date.

 

(d)          At any time, the Escrow Agent shall pay part or all of the Escrowed Funds in accordance with a final order of a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final.

 

1.5.           Escrow Controversy . If a controversy arises before, during, or after the term of this Agreement with respect to the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or the application of any of them, the Escrow Agent may do either or both of the following: (i) withhold further performance by it under Section 1.4(b), (c) or (d) above until the Escrow Agent receives the joint written instructions of Seller and Purchaser, in which case the Escrow Agent may act in accordance with such joint written instructions, or (ii) commence or defend any action or proceeding for or in the nature of interpleader. If a suit or proceeding for or in the nature of interpleader is brought by or against it, the Escrow Agent may deliver all funds, if any, and other property held by it under this Agreement into the registry of the court and thereupon will be released and discharged from all further obligations and responsibilities under this Agreement.

 

1.6.           Reimbursement and Indemnification of Escrow Agent . Purchaser and Seller shall indemnify the Escrow Agent and hold it harmless, upon demand, from all cost, loss, damage,

 

 
 

  

expense, and liability (including reasonable legal fees and expenses and amounts paid in settlement) suffered or incurred by it in connection with, or arising out of, the escrow under this Agreement, including any attributable to a suit or proceeding for or in the nature of interpleader brought by or against the Escrow Agent, except to the extent arising as a result of Escrow Agent’s negligence, willful misconduct or breach of this Agreement. Other than the foregoing, Escrow Agent shall not be entitled to any fee or compensation for the services rendered hereunder.

 

1.7.           Discretion of Escrow Agent to File an Interpleader Action in the Event of Dispute . If any Parties to this Agreement shall be in disagreement about the interpretation of this Agreement, or about their rights and obligations, or the propriety of any action contemplated by the Escrow Agent hereunder, the Escrow Agent may, but shall not be required to, file an action of interpleader in a Court (defined below) and deposit the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder in the registry of the Court. The Escrow Agent shall be indemnified for all costs, including reasonable attorneys’ fees and costs incurred by it, in connecting with the aforesaid interpleader action, and the Escrow Agent shall be fully protected in suspending all or part of its activities under this Agreement until a final judgment or other appropriate order in the interpleader action is received. The exclusive venue for all actions under this Agreement shall be a court of competent jurisdiction in Orange County, Florida (a “ Court ”).

 

The Escrow Agent, in the event it is in doubt about its duties and obligations hereunder as Escrow Agent, shall also have the right, but not the duty, to so notify in writing the Seller and Purchaser and, thereafter, the Escrow Agent shall not be obligated to deliver or release any of the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder unless: (i) the Seller and Purchaser have jointly directed the Escrow Agent to deliver the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder, or (ii) a final order by a court of competent jurisdiction, from which no appeal has been taken and appeal time expired or, if taken, has become final, to which Escrow Agent, Purchaser and Seller are all parties, has been entered directing the Escrow Agent to take certain action with respect to the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder.

 

1.8.           Resignation of Escrow Agent . The Escrow Agent may resign upon thirty (30) days written notice to the Seller and Purchaser. If a successor escrow agent is not appointed by the Seller and Purchaser within this thirty (30) day period, the Escrow Agent may, but shall have no duty to, petition a Court to name a successor. If no successor escrow agent is appointed within thirty (30) days after such written notice, the Escrow Agent may withhold performance by it under Section 1.4(b), (c) or (d) above until such time as a successor escrow agent is appointed and, at such time, the Escrow Agent shall deliver the Escrowed Funds or other documents, instruments or items, if any, delivered to the Escrow Agent hereunder to any such successor

 

 
 

  

escrow agent; provided, however, the Escrow Agent shall act in accordance with any joint written instructions from the Seller and Purchaser. The Escrow Agent may be removed, with or without cause, by the Purchaser and Seller acting jointly at any time by providing written notice to the Escrow Agent.

 

Article II.
GENERAL PROVISIONS

 

2.1.           Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and electronic confirmation of receipt is obtained promptly after completion of transmission, (iii) on the day after delivery to FedEx or similar overnight courier, or (iv) on the tenth day after mailing, if mailed to the party to whom notice is to be given, by first-class mail, registered or certified, return receipt requested, postage prepaid and properly addressed, to the party as follows:

 

If to Purchaser:   American Realty Capital Healthcare Trust
    II Operating Partnership, L.P.
    c/o American Realty Capital
    Attn: Edward M Weil., Jr.
    405 Park Avenue, 2 nd Floor
    New York, New York 10022
     
     
With a copy (which will not   Jesse C. Galloway, General Counsel
constitute notice) to:   405 Park Avenue, 14 th Floor
    New York, New York 10022
     
     
With a copy (which will not   Taylor C. Pancake
constitute notice) to:   Foley & Lardner LLP
    111 North Orange Avenue, Suite 1800
    Orlando, Florida  32801
    E-mail: tpancake@foley.com
     
If to Seller:   Allegro
    c/o Allegro Senior Living, LLC
    212 South Central Avenue
    Suite 201
    Attention Laurence A. Schiffer, CEO
    St. Louis, MO 63105
     
With a copy (which will not   Theresa Marie Kenney, Esq., B.C.S.
constitute notice) to:   Duss, Kenney, Safer, Hampton & Joos, P.A.
    4348 Southpoint Boulevard, Suite 101

 

 
 

  

    Jacksonville, Florida 32216
     
If to Escrow Agent:   Stewart Title Guaranty Company
    National Title Services
    One Washington Mall – Suite 1400
    Boston, MA 02108
    Attention:      Annette Labrecque Comer
    Telephone:    (607) 933-2415
    Facsimile:       (607) 727-8372
    Email:             acomer@stewart.com

 

Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other parties in the manner herein provided for giving notice. Notice given by a party’s attorney in accordance with this Section 2.1 shall (a) constitute notice from said party, and (b) not be considered an improper direct contact from the sending attorney to a “person known to be represented by counsel”.

 

2.2.           Representations.  The Parties do hereby expressly acknowledge, warrant and represent to one another that:

 

(a)          the terms and conditions of this Agreement were agreed to only after due consideration and consultation with their respective attorneys, or in the absence of consideration and consultation with an attorney, only after sufficient time to consider and consult an attorney;

 

(b)          the Parties are competent and were not fraudulently induced, coerced or intimidated to agree to the terms and conditions of this Agreement, and the Escrow Agreement is supported by good and sufficient consideration; and

 

(c)          no promise, representation, inducement, agreement or warranty other than those specifically set forth herein has been made or relied upon by the Parties in agreeing to the terms and conditions of this Agreement.

 

2.3.           Attorneys’ Fees and Costs . If subsequent to the Effective Date, litigation should arise among the Parties concerning this Agreement or its enforcement, the prevailing Party or Parties in such litigation shall be entitled to collect in such action from the non-prevailing Party or Parties all costs of such litigation, including reasonable attorney’s fees.

 

2.4.           Entire Agreement . This Agreement constitutes the entire and integrated agreement among the Parties and sets forth all promised, covenants, agreements, conditions and understandings among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, representations, understandings, inducements, conditions and agreements, expressed or implied, or written with respect to the subject matter thereof; provided, however, that as between Purchaser and Seller, this Agreement does not

 

 
 

  

supersede or amend the Purchase Agreement or modify any of the rights and obligations of the parties thereunder. This Agreement may not be modified, amended, altered or supplemented, except by written instrument signed by the Parties or their successors in interest.

 

2.5.           Severability . If any provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any Party or substantially increase the burden of any Party (as determined by such Party), shall be held to be invalid or unenforceable to any extent, the same shall not affect in any respect whatsoever the validity or enforceability of the remainder of this Agreement.

 

2.6.           Counterparts . To facilitate execution, this Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement 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.

 

2.7.           Governing Law; Venue . This Agreement shall be interpreted and enforced under the laws of the State of Florida. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts in and for Orange County, Florida for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts in and for Orange County, Florida, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such courts.

 

2.8.           Successors/Assigns . This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto, to the extent permitted by the Purchase Agreement.

 

2.9.           No Assignment . This Agreement is not assignable by the Escrow Agent without the prior written consent of the Seller and Purchaser.

 

 
 

  

[signatures on following pages]

 

 
 

  

IN WITNESS WHEREOF , the Parties have caused this Post-Closing Escrow Agreement to be executed as of the date first set forth above.

 

  SELLER :
       
  THE ALLEGRO AT ABACOA, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , a
    Delaware limited liability company, its sole
    managing member
       
    By:  
    Print Name:  
    Print Title:  
       
  THE ALLEGRO AT HELMWOOD, LLC
  a Kentucky limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC ,
    a Delaware limited liability company, its sole
    managing member
       
    By:  
    Print Name:  
    Print Title:  
       
  COLLEGE HARBOR PROPERTIES, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , a
    Delaware limited liability company, its sole
    managing member
       
    By:  
    Print Name:  
    Print Title:  

 

[Signatures Continue on the Following Page]

 

 
 

 

  THE ALLEGRO AT WILLOUGHBY, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , a
    Delaware limited liability company, its sole
    managing member
       
    By:  
    Print Name:  
    Print Title:  
       
  THE ALLEGRO AT EAST LAKE, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , a
    Delaware limited liability company, its sole
    managing member
       
    By:  
    Print Name:  
    Print Title:  
       
  HARBOR TOWERS, L.L.C. ,
  a Florida limited liability company
       
  By: ALLEGRO SENIOR LIVING, LLC , a
    Delaware limited liability company, its sole
    managing member
       
    By:  
    Print Name:  
    Print Title:  

 

[Signatures Continue on the Following Page]

 

 
 

  

  PURCHASER :
     
  AMERICAN REALTY CAPITAL VII, LLC a
  Delaware limited liability company
     
  By:  
  Print Name:  
  Title:  
     
  ARHC ALJUPFL01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC ALSTUFL01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC ALTSPFL01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC ALSPGFL01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  

 

[Signatures Continue on the Following Page]

 

 
 

  

  ARHC ALELIKY01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  ARHC LDSPGFL01, LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  
     
  Escrow Agent :
     
  Stewart Title Guaranty Company ,
  as escrow agent
     
  By:  
  Name:  
  Title:  

 

 
 

  

EXHIBIT C

 

Deed

 

[ See attached. ]

 

 
 

  

Prepared by and return to:

 

Michael Okaty

Foley & Lardner LLP

111 North Orange Avenue, Suite 1800

Orlando, Florida 32801

 

Parcel ID No.:_____________

 

SPECIAL WARRANTY DEED

 

THIS SPECIAL WARRANTY DEED , is given this _____ day of August, 2014, by [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES], LLC , a [Florida/Kentucky] limited liability company, whose mailing address is [212 South Central Avenue, Suite 301, St. Louis, MO 63105] (“Grantor”) to ARHC [__________], LLC, a Delaware limited liability company whose mailing address is 405 Park Avenue, 15th Floor, New York, New York 10022 (“Grantee”).

 

WITNESSETH:

 

That Grantor, for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, by these presents does hereby grant, bargain, sell and convey unto Grantee, its successors and assigns, all of Grantor's right, title and interest in and to that certain tract or parcel of land situate, lying and being in the County of [_________], State of [Florida/Kentucky], as more particularly described on Exhibit A attached hereto and by this reference incorporated herein (the “ Property ”), together with all buildings, structures, improvements and fixtures located thereon, as well as all and singular the rights of ways, easement rights, hereditaments and appurtenances belonging thereto, subject only to those matters set forth on Exhibit B hereto (the “ Permitted Encumbrances ”);

 

TO HAVE AND TO HOLD the Property, together with the improvements thereon and the rights, easements, privileges and appurtenances thereunto belonging or appertaining, unto Grantee, its successors and assigns, in fee simple forever.

 

AND Grantor, for itself and its successors, hereby fully warrants to Grantee, its successor and assigns, title to the Property and that Grantor will forever defend the Property against all persons lawfully claiming by, through or under Grantor but against no other, subject to all covenants, restrictions, reservations, easements, conditions and rights appearing of record.

 

 
 

  

IN WITNESS WHEREOF , Grantor has caused these presents to be executed in its name the day and year first above written.

 

Signed, sealed and delivered [___________________], LLC,
in the presence of: a Florida/Kentucky limited liability company

 

  By: ALLEGRO SENIOR LIVING, LLC,
    a Delaware limited liability
    company,  its sole managing member

 

    By:  
Name:     Name:  
    Its:  
       
       
Name:        

 

STATE OF ______________

COUNTY OF _____________

 

This instrument was acknowledged before me this _______ day of __________, 2014, by _________________, as ____________ of ALLEGRO SENIOR LIVING, LLC, A Delaware limited liability company, as sole and managing member of [________________] , LLC , a Florida/Kentucky limited liability company, on behalf of the company. He is [ ] personally known to me, or [ ] has produced a __________ driver’s license as identification.

 

________________________________

Print Name: ______________________________

Notary Public, State of _____________

Commission No.:__________________________

My Commission Expires:____________________

 

 
 

 

EXHIBIT A

 

 
 

 

EXHIBIT B

 

 
 

 

 

EXHIBIT D

 

Bill of Sale and Assignment

 

[ See attached. ]

 

 
 

 

BILL OF SALE

 

THIS BILL OF SALE, effective as of ______ ___, 2014, is furnished by [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES], LLC , a [Florida/Kentucky] limited liability company (“ Seller ”), to ARHC [________] , LLC , a Delaware limited liability company (“ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL VII, a Delaware limited liability company (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC and affiliates of the Seller, dated as of August __, 2014 (the “ Purchase Agreement ”). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

In consideration of payment by ARC of the Purchase Price described in the Purchase Agreement and other good and valuable consideration, the receipt and sufficiency of which Seller hereby acknowledges, Seller hereby sells, conveys, transfers, assigns and delivers to Purchaser and its successors and assigns, all of Seller's right, title and interest in and to the Purchased Personal Property located on or relating to the Facility known as [_____________], free and clear of all Liens and liabilities whatsoever, except for the Assumed Liabilities and Permitted Encumbrances.

 

EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, SELLER IS CONVEYING THE PURCHASED PERSONAL PROPERTY "AS IS" WITH NO ADDITIONAL REPRESENTATIONS OR WARRANTIES WHATSOEVER.

 

This Bill of Sale is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Bill of Sale, the terms of the Purchase Agreement shall prevail.

 

This Bill of Sale may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

[Signature Page Follows]

 

 
 

 

IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed and delivered under seal as of the day and year first above written.

 

PURCHASER :   SELLER :
     
ARHC [__________], LLC , a Delaware limited liability company   [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC , a [Florida/Kentucky] limited liability company
     
By:     By: ALLEGRO SENIOR LIVING, LLC ,
      its sole managing member
Name:      
        By:  
Title:       Name:  
        Title:  

 

 
 

 

ACKNOWLEDGEMENT OF BILL OF SALE

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Bill of Sale by [PH__] REALTY, LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Purchased Personal Property conveyed thereby.

 

  SELLER :
   
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC , a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC , its sole managing member
     
  By:  
  Name:  
  Title:  
     
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC , a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC , its sole managing member
     
  By:  
  Name:  
  Title:  
     
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC , a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC , its sole managing member
     
  By:  
  Name:  
  Title:  

 

[signatures continue on next page]

 

 
 

 

  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC , a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC , its sole managing member
     
  By:  
  Name:  
  Title:  
     
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC , a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC , its sole managing member
     
  By:  
  Name:  
  Title:  
 
 

 

EXHIBIT E-1

 

Post-Closing Management Agreement

 

[ See attached. ]

 

 
 

 

 

MANAGEMENT AGREEMENT

 

BY AND BETWEEN

 

ARHC [______________] TRS, LLC,
a Delaware limited liability company

 

AS TENANT

 

[SELLER LICENSEE]

 

AS SUBTENANT

 

And

 

Allegro management company

 

AS MANAGER

 

FOR [FACILITY NAME], [FACILITY CITY], [FLORIDA/KENTUCKY]

 

DATED AS OF SEPTEMBER ____, 2014

 

 
 

 

index

 

SECTION   CAPTION   PAGE
Article I DEFINITIONS   1
         
1.01.   Accounting Period   1
1.02.   Affiliate   1
1.03.   Agreement   1
1.04.   Annual Financial Report   1
1.05.   Applicable Laws   1
1.06.   Approved Operating Budget   2
1.07.   Annual Operating Budget   2
1.08.   Capital Budget   2
1.09.   Cash Flow   2
1.10.   Commencement of Management Services   2
1.11.   Control   2
1.12.   Eligible Independent Contractor   2
1.13.   Entity   2
1.14.   Environment   3
1.15.   Event of Default   3
1.16.   Excess Cash Flow   3
1.17.   Expert   3
1.18.   Facility   3
1.19.   Facility Expenses   3
1.20.   FF&E   6
1.21.   FF&E Reserve   6
1.22.   FF&E Reserve Expenditures   6
1.23.   FF&E Reserve Payment   6
1.24.   Fiscal Year   6
1.25.   Force Majeure Event   6
1.26.   GAAP   6
1.27.   GDP Deflator   6
1.28.   Government Agency   7
1.29.   Hazardous Substances   7
1.30.   Home Office Employees   7
1.31.   Incentive Fee   7
1.32.   Intellectual Property   8
1.33.   Inventories   8
1.34.   Lease Agreement   8
1.35.   Legal Requirements   8
1.36.   Licensee   8
1.37.   Management Services   8
1.38.   Manager   8
1.39.   Marketing Budget   8
1.40.   Marketing Services   8
1.01.   Net Facility Revenues   8
1.02.   Net Operating Income   9
1.03.   Non-Routine Capital Expenditures   9
1.04.   Operating Fee   9

 

 
 

 

1.05.   Owner   9
1.06.   Permitted Use   9
1.07.   Person   9
1.08.   Repairs and Equipment Estimate   9
1.09.   Residents   9
1.10.   State   9
1.11.   Subtenant   9
1.12.   Sublease   9
1.13.   Targeted NOI   9
1.14.   Tenant   9
1.15.   Term   9
1.16.   Total Casualty   10
1.17.   Total Facility Revenues   10
1.18.   Unsuitable for Its Permitted Uses   10
1.19.   Working Capital   10
         
Article II APPOINTMENT oF MANAGER AND PRIMARY GoAL OF AGREEMENT   10
         
2.01.   Appointment of Manager   10
2.02.   Goals   10
         
Article III OPERATING FEES   11
         
3.01.   Operating Fee   11
3.02.   Incentive Fee   11
3.03.   Special Agreement Concerning the Revenues from the Sale of Alcoholic Beverages   12
3.04.   Construction Management   13
3.05.   No Other Fees   13
         
Article IV DUTIES AND RIGHTS OF MANAGER   13
         
4.01.   Authority of Manager Right of Possession   13
4.02.   Marketing Services   14
4.03.   Hiring and Training of Staff   14
4.04.   Operation Services Duties   14
4.05.   Manager’s Home Office Employees   17
4.06.   Personnel Administration   17
4.07.   Purchasing   17
4.08.   Occupancy Agreements   18
4.09.   Working Capital   18
4.10.   Expense Allocations   18
4.11.   Deposit and Disbursement of Funds   18
4.12.   Licenses and Permits   18
         
Article V OPERATING PROFITs, CREDITS AND COLLECTIONS, AND PROCEDURE FOR HANDLING RECEIPTS AND OPERATING CAPITAL   19
         
5.01.   Total Facility Revenues   19
5.02.   Total Facility Revenues Priority   19
5.03.   Credits and Collections   19

 

 
 

 

         
Article VI FINANCIAL RECORDS   20
         
6.01.   Accounting and Financial Records   20
6.02.   Reports   20
6.03.   Access   20
6.04.   Rights of Owner to Perform Accounting Functions   20
         
Article VII ANNUAL OPERATING BUDGET   21
         
7.01.   Annual Operating Budget; Approved Operating Budget   21
         
Article VIII OTHER FINANCIAL MATTERs   22
         
8.01.   Charges   22
8.02.   Tax Status   22
8.03.   Employee Withholding   22
8.04.   Reservation Deposit Accounts   22
         
Article IX GENERAL COVENANTS AND TENANT AND MANAGER OBLIGATIONS   22
         
9.01.   Licensee’s Obligations   22
9.02.   Quiet Enjoyment   23
9.03.   Manager’s Obligations   23
9.04.   Covenant Not To Compete   23
9.05.   Covenants Not to Hire   23
         
Article X REPAIRS, MAINTENANCE AND REPLACEMENTS   23
         
10.01.   Routine Repairs and Maintenance   23
10.02.   Repairs and Equipment   23
10.03.   Building Alterations, Improvements, Renewals and Replacements   25
         
Article XI REPRESENTATIONS, WARRANTIES AND GENERAL COVENANTS OF MANAGER   25
         
11.01.   Representations, Warranties and Covenants of Manager   25
         
Article XII INSURANCE   27
         
12.01.   General Insurance Requirements   27
         
Article XIII TERMINATION OF AGREEMENT; REMEDIES   27
         
13.01.   General Termination   27
13.02.   Elective Termination   28
13.03.   Termination on Sale of Facility   28
13.04.   Termination During Initial Term   28
13.05.   Performance Termination   28
13.06.   Termination on Change in Control of Manager   29
13.07.   Transition upon Termination   29
         
Article XIV LEGAL ACTIONS, GOVERNING LAW, LIABILITY OF MANAGER AND INDEMNITY   29
         
14.01.   Legal Actions   29
14.02.   Legal Fees and Costs   29
14.03.   Choice of Law   29
14.04.   Liability of Manager   29
14.05.   Indemnity   30
14.06.   Notice of Claim or Suit   31
14.07.   Survival of Indemnity   31
         
Article XV Regulatory and Contractual Requirements   31

 

 
 

 

         
15.01.   Regulatory and Contractual Requirements   31
15.02.   Equal Employment and Equal Housing Opportunity   32
15.03.   Hazardous Substances   32
         
Article XVI INTELLECTUAL PROPERTY   32
         
16.01.   Name of Facility   32
16.02.   Intellectual Property   32
         
Article XVII DAMAGE AND CONDEMNATION   32
         
17.01.   Damage and Repair   32
17.02.   Condemnation   33
         
Article XVIII MISCELLANEOUS PROVISIONS   33
         
18.01.   Additional Assurances   33
18.02.   Consents, Approval and Discretion   33
18.03.   No Brokerage   33
18.04.   Notices   34
18.05.   Severability   34
18.06.   Gender and Number   35
18.07.   Division and Heading   35
18.08.   Confidentiality of Information   35
18.09.   Right to Perform   35
18.10.   Assignment   35
18.11.   Limitation of Liability   35
18.12.   Right to Inspect   36
18.13.   Entire Agreement/Amendment/Waiver   36
18.14.   Expert Decisions   36
18.15.   Arbitration   37
18.16.   WAIVER OF JURY TRIAL.   37
 
 

LIST OF EXHIBITS

 

EXHIBIT A Description of Real Property
EXHIBIT B Approved Operating Budget
EXHIBIT C Insurance Requirements
EXHIBIT D Quarterly Certification
EXHIBIT E Assumed Employee Obligations

 

 
 

 

MANAGEMENT AGREEMENT

 

THIS MANAGEMENT AGREEMENT (“ Agreement ”) is executed effective as of the [____] day of September, 2014 (the “ Effective Date ”), by and among LOVE MANAGEMENT COMPANY, LLC , a Missouri limited liability company d/b/a Allegro management company (“ Manager ”); [ SELLER LICENSEE ENTITY ] (“ Subtenant ”); and ARHC [_____________] TRS, LLC , a Delaware limited liability company (“ Tenant ”).

 

WHEREAS , Subtenant is the sublessee of certain real property located in the city of [_______________], Florida as further described in Exhibit A attached hereto and made a part hereof, on which is situated a facility known as THE ALLEGRO AT _________ (the “ Facility ” as further defined in Section 1.18 herein); and

 

WHEREAS , Subtenant wishes to appoint Manager as manager of the Facility and Manager desires to operate the Facility, all subject to and upon the terms and conditions herein set forth;

 

NOW, THEREFORE , the parties hereto agree as follows:

 

Article III.
DEFINITIONS

 

The following terms shall have the meanings set forth below when used in this Agreement.

 

3.1.          Accounting Period . The term “Accounting Period” means and refers to a calendar month.

 

3.2.          Affiliate . The term “Affiliate” shall mean, with respect to any Person, any Person directly or indirectly Controlling, Controlled by or under common Control with any such Person.

 

3.3.          Agreement . The terms “Agreement” and this “Agreement” shall mean this Management Agreement between Subtenant, Tenant and Manager, and any amendments thereto as may be from time to time agreed to in writing by the parties.

 

3.4.          Annual Financial Report . The term “Annual Financial Report” shall have the meaning given such term in Section 4.04(k)(i).

 

3.5.          Applicable Laws . The term “Applicable Laws” shall mean all applicable laws, statutes, regulations, rules, ordinances, codes, licenses, permits and orders, from time to time in existence, of all courts of competent jurisdiction and Government Agencies, and all applicable judicial and administrative and regulatory decrees, judgments and orders, including common law rulings and determinations of any kind, including, without limitation, those relating to (i) damage to, or the protection of real or personal property, (ii) human health and safety (except those requirements which, by definition, are solely the responsibility of employers), (iii) the Environment, including, without limitation, all valid and lawful requirements of courts and other Government Agencies pertaining to reporting, licensing, permitting, investigation, remediation and removal of underground improvements (including, without limitation, treatment or storage tanks, or water, gas or oil wells), or emissions, discharges, releases or threatened releases of Hazardous Substances, chemical substances, pesticides, petroleum or petroleum products, pollutants, contaminants or hazardous or toxic substances, materials or wastes whether solid, liquid or gaseous in nature, into the Environment, or relating to the manufacture, processing, distribution, use,

 

1
 

 

treatment, storage, disposal, transport or handling of Hazardous Substances, underground improvements (including, without limitation, treatment or storage tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, or (iv) accessibility for the disabled or handicapped, including, but not limited to, any applicable provisions of The Architectural Barriers Act of 1968, The Rehabilitation Act of 1973, The Fair Housing Act of 1988, The Americans With Disabilities Act, the accessibility code(s), if any, of the State in which the Facility is located, the laws described in Section 15.02, and all regulations and guidelines lawfully promulgated under any of the foregoing, as the same may be amended from time to time.

 

3.6.          Approved Operating Budget . The "Approved Operating Budget" shall be the Annual Operating Budget approved pursuant to Section 7.01.

 

3.7.          Annual Operating Budget . The term “Annual Operating Budget” shall have the meaning given to such term in Section 7.01.

 

3.8.          Capital Budget . The term “Capital Budget” shall be the Capital Budget included in the Approved Operating Budget.

 

3.9.          Cash Flow . The term “Cash Flow” shall mean all Total Facility Revenues in excess of Facility Expenses.

 

3.10.        Commencement of Management Services . The term “Commencement of Management Services” shall mean the date of this Agreement.

 

3.11.        Control . The term “Control” (including the correlative meanings of the terms “Controlling”, “Controlled by”, and “under common control with” as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person whether through the Ownership of voting securities, by contract, or otherwise.

 

3.12.        Eligible Independent Contractor . The term “Eligible Independent Contractor” shall mean any person or entity designated as manager of the Facility, but only if (a) such person or entity does not own (either actually or constructively through related parties, as determined under Section 856(d)(3) of the Internal Revenue Code), directly or indirectly, more than thirty five percent (35%) of the shares of American Realty Capital Healthcare Trust II, Inc., (b) not more than thirty five percent (35%) of the total combined voting power of such person or entity’s stock or thirty five percent (35%) of the total shares of all classes of stock of such person or entity (in the case of a corporation), or not more than thirty five percent (35%) of the interests in such person or entity’s assets or net profits (in the case of entities other than corporations) is owned (again, either actually or constructively through related parties, as determined under Section 856(d)(3) of the Internal Revenue Code), by American Realty Capital Healthcare Trust II, Inc., and (c) at the time such person or entity enters into the Management Agreement with respect to the Facility to operate the same, such person or entity is actively engaged in the trade or business of operating Qualified Health Care Properties for any person or entity who is not a “related person” (within the meaning of Section 856(d)(9)(A) of the Internal Revenue Code) with respect to the Tenant and/or any of the Tenant’s Affiliates.

 

3.13.        Entity . The term Entity shall mean any corporation, general or limited partnership, limited liability company, partnership, stock company or association, joint venture, association, company, trust, bank, trust company, land trust, business trust, cooperative, any government or agency or political subdivision thereof or any other entity that is not a natural person.

 

2
 

 

3.14.      Environment . The term “Environment” shall mean soil, surface waters, ground waters, land, streams, sediments, surface or subsurface strata and ambient air.

 

3.15.      Event of Default . The term “Event of Default” means the occurrence of any default and the expiration of any applicable cure period set forth herein.

 

3.16.      Excess Cash Flow . The term “Excess Cash Flow” shall mean the amount, if any, that is left after deducting from Total Facility Revenues for a Fiscal Year (or any period thereof) the amount necessary to pay the following amounts (including all amounts accrued pursuant to the second paragraph of Section 5.02 below), in the following order, for that Fiscal Year (or applicable period thereof) (i) Facility Expenses (which shall include the Operating Fee but excluding Facility Expenses of the type described in Section 1.19(k)) and (ii) payment to the FF&E Reserve as provided herein, except to the extent the same exceeds $500 per unit per year.

 

3.17.      Expert . The term “Expert” shall mean an independent, nationally recognized assisted living facility consulting firm or individual who is qualified to resolve the issue in question, and who is appointed in each instance by agreement of the parties or, failing agreement, each party shall select one (1) such nationally recognized consulting firm or individual and the two (2) respective firms and/or individuals so selected shall select another such nationally recognized consulting firm or individual to be the Expert. Each party agrees that it shall not appoint an individual to select or to be an Expert hereunder if the individual is, as of the date of appointment or within six (6) months prior to such date, employed by such party, either directly or as a consultant, in connection with any other matter. In the event that either party calls for an Expert determination pursuant to the terms hereof, the parties shall have ten (10) days from the date of such request to agree upon an Expert and, if they fail to agree, each party shall have an additional ten (10) days to make its respective selection of a firm or individual, and within ten (10) days of such respective selections, the two (2) respective firms and/or individuals so selected shall select another such nationally recognized consulting firm or individual to be the Expert. If either party fails to make its respective selection of a firm or individual within the ten (10) day period provided for above, then the other party’s selection shall be the Expert. Also, if the two (2) respective firms and/or individuals so selected shall fail to select a third nationally recognized consulting firm or individual to be the Expert, then such Expert shall be appointed by the American Arbitration Association and shall be a qualified person having at least ten (10) years recent professional experience as to the subject matter in question. Prior to the actual occurrence of a dispute hereunder, upon request by either party, the parties shall in good faith select and agree upon the firm or individual who will perform the duties of the Expert hereunder with respect to one, some or all of the issues that may be referred to an Expert pursuant to the provisions of this Agreement; provided that at any time after such pre-approval of an Expert, upon the request of either party based upon a reasonable objection to such Expert, the parties shall in good faith discuss the replacement of such Expert with respect to one, some or all of the issues that may be referred to such Expert hereunder.

 

3.18.      Facility . The term “Facility” shall mean the facility located on the real property located in [_______________], [Kentucky/Florida], as further described on attached Exhibit A .

 

3.19.      Facility Expenses . The term “Facility Expenses” shall mean for the requisite period, the sum of the following items:

 

(i)          The cost of operating the Facility incurred in accordance with this Agreement, including, without limitation, compensation, fringe benefits, payroll taxes and other costs relating to employees of Licensee or the Manager (the foregoing costs shall not include salaries and other employee costs of any personnel of the Manager who do not work at the Facility on a regular basis, unless such

 

3
 

 

persons are replacing or supplementing the services of Facility level employees at a time of need for such assistance (i.e., in the event of emergency, absence, vacancy, or unusual demand levels, or other atypical circumstances);

 

(ii)         Departmental expenses incurred at departments within the Facility; administrative and general expenses; the cost of marketing, advertising and business promotion incurred by the Facility in accordance with the Marketing Budget; heat, light, and power; software license fees and computer line charges at the Facility;

 

(iii)        Facility license fees (prorated amongst applicable license terms);

 

(iv)        Except to the extent funded from the FF&E Reserve, the cost of FF&E and Inventories consumed in the operation of the Facility;

 

(v)         A reasonable reserve for uncollectible accounts receivable as determined by the Manager;

 

(vi)        To the extent provided in the Approved Operating Budget or otherwise approved in writing by Tenant and Licensee, all costs and fees of independent professionals or other third parties who are retained by the Manager to perform services required or permitted hereunder;

 

(vii)       To the extent provided in the Approved Operating Budget or otherwise approved in writing by Tenant and Licensee, all costs and fees of technical consultants and operational experts who are retained or employed by the Manager for specialized services (including, without limitation, quality assurance inspectors) and the cost of attendance by employees of the Facility at training and manpower development programs sponsored by the Manager;

 

(viii)      Payments made into the FF&E Reserve, up to $500 per unit, per calendar year;

 

(ix)         Any applicable sales tax;

 

(x)          The Operating Fee paid to Manager, and such other costs and expenses incurred by Manager or its Affiliates or employees in connection with the Facility as are specifically provided for elsewhere in this Agreement (but expressly excluding any Construction Management Fee payable to Manager or any fee for construction management services payable to any third party to the extent either arise from payments from the FF&E Reserve for capital expenditures in excess of $500 per unit, per calendar year);

 

(xi)         Costs and expenses incurred by the Expert in performing its duties under Section 18.14 of the Agreement;

 

(xii)        Any premium or deductible on any of the insurance policies maintained by Manager under Article XII below;

 

(xiii)       All other costs and expenses treated as Facility Expenses under this Agreement or under the Lease Agreement or included in the Approved Operating Budget; and

 

(xiv)       Certain expenses incurred by Manager with respect to multiple Facilities, including the Facility, and allocated to the Facility in accordance with Section 4.10.

 

4
 

 

Except as expressly set forth in an Approved Operating Budget or expressly permitted in this Agreement or otherwise expressly approved by Tenant, the term “Facility Expenses” shall not include:

 

a) Any employee claim which is not covered by insurance, if the claim arose as a result of the gross negligence or intentional misconduct of the Manager, or its Home Office Employees or officers;

 

b) Costs incurred by Manager for salary and wages, payroll taxes, workers' compensation, bonus compensation, incentive compensation, retirement plan payments, travel expenses and other benefits payable to Manager's corporate office employees or divisional or regional supervisor employees (including, without limitation, non-incentive stock option grants and any bonus compensation to such employees);

 

c) Costs and expenses incurred by Manager for stock options plans or stock award programs provided to personnel and staff unless approved by Tenant in writing or included as part of the Approved Budget;

 

d) Costs incurred by Manager for in-house accounting and reporting systems, software or services, or any pro rata charge thereof, furnished by Manager under this Agreement, as distinguished from third party accounting and reporting costs (as for example, the annual auditing costs of accountants) and third party software (such as Yardi);

 

e) Costs incurred by Manager for forms, papers, ledgers and other supplies, equipment, copying and telephone of any kind used in Manager's office at any location other than the Facility;

 

f) Costs incurred by Manager for political contributions;

 

g) Costs attributable to losses which are covered by the indemnity obligations of Manager pursuant to Section 14.05 of this Agreement;

 

h) Costs incurred by Manager for training and hiring expenses related to Home Office Employees or divisional supervisory employees, including but not limited to employment and employment agency fees;

 

i) Costs incurred by Manager for advertising expenses of Manager other than costs of marketing the Facility for lease or occupancy, or costs of employment ads for positions at the Facility;

 

j) Costs incurred by Manager for any in-house risk manager, architect, engineer, accountant or other professional advisor or consultant employed by Manager (as distinct from third parties engaged for the performance of such services) except for allocations for services rendered directly to the Facility;

 

k) Costs incurred by Manager for dues of Manager or any of its employees (except those employees located at the Facility) in professional

 

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    organizations or for any of Manager's employees participating in industry conventions or meetings (except those employees located at the Facility);

  

l) Payments made into the FF&E Reserve in excess of $500 per unit, per calendar year; and

 

m) Any costs and expenses incurred in management of properties or facilities not operated by Tenant.

 

3.20.      FF&E . The term “FF&E” shall mean all items of personal property, as defined under the Model Uniform Commercial Code, including, but not limited to: (a) all equipment, machinery, fixtures, and other items of property, now or hereafter permanently affixed to or incorporated into the Facility, including, without limitation, all furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting, ventilating, refrigerating, incineration, air and water pollution control, waste disposal, air-cooling and air-conditioning systems and apparatus, sprinkler systems and fire and theft protection equipment, all of which, to the maximum extent permitted by law, are hereby deemed by the parties hereto to constitute real estate, together with all replacements, modifications, alterations and additions thereto; (b) all furniture, furnishings, movable walls or partitions, computers or trade fixtures or other personal property of any kind or description used or useful in Licensee’s business on or in the Facility, and all modifications, replacements, alterations and additions to such personal property, except those incurred in normal resident turnover which shall be a Facility Expense; (c) all linen, china, glassware, tableware, uniforms and similar items, whether used in connection with public space or Licensee rooms; and (d) “Property and Equipment,” “P&E,” and “FF&E” (as such terms are customarily used and defined in the most broad and inclusive sense), as well as all other items included within the category of Inventory.

 

3.21.      FF&E Reserve . The term “FF&E Reserve” shall mean the reserve established pursuant to Section 10.02(a). All amounts in the FF&E Reserve shall be the property of the Licensee.

 

3.22.      FF&E Reserve Expenditures . The term “FF&E Reserve Expenditures” shall mean the expenditures from the FF&E Reserve pursuant to Article X below.

 

3.23.      FF&E Reserve Payment . The term “FF&E Reserve Payment” shall mean the reserve payment required pursuant to Section 10.02(e).

 

3.24.      Fiscal Year . The term “Fiscal Year” shall mean the calendar year, and the period, if any, from January 1 st to the end of the Term in the calendar year in which the Term expires.

 

3.25.      Force Majeure Event . The term “Force Majeure Event” means any circumstance at the Facility which is not in the reasonable control of either party hereto, caused by any of the following: strikes, lockouts; acts of God; acts of war; acts of terrorism; civil commotion; fire or any other casualty; governmental action; or other similar cause or circumstance which is not in the reasonable control of either party hereto. Neither lack of financing nor general economic and/or market factors is a Force Majeure Event.

 

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3.26.      GAAP . The term “GAAP” shall mean Generally Accepted Accounting Principles as adopted by the American Institute of Certified Public Accountants.

 

3.27.      GDP Deflator . The term “GDP Deflator” shall mean the “Gross Domestic Product Implicit Price Deflator” issued from time to time by the United States Bureau of Economic Analysis of the Department of Commerce, or if the aforesaid GDP Deflator is not at such time so prepared and published, any comparable index selected by Manager and reasonably satisfactory to Licensee and Tenant (a “Substitute Index”), then prepared and published by an agency of the government of the United States, appropriately adjusted for changes in the manner in which such index is prepared and/or year upon which such index is based. Except as otherwise expressly stated herein, whenever a number or amount is required to be “adjusted by the GDP Deflator,” or similar terminology, such adjustment shall be equal to the percentage increase or decrease in the GDP Deflator which is issued for the month in which such adjustment is to be made (or, if the GDP Deflator for such month is not yet publicly available, the GDP Deflator for the most recent month for which the GDP Deflator is publicly available) as compared to the GDP Deflator which was issued for the month in which the Commencement of Management Services occurred.

 

3.28.      Government Agency . The term “Government Agency” shall mean any legislative body, court, agency, authority, board (including, without limitation, health and long term care, environmental protection, planning and zoning), bureau, commission, department, office or instrumentality of any nature whatsoever of any governmental or quasi-governmental unit of the United States or the State or any county or any political subdivision of any of the foregoing, whether now or hereafter in existence, having jurisdiction over Manager or the Facility or any portion thereof.

 

3.29.      Hazardous Substances . The term “Hazardous Substances” shall mean any substance:

 

(i)          the presence of which requires or may hereafter require notification, investigation or remediation under any federal, state or local statute, regulation, rule, ordinance, order, action or policy; or

 

(ii)         which is or becomes defined as a “hazardous waste”, “hazardous material” or “hazardous substance” or “pollutant” or “contaminant” under any present or future federal, state or local statute, regulation, rule or ordinance or amendments thereto including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. et seq .) and the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq .) and the regulations promulgated thereunder; or

 

(iii)        which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by any Government Agency; or

 

(iv)        the presence of which on the Facility causes or materially threatens to cause an unlawful nuisance upon the real property described in Exhibit A or to adjacent properties or poses or materially threatens to pose a hazard to the Facility or to the health or safety of persons on or about the Facility; or

 

(v)         without limitation, which contains gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic compounds; or

 

(vi)        without limitation, which contains polychlorinated biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or

 

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(vii)       without limitation, which contains or emits radioactive particles, waves or material; or

 

(viii)      without limitation, constitutes materials which are now or may hereafter be subject to regulation pursuant to the Material Waste Tracking Act of 1988, or any Applicable Laws promulgated by any Government Agency.

 

3.30.      Home Office Employees . The term “Home Office Employees” shall mean those employees defined in Section 4.05.

 

3.31.      Incentive Fee . The term “Incentive Fee” shall have the meaning given to such term in Section 3.02.

 

3.32.      Intellectual Property . The term “Intellectual Property” shall mean (i) all computer software (and any associated source codes) developed and owned by Manager or an Affiliate of Manager; (ii) all manuals, instructions, policies, procedures and directives developed and issued by Manager to its employees at the Facility or to Licensee’s employees at the Facility regarding the procedures and techniques to be used in operation of the Facility; and (iii) the “Allegro” name used as part of the name of the Facility. The term “Intellectual Property” does not include the data and information stored or maintained on the Intellectual Property described in subsection (i) above.

 

3.33.      Inventories . The term “Inventories” shall mean all inventories, as such term is customarily used and defined in its most broad and inclusive sense including, but not limited to, all inventories of food, beverages and other consumables held by Manager for sale or use at or from the Facility, and soap, cleaning supplies, paper supplies, operating supplies, china, glassware, silver, linen, uniforms, building and maintenance supplies, spare parts and attic stock, medical supplies, drugs and all other such goods, wares and merchandise held by Manager for sale to or for consumption by Residents of the Facility and all such other goods returned to or repossessed by Manager.

 

3.34.      Lease Agreement . The term “Lease Agreement” shall mean the Lease Agreement of even date herewith between the Owner, as the landlord thereunder, and the Tenant, as tenant thereunder, with respect to the Facility.

 

3.35.      Legal Requirements . The term “Legal Requirements” shall mean all federal, state, county, municipal and other governmental statutes, codes, laws, rules, orders, writs, regulations, ordinances, judgments, decrees and injunctions affecting the Facility or the maintenance, construction, alteration or operation thereof, whether now or hereafter enacted or in existence, including, without limitation, (a) all permits, licenses, authorizations, certificates and regulations necessary to operate the Facility for its Permitted Use, and (b) Applicable Laws.

 

3.36.      Licensee . The term “Licensee” shall mean the Entity holding the State license to operate the Facility for its Permitted Use, who shall be the Subtenant until the expiration or earlier termination of the Sublease, and thereafter shall be the Tenant.

 

3.37.      Management Services . The term “Management Services” shall mean the operational and personnel administration services described in this Agreement, which shall commence upon the date of this Agreement.

 

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3.38.      Manager . The term “Manager” shall mean LOVE MANAGEMENT COMPANY, LLC , a Missouri limited liability company d/b/a Allegro management company .

 

3.39.      Marketing Budget . The term “Marketing Budget” shall be the Marketing Budget included in the Approved Operating Budget.

 

3.40.      Marketing Services . The term “Marketing Services” shall have that meaning given such term in Section 4.02.

 

3.41.      Net Facility Revenues . The term “Net Facility Revenues” shall mean for the applicable period of time, Total Facility Revenues for such period (i) less the cost of rent and similar incentives provided to Residents and prospective Residents during such period, (ii) less the cost of bad debt expenses incurred during such period, and (iii) plus the amount of bad debt recoveries received during such period.

 

3.42.      Net Operating Income . The term “Net Operating Income” for any period shall mean Total Facility Revenues for such period less Facility Expenses (other than Facility Expenses of the type described in Section 1.19(j)) for such period.

 

3.43.      Non-Routine Capital Expenditures . The term “Non-Routine Capital Expenditures” shall have the meaning given to such term in Section 10.03(a).

 

3.44.      Operating Fee . The term “Operating Fee” shall have the meaning given such term in Section 3.01.

 

3.45.      Owner . The term “Owner” shall mean ARHC [___________], LLC , a Delaware limited liability company.

 

3.46.      Permitted Use . The term “Permitted Use” shall mean use as an independent and/or assisted living facility [FOR COLLEGE HARBOR ONLY and for skilled nursing] and for such other uses as may be necessary or incidental to such use, with appropriate amenities for the same, and for no other purpose that has not been approved in writing by Tenant, Owner and Manager.

 

3.47.      Person . The term “Person” shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so admits.

 

3.48.      Repairs and Equipment Estimate . The term “Repairs and Equipment Estimate” shall have the meaning given to such term in Section 10.02(e).

 

3.49.      Residents . The term “Resident” or "Residents" shall have the meaning given such term in Section 2.02(c).

 

3.50.      State . The term “State” shall mean the [Commonwealth of Kentucky/State of Florida] and any regulatory agencies within the State with overview authority or other authority over the Facility, unless otherwise specifically indicated.

 

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3.51.      Subtenant . The term “Subtenant” shall mean ____________________________, a __________ ______________.

 

3.52.      Sublease . The term “Sublease” shall mean the Transition Period Sublease of even date herewith between the Tenant and the Subtenant.

 

3.53.      Targeted NOI . The term “Targeted NOI” shall mean the total targeted Excess Cash Flow for a given Fiscal Year (or any period thereof) as reflected in the Approved Operating Budget for such Fiscal Year.

 

3.54.      Tenant . The term “Tenant” shall mean ARHC [_____________] TRS, LLC , a Delaware limited liability company.

 

3.55.     Term . The “Term” of this Agreement shall be the period beginning on the date of Commencement of Management Services and ending at 11:59 p.m. on the day before the second (2nd) anniversary of such date (the "Initial Term"), subject to earlier termination as permitted under the terms of this Agreement. Unless either party provides notice to the other party of termination at least thirty (30) days prior to the end of the Initial Term of this Agreement or any extended term of this Agreement, the Term shall automatically extend for successive one-year periods following the expiration of the Initial Term (each a “ Renewal Term ”).

 

3.56.      Total Casualty . The term “Total Casualty” shall mean any fire or other casualty which renders the Facility Unsuitable for its Permitted Uses.

 

3.57.      Total Facility Revenues . The term “Total Facility Revenues” shall mean for the applicable period of time, but without duplication, all gross revenues and receipts of every kind received or derived by or for the benefit of Licensee, Manager or their Affiliates from operating or causing the operation of the Facility and all parts thereof; provided , however , that Total Facility Revenues shall not include the following: the Operating Fee paid by Licensee to Manager pursuant to this Agreement (which, for the avoidance of doubt, shall be based upon Total Facility Revenues and treated as a Facility Expense); gratuities to Facility employees; federal, state or municipal excise, sales, occupancy, use or similar taxes collected directly from Residents or included as part of the sales price of any goods or services, and which are remitted to the appropriate Government Agency; insurance proceeds (except loss of income insurance); condemnation proceeds; and any proceeds from the sale of the Facility or from the refinancing of any debt encumbering the Facility; proceeds from the disposition of furnishings, fixtures and equipment no longer necessary for the operation of the Facility, which shall be deposited in the FF&E Reserve; and interest which accrues on amounts deposited in the FF&E Reserve. Any deposits or other amounts that are refunded to a Resident shall be credited against Total Facility Revenues during the month in which such refunds are made, if previously included in Total Facility Revenues.

 

3.58.       Unsuitable for Its Permitted Uses . The term “Unsuitable for its Permitted Uses” shall mean a state or condition of the Facility such that following any damage or destruction involving the Facility, the Facility cannot be operated in the reasonable judgment of Manager (after conferring with Licensee, Tenant and Owner) on a commercially practical basis for its Permitted Use.

 

3.59.      Working Capital . The term “Working Capital” means assets that are reasonably necessary and used for the day-to-day operation of the Facility, including, without limitation,

 

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amounts sufficient for the maintenance of petty cash funds, amounts deposited in operating bank accounts, accounts receivables, prepaid expenses, and funds required to maintain Inventories and pay all Facility Expenses as they become due, less accounts payable and accrued current liabilities.

 

Article IV.
APPOINTMENT oF MANAGER AND PRIMARY GoAL OF AGREEMENT

 

4.1.        Appointment of Manager . Licensee hereby appoints Manager and Manager hereby accepts appointment, subject to the terms and conditions of this Agreement, as the sole and exclusive manager for the daily operation and management of the Facility during the Term. Except as otherwise provided herein, Manager shall have responsibility and complete and full control and discretion in the operation, direction, management and supervision of the Facility, subject only to the limitations expressed herein. Manager accepts said appointment and agrees to manage the Facility during the Term of this Agreement in accordance with the terms and conditions hereinafter set forth. Notwithstanding any provision of this Agreement to the contrary, Licensee shall, to the extent required by Legal Requirements, retain ultimate authority and responsibility for the operation of the Facility, and Manager shall act in accordance with Licensee’s written instructions, if given pursuant to the authority retained by Licensee in this sentence.

 

4.2.        Goals . Manager shall, consistent with the then-current Approved Operating Budget and to the extent funds are made available, take all commercially reasonable steps to:

 

(i)          Have the Facility operated and maintained the way it was previously operated and maintained by Manager or its Affiliates;

 

(ii)         Establish and maintain programs to promote the most effective utilization of the Facility’s services;

 

(iii)        Provide quality services to residents of the Facility (the “Residents”) in a manner consistent with the form of resident agreement in use from time to time at the Facility in accordance with Section 4.08 below and the Approved Operating Budget;

 

(iv)        Establish appropriate marketing programs and maintain a public image of excellence for the Facility;

 

(v)         Maintain a well-trained and sufficient number of quality staffing of the Facility;

 

(vi)        Operate the Facility on a sound financial basis;

 

(vii)       Institute and maintain a sound financial accounting system for the Facility;

 

(viii)      Institute and maintain adequate internal fiscal controls through proper budgeting, accounting procedures, and timely financial reporting;

 

(ix)         Prevent loss of Total Facility Revenues from the Facility and establish sound Cash Flow through sound billing and collection procedures and methods;

 

(x)          Conform operations at the Facility to all applicable Legal Requirements; and

 

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(xi)         Maintain the Facility in a first-class condition and repair.

 

Article V.
OPERATING FEES

 

5.1.        Operating Fee . As compensation for the services to be rendered by Manager in accordance with this Agreement, unless an Event of Default by Manager has occurred and is continuing, during the Term Licensee shall pay to Manager on a monthly basis in accordance with Section 5.01 an operating fee (the “ Operating Fee ”) equal to five percent (5.0%) of the Net Facility Revenues. The Operating Fee for the month during which the Commencement of Management Services occurs and for the month during which the expiration of the Term occurs shall be prorated based on the number of days in the month including the date of the Commencement of Management Services and the date the Term expires. The Operating Fee for the month during which the Commencement of Management Services occurs shall be due in the first month after the month in which the Commencement of Management Services occurs.

 

The Operating Fee will cover the cost of Manager’s supervision and general overall management of the Facility, including Manager’s overhead costs and its Home Office Employees’ salaries and fringe benefits and all necessary travel and incidental expenses of management in accordance with Article IV (except as otherwise provided in Section 1.19(a) above and Section 4.05 below) (except for allocable costs described in Section 4.10, which shall be Facility Expenses).

 

5.2.        Incentive Fee . As additional compensation for services to be rendered by Manager, beginning in the first full Fiscal Year following the Effective Date (i.e., beginning on January 1, 2015), an incentive fee shall be paid to Manager equal to twenty percent (20%) of any Excess Cash Flow over Targeted NOI (the “ Incentive Fee ”) for each Fiscal Year. For these purposes, Excess Cash Flow shall mean the amount, if any, that is left after deducting from Total Facility Revenues for the applicable Fiscal Year the amount necessary to pay the following amounts (including all amounts accrued pursuant to the second paragraph of Section 5.02 below), in the following order, for that Fiscal Year (i) Facility Expenses (which shall include the Operating Fee) and (ii) payment to the FF&E Reserve a contribution of up to $500 per unit (without duplication to the extent such contribution has been reflected in the determination of Facility Expenses) as provided herein. Any Incentive Fee for a Fiscal Year shall be payable after the Annual Financial Report for that Fiscal Year has been accepted pursuant to Section 6.01 below. For the avoidance of doubt, any remaining Excess Cash Flow after payment of the Incentive Fee in accordance with this Agreement shall be paid to Tenant.

 

5.3.        Special Agreement Concerning the Revenues from the Sale of Alcoholic Beverages. [DOES NOT APPLY TO HELMWOOD]. Manager is currently the holder of a license issued by the Florida Department of Professional Regulation, Division of Alcohol and Tobacco (the "Division") to sell alcoholic beverages at the Facility. The parties agree as follows concerning the sale of alcoholic beverages at the Facility:

 

(a) All sales of alcoholic beverages at the Facility shall only be accomplished in strict accordance with applicable law.

 

(b) Until and unless Licensee obtains a license for the sale of alcoholic beverages, (and unless the Licensee, Manager and Tenant agree to

 

12
 

 

    discontinue the sale of alcoholic beverages at the Facility) at all times both this Agreement and the Sublease shall remain in full force and effect, Manager agrees that Manager shall retain its license for the sale of alcoholic beverages at the Facility existing as of the Effective Date.

 

(c) In the event that anytime during the term of this Agreement, the Division determines that Manager must be a co-licensee with Licensee in connection with the sale of alcoholic beverages at the Facility, at Licensee's sole cost and expense, Manager shall take all reasonable and necessary steps to join in such application, provide all certifications and documentation required for Manager's inclusion as a co-licensee for the beverage license for the Facility, and to satisfy the requirements imposed upon Manager as a co-licensee for the beverage license for the Facility.

 

(d) At anytime during the term of this Agreement that either : (i) there is a Sublease in place, or (ii) Licensee is not the holder of a valid license to sell alcoholic beverages at the Facility and Manager does hold such a license:

 

(1) Manager shall be entitled to retain one hundred percent (100%) of the income received from the sale of alcoholic beverages at the Facility and

 

(2) the costs of purchase of alcoholic beverages for resale by the Facility shall not be included in Facility Expenses and shall be paid by Manager from Manager's own funds.

 

(e) For the sake of clarity, at anytime during the term of this Agreement, both (i) there is no Sublease in place with regard to the Facility, and (ii) Licensee holds a license from the Division authorizing the sale of alcoholic beverages from the Facility (regardless of whether Manager is a co-licensee thereon), the provisions of paragraph 3.03(d) above shall not apply and (x) income from the sale of alcoholic beverages shall be included in Total Facility Revenues, and (z) the costs of purchase of alcoholic beverages for resale by the Facility shall be included in Facility Expenses.

 

(f) At the time of changeover between the provisions of paragraph 3.03(d) and 3.03(e) above, the parties shall make reasonable and equitable adjustments amongst themselves with regard to the party making payment for purchases of alcoholic beverages for resale.

 

(g) Upon the termination of this Agreement for any reason, Manager shall be removed from the alcoholic beverage license for the Facility within three (3) business days following the last day of the term of this Agreement.

 

5.4.       Construction Management. Licensee shall have the option of supervising all capital improvement or other construction management projects at or involving the Facility or requesting

 

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Manager to supervise the same on a case by case basis. For any supervision of capital improvement projects or other construction management services at or involving the Facility:

 

(a) as to which capital improvement project Licensee has delegated supervision to Manager; and

 

(b) either, (i) the cost of which individual project exceeds $300,000.00 or (ii) the scope of which capital improvement project reasonably necessitates true construction management services (as reasonably recommended to Licensee by Manager or as determined by Licensee),

 

Tenant/Licensee shall pay and Manager shall receive an additional fee equal to five percent (5%) of the total cost of the project (the “Construction Management Fee”) in the event Manager agrees to undertake (either directly or through an Affiliate) to provide such construction management services. For any individual capital improvement project or other construction project at or involving the Facility, the cost of which does not exceed $300,000.00 or the scope of which does not reasonably require professional construction management services, Manager shall receive no additional fee. In addition, Manager shall not be entitled to any additional fee for construction projects where Licensee has elected to self-supervise or to hire another construction management professional to oversee the project.

 

5.5.         No Other Fees . Except for any Termination Fee or Early Termination Fee and any other compensation expressly set forth in this Agreement, the fees detailed in this Article III shall be Manager’s only compensation under this Agreement.

 

Article VI.
DUTIES AND RIGHTS OF MANAGER

 

6.1.        Authority of Manager Right of Possession . Subject to the limitations in the last sentence of Section 2.01 above, Facility operations shall be under the supervision and control of Manager who, except as otherwise specifically provided in this Agreement, shall be responsible for the proper and efficient operation of the Facility. To the fullest extent permitted by Legal Requirements, Manager shall have discretion and control, free from interference, interruption or disturbance, in all matters relating to day-to-day management and operation of the Facility, including, without limitation, the following: fees and charges for providing accommodations, food services, and related services to Residents and their guests (subject to Licensee’s rights under Section 8.01 below); supervision of Resident care; credit policies; food and beverage services; employment policies; executing, modifying and terminating licenses and concessions for commercial space within the Facility in accordance with Section 4.04 hereof (provided that the term of any such license or concession shall not extend beyond the Term of this Agreement); receipt, holding and disbursement of funds; maintenance of bank accounts; procurement of inventories, supplies and services; promotion and publicity; and, generally, all activities necessary for the operation of the Facility.

 

6.2.        Marketing Services . Manager shall provide the following services (the “ Marketing Services ”):

 

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(i)          Prepare the marketing plan and marketing strategy for the Facility, and the Marketing Budget, which shall be part of the Annual Operating Budget, revised annually at the time of submission of the Annual Operating Budget, and (as approved) part of the Approved Operating Budget.

 

(ii)         Direct the marketing efforts for the Facility in accordance with the Approved Operating Budget.

 

(iii)        Plan and implement community outreach, public relations and special events programs.

 

6.3.        Hiring and Training of Staff . Subject to the limitations in the last sentence of Section 2.01 above, Manager shall be solely responsible for the hiring of all Facility staff. All personnel hired for purposes of operating and maintaining the Facility shall be employed and paid by Manager, and the salaries, costs and benefits of such employees shall be Facility Expenses. The salaries, costs and benefits of the employees shall be competitive with the community in which the Facility is located and generally commensurate with the salaries, costs and benefits paid by Manager or its Affiliates at the other comparable facilities it owns or manages, to the extent provided for in the Approved Operating Budget. Manager may retain the services of a professional employer organization (PEO) reasonably acceptable to Licensee to provide payroll benefits, administration and other employment-related services. The form of the agreement between Manager and the PEO shall be subject to Licensee’s approval. The cost of the PEO shall be a Facility Expense. The PEO shall not be deemed an agent or representative of Licensee, Tenant or Owner for purposes of this Agreement.

 

6.4.        Operation Services Duties . As Manager of the Facility, Manager shall implement all aspects of the operation of the Facility in accordance with the terms of this Agreement, and to the fullest extent permitted by Legal Requirements, shall have responsibility and commensurate authority for all such activities. In addition to any other duties set forth in this Agreement, and subject to the limitations contained in this Agreement, Manager shall:

 

(i)          On behalf of Licensee, enter into all contracts, leases and agreements required in the ordinary course of business for the supply, operation, maintenance and service of the Facility (including but not limited to food procurement, trash removal, pest control and elevator maintenance) and, subject to adequate funds being available, pay the costs of all such services when due. Manager shall obtain the written consent of Licensee before entering into any contract, lease or agreement in excess of $15,000 per year, or with a term of more than twelve (12) months that may not be terminated by Manager without penalty on no more than thirty (30) days written notice, except those specifically set forth in the Approved Operating Budget or authorized by Section 4.08 below. Notwithstanding the foregoing, Manager shall obtain Licensee’s written consent on any proposed resident lease whose proposed terms are less than 85% of the approved Leasing Guidelines. If Manager requests the written consent of Licensee to a contract, lease or agreement pursuant to the immediately preceding sentence, in accordance with the notice requirements in Section 18.04 below, then the Licensee shall be conclusively deemed to have given such written consent if Licensee has not, within ten (10) business days after its receipt of such written notice from Manager, given Manager written notice, in accordance with the requirements of Section 18.04 below, objecting to such contract, lease or agreement.

 

(ii)         Purchase such Inventories as are necessary to operate and maintain the Facility in a proper manner.

 

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(iii)        Recruit, hire, supervise and train all employees to be employed at the Facility.

 

(iv)        Provide care to Residents of the Facility as provided for in the resident agreement agreed to by the Manager, on behalf of Licensee, in accordance with Section 4.08 below, and such Residents.

 

(v)         Subject to the limitations in Section 8.01 below, set all resident fees, and make a diligent and commercially reasonable effort to collect such fees.

 

(vi)        Oversee and manage all day-to-day operations of the Facility.

 

(vii)       Subject to the limitations in Section 5.03 below, collect all amounts included in Total Facility Revenues and deposit them in the “operations” bank account described in Section 4.11 below.

 

(viii)      Provide Licensee with periodic operational updates (e.g. quarterly conference calls or as reasonably requested) as to lease-up status, market conditions, collection matters, budget variances and similar matters.

 

(ix)         As a Facility Expense, prepare and deliver to Licensee the following statements for the Facility prepared consistently from period to period (which reports shall be certified by the accounting supervisor of Manager, and either of the president or chief operating officer of the Manager, as fairly presenting the financial position and results of operations of the Facility at the dates and for the periods presented in the reports) by the fifth (5th) business day of each calendar month during the Term (provided, however, that the Manager agrees to use commercially reasonable efforts to provide the same by the fifth (5 th ) calendar day of each month):

 

a) Balance sheet and income statement (in Microsoft Excel format) (which balance sheet and income statement shall be consistent with GAAP);

 

b) Trial balance with 3 columns (balance forward, net debits/credit, and ending balance in Microsoft Excel format);

 

c) Rent roll;

 

d) Report of daily census for the month;

 

e) Marketing report;

 

f) Accounts receivable and aging schedule (with comments regarding status of collections) for any Residents with an outstanding balance greater than thirty (30) days and greater than $500.00;

 

g) Detail of Operating Fee calculations;

 

h) Capital expenditure reconciliation to the approved capital budget in the Approved Budget;

 

i) Disclosure of any material communications relating to the Facility with regulatory agencies and state surveys;

 

j) Most recent sales tax filings with the monthly reporting submittals to help validate to our tax department that you are current with filings;

 

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k) Manager expenses allocated to the Facility as Facility Expenses pursuant to Section 4.10;

 

l) All balance sheet reconcilements;

 

m) A month-to-month income statement variance analysis based upon actual financial performance; and

 

n) Any other information in Manager’s possession or control relating to the Facility reasonably requested by Licensee or Tenant.

 

(x)          As a Facility Expense, prepare the following reports (which reports shall be certified by an officer of Manager as fairly presenting the financial position and results of operations of the Facility at the dates and for the periods presented in the reports) and management status reports of the Facility, to be submitted to Licensee within twenty (20) days after the end of each February, May, August and December.

 

a) Signed Certification statement in the form attached hereto as Exhibit D executed by the controller, chief financial officer or president of Manager; and

 

b) Manager will cooperate in providing other reports as reasonable and necessary which are requested by the Tenant.

 

(xi)        As a Facility Expense, prepare the following annual reports (which reports shall be certified by the accounting supervisor of Manager, and either of the president or chief operating officer of the Manager as fairly presenting the financial position and results of operations of the Facility at the dates and for the periods presented in the reports) and management status reports of the Facility, to be submitted to Licensee within seventy-five (75) days after the end of each calendar year, and each of which to be subject to an audit, at Tenant's cost, by a firm of accountants selected by Licensee, at Licensee’s expense.

 

a) Balance sheet and income statement (which balance sheet and income statement shall be prepared in accordance with GAAP) (the “ Annual Financial Report ”);

 

b) Revenues, Facility Expenses, Excess Cash Flow and Net Operating Income;

 

c) Calculations of the Operating Fee;

 

d) Capital expense reconciliation to the capital budget in the Approved Budget;

 

e) Communications with any regulatory agencies relating to the Facility; and

 

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f) Manager will cooperate in providing other reports as reasonable and necessary which are requested by the Tenant.

 

(xii)        As a Facility Expense, file and pay all applicable sales, personal property and real estate taxes imposed upon the Facility or the activities conducted therein.

 

6.5.        Manager’s Home Office Employees . As part of the provision of the services provided by Manager, Manager shall from time to time make its employees who are not working directly at the Facility (the “ Home Office Employees ”) available to Licensee and Manager’s onsite management staff for consultation and advice related to the Facility. Home Office Employees include Manager’s home office staff and staff at other facilities managed by Manager and its Affiliates with experience in areas such as, without limitation, accounting, budgeting, finance, human resources, marketing, food service and purchasing. Licensee may reasonably request such services, but the decision to provide Home Office Employees shall be within the reasonable discretion of Manager unless they were provided by Manager or its Affiliates under their prior management of the Facility. Except as otherwise provided in Section 4.10, the services of Home Office Employees shall be provided at no additional charge to Licensee. Should Licensee request a type, form or level of service that Home Office Employees have not previously provided to the Facility under Manager or its Affiliates prior management thereof at no additional cost, Manager shall, in its sole discretion, either (i) provide such services by Home Office Employees for an additional cost to be agreed to in advance by Licensee, which cost shall be a Facility Expense, or (ii) make a diligent and commercially reasonable effort to locate and contract for such services from outside consultants, the cost of which shall be a Facility Expense.

 

6.6.        Personnel Administration . The personnel at the Facility shall be employed by Manager, and the salaries, costs and benefits of such employees shall be Facility Expenses. Manager shall be responsible for recruiting, hiring, training, promoting, assigning, supervising and discharging the personnel of the Facility and shall be responsible for the formulation, implementation, modification and administration of wage scales, rates of compensation, employee insurance, employee taxes, in-service training, attendance at seminars or conferences, staffing schedules, job descriptions and personnel policies with respect to the personnel of the Facility in accordance with the Approved Operating Budget and in accordance with all Applicable Laws, including, without limitation, the laws set forth in Section 15.02. Licensee acknowledges and agrees that certain liabilities consisting of vacation pay, sick leave and obligations for quarterly bonuses accrued while such employees were employed by the Facility’s prior owner as set forth on Exhibit E shall be assumed by the Manager for the account of the Licensee and the Facility, and the costs of such items shall be a Facility Expense in the Accounting Periods in which such amounts are paid to the respective employees.

 

6.7.        Purchasing . Manager shall use, on behalf of the Facility, such purchasing systems and procedures developed by or otherwise available to Manager or its Affiliates for all items that are consistent with the Approved Operating Budget. In furtherance thereof, Manager shall utilize, to the extent that they offer competitive prices, any national purchasing contracts that Manager or its Affiliates may from time to time have in effect with suppliers of equipment and supplies. Any purchase by Manager made pursuant to or otherwise ancillary to this Agreement shall be made with Manager acting as agent for and at the expense of the Facility or Licensee. Licensee acknowledges that Manager is not a merchant and thus is not making any representations or

 

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warranties with respect to the goods or services purchased by Manager for use at the Facility, implied or otherwise. Manager shall fully disclose to Tenant and Licensee in writing any material interest of Manager and/or Affiliate in any vendor and Manager shall establish to Tenant’s and Licensee’s reasonable satisfaction that the purchase or contract was made after a competitive selection process and at a fair market price.

 

6.8.        Occupancy Agreements . Manager shall act as agent for Licensee in executing resident agreements and occupancy agreements, but Manager shall not enter into such agreement for a duration of more than one year, or any such agreement with terms less than eight-five percent (85%) of the Leasing Guidelines, without the prior consent of Licensee and Tenant, which shall not be unreasonably withheld, and which shall be granted or denied by Licensee and Tenant within five (5) business days after Manager’s request. The form of all resident agreements and occupancy agreements, and any material amendment thereto, shall be subject to Licensee’s written consent which shall not be unreasonably withheld or delayed.

 

6.9.        Working Capital . Licensee shall provide Working Capital for the Facility in an amount necessary to satisfy the reasonable needs of the Facility and Manager’s operation and management thereof, as set forth in the Approved Operating Budget. Under no circumstances shall Manager have the obligation to advance its own funds if there is insufficient Working Capital. If Manager provides written notice to Tenant and Licensee of a deficiency in Working Capital and submits an estimate of additional Working Capital that is needed, Licensee shall provide such additional Working Capital to Manager no later than ten (10) business days after Licensee’s receipt of a written request for same. In the event Tenant or Licensee disputes Manager’s request for additional Working Capital by written notice delivered to Manager within such ten (10) business day period, the dispute shall be submitted to the Expert as provided in Section 18.14 below, and Licensee’s duty to fund such additional Working Capital shall be tolled until such time as the Expert renders its decision. Manager will manage the Working Capital of the Facility prudently and in accordance with the Approved Operating Budget. Manager shall review and analyze the Working Capital needs of the Facility on a continuing basis. If Manager reasonably determines that there is excess Working Capital, such excess shall be returned to Tenant.

 

6.10.      Expense Allocations . Manager may allocate to the Facility, as a Facility Expense, a portion of certain out-of-pocket expenditures which benefit two or more of the facilities managed by Manager provided that such expenditures actually provide benefit to the Facility and are either included in an Approved Budget or otherwise approved in writing, in advance, by Tenant.

 

6.11.      Deposit and Disbursement of Funds . Manager shall open an "operations" bank account in which all receipts and monies arising from the operation of the Facility will be deposited and from which all Facility Expenses will be paid. The CFO, Chairman, President and any Vice President of the Manager shall be the only signatories on this "operations" bank account.

 

6.12.      Licenses and Permits . In addition to any other duties set forth in this Agreement, and subject to the limitations contained in this Agreement, Manager shall cause to be applied for, and use commercially reasonable efforts to obtain and maintain, all licenses and permits required of Licensee or Manager in connection with the management and operation of the Facility, other than the Facility License (as herein defined). Manager shall also take all action requested by

 

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Tenant and Licensee to allow Tenant to make initial applications for, and to prepare and submit any renewals or similar updates required to allow Licensee to maintain and comply with requirements related to, the Facility License.

 

For purposes of this Agreement, “ Facility License ” means the Assisted Living Facility License issued by the Agency for Health Care Administration for the State.

 

Article VII.
OPERATING PROFITs, CREDITS AND COLLECTIONS, AND
PROCEDURE FOR HANDLING RECEIPTS AND OPERATING CAPITAL

 

7.1.        Total Facility Revenues . Manager shall be responsible for taking all commercially reasonable steps to collect all Total Facility Revenues and fees billed to Residents and to the extent Total Facility Revenues and Working Capital are available, for paying Facility Expenses as agreed in the Approved Operating Budget. The Operating Fee will be paid from the Total Facility Revenues as Facility Expenses and will appear as such on the profit and loss report required by Section 6.01 below, and subject to available funds and the provisions of this Agreement relating to payment of the Operating Fee, Manager is entitled to cause payment of the Operating Fee based upon the Total Facility Revenues for the previous Accounting Period to be paid by the fifth (5 th ) calendar day of the current Accounting Period.

 

7.2.        Total Facility Revenues Priority . During each Accounting Period, the following items shall be paid from Total Facility Revenues, if available, in the following order: (a) Facility Expenses (which shall include the Operating Fee unless an Event of Default by Manager has occurred and is continuing), and (b) one-twelfth (1/12) of the FF&E Reserve Payment. The Incentive Fee shall be payable from Excess Cash Flow as provided in Section 3.02 above. Any remaining Excess Cash Flow, after payment of the Incentive Fee, shall be payable to Tenant.

 

In the event there is insufficient Total Facility Revenues to pay all such Facility Expenses in full, any unpaid amounts shall accrue and shall be payable, in the order set forth above, in any subsequent Accounting Period, to the extent Total Facility Revenues are available in such subsequent Accounting Period to make such payment, in whole or in part, after application of Total Facility Revenues in the then current Accounting Period to pay the amounts coming due in such then current Accounting Period in full, in the order set forth above in this Section 5.02.

 

7.3.        Credits and Collections . Manager shall install credit and collection policies and procedures, and Manager shall institute reasonable steps necessary to effectuate monthly billing by the Facility, and the collection of accounts and monies owed to the Facility. This also includes the institution by Manager of legal proceedings in the name of Licensee, the Manager (solely in its capacity as Manager of the Facility) and/or the Facility, if authorized by Licensee and Tenant in writing or consistent with Manager's credit and collection policies approved by Licensee and Tenant, to collect such accounts or to enforce the rights of Licensee as creditor under any contract in connection with the rendering of any service or the purchase of any goods, if, necessary in Licensee’s judgment after Manager has made a diligent and commercially reasonable effort to collect such accounts or to enforce such rights without the institution of such legal proceedings. Any and all reasonable costs and/or fees charged by third parties in

 

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connection with the collections and/or enforcement set forth in this Section 5.03, including, without limitation, attorneys’ fees, shall be included in Facility Expenses as a legal expense.

 

It being agreed and understood by the parties that for the Term of this Agreement as the same may be extended or sooner terminated, Licensee expressly appoints Manager, to the extent permitted by applicable law, as its agent to administer, process and collect, on Licensee’s behalf and in its name, any third party receivables. Manager shall have the right to enforce Licensee’s rights as creditor under any contract relating to the Facility or in connection with rendering any services at the Facility for the purposes of collecting accounts receivable and monies owed to the Facility.

 

Article VIII.
FINANCIAL RECORDS

 

8.1.        Accounting and Financial Records . Manager shall, at its own expense, establish and administer accounting procedures and controls and systems for the development, preparation and safekeeping of records and books of accounting relating to the business and financial affairs of the Facility, including payroll, accounts receivable and accounts payable. Such records shall be in accordance with Manager's accounting records consistently maintained for the other facilities owned or managed by Manager or its Affiliates and, to the extent applicable, in accordance with GAAP. Notwithstanding the foregoing, the Manager agrees to make use of the MRI Accounting System to be provided by Tenant for financial accounting and reporting purposes.

 

8.2.        Reports . Manager shall keep Owner, Tenant and Licensee informed as to the financial status, condition, and operation of the Facility and as to any State or local reporting requirements in connection with the licenses and permits necessary for Manager to operate the Facility and shall provide the reports required pursuant to Sections 4.04(i), (j) and (k) hereof. At the written request of Owner, Tenant or Licensee, Manager shall make a commercially reasonable effort to provide to any third party identified in such written request with any non-proprietary information described in such written request that is in Manager's possession or under its control, and within the time frame set forth in such written request. In addition to the other reports required of the Manager hereunder, Manager shall also comply with on a timely basis, or provide Licensee, Tenant, and Owner with all information within the Manager’s control necessary for Licensee, Tenant and/or Owner to comply on a timely basis, with all reporting requirements imposed upon the Licensee, Owner, Tenant, Manager, or with respect to the Facility in general by any loan agreement, agreement for the assumption of debt, mortgage, deed to secure debt or similar instrument evidencing a loan secured by the Facility, provided copies of such agreements have been provided to Manager.

 

8.3.        Access . Owner, Tenant and Licensee shall have the right at its expense at all reasonable times to audit, examine, and make copies of books of account maintained by Manager with respect to the Facility. Such right may be exercised through any agent or employee designated by Owner, Tenant or Licensee or by an independent public accountant designated by Owner or Tenant. Further, at the end of the Term of this Agreement, or upon the earlier termination of this Agreement, as provided herein, copies of all books and records kept for the Facility, including all records kept on electronic media, and accounts and funds belonging to the Facility, are to be promptly delivered to Licensee in a form readable by generally available

 

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software. Manager shall either locate or keep copies of books of account and other records maintained by the Manager with respect to the Facility at the Facility.

 

8.4.        Rights of Owner to Perform Accounting Functions . Notwithstanding the foregoing provisions of this Article VI, or any other provision of this Agreement to the contrary, Owner shall have the right, exercisable by written notice to Manager and Licensee, to perform (or retain a third party to perform), all accounting functions that would otherwise be required to be performed by Manager under this Agreement, such as, without limitation, billing, payables, operating expense calculations, annual reporting and the like. If Owner exercises this right, its written notice to Licensee and Manager shall describe the accounting functions that Owner has decided to perform, and starting thirty (30) days after the date of such written notice, Manager shall no longer be obligated to perform the accounting functions described in such written notice. The cost of all such accounting functions thereafter performed by Owner shall be payable as a Facility Expense.

 

Article IX.
ANNUAL OPERATING BUDGET

 

9.1.        Annual Operating Budget; Approved Operating Budget . The Approved Operating Budget for the period from the Commencement of Management Services through December 31, 2014 is attached hereto as Exhibit B .

 

Not later than sixty (60) days before the end of each Fiscal Year after the Commencement of Management Services during the Term, Manager shall prepare in advance and deliver to Tenant and Licensee for approval by Tenant and Licensee, which shall not be unreasonably withheld or delayed, a capital expenditure and operations budget for the next Fiscal Year for the Facility (in which each proposed expenditure will be designated either as required or desirable), setting forth an estimate of Total Facility Revenues and Facility Expenses, together with an explanation of anticipated changes to resident charges, payroll rates and positions, non-wage cost increases, and all other factors differing from the current Fiscal Year. The budget, as proposed (the “ Annual Operating Budget ”), shall be considered by Tenant and Licensee and, in consultation between Tenant, Licensee and Manager, the budget for the Facility for the ensuing Fiscal Year will be prepared by the Manager with the final contents of the budget to be determined mutually by Tenant, Licensee and Manager, and once so determined shall be the Approved Operating Budget for the ensuing Fiscal Year. If there is a delay in the preparation of the proposed Annual Operating Budget, or if Tenant and Licensee shall fail to approve the proposed Annual Operating Budget, Manager shall operate under the expired Approved Operating Budget (increased, but not decreased, by the GDP Deflator) until a new budget is approved. If consensus cannot be reached between the parties as to the Approved Operating Budget within sixty (60) days of Tenant’s and Licensee’s receipt of the proposed Annual Operating Budget, the matter shall be submitted to the Expert pursuant to Section 18.14 below, to determine whether Tenant and Licensee unreasonably withheld or delayed its approval of the proposed Annual Operating Budget or, if Tenant’s withholding or delay of approval was reasonable, to determine the Approved Operating Budget, and such determination shall be final and binding on the parties. If the Expert determines that Tenant and/or Licensee unreasonably withheld or delayed such approval, the proposed Annual Operating Budget shall be deemed the Approved Operating Budget. The Approved Operating Budget shall include an exhibit detailing the proposed rental amounts by unit type, concessions, projected absorption and other material terms (the “ Leasing Guidelines ”).

 

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Manager shall make a diligent and commercially reasonable effort to operate the Facility as provided herein so that the actual Total Facility Revenues, costs, and Facility Expenses of the operation and maintenance of the Facility during any applicable Fiscal Year shall be consistent with the Approved Operating Budget. Manager shall give Licensee, Tenant and Owner prompt written notice if it determines that Facility Expenses included in the Approved Operating Budget during any Fiscal Year will be exceeded by more than 10% in the aggregate, and of the steps that Manager intends to take as part of its diligent and commercially reasonable efforts to bring Facility Expenses into compliance with the Approved Operating Budget. Except as otherwise expressly provided for in this Agreement and except for expenditures relating to the health and safety of Residents or Facility employees, Manager shall not make expenditures for any item aggregating materially in excess of the amount budgeted, defined as more than the greater of five percent (5%) and Ten Thousand and NO/100 Dollars ($10,000.00) and for work undertaken by vendors with whom Manager and its Affiliates have a national agreement or relationship, Twenty Five Thousand Dollars ($25,000) of the total expense sum of each operating expense category as set forth in the Approved Operating Budget (which categories shall be as follows: (i) marketing expenses, (ii) administration expenses, (iii) utilities, (iv) operating and maintenance expenses, (v) taxes and insurance, and (vi) elderly/congregate expenses), without prior written approval of Tenant and Licensee. Except when necessitated by an Emergency, all expenditures of a capital nature which are over Five Thousand Dollars ($5,000.00) not otherwise expressly included in the Approved Operating Budget shall also require prior written approval of Tenant and Licensee. Tenant and Licensee further reserve the right to require Manager to obtain three (3) competitive bids for any capital projects in excess of Five Thousand Dollars ($5,000.00) (unless such items are for emergency repairs).

 

Article X.
OTHER FINANCIAL MATTERs

 

10.1.      Charges . The overall rate structure of the Facility included in the Approved Operating Budget was approved by Licensee. Manager will recommend, as part of the proposed Annual Operating Budget (and at such other times as determined by Manager, subject to reasonable approval of Tenant and Licensee) changes to the overall rate structure of the Facility, including, without limitation, residency room charges, charges for all ancillary services, and charges for supplies, and special services performed by Facility personnel. All such charges shall take into account the financial obligations of the Facility, the level of rates at other comparable facilities, and the importance of providing housing and services at competitive rates, all considered in a manner most likely to achieve the goals set forth in Section 2.02 above.

 

10.2.      Tax Status . Manager is obligated to prepare the necessary data for any Federal and State taxes related to the Facility, including real estate taxes, sales tax and personal property taxes, and submit such data to Tenant and Licensee within the time periods specified by State and Federal regulations so that Tenant and Licensee may prepare Federal and State tax returns for submission. Manager shall not be responsible for the preparation of Tenant’s or Licensee’s Federal or State tax returns, or the collection or payment of any taxes (including interest or penalties thereon) payable with respect to the ownership or operation of the Facility or any income or asset of Tenant, Licensee, or Owner (other than payment as a Facility Expense of all real and personal property taxes on the Facility, and of all sales tax on purchases paid as a Facility Expense). Manager shall not be obligated to contest Taxes imposed with regard to the

 

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Facility, but shall provide reasonable assistance to any efforts by Licensee, Tenant, or Owner to do so, subject to reimbursement of Manager's reasonable expenses in connection with rendering such assistance.

 

10.3.      Employee Withholding . Manager shall use its reasonable efforts to comply with all applicable local, State and Federal requirements concerning the withholding of taxes from employee wages.

 

10.4.      Reservation Deposit Accounts. If elected by Manager and in accordance with all applicable laws, Manager may hold unearned deposits or reservation fees paid by or on behalf of prospective Residents of the Facility ("Reservation Deposits") in a bank account established therefor until and unless such Reservation Deposits are deemed earned or nonrefundable to the paying party. The account information concerning any bank account established for Reservation Deposits shall be a trust account established by Manager for the benefit of the Licensee and reasonable information concerning said accounts and the funds held therein shall be included in the monthly reports provided to Licensee and Tenant pursuant to this Agreement.

 

Article XI.
GENERAL COVENANTS AND
TENANT AND MANAGER OBLIGATIONS

 

11.1.      Licensee’s Obligations . Licensee hereby agrees to perform all obligations of Licensee as set forth herein and to cooperate with all commercially reasonable requests by Manager to fund, operate and license the Facility.

 

11.2.      Quiet Enjoyment . Licensee covenants that, so long as Licensee has not terminated this Agreement by reason of (i) an Event of Default by Manager under this Agreement or (ii) the exercise by Licensee of any right of Licensee to terminate this Agreement under any other provision of this Agreement, and subject to Licensee’s rights to enter and inspect and/or repair the Facility as provided herein, and to Licensee’s rights under the last sentence of Section 2.01 above, Manager shall quietly hold, occupy and enjoy the Facility throughout the Term hereof free from hindrance or ejection by Licensee or Tenant or other party claiming under, through or by right of Tenant.

 

11.3.      Manager’s Obligations . Manager hereby agrees to perform all obligations of Manager as set forth herein.

 

11.4.      Covenant Not To Compete . In addition to any agreement concerning competition governing Manager or its Affiliates under Section 10.14 of that certain Asset Purchase Agreement dated August 25, 2014, during the Term and for a period of two (2) years thereafter (the “ Non-Compete Period ”), Manager shall not, and shall not permit any Affiliate, directly or indirectly, to develop, own, invest in, finance, manage or franchise any facility engaged in a business similar to the business engaged in by the Facility on the expiration or earlier termination of this Agreement and located within a five (5) mile radius from the Facility. For the avoidance of doubt and without limitation, any facility operating as a skilled nursing, assisted living facility, memory care facility, and/or independent living facility shall be deemed to be similar to the business engaged in by the Facility for purposes of this Section 9.04. This Section shall survive the termination of this Agreement.

 

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11.5.      Covenants Not to Hire . It is expressly understood and agreed by Manager that, during the Term and for a period of eighteen (18) months thereafter, Manager shall not, and shall not permit any Affiliate, directly or indirectly, to offer to employ, induce to terminate the employment of, attempt to hire, or in any way contact regarding employment, any person employed by the Tenant or Owner, or any person employed at the Facility for any other facility or business, without the written consent of the Tenant or Owner, as applicable. Nothing herein shall prevent Manager from promoting or transferring Facility level employees to Home Office Employees or to allow Facility employees to transfer and work at any other facility managed by Manager.

 

Article XII.
REPAIRS, MAINTENANCE AND REPLACEMENTS

 

12.1.      Routine Repairs and Maintenance . Subject to the limitations in Article XVII below and subject to the availability of funds and the Approved Operating Budget, Manager shall, keep the Facility in good order and repair, and shall promptly make, or contract with third parties on behalf of Licensee to make, all necessary and appropriate repairs and replacements thereto of every kind and nature, whether interior or exterior, structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by reason of a condition existing prior to the commencement of the Term and whether or not necessitated by wear, tear, obsolescence or defects, latent or otherwise, and shall use all reasonable precautions to prevent damage or injury to the Facility. The cost of such maintenance, repairs and alterations that are not paid from the FF&E Reserve shall be paid from Total Facility Revenues and treated as a Facility Expense in determining Cash Flow.

 

12.2.      Repairs and Equipment.

 

(i)          Manager shall establish a reserve account (the “FF&E Reserve”) in a bank designated by Owner and approved by Manager, Tenant, and Licensee, to cover the cost of FF&E Reserve Expenditures. Unless Manager has committed an uncured Event of Default under this Agreement, and provided that Manager has not received written notice from Owner or Tenant that Manager may not draw on such FF&E Reserve, Manager may draw on the FF&E Reserve to pay such FF&E Reserve Expenditures.

 

(ii)         Within five (5) business days following the Effective Date, Licensee shall deposit into the FF&E Reserve a sum equal to $250.00 for each unit in the Facility as an initial deposit.

 

(iii)        Throughout the Term, Licensee shall transfer into the FF&E Reserve an amount equal to the FF&E Reserve Payment required by Section 10.02(e) below. All amounts transferred into the FF&E Reserve shall be paid from Total Facility Revenues.

 

(iv)        Manager shall from time to time make expenditures from the FF&E Reserve, up to the balance in the FF&E Reserve, to pay for: (i) replacements, renewals and additions to the Facility’s FF&E; and (ii) repairs, alterations, improvements and additions, whether routine, non-routine or major, to the Facility, including, without limitation, those which are normally capitalized under GAAP such as repairs, alterations, improvements, renewals, replacements and additions to the structure, the exterior façade, the mechanical, electrical, heating, ventilating, air conditioning, plumbing and vertical transportation elements of the Facility, which expenditures Manager believes should be made for the Facility. No expenditures shall be made in excess of said balance without the written approval of

 

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Licensee and Tenant. At the end of each Fiscal Year, any amounts remaining in the FF&E Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Facility shall be deposited in the FF&E Reserve, as shall any interest which accrues on amounts placed in the FF&E Reserve. Neither: (x) proceeds from the disposition of FF&E, nor (y) interest which accrues on amounts held in the FF&E Reserve, shall either (aa) result in any reduction in the required contributions to the FF&E Reserve, or (bb) be included in Total Facility Revenues. Manager shall provide Licensee, Tenant and Owner, within thirty (30) days after the end of each month, with an itemized statement setting forth all expenditures made from the FF&E Reserve through the end of such month during the current Fiscal Year.

 

(v)         The amount of the annual FF&E Reserve Payment shall be equal to $500 per year for each residential unit.

 

The contributions for the FF&E Reserve Payment are estimates based upon Manager’s prior experience with the Facility. As the Facility ages, these amounts may not be sufficient to keep the FF&E Reserve at the levels necessary to make the replacements and renewals to the Facility’s FF&E, or to make the repairs to the Facility buildings of the nature described in Section 10.02(d), which are required to maintain the Facility in a first-class condition. If any estimate of any such costs (a “Repairs and Equipment Estimate”) prepared in good faith by Manager exceeds the available funds in the FF&E Reserve, the anticipated deficit amount shall be included in the proposed annual Operating Budget for the ensuing year, and if included in the Approved Operating Budget for that ensuing year, in accordance with Article VII, the payment of the special addition to the FF&E Reserve will be treated as a Facility Expense.

 

(vi)        Any failure or refusal by Licensee to fund the amounts necessary to maintain the Facility in appropriate condition within a thirty (30) day period after Manager’s request therefor may be submitted by Manager to the Expert, pursuant to Section 18.14 below, to determine whether such failure or refusal was unreasonably withheld or delayed, and if the Expert determines that such failure or refusal was unreasonably withheld or delayed, Licensee shall be deemed to have approved and shall be obligated to fund such amounts.

 

12.3.      Building Alterations, Improvements, Renewals and Replacements.

 

(i)          Manager shall prepare an annual estimate in the Capital Budget of the expenses necessary for major repairs, alterations, improvements, renewals and replacements (which repairs, alterations, improvements, renewals and replacements are not among those referred to in Section 10.02(c)) to the structure or exterior facade of the Facility, or to the mechanical, electrical, heating, ventilating, air conditioning, plumbing, or vertical transportation elements of the Facility buildings which expenditures, together with all other repair, maintenance and replacement expenditures to the Facility which are classified as capital expenditures under GAAP and are not among those referred to in Section 10.02(d), are, to the extent approved by Licensee and Tenant in the Capital Budget, collectively referred to as “Non-Routine Capital Expenditures”. Manager shall submit such Capital Budget to Licensee and Tenant as part of the proposed Annual Operating Budget for Licensee’s and Tenant’s approval pursuant to Section 7.01 above.

 

(ii)         Manager shall be authorized to use funds in the FF&E Reserve without receiving Licensee’s and Tenant’s prior consent, to the extent required, in Manager’s reasonable business judgment, for reasonable assessment, remedial and preventive action (i) as a result of Legal Requirements or as otherwise required for the continued safe and orderly operation of the Facility, (ii) due to an emergency threatening the Facility, its Residents, patients, guests, invitees or employees, (iii) because the continuation of a given condition will subject Licensee, Owner, Tenant or Manager to civil or criminal

 

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liability, or (iv) to undertake appropriate assessment, remedial and preventive actions sufficient to meet any guidelines or regulations adopted by applicable Government Agencies in connection with any material adverse change to the Facility, such as material changes to any environmental condition, including, without limitation, bio-contaminants such as mold, including, with respect to mold contamination, the removal of the mold, abatement of the underlying cause of the mold (including water intrusion), and repair of any leaks associated with water damage at the Facility. Manager shall, as soon as reasonably practical under the circumstances, notify Licensee, Tenant and Owner of the existence of any such condition, and of any action that Manager has taken and any costs it has paid or incurred utilizing the FF&E Reserve under this Section 10.03(b). Manager shall cooperate with Licensee and Tenant in the pursuit of any such action, and Licensee and Tenant shall have the right to participate therein. Licensee shall replenish the FF&E Reserve of the Facility, to the extent funds from the FF&E Reserve were used in connection with any such remedial action within thirty (30) days after Licensee’s receipt of written notice from Manager of the amount of such costs.

 

(iii)        The cost of all Non-Routine Capital Expenditures referred to in Section 10.03(a) shall be paid, to the extent reasonably possible (given the requirement, set forth hereinabove that the FF&E at the Facility be replaced in accordance with good, first-class standards), from the FF&E Reserve, and Licensee shall pay such costs from its own funds only to the extent there are not adequate funds for such purpose in the FF&E Reserve only to the extent they have been approved in writing by Licensee and Tenant and in advance of any costs being incurred, except as provided in this Section 10.03.

 

Article XIII.
REPRESENTATIONS, WARRANTIES AND
GENERAL COVENANTS OF MANAGER

 

13.1.      Representations, Warranties and Covenants of Manager. Manager hereby represents and warrants to Licensee and Tenant as follows:

 

(i)           Organization . Manager is a Missouri limited liability company duly organized, validly existing and in good standing under the laws of the State of Missouri, and is qualified to do business in the State.

 

(ii)          Authorization; No Violation of Laws or Agreements . Manager has full power and authority, and has taken all requisite limited liability company action, to enter into and perform under this Agreement and all other agreements and documents contemplated by or related to this Agreement to which Manager is a party. Nothing in the articles of organization or operating agreement of Manager, as amended, or any other agreement, instrument, decree, proceeding, law or regulation (except as specifically referred to in or contemplated by this Agreement) by or to which Manager is bound or subject would prohibit or inhibit Manager from consummating this Agreement on the terms and conditions herein contained. Upon execution and delivery, this Agreement and any agreement or document to be executed by Manager pursuant hereto shall constitute a legal, valid and binding obligation of Manager in accordance with its terms.

 

(iii)         Eligible Independent Contractor . From and following the Commencement of Management Services, Manager shall at all times be an Eligible Independent Contractor, and Manager will and shall cause the Facility to be operated in such a manner so that it qualifies as a “qualified health care facility” within the meaning of Section 856(e)(6)(D) of the Internal Revenue Code at all times, including, without limitation, implementation of any steps identified by the Tenant from time to time with respect to maintaining such status. In the event that the Tenant reasonably determines that the terms of this Agreement will have any effect as to cause the rent under the Lease Agreement to fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Internal Revenue Code, Manager

 

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hereby agrees to enter into a reasonable amendment to this Agreement as proposed by Tenant modifying such terms in such a way as to cause rent under the Lease Agreement to so qualify as “rent from real property” in the reasonable opinion of Tenant and its counsel; provided however, no such modifications shall affect the amount of Operating Fees or Incentive Fees or the material terms of any rights or obligations of Manager hereunder.

 

(iv)         Exclusion . Manager represents and warrants to Licensee and Tenant that neither Manager nor any of its owners, officers, directors, managers, or, to its knowledge, employees are excluded (each an “ Exclusion ”) from participation in any federal health care programs, as defined under 42 U.S.C. 1320a-7b(f), or in any form of state Medicaid program (each a “ Health Care Program ”), and to Manager’s knowledge, there are no pending or threatened governmental investigations that may lead to such Exclusion. Manager agrees to notify Licensee and Tenant of the commencement of any such Exclusion or investigation within seven (7) business days of Manager’s first learning of it. Tenant shall have the right to terminate this Agreement after giving Manager not less than sixty (60) days prior written notice of such election after learning of any such investigation which may result, with reasonable probability, in Manager’s exclusion. Manager agrees to notify Tenant of the status of any investigation that may result in Manager’s Exclusion. In the event of Manager’s Exclusion, Tenant shall have the right to terminate this Agreement effective as of the earlier to occur of the following: (i) sixty (60) days after notice from Tenant of such termination or (ii) the date on which Tenant shall enter into an agreement with a replacement Manager. In the event Tenant shall give notice to Manager following Manager’s Exclusion under this Section 11.01(d), Tenant agrees to use its best efforts in good faith to enter into an agreement with a replacement Manager as soon as possible following Tenant’s notice. Manager agrees to indemnify Licensee and Tenant and save it harmless from any penalty, loss, cost or damage Licensee and Tenant may incur as a result of Manager’s Exclusion.

 

Article XIV.
INSURANCE

 

14.1.      General Insurance Requirements . Manager and Tenant, as indicated as Primarily Responsible Insured on Exhibit C , shall, at all times during the Term, keep the Facility and all property located therein or thereon, insured against the risks and in the amounts as provided on attached Exhibit C , shall name Licensee and Owner, and either Tenant or Manager, as applicable, as additional insureds on such policies as set forth on Exhibit C and upon Commencement of Management Services shall provide Manager with a certificate of insurance reflecting such insurance coverage, and Manager shall pay as a Facility Expense all premiums and deductibles on all of the insurance policies maintained by Manager and approved by Licensee and Tenant under this Article XII.

 

Licensee, Tenant and Manager may agree upon new required insurance coverage limits and policies from time to time provided that any adjustments thereto shall also be approved in writing, in advance by Owner. Licensee, Tenant and Owner will also discuss and agree with Manager from time to time whether, in light of any new or different coverages, Manager rather than Tenant, or Licensee, Tenant and/or Owner rather than Manager, as applicable, should assume primary responsibility for any particular insurance coverage under this Article XII.

 

It is the intention of the parties hereto to secure the broadest and most cost-effective insurance available to cover Owner, Tenant and Manager in the protection, operation and enhancement of the Facility, which is usually accomplished when both principal parties are insured under the same policies. Thus Manager or Owner, as applicable, is (1) to be included as an additional

 

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named insured under the general liability insurance covering inherent and operational hazards associated with the management of the Facility, and (2) to receive a waiver of all direct damage insurers' rights of subrogation against Manager or Owner, as applicable, under all direct damage insurance policies covering the Facility. Manager's insurance is intended to cover Manager for claims against Manager not covered under Owner's or Tenant’s policies, and in respect to such claims, to include Owner and Tenant as an additional insured and waive Manager's insurer's rights of subrogation against Owner and Tenant.

 

Article XV.
TERMINATION OF AGREEMENT; REMEDIES

 

15.1.      General Termination . This Agreement shall terminate at the end of the Term. Manager may sooner terminate this Agreement if Licensee or Tenant causes a default under any material provision of this Agreement to occur and fails to cure such default within ten (10) business days after written notice in the case of a monetary default, or within thirty (30) days after written notice in the event of a non-monetary default. Licensee may terminate this Agreement if Manager causes a default under any material provision of this Agreement to occur and fails to cure such default within ten (10) business days after written notice in the case of a monetary default or within thirty (30) business days after written notice in the case of a non-monetary default. This Agreement may also be sooner terminated by Licensee if Manager causes the licenses for operation of the Facility at any time to be terminated or revoked resulting in cessation of operations at the Facility.

 

(i)          If this Agreement is terminated by Licensee as the result of an uncured Event of Default by Manager or the cessation of operations at the Facility pursuant to the preceding sentence, then no Termination Fee or Early Termination Fee shall apply and Manager shall be compensated for its Management Services only through the date of termination by payment of the monthly Operations Fee through the date of termination.

 

(ii)         If this Agreement is terminated by Manager as the result of an Event of Default by Licensee or Tenant, then Manager shall be entitled to receive (i) if such termination occurs during the Initial Term, an Early Termination Fee in accordance with Section 13.04 below, or (i) if such termination occurs during a Renewal Term, a Termination Fee in accordance with Section 13.02 below. In addition upon the termination of this Agreement by Manager as the result of an Event of Default by Licensee or Tenant, the provisions of Section 13.07 below shall not apply, and Owner, Tenant, and Licensee shall cease and desist all use of Manager's policies, procedures, proprietary software and all use of any derivation of the name "Allegro" upon the date of such termination of this Agreement.

 

15.2.      Elective Termination . During any Renewal Term, this Agreement is further subject to termination for any reason and without cause at the election of Tenant upon at least ninety (90) days prior written notice to Manager. In the event of any termination of this Agreement pursuant to this Section 13.02 (an “ Elective Termination ”) by Tenant, Tenant shall pay Manager a termination fee equal to three (3) times the average monthly Operating Fee earned by Manager during the six (6) months prior to the termination of the Agreement (the “ Termination Fee ”). [NOTE THAT FOR ALLEGRO ST. PETERSBURG AND ALLEGRO ELIZABETHTOWN, TERMINATION UNDER THIS SECTION 13.02 WILL BE AVAILABLE AFTER THE FIRST 12 MONTHS OF THE AGREEMENT.]

 

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15.3.      Termination on Sale of Facility . During any Renewal Term, Tenant shall provide Manager at least thirty (30) days prior written notice of any proposed closing of the sale by Owner of the Facility to a third party who is not an Affiliate of Owner and shall give prompt written notice of any postponement of such closing. Tenant shall have the right, exercisable by written notice to Manager within thirty (30) days prior to any such closing, to terminate this Agreement on the closing of the sale by Owner of the Facility upon payment to Manager of a Termination Fee in accordance with Section 13.02 above. In addition upon the termination of this Agreement as the result of a sale of the Facility, the provisions of Section 13.07 below shall not apply, and Owner, Tenant, and Licensee shall cease and desist all use of Manager's policies, procedures, proprietary software and all use of any derivation of the name "Allegro" upon the date of such termination of this Agreement.

 

15.4.      Termination During Initial Term. Termination of this Agreement by Tenant or Licensee during the Initial Term hereof for any reason other than Manager's material default under this Agreement shall require payment of an early termination fee determined as follows:

 

(a) The greater of (x) Three (3) or (y) the number of months remaining in the unexpired Initial Term of this Agreement [[NOTE THAT FOR ALLEGRO ST. PETERSBURG AND ALLEGRO ELIZABETHTOWN, TERMINATION UNDER THIS SECTION 13.04 AFTER THE FIRST 12 MONTHS OF THE AGREEMENT SHALL BE LIMITED TO (x) above], multiplied by

 

(b) the average monthly Operating Fee earned by Manager during the six (6) months prior to the proposed date of termination of the Agreement.

 

(the "Early Termination Fee").

 

15.5.      Performance Termination . If at any time Net Operating Income for any trailing twelve-month period falling within the term of this Agreement is less than the ninety (90%) of the Net Operating Income budgeted for such period in the applicable Approved Operating Budget (without taking into account any reduction in Net Operating Income solely attributable to a Force Majeure Event), Tenant shall have the right to immediately terminate this Agreement without any Termination Fee or payment of any fee that accrues after the date of such termination, provided that written notice of such termination is given to Manager by Tenant within (120) days from the end of the calendar month in which any such shortfall was calculated.

 

15.6.      Termination on Change in Control of Manager . In the event that there is a change in the parties who Control the Manager, then Tenant shall have the right, exercisable within thirty (30) days following the applicable event, with such termination to be effective thirty (30) days following Tenant’s delivery of its notice of termination, to terminate this Agreement without any Termination Fee, Early Termination Fee, or payment of any fee that accrues after the date of such termination.

 

15.7.      Transition upon Termination . Upon termination of this Agreement for any reason, Manager agrees to cooperate in a commercially reasonable manner, at Licensee’s expense, in transferring Manager’s rights and obligations with respect to the Facility to Licensee or a successor manager. Such cooperation shall include but not be limited to (i) transfer of Facility-specific service contracts in Manager’s name, including without limitation, lease agreements to vehicles leased (which shall be assumed by Tenant or its designee) (if any), (ii) transfer of title to vehicles owned by Manager on behalf of Facility, if any, to Tenant or its designee, and (iii)

 

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transfer of computer data in non-proprietary machine readable format and the transfer of any documents housed in Manager’s corporate headquarters relating to the Facility (or copies of such documents if Manager is required by law to maintain the originals), in each case without any additional fee or payment to Manager. The fees and expenses to prepare and file the title transfers and those fees and taxes payable to governmental authorities in connection with the transfer of the motor vehicles to Tenant in accordance with subparagraph (ii) above shall be paid by Tenant. Except as expressly set forth in this Article XIII to the contrary, Licensee shall have the right to use Manager’s proprietary software and operational procedures, together with any derivation of the “Allegro” name used as the Facility’s name or to otherwise market the Facility at the time of termination, for a transitional period of ninety (90) days after termination of this Agreement. This Section 13.07 shall survive the termination of this Agreement.

 

Article XVI.
LEGAL ACTIONS, GOVERNING LAW,
LIABILITY OF MANAGER AND INDEMNITY

 

16.1.      Legal Actions . Legal counsel for Manager, Licensee, and Tenant shall cooperate in the defense or prosecution of any action affecting the Facility. Manager shall not institute any legal action affecting the Facility, other than routine collection matters in the ordinary course of operations and in accordance with established collection and credit policies and procedures, without the written consent of Licensee, which consent shall not be unreasonably withheld, conditioned or delayed. Manager shall promptly forward all legal notices to Licensee, Tenant and Owner that relate to the Facility.

 

16.2.      Legal Fees and Costs . In the event either party elects to incur legal expenses to enforce or interpret any provision of this Agreement against the other party to this Agreement, the prevailing party shall be entitled to recover such legal expenses, including, without limitation, reasonable attorney’s fees, costs and necessary disbursements, in addition to any other relief to which such party shall be entitled.

 

16.3.      Choice of Law . The parties agree that this Agreement shall be governed by and construed in accordance with the laws of the State, without regard to concepts of choice of laws.

 

16.4.      Liability of Manager.

 

(i)          Standard of Care. Manager agrees to exercise, with respect to all services provided by Manager under or pursuant to this Agreement, a high and qualified standard of care, skill, and diligence such as is at least comparable to that at other facilities having the same Permitted Use owned or managed by the Manager or its Affiliates and as is reasonably necessary for the maintenance of any license or permit required for the Facility to be operated for its Permitted Uses in accordance with all applicable Legal Requirements. Manager agrees to make a diligent and commercially reasonable effort to maximize the occupancy of the Facility.

 

(ii)         Other Persons. Neither party shall be responsible for the acts or omissions of the other party’s contractors, subcontractors or employees, or of any persons representing the other party and performing any services for or in connection with the Facility, or any consultants or other persons engaged by the other party with respect thereto, except and only to the extent a party is supervising, or legally should be supervising the same, and a party shall be responsible only for the performance of such party’s obligations hereunder in accordance with the terms hereof.

 

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(iii)        Non-Recourse. In the event that Manager makes any claim against the Facility, Licensee and/or Tenant, Manager’s recourse shall be limited to the provisions of this Agreement and to the Licensee’s and Tenant’s right, title and interest in and to the Facility and in Total Facility Revenues. Manager shall have no recourse to Affiliates, shareholders, directors, officers, employees, or members of the Licensee and/or Tenant. In the event that the Licensee and/or Tenant makes any claim against the Manager, Licensee and/or Tenant shall have no recourse to Affiliates, directors, officers, employees, members or managers of the Manager.

 

16.5.      Indemnity . Manager will defend, indemnify and hold Licensee, Tenant and Owner (and any Affiliate, their respective directors, officers, shareholders, members, employees and agents) harmless from and against any claims, losses, expenses, costs, suits, actions, proceedings, demands or liabilities that are asserted against, or sustained or incurred by them as a direct result of Manager’s material breach of this Agreement or as a result of legal actions or regulatory violations arising from the gross negligence, fraud, or willful misconduct of Manager, its Home Office Employees and/or officers (including without limitation any grossly negligent or wrongful intentional failure of Manager to adequately supervise Facility-level employees or enforce applicable policies and procedures with respect to Facility-level employees), or because of any loss, cost, liability and damage (including, without limitation, engineers’ and reasonable attorneys’ fees and expenses, and the cost of litigation) arising from the placing of Hazardous Substances, in violation of any Legal Requirements, including those governing the Environment, on or in the Facility by Manager's Home Office Employees and/or officers during the Term. If and, to the extent any claim is not covered by insurance carried under this Agreement, Manager will defend, at its expense, any actions brought directly against the Manager as a result of its gross negligence, fraud or willful misconduct, in managing and/or operating the Facility, or arising from the placing of Hazardous Substances, in violation of any Legal Requirements, on or in the Facility by Manager's Home Office Employees and/or officers. Tenant will defend, indemnify, and hold Manager harmless, from and against any and all claims, expenses, losses, costs, suits, actions, proceedings, demands, or liabilities (including, without limitation, engineers’ and reasonable attorneys’ fees and expenses, and the cost of litigation) that are asserted against, or sustained or incurred by Manager in the proper performance of Manager’s duties under this Agreement or otherwise while acting properly within the scope of the agency established by the parties to this Agreement, or arising under or in connection with Tenant’s breach of this Agreement, or the gross negligence or willful misconduct of Tenant, its employees, contractors, managers, representatives or agents, or Tenant’s written instructions to Manager given pursuant to the authority retained by Licensee in the last sentence of Section 2.01 above. The scope of the foregoing indemnities includes any and all costs and expenses properly incurred in connection with any proceedings to defend any indemnified claim, or to enforce the indemnity, or both. Recovery upon an indemnity contained in this Agreement shall be reduced dollar-for-dollar by any applicable insurance collected by the indemnified party with respect to the claims covered by such indemnity. For clarity, it being intended in this Section 14.05 that Manager be indemnified by Tenant for the negligent or wrongful intentional actions and omissions of Manager's Facility-level employees which do not arise as a direct result of Manager’s material breach of this Agreement or as a result of legal actions or regulatory violations arising from the gross negligence, fraud, or willful misconduct of Manager, its Home Office Employees and/or officers, including without limitation any grossly negligent or wrongful intentional failure of Manager to adequately supervise Facility-level employees or enforce applicable policies and procedures with respect to Facility-level employees.

 

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16.6.      Notice of Claim or Suit . Manager shall promptly notify Owner, Licensee and Tenant of any claim, action, proceeding or suit instituted or threatened against Owner, Licensee or Tenant and relating to the Facility or this Agreement, of which Manager receives notice or of which Manager acquires knowledge. Licensee shall promptly notify Owner and Manager of any claim, action, proceeding or suit instituted or threatened against Manager, or against Owner or Tenant and relating to the Facility or this Agreement, of which Licensee receives notice or of which Tenant acquires knowledge. In the event either Tenant, Licensee, Owner or Manager is made a party to any action for damages or other relief against which such party has been indemnified, as provided in Section 14.05 above, the indemnifying party shall at its own expense using counsel reasonably approved by the indemnified party, diligently defend the indemnified party, pay all costs in such litigation or, at the option and expense of the indemnified party, the indemnified party at its expense may nonetheless engage its own counsel in connection with its own defense or settlement of said litigation in which event the indemnifying party shall cooperate with indemnified party and make available to the indemnified party all information and data in the indemnifying party’s custody or under its control which the indemnified party reasonably deems necessary or desirable for such defense. In the event the indemnified party is required to secure its own counsel due to a conflict in the interests of the indemnifying party and the indemnified party in any action for damages or other relief against which the indemnifying party has indemnified the indemnified party, the indemnifying party shall pay all of the indemnified party’s reasonable attorney’s fees and costs thereafter incurred in such litigation. The indemnifying party is required to and shall approve a settlement agreement for any such claim or suit as requested by the indemnified party and which is consistent with applicable insurance company requirements and within insured limits and any deductible, unless the indemnifying party posts a bond or other security acceptable to the indemnified party for any potentially uninsured liability amounts.

 

16.7.      Survival of Indemnity Terms . This Article XIV shall survive the termination of this Agreement.

 

Article XVII.
Regulatory and Contractual Requirements

 

17.1.      Regulatory and Contractual Requirements . Subject to the availability of funds from Tenant or from Total Facility Revenues and in accordance with the Approved Operating Budget, Manager shall cause all things to be done in and about the Facility reasonably necessary to comply with the requirements of any Legal Requirements (subject to the limitations in the next paragraph) or board of fire underwriters respecting the use of the Facility or the construction, maintenance, or operation thereof. Manager shall maintain all Federal, State and local government permits and licenses needed for its management and operation of the Facility for its Permitted Use in the State.

 

The parties understand and agree that certain deficiencies or situations of noncompliance with various Legal Requirements (such as building codes, OSHA, ADA and the like) are likely to occur from time to time in the normal course of business operations. Such occurrences will not constitute a breach or Event of Default of Manager hereunder, provided that, (i) they are not materially beyond the general experience of similar facility operations located in the State in terms of scope, seriousness, or frequency, and (ii) Manager takes all reasonable actions in a timely manner after acquiring knowledge or receiving notice of such to cure such deficiencies or situations of non-compliance. The costs (including any fines for non-compliance) of curing such deficiencies or circumstances of non-compliance shall

 

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constitute Facility Expenses unless incurred by reason of Manager’s willful failure, gross negligence or Event of Default hereunder.

 

17.2.      Equal Employment and Equal Housing Opportunity . Without limitation of any provision set forth herein, Manager expressly agrees to abide by any and all Applicable Laws, including, without limitation, (i) all applicable Federal and/or State equal employment opportunity statutes, rules and regulations, including, without limitation, Title II of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the National Labor Relations Act, the Fair Labor Standard Act, the Rehabilitation Act of 1983, and the Occupational Safety and Health Act of 1970, all as may be from time to time modified or amended, and (ii) all applicable Federal and/or State equal housing opportunity statutes, rules and regulations, all as may be from time to time modified or amended.

 

17.3.      Hazardous Substances . Manager shall not place, or authorize or instruct any of the Manager’s employees, representatives, or agents, to place any Hazardous Substances on or in the Facility in violation of any Legal Requirements, including any Legal Requirements governing the Environment. Manager shall remove, at Manager’s expense (and not as a Facility Expense or subject to reimbursement by Owner or Tenant) any Hazardous Substances placed on or in the Facility in violation of this Section 15.03.

 

Article XVIII.
INTELLECTUAL PROPERTY

 

18.1.      Name of Facility . During the Term of this Agreement, the Facility shall be known as “[NAME OF FACILITY],” with such additional identification as may be necessary and agreed to by Tenant and Manager to provide local identification.

 

18.2.      Intellectual Property . All Intellectual Property shall at all times be proprietary to Manager or its Affiliates, and shall be the exclusive property of Manager or its Affiliates. During the Term of this Agreement, Manager shall be entitled to take all reasonable steps to ensure that any Intellectual Property of a confidential nature remains confidential. Upon termination, except as otherwise provided in Section 13.07 above, all Intellectual Property shall be removed from the Facility by Manager, without compensation to Tenant. Manager shall arrange for license agreements between any Affiliate of Manager owning any of the Intellectual Property used by Manager in the operation of the Facility and Licensee, which license agreement shall be in strict accordance with the terms of this Agreement.

 

Article XIX.
DAMAGE AND CONDEMNATION

 

19.1.      Damage and Repair

 

(i)          If, during the Term, the Facility suffers a Total Casualty, this Agreement shall terminate effective as of the date of such Total Casualty.

 

(ii)         If, during the Term, the Facility is damaged by fire, casualty or other cause, but not to the extent of a Total Casualty, Manager shall have the right to discontinue operating the Facility or any

 

34
 

 

portion thereof to the extent it reasonably deems necessary to comply with applicable Legal Requirements or for the damaged portion of the Facility to be safely repaired and/or replaced by Tenant or Owner.

 

(iii)        Termination of this Agreement pursuant to this Section 17.01 shall not require payment by Tenant/Licensee of any Termination Fee or Early Termination Fee.

 

19.2.      Condemnation

 

(i)          In the event all or substantially all of the Facility shall be taken in any eminent domain, condemnation, compulsory acquisition, or similar proceeding by any competent authority for any public or quasi-public use or purpose, or in the event a portion of the Facility shall be so taken, but the result is that it is unreasonable to continue to operate the Facility for its Permitted Use pursuant to this Agreement, in accordance with the standards required by this Agreement, in the mutual reasonable judgment of Owner, Tenant and Manager, this Agreement shall terminate effective as of the date of such taking or similar proceeding.

 

(ii)         In the event a portion of the Facility shall be taken by the events described in Section 17.02(a), or the entire Facility is affected but on a temporary basis, and the result is not to make it unreasonable to continue to operate the Facility for its Permitted Use pursuant to this Agreement, in the mutual reasonable judgment of Owner, Tenant and Manager, this Agreement shall not terminate. Manager shall have the right to discontinue operating the Facility or any portion thereof to the extent it reasonable deems necessary to comply with applicable Legal Requirements or for the remaining portion thereof to be safely restored by Tenant or Owner.

 

(iii)        In the event of any proceeding described in Section 17.02(a) or (b), Manager shall have no claim to any portion of the award and no claim for damages arising out of any taking, except for any claim Manager may have for the taking of Manager's personal property located in or about the Facility.

 

(iv)        Termination of this Agreement pursuant to this Section 17.02 shall not require payment by Tenant/Licensee of any Termination Fee or Early Termination Fee.

 

Article XX.
MISCELLANEOUS PROVISIONS

 

20.1.      Additional Assurances . The provisions of this Agreement shall be self-operative and shall not require further agreement by the parties except as may be herein specifically provided to the contrary; provided , however , at the request of either party, the party requested shall execute such additional instruments and take such additional acts as the requesting party may reasonably deem necessary to effectuate this Agreement.

 

20.2.      Consents, Approval and Discretion . Except as expressly provided herein to the contrary, whenever this Agreement requires any consent or approval to be given by either party or either party must or may exercise discretion, the parties agree that such consent or approval shall not be unreasonably withheld or delayed and such discretion shall be reasonably exercised, in good faith.

 

20.3.      No Brokerage . Each party represents to the other that it has not engaged a broker in connection with this transaction, and agrees to defend, indemnify, and hold the other party harmless from any claim made by a broker through the indemnifying party.

 

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20.4.      Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and electronic confirmation of receipt is obtained promptly after completion of transmission, or if sent via electronic mail ( e.g . email) with receipted delivery, (iii) on the day after delivery to FedEx or similar overnight courier, or (iv) on the tenth (10 th ) day after mailing, if mailed to the party to whom notice is to be given, by first-class mail, registered or certified, return receipt requested, postage prepaid and properly addressed, to the party as follows:

 

 

OWNER :

 

c/o American Realty Capital Healthcare Trust II Operating Partnership, L.P.

Attn: Judi Stillman

200 Dryden Road

Suite 1100

Dresher, PA 19025

 

copy to:

 

American Realty Capital Healthcare Trust II, Inc.

Attn: Jesse Galloway

405 Park Ave, 14th Floor

New York, NY

Telephone: (212) 415-6542

Facsimile: (212) 421-5799

And to:

 

Foley & Lardner LLP

111 North Orange Avenue

Suite 1800

Orlando, FL 32801-2386

Attn: Taylor Pancake, Esq.

Telephone: (407) 423-7656

Facsimile: (407) 648-1743

 

TENANT :

 

c/o American Realty Capital

Healthcare Trust II

Operating Partnership, L.P.

Attn: Judi Stillman

200 Dryden Road

Suite 1100

Dresher, PA 19025

 

copy to:

 

American Realty Capital Healthcare Trust II, Inc.

Attn: Jesse Galloway

405 Park Ave, 14th Floor

New York, NY

Telephone: (212) 415-6542

Facsimile: (212) 421-5799

And to:

 

Foley & Lardner LLP

111 North Orange Avenue

Suite 1800

Orlando, FL 32801-2386

Attn: Taylor Pancake, Esq.

Telephone: (407) 423-7656

Facsimile: (407) 648-1743

 

 

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MANAGER :

 

Allegro Management Company

212 South Central Avenue

Suite 301

Attention: President

St. Louis, MO 63105

Telephone: 314.512.8704

Facsimile: 314.512 _____

mrieser@allegroliving.com

copy to:

 

Allegro Senior Living, LLC

212 South Central Avenue

Suite 301

Attention: Robert B. Karn, CFO

St. Louis, MO 63105

Telephone: 314.512.8788

Facsimile: 314.512 _____

rkarn@allegroliving.com

 

And to:

 

Theresa Marie Kenney, Esq., B.C.S.

Duss, Kenney, Safer, Hampton & Joos, P.A.

4348 Southpoint Boulevard, Suite 101

Jacksonville, Florida 32216

Telephone: 904.543.4300

Facsimile: 904.543.4301

Email: tkenney@jaxfirm.com

 

or to such other address and to the attention of such other person as either party may from time to time designate in writing. Notice given by a party's attorney in accordance with this Section 18.04 shall (a) constitute notice from said party, and (b) not be considered an improper direct contact from the sending attorney to a "person known to be represented by counsel".

 

20.5.      Severability . If any term or provision of this Agreement or the application thereof to any person or circumstance is held to be invalid or unenforceable for any reason, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

 

20.6.      Gender and Number . Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine, and neuter, and the number of all words herein shall include the singular and plural.

 

20.7.      Division and Heading . The divisions of this Agreement into sections and subsections and the use of captions and headings in connection therewith are solely for convenience and shall have no legal effect whatsoever in construing the provisions of this Agreement.

 

20.8.      Confidentiality of Information . Manager, Subtenant and Tenant agree to keep confidential and not to use or to disclose to others, except as expressly consented to in writing by the other party or required by law, the terms of this Agreement, or any and all of their respective secrets or confidential technology, proprietary information, customer lists, or trade secrets, or any other confidential matter or confidential items ascertained through their association with each other. Manager, Subtenant and Tenant further agree that should Manager cease to be the manager of the Facility, Manager and Subtenant will return to Tenant any Facility information of any kind pertaining to the Facility or to Residents of the Facility, and Tenant will return to Manager any and all of Manager’s confidential information obtained by Tenant. All funds related to and accounts opened on behalf of the Facility also will be returned to Tenant.

 

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20.9.      Right to Perform . In the event that Licensee or Manager shall fail to perform any duty or fulfill any obligation hereunder to the material detriment of the other and after the passage of any applicable cure periods set forth in this Agreement, Licensee or Manager, in addition to any rights or remedies available to it under law, shall have the right, but not the obligation to perform any such duty or fulfill any such obligation, but in no way obligating the party beyond any termination period allowable hereunder.

 

20.10.    Assignment.

 

(i)          Manager shall not have any right to assign this Agreement without the prior written consent of Tenant and Owner, which may be granted or withheld in Tenant and Owner’s sole discretion.

 

(ii)         When Tenant notifies the Manager and the Subtenant in writing that the licenses to operate the Facility for its Permitted Use have been issued by the State to the Tenant, then on the date such notice is received by the Manager all of the Subtenant’s rights and obligations under this Agreement shall be automatically assigned by Subtenant to Tenant, Tenant shall assume all obligations of the Licensee thereafter arising hereunder and Subtenant (i) shall have no liability for any such obligations, and (ii) shall be deemed to no longer be a party to this Agreement.

 

(iii)        Licensee and Manager shall at Owner’s written request assign this Agreement as security, and shall agree to subordinate their respective rights herein, to the holder of any mortgage granted by Owner on the Facility. Such assignment and/or subordination shall be in a commercially reasonable form approved by Owner and the holder of such mortgage.

 

20.11.    Limitation of Liability . To the maximum extent permitted by applicable law, no shareholder, member, manager, officer, director, employee, agent or Affiliate of any party to this Agreement shall have any personal liability with respect to the liabilities or obligations of such party under this Agreement or any document executed by such party pursuant to this Agreement. This Section shall survive the termination of this Agreement.

 

20.12.    Right to Inspect . Owner, Licensee and the holder of any mortgage on the Facility and their agents shall have the right to enter upon the Facility or any portion thereof at any reasonable time to inspect the same, including but not limited to, the operation, sanitation, safety, maintenance and use of the same, and to assure itself that Manager is in full compliance with its obligations under this Agreement (but Owner, Licensee and the holder of any such mortgage shall not thereby assume any responsibility for the performance of any of Manager’s obligations hereunder, nor any liability arising from the improper performance thereof). In making any such inspections, neither Owner nor Licensee nor the holder of any such mortgage shall unduly interrupt or interfere with the conduct of Manager’s business. Provided, however, that for routine visits to the Facility, Owner, Licensee and/or any mortgagee shall endeavor to provide Manager with reasonable advance notice of planned visits.

 

20.13.    Entire Agreement/Amendment/Waiver . With respect to the subject matter hereof, this Agreement supersedes all previous contracts and constitutes the entire Agreement between the parties, and no party shall be entitled to benefits other than those specified herein. As between the parties, no oral statements or prior written material not specifically incorporated herein shall be of any force and effect. The parties specifically acknowledge that in entering into and executing this Agreement, the parties rely solely upon the representations and agreements contained in this Agreement and no others. All prior representations or agreements not expressly incorporated herein, whether written or verbal, are superseded, and no changes in or additions to this Agreement shall be recognized unless and until made in writing and signed by both parties

 

38
 

 

hereto, and consented to by the Owner, and no waiver of any of the provisions of this Agreement shall be enforceable unless such waiver is in writing and signed by the party against whom the waiver is sought to be enforced. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.

 

20.14.    Expert Decisions . Where this Agreement expressly calls for a matter to be referred to an Expert or in other circumstances in which the parties agree in writing to refer a matter to an Expert, for determination, the following provisions shall apply:

 

(i)          Unless specifically stated to the contrary, the use of the Expert shall be the exclusive remedy of the parties and neither party shall attempt to adjudicate any dispute in any other forum.  The decision of the Expert shall be final and binding on the parties and shall not be capable of challenge, whether by arbitration, in court or otherwise;

 

(ii)         Each party shall be entitled to make written submissions to the Expert, and if a party makes any submission it shall also provide a copy to the other party and the other party shall have the right to comment on such submission. The parties shall make available to the Expert all books and records relating to the issue in dispute and shall render to the Expert any assistance requested of the parties. The costs of the Expert and the proceedings shall be treated as a Facility Expense;

 

(iii)        Each party shall bear its own respective attorneys fees and costs in connection with any matter referred to the Expert in accordance with this Agreement and any submissions by a party to the Expert;

 

(iv)        The Expert shall make its decision with respect to the matter referred for determination in accordance with industry standards (including compliance with the requirements of any quality assurance program) and determining whether the matter at issue is necessary to satisfy such standards; and

 

(v)         The terms of engagement of the Expert shall include an obligation on the part of the Expert to: (i) notify the parties in writing of his or her decision within forty-five (45) days from the date on which the Expert has been selected (or such other period as the parties may agree or as set forth herein); and (ii) establish a timetable for the making of submissions and replies.

 

20.15.    Arbitration . In the event of any dispute, controversy or claim arising out of or in connection with, or relating to, this Agreement or any breach or alleged breach hereof (each, a “Dispute”) that is not referred to an Expert, the parties shall in all events and prior to submitting any Dispute to an arbitrator for resolution hereunder, meet in person and attempt in good faith to resolve the Dispute. Any Dispute that is not resolved after a meeting of the parties shall, upon the request of any party involved, be submitted to, and settled by, arbitration in the State, by a single arbitrator pursuant to the commercial arbitration rules then in effect of the American Arbitration Association (or at any time or at any other place or under any other form of arbitration mutually acceptable to the parties so involved) and pursuant to the U.S. Federal Arbitration Act; provided, however , that any party may apply to a court of competent jurisdiction to obtain an injunction or other interim relief, provided such party simultaneously submits such matter to Arbitration for a final determination on the merits. Any award rendered shall be final and conclusive upon the parties and a judgment thereon may be entered in the highest court of the forum, state or federal, having jurisdiction.

 

39
 

 

20.16.    WAIVER OF JURY TRIAL. WITHOUT LIMITING THE INTENDED EFFECT OF SECTION 18.15 above , THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED UPON THIS AGREEMENT OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTION OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS AGREEMENT.

 

[Signature Page Follows.]

 

40
 

 

IN WITNESS WHEREOF , the parties hereto have caused this Management Agreement to be executed under seal by their duly authorized offices, all as of the day and year first above written.

 

  TENANT:
   
  ARHC [___________] TRS, LLC ,
  a Delaware limited liability company
   
  By:_______________________________________
  Print Name:________________________________
  Print Title:  ________________________________
   
  SUBTENANT:
   
  _________________________________________ , a
  ______________________________
   
  By:_______________________________________
  Print Name:________________________________
  Print Title:  ________________________________
   
  MANAGER:
   
  LOVE MANAGEMENT COMPANY, LLC, a Missouri Limited Liability Company d/b/a ALLEGRO MANAGEMENT COMPANY
   
  By:_______________________________________
  Mary F. Rieser, President

 

JOINDER

 

By its signature below, the undersigned Owner joins in this Agreement to the extent that this Agreement confers rights on the Owner.

 

  OWNER:
   
  ARHC [___________], LLC ,
  a Delaware limited liability company
   
  By:_______________________________________
  Print Name:________________________________
  Print Title:  ________________________________

 

41
 

 

EXHIBIT “A”

 

LEGAL DESCRIPTION

 

 
 

 

EXHIBIT “B”

APPROVED OPERATING BUDGET

 

 
 

 

EXHIBIT “C”

INSURANCE REQUIREMENTS

 

  Property Coverage
   
Primarily Responsible Insured: Tenant
   
Risks Covered: Special Form Coverage including Earthquake and Flood
   
Property, Interest Insured: Building
  Business Personal Property
  Business Income & Extra Expense (60% of 12 month revenues)
  Extended Period of Indemnity – 180 days
  Builder’s Risk & Course of Construction for new building projects and renovations
  Valuable Papers and Records
  Ordinance/Law A - Full Limits  Ordinance/Law B&C – 10% Bldg Limit
  Debris Removal
  Equipment Breakdown
  Property values should be based on full insurable values
   
Deductibles: $10,000 per occurrence
   
Valuation:  
Real and Personal Property Replacement cost waiving co-insurance or Agreed Value
   
Property of others Amount of Company liability imposed by law or assumed by contract

 

{continued on next page}

 

 
 

 

 

  Liability Coverage
   
Primarily Responsible Insured: Manager
   
Limits of Liability:  
Bodily Injury $1,000,000 per occurrence
Property Damage $3,000,000 aggregate
Deductible Maximum $25,000
   
Abuse Liability Included
Employers Liability Included
Employee Benefit Liability Included
Liquor Liability Included
Professional Liability Included at same limits
   
Commercial Auto Liability incl. Hired/Non-Owned   $1,000,000
   
Employment Practice Liability $1,000,000
   
Employee Dishonesty $1,000,000
Monies & Securities (inside/outside premise) $25,000
   
Excess Liability $5,000,000
   
Environmental Liability $1,000,000 per occurrence
      $3,000,000 aggregate
     
 
 

 

EXHIBIT “D”

QUARTERLY CERTIFICATION

 

[Date]

 

TO:

 

Attn:

 

Re:         Quarter Ending ____________ for the ____________________ Facility.

 

Dear __________________:

 

The undersigned, as ___________________ of [______________________], the manager of the ______________________ Facility, hereby certifies to __________________ that the following statements are true and correct:

 

1) To the knowledge of the undersigned, the consolidated income statement and balance sheet (the “ Reports ”) of the Facility delivered on ___________ fairly present the financial position and results of operations of the Facility at the dates and for the periods presented in the Reports, with respect to the matters addressed by such Reports, all in accordance with United States GAAP consistently applied (subject to normal year-end adjustments).

 

2) The undersigned is not aware of any significant deficiencies or material weaknesses in Manager’s design or operation of internal control over financial reporting which are reasonably likely to adversely affect Manager’s ability to record, process, summarize and report financial information with respect to the Facility.

 

3) The undersigned is not aware of any material fraud that involves management or other employees who have a significant role in Manager’s internal control over financial reporting.

 

By:    
     
Name:    
     
Title:    

 

 
 

 

EXHIBIT “E”

ASSUMED EMPLOYEE OBLIGATIONS

 

PTO Balance                                     $[________________]

 

 
 

 

EXHIBIT E-2

 

Transition Period Sublease

 

[ See attached. ]

 

 
 

 

TRANSITION PERIOD SUBLEASE

 

THIS TRANSITION PERIOD SUBLEASE (this “ Sublease ”) dated [_______] ___, 2014, (the “ Effective Date ”), is made by and between ARHC [__________] TRS, LLC , a Delaware limited liability company (herein called “ Sublessor ”) and [ALLEGRO OPERATOR] (herein called “ Sublessee ”).

 

Recitals:

 

R-1.          Sublessee (together with certain of its affiliates) has on the Effective Date sold its interest in certain real property and improvements situated in the [State of Florida/Commonwealth of Kentucky] (the “ State ”), including [a skilled nursing/assisted living and/or memory care facility] (the “ Facility ”) as more particularly described on Exhibit A attached hereto and by this reference incorporated herein (said real property, including the land and all improvements thereon, is referred to herein as the “ Premises ”) to ARHC [__________], LLC , a Delaware limited liability company (“ Landlord ”).

 

R-2.          Landlord has leased the Premises to Sublessor, as tenant, under a Lease dated as of the Effective Date (the “ Lease ”).

 

R-3.          Sublessee currently holds certain Licenses (as defined in Section 5.4 below) necessary for the operation of the Facility.

 

R-4.          Sublessor is in the process of obtaining its own licenses, but has not done so by the date of the sale.

 

R-5.          Sublessee wishes to Sublease the Premises from the Sublessor so that its Licenses can allow the Facility to remain in operation until such time as Sublessor obtains licenses in its name.

 

R-6.          Simultaneous with the execution of this Sublease, Sublessee is entering into an agreement for management of the Facility (the “ Management Agreement ”) with [LOVE MANAGEMENT COMPANY, LLC , a Missouri limited liability company doing business as “ALLEGRO MANAGEMENT COMPANY”] (“ Manager ”).

 

R-7.          In accordance with the terms of the Management Agreement, upon Sublessor’s written notice to Sublessee of Sublessor’s receipt of its own licenses, the Management Agreement shall automatically be assigned by Sublessee to Sublessor and Sublessee shall cease to be a party thereto. Upon such assignment, any agreements with Residents (as defined in the Management Agreement) entered into by Manager on behalf of Sublessee pursuant to the terms of the Management Agreement shall automatically be assigned by Sublessee to Sublessor and Sublessee shall cease to be a party thereto. Notwithstanding the foregoing, promptly following the occurrence of such automatic assignments the parties shall execute and deliver (a) a blanket assignment of both the Resident Agreements and the Management Agreement, and (b) a termination of this Sublease.

 

NOW, THEREFORE , for good and valuable consideration, the receipt of sufficiency of which are mutually agreed, and the premises and the mutual covenants herein contained, the parties hereto agree as follows:

 

 
 

 

ARTICLE 11 Premises . Sublessor hereby subleases the Premises to Sublessee and Sublessee subleases the Premises from Sublessor for the Term (hereinafter defined) and pursuant to all of the conditions set forth herein.

 

ARTICLE 12 Term .

 

Section 12.1          Term . The term of this Sublease (“ Term ”) shall commence on the Effective Date and shall expire (the “ Expiration Date ”) on the earliest to occur of

 

(a)          the date on which Sublessee and Sublessor by mutual written agreement elect to terminate this Sublease;

 

(b)          the date on which Sublessor notifies Sublessee in writing that the State has issued to the Sublessor the Sublessor’s own licenses;

 

(c)          the date upon which the Management Agreement is terminated in accordance with its terms;

 

(d)          the date on which this Sublease is terminated pursuant to any provision hereof; or

 

(e)          one (1) year following the Effective Date.

 

Sublessor and Sublessee shall each give the other prompt written notice upon receipt of notice from the State that it has issued or otherwise confirmed the approval for the issuance of the Licenses to Sublessor. Further, any and all costs of maintaining the Licenses shall be paid by the Manager as a Facility Expense under the Management Agreement.

 

Section 12.2          Surrender . On the Expiration Date, or on any sooner termination of the Term, Sublessee shall surrender the Premises to Sublessor or to Sublessor’s designee in its then-current condition, except to the extent otherwise provided in Sections 7 or 13 below.

 

ARTICLE 13 Rent . Notwithstanding the independent sufficiency and receipt by the parties of the consideration recited above, Sublessee shall be obligated to pay to Sublessor, as fixed rent, the sum of Ten Dollars ($10) per year (the “ Rent ”), payable on the Effective Date, receipt of which is hereby acknowledged by Sublessee.

 

ARTICLE 14 Use .

 

Section 14.1          Use . The Premises shall be used and occupied in accordance with the terms of the Management Agreement.

 

Section 14.2          Condition of Premises . Sublessee hereby accepts the Premises in its condition existing as of the Effective Date, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any encumbrances, covenants or restrictions of record, and accepts this Sublease subject thereto and to all matters disclosed thereby. Sublessee acknowledges that neither Sublessor nor Sublessor’s agent has made any representation or warranty as to the present or future suitability of the Premises for the conduct of Sublessee’s business. Sublessor

 

 
 

 

acknowledges that Sublessee shall have no obligation to maintain, repair or restore the condition of the Premises at any time during the term of the Sublease, and that upon termination of the Sublease, Sublessee shall surrender the Premises to Sublessor in “as is” condition, without further obligation or liability with respect to the Premises, unless such damage was caused by Sublessee’s gross negligence or intentional misconduct.

 

ARTICLE 15 Operation of Facility .

 

Section 15.1          Operation of Facility . The Sublessee agrees that it shall permit the Manager to operate the Facility and keep the Premises in good order, condition and repair, in accordance with Manager’s obligations under the terms of the Management Agreement. Sublessor agrees that except as provided in the last sentence of this Section 5.1, Sublessee shall have no obligation or liability with respect to Manager’s performance or nonperformance of such obligations, but at Sublessor’s written request, Sublessee will direct Manager to perform such obligations. Notwithstanding any provision of this Sublease to the contrary, Sublessee shall, to the extent required by applicable law, retain ultimate authority and responsibility for the operation of the Facility.

 

Section 15.2          Financial Obligations . From the effective date of the Management Agreement, until such time as Sublessee ceases to be a party thereto as provided in Recital R-7 above, all financial obligations imposed on the Sublessee pursuant to the Management Agreement that are not paid by the Manager as a Facility Expense shall be paid by Sublessor to Sublessee from Sublessor’s own funds. Notwithstanding the foregoing, to enforce such imposition of financial obligations on the Sublessor, Sublessee shall give Sublessor written notice of such financial obligation(s) providing, in reasonable detail, the nature and estimated cost thereof. Sublessor shall, within ten (10) business days after receipt of such notice disburse such required funds to Sublessee, or if Sublessor disputes its obligation to disburse such funds, it shall give Sublessee notice of such dispute within such ten (10) business-day period. To the extent reasonably possible, Sublessor shall identify disputed items on a line item basis. Sublessee shall have no obligation to disburse its own funds during the period of such dispute regardless of the consequences.

 

Section 15.3          Deposit and Disbursement of Funds . Sublessee shall remit to Sublessor all monies received by Sublessee in connection with the operation of the Facility within five (5) days receipt thereof. This Section 5.3 shall survive the termination of this Sublease.

 

Section 15.4          Licenses and Approvals . Sublessee shall use its commercially reasonable efforts to maintain in effect at all times during the term hereof all certificates of need, accreditations, registrations, facility or other operating licenses and other consents of regulatory authorities necessary for the operation of the Facility, including the licenses listed on Exhibit B attached hereto, (collectively, the “ Licenses ”) which are necessary and appropriate to operate the Facility as presently operated as of the date of this Sublease. Sublessee shall use commercially reasonable efforts to refrain from any and all conduct which has the effect of jeopardizing any License of the Facility, provided that Sublessee shall have absolutely no obligation to utilize its own funds in the course thereof. All costs and expenses incurred by Sublessee necessary in maintaining the Licenses or to comply with any rules, regulations, requirements or laws associated

 

 
 

 

therewith shall be paid to Sublessee by the Manager as a Facility Expense within ten (10) business days of Sublessor’s receipt of a written request with documentation for the same, and if not so paid within such ten (10) business day period, shall thereafter accrue interest at ten percent (10%) per annum. Sublessor shall diligently and in good faith pursue the prompt issuance of Licenses in Sublessor’s own name, with the understanding that it is the mutual desire of Sublessor and Sublessee for Sublessor to procure such Licenses as promptly as is commercially practicable.

 

Section 15.5          Limitations on Authority of Sublessee . Except as expressly provided herein or as otherwise required by applicable law or the requirements of any of the Licenses, Sublessee shall have no right, authority or obligation to take any action with respect to the Premises without the prior written consent of Sublessor. To the extent action or payment is required by Sublessee as Licensee under the Management Agreement, Sublessee (vis a vis Sublessor) shall be excused from the same in the event and to the extent Sublessor does not both authorize the same and provide any required funds therefor.

 

Section 15.6          Records . Sublessee, through the Manager, shall retain all financial and other records of the Facility during the Term of this Sublease, in accordance with applicable rules and regulations promulgated by Federal and State governmental authorities and relevant accreditation agencies and organizations governing the Facility, and otherwise in accordance with industry practice. All costs associated with same shall be paid by Manager as a Facility Expense, and at Sublessor’s written request, Sublessee shall direct the Manager to pay such costs.

 

 
 

 

ARTICLE 16 Insurance . The Manager shall be responsible for maintaining insurance in accordance with the terms of the Management Agreement. On or before the commencement of the Term, Sublessee shall be named (and certificates of insurance shall be furnished to Sublessee confirming that Sublessee has been named) as an additional insured on all professional and commercial general liability insurance policies required by the Management Agreement with respect to the Premises. Such commercial general liability insurance shall be primary to any and all separate insurance policies maintained by Manager related to the Facility.

 

ARTICLE 17 Damage, Destruction . If the Premises are damaged or destroyed during the Term of this Sublease and as a result the Management Agreement is terminated pursuant to the terms of the Management Agreement, this Sublease shall terminate on the date the Management Agreement is terminated as a result thereof. Provided that such damage or destruction is not the result of damage caused by Sublessee’s gross negligence or intentional misconduct, Sublessee shall have no obligation to repair or restore the Premises and or replace any personal property, furniture, fixtures or equipment as a result of any damage to or destruction of the Premises.

 

ARTICLE 18 Real Property Taxes . Manager shall be responsible for the payment as a Facility Expense of all real property and any other taxes on or with respect to the Facility, pursuant to the terms of the Management Agreement, and at Sublessor’s written request, Sublessee shall direct the Manager to pay such taxes.

 

ARTICLE 19 Utilities . Manager shall be responsible for the payment as a Facility Expense all water, gas, heat, light, power, telephone and other utilities and services supplied to the Premises pursuant to the terms of the Management Agreement, and at Sublessor’s written request, Sublessee shall direct the Manager to pay for such utilities and services.

 

ARTICLE 20 Assignment and Subletting .

 

Section 20.1          Assignment and Subletting . Sublessee shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of Sublessee’s interest in this Sublease or in the Premises, without Sublessor’s prior written consent, which consent may be withheld in Sublessor’s sole and absolute discretion.

 

Section 20.2          No Waiver . The acceptance of rent by Sublessor from any other person shall not be deemed to be a waiver by Sublessor of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting.

 

ARTICLE 21 Defaults; Remedies .

 

Section 21.1          Default by Sublessee . The occurrence of any one or more of the following events shall constitute a material default and breach of this Sublease by Sublessee:

 

(a)          The failure by Sublessee to observe or perform any of the covenants, conditions or provisions of this Sublease to be observed or performed by Sublessee where such failure shall continue for a period of thirty (30) days after written notice thereof from Sublessor to

 

 
 

 

Sublessee or such longer period as shall reasonably be required to cure the same with the exercise of due diligence.

 

(b)          (i) The making by Sublessee of any general arrangement or assignment for the benefit of creditors; (ii) Sublessee becomes a “debtor” as defined in 11 U.S.C. 101 or any successor statute thereto (unless, in the case of a petition filed against Sublessee, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Sublessee’s assets located at the Premises or of Sublessee’s interest in this Sublease, where possession is not restored to Sublessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all of Sublessee’s assets located at the Premises or of Sublessee’s interest in this Sublease, where such seizure is not discharged within 30 days. Provided, however, in the event that any provision of this paragraph 11.1(c) is contrary to any applicable law, such provision shall be of no force or effect.

 

Section 21.2          Remedies of Sublessor . In the event of any such material default or breach by Sublessee, Sublessor may at any time thereafter, with reasonable prior written notice of not less than thirty (30) days except for a default under Section 11.1(b) above, as Sublessor’s sole right and remedy by reason of such default or breach, terminate Sublessee’s right to possession of the Premises by any lawful means, in which case this Sublease shall terminate and Sublessee shall immediately surrender possession of the Premises to Sublessor.

 

Section 21.3          Default by Sublessor . The occurrence of any one or more of the following events shall constitute a default and breach of this Sublease by Sublessor:

 

(a)          A default under the Management Agreement by Sublessee arising from the failure or refusal of Sublessor to perform its obligations under this Sublease.

 

(b)          The failure by Sublessor to observe or perform any of the covenants, conditions or provisions of this Sublease to be observed or performed by Sublesseor where such failure shall continue for a period of thirty (30) days after written notice thereof from Sublessee to Sublessor or such longer period as shall reasonably be required to cure the same with the exercise of due diligence.

 

Section 21.4          Remedies of Sublessee . In the event of any such material default or breach by Sublessor, Sublessee may at any time thereafter, with reasonable prior written notice of not less than thirty (30) days, as Sublessee’s sole right and remedy by reason of such default or breach, terminate this Sublease and surrender possession of the Premises to Sublessor. The restrictions on Sublessee's remedies hereunder shall not apply to matters for which Sublessee is entitled to indemnity from Sublessor pursuant to Paragraph 12(a) below.

 

Section 21.5          No right to Damages . Except as expressly set forth in Paragraph 12 below to the contrary, both parties hereby waive and release any right to damages for or on account of the breach of this Sublease.

 

 
 

 

ARTICLE 22 Indemnity .

 

(a)          Sublessor shall and hereby agrees to indemnify and save and hold Sublessee (and all of its officers, employees, agents, affiliates and directors) harmless from and against and reimburse Sublessee for any and all claims, causes of action, costs, expenses, judgments and awards (including, without limitation, reasonable attorney’s fees based upon service rendered at hourly rates) incurred by or asserted against Sublessee to the extent occasioned by or resulting, directly or indirectly from its status as subtenant hereunder or the operation of the Premises, unless arising out of Sublessee’s (i) breach of this Sublease, (ii) affirmative act in breach of the Management Agreement (unless Sublessee took such action at the written direction of Sublessor, such action was approved in writing by the Sublessor, or such breach was caused by Sublessor’s breach of its obligations under Section 5.2 above), or (iii) gross negligence, fraud or intentional misconduct. This obligation shall survive the expiration or termination of this Sublease.

 

(b)          Sublessee shall and hereby agrees to indemnify and save and hold Sublessor (and all of its officers, employees, agents, affiliates and directors) harmless from and against and reimburse Sublessor for any and all claims, causes of action, costs, expenses, judgments and awards (including, without limitation, reasonable attorney’s fees based upon service rendered at hourly rates) incurred by or asserted against Sublessor to the extent occasioned by or resulting, directly or indirectly, from Sublessee’s breach of this Sublease or the affirmative act of Sublessee in breach of the Management Agreement (unless Sublessee took such action at the written direction of the Sublessor, such action was approved in writing by the Sublessor, or such breach was caused by Sublessor’s breach of its obligations under Section 5.2 above), or Sublessee’s gross negligence, fraud or intentional misconduct. This obligation shall survive the expiration or termination of this Sublease.

 

(c)          An indemnifying party shall be relieved of its duty to indemnify an indemnified party hereunder if and to the extent the indemnified party fails to use commercially reasonable efforts in good faith to mitigate its damages, including, but not limited to, failure to give timely notice to its insurance carriers and to pursue recovery under applicable policies of insurance. Damages afforded an indemnified party pursuant to this Paragraph 12 shall include actual damages suffered by such indemnified party as a result of the matters indemnified against and shall not include any special, punitive, multiplied or consequential damages, or lost profits, except to the extent the same are included in a third-party judgment against the indemnified party, the right to which is hereby waived by both parties.

 

 
 

 

ARTICLE 23 Condemnation . If all or substantially all of the Premises are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called “condemnation”), and the Management Agreement is terminated as a result thereof, then this Sublease shall terminate as of the date the Management Agreement is terminated as a result thereof. Any award for the taking of all or any part of the Premises under the power of eminent domain, or under threat of the exercise of such power shall be paid to Landlord. Sublessor and Sublessee shall have no claim to any portion of such award. Sublessee shall have no obligation to repair or restore the Premises as a result of any taking of the Premises or any part thereof.

 

ARTICLE 24 Brokers . Sublessor and Sublessee each represent and warrant to the other that it has not employed any broker, agent or finder relating to this Sublease. Sublessor shall indemnify and hold Sublessee harmless, and Sublessee shall indemnify and hold Sublessor harmless, from and against any claim for brokerage or other commission arising from or out of any breach of the indemnitor’s representation and warranty. This indemnification shall survive the expiration or termination of this Sublease.

 

ARTICLE 25 Severability . The invalidity of any provision of this Sublease as determined by a court of competent jurisdiction shall in no way affect the validity of any other provision hereof.

 

ARTICLE 26 Incorporation of Prior Agreements; Amendments . This Sublease contains all agreements of the parties with respect to the Sublease of the Premises during the Term mentioned herein. This Sublease may only be modified in writing signed by the parties in interest at the time of the modification.

 

ARTICLE 27 Notices . Any notice, request, demand, consent, approval and other communications under this Agreement shall be in writing, and shall be deemed duly given or made at the time and on the date when received by electronic mail transmission or facsimile (provided that the sender of such communication shall orally confirm receipt thereof by the appropriate parties and send a copy of such communication to the appropriate parties within one (1) business day of any such e-mail or facsimile) or when personally delivered as shown on a receipt therefor (which shall include delivery by a nationally recognized overnight delivery service), to the address for each party set forth below. Any party, by written notice to the other in the manner herein provided, may designate an address different from that set forth below. Notice given by a party's attorney in accordance with this Section 17 shall (a) constitute notice from said party, and (b) not be considered an improper direct contact from the sending attorney to a "person known to be represented by counsel".

 

If to Sublessor :

American Realty Capital VII, LLC

Attn: Edward M Weil., Jr.

405 Park Avenue, 2 nd Floor

New York, New York 10022

 

with a copy(which will not constitute notice) to:

 

Jesse Galloway

American Realty Capital VII, LLC

405 Park Avenue, 14 th Floor

 

 

 
 

 

  New York, New York 10022
   
with a copy (which will not constitute notice) to:

Michael A. Okaty

Foley & Lardner LLP

111 North Orange Avenue, Suite 1800

Orlando, Florida 32801

 

If to Sublessee :

Allegro

c/o Allegro Senior Living, LLC

212 South Central Avenue

Suite 201

Attention Laurence A. Schiffer, CEO

St. Louis, MO 63105

 

with a copy (which will not constitute notice) to:

Theresa Marie Kenney, Esq., B.C.S.

Duss, Kenney, Safer, Hampton & Joos, P.A.

4348 Southpoint Boulevard, Suite 101

Jacksonville, Florida 32216

 

And to:

 

Allegro

c/o Allegro Senior Living, LLC

212 South Central Avenue, Suite 301

Attention Robert B. Karn, CFO

St. Louis, MO 63105

 

ARTICLE 28 Holding Over . If Sublessee, with or without Sublessor’s consent, remains in possession of the Premises or any part thereof after the expiration of the Term hereof, such occupancy shall be a tenancy at sufferance upon all the provisions of this Sublease pertaining to the obligations of Sublessee.

 

ARTICLE 29 Binding Effect . Subject to any provisions hereof restricting assignment or subletting by Sublessee and subject to the provisions of Section 10, this Sublease shall bind the parties, their personal representatives, successors and assigns.

 

Section 29.1          Governing Law; Venue . This Sublease shall be interpreted and enforced under the laws of the State, without regard to concepts of choice of laws The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts in and for the state and county in which the Premises is located for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Sublease except in the federal and state courts in and for the state and county in which the Premises is located, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or

 

 
 

 

proceeding is improper or that this Sublease or the subject matter hereof may not be enforced in or by such courts.

 

 
 

 

ARTICLE 30 Sublessor’s Access . Sublessor and its officers, employees and agents shall have the right to enter the Premises at any time so long as such entry by Sublessor complies with the requirements of the Management Agreement concerning access to the Premises by Sublessee as Licensee thereunder.

 

ARTICLE 31 Limitation of Liability . To the maximum extent permitted by applicable law, no shareholder, member, director, manager, officer or employee of either party to this Agreement shall have any personal liability with respect to the liabilities or obligations of such party under this Agreement.

 

ARTICLE 32 Consent to Assignment and Subordination . Sublessee hereby consents to any assignment of this Sublease or the Sublessor’s rights hereunder to any lender that finances the purchase of the Premises by Landlord. Sublessee further agrees to subordinate its interest in the Premises to such lender and to execute a subordination agreement in favor of any such lender in a form reasonably acceptable thereto.

 

ARTICLE 33 Counterparts . This Sublease may be executed in any number of counterparts, each of which shall be deemed an original. This Sublease may be executed by counterpart signatures and all counterpart signature pages shall constitute a part of this Sublease. 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.

 

ARTICLE 34 Management Agreement . Sublessee agrees that it will not consent to any amendment to the Management Agreement without Sublessor’s consent which may be granted or withheld in Sublessor’s sole discretion. Except to the extent prohibited by applicable law, Sublessee further agrees that it shall not grant any approval or consent required of the Licensee under the Management Agreement without Sublessor’s consent which may not be unreasonably withheld or delayed if Licensee’s consent under the Management Agreement may not be unreasonably withheld or delayed. Sublessee further agrees that Sublessor, in Sublessee’s name, but at Sublessor’s expense, shall have the right to enforce any of Manager’s obligations under the Management Agreement, except to the extent prohibited by applicable law. Sublessee further agrees that, without the prior written consent or request of Sublessor it shall not terminate the Management Agreement.

 

ARTICLE 35 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED UPON THIS AGREEMENT OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS SUBLEASE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTION OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS SUBLEASE.

 

ARTICLE 36 RADON GAS . The following notice is given pursuant to Florida Statutes Section 404.056: “RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons

 

 
 

 

who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.”

 

SUBLESSOR AND SUBLESSEE HAVE CAREFULLY READ AND REVIEWED THIS SUBLEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS SUBLEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS SUBLEASE IS EXECUTED, THE TERMS OF THIS SUBLEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF SUBLESSOR AND SUBLESSEE WITH RESPECT TO THE PREMISES.

 

[Signature Page Follows.]

 

 
 

NOW WHEREFORE , the parties hereto have executed this Transition Period Sublease as of the date first set forth above.

 

      SUBLESSOR:
       
      ARHC [___________] TRS, LLC , a Delaware limited liability company
         
      By:  
      Name:  
      Title:  
         
Witnesses:      
       
       
Print Name:      
       
       
Print Name:      
       
      SUBLESSEE:
       
      [ALLEGRO OPERATOR]
         
      By:  
      Name:  
      Title:  
       
Witnesses:      
       
       
Print Name:      
       
       
Print Name:      

 

 
 

 

EXHIBIT A

 

DESCRIPTION OF REAL PROPERTY

 

 
 

 

EXHIBIT B

 

LICENSES

 

 
 

 

EXHIBIT E-3

 

Operations Transfer Agreement

 

[ INTENTIONALLY OMITTED ]

 

 
 

 

EXHIBIT F

 

Assumption Agreement

 

[ See attached. ]

 

 
 

ASSUMPTION AGREEMENT

 

THIS ASSUMPTION AGREEMENT is made effective _______ __, 2014, (the “Closing Date”) by and between by [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES], LLC , a [Florida/Kentucky] limited liability company (“ Seller ”) and ARHC [________] LLC , a Delaware limited liability company (the “ Purchaser ”) which is the assignee of certain rights and obligations of AMERICAN REALTY CAPITAL VII, LLC, a Delaware limited liability company (“ ARC ”), pursuant to that certain Asset Purchase Agreement by and between Seller, ARC, and certain other parties, dated as of August ___, 2014 (the “ Purchase Agreement ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Purchase Agreement.

 

In consideration of the Seller’s consummation of the transactions described in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Purchaser hereby acknowledges, the Purchaser, for itself and for its successors and assigns, hereby assumes and agrees to pay, perform or discharge, as the case may be, all of the Assumed Liabilities, including without limitation, those matters described on Composite Exhibit A attached hereto.

 

Except for the Assumed Liabilities, the Purchaser shall not assume or incur, and the Seller shall remain liable to pay, perform or discharge, all liabilities and obligations of the Seller of every kind.

 

The undertakings of the Purchaser referred to in this Assumption Agreement shall not in any way limit the Purchaser’s right of recourse as set forth in the Purchase Agreement for any breach of the covenants, representations or warranties of the Seller contained therein. Nothing herein shall prevent the Purchaser from contesting with a third party in good faith any of the Assumed Liabilities.

 

This Assumption Agreement is subject to the terms of the Purchase Agreement, and nothing contained herein shall be deemed to modify, alter or amend the terms and provisions of the Purchase Agreement. In the event of any inconsistency or conflict between the terms of the Purchase Agreement and the terms of this Assumption Agreement, the terms of the Purchase Agreement shall prevail.

 

[Signature Page Follows]

 

 
 

IN WITNESS WHEREOF, the Purchaser and the Seller have caused this Assumption Agreement to be executed and delivered under seal as of the day and year first above written. This Assumption Agreement may be executed in multiple counterparts, each of which, taken together, shall constitute one original.

 

  SELLER :
   
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC, a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC, its sole managing member
       
    By:  
    Name:  
    Title:  

 

  PURCHASER :
   
  ARHC [__________], LLC ,
  a Delaware limited liability company
     
  By:  
  Name:  
  Title:  

 

 
 

ACKNOWLEDGEMENT OF ASSUMPTION AGREEMENT

 

Each of the undersigned, which also comprise the cumulative “Seller” under the Purchase Agreement, acknowledges the Assumption Agreement by [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES], LLC to which this Acknowledgement is attached and represents and warrants that it has no ownership or interest in any of the Assumed Liabilities conveyed thereby.

 

  SELLER :
   
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC, a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC, its sole managing member
       
    By:  
    Name:  
    Title:  
       
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC, a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC, its sole managing member
       
    By:  
    Name:  
    Title:  
     
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC, a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC, its sole managing member
       
    By:  
    Name:  
    Title:  

 

[signatures continue on next page]

 

 
 

 

  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC, a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC, its sole managing member
       
    By:  
    Name:  
    Title:  
     
  [THE ALLEGRO AT ______/COLLEGE HARBOR PROPERTIES],  LLC, a [Florida/Kentucky] limited liability company
     
  By: ALLEGRO SENIOR LIVING, LLC, its sole managing member
       
    By:  
    Name:  
    Title:  

 

 
 

 

COMPOSITE EXHIBIT A TO ASSUMPTION AGREEMENT

 

As used herein the “Assumed Liabilities” are:

 

(i) all of Seller’s obligations and liabilities under the Assumed Contracts and Leases described on Schedule 1.1(a) attached hereto and incorporated herein by reference, to the extent the same arise or accrue at any time after 11:59 PM on the date immediately preceding the Closing Date;

 

(ii) all of Seller’s obligations with respect to accrued vacation and sick pay for employees to the extent of Purchaser’s obligations pursuant to Schedule 4.4(d) attached hereto and incorporated herein by this reference; and

 

(iii) the Prepaids and Deposits described on Schedule 2.2(c) attached hereto an incorporated herein by this reference.

 

 
 

 

EXHIBIT G

 

Due Diligence Materials

 

[ See attached. ]

 

 
 

Due Diligence Materials

 

1. A complete copy of all commercial leases affecting the Properties and all amendments thereto and of all material correspondence relating thereto.

 

2. A copy of the forms of resident agreements for each of the Properties and a resident census (without resident names).

 

3. A copy of all surveys and site plans of the Properties, including, without limitation, any as built surveys obtained or delivered to tenants of the Properties in connection with its construction.

 

4. A copy of all architectural plans and specifications and construction drawings for improvements located on the Properties.

 

5. A copy of Seller's title insurance policies relating to the Properties.

 

6. A-copy-of-the-certificate-of-occupancy and-zoning-reports-in-Seller's-possession-for-the-Properties and of all governmental permits and approvals.

 

7. A copy of all existing environmental, engineering and physical condition reports in Seller's possession for the Properties.

 

8. The operating budgets and operating statements of the Properties for the thirty-six (36) month period immediately preceding the Purchase and Sale Agreement effective date or such shorter period from the commencement of rent under the leases.

 

9. Copies of each Property's real estate tax bills and all utility bills for the current and prior two (2) tax years.

 

10. All service contracts and insurance policies which affect the Properties, if any.

 

11. A copy of all inspections of and warranties relating to the improvements constructed on the Properties and systems serving the Properties, including without limitation any structural slab, roof, electrical, plumbing, heating, air conditioning and elevator inspections and warranties.

 

12. A written inventory of all items of personal property, if any, to be conveyed to Buyer.

 

13. Updated set of current financials of the Properties through June 30, 2014.

 

14. Complete copy of any feasibility study completed by the senior housing operator, if any.

 

15. Operator records of payor-mix for patients/residents at the Properties.

 

16. A copy of all primary and secondary state licenses or regulatory permits for the Properties.

 

17. A copy of any third-party accreditation (i.e. Joint Commission) which affect the Properties, if any.

 

18. A copy of all Medicare and Medicaid provider agreements and provider numbers for the Properties.

 

19. A copy of all Medicare and Medicaid cost reports for the previous three years, if applicable.

 

 
 

 

20. A copy of any certificate of need documentation for each Property, if any.

 

21. A copy of all licensing inspection reports (whether performed on an annual basis or otherwise) from state regulators related to operation of each Property as an assisted living facility for the past five (5) years, and a summary of actions taken to correct deficiencies identified in any such reports.

 

22. A copy of all regulatory correspondence relating to enforcement actions imposed or threatened
for the past five (5) years.

 

23. A copy of any consent order imposed on the Properties.

 

24. A copy of all regulatory correspondence relating to any physical plant or life safety code deficiencies for the Properties.

 

25. A copy of any documents relating to a waiver of life safety code or physical plant requirements for the Properties.

 

26. Summary of all capital expenditures for the thirty-six (36) month period immediately preceding the Purchase and Sale Agreement effective date.

 

27. All pest control inspection reports of the Properties for the preceding thirty-six (36) months.

 

28. Copy of any ADA Survey report for the Properties.

 

29. Copies of all maintenance and service reports for the Properties for the preceding thirty-six (36) months.

 

 

Exhibit 10.43

FIRST AMENDMENT TO SENIOR SECURED REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO SENIOR SECURED REVOLVING CREDIT AGREEMENT (this “ Amendment ”) made as of the _____ day of September, 2014, by and among AMERICAN REALTY CAPITAL HEALTHCARE TRUST II OPERATING PARTNERSHIP, L.P. , a Delaware limited partnership (“ Borrower ”), AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC. , a Maryland corporation (“ Guarantor ”), KEYBANK NATIONAL ASSOCIATION (“ KeyBank ”), individually and as Agent for itself and the other Lenders from time to time a party to the Credit Agreement (as hereinafter defined) (KeyBank, in its capacity as Agent, is hereinafter referred to as “ Agent ”), and THE OTHER “LENDERS” WHICH ARE SIGNATORIES HERETO (hereinafter referred to collectively as the “ Lenders ”).
W I T N E S S E T H:
WHEREAS , Borrower, Agent and certain of the Lenders entered into that certain Senior Secured Revolving Credit Agreement dated as of March 21, 2014 (the “ Credit Agreement ”); and
WHEREAS , Borrower has requested that the Agent and the Lenders make certain modifications to the terms of the Credit Agreement; and
WHEREAS , the Agent and the Lenders have agreed to make such modifications subject to the execution and delivery by Borrower and Guarantor of this Amendment.
NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby covenant and agree as follows:
1. Definitions . All the terms used herein which are not otherwise defined herein shall have the meanings set forth in the Credit Agreement.
2.      Modification of the Credit Agreement . Borrower, the Lenders and Agent do hereby modify and amend the Credit Agreement as follows:
(a)      By inserting the following definitions in §1.1 of the Credit Agreement, in the appropriate alphabetical order:
“ Distribution Limit . See §8.7(a).”;
“ Dividend Limit Waiver Period . See §8.7(a).”; and
“ Increased Distributions Limit Period . See §8.7(a).”
(b)      By deleting in its entirety the first (1 st ) sentence of §8.7(a) of the Credit Agreement and inserting in lieu thereof the following new sentence:
“(a)    The Borrower shall not pay any Distribution to the partners, members or other owners of the Borrower, and REIT shall not pay any Distribution to

1


its partners, members or other owners of REIT, to the extent that the aggregate amount of such Distributions paid in any fiscal quarter, when added to the aggregate amount of all other Distributions paid in the same fiscal quarter and the preceding three (3) fiscal quarters, exceeds ninety-five percent (95%) of such Person’s Modified FFO for such period (the “ Distribution Limit ”) (provided that (X) during the time period commencing on April 1, 2014 and ending on September 30, 2014 (the “ Dividend Limit Waiver Period ”), Borrower or REIT may make Distributions in excess of the Distribution Limit so long as all Distributions made by Borrower or REIT during the Dividend Limit Waiver Period consist solely of cash dividends at such Person’s normal rate consistent with past practice paid on account of Equity Interests of REIT or its Subsidiaries which are then outstanding, (Y) during the time period commencing on October 1, 2014 and ending on March 31, 2015 (the “ Increased Distributions Limit Period ”), the Distribution Limit shall be increased to one hundred twenty-five percent (125%) of such Person’s Modified FFO and any Distributions paid by Borrower or REIT to their respective partners, members or other owners before the Increased Distributions Limit Period shall not be considered in the calculation of the limitations contained in this §8.7(a)(Y), it being agreed that during the Increased Distributions Limit Period, the aggregate amount of such permitted Distributions shall be determined by using only the quarters elapsed from October 1, 2014 and annualizing such amount in a manner reasonably acceptable to Agent, and (Z) upon the expiration of the Increased Distributions Limit Period, the Distribution Limit shall return to ninety-five percent (95%) of such Person’s Modified FFO and any Distributions paid by Borrower or REIT to their respective partners, members or other owners during the Dividend Limit Waiver Period or the Increased Distributions Limit Period shall not be considered in the calculation of the limitations contained in this §8.7(a) for the period commencing April 1, 2015 and continuing thereafter, it being agreed that until three (3) fiscal quarters following April 1, 2015 have occurred, the aggregate amount of such permitted Distributions shall be determined by using the quarters elapsed from April 1, 2015 and annualizing such amount in a manner reasonably acceptable to Agent); provided that the limitations contained in this §8.7(a) shall not preclude the Borrower or REIT from making Distributions in an amount equal to the minimum distributions required under the Code to maintain the REIT Status of REIT, as evidenced by a certification of the principal financial officer or accounting officer of REIT containing calculations in detail reasonably satisfactory in form and substance to the Agent.”
3.      References to Credit Agreement . All references in the Loan Documents to the Credit Agreement shall be deemed a reference to the Credit Agreement as modified and amended herein .
4.      Consent and Acknowledgment of Borrower and Guarantor . By execution of this Amendment, the Guarantor hereby expressly consents to the modifications and amendments relating to the Credit Agreement as set forth herein, and Borrower and Guarantor hereby acknowledge, represent and agree that (a) the Credit Agreement, as modified and amended herein, and the other

2


Loan Documents remain in full force and effect and constitute the valid and legally binding obligation of Borrower and Guarantor, as applicable, enforceable against such Persons in accordance with their respective terms, (b) that the Guaranty extends to and applies to the Credit Agreement as modified and amended herein, and (c) that the execution and delivery of this Amendment does not constitute, and shall not be deemed to constitute, a release, waiver or satisfaction of Borrower’s or the Guarantor’s obligations under the Loan Documents .
5.      Representations and Warranties . Borrower and Guarantor represent and warrant to Agent and the Lenders as follows:
(a)      Authorization . The execution, delivery and performance of this Amendment and the transactions contemplated hereby (i) are within the authority of Borrower and Guarantor, (ii) have been duly authorized by all necessary proceedings on the part of the Borrower and Guarantor, (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which Borrower or Guarantor is subject or any judgment, order, writ, injunction, license or permit applicable to Borrower or Guarantor, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the partnership agreement, articles of incorporation or other charter documents or bylaws of, or any agreement or other instrument binding upon, Borrower or Guarantor or any of their respective properties, (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of Borrower or Guarantor and (vi) do not require the approval or consent of any Person other than those already obtained and delivered to the Agent.
(b)      Enforceability . This Amendment is the valid and legally binding obligations of Borrower and Guarantor enforceable in accordance with the respective terms and provisions hereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and the effect of general principles of equity.
(c)      Governmental Approvals . The execution, delivery and performance of this Amendment and the transactions contemplated hereby do not require the approval or consent of, or any filing or registration with, or the giving of any notice to, any court, department, board, governmental agency or authority other than those already obtained, and filings after the date hereof of disclosures with the SEC, or as may be required hereafter with respect to tenant improvements, repairs or other work with respect to any Real Estate.
(d)      Reaffirmation of Representations and Warranties . Each of the representations and warranties made by or on behalf of the Borrower, the Guarantor or any of their respective Subsidiaries contained in the Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement is true and correct in all material respects as of the date hereof, with the same effect as if made at and as of the date hereof, except to the extent of changes resulting from transactions permitted by the Loan Documents (it being understood and agreed that, with respect to any representation or warranty which by its terms is made as of a specified date, such representation or warranty is reaffirmed hereby only as of such specified date). To the extent that any of the representations and warranties contained in the Credit Agreement, any other Loan Document or in any document or instrument

3


delivered pursuant to or in connection with the Credit Agreement is qualified by “Material Adverse Effect” or any other materiality qualifier, then the qualifier “in all material respects” contained in this Paragraph 5(d) shall not apply with respect to any such representations and warranties.
6.      No Default . By execution hereof, the Borrower and the Guarantor certify that, immediately after giving effect to this Amendment, there exists no Default or Event of Default as of the date of this Amendment.
7.      Waiver of Claims . Borrower and Guarantor acknowledge, represent and agree that none of such Persons has any defenses, setoffs, claims, counterclaims or causes of action of any kind or nature whatsoever arising on or before the date hereof with respect to the Loan Documents, the administration or funding of the Loan or the Letters of Credit or with respect to any acts or omissions of Agent or any Lender, or any past or present officers, agents or employees of Agent or any Lender pursuant to or relating to the Loan Documents, and each of such Persons does hereby expressly waive, release and relinquish any and all such defenses, setoffs, claims, counterclaims and causes of action arising on or before the date hereof, if any.
8.      Ratification . Except as hereinabove set forth, all terms, covenants and provisions of the Credit Agreement remain unaltered and in full force and effect, and the parties hereto do hereby expressly ratify and confirm the Credit Agreement as modified and amended herein. Nothing in this Amendment or any other document delivered in connection herewith shall be deemed or construed to constitute, and there has not otherwise occurred, a novation, cancellation, satisfaction, release, extinguishment or substitution of the indebtedness evidenced by the Notes or the other obligations of Borrower and Guarantor under the Loan Documents.
9.      Effective Date . This Amendment shall be deemed effective and in full force and effect as of the date hereof upon (a) the execution and delivery of this Amendment by Borrower, Guarantor, Agent and the Majority Lenders, and (b) evidence that the Borrower shall have paid all fees due and payable with respect to this Amendment. The Borrower shall pay the reasonable fees and expenses of Agent in connection with this Amendment in accordance with Section 15 of the Credit Agreement.
10.      Amendment as Loan Document . This Amendment shall constitute a Loan Document.
11.      Counterparts . This Amendment may be executed in any number of counterparts which shall together constitute but one and the same agreement.
12.      MISCELLANEOUS . THIS AMENDMENT SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors, successors-in-title and assigns as provided in the Credit Agreement.
[Signatures Begin On Next Page]


4



IN WITNESS WHEREOF , the parties hereto have hereto set their hands and affixed their seals as of the day and year first above written.
BORROWER :
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     
Name: Edward M. Weil
Title: President

REIT :

AMERICAN REALTY CAPITAL HEALTHCARE TRUST II, INC. , a Maryland corporation

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

[Signatures Continue on Following Page]











KeyBank/American Realty Capital Healthcare Trust II Operating Partnership, L.P. – Signature Page to First Amendment to Senior Secured Revolving Credit Agreement

LENDERS :

KEYBANK NATIONAL ASSOCIATION, individually as a Lender and as the Agent
By: /s/ Wayne D. Horvath    
Name: Wayne D. Horvath
Title: Senior Vice President

REGIONS BANK
By: /s/ David Blevins    
Name: David Blevins
Title: Vice President

JPMORGAN CHASE BANK, N.A.
By: /s/ Rita Lai    
Name: Rita Lai
Title: Authorized Signer


CAPITAL ONE, NATIONAL ASSOCIATION
By: /s/ Daniel Moore    
Name: Daniel Moore
Title: Authorized Signatory




KeyBank/American Realty Capital Healthcare Trust II Operating Partnership, L.P. – Signature Page to First Amendment to Senior Secured Revolving Credit Agreement
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Thomas P. D'Arcy, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of American Realty Capital Healthcare Trust II, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated this 14th day of November, 2014
 
/s/ Thomas P. D'Arcy
 
 
Thomas P. D'Arcy
 
 
Chief Executive Officer
 
 
(Principal Executive Officer)

 



Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Edward F. Lange, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of American Realty Capital Healthcare Trust II, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated this 14th day of November, 2014
 
/s/ Edward F. Lange
 
 
Edward F. Lange
 
 
Chief Financial Officer and Chief Operating Officer
 
 
(Principal Financial Officer and Principal Accounting Officer)


 



Exhibit 32
SECTION 1350 CERTIFICATIONS

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
The undersigned, who are the Chief Executive Officer and Chief Financial Officer of American Realty Capital Healthcare Trust II, Inc. (the “Company”), each hereby certify as follows:
The quarterly report on Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated this 14th day of November, 2014
 
/s/ Thomas P. D'Arcy
 
Thomas P. D'Arcy
 
Chief Executive Officer
 
(Principal Executive Officer)
 
 
 
/s/ Edward F. Lange
 
Edward F. Lange
 
Chief Financial Officer and Chief Operating Officer
 
(Principal Financial Officer and Principal Accounting Officer)