10-Q

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, 2013

or

¨ 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 000-53969

SENTIO HEALTHCARE PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

MARYLAND	20-5721212
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
189 South Orange Avenue, Suite 1700,
Orlando, FL	32801
(Address of principal executive offices)	(Zip Code)

407-999-7679

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the 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.     x  Yes     ¨  No

Indicate by check mark whether the registrant has 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 (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     x  Yes     ¨  No

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	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).     ¨ Yes     x  No

As of November 4, 2013, there were 12,609,784 shares of common stock of Sentio Healthcare Properties, Inc. outstanding.

Table of Contents

PART I — FINANCIAL INFORMATION

FORM 10-Q

SENTIO HEALTHCARE PROPERTIES, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012 (unaudited)	1
Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2013 (unaudited) and 2012 (unaudited)	2
Condensed Consolidated Statements of Equity for the Nine months ended September 30, 2013 (unaudited) and 2012 (unaudited)	3
Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2013 (unaudited) and 2012 (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	27
Item 4. Controls and Procedures	27
PART II. OTHER INFORMATION	28
Item 1A. Risk Factors	28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6. Exhibits	29
SIGNATURES	30

 

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2013		December 31, 2012
ASSETS
Cash and cash equivalents	$	18,265,000	$	21,507,000
Investments in real estate:
Land		23,193,000		23,193,000
Buildings and improvements, net		154,439,000		157,845,000
Furniture, fixtures and equipment, net		2,786,000		3,315,000
Intangible lease assets, net		3,334,000		5,383,000
		183,752,000		189,736,000
Deferred financing costs, net		1,496,000		1,697,000
Investment in unconsolidated entities		1,458,000		3,529,000
Tenant and other receivable, net		2,912,000		1,988,000
Deferred costs and other assets		8,249,000		2,987,000
Restricted cash		3,869,000		3,821,000
Goodwill		5,965,000		5,965,000
Total assets	$	225,966,000	$	231,230,000
LIABILITIES AND EQUITY
Liabilities:
Notes payable, net	$	143,605,000	$	145,364,000
Accounts payable and accrued liabilities		4,554,000		4,545,000
Prepaid rent and security deposits		1,984,000		1,879,000
Distributions payable		1,544,000		1,533,000
Total liabilities		151,687,000		153,321,000
Commitments and contingencies
Equity:
Common stock, $0.01 par value per share; 580,000,000 shares authorized; 12,615,208, and     12,807,673 shares issued and outstanding at September 30, 2013 and December 31, 2012,     respectively		126,000		128,000
Additional paid-in capital		84,953,000		91,589,000
Accumulated deficit		(14,419,000)		(17,936,000)
Total stockholders’ equity		70,660,000		73,781,000
Noncontrolling interests		3,619,000		4,128,000
Total equity		74,279,000		77,909,000
Total liabilities and equity	$	225,966,000	$	231,230,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
		2013		2012		2013		2012
Revenue:
Rental revenue	$	8,499,000	$	8,422,000	$	25,373,000	$	24,525,000
Resident services and fee income		6,195,000		3,655,000		18,115,000		8,243,000
Tenant reimbursements and other income		403,000		312,000		1,212,000		1,121,000
		15,097,000		12,389,000		44,700,000		33,889,000
Expenses:
Property operating and maintenance		9,181,000		7,473,000		26,899,000		20,921,000
General and administrative expenses		523,000		423,000		1,186,000		1,632,000
Asset management fees and expenses		732,000		559,000		2,125,000		1,543,000
Real estate acquisition costs and contingent consideration		—		1,016,000		—		1,229,000
Depreciation and amortization		1,528,000		1,689,000		6,317,000		4,653,000
		11,964,000		11,160,000		36,527,000		29,978,000
Income from operations		3,133,000		1,229,000		8,173,000		3,911,000
Other (income) expense:
Interest expense, net		2,031,000		1,788,000		6,121,000		4,808,000
Loss on debt extinguishment and other expense		—		—		—		151,000
Equity in loss (income) from unconsolidated entities		56,000		(14,000)		(24,000)		363,000
Gain on remeasurement of investment in unconsolidated entity		—		—		—		(1,282,000)
Gain on disposition of investment in unconsolidated entity		(1,701,000)		—		(1,701,000)		—
Net income (loss)		2,747,000		(545,000)		3,777,000		(129,000)
Net income (loss) attributable to noncontrolling interests		215,000		(16,000)		260,000		108,000
Net income (loss) attributable to common stockholders	$	2,532,000	$	(529,000)	$	3,517,000	$	(237,000)
Basic and diluted net income (loss) per common share attributable to common stockholders	$	0.20	$	(0.04)	$	0.28	$	(0.02)
Basic and diluted weighted average number of common shares		12,673,194		12,853,483		12,756,221		12,877,929

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Nine Months Ended September 30, 2013 and 2012

(Unaudited)

	Common Stock
	Number of Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance — December 31, 2012		12,807,673	$	128,000	$	91,589,000	$	(17,936,000)	$	73,781,000	$	4,128,000	$	77,909,000
Redeemed shares		(192,465)		(2,000)		(1,922,000)		—		(1,924,000)		—		(1,924,000)
Offering costs		—		—		(92,000)		—		(92,000)		—		(92,000)
Distributions		—		—		(4,622,000)		—		(4,622,000)		(769,000)		(5,391,000)
Net income		—		—		—		3,517,000		3,517,000		260,000		3,777,000
Balance — September 30, 2013		12,615,208	$	126,000	$	84,953,000	$	(14,419,000)	$	70,660,000	$	3,619,000	$	74,279,000

	Common Stock
	Number of Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance — December 31, 2011		12,916,612	$	129,000	$	96,542,000	$	(17,054,000)	$	79,617,000	$	1,242,000	$	80,859,000
Redeemed shares		(76,293)		—		(719,000)		—		(719,000)		—		(719,000)
Noncontrolling interest contribution		—		—		—		—		—		3,444,000		3,444,000
Distributions		—		—		(2,407,000)		—		(2,407,000)		(302,000)		(2,709,000)
Net (loss) income		—		—		—		(237,000)		(237,000)		108,000		(129,000)
Balance —September 30, 2012		12,840,319	$	129,000	$	93,416,000	$	(17,291,000)	$	76,254,000	$	4,492,000	$	80,746,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2013		2012
Cash flows from operating activities:
Net income (loss)	$	3,777,000	$	(129,000)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of deferred financing costs		308,000		356,000
Depreciation and amortization		6,317,000		4,653,000
Straight-line rent and above/below market lease amortization		(487,000)		(527,000)
Gain on disposition of investment in unconsolidated entity		(1,701,000)		—
Amortization of loan premium		(52,000)		—
Real estate contingent consideration		—		110,000
Gain on remeasurement of investment in unconsolidated entity		—		(1,282,000)
Equity in (income) loss from unconsolidated entities		(24,000)		363,000
Bad debt expense		27,000		40,000
Deferred tax (benefit)		(569,000)		(191,000)
Change in operating assets and liabilities:
Tenant and other receivables		(285,000)		205,000
Deferred costs and other assets		152,000		441,000
Restricted cash		9,000		95,000
Prepaid rent and security deposits		105,000		142,000
Accounts payable and accrued liabilities		1,000		145,000
Net cash provided by operating activities		7,578,000		4,421,000
Cash flows from investing activities:
Real estate acquisitions		—		(18,151,000)
Additions to real estate		(489,000)		(383,000)
Purchase of an interest in an unconsolidated entity		—		(2,490,000)
Proceeds from disposition of investment in unconsolidated entity		3,534,000		—
Changes in restricted cash		(57,000)		47,000
Acquisition deposits		(886,000)		—
Distributions from unconsolidated entities		342,000		143,000
Net cash provided by (used in) investing activities		2,444,000		(20,834,000)
Cash flows from financing activities:
Redeemed shares		(1,924,000)		(719,000)
Proceeds from notes payable		—		40,763,000
Repayments of notes payable		(1,707,000)		(25,529,000)
Offering costs		(84,000)		—
Deferred financing costs		(107,000)		(1,247,000)
Noncontrolling interest contribution		—		603,000
Payment of real estate contingent consideration		—		(980,000)
Distributions paid to stockholders		(4,611,000)		(2,407,000)
Distributions paid to noncontrolling interests		(769,000)		(302,000)
Prepaid preferred stock offering costs		(4,062,000)		—
Net cash (used in) provided by financing activities		(13,264,000)		10,182,000
Net (decrease) in cash and cash equivalents		(3,242,000)		(6,231,000)
Cash and cash equivalents — beginning of period		21,507,000		27,972,000
Cash and cash equivalents — end of period	$	18,265,000	$	21,741,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	5,808,000	$	4,694,000
Cash paid for income taxes		367,000		549,000
Supplemental disclosure of non-cash financing and investing activities:
Distributions declared not paid		1,544,000		807,000
Accrued offering costs		8,000		—
Notes payable assumed and non-cash equity contribution in connection with real estate acquisition		—		50,236,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2013

(Unaudited)

1. Organization

Sentio Healthcare Properties, Inc., a Maryland corporation, was formed on October 16, 2006 under the Maryland General Corporation Law for the purpose of engaging in the business of investing in and owning commercial real estate. As used in this report, the “Company”, “we”, “us” and “our” refer to Sentio Healthcare Properties, Inc. and its consolidated subsidiaries, except where context otherwise requires. Our business is managed by Sentio Investments, LLC, a Florida limited liability company that was formed on December 20, 2011 (the “Advisor”), which is majority-owned and controlled by John Mark Ramsey, our Chief Executive Officer. Beginning with the taxable year ended December 31, 2008, Sentio Healthcare Properties, Inc. has elected to be taxed as a real estate investment trust (“REIT”).

Sentio Healthcare Properties OP, LP, a Delaware limited partnership (the “Operating Partnership”), was formed on October 17, 2006. At September 30, 2013, we owned 100% of the interest in the Operating Partnership and the HC Operating Partnership, LP, a subsidiary of the Operating Partnership. We anticipate that we will conduct substantially all of our operations through the Operating Partnership. Our financial statements and the financial statements of the Operating Partnership are consolidated in the accompanying condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

For more information regarding our significant accounting policies and estimates, please refer to “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2012.

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In accordance with the guidance for the consolidation of variable interest entities (“VIEs”), we analyze our variable interests, including investments in partnerships and joint ventures, to determine if the entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews, based on our review of the design of the entity, its organizational structure including decision-making ability, risk and reward sharing experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions and financial agreements. We also use quantitative and qualitative analyses to determine if we must consolidate a variable interest entity as the primary beneficiary.

Interim Financial Information

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Our accompanying interim condensed consolidated financial statements should be read in conjunction with our audited condensed consolidated financial statements and the notes thereto included on our 2012 Annual Report on Form 10-K, as filed with the SEC.

3. Investments in Real Estate

As of September 30, 2013, accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements		Furniture, fixtures and equipment		Intangible lease assets
Cost	$	23,193,000	$	167,224,000	$	5,270,000	$	14,757,000
Accumulated depreciation and amortization		—		(12,785,000)		(2,484,000)		(11,423,000)
Net	$	23,193,000	$	154,439,000	$	2,786,000	$	3,334,000

5

As of December 31, 2012, accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements		Furniture, fixtures and equipment		Intangible lease assets
Cost	$	23,193,000	$	166,996,000	$	5,118,000	$	14,757,000
Accumulated depreciation and amortization		—		(9,151,000)		(1,803,000)		(9,374,000)
Net	$	23,193,000	$	157,845,000	$	3,315,000	$	5,383,000

Depreciation expense associated with buildings and improvements, site improvements and furniture and fixtures for the three months ended September 30, 2013 and 2012 was approximately $1.4 million and $1.2 million, respectively. Depreciation expense associated with buildings and improvements, site improvements and furniture and fixtures for the nine months ended September 30, 2013 and 2012 was approximately $4.3 million and $3.2 million, respectively.

Amortization associated with intangible assets for the three months ended September 30, 2013 and 2012 was $0.1 million and $0.5 million, respectively. Amortization associated with intangible assets for the nine months ended September 30, 2013 and 2012 was $2.0 million and $1.5 million, respectively.

Estimated amortization for October 1, 2013 through December 31, 2013 and each of the subsequent years is as follows:

	Intangible assets
October 1, 2013 — December 31, 2013	$	82,000
2014		330,000
2015		330,000
2016		329,000
2017		328,000
2018		328,000
2019 and thereafter		1,607,000

The estimated useful lives for intangible assets range from approximately three to sixteen years. As of September 30, 2013, the weighted-average amortization period for intangible assets was eleven years.

4. Investments in Unconsolidated Entities

As of September 30, 2013, the Company owns an interest in the following entity that is accounted for under the equity method of accounting:

Entity(1)	Property Type	Acquired	Investment(2)		Ownership%
Physicians Center MOB	Medical Office Building	April 2012		1,458,000		71.9

(1)	This entity is not consolidated because the Company exercises significant influence, but does not control or direct the activities that most significantly impact the entity’s performance.
(2)	Represents the carrying value of the Company’s investment in the unconsolidated entity.

Summarized combined financial information for the Company’s unconsolidated entities is as follows:

	September 30, 2013(2)		December 31, 2012(1)(2)
Cash and cash equivalents	$	370,000	$	423,000
Investments in real estate, net		8,949,000		16,312,000
Other assets		173,000		549,000
Total assets	$	9,492,000	$	17,284,000
Notes payable		7,240,000		12,504,000
Accounts payable and accrued liabilities		252,000		219,000
Other liabilities		26,000		99,000
Total stockholders’ equity		1,974,000		4,462,000
Total liabilities and equity	$	9,492,000	$	17,284,000

6

	Three Months Ended September 30,				Nine Months Ended September 30,
		2013(1)(2)		2012(1)(2)		2013(1)(2)		2012(1)(2)(3)
Total revenues	$	505,000	$	689,000	$	1,898,000	$	1,754,000
Net loss		(81,000)		(15,000)		(22,000)		(486,000)
Company’s equity in loss (income) from unconsolidated     entities		56,000		(14,000)		(24,000)		363,000

(1)	Littleton Specialty Rehabilitation Facility was completed in April 2012 and the single tenant began paying rent in July 2012, in accordance with the lease. Tenant operations commenced upon licensure of the facility in July 2012 and Littleton Specialty Rehabilitation Facility was accounted for under the equity method of accounting. On December 17, 2012, our joint venture partner noticed the Company of their intent to exercise their promote monetization right. The Company elected to satisfy the monetization provision through a sale of the property. The property was sold on August 8, 2013 for $11.3 million, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013. The Company’s equity in income from the Littleton Specialty Rehabilitation Facility is included in the statement of operations through the date of the sale.
(2)	The Physicians Centre MOB joint venture was acquired in April 2012 and was accounted for under the equity method of accounting beginning with the second quarter of 2012.
(3)	The Company acquired the controlling interest in the operations of Rome LTACH in April 2012 and as a result, Rome LTACH was consolidated in the second quarter of 2012. Accordingly, Rome LTACH was accounted for under the equity method of accounting during the three months ended March 31, 2012.

5. Income Taxes

For federal income tax purposes, we have elected to be taxed as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our taxable year ended December 31, 2008. REIT status imposes limitations related to operating assisted-living properties. Generally, to qualify as a REIT, we cannot directly operate assisted-living facilities. However, such facilities may generally be operated by a taxable REIT subsidiary (“TRS”) pursuant to a lease with the Company. Therefore, we have formed Master HC TRS, LLC (“Master TRS”), a wholly owned subsidiary of HC Operating Partnership, LP, to lease any assisted-living properties we acquire and to operate the assisted-living properties pursuant to contracts with unaffiliated management companies. Master TRS and the Company have made the applicable election for Master TRS to qualify as a TRS. Under the management contracts, the management companies have direct control of the daily operations of these assisted-living properties.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would not be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would establish a valuation allowance which would reduce the provision for income taxes.

The Master TRS recognized a $0.1 million expense and a $0.1 million expense for Federal and State income taxes in the three months ended September 30, 2013 and 2012, respectively, and a $0.1 million benefit and a $0.1 million expense for Federal and State income taxes in the nine months ended September 30, 2013 and 2012, respectively, which have been recorded in general and administrative expenses. Net deferred tax assets related to the TRS entities totaled approximately $1.9 million at September 30, 2013 and $1.3 million at December 31, 2012, respectively, related primarily to book and tax basis differences for straight-line rent and accrued liabilities. Realization of these deferred tax assets is dependent in part upon generating sufficient taxable income in future periods. These deferred tax assets are included in deferred costs and other assets in our condensed consolidated balance sheets. We have not recorded a valuation allowance against our deferred tax assets as of September 30, 2013, as we have determined that the future projected taxable income from the operations of the TRS entities are sufficient to cover the additional future expenses resulting from these book tax differences.

7

 

6. Segment Reporting

As of September 30, 2013, we operated in three reportable business segments: senior living operations, triple-net leased properties, and medical office building (“MOB”) properties. Our senior living operations segment primarily consists of investments in senior housing communities located in the United States for which we engage independent third-party managers. Our triple-net leased properties segment consists of investments in skilled nursing and hospital facilities in the United States. These facilities are leased to healthcare operating companies under long-term “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our medical office building operations segment primarily consists of investing in medical office buildings and leasing those properties to healthcare providers under long-term leases, which may require tenants to pay property-related expenses.

We evaluate performance of the combined properties in each segment based on net operating income. Net operating income is defined as total revenue less property operating and maintenance expenses. There are no intersegment sales or transfers. We use net operating income to evaluate the operating performance of our real estate investments and to make decisions concerning the operation of the property. We believe 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 depreciation and amortization, asset management fees and expenses, real estate acquisition costs, interest expense and corporate general and administrative expenses. Additionally, net operating income as we define it may not be comparable to net operating income as defined by other REITs or companies.

8

The following tables reconcile the segment activity to consolidated net income for the three months ended September 30, 2013 and 2012:

	Three Months Ended September 30, 2013								Three Months Ended September 30, 2012
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated		Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenue	$	6,976,000	$	1,309,000	$	214,000	$	8,499,000	$	6,910,000	$	1,298,000	$	214,000	$	8,422,000
Resident services and fee income		6,195,000		—		—		6,195,000		3,655,000		—		—		3,655,000
Tenant reimbursements and other     income		103,000		226,000		74,000		403,000		15,000		222,000		75,000		312,000
	$	13,274,000	$	1,535,000	$	288,000	$	15,097,000	$	10,580,000	$	1,520,000	$	289,000	$	12,389,000
Property operating and maintenance		8,875,000		227,000		79,000		9,181,000		7,159,000		220,000		94,000		7,473,000
Net operating income	$	4,399,000	$	1,308,000	$	209,000	$	5,916,000	$	3,421,000	$	1,300,000	$	195,000	$	4,916,000
General and administrative     expenses								523,000								423,000
Asset management fees and     expenses								732,000								559,000
Real estate acquisition costs and     contingent consideration								—								1,016,000
Depreciation and amortization								1,528,000								1,689,000
Interest expense, net								2,031,000								1,788,000
Equity in loss (income) from     unconsolidated entities								56,000								(14,000)
Gain on disposition of investment in     unconsolidated entity								(1,701,000)								—
Net income (loss)							$	2,747,000							$	(545,000)

	Nine Months Ended September 30, 2013								Nine Months Ended September 30, 2012
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated		Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenue	$	20,805,000	$	3,928,000	$	640,000	$	25,373,000	$	20,453,000	$	3,436,000	$	636,000	$	24,525,000
Resident services and fee income		18,115,000		—		—		18,115,000		8,243,000		—		—		8,243,000
Tenant reimbursements and other     income		328,000		663,000		221,000		1,212,000		294,000		593,000		234,000		1,121,000
	$	39,248,000	$	4,591,000	$	861,000	$	44,700,000	$	28,990,000	$	4,029,000	$	870,000	$	33,889,000
Property operating and maintenance		25,987,000		682,000		230,000		26,899,000		20,084,000		594,000		243,000		20,921,000
Net operating income	$	13,261,000	$	3,909,000	$	631,000	$	17,801,000	$	8,906,000	$	3,435,000	$	627,000	$	12,968,000
General and administrative     expenses								1,186,000								1,632,000
Asset management fees and     expenses								2,125,000								1,543,000
Real estate acquisition costs and     contingent consideration								—								1,229,000
Depreciation and amortization								6,317,000								4,653,000
Interest expense, net								6,121,000								4,808,000
Loss on debt extinguishment and     other expense								—								151,000
Equity in (income) loss from     unconsolidated entities								(24,000)								363,000
Gain in remeasurement of     investment in unconsolidated     entity								—								(1,282,000)
Gain on disposition of investment in     unconsolidated entity								(1,701,000)								—
Net income (loss)							$	3,777,000							$	(129,000)

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The following table reconciles the segment activity to consolidated financial position as of September 30, 2013 and December 31, 2012.

	September 30, 2013		December 31, 2012
Assets
Investment in real estate:
Senior living operations	$	133,296,000	$	137,784,000
Triple-net leased properties		42,523,000		43,781,000
Medical office building		7,933,000		8,171,000
Total reportable segments	$	183,752,000	$	189,736,000
Reconciliation to consolidated assets:
Cash and cash equivalents		18,265,000		21,507,000
Deferred financing costs, net		1,496,000		1,697,000
Investment in unconsolidated entities		1,458,000		3,529,000
Tenant and other receivables, net		2,912,000		1,988,000
Deferred costs and other assets		8,249,000		2,987,000
Restricted cash		3,869,000		3,821,000
Goodwill		5,965,000		5,965,000
Total assets	$	225,966,000	$	231,230,000

As of September 30, 2013 and December 31, 2012, goodwill had a balance of approximately $6.0 million, all of which related to the senior living operations segment. The Company historically has not recorded any impairment charges for goodwill.

7. Fair Value Measurements

FASB Accounting Standards Codification (“ASC”) 825-10, “Financial Instruments” , requires the disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and International Financial Reporting Standards and change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.

Level 1.  Quoted prices in active markets for identical instruments.

Level 2.  Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3.  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument.

We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets when such information is available or using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.

Our balance sheets include the following financial instruments: cash and cash equivalents, tenant and other receivables, restricted cash, security deposits, accounts payable and accrued liabilities, distributions payable, and notes payable. We consider the carrying values of our financial instruments, other than notes payable, to approximate fair value because they generally expose the Company to limited credit risk and because of the short period of time between origination of the financial assets and liabilities and their expected settlement.

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The fair value of the Company’s notes payable is estimated by discounting future cash flows of each instrument at rates that reflect the current market rates available to the Company for debt of the same terms and maturities. The fair value of the notes payable was determined using Level 2 inputs of the fair value hierarchy. Based on the estimates used by the Company, the fair value of notes payable was $143.7 million and $146.2 million, compared to the carrying values of $ 143.6 ($143.2 million, net of premium) million and $145.4 ($145.0 million, net of premium) million at September 30, 2013 and December 31, 2012, respectively.

There were no transfers between Level 1 or 2 during the three and nine months ended September 30, 2013.

8. Notes Payable

Notes payable were $143.6 million ($143.2 million, net of premium) and $145.4 million ($145.0 million, net of premium) as of September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013, we had fixed and variable rate secured mortgage loans with effective interest rates ranging from 2.80% to 6.50% per annum and a weighted average effective interest rate of 5.45% per annum. As of September 30, 2013, notes payable consisted of $112.4 million of fixed rate debt, or approximately 79% of notes payable, at a weighted average interest rate of 5.35% per annum and $30.8 million of variable rate debt, or approximately 21% of notes payable, at a weighted average interest rate of 5.83% per annum. As of December 31, 2012, we had fixed and variable rate secured mortgage loans with effective interest rates ranging from 2.80% to 6.50% per annum and a weighted-average effective interest rate of 5.45% per annum. As of December 31, 2012, notes payable consisted of $113.8 million of fixed rate debt, or 79% of notes payable, at a weighted average interest rate of 5.35% per annum and $31.1 million of variable rate debt, or 21% of notes payable, at a weighted average interest rate of 5.83% per annum.

We are required by the terms of the applicable loan documents to meet certain financial covenants, such as debt service coverage ratios, rent coverage ratios and reporting requirements. As of September 30, 2013, we were in compliance with all such covenants and requirements.

Principal payments due on our notes payable for October 1, 2013 to December 31, 2013 and each of the subsequent years is as follows:

Year	Principal amount
October 1, 2013 to December 31, 2013	$	604,000
2014		8,596,000
2015		25,420,000
2016		9,030,000
2017		2,098,000
2018 and thereafter		97,447,000
	$	143,195,000
Add: premium		410,000
	$	143,605,000

Interest Expense and Deferred Financing Cost

For the three months ended September 30, 2013 and 2012, the Company incurred interest expense, including amortization of deferred financing costs of, $2.0 million and $1.8 million, respectively. For the nine months ended September 30, 2013 and 2012, the Company incurred interest expense, including amortization of deferred financing costs of, $6.1 million and $4.8 million, respectively. As of September 30, 2013 and December 31, 2012, the Company’s net deferred financing costs were approximately $1.5 million and $1.7 million, respectively. All deferred financing costs are capitalized and amortized over the life of the respective loan agreement.

9. Stockholders’ Equity

Common Stock

Our charter authorizes the issuance of 580,000,000 shares of common stock with a par value of $0.01 per share and 20,000,000 shares of preferred stock with a par value of $0.01 per share. As of September 30, 2013, including distributions reinvested, we had issued approximately 13.3 million shares of common stock for a total of approximately $132.3 million of gross proceeds in our initial and follow-on public offerings.

Preferred Stock and OP Units

On February 10, 2013, we entered into a series of agreements with Sentinel RE Investment Holdings LP, an affiliate of Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”) for the purpose of obtaining up to a $150 million equity commitment to be used to finance future real estate acquisitions (such investment and the related agreements, are referred to herein collectively as the “KKR Equity Commitment”). Pursuant to the KKR Equity Commitment, the Company may issue up to 1,000 shares of 3% Senior Cumulative Preferred Stock, Series A, $0.01 par value per share (the “Series A Preferred Stock”), or 3% Senior Cumulative Preferred Stock, Series C, $0.01 par value per share (the “Series C Preferred Stock”), in either case representing up to an aggregate issuance amount of $100,000. The Operating Partnership may issue 7.5% Series B Convertible Preferred Units (the “Series B Preferred Units”) up to an aggregate issuance amount of $149.9 million. Subject to certain limitations, the Series B Preferred Units may be converted into common stock of the Company. The obligations of KKR to fund and the Company to draw funds under the KKR Equity Commitment are subject to various conditions, limitations and penalties as more fully outlined in our Annual Report on Form 10-K for the year ended December 31, 2012 and in the proxy statement related to our 2013 annual meeting of stockholders as filed with the SEC on April 9, 2013.

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The Series A Preferred Stock and the Series C Preferred Stock will rank senior to the Company’s common stock with respect to dividend rights and rights on liquidation. The holders of the Series A Preferred Stock and the Series C Preferred Stock will be entitled to receive dividends, as and if authorized by our board of directors out of funds legally available for that purpose, at an annual rate equal to 3% of the liquidation preference for each share. Dividends on the Series A Preferred Stock and the Series C Preferred Stock will be payable annually in arrears.

The Series B Preferred Units will rank senior to the Operating Partnership’s common units with respect to distribution rights and rights on liquidation. The Series B Preferred Units will be entitled to receive cash distributions at an annual rate equal to 7.5% of the Series B liquidation preference to any distributions paid to common units of the Operating Partnership. If the Operating Partnership is unable to pay cash distributions, distributions will be paid in kind at an annual rate of 10% of the Series B liquidation preference. After payment of the preferred distributions, additional distributions will be paid first to the common units until they have received an aggregate return of 7.5% per unit in annual distributions commencing from February 10, 2013, and thereafter to the common units and Series B Preferred Units pro rata.

As of September 30, 2013, no shares or units had been issued pursuant to the KKR Equity Commitment. On October 21, 2013, in connection with the first put exercise pursuant to the KKR Equity Commitment, we issued 1,000 shares of our Series C Preferred Stock and 142,000 Series B Preferred Units in our Operating Partnership to KKR (See Note 13).

Distributions

The following are the distributions declared during the nine months ended September 30, 2013 and 2012:

	Distributions Declared						Cash Flow from
Period	Cash		Reinvested		Total		Operations
First quarter 2012	$	801,000	$	—	$	801,000	$	1,277,000
Second quarter 2012		799,000				799,000		214,000
Third quarter 2012		807,000		—		807,000		2,930,000
First quarter 2013		1,493,000		—		1,493,000		2,643,000
Second quarter 2013		1,585,000		—		1,585,000		2,522,000
Third quarter 2013		1,544,000		52,000		1,596,000		2,413,000

Effective October 1, 2012, our board of directors declared distributions for daily record dates occurring in the first quarter of 2013 in amounts per share that, if declared and paid each day for a 365 -day period, would equate to an annualized rate of $.475 per share (4.75 % based on share price of $ 10.00). Effective July 1, 2013, our board of directors declared distributions for daily record dates occurring in the third quarter of 2013 in amounts per share that, if declared and paid each day for a 365-day period, would equate to an annualized rate of $.50 per share (5.00 % based on a share price of $ 10.00).

The declaration of distributions is at the discretion of our board of directors and our board will determine the amount of distributions on a regular basis. The amount of distributions will depend on our funds from operations, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and other factors our board of directors deems relevant.

On June 19, 2013, we filed a registration statement on Form S-3 to register up to $ 99,000,000 of shares of common stock to be offered to our existing stockholders pursuant to an amended and restated distribution reinvestment plan (the “DRIP offering”). The DRIP offering shares will initially be offered at a purchase price of $10.02, which is 100% of the current estimated per-share value of our common stock. The distributions declared in the third quarter of 2013 to be reinvested in the Company’s common stock will result in approximately 5,205 shares of common stock issued in October 2013.

Stock Repurchase Program

In 2007, we adopted a stock repurchase program for investors who had held their shares for at least one year. Under our stock repurchase program, the repurchase price varies depending on the purchase price paid by the stockholder and the number of years the shares are held. Our board of directors may amend, suspend or terminate the program at any time with 30 days prior notice to stockholders. We have no obligation to repurchase our stockholders’ shares. In 2009, our board of directors waived the one-year holding period in the event of the death of a stockholder and adjusted the repurchase price to 100% of such stockholder’s purchase price if the stockholder held the shares for less than three years.

On April 29, 2011, we informed our stockholders that our Independent Directors Committee had directed us to suspend our public offering, our dividend reinvestment program and our stock repurchase program (except for repurchases due to death). As a result our stock repurchase program has been suspended since May 29, 2011 for all repurchases, except repurchases due to death of a stockholder.

During the nine months ended September 30, 2013, we repurchased shares pursuant to our stock repurchase program as follows:

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Period	Total Number of Shares Redeemed		Average Price Paid per Share
First quarter 2013		60,432	$	9.98
Second quarter 2013		30,153		10.02
Third quarter 2013		101,880		10.02
		192,465

10. Related Party Transactions

The Company has no employees. Our Advisor is primarily responsible for managing our business affairs and carrying out the policies established by our board of directors. We are party to an advisory agreement that entitles the Advisor to specified fees upon the provision of certain services to us.

Advisory Agreement and Transition to Internal Management Agreement

Sentio Investments, LLC became our Advisor on January 1, 2012, pursuant to an advisory agreement dated December 22, 2011. As required by our charter, that advisory agreement had a one-year term that ended on December 31, 2012. Effective January 1, 2013, we renewed the advisory agreement on substantially similar terms for an additional one-year term ending on December 31, 2013.

Under the terms of the current advisory agreement, the Advisor is required to use commercially reasonable efforts to present to us investment opportunities to provide a continuing and suitable investment program consistent with the investment policies and objectives adopted by our board of directors. The advisory agreement calls for the Advisor to provide for our day-to-day management and to retain property managers and leasing agents, subject to the authority of our board of directors, and to perform other duties.

On February 10, 2013 in connection with the execution of the KKR Equity Commitment (See Note 9), we entered into a Transition to Internal Management Agreement (the “Transition Agreement”) with our Advisor and KKR. The Transition Agreement provides, following the satisfaction of certain conditions, for certain amendments to the advisory agreement between us and the Advisor and sets forth the terms for our transition to an internal management structure.

The terms of our advisory agreement with our Advisor and the terms of the Transition Agreement are more fully outlined in our Annual Report on Form 10-K for the year ended December 31, 2012 and in the proxy statement related to our 2013 annual meeting of stockholders as filed with the SEC on April 9, 2013.

The fees and expense reimbursements payable to the Advisor under the advisory agreement for the three and nine months ended September 30, 2013 and September 30, 2012 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2013		2012		2013		2012
Asset management fees	$	732,000	$	559,000	$	2,125,000	$	1,543,000

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Consistent with limitations set forth in our charter, the advisory agreement further provides that, commencing four fiscal quarters after the acquisition of our first real estate asset, we shall not reimburse the Advisor at the end of any fiscal quarter management fees and expenses and operating expenses that, in the four consecutive fiscal quarters then ended exceed (the “Excess Amount”) the greater of 2% of our average invested assets or 25% of our net income for such year (the “2%/25% Guidelines”) unless the Independent Directors Committee of our board of directors determines that such excess was justified, based on unusual and nonrecurring factors which it deems sufficient. If the Independent Directors Committee does not approve such excess as being so justified, the advisory agreement requires that any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. In addition, our charter provides that, if the Independent Directors Committee does not determine that the Excess Amount is justified, the Advisor shall reimburse us the amount by which the aggregate annual expenses paid to the Advisor during the four consecutive fiscal quarters then ended exceed the 2%/25% Guidelines.  

For the four quarters ended September 30, 2013, our management fees and expenses and operating expenses totaled did not exceed the greater of 2% of our average invested assets and 25% of our net income.

11. Commitments and Contingencies

We monitor our properties for the presence of hazardous or toxic substances. We are not currently aware of any environmental liability with respect to the properties that we believe would have a material effect on our financial condition, results of operations and cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Our commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In the opinion of management, these matters are not expected to have a material impact on our condensed consolidated financial position, cash flows and results of operations. We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against the Company which if determined unfavorably to us would have a material adverse effect on our cash flows, financial condition or results of operations.

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12. Immaterial Correction to Prior Period Financial Statements

In the third quarter of 2013, we revised our disclosure related to the consolidated statement of cash flows for the nine months ended September 30, 2012 to reflect i) a decrease in cash provided by operating activities of $ 3.0 million and ii) a decrease in cash used in investing activities of $3.0 million. This adjustment was made after completing an analysis that determined the change in accounts payable and accrued liabilities improperly reflected payments which primarily relate to the buyout of the Company’s partners in Rome LTH in April 2012.

The Company has determined that the cash flow statement for the year ended December 31, 2012, is correct as reported. After evaluating the quantitative and qualitative effects of this adjustment, we have concluded that the impact on the Company’s prior interim period financial statements was not material.

13. Subsequent Events

On October 21, 2013, through wholly-owned subsidiaries, we acquired real estate property (“Woodbury Mews”) from Three WM Real Estate, LLC, Three WM Operating, LLC, Four WM Real Estate, LLC and Four WM Operating, none of which are affiliated with us, for a purchase price of $38.1 million plus closing costs. We funded the purchase of Woodbury Mews with proceeds from the sale of Series C Preferred Stock and Series B Preferred Units in our Operating Partnership to KKR, pursuant to the KKR Equity Commitment (See Note 9) and with proceeds from a mortgage loan from Key Bank National Association, Inc.

On October 18, 2013, in connection with our acquisition of Woodbury Mews, Sentinel RE Investment Holdings, LP, an affiliate of KKR, completed the first put exercise under the KKR Equity Commitment, purchasing the following securities for an aggregate purchase price of $14.3 million:

• 1,000 shares of newly issued Series C Preferred Stock and 

• 142,000 newly-issued Series B Preferred Units of the Operating Partnership, which are convertible into approximately 1,417,166 shares of the Company’s common stock at the currently effective conversion price.

On October 21, 2013, also in connection with our acquisition of Woodbury Mews, we entered into a mortgage agreement with Key Bank National Association, Inc. (“Key”), an unaffiliated lender, with an outstanding principal balance of approximately $25.0 million (the “Woodbury Loan”), which is secured by Woodbury Mews. The Woodbury Loan has an initial term of twelve months with two 12-month extensions available assuming certain criteria are met, and bears interest at a rate of one month LIBOR plus 3.0%. Payments on the loans are due monthly and consist of accrued interest-only during the initial term. If the extension option is exercised, payments will consist of interest plus principal amortization payments based upon a 25-year amortization schedule.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report. The 2012 financial information reflects the effects of the corrections described in Note 12, Immaterial Corrections to Prior Period Financial Statements included in Item 1 of this report. This section contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to update or revise publicly any forward —looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2012 as listed with the SEC, and the risks identified in Part II, Item 1A of the quarterly report. 

Our actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with the SEC. These factors include without limitation:

• Macroeconomic conditions, such as a prolonged period of weak economic growth, and volatility in capital markets.

• changes in national and local economic conditions in the real estate and healthcare markets specifically;

• legislative and regulatory changes impacting the healthcare industry, including the implementation of the healthcare reform legislation enacted in 2010;

• legislative and regulatory changes impacting real estate investment trusts, or REITs, including their taxation;

• the availability of debt and equity capital;

• changes in interest rates;

• competition in the real estate industry;

• the supply and demand for operating properties in our market areas;

• changes in accounting principles generally accepted in the United States of America, or GAAP; and

• the risk factors in our Annual Report for the year ended December 31, 2012 and this quarterly report on Form 10-Q.

Overview

We were incorporated on October 16, 2006 for the purpose of engaging in the business of investing in and owning commercial real estate. We intend to invest primarily in real estate including health care properties and other real estate related assets located in markets in the United States.

On June 20, 2008, we commenced an initial public offering of our common stock. We stopped making offers under our initial public offering on February 3, 2011 after raising gross offering proceeds of $123.9 million from the sale of approximately 12.4 million shares, including shares sold under the distribution reinvestment plan. On February 4, 2011, we commenced a follow-on offering of our common stock. We suspended primary offering sales in our follow-on offering on April 29, 2011 and completed the final sale of shares under the dividend reinvestment plan on May 10, 2011. We raised gross offering proceeds under the follow-on offering of $8.4 million from the sale of approximately 800,000 shares, including shares sold under the distribution reinvestment plan. On June 12, 2013 we deregistered all remaining unsold follow-on offering shares.

On June 19, 2013, we filed a registration statement on Form S-3 to register up to $99,000,000 of shares of common stock to be offered to our existing stockholders pursuant to an amended and restated distribution reinvestment plan (the “DRIP offering”). The DRIP offering shares will initially be offered at a purchase price of $10.02, which is 100% of the current estimated per-share value of our common stock.

Since January 1, 2012, our business has been managed by Sentio Investments, LLC (the “Advisor”) pursuant to an advisory agreement (the “Advisory Agreement”). As required by our charter, the term of the Advisory Agreement is limited to one year, but can be renewed for an unlimited number of successive one-year terms. The term of our initial Advisory Agreement ended on December 31, 2012. Effective January 1, 2013, we renewed the Advisory Agreement on substantially similar terms for an additional one-year term ending on December 31, 2013.

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On February 10, 2013, in connection with the execution of the KKR Equity Commitment (See Note 9 of the accompanying condensed consolidated financial statements), we entered into a Transition Agreement, which provides, following the satisfaction of certain conditions, for certain amendments to the Advisory Agreement between us and the Advisor and sets forth the terms for our transition to an internal management structure. The Transition Agreement requires that, unless the parties agree otherwise or certain third party consents cannot be obtained in time, the existing external advisory structure will remain in place upon substantially the same terms as currently in effect for a period of two years from the Transition Agreement date, upon which time the advisory function will be internalized in accordance with procedures set forth in the Transition Agreement. The terms of the Advisory Agreement and the Transition Agreement are more fully outlined in our Annual Report on Form 10-K for the year ended December 31, 2012 and in the proxy statement related to our 2013 annual meeting of stockholders as filed with the SEC on April 9, 2013.

Our revenues, which are comprised largely of rental income, include rents reported on a straight-line basis over the initial term of the lease. Our growth depends, in part, on our ability to (i) increase rental income and other earned income from leases by increasing rental rates and occupancy levels; (ii) control operating and other expenses; and (iii) maximize tenant recoveries given the underlying lease structures. Our operations are impacted by property specific, market-specific, general economic and other conditions.

Market Outlook — Real Estate and Real Estate Finance Markets

In recent years, both the national and most global economies have experienced substantially increased unemployment and a downturn in economic activity over an extended period, as well as significant market fluctuations. Despite certain recent more positive economic indicators and improved stock market performance, the economic environment continues to be unpredictable and to present challenges that may delay the implementation of our business strategy or force us to modify it.

Despite the economic conditions discussed above, the demand for health care services is projected to continue to grow for the foreseeable future. According to The National Coalition on Healthcare, by 2016 nearly $1 in every $5 in the U.S. will be spent on healthcare, and the aging US population is expected to continue to fuel the need for healthcare services. The over age 65 population of the United States is projected to grow 36% between 2010 and 2020, compared with 9% for the general population, according to the US Census Bureau. Presently, the healthcare real estate market is fragmented, with a local or regional focus, offering opportunities for consolidation and market dominance. We believe that a diversified portfolio of healthcare property types minimizes risks associated with third-party payors, such as Medicare and Medicaid, while also allowing us to capitalize on the favorable demographic trends described above.

Critical Accounting Policies

There have been no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC.

Results of Operations

As of September 30, 2013, we operated in three reportable business segments: senior living operations, triple-net leased properties, and medical office building (“MOB”) properties. Our senior living operations segment invests in and directs the operations of assisted-living, memory care and other senior housing communities located in the United States. We engage independent third party managers to operate these properties. Our triple-net leased properties segment invests in healthcare properties in the United States leased under long-term “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our MOB segment invests in medical office buildings and leases those properties to healthcare providers under long-term “full service” leases which may require tenants to reimburse property related expenses to us.

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As of September 30, 2013, we owned or had joint venture interests in 19 properties. These properties included fourteen assisted-living facilities which comprise our senior housing segment, one medical office building, which comprises our MOB segment, three operating healthcare facilities, which comprise our triple-net leased segment and one medical office building held as an unconsolidated entity. Four senior living properties, the Leah Bay portfolio, were acquired at the end of August 2012. Physicians Centre MOB, which is held in an unconsolidated entity, was acquired in April 2012. In April 2012, we also acquired our partners’ interests in the Rome LTACH investment, and as a result of the acquisition, the investment is consolidated in our September 30, 2013 condensed consolidated financial statements. The Rome LTACH investment is presented under the equity method in periods prior to the April 2012 acquisition. The disposition of the Company’s investment in the Littleton Specialty Rehabilitation Facility occurred on August 8, 2013. As of September 30, 2012, we owned or had joint venture interests in 20 properties, including fourteen assisted-living facilities, one medical office building and three operating healthcare facilities, one medical office building and one net leased healthcare facility held as unconsolidated entities. The results of our operations for the three and nine months ended September 30, 2013 reflect the acquisitions indicated above that are not included in our results of operations for the three and nine months ended September 30, 2012, and differ accordingly.

Comparison of the Three Months Ended September 30, 2013 and 2012

	Three Months Ended September 30,
		2013		2012		$ Change	% Change
Net operating income, as defined (1)
Senior living operations	$	4,399,000	$	3,421,000	$	978,000	29	%
Triple-net leased properties		1,308,000		1,300,000		8,000	1	%
Medical office building		209,000		195,000		14,000	7	%
Total portfolio net operating income	$	5,916,000	$	4,916,000	$	1,000,000	20	%
Reconciliation to net income:
Net operating income, as defined (1)	$	5,916,000	$	4,916,000	$	1,000,000	20	%
Unallocated (expenses) income:
General and administrative expenses		523,000		423,000		100,000	24	%
Asset management fees and expenses		732,000		559,000		173,000	31	%
Real estate acquisition costs and earn out costs		—		1,016,000		(1,016,000)	(100)	%
Depreciation and amortization		1,528,000		1,689,000		(161,000)	(10)	%
Interest expense, net		2,031,000		1,788,000		243,000	14	%
Equity in loss (income) from unconsolidated entities		56,000		(14,000)		(70,000)	(500)	%
Gain on disposition of investment in unconsolidated entity		(1,701,000)		—		1,701,000	100	%
Net income (loss)	$	2,747,000	$	(545,000)	$	3,292,000	604	%

(1) Net operating income, a non-GAAP supplemental measure, is defined as total revenue less property operating and maintenance expenses. We use net operating income to evaluate the operating performance of our consolidated real estate investments and to make decisions concerning the operation of the property. We believe that net operating income is useful to investors in understanding the value of our consolidated 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 a gain or loss from investments in unconsolidated entities depreciation and amortization, interest expense and corporate general and administrative expenses. Additionally, net operating income as we define it may not be comparable to net operating income as defined by other REITs or companies.

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Senior Living Operations

Total revenue for senior living operations includes rental revenue and resident fees and service income. Property operating and maintenance expenses include labor, food, utilities, marketing, management and other property operating costs. Net operating income for the three months ended September 30, 2013 increased to $4.4 million from $3.4 million for the three months ended September 30, 2012. The increase is primarily due to the acquisition and consolidation of the Leah Bay joint venture in August of 2012.

	Three Months Ended September 30,
	2013		2012		$ Change		% Change
Senior Living Operations — Net     operating income
Total revenues
Rental revenue	$	6,976,000	$	6,910,000	$	66,000	1	%
Resident services and fee income		6,195,000		3,655,000		2,540,000	69	%
Tenant reimbursement and other income		103,000		15,000		88,000	587	%
Less:
Property operating and maintenance expenses		(8,875,000)		(7,159,000)		1,716,000	24	%
Total portfolio net operating income	$	4,399,000	$	3,421,000	$	978,000	29	%

Triple-Net Leased Properties

Total revenue for triple-net leased properties includes rental revenue and expense reimbursements from tenants. Property operating and maintenance expenses include insurance and property taxes and other operating expenses reimbursed by our tenants. Net operating income for the three month period ended September 30, 2013 of $1.3 million was comparable to net operating income for the three month period ended September 30, 2012.

	Three Months Ended September 30,
	2013		2012		$ Change		% Change
Triple-Net Leased Properties — Net     operating income
Total revenues
Rental revenue	$	1,309,000	$	1,298,000	$	11,000	1	%
Tenant reimbursement and other income		226,000		222,000		4,000	2	%
Less:
Property operating and maintenance expenses		(227,000)		(220,000)		7,000	3	%
Total portfolio net operating income	$	1,308,000	$	1,300,000	$	8,000	1	%

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Medical Office Buildings

Total revenue for medical office buildings includes rental revenue and expense reimbursements from tenants. Property operating and maintenance expenses include utilities, repairs and maintenance, insurance and property taxes. Net operating income for the three month period ended September 30, 2013 of $0.2 million was comparable to net operating income for the three month period ended September 30, 2012.

	Three Months Ended September 30,
	2013		2012		$ Change		% Change
Medical Office Buildings — Net operating income
Total revenues
Rental revenue	$	214,000	$	214,000	$	—	—
Tenant reimbursement and other income		74,000		75,000		(1,000)	(1)	%
Less:
Property operating and maintenance expenses		(79,000)		(94,000)		(15,000)	(16)	%
Total portfolio net operating income	$	209,000	$	195,000	$	14,000	7	%

Unallocated (expenses) income

General and administrative expenses increased to $0.5 million for the three months ended September 30, 2013 from $0.4 million for the three months ended September 30, 2012. The increase was primarily due to higher professional fees, as compared to the three months ended September 30, 2012.

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Asset management fees for the three months ended September 30, 2013 of $0.7 million was comparable to asset management fees for the three months ended September 30, 2012 and the bonus asset management fee earned in the quarters ended June 30, 2013 and September 30, 2013. Depreciation and amortization for the same periods decreased to $1.5 million from $1.7 million, as a result of the in-place lease value assigned in the Leah Bay purchase price allocation, which was amortized over the expected resident lease term and fully amortized as of June 30, 2013.

For the three months ended September 30, 2013 and 2012, real estate acquisition costs and contingent consideration were $0.0 million and $1.0 million, respectively. Real estate acquisition costs and contingent consideration in 2012 consisted primarily of costs associated with the acquisition of an interest in the Physicians Centre MOB property and the costs associated with the acquisition of the Leah Bay joint venture.

Interest expense, net, for the three months ended September 30, 2013 increased to $2.0 million from $1.8 million for the three months ended September 30, 2012, principally due to the acquisition of the Leah Bay properties, which was completed during the third quarter of 2012, respectively.

The Company recognized a loss from unconsolidated entities of $0.1 for the three months ended September 30, 2013 as compared to income of $0.1 million for the three months ended September 30, 2012, which is primarily due to the operations of Physicians Centre MOB, acquired in April 2012 and Littleton Specialty Rehabilitation Center, in which began operations in July 2012. Our equity interest in the Littleton Specialty Rehabilitation Facility was sold in August 2013, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013.

Comparison of the Nine Months Ended September 30, 2013 and 2012

	Nine Months Ended September 30,
	2013		2012		$ Change		% Change
Net operating income, as defined (1)
Senior living operations	$	13,261,000	$	8,906,000	$	4,355,000	49	%
Triple-net leased properties		3,909,000		3,435,000		474,000	14	%
Medical office building		631,000		627,000		4,000	1	%
Total portfolio net operating income	$	17,801,000	$	12,968,000	$	4,833,000	37	%
Reconciliation to net income:
Net operating income, as defined (1)	$	17,801,000	$	12,968,000	$	4,833,000	37	%
Unallocated (expenses) income:
General and administrative expenses		1,186,000		1,632,000		(446,000)	(27)	%
Asset management fees and expenses		2,125,000		1,543,000		582,000	38	%
Real estate acquisition costs and earn out costs		—		1,229,000		(1,229,000)	(100)	%
Depreciation and amortization		6,317,000		4,653,000		1,664,000	36	%
Interest expense, net		6,121,000		4,808,000		1,313,000	27	%
Loss on debt extinguishment and other expense		—		151,000		(151,000)	(100)	%
Equity in (income) loss from unconsolidated entities		(24,000)		363,000		387,000	107	%
Gain on remeasurement of investment in unconsolidated entity		—		(1,282,000)		(1,282,000)	(100)	%
Gain on disposition of investment in unconsolidated entity		(1,701,000)		—		1,701,000	100	%
Net income (loss)	$	3,777,000	$	(129,000)	$	3,906,000	3,028	%

(1) Net operating income, a non-GAAP supplemental measure, is defined as total revenue less property operating and maintenance expenses. We use net operating income to evaluate the operating performance of our consolidated real estate investments and to make decisions concerning the operation of the property. We believe that net operating income is useful to investors in understanding the value of our consolidated 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 a gain or loss from investments in unconsolidated entities depreciation and amortization, interest expense and corporate general and administrative expenses. Additionally, net operating income as we define it may not be comparable to net operating income as defined by other REITs or companies.

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Senior Living Operations

Total revenue for senior living operations includes rental revenue and resident fees and service income. Property operating and maintenance expenses include labor, food, utilities, marketing, management and other property operating costs. Net operating income for the nine months ended September 30, 2013 increased to $13.3 million from $8.9 million for the nine months ended September 30, 2012. The increase is primarily due to an additional $3.6 million of net operating income in the nine months ended September 30, 2013 from the acquisition and consolidation of the Leah Bay joint venture in August of 2012, but also reflects higher levels of care at several senior living properties, including Spring Village at Floral Vale and Forestview Manor.

	Nine Months Ended September 30,
	2013		2012		$ Change		% Change
Senior Living Operations — Net operating     income
Total revenues
Rental revenue	$	20,805,000	$	20,453,000	$	352,000	2%
Resident services and fee income		18,115,000		8,243,000		9,872,000	120%
Tenant reimbursement and other income		328,000		294,000		34,000	12%
Less:
Property operating and maintenance expenses		(25,987,000)		(20,084,000)		5,903,000	29%
Total portfolio net operating income	$	13,261,000	$	8,906,000	$	4,355,000	49%

Triple-Net Leased Properties

Total revenue for triple-net leased properties includes rental revenue and expense reimbursements from tenants. Property operating and maintenance expenses include insurance and property taxes and other operating expenses reimbursed by our tenants. Net operating income increased to $3.9 million for the nine months ended September 30, 2013 compared to $3.4 million for the nine months ended September 30, 2012, due to the acquisition of a controlling interest in the Rome LTACH in April 2012. As a result of this acquisition, Rome LTACH operations are included in our condensed consolidated financial statements and included in the operations of our triple-net leased segment for the nine months ended September 30, 2013. In the comparable period of 2012, Rome LTACH was accounted for as an equity method investment and its operating results were not included in our triple-net leased properties segment prior to April 2012.

	Nine Months Ended September 30,
		2013		2012		$ Change	% Change
Triple-Net Leased Properties — Net     operating income
Total revenues
Rental revenue	$	3,928,000	$	3,436,000	$	492,000	14%
Tenant reimbursement and other income		663,000		593,000		70,000	12%
Less:
Property operating and maintenance expenses		(682,000)		(594,000)		88,000	15%
Total portfolio net operating income	$	3,909,000	$	3,435,000	$	474,000	14%

Medical Office Buildings

Total revenue for medical office buildings includes rental revenue and expense reimbursements from tenants. Property operating and maintenance expenses include utilities, repairs and maintenance, insurance and property taxes. Net operating income for the nine month period ended September 30, 2013 of $0.6 million was comparable to net operating income for the nine months ended September 30, 2012.

	Nine Months Ended September 30,
		2013		2012		$ Change	% Change
Medical Office Buildings —     Net operating income
Total revenues
Rental revenue	$	640,000	$	636,000	$	4,000	1%
Tenant reimbursement and other income		221,000		234,000		(13,000)	(6)%
Less:
Property operating and maintenance expenses		(230,000)		(243,000)		(13,000)	(5)%
Total portfolio net operating income	$	631,000	$	627,000	$	4,000	1%

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Unallocated (expenses) income

General and administrative expenses decreased to $1.2 million for the nine months ended September 30, 2013 from $1.6 million for the nine months ended September 30, 2012. The decrease was due to lower professional fees in the nine months ended September 30, 2013 as a result of the Company’s transition to a new advisor beginning in January 2012. The remaining decrease is due to a $0.1 million tax benefit for the nine months ended September 30, 2013, as compared to a $0.1 million tax expense for the nine months ended September 30, 2012.

Asset management fees for the nine months ended September 30, 2013 increased to $2.1 million from $1.5 million as a result of a higher portfolio value in the quarter ended September 30, 2013 and the bonus asset management fee earned in the quarters ended June 30, 2013 and September 30, 2013. Depreciation and amortization for the same periods increased to $6.3 million from $4.7 million, as a result of increases in depreciation of buildings, improvements and tenant improvements and the in-place lease value assigned in the Leah Bay purchase price allocation. In-place lease value is amortized over the expected resident lease term, resulting in a higher than average amortization expense in the first year after the acquisition.

For the nine months ended September 30, 2013 and 2012, real estate acquisition costs and contingent consideration were $0.0 million and $1.2 million, respectively. Real estate acquisition costs and contingent consideration in 2012 consisted primarily of costs associated with the acquisition of the minority interest in the Rome LTACH property, the costs associated with the acquisition of an interest in the Physicians Centre MOB property and the costs associated with the acquisition of the Leah Bay joint venture.

Interest expense, net, for the nine months ended September 30, 2013 increased to $6.1 million from $4.8 million for the nine months ended September 30, 2012, respectively, principally due to higher debt levels associated with the acquisitions of the Rome LTACH and Leah Bay properties, which were completed during the second and third quarters of 2012, respectively.

Our equity interest in the Rome LTACH joint venture was revalued in connection with the acquisition of our partners’ joint venture interests resulting in a gain of $1.3 million for the nine months ended September 30, 2012.

Income (loss) from unconsolidated entities increased to $0.1 million for the nine months ended September 30, 2013 from ($0.4) million for the nine months ended September 30, 2012, primarily due to the income reported as a result of the single tenant at Littleton Specialty Rehabilitation Facility paying rent beginning in July 2012. Our equity interest in the Littleton Specialty Rehabilitation Facility was sold in August 2013, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013.

Liquidity and Capital Resources

Primary offering sales in our follow-on public offering have been suspended since April 29, 2011 and the final sale of shares under the related dividend reinvestment plan was completed on May 10, 2011. On June 12, 2013 we concluded the follow-on offering by deregistering all remaining unsold shares that had been registered in connection with the offering.

On June 19, 2013, we filed a registration statement on Form S-3 to register up to $99,000,000 of shares of common stock to be offered to our existing stockholders pursuant to an amended and restated distribution reinvestment plan (the “DRIP offering”). The DRIP offering shares will initially be offered at a purchase price of $10.02, which is 100% of the current estimated per-share value of our common stock.

On February 10, 2013, we entered into the KKR Equity Commitment for the purpose of obtaining up to $150 million of equity funding to be used to finance future real estate acquisitions. Pursuant to the KKR Equity Commitment, we may issue and sell to the Investor and its affiliates on a private placement basis from time to time over a period of two to three years, up to $150 million in aggregate issuance amount of shares of newly issued Series A Preferred Stock, newly issued Series C Preferred Stock and newly issued Series B Convertible Preferred Units of our Operating Partnership. As of September 30, 2013, no shares or units had been issued pursuant to the KKR equity commitment. On October 21, 2013, in connection with the first put exercise pursuant to the KKR Equity Commitment, we issued 1,000 shares of our Series C Preferred Stock and 142,000 Series B Preferred Units in our Operating Partnership to KKR (See Note 13 to the accompanying condensed consolidated financial statements).

We expect that primary sources of capital over the long-term will include net proceeds from the sale of our capital stock, the sale of preferred units of partnership interest in our Operating Partnership in accordance with the terms of the KKR Equity Commitment, debt financing, and net cash flows from operations. We expect that our primary uses of capital will be for property acquisitions, including promote monetization payments, for the payment of tenant improvements and capital improvements and operating expenses, including interest expense on any outstanding indebtedness, reducing outstanding indebtedness and for the payment of distributions.

We intend to own our stabilized properties with low to moderate levels of debt financing. We will incur moderate to high levels of indebtedness when acquiring development or value-added properties and possibly other real estate investments. For our stabilized core plus properties, our long-term goal will be to use low to moderate levels of debt financing with leverage ranging from 50% to 65% of the value of the asset. For development and value-added properties, our goal will be to acquire and develop or redevelop these properties using moderate to high levels of debt financing with leverage ranging from 65% to 75% of the cost of the asset. Once these properties are developed, redeveloped and stabilized with tenants, we plan to reduce the levels of debt to fall within target debt ranges appropriate for core plus properties. While we seek to fall within the outlined targets on a portfolio basis, for any specific property we may exceed these estimates. To the extent sufficient proceeds from public offerings, debt financing, the KKR Equity Commitment or a combination of these are unavailable to repay acquisition debt financing down to the target ranges within a reasonable time as determined by our board of directors, we will endeavor to raise additional equity or sell properties to repay such debt so that we will own our properties with low to moderate levels of permanent financing. In the event that we are unable to raise additional equity, our ability to diversify our investments may be diminished.

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As of September 30, 2013, we had approximately $18.3 million in cash and cash equivalents on hand. Our liquidity will increase from the sale of common stock, the sale of preferred units of partnership interest in our Operating Partnership, and if refinancing results in excess loan proceeds. The Company’s liquidity will decrease as net offering proceeds are expended in connection with the acquisition and distributions are made in excess of cash available from operating cash flows.

Cash flows provided by operating activities for the nine months ended September 30, 2013 and 2012 were $7.6 million and $4.4 million, respectively. The increase in cash flows from operations was primarily due to an increase in operating income of $4.8 million and lower real estate acquisition costs, partially offset by the timing of cash receipts and payments. 

Cash flows provided by and (used in) investing activities for the nine months ended September 30, 2013 and 2012 were $2.4 million and ($20.8) million, respectively. The 2013 amount was comprised of capital expenditures related to existing properties and proceeds from the disposition of the investment in the Littleton Specialty Rehabilitation Facility, while the 2012 amount reflects the acquisition of additional equity interest in the Rome LTACH Project, the acquisition interest in the Leah Bay joint venture and the acquisition of a joint venture interest in Physicians Center MOB.

Cash flows (used in) and provided by financing activities for the nine months ended September 30, 2013 and 2012 were ($13.3) million and $10.2 million, respectively. During the nine months ended September 30, 2013, the Company paid $4.1 million of fees and expenses in connection with the KKR Equity Commitment, and redeemed shares in the amount of $1.7 million. In addition, the Company’s distribution payment for the nine months ended September 30, 2013 and 2012 were $4.6 million and $2.7 million, respectively, due to an increase in the Company’s distribution rate to 4.75% from 2.5%, effective October 1, 2012. During the nine months ended September 30, 2012, the Company received net proceeds of approximately $15.2 million, and paid $1.2 million in deferred financing costs.

We expect to have sufficient cash available from cash on hand and operations to fund capital improvements and principal payments due on our borrowings in the next twelve months. We expect to fund stockholder distributions from cash on hand and from the excess of cash provided by operations over required capital improvements and debt payments. This excess may be insufficient to make distributions at the current level or at all.

There may be a delay between the sale of our shares or equity securities and the purchase of properties. During this period, proceeds from sales of securities may be temporarily invested in short-term, liquid investments that could yield lower returns than investments in real estate.

Potential future sources of capital include proceeds from future equity offerings, proceeds from secured or unsecured financings from banks or other lenders, proceeds from the sale of properties and undistributed funds from operations.

Funds from Operations and Modified Funds from Operations

Funds from operations (“FFO”) is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We compute FFO in accordance with the definition outlined by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as net income (loss), computed in accordance with GAAP, excluding extraordinary items, as defined by the accounting principles generally accepted in the United States of America (“GAAP”) , and gains (or losses) from sales of property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures, noncontrolling interests and subsidiaries. Our FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. We believe that FFO is helpful to investors and our management as a measure of operating performance because it excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which is not immediately apparent from net income. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, our management believes that the use of FFO, together with the required GAAP presentations, provide a more complete understanding of our performance. Factors that impact FFO include start-up costs, fixed costs, delay in buying assets, lower yields on cash held in accounts pending investment, income from portfolio properties and other portfolio assets, interest rates on acquisition financing and operating expenses. FFO should not be considered as an alternative to net income (loss), as an indication of our performance, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions, as well as dividend sustainability.

Changes in the accounting and reporting rules under GAAP have prompted a significant increase in the amount of non-cash and non-operating items included in FFO, as defined. Therefore, we use modified funds from operations (“MFFO”), which excludes from FFO real estate acquisition expenses, and non-cash amounts related to straight line rent to further evaluate our operating performance as well as dividend sustainability. We compute MFFO consistently with the definition suggested by the Investment Program Association (the “IPA”), the trade association for direct investment programs (including non-listed REITs). However, certain adjustments included in the IPA’s definition are not applicable to us and are therefore not included in the foregoing definition.

We believe that MFFO is a helpful measure of operating performance because it excludes costs that management considers more reflective of investing activities or non-operating changes. Accordingly, we believe that MFFO can be a useful metric to assist management, investors and analysts in assessing the sustainability of our operating performance. As explained below, management’s evaluation of our operating performance excludes the items considered in the calculation based on the following considerations:

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⋅	Adjustments for straight line rents. Under GAAP, rental income recognition can be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the economic impact of our lease terms and presents results in a manner more consistent with management’s analysis of our operating performance.
⋅	Real estate acquisition costs. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analysis differentiate costs to acquire the investment from the operations derived from the investment. These acquisition costs have been funded from the proceeds of our initial public offering and other financing sources and not from operations. We believe by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of our real estate investments and is consistent with management’s analysis of the investing and operating performance of our properties. Real estate acquisition expenses include those paid to our advisor and to third parties.
⋅	Non-recurring gains or losses included in net income from the extinguishment or sale of debt.
⋅	Unrealized gains or losses resulting from consolidation to, or deconsolidation from equity accounting.

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FFO or MFFO should not be considered as an alternative to net income (loss) nor as an indication of our liquidity. Nor is either indicative of funds available to fund our cash needs, including our ability to make distributions. Both FFO and MFFO should be reviewed along with other GAAP measurements. Our FFO and MFFO as presented may not be comparable to amounts calculated by other REITs. In addition, FFO and MFFO presented for different periods may not be directly comparable.

We believe that MFFO is helpful as a measure of operating performance because it excludes costs that management considers more reflective of investing activities or non-operating changes.

Our calculations of FFO and MFFO for the three and nine months ended September 30, 2013 and 2012 are presented below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net income (loss)	$	2,532,000	$	(529,000)	$	3,517,000	$	(237,000)
Adjustments:
Real estate depreciation and amortization		1,528,000		1,689,000		6,317,000		4,653,000
Joint venture depreciation and amortization		154,000		236,000		509,000		478,000
Gain on disposition of investment in unconsolidated entity		(1,701,000)				(1,701,000)
Funds from operations (FFO)		2,513,000	$	1,396,000		8,642,000	$	4,894,000
Adjustments:
Straight-line rent		(190,000)		(218,000)		(629,000)		(527,000)
Above/Below market lease amortization		34,000		27,000		103,000		2,000
Real estate acquisition costs		—		1,016,000		—		1,229,000
Loss on debt extinguishment		—		—		—		151,000
Gain on remeasurement of investment in unconsolidated     entity		—		—		—		(1,282,000)
Modified funds from operations (MFFO)		2,357,000	$	2,221,000		8,116,000	$	4,465,000
Weighted average shares		12,673,194		12,853,483		12,756,221		12,877,929
FFO per weighted average shares	$	0.20	$	0.11	$	0.68	$	0.38
MFFO per weighted average shares	$	0.19	$	0.17	$	0.64	$	0.34

Distributions

Through June 30, 2011, we made cash distributions to our stockholders at an annualized rate of 7.5%, based on a $10.00 per-share purchase price. Effective July 1, 2011, our board of directors resolved to lower our distributions to an annualized rate of $0.25 per share (2.5% based on a share price of $10.00) to more closely align distributions to funds available from operations at that date. Beginning on October 1, 2012, our board of directors declared distributions that, if declared and paid each day for a 365-day period, would equate to an annualized rate of $.475 per share (4.75% based on share price of $10.00), and beginning April 1, 2013, our board of directors have declared distributions for daily record dates occurring in the second and third quarters of 2013 that, if declared and paid each day for a 365-day period, would equate to an annualized rate of $.50 per share (5.0% based on share price of $10.00). The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

	Distributions Declared						Cash Flow
							from
Period	Cash		Reinvested		Total		Operations
First quarter 2012	$	801,000	$	—	$	801,000	$	1,277,000
Second quarter 2012		799,000		—		799,000		214,000
Third quarter 2012		807,000		—		807,000		2,930,000
First quarter 2013		1,493,000		—		1,493,000		2,643,000
Second quarter 2013		1,585,000		—		1,585,000		2,522,000
Third quarter 2013		1,544,000		52,000		1,596,000		2,413,000

For the nine months ended September 30, 2013, we paid aggregate distributions of approximately $4.6 million, all of which were paid in cash. The distributions declared in the third quarter of 2013 to be reinvested in the Company’s common stock will result in approximately 5,205 shares of common stock issued in October 2013. FFO for the nine months ended September 30, 2013 was approximately $8.7 million and cash flow from operations was approximately $7.6 million. We funded our total distributions paid with cash flows from operations. For the purposes of determining the source of our distributions paid, we assume first that we use cash flows from operations from the relevant periods to fund distribution payments. See the reconciliation of FFO to net income above.

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. We invest our cash and cash equivalents in government-backed securities and FDIC-insured savings accounts, which, by their nature, are subject to interest rate fluctuations. However, we believe that the primary market risk to which we will be exposed is interest rate risk relating the variable portion of our debt financing. As of September 30, 2013, we had approximately $30.8 million of variable rate debt, the majority of which is at a rate tied to the 3-month LIBOR. A 1.0% change in 3-Month LIBOR would result in a change in annual interest expense of approximately $0.3 million per year. Our interest rate risk management objectives will be to monitor and manage the impact of interest rate changes on earnings and cash flows by using certain derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on variable rate debt. We will not enter into derivative or interest rate transactions for speculative purposes.

In addition to changes in interest rates, the fair value of our real estate is subject to fluctuations based on changes in the real estate capital markets, market rental rates for healthcare facilities, local, regional and national economic conditions and changes in the credit worthiness of tenants. All of these factors may also affect our ability to refinance our debt if necessary.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our senior management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of our disclosure controls and procedures and have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

27

PART II — OTHER INFORMATION

Item 1A. Risk Factors

In addition to the risk factors disclosed under Item 1.A of the Company’s Annual Report on Form 10-K for a year ended 2012 please consider the additional risk disclosed below:

Our equity commitment transaction with KKR dilutes the interests of our common shareholders and grants important rights to KKR.

On October 18, 2013, in connection with our acquisition of the Woodbury Mews property, the first purchase of securities was completed by Sentinel RE Investment Holdings, LP (the “KKR Investor”), an affiliate of Kohlberg Kravis Roberts & Co., (together with its affiliates, “KKR”) pursuant to the Securities Purchase Agreement dated as of February 10, 2013 between us, Sentio Healthcare Properties OP, L.P. (our “Operating Partnership”), and the KKR Investor. We refer to the Securities Purchase Agreement and the related agreements, collectively, as the “KKR Equity Commitment.” Under the KKR Equity Commitment, we may issue and sell to the KKR Investor and its affiliates from time to time over a period of two to three years, up to $150 million in aggregate issuance amount of shares of newly issued 3% Senior Cumulative Preferred Stock, Series A, $0.01 par value per share, newly issued 3% Senior Cumulative Preferred Stock, Series C, $0.01 par value per share (the “Series C Preferred Stock”) and newly issued 7.5% Series B Convertible Preferred Units (the “Series B Preferred Units”) of our Operating Partnership.

In connection with the first put exercise on October 18, 2013, the KKR Investor acquired 1,000 shares of Series C Preferred Stock and 142,000 Series B Preferred Units for an aggregate purchase price of $14.3 million. After giving effect to the first put exercise, 1,357,000 Series B Preferred Units remain issuable under the Purchase Agreement.

The KKR Equity Commitment and the transactions contemplated thereby may result in a change of control of the Company. Based on the capitalization of the Company as of February 10, 2013 if the maximum amount of $150 million is drawn by us under the KKR Equity Commitment, then the KKR Investor and its affiliates would hold 53.9% of our voting capital stock as well as the same percentage of our as-converted common stock by virtue of their combined interests in the Series C Preferred Stock and Series B Preferred Units.

Disclosure concerning the terms, rights and conditions of the Series C Preferred Stock and the Series B Convertible Preferred Operating Partnership units, the transfer and registration thereof and the other provisions of the KKR Equity Commitment are described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2013. There can be no assurance that the interests of the KKR Investor are aligned with that of our other stockholders. Investor interests can differ from each other and from other corporate interests and it is possible that this significant stockholder with a stake in corporate management may have interests that differ from us and those of other shareholders.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) On October 21, 2013, in connection with the first put exercise pursuant to the KKR Equity Commitment, we issued 1,000 shares of our Series C Preferred Stock and 142,000 Series B Preferred Units in our Operating Partnership to KKR (See Note 13 to the accompanying condensed consolidated financial statements). The first put exercise was made pursuant to the private placement exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated by the SEC thereunder. The terms of the first put exercise were disclosed in the Company’s current report on Form 8-K filed with the SEC on October 24, 2013.

(c)  During the nine months ended September 30, 2013, we repurchased shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share		Approximate Dollar Value of Shares Available that may yet be Redeemed under the program
January		3,028	$	9.02	(1)
February		—	$	—	(1)
March		57,404	$	10.02	(1)
April		26,827		10.02	(1)
May		3,326		10.02	(1)
June		—		—	(1)
July		40,226		10.02	(1)
August		34,501		10.02	(1)
September		27,153		10.02	(1)
		192,465

(1) As further discussed in Note 9 (Stockholders’ Equity) of the condensed consolidated financial statements included in this report, the stock repurchase program has been suspended since May 29, 2011 for all repurchases except repurchases in connection with the death of a stockholder. The plan does not specify a limit on the number of shares that may be repurchased upon the death of stockholders.   

28

Item 6.  Exhibits

Ex.	Description
3.1	Articles of Amendment and Restatement of the Registrant, as amended on December 29, 2009 and January 24, 2012 (incorporated by reference to Exhibit 3.1 to the Registrant’s annual report on Form 10-K for the year ended December 31, 2011).
3.2	Articles of Amendment of the Registrant, dated August 6, 2013 (incorporated by reference to Exhibit 3.2 to the Registrant’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2013).
3.3	Articles Supplementary, 3% Senior Cumulative Preferred Stock, Series A, dated August 6, 2013 (incorporated by reference to Exhibit 3.3 to the Registrant’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2013).
3.4	Articles Supplementary, 3% Senior Cumulative Preferred Stock, Series C, dated August 6, 2013 (incorporated by reference to Exhibit 3.4 to the Registrant’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2013).
3.5	Second Amended and Restated Bylaws of the Registrant as adopted on August 6, 2013 (incorporated by reference to Exhibit 3.5 to the Registrant’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2013).
3.6	Second Amended and Restated Limited Partnership Agreement of Sentio Healthcare Properties OP, L.P., dated August 5, 2013 (incorporated by reference to Exhibit 3.6 to the Registrant’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2013).
4.1	Form of Distribution Reinvestment Enrollment Form (incorporated by reference to Appendix A to the Registrant’s prospectus filed on June 19, 2013).
4.2	Statement regarding restrictions on transferability of the Registrant’s shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 (No. 333-139704) filed on June 15, 2007 (“Pre-Effective Amendment No. 2”).
4.3	Second Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix B to the Registrant’s prospectus filed on June 19, 2013).
10.1	Agreement of Sale dated as of June 26, 2013 by and among Woodbury Mews III, LLC, Woodbury Mews IV, LLC and Three WM Real Estate, LLC, Three WM Operating, LLC, Four WM Real Estate, LLC and Four WM Operating.
10.2	First Amendment dated as of August 9, 2013 to Agreement of Sale dated June 26, 2013 by and among Woodbury Mews III, LLC, Woodbury Mews IV, LLC, Three WM Real Estate, LLC, Three WM Operating, LLC, Four WM Real Estate, LLC and Four WM Operating.
10.3	Second Amendment dated as of August 23, 2013 to Agreement of Sale dated June 26, 2013 by and among Woodbury Mews III, LLC, Woodbury Mews IV, LLC, Three WM Real Estate, LLC, Three WM Operating, LLC, Four WM Real Estate, LLC and Four WM Operating.
10.4	Third Amendment dated as of August 28, 2013 to Agreement of Sale dated June 26, 2013 by and among Woodbury Mews III, LLC, Woodbury Mews IV, LLC, Three WM Real Estate, LLC, Three WM Operating, LLC, Four WM Real Estate, LLC and Four WM Operating.
10.5	Fourth Amendment dated as of October 21, 2013 to Agreement of Sale dated June 26, 2013 by and among Woodbury Mews III, LLC, Woodbury Mews IV, LLC, Three WM Real Estate, LLC, Three WM Operating, LLC, Four WM Real Estate, LLC and Four WM Operating.
10.6	Term Loan Agreement dated as of October 21, 2013 among Woodbury Mews III, LLC and Woodbury Mews IV, LLC as the Borrowers, the Lenders from time to time party hereto as the Lenders, and KeyBank National Association, as a Lender and Agent.
10.7	Guaranty dated as of October 21, 2013 by Sentio Healthcare Properties, Inc. in favor of the Lenders from time to time party hereto as the Lenders, and KeyBank National Association, as a Lender and Agent.
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

29

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized this 8th day of November 2013.

SENTIO HEALTHCARE PROPERTIES, INC.
By:	/s/ JOHN MARK RAMSEY
	John Mark Ramsey, President and Chief
	Executive Officer
	(Principal Executive Officer)
By:	/s/ SHARON C. KAISER
	Sharon C. Kaiser, Chief Financial Officer
	(Principal Financial Officer and Principal
	Accounting Officer)

30

 

EX-10.1

AGREEMENT OF SALE

BETWEEN

Three WM Real Estate, LLC,

Three WM Operating, LLC,

Four WM Real Estate, LLC,

AND

Four WM Operating, LLC,

collectively, as Seller

AND

Woodbury Mews III, LLC

Woodbury Mews IV, LLC

Woodbury Mews Land Parcels, LLC

collectively, as Purchaser

June 26, 2013 

TABLE OF CONTENTS

Page

[To be inserted]

1

AGREEMENT OF SALE

This AGREEMENT OF SALE (“Agreement”) is made on June 26, 2013 (the “Effective Date”) between THREE WM REAL ESTATE, LLC (“Three Real Estate”), THREE WM OPERATING, LLC (“Three Operating”), FOUR WM REAL ESTATE, LLC (“Four Real Estate”), and FOUR WM OPERATING, LLC (“Four Operating”), each a Delaware limited liability company (individually and collectively, the “Seller”), Woodbury Mews III, LLC, Woodbury Mews IV, LLC, and Woodbury Mews Land Parcels, LLC, each a Delaware limited liability company (individually and collectively, the “Purchaser”).

WITNESSETH:

A.           Three Real Estate is the owner in fee simple of the land located at 124 Green Avenue, Woodbury, New Jersey, more particularly described on Exhibit A-2 attached hereto (the “Three Land”), and has leased the Three Land to Three Operating pursuant to a lease dated February 1, 2011 (the “Three Operating Lease”) for purposes of operating an assisted living facility for senior citizens as described on Exhibit A-1 annexed hereto (the “Three Facility”).

B.           Four Real Estate is the owner in fee simple of the land located at 122 Green Avenue, Woodbury, New Jersey, more particularly described on Exhibit A-2 attached hereto (the “Four Land”), and has leased the Four Land to Four Operating pursuant to a lease dated February 1, 2011 (the “Four Operating Lease”) for purposes of operating an independent living facility for senior citizens as described on Exhibit A-1 annexed hereto (the “Four Facility”). The Three Operating Lease and the Four Operating Lease are hereinafter individually referred to as an “Operating Lease” and collectively as the “Operating Leases.”

C.           Upon the terms and conditions hereinafter set forth, Seller agrees to sell and convey fee title to the Three Facility and the Four Facility to Purchaser (each, a “Facility,” and collectively, the “Facilities”).

D.           The Facilities are included in the Property (as hereinafter defined).

E.           Seller wishes to sell the Property to Purchaser and Purchaser wishes to purchase the Property in accordance with and subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the agreement set forth herein and for other good and valuable consideration, the parties hereto agree as follows:

Definitions

“Accrued Employee Benefits” has the meaning set forth in Section 6(n)(ii).

“Addit” has the meaning set forth in Section 4(g).

“Adjacent Land” means those certain parcels of real estate adjacent to the Land, identified as Block 142, Lots 1, 4, 5 and 6 on the Tax Maps of the City of Woodbury, Gloucester County, New Jersey, which are the burdened parcels under a certain Declaration of Easements recorded on February 2, 2011 in the Gloucester County Clerk’s office in Deed Book 4843, Page 287, benefitting the Land.

2

“Agreed Upon Title Defect” has the meaning set forth in Section 4(b).

“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. For purposes of this definition, “control” and “own” shall mean ownership, directly or indirectly, of more than fifty percent (50%) of the issued and outstanding equity interests in an entity, together with the ability, through the ownership of said equity interests, by contract, or otherwise, to direct the management of such entity.

“Allocated Purchase Price” shall have the meaning set forth in Section 2(a).

“Annual Threshold” has the meaning set forth in Section 28(b).

“Applicable Law” shall mean any federal, state, municipal, county, local, foreign, or other statute, law, ordinance, rule or regulation or any order, writ, injunction, judgment, plan or decree of any court, arbitrator, department, commission, board, bureau, agency, authority, instrumentality or other body, whether federal, state, municipal, county, local, foreign or other.

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

“Assumed Obligations” has the meaning set forth in Section 3(c).

“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.

“Cap” has the meaning set forth in Section 18(d)(iv).

“City” has the meaning set forth in Section 26.

“City Agreement” has the meaning set forth in Section 26.

“Closing” has the meaning set forth in Section 9(a).

“Closing Date” has the meaning set forth in Section 9(a).

“Closing Statement” has the meaning set forth in Section 10(a)(xiv).

“Code” has the meaning set forth in Section 6(q).

“Commercial Leases” shall mean all leases, rental, use and occupancy agreements, commitments, documents and instruments relating to any Property and all related documents, instruments, agreements, letters of credit, deposits and other items (including, without limitation, guarantees) other than the Residency Agreements or the Operating Leases.

“Deeds” has the meaning set forth in Section 10(a)(i).

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

“Diligence Materials” has the meaning set forth in Section 19.

3

“Document” shall mean this Agreement, all Exhibits and Schedules hereto, and each other agreement, certificate or instrument to be delivered pursuant to this Agreement.

“Due Diligence Deadline” means 5 P.M. Eastern Standard Time on the date which is forty-five (45) days after the Effective Date of this Agreement.

“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.

“Employee Contracts” has the meaning set forth in Section 6(n)(i).

“Environmental Laws” means all past, present or future federal, state and local laws, statutes, regulations, directives, ordinances, rules, policies, guidelines, orders, decrees, arbitration awards, permits 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).

“Environmental Reports” means those environmental reports set forth on Schedule 3 attached hereto.

“Escrow Agent” shall mean Acres Land Title Agency, Agent for Chicago Title Insurance Company, c/o Debbie Bannworth, 55 Essex Street, Millburn, New Jersey 07041, Phone: (973)376-4643, Fax: (973)912-8195.     

“Existing Manager” shall mean Senior Management of New Jersey, LLC.

“Facility” has the meaning set forth in the recitals.

“Facilities” has the meaning set forth in the recitals.

“Floor” has the meaning set forth in Section 18(d)(vi).

“Four Facility” has the meaning given in the recitals.

“Four Land” has the meaning given in the recitals.

“Four Operating” has the meaning given in the recitals.

“Four Operating Lease” has the meaning given in the recitals.

“Four Real Estate” has the meaning given in the recitals.

“GAAP” shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such entity as may be in general use by significant segments of the U.S. accounting profession.

4

“Governmental Payor Program” has the meaning set forth in Section 6(u)(i).

“Guarantor” has the meaning set forth in Section 5(b)(ix).

“Guaranty” has the meaning set forth in Section 5(b)(ix).

“Hired Employees” has the meaning set forth in Section 10(e).

“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 that is listed or defined or that may be considered as hazardous, infectious or toxic under any applicable federal, state or local law, statute, regulation, directive, ordinances, rules, policies, guidelines, orders, decrees or common law.

“HSR Act” has the meaning set forth in Section 8(e).

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

“Income Support Agreement” has the meaning set forth in Section 28(a).

“Income Support Payment” has the meaning set forth in Section 28(a).

“Indemnification Loss” means, with respect to any Indemnified Party, any liability, obligation, damage, loss, cost or expense of any kind or nature whatsoever, whether accrued or unaccrued, including, without limitation, reasonable attorneys’ fees and expenses and court costs, incurred by such Indemnified Party as a result of the act, omission or occurrence in question.

“Indemnified Party” has the meaning set forth in Section 18(d)(i).

“Indemnifying Party” has the meaning set forth in Section 18(d)(i).

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

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

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

“Interim Licensure Arrangements” means the agreement annexed hereto as Exhibit H.

“Interim Period” means: in the event the Three Facility is subject to an Interim Licensure Arrangement, the period of time from the Closing Date until the Interim Licensure Arrangement expires or is earlier terminated in accordance with its terms.

“Knowledge Parties” shall have the meaning set forth in Section 6.

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

5

“Licenses” shall mean all certificates, licenses, 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 Property as an independent and assisted living facility.

“Lists” has the meaning set forth in Section 6(m)(i).

“LSRP” has the meaning set forth in Section 4(f)(ii).

“Management Agreement” has the meaning set forth in Section 4(g).

“Material Change in Occupancy” means, with respect to the Facilities, any decrease in the Occupancy Rate at the Facilities by more than ten percent (10%) from the Occupancy Rate of the Facilities as of the Due Diligence Deadline.

“NOI” shall mean, for any period, Operating Income for such period minus Operating Expenses for such period.

“Occupancy Rate” shall mean the percentage derived by dividing the actual number of occupied units by the total number of units in the Facilities, as determined on the date each month that resident fees are billed; provided, however, that units which provide for occupancy of more than one resident shall be considered as a fraction. For illustration purposes only, a double occupancy unit which is occupied by one resident would constitute ½ (0.5) of an occupied unit for purposes of calculating the Occupancy Rate.

“OFAC” has the meaning set forth in Section 6(m).

“Operating Expenses” shall mean, for any period, without duplication, all commercially reasonable expenses actually paid or payable by Purchaser during such period in connection with the operation, management, maintenance, repair and use of the Property, determined on an accrual basis, and in accordance with GAAP. Operating Expenses specifically shall include (i) the property management fees actually paid under the Management Agreement, (ii) administrative, payroll (including all reasonable and customary bonuses paid or expected to be paid to employees), security and general expenses for the Property, (iii) the cost of utilities, inventories and fixed asset supplies consumed in the operation of the Property, (iv) a reasonable reserve for uncollectible accounts, (v) costs and fees of independent professionals (including, without limitation, legal, accounting, consultants and other professional expenses) or other third parties retained to perform services in connection with the operation of the Property in the ordinary course of business, (vi) operational equipment and other lease payments in the ordinary course of business, (vii) real property taxes and payments under the PILOT Agreement with respect to the Real Property, (viii) insurance premiums with respect to the Property, and (ix) all other commercially reasonable expenses paid or payable, or reasonably expected to be incurred by Purchaser during such period in connection with the operation, management, maintenance, repair and use of the Property. Notwithstanding the foregoing, Operating Expenses shall not include (1) depreciation or amortization, (2) income taxes, (3) any expenses (including legal, accounting and other professional fees, expenses and disbursements) incurred in connection with the sale, exchange, transfer, financing or refinancing of all or any portion of the Property, (4) amounts expended for replacements and alterations to the Property and required to be capitalized according to GAAP, (5) the scheduled principal and interest payments due under any mortgage financing with respect to the Property; (6) costs or expenses outside the ordinary course of business; and (7) costs or expenses associated with the operation of the legal entity (or entities) that constitutes Purchaser to the extent they are separate and apart from the costs of the operation of the Property.

6

“Operating Income” shall mean, for any period, all actual income of Purchaser during such period from the use, ownership or operation of the Property, including without limitation, (i) all amounts actually paid to Purchaser as Rent and other amounts under lease, license or occupancy agreements relating to the Property; (ii) all amounts payable by Medicaid with respect to the relevant period; (iii) business interruption insurance proceeds allocable to the applicable reporting period; and (iv) all other amounts (to the extent not covered pursuant to clauses (i) through (iii) of this sentence) which in accordance with GAAP, are included in Purchaser’s annual financial statements as income attributable to the Property.

“Operating Lease or Operating Leases” has the meaning given in the recitals.

“Order or Orders” has the meaning set forth in Section 6(m).

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

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

“PILOT Agreement” has the meaning set forth in Section 26.

“PILOT Assignment” has the meaning set forth in Section 26.

“Prior Owner Diligence Materials” has the meaning set forth in Section 6.

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

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

“Purchaser’s Designee” has the meaning set forth in Section 2(d).

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

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

“Purchaser Commissioned Reports” means any and all reports commissioned at any time prior to Closing by Purchaser or its agents or Affiliates relating to the environmental or physical condition of any Individual Property, including without limitation Phase I or Phase II environmental reports, survey, mechanical reports, structural or engineering, and zoning reports.

“Purchaser Knowledge” shall mean in all cases the actual knowledge of the following individuals (or any one of them): Purchaser Knowledge Parties, after reasonable inquiry with the consultants performing due diligence for Purchaser. In no event shall Seller 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 Knowledge Parties” shall mean John Mark Ramsey or Kevin Thomas.

“Purchaser Permits” has the meaning set forth in Section 7(b).

7

“Quarter” has the meaning set forth in Section 28(a).

“Quarterly Threshold” has the meaning set forth in Section 28(a).

“Real Property” means the Land and the Improvements.

“Rent Roll” has the meaning set forth in Section 6(k)

“Rents” shall mean all rents, moneys payable as damages (including payments by reason of the rejection of a lease in a bankruptcy proceeding) or in lieu of rent, royalties (including all oil and gas or other mineral royalties and bonuses), income, fees, receivables, receipts, revenues, deposits (including security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other payment and consideration of whatever form or nature received by or paid to or for the account of or benefit of Purchaser or any of its agents or employees from any and all sources arising from or attributable to the Property.

“Required Cure Items” has the meaning set forth in Section 4(b).

“Required Governmental Approvals” means all Licenses, permits, authorizations and certifications from all governmental authorities or otherwise that are necessary for the management and operation of the Facilities for their current uses following the Closing Date, including any State of New Jersey facility license, certificate of need and any certifications from Medicaid.

“Residency Agreements” shall mean all leases, rental, use, occupancy and reservation agreements, commitments, documents and instruments relating to any Property other than Commercial Leases or Operating Leases and all related documents, instruments, agreements, letters of credit, deposits and other items (including, without limitation, guarantees) which relate to the occupancy of portions of the Property by individuals for independent living or assisted living purposes, as applicable.

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

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

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

“SN” has the meaning set forth in Section 14.

“Substantial Portion” has the meaning set forth in Section 15(a)(ii).

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

“Survival Period” has the meaning set forth in Section 18(d)(v).

“Taking” has the meaning set forth in Section 15(a)(i).

“Tax Foreclosure Actions” has the meaning set forth in Section 25.

“Tax Sale Certificates” has the meaning set forth in Section 25.

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

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“Three Facility” has the meaning given in the recitals.

“Three Land” has the meaning given in the recitals.

“Three Operating” has the meaning given in the recitals.

“Three Operating Lease” has the meaning given in the recitals.

“Three Real Estate” has the meaning given in the recitals.

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

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

“Title Defect” has the meaning set forth in Section 4(b).

“Title Expenses” has the meaning set forth in Section 4(e).

“Title Insurance Policy and Title Insurance Policies” has the meaning set forth in Section 5(b)(i).

“Title Notice” has the meaning set forth in Section 4(b).

“Transactions” means the transactions contemplated by this Agreement.

“WMA” has the meaning set forth in Section 25.

“Year” has the meaning set forth in Section 28(a).

1.                           Purchase and Sale. Seller agrees to sell and assign, as applicable, to Purchaser, and Purchaser agrees to purchase and assume, as applicable, from Seller, the Property, as hereinafter defined, for the Purchase Price, as hereinafter defined, and subject to the terms and conditions set forth in this Agreement.

2.                           Purchase Price.

(a)          The purchase price (the “Purchase Price”) for the Property shall be THIRTY NINE MILLION and 00/100 DOLLARS ($39,000,000.00), subject to prorations and the adjustments expressly set forth in this Agreement. Prior to the expiration of the Due Diligence Period, Seller and Purchaser shall agree on a reasonable allocation of the Purchase Price payable for each individual property described on Exhibit A-2 (each, an “Individual Property”) which shall be allocated in the form set forth on Exhibit B (each such allocated portion, an “Allocated Purchase Price”). In addition, Seller and Purchaser shall agree on a reasonable further allocation of the Purchase Price as between (a) the Land and the Improvements, (b) the Personalty, and (c) the Intangibles prior to the expiration of the Due Diligence Period.

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(b)          The Purchase Price shall be payable by Purchaser to Seller as follows:

(i)          Within three (3) Business Days after the Effective Date, the sum of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) (the “Initial Deposit”) shall be paid by electronic wire transfer of immediately available federal funds to an interest bearing account designated by Escrow Agent or by certified check of Purchaser or bank teller’s check to the order of Escrow Agent.

(ii)         If Purchaser has not terminated this Agreement prior to the Due Diligence Deadline in accordance with Section 4(d)(iii) below, then within two (2) Business Days after the Due Diligence Deadline, the sum of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the “Second Deposit”, the Initial Deposit and the Second Deposit are hereinafter collectively referred to as the “Deposit”) shall be paid by electronic wire transfer of immediately available federal funds to an interest bearing account designated by Escrow Agent or by certified check of Purchaser or bank teller’s check to the order of Escrow Agent. The Deposit shall include all interest earned thereon. In the event any check in payment of the Deposit is cancelled or returned uncollected, Seller, at its sole option, may cancel this Agreement and/or pursue any legal remedies Seller may have against Purchaser on such check at the sole expense of Purchaser, such remedies being cumulative and not exclusive.

(iii)        On the Closing Date, the sum of Thirty Eight Million Two Hundred Fifty Thousand and No/100 Dollars ($38,250,000.00), subject to adjustment and proration as expressly set forth in this Agreement, to 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 Seller 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 Seller (or as Seller may direct).

(ii)         In the event Seller terminates this Agreement pursuant to Section 13(a) below, Escrow Agent shall pay the Deposit to Seller, who shall retain the Deposit in accordance with Section 13(a) below.

(iii)        In the event this Agreement is terminated as provided in this Agreement by reason other than Purchaser's default, Escrow Agent shall pay the Deposit to Purchaser.

(iv)        Escrow Agent shall invest and reinvest the proceeds of 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 Seller and Purchaser shall agree. If the Closing occurs, then any interest earned on the Deposit shall be paid to Purchaser. If the Closing does not occur, then such interest shall follow the Deposit. The party entitled to receive the interest earned on the Deposit shall pay all income taxes owed in connection therewith. The employer identification numbers of Seller and Purchaser are respectively set forth on the signature page hereof.

(v)         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 in court to await the resolution of such dispute. Escrow Agent 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.

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(vi)        Except as otherwise provided for 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. 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 such demand is served by personal delivery on 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 be returned to Purchaser, and Seller shall have no right to object.

(vii)       In the event that Escrow Agent shall receive conflicting instructions or objections from Purchaser or Seller, Escrow Agent shall be entitled to consult with counsel in connection with its duties hereunder. Each of Seller and Purchaser agree to reimburse Escrow Agent, upon demand, for one half (1/2) of the reasonable costs and expenses incurred by Escrow Agent in connection with such consultation. 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 reasonable 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, negligently 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.

(d)          Purchaser’s Designated Transferee. Purchaser may assign the right to take title to the Facilities to (i) a special purpose entity that is an Affiliate of Purchaser subject to and in accordance with Section 17(e), or (ii) an entity formed by a real estate investment trust at the request of Purchaser for the sole purposes of holding the fee simple title to either or both of the Facilities and leasing them to Purchaser or its Affiliate (“Purchaser’s Designee”); provided, however, that such designation shall not delay the Closing Date and Purchaser shall notify Seller of such assignment not less than five (5) Business Days prior to the Closing Date. Any assignment by Purchaser to Purchaser’s Designee shall not release or relieve Purchaser from any duties, obligations or rights arising under this Agreement.

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3.                           Property.

(a)          “Property” means, except for the items listed in Section 3(b), all of Seller’s right, title and interest in: (i) the Three Land and the Four Land (collectively, the “Land”); (ii) all easements, and other related rights appurtenant to the Land (collectively, “Appurtenances”); (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 except for the fact that it is inextricably related or attached to any such buildings, structures, fixtures and/or other improvements (collectively, “Improvements”); (iv) all furnishings, machinery, equipment, vehicles, supplies, inventory, linens, medicine, foodstuffs, consumable and other personal property of any type or description, including, without limitation, all beds, chairs, sofas, wheelchairs, tables, kitchen and laundry equipment associated with and present at the Property, including, but not limited to those items of personal property more particularly set forth on Exhibit I attached hereto (the “Personalty”), (v) any and all trademarks, trade names, brand names, Licenses, intellectual property, guaranties, warranties, development rights, permits, drawings, plans and business licenses (including, without limitation, healthcare operating licenses) affecting each Individual Property (to the extent assignable) (collectively, the “Intangibles”), (vi) all rights of Seller in, to and under all contracts, leases, agreements, commitments and other arrangements, and any amendments, modifications, supplements, renewals and extensions thereof, used or useful in the operation of the Property made or entered into by Seller as of the Effective Date, or between the Effective Date and the Closing in compliance with this Agreement (the “Property Agreements”). (Notwithstanding the foregoing, Property Agreements expressly exclude: Seller’s management agreement with Existing Manager, the Management Agreement, the City Agreement, the PILOT Agreement, the Residency Agreements, any contracts, leases, agreements, commitments and other arrangements, and any amendments, modifications, supplements, renewals and extensions entered into by Seller after the Effective Date and prior to the Closing in breach of Section 7(a), and any Property Agreements for which consents to the assignment thereof to the Purchaser have not been obtained as of the Closing, unless waived by Purchaser.), (vii) all rights of Seller in, to and under all Residency Agreements including any amendments, modifications, supplements, renewals and extensions thereof, and all deposits, initial service fees and advances of any kind or nature from any resident of the Property (“Resident Deposits”), (viii) true and complete copies of all the books, records, accounts, files, logs, ledgers, journals and architectural, mechanical and electrical plans and specifications pertaining to or used in the operation of the Property in Seller’s possession or control, however such data is stored, (ix) rights in and to any claims or causes of action (to the extent assignable) to the extent they are in the nature of enforcing a guaranty, warranty, or a contract obligation to complete improvements, make repairs, or deliver services to the Property, (x) the Tax Sale Certificates, including any and all rights related to the Tax Foreclosure Actions (as such terms are defined in Section 25) and the results therefrom, and (xi) all rights of Seller in and to the City Agreement and PILOT Agreement (subject to the consent of the City to the assignment of the PILOT Agreement) (as those terms are more particularly defined in Section 26).

(b)          The Property relating to each Facility shall not include, and Seller shall not sell, transfer or convey to Purchaser the following:

(i)          Accounts receivable relating to such Facility for periods prior to Closing;

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(ii)         Those books and records relating to Seller which Seller is required by Applicable Law to retain; provided, however, that Purchaser may retain copies of such books and records;

(iii)        The computer software and systems set forth on Schedule 1;

(iv)        All Medicaid provider agreements in respect of such Facility;

(v)         All cash on hand at such Facility (subject to prorations of Section 11 below), cash equivalents, bank accounts and similar type investments, such as certificates of deposit, treasury bills and other marketable securities wherever and however held;

(vi)        All proprietary materials and documents of Seller or Existing Manager, provided that Seller shall transfer to Purchaser (to the extent in the Seller’s possession or control) copies of operations handbooks, marketing materials (other than marketing materials bearing Existing Manager’s logo or other intellectual property) and manuals for all equipment, systems and personal property acquired by Purchaser;

(vii)       The personal property of the Existing Manager set forth on Schedule 5; and

(viii)      All websites, URLs and domain names of the Existing Manager.

Notwithstanding the foregoing, Seller shall cooperate with Purchaser, and cause the Existing Manager to cooperate with Purchaser, in order to affect the orderly transfer of operation of the Facilities (including, without limitation, transfer of electronic files and account information).

(c)          Assumption of Liabilities. Except as expressly set forth in this Agreement, Purchaser is assuming no liabilities attributable to the operation or ownership of the Property which accrued or occurred on or prior to the Closing. Specifically, without limiting the foregoing, except as specifically set forth herein, Purchaser shall not assume (i) any claim, action, suit, or proceeding pending as of the Closing or any subsequent claim, action, suit, or proceeding arising out of or relating to any event occurring prior to Closing, with respect to the manner in which Seller conducted its businesses on or prior to the Closing (ii) any liability for taxes other than real property taxes (and any payments under the PILOT Agreement) from and after Closing, or (iii) any liability under any Property Agreements, except for the Assumed Obligations listed below. Purchaser acknowledges that, effective as of the Closing, Purchaser shall assume and undertake to pay, discharge, and perform only the liabilities and obligations of Seller under the Property Agreements listed in Schedule 2 (but not the Property Agreements which are entered into after the Effective Date hereof not in compliance with this Agreement or Property Agreements for which consents to the assignment thereof to the Purchaser hereunder have not been obtained as of the Closing), the City Agreement, the PILOT Agreement, the Residency Agreements, and the Tax Foreclosure Actions (subject to and in accordance with Section 25) to the extent such liabilities and obligations arise during and relate to any period from and after the Closing (collectively, the “Assumed Obligations”).

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4.                           Due Diligence.

(a)          Within five (5) days after the execution of this Agreement, Purchaser shall order commitments for owner’s policies of title insurance (the “Title Commitment”) issued by Acres Land Title Agency, Inc., Agent for Chicago Title Insurance Company (the “Title Company”) covering fee simple title to the Real Property, in which the Title Company shall agree to insure, in such amount as Purchaser deems adequate, merchantable title to such interests free from the Schedule B standard printed exceptions and all other exceptions except for (i) exceptions which, under applicable state rules and regulations, cannot be deleted or modified, and (ii) exceptions to which Purchaser does not object pursuant to Section 4(b) below (collectively, “Permitted Exceptions”), with such endorsements as Purchaser shall reasonably require and with insurance coverage over any “gap” period. Such Title Commitments shall have attached thereto complete, legible copies of all instruments noted as exceptions therein. Purchaser shall furnish Seller with a copy of the title commitment and attachments, and all subsequent revisions thereof, promptly upon receipt of same, but in no event later than five (5) days before the Due Diligence Deadline.

(b)          If (i) any of the Title Commitments reflect any exceptions to title other than Permitted Exceptions which are not acceptable to Purchaser in Purchaser’s sole discretion, or (ii) the Survey to be obtained by Purchaser pursuant to Section 4(d) below discloses anything not acceptable to Purchaser in Purchaser’s sole discretion (any such exception or unacceptable statement of fact being referred to herein as a “Title Defect”), then Purchaser shall, on or before the earlier of five (5) days before the end of the Due Diligence Period give Seller written notice of such Title Defect (the “Title Notice”). Such Title Notice shall include a copy of the relevant Title Commitment and copies of the exceptions. Any exception to title that is (x) disclosed in the Title Commitment, or (y) identified on a Survey, which, in either case, is not identified as a Title Defect in the Title Notice, shall be deemed to be a “Permitted Exception” for purposes of this Agreement. Seller shall, within ten (10) days after receipt of any such Title Notice, notify Purchaser whether Seller will take the action necessary to remove the Title Defects (the Title Defects that Seller agrees to remove are hereinafter referred to as the “Agreed Upon Title Defects”); it being understood that Seller shall have no obligation to agree to remove any Title Defects other than Required Cure Items. If Seller gives notice that it will not cure one or more Title Defects, or if Seller does not respond to the Title Notice during said ten (10) day period (in which case Seller shall be deemed to have refused to cure any Title Defects), Purchaser shall have the right, in its sole discretion, to terminate this Agreement within five (5) days after the earlier of (y) the date Purchaser receives Seller’s notice, or (z) the expiration of said ten (10) day period, in which case this Agreement shall terminate and the Deposit shall be returned to Purchaser and neither party shall have any further obligations to the other party hereunder, except as otherwise provided herein. Notwithstanding anything contained herein to the contrary, the following items (the “Required Cure Items”) must be cured prior to or at Closing (with Seller having the right to apply the portion of the Purchase Price allocated to either such party pursuant to Section 2 hereof, or a portion thereof, for such purpose): (x) all mortgages, security deeds, and other security instruments created by Seller, (y) all mechanics’, materialmen’s, repairmen’s, contractors’ or other similar liens which encumber the Real Property as of the Effective Date created by, through or under Seller or which may be filed against the Real Property after the Effective Date created by, through or under Seller, and (z) all judgments against the Seller in a liquidated monetary amount which may constitute a lien against the Real Property. On or before the Closing, Seller shall provide Purchaser with reasonable evidence of removal of the Agreed Upon Title Defects (with Seller having the right to apply the portion of the Purchase Price allocated to an Individual Property pursuant to Section 2 hereof, or a portion thereof, for such purpose). Following the Due Diligence Deadline, Purchaser shall notify Seller within five (5) days of receipt of an updated Title Commitment or Survey showing any Title Defects that are not Permitted Exceptions, and Seller shall have the same opportunity to respond and Purchaser the same remedies as set forth in this Section 4(b). Any Title Defects that are not Permitted Exceptions that are not timely objected to in the manner set forth in this Section 4(b) shall be deemed Permitted Exceptions.

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(c)          In the event (x) the Agreed Upon Title Defects specified are not cured on or before the Closing, or (y) a Required Cure Item is not cured on or before the Closing, Purchaser shall have the option to:

(i) accept Seller’s interest in the Land subject to such Title Defect(s) or Required Cure Item(s), in which event such Title Defect(s) or Required Cure Item(s) shall become part of the Permitted Exceptions, and to close the transaction contemplated hereby in accordance with the terms of this Agreement;

(ii) pay up to an aggregate of Five Hundred Thousand Dollars ($500,000.00) to cure the Agreed Upon Title Defect or Required Cure Items and deduct such amount from the Purchase Price; or

(iii) by giving Seller written notice of Purchaser’s election, terminate this Agreement and receive a refund of the Deposit, Seller shall reimburse Purchaser for its actual out-of-pocket costs in negotiating and performing due diligence under this Agreement, not to exceed $200,000 in the aggregate, and upon the making of such refund and reimbursement, no party shall have any further rights or obligations to the other hereunder, except for such rights and obligations that, by the express terms hereof, survive any termination of this Agreement. If Purchaser elects to proceed with the Closing without giving notice of its election of this option (iii), it will be deemed to have accepted such Title Defect(s) or Required Cure Item(s) as Permitted Exceptions.

Notwithstanding anything to the contrary contained in this Section 4(c), if on the Closing Date the Real Property is affected by any Required Cure Item or Agreed Upon Title Defect then in such event, Seller, at Seller’s election shall have the privilege to (i) 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 beyond the date scheduled for Closing, or (ii) if the Required Cure Item or Agreed Upon Title Defect is of a liquidated monetary amount, Seller may, at Seller’s election, post a bond, letter of credit or escrow reasonably acceptable to the Title Company to cause the Title Company to omit the applicable Required Cure Item or Agreed Upon Title Defect from the Purchaser’s title insurance policy to be issued at the Closing, and Seller shall use commercially reasonable efforts after the Closing to contest the applicable Required Cure Item or Agreed Upon Title Defect and to cause the applicable Required Cure Item or Agreed Upon Title Defect to be discharged of record.

(d)          Seller will provide Purchaser with copies of any existing boundary surveys for the Real Property. Purchaser may order one or more boundary surveys for the Real Property (the “Survey”) prepared by a registered land surveyor or surveyors satisfactory to Purchaser.

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(e)          All Title Expenses shall be paid by the Purchaser. “Title Expenses” shall include all costs and expenses of obtaining the Survey, Title Commitment and title policies, together with any endorsements required by any lender financing the Purchaser’s acquisition of the Property. “Title Expenses” shall exclude any costs and expenses incurred or required to be incurred to cure any Title Defects or Required Cure Items.

(f)          Tests and Inspections.

(i)          From the Effective Date and continuing until the Closing, Purchaser and/or its designees, shall have the right to enter, upon reasonable prior notice to Seller (not less than two (2) Business Days) and during normal business hours, each Individual Property, 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 deems appropriate (collectively, the “Tests”). In addition, Purchaser may investigate all other aspects of the Property.

(ii)         Purchaser’s access to each Individual Property shall be subject to the following: (A) Seller shall have the option to have an agent or employee accompany Purchaser at all times during its investigation or inspection of the Property; (B) Purchaser may only communicate with the employees of Seller or the Existing Manager after obtaining the prior written consent of Seller in each instance (not to be unreasonably withheld, conditioned or delayed) and then only in the presence of an agent or representative of Seller; (C) Purchaser shall conduct the Tests in a manner that does not unreasonably interfere with the operations of the respective Facility and Purchaser shall coordinate all visits to the Facilities in order to minimize the number of visits required; (D) Purchaser shall not conduct any invasive testing without the prior written consent of Seller; (E) Purchaser shall indemnify and hold harmless Seller from and against all costs, claims, damages or liabilities incurred by Seller in connection with or by reason of any damage, death, or injury to any person or property occurring in connection with the Tests (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); (F) Purchaser’s delivering to Seller evidence of commercial general liability insurance in the amount of $1,000,000.00, in form and substance reasonably acceptable to the Seller, and naming Seller as an additional insured thereunder; and (G) a Licensed Site Remediation Professional (“LSRP”), as defined in the Site Remediation Reform Act, N.J.S.A. 58:10C-1 et seq., and the regulations promulgated thereunder, shall not be utilized at any time in connection with Purchaser's inspections or Tests, or be permitted access to either Individual Property or to the results of the inspections or Tests. Without limiting the generality of the foregoing indemnity, Purchaser shall (i) remove 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 (ii) 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 (other than Fannie Mae or Freddie Mac) prior to Closing which would or could lead to an investigation or 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 Property, or any part thereof; provided, however, that Purchaser, within ten (10) Business Days following the Effective Date, shall submit applications for the Required Governmental Approvals. The foregoing indemnity shall survive the expiration or any earlier termination of this Agreement. Notwithstanding anything herein to the contrary, (1) Purchaser may contact governmental authorities in regard to land use and licensing matters, but only to extent required for due diligence, licensing of the new operators for the Facilities, and operation of the Facilities, and (2) Purchaser shall not contact any officials of the City without giving Seller a minimum of two (2) Business Days advance notice and an opportunity to participate, and (3) Purchaser shall not contact International Senior Properties or any of its principals, employees or Affiliates without giving Seller a minimum of two (2) Business Days advance notice and an opportunity for Seller to participate.

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(iii)        Purchaser shall have the right to cancel this Agreement in its sole and absolute discretion, for any reason (including any title or Survey concerns) or no reason on or before the Due Diligence Deadline by written notice given to Seller on or before Due Diligence Deadline. If Purchaser duly cancels this Agreement in accordance with this Section 4(f)(iii), this Agreement shall be deemed terminated and of no further force or effect, except for the provisions expressly stated to survive termination, and the Deposit shall be returned to Purchaser. If Purchaser does not duly cancel this Agreement by the Due Diligence Deadline in accordance with this subparagraph or if Purchaser expressly waives its right to cancel this Agreement pursuant to written notice thereof given to Seller, (i) this Agreement shall remain in full force and effect and Purchaser shall have no further right to cancel this Agreement under this Section and (ii) Purchaser shall be deemed to have waived any liability of Seller and any right to refuse to consummate the Closing by reason of any condition known to Purchaser as of the Due Diligence Deadline, including, without limitation, a misrepresentation known to Purchaser, Required Cure Items (other than those which Seller has agreed or is otherwise obligated to cure) or any other condition, except as otherwise expressly provided herein and except for Seller’s default.

(iv)         All information obtained by Purchaser or its representatives relating to the Property or the transactions contemplated hereby shall be treated as confidential information. Purchaser shall not disclose any information obtained by Purchaser, including, without limitation, the results of environmental inspections or analysis, to any party (including Seller) without obtaining Seller’s prior written consent, except that Purchaser may disclose such information to its consultants, attorneys and prospective lenders engaged in the review of same. Notwithstanding the foregoing, Purchaser shall have the right to disclose confidential information to third parties if such disclosure is required by an order of a court of competent jurisdiction, provided that Purchaser delivers reasonable advance notice thereof to Seller. Notwithstanding anything herein to the contrary, to the extent the transaction contemplated by this Agreement proceeds through Closing, this provision shall no longer be applicable.

(g)          Management Agreement. This Agreement is contingent upon and subject to an Affiliate of Purchaser and an Affiliate of Capital Health Group Management, LLC (“Addit”) entering into and delivering to the Escrow Agent an executed Management Agreement in substantially the form and substance annexed hereto as Exhibit G (“Management Agreement”) on or before July 12, 2013. If Purchaser and Addit have not executed and delivered the Management Agreement to Escrow Agent as provided in the preceding sentence, each of Seller and Purchaser shall have the right to cancel this Agreement on or before July 12, 2013 by written notice given to the other on or before July 12, 2013. If either party duly cancels this Agreement in accordance with this Section 4(g), this Agreement shall be deemed terminated and of no further force and effect, except for the provisions expressly stated to survive termination, and the Deposit shall be returned to Purchaser. If Purchaser or Seller does not timely cancel this Agreement in accordance with this Section 4(g) or if Purchaser and Addit execute and deliver the Management Agreement to the Escrow Agent on or prior to July 12, 2013, (i) this Agreement shall remain in full force and effect and Purchaser and Seller shall have no further right to cancel this Agreement under this Section 4(g), and (ii) Purchaser and Seller shall be deemed to have waived any right to refuse to consummate the Closing arising out of or in connection with the Management Agreement.

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5.                          Conditions to Closing.

(a)          Seller shall not be obligated to proceed with Closing unless and until each of the following conditions have been fulfilled:

(i)          Seller’s satisfaction that there is no material pending or threatened litigation regarding the Transactions.

(ii)         Seller shall have received payment of the Purchase Price in accordance with Section 2 of this Agreement, subject to the adjustments and prorations contemplated by this Agreement.

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

(iv)        Purchaser shall have delivered or caused to be delivered to Seller on the Closing each of the Documents required to be delivered pursuant to Section 10.

(b)          Purchaser obligation to close pursuant to the terms of this Agreement is subject to the satisfaction, on or prior to the Closing, of each of the following conditions, unless waived by Purchaser in writing:

(i)          The Title Company shall have delivered to Purchaser Title Commitments to issue at the prevailing promulgated rates, ALTA standard owner’s policies and extended lender’s policies of title insurance insuring fee title and any lender’s mortgage interest, as the case may be, for each Individual Property (collectively, the “Title Insurance Policies” and each individually a “Title Insurance Policy”) in the amount of the Purchase Price (or the loan amount for lender policies) for each Individual Property, as set forth on Exhibit B, subject only to the Permitted Exceptions.

(ii)         All Property Agreements not assumed by Purchaser (other than those automobile leases and equipment leases which Purchaser elects to assume or is deemed to have elected to assume pursuant to the provisions of this Agreement) and management agreements affecting the Property shall be terminated effective as of the Closing Date (Seller hereby covenanting to so terminate all such agreements, or otherwise make provision reasonably acceptable to Purchaser to perform, effective as of the Closing Date).

(iii)        Except for any changes permitted by the terms of this Agreement, including without limitation, Section 6 hereof, or consented to in writing by Purchaser, each of the representations and warranties made by Seller in this Agreement or in any certificate delivered at Closing that is qualified as to knowledge or materiality shall be true and correct in all respects when made and shall be true and correct in all respects at and as of the Closing as though such representations and warranties were made or given on and as of the Closing, and each of such representations and warranties that is not qualified as to knowledge or materiality shall be true and correct when made and shall be true and correct in all material respects at and as of the Closing as though such representations and warranties were made or given on and as of the Closing. For purposes of determining whether the representations and warranties made by the Seller pursuant to this Agreement are true and correct at and as of the Closing, the Schedules and Exhibits shall be deemed to include only that information contained therein on the date such Schedules and Exhibits are acknowledged pursuant to Section 29.

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(iv)        Seller shall have obtained any approvals and given any notice required of Seller by the New Jersey Department of Health to consummate the transactions contemplated herein, which Seller covenants to diligently pursue.

(v)         Purchaser, at its sole cost and expense, shall within ten (10) Business Days after the Effective Date, file for the Required Governmental Approvals and shall diligently prosecute such Required Governmental Approval applications (Seller hereby agreeing to cooperate with Purchaser, to obtain the Required Governmental Approvals) and will copy Seller on such filings and all related correspondence. If the Required Governmental Approvals have not been obtained by the date then-scheduled for Closing, then to the extent allowed under the laws of New Jersey, Seller and Purchaser shall enter into the Interim Licensure Arrangements with respect to the Three Facility in the form attached hereto as Exhibit H. The term of the Interim Licensure Arrangements shall not exceed eighteen (18) months after the Closing; provided, however, that Purchaser shall have the right to extend the term of said arrangements for up to six (6) additional periods of one (1) month each, by written notice to Seller given prior to the expiration of the then-current term, provided that Purchaser is diligently pursuing the Required Governmental Approvals. Purchaser shall pay all costs incurred by Seller to maintain any Required Governmental Approvals required to operate the Facilities during the term of said Interim Licensure Arrangements. Purchaser shall be entitled to receive all revenues and shall be obligated to pay all operating costs during such period. Purchaser shall indemnify, defend and hold Seller (and its Affiliates) harmless from any claims, demands, costs, damages, losses or causes of action that may arise in relation to Purchaser’s (or its designees) operation of the Facilities during such temporary period, and Purchaser’s indemnification obligation shall be guaranteed by an Affiliate of Purchaser acceptable to Seller in its sole discretion.

(vi)        Seller shall have obtained the consent to the assignment of the PILOT Agreement from the City to Purchaser with respect to (i) the Three Land and Four Land, and (ii) only in the event WMA has taken fee ownership of the Adjacent Land, the Adjacent Land.

(vii)       Seller shall have delivered or caused to be delivered to Purchaser on the Closing each of the Documents required to be delivered pursuant to Section 10.

(viii)      Purchaser shall have received evidence from Seller, satisfactory to Purchaser in its reasonable discretion, that the management agreement between Seller and Existing Manager has been terminated without fee or cost to Purchaser.

(ix)         Seller shall have caused Capital Health Group, LLC (the “Guarantor”) to execute and deliver the guaranty in the form attached as Exhibit D to this Agreement (the “Guaranty”).

(x)          Seller shall have performed in all material respects all of their covenants, agreements and obligations required by this Agreement to be performed or complied with by them prior to or upon the Closing.

(xi)         No Material Change in Occupancy shall have occurred.

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6.                          Certain Representations and Warranties by Seller. Each Seller, for itself and its Individual Property, hereby represents and warrants to Purchaser that:

(a)          Each Seller is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware, authorized to conduct business in the State of New Jersey, with all requisite limited liability 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 to perform its obligations hereunder.

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

(c)          All of the documents to be delivered by Seller at Closing will, at Closing, be duly authorized, executed and delivered by Seller (and/or, if applicable, its Affiliates), will be the legal, valid and binding obligations of Seller (and/or, if applicable, its Affiliates), and be enforceable against 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 Seller of the terms thereof will not violate any material provision of any agreement, instrument, writ, order or decree to which Seller (and/or, if applicable, its Affiliates) is a party, or to which any portion of the Property is subject.

(d)          Except for (i) a certificate of continuing occupancy, (ii) any notice to or consent or approval required by any governmental agency regulating the issuance of Required Governmental Approvals to operate senior housing facilities, (iii) notice to the New Jersey Division of Taxation Bulk Sale Section, and (iv) the consent of the City to the assignment of the PILOT Agreement, Seller is not required to give any notice to, make any filing with, or obtain any authorization, consent or approval of any governmental agency in order for the parties to consummate the Transactions contemplated by this Agreement.

(e)          Attached hereto as Exhibit I is a list of all vehicles owned or leased (and equipment that is leased) by Seller in connection with the operation of the Facilities. Except as set forth on Exhibit I, Seller owns and has good title to all Personalty, free and clear of any liens and encumbrances, except for the Permitted Exceptions and liens that will be satisfied at Closing. Such Personalty represents all material assets used in the operation of the Facilities, other than the personal and intellectual property excluded by Section 3(b) above.

(f)          Seller has not received any written notice of any condemnation proceeding or other proceeding in the nature of eminent domain in connection with the Real Property or any portion or portions thereof or any utilities, sewers, roadways or other public improvements serving the Real Property.

(g)          Schedule 7 attached hereto is a true and complete list of all Licenses held by the Seller in connection with the Facilities. To Seller’s Knowledge, the Licenses listed on Schedule 7 are valid and no material violations exist with respect to such Licenses. No applications, complaints or proceedings are pending or, to the Knowledge of Seller, threatened in writing which may (i) result in the revocation, modification, non-renewal or suspension of any License or of the denial of any pending applications, (ii) the issuance of any cease and desist order, or (iii) the imposition of any fines, forfeitures, or other administrative actions with respect to the Facilities or their operation.

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(h)          Other than usual and customary annual assessments, and except for the PILOT Agreement, Seller has no Knowledge of, nor has Seller received any written notice of, any proposed assessment for public improvements or otherwise in connection with the Property or any portion thereof.

(i)          Except for (i) the foreclosure of the Tax Sale Certificates by WMA or (ii) the matters set forth on Schedule 8, there is no suit, action or proceeding pending or to Seller’s Knowledge threatened against Seller or any portion of the Property before or by any court, administrative agency or other governmental or quasi-governmental authority, which brings into question the validity of this Agreement or the Transactions or otherwise materially affects the Property.

(j)          The Property Agreements listed on Schedule 2 hereto are in full force and effect and are all of the Property Agreements relating to or affecting the Property. Seller is not in material default of any of its obligations under any of the Property Agreements, and Seller has no Knowledge of any default on the part of any other party thereto.

(k)          Set forth on Exhibit J hereto is a true and complete rent roll for each Facility (the “Rent Roll”). Except for the Operating Leases and as set forth on the Rent Roll, to Seller’s Knowledge:

(i)          Other than the residents under the Residency Agreements and Commercial Leases, no party has any right to possess all or any portion of the Real Property.

(ii)         Seller has delivered, true, correct and complete copies of the Residency Agreements and Commercial Leases, including any and all amendments and guarantees.

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

(iv)        Seller has not assigned or pledged any Residency Agreement or Commercial Lease, or rents or any interest therein, to any person or entity other than the lenders in connection with existing mortgage loans encumbering the Real Property which will be discharged at Closing in accordance with the terms of this Agreement.

(v)         Seller is not in default under any of its material obligations under any Residency Agreement or any Commercial Lease, and, except as set forth on the Rent Roll, Seller has no Knowledge of any material default on the part of any other party thereto. All of the Residency Agreements identified on the Rent Roll are currently in full force and effect as of the date of the Rent Roll.

(l)          Seller has not made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy or, to the Knowledge of Seller, 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.

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(m)          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 Seller’s Knowledge, neither Seller nor any member of Seller:

(i)          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”); or

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

Seller hereby covenants and agrees that if Seller obtains Knowledge that Seller or any of its members becomes listed on the Lists or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, 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 Seller immediately upon delivery of written notice thereof to Purchaser.

(n)          Employee Matters.

(i)          All persons employed at the Real Property in connection with the operation or maintenance of the Property are employees of Three Operating or Four Operating, except for the Existing Manager and other third party service providers. There are no employment contracts, operating agreements, management contracts, listing agreements, consulting agreements, union contracts, labor agreements, pension plans, profit sharing plans or employee benefit plans which relate to the Facility (“Employee Contracts”) except as set forth in the Schedule of Employee Contracts on Exhibit K attached hereto. Except as set forth on the Schedule of Employee Contracts, none of the employees engaged in the operation or maintenance of the Facility is employed pursuant to a written agreement.

(ii)         Purchaser shall have no liability for any matter concerning any individual employed by Seller or Existing Manager in the operation or management of any Facility which accrues prior to Closing except for accrued vacation and other accrued paid time off and benefits (“Accrued Employee Benefits”) related to any employee hired by Purchaser or the Facilities’ property manager at Closing with respect to which Purchaser receives a fully offsetting credit against the Purchase Price in accordance with the provisions hereof. Seller shall be solely liable to pay (or cause Existing Manager to pay) the employees all severance and Accrued Employee Benefits to which the employees are entitled through the Closing Date, except for any Accrued Employee Benefits for which Purchaser receives a fully offsetting credit against the Purchase Price at Closing as aforesaid, in which case Purchaser will provide the Accrued Employee Benefits to such employees. For the purposes hereof, the term “Accrued Employee Benefits” shall be deemed to include, without limitation, any bonus payable to any employee to the extent that such bonus is attributable to services rendered by such employee prior to the Closing Date, but payable after the Closing Date.

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(o)          Lack of Conflict. Subject to any licensing requirements and approvals otherwise set forth in this Agreement, neither the execution of this Agreement nor the consummation of the transactions contemplated herein will violate any restriction, court order, judgment, law, regulation, charter, bylaw, instrument, or agreement to which Seller or the Property (or any portion thereof) are subject.

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

(q)          ERISA; Benefit Plans. Seller has not incurred and does not presently expect to incur any liability under Title IV of ERISA that would reasonably be expected to result in liability to Purchaser. Each of the Benefit Plans that is a group health plan within the meaning of Section 5000(b)(1) of the Internal Revenue Code (the “Code”) was in complete compliance with the provisions of Section 4980B(f) of the Code.

(r)          Insurance Schedule 6 sets forth an accurate summary of all general liability, fire, theft, professional liability and other insurance maintained with respect to the Property, currently and for the last three (3) years.

(s)          Financial Disclosures. The following documents have been provided or will be provided to Purchaser by Seller as part of the Diligence Materials and to Seller’s Knowledge are substantially true, complete and correct in all material respects:

(i)          Detailed operating statements for Seller’s period of ownership of the Facilities

(ii)         Current List of Employees

(iii)        Current Rent Roll

(iv)        Current Accounts receivable.

(t)          Seller is not now nor will it be at Closing in default or breach of any of its material obligations under the City Agreement, Pilot Assignment or Pilot Agreement.

(u)          Medicaid.

(i)          Seller is receiving payment under Title XIX of the Social Security Act and is certified for participation in the Medicaid program, (“Governmental Payor Program”), and is a party to valid a participation agreement for payment by the Governmental Payor Program, which agreement is in full force and effect. A true and correct copies of such agreement shall be delivered to Purchaser, to the extent not prohibited by Applicable Law. Without limiting the generality of the foregoing, the facilities, equipment, staffing and operations of Seller satisfy all material conditions of participation in the Governmental Payor Program.  Seller has not received written notice of pending, threatened or possible investigation by, or loss of participation in, the Governmental Payor Program, and, to Seller’s Knowledge, there is no basis for any such notice.

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(ii)         There are no pending or threatened material claims (including potential penalties) by the Governmental Payor Program against Seller, and Seller has not been subject to loss of waiver of liability for utilization review denials with respect to the Governmental Payor Program during the past two (2) years.

(iii)        All billing practices of Seller with respect to Governmental Payor Programs and private insurance companies have been in material compliance with Applicable Laws, and Seller has not billed or received any payment or reimbursement in excess of amounts allowed by Applicable Laws.

(iv)        Seller has not (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 Seller 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 to its Knowledge 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 governmental 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 to its Knowledge made any misleading, false or artificial entries on any of its books or records for any reason; or (v) to its Knowledge 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.

(v)         Neither Seller, nor to its Knowledge, any partner, member, director, or officer 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 referrals to or otherwise generate business for Seller, or otherwise influence the affairs of the Seller, to provide services, lease space, lease equipment or engage in any other venture or activity that is prohibited by law 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.

(v)         Intentionally omitted.

(w)          Intentionally omitted.

(x)          Title Encumbrances. 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 Seller has no Knowledge of any material default on the part of any other party thereto.

(y)          Intentionally omitted.

(z)          Intentionally omitted.

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(aa)         Intentionally omitted.

(bb)         Environmental Matters. Seller has not generated, stored or disposed of any Hazardous Substance at or on the Real Property other than in accordance with Environmental Laws. Except as set forth in the Environmental Reports, Seller has no Knowledge of any previous generation, storage, disposal or existence of any Hazardous Substance at or on the Real Property other than in accordance with all Environmental Laws. Except as set forth in the Environmental Reports, neither Seller, nor, to Seller’s Knowledge, Existing Manager, has received any notice letter under any Environmental Law or any notice or claim, and there is no investigation pending or to Seller’s Knowledge threatened, to the effect that Seller 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 Real Property.

(cc)         Neither the Seller nor, to Seller’s Knowledge, the Existing Manager has received written notice of any violation of Applicable Laws with respect to the Facilities.

Purchaser acknowledges that Seller acquired the Facilities through foreclosure on February 1, 2011 and that the Diligence Materials may include certain financial statements, reports, documents, investigations, etc. prepared by or on behalf of the prior owner of the Facilities (“Prior Owner Diligence Materials”). Notwithstanding anything to the contrary contained in this Agreement, Seller makes absolutely no representations or warranties of any kind, express or implied, with respect to any Prior Owner Diligence Materials, including without limitation, with respect to the accuracy or completeness thereof.

All representations and warranties made by Seller in this Section 6 shall be true and correct on the date made and their continued validity in all material respects as of the Closing Date shall be a condition precedent to Purchaser’s obligation to close the Transactions hereby contemplated.

If before the Closing Purchaser acquires Purchaser Knowledge that any representation or warranty set forth in Section 6 is untrue or incomplete or has become untrue or incomplete due to a change in facts or circumstances, then within five (5) days, Purchaser shall give Seller written notice, specifying the manner in which such representation or warranty is untrue or incomplete. If before the Closing Seller acquires Knowledge that any representation or warranty set forth in Section 6 has become untrue or incomplete due to a change in facts or circumstances (or Seller acquiring Knowledge of facts or circumstances of which Seller did not previously have Knowledge), then Seller shall promptly notify Purchaser of the representation or warranty which is untrue or incomplete. In either case, Seller shall have the right to cure such condition before the Closing, and Seller shall give Purchaser written notice within five (5) days after (i) receipt of Purchaser’s notice pursuant to the first sentence of this Section 6, or (ii) the giving of Seller’s notice pursuant to the immediately preceding sentence, whether Seller will be able to cure such condition prior to the Closing Date. If Seller is unable to cure any such condition prior to the Closing Date, then, provided the condition is not the result of the willful conduct of Seller in violation of this Agreement, Purchaser's exclusive remedy shall be to terminate this Agreement by notice to Seller and Escrow Agent given within ten (10) calendar days after Seller notifies Purchaser that Seller will be unable to cure the same. In the event this Agreement is terminated pursuant to this Section 6, the Deposit shall be refunded to Purchaser, whereupon, except as provided herein, this Agreement and all rights and obligations of the parties hereunder shall be null and void; provided, however, if the condition is as a result of the willful conduct of Seller in violation of this Agreement, Seller shall reimburse Purchaser for its actual out-of-pocket costs in negotiating and performing due diligence under this Agreement, not to exceed $200,000 in the aggregate, and upon the making of such refund and reimbursement, this Agreement shall be null and void. If Purchaser fails to terminate this Agreement within such ten (10) day period, Purchaser shall be deemed to have waived any right to terminate under this Section 6, or any other recourse against Seller, and the applicable representation and warranty made by Seller hereunder shall be deemed waived by Purchaser to the extent that it is untrue or incomplete.

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The phrases “Knowledge” “to Seller’s Knowledge,” the “Knowledge of Seller and/or of its Affiliates,” and similar terms used in this Agreement, shall mean in all cases the actual knowledge of the following individuals (or any one of them): Jordan S. Socaransky and Kenneth R. Assiran (the “Knowledge Parties”), after reasonable inquiry with the executive director of the Facilities. In no event shall Purchaser be entitled to assert any cause of action against any of the Knowledge Parties with respect to this Agreement or any breach hereof, nor shall any of the Knowledge Parties have any personal liability whatsoever for any matter under or related to this Agreement.

7.                           Covenants of Seller.

(a)          Operation of the Facility. Subject to the terms of this Agreement, Seller, during the term of this Agreement, shall carry on the business and operations of each Facility in substantially the same manner as heretofore carried on by it. Prior to the Closing Date, Seller shall maintain (or replace with policies of like amounts) all existing insurance policies set forth on Schedule 6 insuring the Property and the operation of the Facility, and such policies shall be on an occurrence basis, where applicable. Seller shall provide Purchaser with current loss runs within fifteen (15) days after the end of each month from the Effective Date until the Closing. Prior to Closing Seller will promptly notify Purchaser of any potential losses or claims that may be covered by the insurance. Except for the items listed in Section 3(b), Seller shall not remove any of the Personalty from the Facilities, unless Seller replaces the same with like items that are of equal or better quality and condition. Seller shall maintain the inventory consistent with Seller’s past practices and will replenish the same consistent with its past practices. Seller shall complete all capital improvements and renovations to the facilities in a good and workmanlike manner. Seller may extend, amend, modify or terminate any of the Property Agreements and Residency Agreements as Seller deems appropriate to operate, service and maintain the Property consistent with normal business practices, and may enter into new Property Agreements; provided, however, (A) from the date of this Agreement to the Closing Date, Seller shall provide to Purchaser copies of new Property Agreements and any terminations, amendments, extensions, or modifications of existing Property Agreements, which Seller has entered into, or intends to enter into, within two (2) business days thereof, (B) 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 Facility, (ii) any new Property Agreement other than those that are consistent with past practices and that are terminable with not more than thirty (30) days’ notice without penalty, or (iii) any extension, amendment, modification, or termination of a Property Agreement other than an extension of an existing Property Agreement on substantially the same terms (provided that Purchaser has not delivered to Seller Notice of its intent to not assume such Property Agreement) or consistent with past practices, (C) no part of the Real Property, or any interest therein, will be sold or otherwise transferred or encumbered without Purchaser’s prior written consent, which approval shall not be unreasonably withheld, conditioned or delayed, and (D) without the prior written approval of Purchaser (which approval shall not be unreasonably withheld, conditioned or delayed), Seller shall not make any material alterations to the Real Property, or remove or otherwise dispose of any material portion of the Personalty.

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(b)          Cooperation. 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 the issuance to Purchaser of all Required Governmental Approvals, certificates and approvals for operation of the Facilities and other authorizations in connection with the operation of the Property (“Purchaser Permits”) 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 affect upon each Facility. In the event that any of the Purchaser Permits required to be obtained prior to the Closing Date are not obtained at such time, but all other conditions set forth herein are satisfied (other than conditions which, by their nature, are to be satisfied on the Closing Date), Seller agrees to cooperate in good faith with Purchaser and to use commercially reasonable efforts in formulating and implementing mutually acceptable alternatives (including, but not limited to the Interim Licensure Arrangement) that permit the consummation of the transactions contemplated by this Agreement in accordance with all legal requirements in the absence of such Purchaser Permits, provided that any such arrangements are fully in compliance with all legal requirements, that Purchaser either pays for or promptly reimburses Seller for all out-of-pocket expenses incurred by Seller in connection therewith, and that Purchaser indemnifies and holds harmless Seller from and against any claims, damages, costs or liabilities arising in connection therewith. If Purchaser is not able to obtain a license from the NJ Department of Health to operate the Three Facility by the Closing Date, Seller and Purchaser shall enter into an Interim Licensure Arrangement in the form attached as Exhibit H on or before the Closing Date.

(c)          Audit. Seller at no material out of pocket cost to Seller, shall assist Purchaser in conducting and completing, no later than seventy-four (74) days following the Closing Date, an audit of property-level financials for the Property as specified by Rule 3-05 of Regulation S-X of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, provided such audit shall be at the sole cost and expense of Purchaser. In connection therewith, Seller agrees to use commercially reasonable efforts to obtain and provide to the auditors any and all data and financial information in the possession of Seller which are necessary or required by the auditors in connection with their preparation and completion of the foregoing audit, which additional data and financial information shall be true, correct and complete in all material respects to Seller’s knowledge. Additionally, Seller shall provide Purchaser, but without expense to Seller, with (a) an audit letter in substantially the form as Exhibit N attached hereto and made a part hereof, and (b) copies of, or access to, such factual 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 SEC in connection with the purchase of the Property. The rights and obligations of Seller and Purchaser under this Section 7(c) shall survive the Closing; provided, however, that any representation and warranty shall be subject to the Survival Period, the Floor and the Cap.

(d)          Seller shall give prompt written notice to Purchaser, and Purchaser shall give prompt written notice to Seller, of (i) the occurrence, or failure to occur, of any event that would be likely to cause any of its respective representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time from the Effective Date to the Closing, and (ii) any failure to comply with or satisfy, in any material respect, any covenant, condition, or agreement to be complied with or satisfied under this Agreement. If, prior to Closing, either Purchaser or Seller obtains Knowledge of any matter that causes the representations or warranties of the other party contained in this Agreement to be untrue or inaccurate in any material respect, such party shall promptly notify the other party thereof in writing.

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8.                         Certain Representations and Warranties of Purchaser. Each Purchaser hereby represents and warrants to Seller as follows:

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

(b)          The execution and delivery of this Agreement by each Purchaser does not violate any provision of any governance document, agreement or judicial order to which any Purchaser is a party or to which any 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), 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 governance document, 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 the Transactions hereby contemplated.

(e)          The Transactions contemplated under this Agreement do not meet the “size of transaction” test, 15 U.S.C. § 18a(a)(2)(B)(ii), under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), and the regulations promulgated thereunder, and therefore the Transactions do not need to be notified to the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the HSR Act.

All representations and warranties made by Purchaser in this Section 8 shall be true and correct on the date made and their continued validity as to any material fact as of the Closing Date shall be a condition precedent to Seller’s obligation to close the Transactions hereby contemplated.

9.                          Closing.

(a)          Closing Date. The closing of the sale of the Property (“Closing”) shall take place at 1:00 p.m. (New York time) at the office of Escrow Agent or at another place mutually agreed upon by the parties, or by mail, on the later of (i) the first Business Day occurring thirty (30) days after the Due Diligence Deadline, or (ii) the first Business Day occurring fifteen (15) days after the consent of the City to the assignment of the PILOT Agreement is granted pursuant to Section 26 below (“Closing Date”), or such earlier date as to which the parties have mutually agreed; provided, however, in no event shall the Closing Date occur after October 31, 2013. For the purpose of allocating revenue and expense, the parties agree that 12:01 a.m. (New York time) on the day of Closing shall be the cut-off time. The parties shall not attend the Closing in person and shall close the transaction contemplated by this Agreement through escrow with Escrow Agent pursuant to written closing escrow instructions, which instructions shall be reasonably satisfactory to Seller and Purchaser, and shall be consistent with the terms hereof.

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(b)          Post-Closing Cooperation. Each party shall at any time and from time to time after the Closing execute, acknowledge where required, and deliver such further instruments and documents and take such other action as may be reasonably requested by the other party in order to carry out the purposes of this Agreement, in each event subject to the limitations on survival and liability set forth in this Agreement.

10.                        Closing Documents.

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

(i)          With respect to each Individual Property comprising the Property, a separate deed in the form of Exhibit C in favor of Purchaser, or at the written request of Purchaser, Purchaser’s Designee (such deeds, collectively, the “Deeds”);

(ii)         Affidavits, indemnities, and other similar instruments as are reasonably required by the Title Company. All such affidavits, indemnities and similar instruments shall be in form and substance reasonably satisfactory to the Title Company;

(iii)        A certification of non-foreign status in the form of Exhibit E;

(iv)        All documents necessary to transfer title to all vehicles and equipment owned by Seller, or to assign and assume vehicle and equipment leases to the extent assumed by Purchaser;

(v)         A certification of Seller in form reasonably satisfactory to Purchaser, containing an updated Rent Roll for the Property and certifying that all of the representations and warranties of Seller contained in this Agreement remain true and correct as of the Closing Date;

(vi)        A document terminating the Operating Leases as of the Closing;

(vii)       A Bill of Sale and General Assignment in the form of Exhibit M attached hereto for each Facility;

(viii)      An assignment from Three Operating and Four Operating of the applicable Residency Agreements and Commercial Leases for each Facility in the form of Exhibit L attached hereto;

(ix)         If Purchaser is assuming any Property Agreements as set forth in Section 3(c) above, an Assignment of Property Agreements in the form attached hereto as Exhibit F-1 executed by the applicable Seller;

(x)          Seller’s Residency Certification (form GIT/REP-3);

(xi)         Affidavit of Consideration for Use by Seller (form RTF-1); 

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(xii)        Interim Licensure Arrangements, if applicable;

(xiii)       Any other documentation reasonably required by the Title Company to consummate the Transactions contemplated by this Agreement;

(xiv)      A statement showing all closing prorations (the “Closing Statement”);

(xv)       An Assignment of the Tax Sale Certificates in the form of Exhibit F-2; or a Deed from WMA to Purchaser for the Adjacent Land, as provided in Section 25.

(xvi)      An assignment of the City Agreement in the form attached hereto as Exhibit F-3; and

(xvii)     An assignment of the PILOT Agreement in the form attached hereto as Exhibit F-4.

(xviii) A governmental certificate, dated as of a date as near as practicable to the Closing, showing that Seller (i) is in good standing in the state of organization of Seller, and (ii) is qualified to do business in the state in which the Real Property is located.

(xix)       A certificate of the secretary (or the equivalent thereto if none) of Seller attesting as to the incumbency of each manager, officer, and authorized representative of Seller who executes this Agreement and any of the other Documents, certifying that resolutions and consents necessary for Seller to act in accordance with the terms of this Agreement have been adopted or obtained (with copies thereof attached) and to similar customary matters.

(xx)        Affidavit of Title, in form reasonably acceptable to Title Company and Seller.

(xxi)       Release or escrow letter from New Jersey Division of Taxation, Bulk Sale Section, and if required, a Bulk Sales Tax Escrow Agreement in the form annexed hereto as Exhibit O.

(xxii)      The Guaranty in the form attached hereto as Exhibit D.

(xxiii)     The Income Support Agreement in the form attached hereto as Exhibit P.

(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)          An assignment of the applicable Residency Agreements and Commercial Leases for each Facility in the form of Exhibit L attached hereto;

(ii)         If Purchaser is assuming any Property Agreements as set forth in Section 3(c) above, an Assignment of Property Agreements in the form attached hereto as Exhibit F-1.

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(iii)        Duly executed Affidavit of Consideration for Use by Purchaser (form RTF-1EE).

(iv)        Documentation to establish to Seller’s reasonable satisfaction the due authorization of Purchaser’s execution of all documents contemplated by this Agreement.

(v)         Interim Licensure Arrangements, if applicable;

(vi)        Duly executed counterpart of the Closing Statement.

(vii)       Any other documentation reasonably required to consummate the transaction contemplated by this Agreement.

(viii)      An Assignment of the Tax Sale Certificates in the form of Exhibit F-2, if required by Section 25.

(ix)         An assignment of the City Agreement in the form attached hereto as Exhibit F-3.

(x)          An assignment of the PILOT Agreement in the form attached hereto as Exhibit F-4.

(xi)         if required, a Bulk Sales Tax Escrow Agreement in the form annexed hereto as Exhibit O.

(xii)        The Income Support Agreement in the form attached hereto as Exhibit P.

(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 Purchase Price, subject to proration’s and adjustments, and any sales taxes in accordance with Section 12(b).

(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 Property pursuant to this Agreement and otherwise complete the Transactions contemplated by this Agreement, 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.

(e)          Employees. Except as expressly set forth herein, Seller shall terminate all employees on the Closing Date. Addit may offer employment to substantially all employees of Seller who, as of the Closing Date, are actively working at a Facility. Addit may also offer employment upon the terms and conditions set forth herein, to all employees of Seller at the applicable Facility who, as of the Closing Date, are on a leave of absence pursuant to the Seller’s Family and Medical Leave of Absence Policy or due to an injury or illness, when and only when they return from such leave. All such employees electing to accept employment with Purchaser (or its manager) are hereinafter referred to as the “Hired Employees”.

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11.                        Prorations and Adjustments.

(a)          The following items shall be prorated and adjusted between Seller and Purchaser as of 12:01 a.m. (New York time) on the day of the Closing, except as otherwise specified:

(i)          all income and revenue from the Facilities including, without limitation, all Resident Deposits, resident payments (uncollected rents and other uncollected revenue shall not be adjusted at Closing and shall be subject to the provisions of Section 11(b) below);

(ii)         water, electricity, gas, sewer, and other utility charges (excluding telephone) and deposits with utility companies to the extent such deposits are assignable and are assigned to Purchaser;

(iii)        real estate taxes and/or payments under the PILOT Agreement for the Real Property for the fiscal year in which Closing occurs based on the most recently ascertainable taxes for the Land and/or the Improvements with a post-closing reconciliation of amounts owed promptly after final tax amounts are determined;

(iv)        amounts payable under the Property Agreements to be assumed by the Purchaser;

(v)         real estate taxes and/or payments under the PILOT Agreement for the Adjacent Land for the fiscal year in which Closing occurs;

(vi)        Accrued Employee Benefits; and

(vii)       any other expenses normal to the operation and maintenance of the Property; all installments of special assessments payable after the Closing, shall be paid exclusively by Purchaser.

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(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 Seller and Purchaser. 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, Seller and Purchaser shall make a recalculation of the apportionment of the same, and Seller or Purchaser, as the case may be, shall make an appropriate payment to the other based on such recalculation, provided such adjustment is claimed by such party within one hundred eighty (180) days after the Closing Date. Subject to the prorations to be made pursuant to this Section 11(b), if any resident sends payments to Seller after the Closing, 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 shall provide Purchaser a schedule of all unpaid accounts receivable relating to the period prior to the Closing Date. Seller shall have the right to pursue such delinquent amounts following the Closing; provided that Seller shall not have the right to cause any eviction or to terminate any Residency Agreement or Commercial Lease following the Closing on account of any delinquent amounts. Other than invoicing such past due amounts in accordance with Purchaser’s customary practice, Purchaser shall have no obligation to pursue any such delinquent amounts. To the extent such delinquent rents and other amounts are collected by Purchaser, Purchaser may deduct from the amount owed to Seller 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 Purchaser’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 Seller, for application against Seller’s delinquent monetary obligations with respect to any periods before the Closing Date, in such order as Seller 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 Purchaser’s future obligations. In addition, in calculating the prorations pursuant to this Section 11(b), Seller shall receive a credit in the amount of any utility, municipality or other deposits relating to the Real Property made by Seller and which are assigned to Purchaser at the Closing. Seller 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 payments under the PILOT Agreement regarding any of the Real Property or the Adjacent Land 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 Seller or as Seller directs. The balance, if any, of such refund that is on account of the period following Closing shall be paid to Purchaser.

(d)          At Closing, Seller shall transfer the following sums or give Purchaser a credit against the Purchase Price in the amount of all (i) Accrued Employee Benefits for any Hired Employees accruing prior to the Closing Date; (ii) security deposits (together with any interest earned thereon or otherwise due to the residents under the terms of any residency agreement or Applicable Law); and (iii) 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).

12.                         Closing Costs.

(a)          Seller shall be responsible for the payment of: (i) the fees and costs of Seller’s counsel and investment advisors representing it in connection with the Transactions; (ii) one-half (1/2) of the escrow fees charged by Escrow Agent; (iii) the real estate transfer fee (other than the “mansion tax”) payable in connection with the conveyance of the Property; and (iv) all fees, costs and expenses in connection with the prepayment and discharge of the financing documents that encumber the Property; and

(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 Transactions; (ii) the entire cost of the Title Insurance Policies; (iii) survey costs, environmental inspection costs and all due diligence costs and expenses; (iv) all recording fees; (v) one-half of the escrow fees charged by Escrow Agent; (vi) any “mansion tax” payable pursuant to N.J.S.A. 46:15-7.2 in connection with the conveyance of the Property; and (vii) all other fees, costs and expenses incurred by Purchaser in connection with the Transactions, not specifically provided for herein.

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13.                         Remedies.

(a)          Purchaser Default. If Purchaser should default under this Agreement, and such default continues for ten (10) days after written notice thereof specifying such default, Seller may elect to cancel this Agreement by giving notice to Purchaser and Escrow Agent. The parties hereto agree that the damages that Seller 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 shall elect to terminate this Agreement as a result of such default, and Seller is not otherwise in default under this Agreement, Escrow Agent is hereby directed to pay the Deposit to Seller, 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; provided, however, nothing herein shall limit the Seller’s rights under any indemnities set forth in this Agreement.

(b)          Seller Default. If Seller defaults on any of Seller’s obligations under this Agreement, and such default continues for ten (10) days after written notice thereof specifying such default, Purchaser’s sole remedy for Seller’s default shall be to elect either to: (i) cause the refund of the Deposit to Purchaser and reimburse Purchaser for its actual out-of-pocket costs in negotiating and performing due diligence under this Agreement, not to exceed $200,000 in the aggregate, and upon the making of such refund and reimbursement, 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 and the lien, if any, of Purchaser against the Property shall wholly cease; or (ii) commence an action for specific performance. 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. In the event that either party is entitled to an award of its attorneys’ fees and expenses pursuant to the terms of this Section 13(c), such award shall be available notwithstanding the limitations on remedies set forth in Sections 13(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(f)(ii), 6 (subject to the Survival Period), 7(c), 9(b), 10, 11, 12, 13, 14, 15, 16, 17(g), 17(k), 18 (subject to the Survival Period), 19, 20, 23, 24, 25, 26, 27, 28, 29 and 30.

(ii)         Termination. None of the terms and conditions of this Agreement shall survive the termination of this Agreement, except for the following Sections: 4(f)(ii) and (iv), 13, 14, and 16.

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14.                       Broker. Seller and Purchaser represent to each other that neither party has dealt with any broker or real estate consultant in connection with the Transactions contemplated by this Agreement. Notwithstanding the foregoing, Seller and Purchaser acknowledge that Seller has engagedStifel, Nicolaus & Company, Incorporated (“SN”) as its investment advisor and the Seller shall pay the fees due to SN in accordance with a separate agreement between Seller and SN. Seller 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 14. The provisions of this Section 14 shall survive the Closing or termination of this Agreement.

15.                        Risk of Loss.

(a)          Condemnation.

(i)          The risk of any loss or damage to the Real Property by condemnation before the Closing shall continue to be borne by Seller. In the event any condemnation proceeding is commenced or threatened, Seller shall promptly give Purchaser written notice thereof (in any event within five (5) days after Seller first has Knowledge of the occurrence of same), together with such reasonable details with respect thereto as to which Seller may have Knowledge. If, prior to 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 Closing, there shall be no reduction in or abatement of the Purchase Price and Purchaser shall be required to purchase the 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 the adjustment and settlement of any insurance claim relating to said damage). For the purpose of this Section 15, the term “material” shall mean any taking of in excess of five percent (5%) of the square footage of the buildings on the Real Property or ten percent (10%) of the Land associated with the Real Property. The parties’ obligations, if any, under this Section 15(a) shall survive the expiration or any termination of this Agreement.

(b)          Destruction or Damage. The risk of any loss or damage to the Real 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 ten (10) 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 Real Property is damaged by fire or casualty after the Effective Date and is not repaired and restored substantially to its original condition prior to Closing, or (ii) at the time of Closing the estimated cost of repairs as to the Real Property is THREE HUNDRED FIFTY THOUSAND U.S. DOLLARS ($350,000.00) 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 receive from Seller at Closing (I) an assignment, without representation of 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. If the estimated cost of repairing such damage to the Real Property is more than THREE HUNDRED FIFTY THOUSAND U.S. DOLLARS ($350,000.00), as determined by such independent adjuster, Purchaser may, at its sole option: (x) terminate this Agreement by notice to Seller on or before the earlier of the Closing or the tenth (10^th) 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 15(b). 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) the Purchase Price. The parties’ obligations, if any, under this Section 15(b) shall survive the expiration or any termination of this Agreement.

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16.                        Limited Warranties; Disclaimer.

(a)          Limited Warranties. Notwithstanding anything to the contrary contained in this Section 16, the purchase, sale and conveyance of the Property shall be made with the limited warranties from Seller to Purchaser contained in this Agreement and the Deeds.

(b)          Disclaimer. Purchaser agrees that, except as and to the extent provided in this Agreement or in the documents to be delivered by Seller at Closing (subject to the provisions set forth in Section 16(a) of this Agreement), Purchaser is purchasing the Property 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, Seller.

(i)          Except as and to the extent provided in the representations and warranties contained in this Agreement and in the documents to be delivered by Seller at Closing, each of Seller and its Affiliates, and its and their officers, directors, employees, members, managers 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 Property 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 this agreement, Each of Seller and its Affiliates, and its and their officers, directors, employees, members, managers 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)        Except as and to the extent provided in this agreement, Purchaser has not relied upon any statement or representation by or on behalf of Seller unless such statement or representation is specifically set forth in this Agreement or in the documents to be delivered by Seller at Closing;

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(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 PROPERTY 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 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 this Agreement or in the documents to be executed and delivered by Seller at Closing, each of Seller and its 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 Property, (3) the real estate, or other, taxes or special assessments, now or hereafter payable on account of, or with respect to, the Property, (4) Purchaser’s ability or inability to demolish the Improvements or otherwise develop the Property, or (5) the environmental condition of the Property.

17.                        General Provisions.

(a)          Entire Agreement. This Agreement and exhibits hereto constitute the entire agreement of Seller and Purchaser with respect to sale of the Property 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 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.

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(e)          Assignment. This Agreement may not be assigned by Purchaser without the consent of Seller. 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 purchaser shall constitute an assignment of this Agreement, which assignment or attempted assignment shall be void if made without the written consent of Seller. Notwithstanding the foregoing, Purchaser may assign its rights under this Agreement, without the consent of Seller, to an Affiliate, including Purchaser’s Designee, provided the assignee assumes in writing all of the obligations of Purchaser to be performed under this Agreement in a form reasonably acceptable to Seller and an original of such fully executed assignment and assumption agreement is delivered to Seller at least five (5) Business Days prior to the Closing. Purchaser shall not assign this Agreement to an entity or individual which would make any of the statements, representations or warranties set forth in Section 8 of this Agreement untrue or incorrect in any material respect and any such assignment shall be null and void and without force and effect. No assignment of this Agreement shall relieve Purchaser from any of its obligations set forth herein arising prior to or after the effective date of the assignment.

(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:	c/o WCP Investment Manager LLC
	40 Danbury Road
	Wilton, CT  06897-4406
	Attention: Mr. Jordan S. Socaransky
	Facsimile: 203-429-8599
with a copy to:	c/o WCP Investment Manager LLC
	40 Danbury Road
	Wilton, CT  06897-4406
	Attention: Marc Porosoff, Esquire
	Facsimile: 203-429-8599
with a copy to:	c/o Capital Health Group, LLC
	Capital Health Group, LLC
	1422 Clarkview Road
	Baltimore, MD 21209
	Attention: Mr. Kenneth R. Assiran
	Facsimile: 410 342 7101
with a copy to:	Drinker Biddle & Reath LLP
	500 Campus Drive
	Florham Park, NJ 07932-1047
	Attention:  Michael San Giacomo, Esq.
	Facsimile: 973-360-9831

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To Purchaser:	Woodbury Mews III, LLC
	Woodbury Mews IV, LLC
	Woodbury Mews Land Parcels, LLC
	Attn: John Mark Ramsey
	Attn: Kevin Thomas
	189 S. Orange Avenue, Suite 1700
	Orlando, FL 32801
	Phone:  407-999-7679
	Fax:  407-999-5210
with a copy to:	Michael A. Okaty, Esq.
	Foley & Lardner LLP
	111 N. Orange Avenue, Suite 1800
	Orlando, FL 32801
	Telephone:  407-423-7656
	Fax:  407-648-1743
	E-mail:  mokaty@foley.com

(g)          Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of New Jersey without regard to the laws regarding 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.

(i)          Construction. Seller 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 to be breached by Purchaser and, in Seller’s sole discretion, ipso facto terminated. Nothing herein shall be deemed to prevent Purchaser from filing a Notice of Settlement.

(k)          Public Announcement. Seller and Purchaser agree to cooperate with each other to make joint and/or coordinated public announcements disclosing this Agreement and the Transactions contemplated hereby.

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(l)          Radon. 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 may have been found in buildings in the state in which the Real Property is located. Additional information regarding radon and radon testing may be obtained from public health units of the county in which the Real Property is located.

18.                        Indemnification.

(a)          Reserved.

(b)          Indemnification by Seller. From and after Closing, Seller shall indemnify, defend, and hold harmless Purchaser and each of their officers, directors, employees, Affiliates, successors and assigns from and against, and pay or reimburse each of them for and with respect to, any Indemnification Loss relating to, arising out of or resulting from any of the following:

(i)          Subject to the provisions of Section 6, any material breach by Seller of any of its representations, warranties, covenants or agreements in this Agreement or any other Document;

(ii)         The operation, ownership or control of the Property prior to Closing, including without limitation, any and all liabilities which relate to events occurring prior to the Closing, regardless of when they are asserted, except for (x) facts disclosed in or pursuant to Section 6 of this Agreement, the Diligence Materials, or in the Purchaser Commissioned Reports, but only to the extent such information constitutes Purchaser Knowledge; (y) Assumed Obligations, and (z) obligations, indebtedness or liabilities to the extent of any Adjustment Amount credited to the Purchaser; and

(iii)        Claims by any other party claiming to have represented Seller as broker or agent in connection with the transactions contemplated by this Agreement.

(c)          Indemnification by Purchaser. From and after Closing, Purchaser shall indemnify, defend and hold harmless Seller and its officers, directors, employees, agents, representatives, Affiliates, successors and assigns from and against, and pay or reimburse each of them for and with respect to any Indemnification Loss relating to, arising out of or resulting from any indemnification of the following: 

(i)          Any material breach by Purchaser of any of its representations, warranties, covenants or agreements in this Agreement or any other Document;

(ii)         The ownership and operation of the Property post-Closing, and the Assumed Obligations.

(iii)        Claims by any other party, other than SN, claiming to have represented Purchaser as broker or agent in connection with the transactions contemplated by this Agreement.

(d)          Administration of Indemnification. For purposes of administering the indemnification provisions set forth in Section 18(b) and Section 18(c), the following procedure shall apply:

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(i)          Whenever a claim shall arise for indemnification under this Section 18, the party entitled to indemnification (the “Indemnified Party”) shall give a reasonably prompt written notice to the party from whom indemnification is sought (the “Indemnifying Party”) setting forth in reasonable detail, to the extent then available, the facts concerning the nature of such claim and the basis upon which the Indemnified Party believes that it is entitled to indemnification hereunder.

(ii)         In the event of any claim for indemnification resulting from or in connection with any claim by a third party, the Indemnifying Party shall be entitled, at its sole expense, either (i) to participate in defending against such claim or (ii) to assume the entire defense with counsel which is selected by it and which is reasonably satisfactory to the Indemnified Party, provided that no settlement shall be made and no judgment consented to without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld. If, however, (x) the claim, action, suit or proceeding would, if successful, result in the imposition of damages for which the Indemnifying Party would not be solely responsible, or (y) representation of both parties by the same counsel would otherwise be inappropriate due to actual or potential differing interests between them, then the Indemnifying Party shall not be entitled to assume the entire defense and each party shall be entitled to retain counsel who shall cooperate with one another in defending against such claim. In the case of clause (x), the Indemnifying Party shall be obligated to bear only that portion of the expense of the Indemnified Party’s counsel that is in proportion to the damages indemnifiable by the Indemnifying Party compared to the total amount of the third-party claim against the Indemnified Party. In the case of clause (y), the Indemnifying Party shall pay all costs of defense of both itself and the actual out-of-pocket costs of the Indemnified Party.

(iii)        If the Indemnifying Party does not choose to defend against a claim by a third party, the Indemnified Party may defend in such manner as it deems appropriate or settle the claim (after giving notice thereof to the Indemnifying Party) on such terms as the Indemnified Party may deem appropriate, and the Indemnified Party shall be entitled to periodic reimbursement from the Indemnifying Party of defense expenses incurred and prompt indemnification from the Indemnifying Party in accordance with this Section 18.

(iv)        Failure or delay by an Indemnified Party to give a reasonably prompt notice of any claim shall not release, waive or otherwise affect an Indemnifying Party’s obligations with respect to the claim, except to the extent that the Indemnifying Party can demonstrate actual loss or prejudice as a result of such failure or delay, except that no claim shall be brought after the expiration of the Survival Period. Notwithstanding anything to the contrary contained herein, the parties agree that no indemnification right or obligation shall apply to the extent any such Indemnification Loss or expense is paid to an Indemnified Party by an insurance company.

(v)         The right to pursue indemnification as set forth in this Section 18 shall survive the Closing hereunder for a period of eighteen (18) months following the Closing (the “Survival Period”).

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(vi)        Notwithstanding anything to the contrary in this Agreement, (i) the right to pursue indemnification as set forth in this Section 18 shall be actionable or payable only if valid claims for Losses, if any, collectively aggregate more than TWENTY FIVE THOUSAND and No/100 U.S. Dollars ($25,000.00) (the “Floor”); and (ii) the aggregate maximum liability of the entities comprising the Seller under this Section 18 shall not exceed $1,500,000.00 (the “Cap”); provided, however, that the foregoing limitation shall not apply in the case of fraud on the part of Purchaser, Seller or any of their respective Affiliates. In addition, Purchaser shall first seek recovery under any insurance policies, the Title Insurance Policy and other applicable agreements, and Seller shall not be liable to Purchaser to the extent Purchaser’s claim is actually satisfied from any sums recovered from such insurance policies, Title Insurance Policy or other applicable agreements. FINALLY, IN NO EVENT SHALL EITHER PARTY EVER BE LIABLE FOR ANY CONSEQUENTIAL OR PUNITIVE DAMAGES OTHER THAN IN THE EVENT OF FRAUD.

(vii)       The indemnification provisions in this Section 18 shall be the sole and exclusive remedy of any Indemnified Party with respect to any claim for Indemnification Loss arising from or in connection with this Agreement.

19.                           Diligence Materials. Seller has delivered or will make available to Purchaser all plans, maps, descriptions, permits, certifications, Licenses, approvals, environmental assessments, environmental audits, and other diligence materials (but not including any appraisals) (the “Diligence Materials”) respecting the Property in Seller's possession or control, which material shall be returned to Seller by Purchaser if Closing is not completed and Purchaser will not retain any copies. For purposes of this Agreement, Diligence Materials shall be deemed to include all Title Commitments, Surveys and results of Tests, including environmental reports and engineering reports relating to the physical condition of the Property, but shall not be deemed to include any appraisals. Purchaser shall make no claim under this Agreement, for breach of representation or warranty, indemnification or otherwise, in respect of a fact, circumstance or condition of which Purchaser has Purchaser Knowledge prior to the Closing, except that the foregoing shall not prevent Purchaser from raising an objection as to any fact, circumstance or condition disclosed in the Title Commitments, Surveys, the Diligence Materials or in the Purchaser Commissioned Reports and shall not prevent Purchaser from exercising any right to terminate this Agreement as provided herein on account of any such fact, circumstance or condition disclosed in the Diligence Materials or in the Purchaser Commissioned Reports whether or not such fact, circumstance or condition is contrary to a representation or warranty of Seller contained in this Agreement. The provisions of this Section 19 shall survive the closing of title.

20.                           Facsimile and PDF Signatures. The execution of this Agreement and all notices given hereunder and all amendments hereto, may be effected by facsimile signatures or signatures in portable document format (pdf) delivered by electronic mail, all of which shall be treated as originals; provided, however, that the party receiving a document with a facsimile or pdf signature may, by notice to the other, require the prompt delivery of an original signature to evidence and confirm the delivery of the facsimile or pdf signature. Purchaser and Seller each intend to be bound by its respective facsimile transmitted or pdf 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 or transmission by electronic mail of pdf signatures.

21.                          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 affected thereby, and each such term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

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22.                           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 a Saturday, Sunday or legal holiday, in which event the period shall run until the next day which is not a Saturday, Sunday or a legal holiday.

23.                           Like-Kind Exchange. Purchaser acknowledges that Seller may, at Seller’s option, include Seller’s sale of the Property in a like-kind exchange under the Code. Purchaser shall reasonably cooperate with Seller and shall execute any documents reasonably required to permit Seller to effect such a like-kind exchange pursuant to the Code, provided that such like-kind exchange shall not delay the Closing or cause Purchaser to incur any additional liability or expense. Seller acknowledges that Purchaser may, at Purchaser’s option, include Purchaser’s acquisition of the Property in a like-kind exchange under the Code. Seller shall reasonably cooperate with Purchaser and shall execute any documents reasonably required to permit Purchaser to effect such a like-kind exchange pursuant to the Code, provided that such like-kind exchange shall not delay the Closing or cause Seller to incur any additional liability or expense.

24.                           Certificate of Occupancy; etc. If any certificate of occupancy, certificate of continued occupancy, site plan waiver, smoke detector certificate or other approval is necessary to legally convey title to the Real Property, Seller shall use commercially reasonable efforts to obtain any such approval at its sole cost and expense prior to the Closing Date. If any alterations or improvements to the Real Property are required in order to obtain any such certificate or approval, then Seller shall use commercially reasonable efforts to perform such alterations and improvements prior to the Closing Date, and Seller shall have the right to postpone the Closing Date for up to thirty (30) days in order to perform such alterations and improvements. The costs and expenses of performing any alterations or improvements for any Real Property shall be the sole responsibility of the Seller. The provisions of this Section 24 shall survive the Closing.

25.                          Tax Sale Certificates. Seller represents and warrants that WM Acquisitions, LLC (“WMA”), an Affiliate of Seller, has good and marketable title (subject to liens in connection with the existing mortgage financing) to the following tax sale certificates encumbering the Adjacent Land: Tax Sale Certificate No. 05-0074; Tax Sale Certificate No. 05-0075; Tax Sale Certificate No. 05-0076; Tax Sale Certificate No. 2007-0058; Tax Sale Certificate No. 2010-0112; Tax Sale Certificate No. 2010-0115; and Tax Sale Certificate No. 2010-0116 (collectively, the “Tax Sale Certificates”), which are the subject of tax sale certificate foreclosure actions by WMA currently pending in the Superior Court of New Jersey, Chancery Division, Docket nos. F-007892-12, F-007893-12, F-007894-12 and F-007895-12 (collectively, the “Tax Foreclosure Actions”). Seller represents and warrants that it has paid all outstanding taxes on the Adjacent Lands as of the date of execution of this Agreement, and will continue to pay all taxes that accrue on the Adjacent Lands up to and including the quarterly taxes for the quarter during which Closing occurs. It is the intention of the parties to have title to the Adjacent Land prior to Closing and in that regard, Seller shall prosecute the pending Tax Foreclosure Actions as promptly as permitted by Rules of Court and Orders of the Court having jurisdiction, Seller agrees time is of the essence. At the Closing, Seller shall cause WMA to (i) if final judgments have not yet been entered in the Tax Foreclosure Actions, assign to Purchaser the Tax Sale Certificates, and its rights to proceed in the Tax Foreclosure Actions, pursuant to an Assignment of Tax Sale Certificates in the form attached hereto as Exhibit F-2; and (ii) if final judgments have been entered in one or more of the Tax Foreclosure Actions, convey the Adjacent Land to Purchaser by Deed in the form annexed hereto as Exhibit C. Seller shall manage the Tax Foreclosure Actions on behalf of Purchaser after the Closing, and, except for the costs expressly required to be borne by Seller under this Section 25, Purchaser shall indemnify, defend and hold Seller (and its Affiliates) harmless from any claims, demands, costs, damages, losses or causes of action with respect to the Tax Sale Certificates or the Tax Foreclosure Actions after the Closing. For the avoidance of doubt, Purchaser shall assume at Closing all risk in connection with the completion of the Tax Foreclosure Actions on the condition that the Tax Foreclosure Actions have been properly filed and prosecuted as of Closing and the Title Company issues a certificate of regularity as to the Tax Foreclosure Actions. Purchaser shall pay all attorneys’ fees and disbursements in connection with the Tax Foreclosure Actions incurred after the Closing, up to $25,000.00, and Seller shall pay all attorneys’ fees and disbursements in connection with the Tax Foreclosure Actions incurred after the Closing in excess of $25,000.00. The provisions of this Section 25 shall survive the Closing.

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26.                           City Agreement and PILOT Agreement. Purchaser acknowledges that Seller is a party to that certain Sale and Assignment Agreement with the City of Woodbury (the “City”), dated March 7, 2012 (the “City Agreement”) and that certain Assignment of Financial Agreement from the City, dated March 30, 2012 (the “PILOT Assignment”) pursuant to which the City assigned to Seller a certain PILOT Agreement (as defined in the PILOT Assignment, the “PILOT Agreement”). Seller shall use all commercially reasonable efforts to assign to Purchaser all of Seller’s right, title and interest in the City Agreement and the Pilot Agreement pursuant to an Assignment of City Agreement in the form attached hereto as Exhibit F-3, Assignment of Pilot Agreement in the form attached hereto as Exhibit F-4; or such other form as may be acceptable to the City. Purchaser acknowledges that: (i) the consent of the City is required under the terms of the City Agreement and the PILOT Agreement to the assignment of the PILOT Agreement; (ii) under applicable legal requirements, Purchaser may be required to organize as an urban renewal entity in order to become a party to the PILOT Agreement; and (iii) the conveyance of certain tax sale certificates from the City to WMA, as contemplated by the City Agreement, has already taken place, and such tax sale certificates are included in the Tax Sale Certificates to be conveyed to Purchaser pursuant to Section 25. In the event that Seller has not obtained the consent of the City to the assignment of the PILOT Agreement to Purchaser with respect to the Adjacent Land prior to the Closing, then Seller and Purchaser shall continue to use commercially reasonable efforts to pursue such assignments until the City consents or irrevocably rejects such assignment, in which event the Seller shall have no further obligation to pursue the assignment and no liability to the Purchaser for the failure to complete such assignments. The provisions of this Section 26 shall survive the closing of title.

27.         Non-compete. Except for those properties currently being owned or operated by Seller and shown on Schedule 4, Seller agrees that for three (3) years following the Closing Date, Seller and Seller’s Affiliates shall not directly or indirectly (unless acting in accordance with Purchaser’s written consent) own, manage, operate or participate in the ownership, management or operation of, or permit its name to be used by or in connection with, any business or 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 independent or assisted living facility for senior citizens and that is located within a five (5) mile radius of the Real Property; provided, however, that the foregoing shall not restrict loans made or acquired by Capital Funding Group, Inc., CFG Community Bank, Westport Capital Partners LLC, or their Affiliates. The provisions of this Section 27 shall survive the Closing.

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28.         Income Support. (a) Subject to and in accordance with the provisions of this Section 28 and the Income Support Agreement attached hereto as Exhibit P (the “Income Support Agreement”), if, after the Closing, the NOI for the Property for any Quarter is less than $775,000.00 (the “Quarterly Threshold”), Seller shall pay to Purchaser the difference between the Quarterly Threshold and the actual NOI for such Quarter (the “Income Support Payment”) within thirty (30) days after receipt of notice from Purchaser, setting forth in reasonable detail the calculation of NOI for such Quarter. A “Quarter” shall be a period of three (3) consecutive calendar months, commencing, with respect to the first Quarter, on the first day of the first (1^st) calendar month after the month in which the Closing Date occurs, and with respect to each subsequent Quarter, on the day immediately following the end of the preceding Quarter. A “Year” shall be a period of four (4) consecutive Quarters, commencing, with respect to the first Year, on the first day of the first Quarter as defined in the immediately preceding sentence, and with respect to each subsequent Year, on the day immediately following the end of the preceding Year.

(b)          At the end of any Year during which Seller has made any Income Support Payments pursuant to Section 28(a), Seller and Purchaser shall reconcile any Income Support Payments made over such Year as follows: (i) if the NOI for the Property for such Year is less than $3,100,000.00 (the “Annual Threshold”), Seller shall pay to Purchaser the difference between the Annual Threshold and the actual NOI for such Year, less the amount of any Income Support Payments paid by Seller during such Year, and (ii) if the NOI for the Property for such Year is equal to or more than the Annual Threshold, Purchaser shall pay to Seller the amount of any Income Support Payments paid by Seller during such Year. The reconciliation pursuant to this Section 28(b) shall occur within thirty (30) days after the end of a Year, and Seller or Purchaser, as applicable, will make any required payment to the other party within thirty (30) days after the reconciliation. Notwithstanding anything to the contrary contained in this Section 28(b), Seller shall not be required to make the payment set forth in clause (i) of the first sentence of this Section 28(b) if Seller’s obligations under this Section 28 have terminated pursuant to Section 28(c) prior to the reconciliation.

(c)          Notwithstanding anything to the contrary contained in this Section 28, Seller’s liability under this Section 28 shall not exceed $2,000,000.00 in the aggregate. Seller’s obligations under this Section 28 shall terminate on the later to occur of (i) the last day of the first Year after the Closing Date occurs, or (ii) the last day of the second (2^nd) consecutive Quarter in which the NOI from the Property is in excess of the Quarterly Threshold.

(d)          The provisions of this Section 28 shall survive the Closing.

29.         Schedules and Exhibits. Each Schedule and Exhibit referred to in this Agreement shall be deemed to be attached hereto and incorporated by reference even though it may be maintained separately from this Agreement or completed after the Effective Date so long as it is acknowledged as a Schedule or an Exhibit to this Agreement by the parties hereto as of Closing. Any item disclosed hereunder (including in the Schedules and Exhibits hereto) shall be deemed disclosed for all purposes hereof irrespective of the specific representation or warranty to which it is explicitly referenced. The Schedules and Exhibits not attached hereto as of the Effective Date will be prepared and mutually agreed to by the parties within five (5) business days of the Effective Date, except for (i) Exhibit B, which will be prepared in the time frame set forth in Section 2(a); (ii) the Management Agreement, which will be prepared in the time frame set forth in Section 4(g); and (iii) the Interim Licensure Arrangements, which shall be finalized prior to July 12, 2013. The parties agree to cooperate and act in good-faith during the preparation of such documents.

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30.         Bulk Sale Tax Compliance. The parties will comply with and file any and all necessary notifications arising from this Agreement with the New Jersey Division of Taxation Bulk Sale Section in accordance with N.J.S.A. 54:50-38, and comply with any escrow or other requirements relating thereto. No later than twenty (20) days prior to Closing, Seller shall provide Purchaser with New Jersey Division of Taxation forms C-9600, completed by Seller with Seller information required, and Asset Transfer Tax Declaration. Purchaser will complete form C-9600 with Purchaser information and file with the New Jersey Division of Taxation Bulk Sale Section no later than fifteen (15) days prior to Closing. Any notice or response received by either party from the New Jersey Division of Tax Bulk Sale Section shall be promptly provided to the other party. Receipt of a response from the New Jersey Division of Taxation Bulk Sale Section with a release or escrow directive, shall be a condition of Closing.

[SIGNATURES CONTINUE ON FOLLOWING PAGES.]

46

IN WITNESS WHEREOF, the Purchaser has executed this Agreement on the date first above written.

PURCHASER:
Woodbury Mews III, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews IV, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews Land Parcels, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory

IN WITNESS WHEREOF, the Seller has executed this Agreement on the date first above written.

	SELLER:
Employer Identification No.:	THREE WM REAL ESTATE, LLC, a Delaware limited liability company
	By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
		By:	CHG WMRE, LLC, a Delaware limited
			liability company, its manager

By:	/s/	Ken Assiran
Name:	Ken Assiran
Title:	President

Employer Identification No.:	THREE WM OPERATING, LLC,
	a Delaware limited liability company
	By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
		By:	CHG WMRE, LLC, a Delaware limited
			liability company, its manager

By:	/s/	Ken Assiran
Name:	Ken Assiran
Title:	President

[SIGNATURES CONTINUE ON FOLLOWING PAGE.] 

	SELLER:
Employer Identification No.:	FOUR WM REAL ESTATE, LLC, a Delaware limited liability company
	By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
		By:	CHG WMRE, LLC, a Delaware limited
			liability company, its manager

By:	/s/	Ken Assiran
Name:	Ken Assiran
Title:	President

Employer Identification No.:	FOUR WM OPERATING, LLC,
	a Delaware limited liability company
	By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
		By:	CHG WMRE, LLC, a Delaware limited
			liability company, its manager

By:	/s/	Ken Assiran
Name:	Ken Assiran
Title:	President

ACCEPTANCE AND APPROVAL BY ESCROW HOLDER

Escrow Holder hereby (i) acknowledges receipt of a fully executed copy or counterpart copies of the foregoing Agreement on this 26^th day of June, 2013, and (ii) agrees to establish an escrow and act as the Escrow Holder in accordance with the provisions of the Agreement. Escrow Holder further agrees to deliver immediately to Purchaser and Seller fully executed copies of the Agreement

Acres Land Title Agency, Agent for Chicago Title Insurance Company,
By:	/s/ Deborah Bannworth
Printed:	Deborah Bannworth
Title:

Escrow No.:

Escrow Officer and
Address for Notices:	Acres Land Title Agency
	Agent for Chicago Title Insurance Company
	c/o Debbie Bannworth
	55 Essex Street
	Millburn, New Jersey 07041
	Phone: (973)376-4643
	Fax: (973)912-8195

Wire Transfer Information:

OUR BANK:

ABA ROUTING:

OUR ACCOUNT NAME:

ACCOUNT NUMBER:

REFERENCE:

Project Name:

CLIENT NAME:

Attention:

Exhibits and Schedules to the Agreement

Exhibit A-1	Description of Facilities
Exhibit A-2	Description of Land
Exhibit B	Purchase Price Allocation
Exhibit C	Form of Deeds
Exhibit D	Form of Guaranty
Exhibit E	FIRPTA Affidavit
Exhibit F – 1	Form of Assignment of Property Agreements
Exhibit F – 2	Form of Assignment of Tax Sale Certificates
Exhibit F – 3	Form of Assignment of City Agreement
Exhibit F – 4	Form of Assignment of Pilot Agreement
Exhibit G	Form of Management Agreement
Exhibit H	Form of Interim Licensure Arrangements
Exhibit I	Schedule of Vehicles and Equipment
Exhibit J	Rent Roll
Exhibit K	Employee Contracts and Matters
Exhibit L	Form of Assignment of Residency Agreements and Commercial Leases
Exhibit M	Form of Bill of Sale and General Assignment
Exhibit N	Form of Audit Letter
Exhibit O	Form of Bulk Sales Tax Escrow Agreement
Exhibit P	Form of Income Support Agreement
Schedule 1	Retained Computer Software
Schedule 2	Property Agreements
Schedule 3	Environmental Reports
Schedule 4	Exclusions from Noncompete
Schedule 5	Existing Manager Property
Schedule 6	Insurance
Schedule 7	Licenses
Schedule 8	Litigation

EXHIBIT A-1

DESCRIPTION OF FACILITIES

Facility Name	Address	Number of Beds/Units
Three Woodbury Mews	124 (a/k/a 160) Green Avenue Block 142, Lot 2 City of Woodbury, Gloucester County, New Jersey	118 Beds
Four Woodbury Mews	122 Green Avenue Block 142, Lot 3 City of Woodbury, Gloucester County, New Jersey	130 Units

EXHIBIT A-2

DESCRIPTION OF LAND

(See Attached) 

EXHIBIT B

PURCHASE PRICE ALLOCATION

Facility	Amount
Three Facility	$
Four Facility	$
[OTHER ALLOCABLE ITEMS]	$
TOTAL PURCHASE PRICE	$

EXHIBIT C

Form of Deed

Prepared by:

_______________

_______________

_______________

BARGAIN AND SALE DEED

This Bargain and Sale Deed is made on ________________, 2013.

BETWEEN	___________________, a ___________________,
	whose address is ___________________________.
	referred to as Grantors
AND	________________________, a ____________,
	whose address is, ___________________________.
	referred to as Grantees.

The words “Grantor” and “Grantee” shall mean all Grantors and Grantees listed above.

TRANSFER OF OWNERSHIP. The Grantor does hereby grant, bargain, sell, convey and transfer ownership of the property (called the “Property”) described below to the Grantee. This transfer is made for the sum of _____________________ Dollars ($____________). The Grantor acknowledges receipt of this money.

TAX MAP REFERENCE. (N.J.S.A. 46:15-1.1)

Municipality:	___________________.
Description:	___________________.

PROPERTY. The Property consists of the land (the “Land”) and all the buildings and structures on the Land in the City of Woodbury, County of Gloucester, State of New Jersey and the easements benefitting such Land, building and structures.

SEE LEGAL DESCRIPTION ATTACHED HERETO AS EXHIBIT A AND MADE A PART HEREOF.

The street address of the Property is: ____________________________________.

Being the same premises conveyed to Grantor by Deed dated [____________] from [____________] which Deed was recorded in the Office of the County Clerk of [___________] County in Deed Book [_____], page [______].

Promises by Grantor. The Grantor promises that, except for easements, covenants, and restrictions of record, the Grantor has done no act to encumber the property. This promise is called a “covenant as to grantor's acts” (N.J.S.A. 46:4-6). This promise means that the Grantor has not allowed anyone else to obtain any legal rights which affect the property (such as by making a mortgage or allowing a judgment to be entered against the Grantor).

SIGNATURES. The Grantor signs this Deed as of the date at the top of the first page.

WITNESSES:	GRANTOR:
	________________________________
	a ______________________________
___________________________
Printed Name:
___________________________	By: ______________________________
Printed Name:	Name: ______________________________
	Title: _______________________________

STATE OF ____________	)
	) ss.
COUNTY OF __________	)

Before me this ______ day of ____________, 2013, personally appeared ________________, who acknowledged himself to be the ________________ of _______________________, a ___________________, and as such, being authorized to do so, executed the foregoing instrument on behalf of said corporation.

WITNESS my hand and Notarial Seal this ____ day of ____________, 2013.

My Commission Expires:
_____________	Notary Public – Signature
My County of Residence:
_________________	Notary Public – Printed

RECORD AND RETURN TO: 

EXHIBIT D

Form of Guaranty

GUARANTY OF agreement of sale

THIS GUARANTY OF AGREEMENT OF SALE, dated as of __________, 2013 (the “Guaranty”), is executed by CAPITAL HEALTH GROUP, LLC (“Guarantor”), and extended to Woodbury Mews III, LLC, Woodbury Mews IV, LLC, and Woodbury Mews Land Parcels, LLC, each a Delaware limited liability company (individually and collectively, the “Purchaser”), for the benefit of THREE WM REAL ESTATE, LLC, THREE WM OPERATING, LLC, FOUR WM REAL ESTATE, LLC, and FOUR WM OPERATING, LLC, each a Delaware limited liability company (each a “Seller” and collectively “Sellers”).

RECITALS:

WHEREAS, Purchaser has agreed to purchase, and Sellers have agreed to sell and cause to be transferred to Purchaser, an assisted living facility and independent living facility located in Woodbury, New Jersey (the “Facilities”), described in the Purchase Agreement, and real and personal property associated therewith pursuant to the terms and conditions of that certain Agreement of Sale between Seller and Purchaser dated June __, 2013 (the “Purchase Agreement”).

WHEREAS, without this Guaranty, Purchaser would be unwilling to consummate the transactions contemplated in the Purchase Agreement.

WHEREAS, because of the direct benefit to Guarantor, as a holder of direct or indirect beneficial ownership interests in each Seller, from the transaction described in the Purchase Agreement, and as an inducement to Purchaser to enter into the Purchase Agreement, Guarantor agree to guarantee to Purchaser certain obligations of Sellers pursuant to the Purchase Agreement as set forth herein.

NOW, THEREFORE, in consideration of the benefits received by Guarantor as a result of the Purchaser’s execution of and performance under the Purchase Agreement, the receipt and sufficiency of which is hereby acknowledged by Guarantor, Guarantor hereby covenants and agrees as follows:

1.          Guaranty of Payment. Guarantor hereby unconditionally guarantees to Purchaser the payment, when due, of all Seller Obligations. For the purposes hereof, the term “Seller Obligations” shall include any and all payment, reimbursement, and indemnity obligations of Seller to Purchaser pursuant to Section 18 and Section 28 of the Purchase Agreement, as such Seller Obligations may be modified, amended, increased, or extended from time to time by agreement of the Sellers. The guaranty of Guarantor, as set forth in this section, is a guaranty of payment.

2.          Subordination. All rights and claims of Guarantor now or hereafter existing including, without limitation, rights to distributions or dividends from the Seller (collectively the “Guarantor Claims”) against Seller or any of Seller’s property which Seller now owns or shall acquire in the future or hereafter existing shall be subordinate and subject in right of payment to the prior payment in full of the Seller Obligations to Purchaser by Seller; provided, however that nothing herein shall limit Sellers’ ability to pay Guarantor Claims in the ordinary course of business.

3.          Guarantor Waivers. Guarantor hereby waives and agrees not to assert or take advantage of (a) any right or claim of right to cause a marshalling of any of Sellers’ assets or the assets of any other party now or hereafter held as security for the Seller Obligations; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of Guarantor, any other guarantor of the Seller Obligations, or any Seller or any other person or entity, or the voluntary or involuntary dissolution of any Seller or Guarantor, or the failure of Purchaser to file or enforce a claim against the estate (either in administration, bankruptcy, or any other proceeding) of any Seller or any other person or entity; (c) any action or non-action on the part of any other person whomsoever; (d) any defense based upon an election of remedies by Purchaser which destroys or otherwise impairs any subrogation rights of Guarantor or any other guarantor of the Seller Obligations or the right of Guarantor to proceed against Seller or any other guarantor for reimbursement, or both; (e) any defense based upon failure of Purchaser to commence an action against any Seller; (f) any defense based upon acceptance of this Guaranty by Purchaser; (g) any defense based upon the invalidity or unenforceability of the Purchase Agreement or any of the Seller Obligations; (h) any defense based upon the failure of Purchaser to perfect any security or to extend or renew the perfection of any security; and (i) any other legal or equitable defenses whatsoever to which Guarantor might otherwise be entitled, other than to the extent related to the underlying merits of whether or not a Seller Obligation exists.

4.          Consent to Purchaser’s Actions or Inactions. Guarantor consents that Purchaser may, at any time and from time to time, before or after any default by any Seller pursuant to the Purchase Agreement, without reducing the liability of Guarantor hereunder and with or without further notice to or assent from Guarantor:

(a)          Waive or delay the exercise of any of its rights or remedies against any Seller or any other person or entity, including without limitation, Guarantor guaranteeing payment of any portion of the Seller Obligations; notwithstanding any waiver or delay, Purchaser shall not be precluded from further exercise of any of its rights, powers or privileges expressly provided for herein or otherwise available, it being understood that all such rights and remedies are cumulative;

(b)          Waive or extend the time of any Seller’s or any other guarantor’s performance of any and all terms, provisions and conditions set forth in the Purchase Agreement;

(c)          Release any Seller or any other person or entity, including without limitation any other guarantor guaranteeing the payment of any portion of the Seller Obligations, from their obligations to repay all or any portion of the Seller Obligations;

(d)          Proceed against Guarantor without first proceeding against or joining any Seller or any other guarantor guaranteeing payment of any portion of the Seller Obligations; and

(e)          Generally deal with any Seller or other person or party as Purchaser may see fit.

Guarantor shall remain bound under this Guaranty notwithstanding any such exchange, release, surrender, subordination, waiver (whether or not such waiver is oral or written), delay, proceeding, renewal, extension, modification, act or failure to act, or other dealings or events described in Subsections 4(a) through (e) above, even if done without notice or consent from Guarantor.

5.          Waiver of Notice. Guarantor waives all notices whatsoever with respect to the Purchase Agreement, this Guaranty, and the Seller Obligations, including, but not limited to, notice of:

(a)          Purchaser’s acceptance of this Guaranty or its intention to act, or its action, in reliance hereon;

(b)          Presentment and demand for payment of any Seller Obligations or any portion thereof;

(c)          Protest and notice of dishonor or non-payment with respect to any Seller Obligations or any portion thereof;

(d)          Any default by any Seller or any pledgor, grantor of security, or any other guarantor guaranteeing the payment of any portion of the Seller Obligations;

(e)          Any other notices to which Guarantor may otherwise be entitled; and

(f)          Any demand for payment under this Guaranty.

6.          Primary Liability of Guarantor. Guarantor agrees that this Guaranty may be enforced by Purchaser without the necessity at any time of resorting to or exhausting any other security or collateral, and Guarantor hereby waives any rights to require Purchaser to proceed against any Seller or any other guarantor or to require Purchaser to pursue any other remedy or enforce any other right, except as otherwise provided in the Purchase Agreement. Guarantor further agrees that Guarantor shall have no right of subrogation, reimbursement or indemnity whatsoever, nor any right of recourse to security for the Seller Obligations against any Seller or any other guarantor, unless and until all of the Seller Obligations have been paid in full to Purchaser or otherwise satisfied to Purchaser’s satisfaction. Guarantor further agrees that nothing contained herein shall prevent Purchaser from exercising any other rights available to it under the Purchase Agreement or any instrument of security if any Seller fails to timely perform the obligations of any Seller thereunder, and the exercise of the aforesaid rights shall not constitute a discharge of any of Guarantor’s obligations hereunder; it being the purpose and intent of Guarantor that Guarantor’s obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. Neither Guarantor’s obligations under this Guaranty nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by an impairment, modification, change, release or limitation of the liability of any Seller or any other guarantor or by reason of any Seller’s or any other guarantor’s bankruptcy, insolvency, death, or dissolution.

7.          Subrogation Rights. Guarantor irrevocably waives any present or future right to which Guarantor is or becomes entitled to be subrogated to Purchaser’s rights against any Seller or to seek contribution, reimbursement, indemnification, or the like from any Seller on account of this Guaranty or to assert any other claim or right of action against any Seller on account of, arising under, or relating to this Guaranty.

8.          Cost of Enforcement. In the event that the Seller Obligations or this Guaranty are not paid when due, or should it be necessary for Purchaser to enforce any other of its rights under the Purchase Agreement or this Guaranty, Guarantor will pay to Purchaser, in addition to payment of all Seller Obligations, all third party costs of collection or enforcement, including reasonable attorneys’ fees, paralegals’ fees, legal assistants’ fees, costs and expenses, whether incurred with respect to collection, litigation, bankruptcy proceedings, interpretation, dispute, negotiation, trial, appeal, defense of actions instituted by a third party against Purchaser arising out of or related to a Seller Obligation under the Purchase Agreement, enforcement of any judgment based on this Guaranty or otherwise related to a Seller Obligation, whether or not a suit to collect such amounts or to enforce such rights is brought or, if brought, is prosecuted to judgment.

9.          Term of Guaranty; Warranties. Notwithstanding any statute of limitations applicable hereto, this Guaranty shall continue in full force and effect (i) with respect to the Seller Obligations under Section 18 of the Purchase Agreement, for eighteen months following the date hereof and (ii) with respect to the Seller Obligations under Section 28 of the Purchase Agreement, until the termination of such Seller Obligations pursuant to the terms of said Section 28; provided, however, that if any claim for Seller Obligations has been made and remains outstanding, then this Guaranty shall not terminate until such claim for Seller Obligations is fully paid or otherwise finally resolved. This Guaranty covers the Seller Obligations whether presently outstanding or arising subsequent to the date hereof. Guarantor warrants and represents to Purchaser, (i) that this Guaranty is binding upon and enforceable against Guarantor and its successors and assigns in accordance with its terms, (ii) that the execution and delivery of this Guaranty does not violate any applicable laws or constitute a breach of any agreement to which Guarantor is a party, and (iii) that except as may have been specifically disclosed to Purchaser in writing, there is no litigation, claim, action or proceeding pending, or, to the knowledge of such Guarantor, threatened against such Guarantor which would materially adversely affect its ability to fulfill its obligations hereunder. Guarantor agrees to promptly inform Purchaser of the adverse determination of any litigation, claim, action or proceeding or the institution of any litigation, claim, action or proceeding against Guarantor which does or could materially adversely affect its ability to fulfill its obligations hereunder.

10.         Additional Liability of Guarantor. If Guarantor is or becomes liable for any indebtedness owing by any Seller to Purchaser by endorsement or otherwise than under this Guaranty, such liability shall not be in any manner impaired or reduced hereby but shall have all and the same force and effect it would have had if this Guaranty had not existed and Guarantor’s liability hereunder shall not be in any manner impaired, reduced, enhanced or expanded thereby.

11.         Cumulative Rights. Except as otherwise provided in the Purchase Agreement, all rights of Purchaser hereunder or otherwise arising under the Purchase Agreement or any documents executed in connection with or as security for the Seller Obligations are separate and cumulative and may be pursued separately, successively or concurrently, or not pursued without affecting, reducing or limiting any other right of Purchaser and without affecting, reducing, or impairing the liability of Guarantor.

12.         Pronouns; Captions; Severability. The pronouns used in this instrument shall be construed as masculine, feminine or neuter as the occasion may require. Use of the singular includes the plural, and vice versa. Captions are for reference only and in no way limit the terms of this Guaranty. Invalidation of any one or more of the provisions of this Guaranty shall in no way affect any of the other provisions hereof, which shall remain in full force and effect. Use of the term “include” or “including” is always without limitation. “Person” or “party” means any natural person or artificial entity having legal capacity.

13.         Purchaser Assigns. This Guaranty is intended for and shall inure to the benefit of Purchaser and its successors or assignees, and each and every reference herein to Purchaser shall include and refer to each and every successor or assignee of Purchaser at any time holding or owning any part of or interest in any part of the Seller Obligations. Guarantor expressly waives notice of transfer or assignment, and agrees that the failure of the Purchaser to give notice will not affect the liabilities of Guarantor hereunder.

14.         Application of Payments. Purchaser may apply any payments received by it from any source against that portion of the Seller Obligations it deems appropriate in such priority and fashion as it may deem appropriate.

15.         Notices. Except as otherwise provided in this Guaranty, all notices or other communications under this Guaranty shall be sent by hand, by overnight courier, or by registered or certified mail, postage prepaid, to the parties at the following addresses:

to Guarantor:	Capital Health Group, LLC
	1422 Clarkview Road
	Baltimore, MD 21209
	Attention: Mr. Kenneth R. Assiran
	Facsimile: 410 342 7101

with copies to:	Drinker Biddle & Reath LLP
	500 Campus Drive
	Florham Park, NJ 07932-1047
	Attention:  Michael San Giacomo, Esq.
	Facsimile: 973-360-9831
to Purchaser:	Woodbury Mews III, LLC
	Woodbury Mews IV, LLC
	Woodbury Mews Land Parcels, LLC
	Attn: John Mark Ramsey
	Attn: Kevin Thomas
	189 S. Orange Avenue, Suite 1700
	Orlando, FL 32801
	Phone:  407-999-7679
	Fax:  407-999-5210
with copies to:	Michael A. Okaty, Esq.
	Foley & Lardner LLP
	111 N. Orange Avenue, Suite 1800
	Orlando, FL 32801
	Phone No.:  407-423-7656
	Fax No.:  407-648-1743
	E-mail:  mokaty@foley.com

This section shall not be construed in any way to affect or impair any waiver of notice or demand herein provided or to require giving of notice or demand to or upon Guarantor in any situation or for any reason.

16.         Governing Law. This Guaranty shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to its principles of conflict of laws.

17.         Submission to Jurisdiction. Guarantor irrevocably and unconditionally (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought, at the option of Purchaser, in a court of competent jurisdiction in Gloucester County, New Jersey or any United States District Court having jurisdiction in Gloucester County, New Jersey; (b) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (c) waives any and all personal rights under the laws of any state to object to the laying of venue of any such suit, action or proceeding in Gloucester County, New Jersey.

18.         Oral Modification Ineffective. Any amendment to or modification of this Guaranty, and any waiver of any provision hereof, shall be in writing and shall require the prior written approval of the Purchaser as evidenced by the handwritten, non-electronic signature of the Purchaser affixed by the Purchaser to a paper document. This Guaranty shall be irrevocable by Guarantor until all outstanding Seller Obligations are fully paid or otherwise finally resolved, at which time Purchaser will promptly terminate this Guaranty. This Guaranty shall continue in full force and effect unless and until discharged or released by Purchaser pursuant to a written instrument properly executed by the Purchaser.

19.         Counterparts. This Guaranty may be executed in separate counterparts, each of which shall constitute an original and both of which, when taken together, shall be constituted one Guaranty.

20.         Waiver of Jury Trial. GUARANTOR HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, OR ANY OTHER DOCUMENT RELATED TO THIS GUARANTY, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. PURCHASER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR.

IN WITNESS WHEREOF, Guarantor has executed this GUARANTY OF AGREEMENT OF SALE as of the day and year first above written.

STATE OF _____________

COUNTY OF ___________

I HEREBY CERTIFY that on this day before me, an officer duly authorized in the State and County aforesaid to take acknowledgements, personally appeared ___________________________________ who [___] are personally known to me or [___] produced ______________________________ as identification, and that they acknowledged executing the same, freely and voluntarily, for the uses and purposes therein expressed.

WITNESS my hand and official seal in the County and State last aforesaid this ____ day of ______________, 2013.

Signature of Notary

Name of Notary (Typed, Printed or Stamped)

Commission Number (if not legible on seal):

My Commission Expires (if not legible on seal):

EXHIBIT E

FIRPTA AFFIDAVIT

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 _____________________________ (“Seller”), the undersigned hereby certifies the following on behalf of Seller:

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.

Under penalties of perjury, I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Seller.

Dated: ______________, 20___.

[Insert signature block]

Sworn to and subscribed before me this day of ________, 2013, in the state and county aforesaid.

	Notary Public
My Commission Expires:	[Notarial Seal]

EXHIBIT F-1

FORM OF ASSIGNMENT OF PROPERTY AGREEMENTS

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 agreements relating to the operation or maintenance of the premises known as [___________], which agreements are listed in Schedule A annexed hereto (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.

Except as expressly set forth in the Agreement of Sale by and between Assignor, ___________ and ____________, dated as of __________, 2013, and subject to the limitations set forth therein, this assignment is made without warranty or representation by the Assignor.

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 New Jersey. 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]

IN WITNESS WHEREOF, Assignor and Assignee have executed this agreement this _____ day of _______________.

ASSIGNOR

[INSERT SIGNATURE BLOCK]

ASSIGNEE:

[INSERT SIGNATURE BLOCK]

EXHIBIT F-2

FORM OF ASSIGNMENT OF TAX SALE CERTIFICATES

EXHIBIT F-3

FORM OF ASSIGNMENT OF CITY AGREEMENT

EXHIBIT F-4

FORM OF ASSIGNMENT OF PILOT AGREEMENT 

EXHIBIT G

FORM OF MANAGEMENT AGREEMENT

EXHIBIT H

FORM OF INTERIM LICENSURE ARRANGEMENTS 

EXHIBIT I

SCHEDULE OF VEHICLES AND EQUIPMENT

(See Attached) 

EXHIBIT J

RENT ROLL

(See Attached) 

EXHIBIT K

EMPLOYEE CONTRACTS AND MATTERS

(See Attached) 

EXHIBIT L

FORM OF ASSIGNMENT OF RESIDENCY
AGREEMENTS AND COMMERCIAL LEASES

THIS ASSIGNMENT AND ASSUMPTION OF RESIDENCY AGREEMENTS AND COMMERCIAL LEASES (this “Assignment Agreement”) is made and entered into as of this _____ day of __________, 2013 (the “Transfer Date”) by and between ___________________________ (the “Assignor”), and ____________________________ (the “Assignee”). Each party hereto is referred to individually as a “Party” and collectively as the “Parties.”

BACKGROUND:

WHEREAS, the Assignor and Assignee (as successor to _________________) have entered into that Agreement of Sale dated as of _______, 2012 (the “Sale Agreement”), providing for, among other things, the transfer by the Assignor to the Assignee of the [assisted/independent] living facility identified on Exhibit A hereto (the “Facility”), all upon the terms and conditions contained in the Settlement Agreement;

WHEREAS, pursuant to the terms of the Sale Agreement, the Assignor shall assign all of its right, title and interest as lessor in and to all “Residency Agreements” and “Commercial Leases” (as each term is defined in the Sale Agreement); and

WHEREAS, attached hereto (i) as Schedule 1 is a list of all Residency Agreement held by Assignor as of the Transfer Date, and (ii) as Schedule 2 is a list of all Commercial Leases held by Assignor as of the Transfer Date.

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 Agreement set forth on Schedule 1 to Assignee. Assignor hereby assigns, transfers and conveys all of its right, title and interest in, to, and under the Commercial Leases set forth on Schedule 2 to Assignee. Except as expressly set forth in the Agreement of Sale by and between Assignor, ___________ and ____________, dated as of __________, 2013, and subject to the limitations set forth therein, this Assignment is made without warranty or representation by the Assignor

2.          Assumption. Assignee hereby accepts all of the Assignor’s right, title and interest in, to, and under the Residency Agreement and Commercial Leases, each as set forth on Schedule 1 or Schedule 2, as applicable, 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 Sale Agreement. Nothing contained herein is intended to amend, modify or affect the rights and obligations of the Parties under the Sale Agreement. 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 New Jersey.

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:

ASSIGNEE:

Schedule 1

To

ASSIGNMENT AGREEMENT

Residency Agreements

Schedule 2

To

ASSIGNMENT AGREEMENT

Commercial Leases 

EXHIBIT M

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 ________________________ (“Assignee”), does hereby assign, transfer and deliver unto Assignee, all of its right, title and interest in and to any and all Personalty and Intangibles (each as defined in that certain Agreement of Sale by and between Assignor, ___________ and ____________, dated as of March __, 2013 presently held by Assignor affecting the premises known as _____________________________ (the “Premises”).

TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns, forever, from and after the date hereof.

Except as expressly set forth in the Agreement of Sale by and between Assignor, ___________ and ____________, dated as of __________, 2013, and subject to the limitations set forth therein, this assignment is made without warranty or representation by the Assignor, including, without limitation, any warranty or representation that Assignor has any right in the Personalty and Intangibles or that the Personalty and Intangibles are transferable, and without recourse to Assignor in any manner whatsoever.

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 New Jersey. 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]

IN WITNESS WHEREOF, Assignor has executed this agreement this _____ day of ___________, 2013.

ASSIGNOR:

ASSIGNEE: 

EXHIBIT N

FORM OF AUDIT LETTER

[DATE]

[ACCOUNTING FIRM]

[ADDRESS]

Ladies and Gentlemen:

We are providing this letter in connection with your audit of the balance sheet(s) of the [PROPERTY OR PORTFOLIO] (“the Property”) as of [REPORTING PERIODS] and the related combined statements of operations, owners’ equity, and cash flows for the years then ended, for the purpose of expressing an opinion as to whether these financial statements present fairly, in all material respects, the financial position, and results of operations of the Property in conformity with U.S. generally accepted accounting principles.

Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement.

We confirm, to the best of our knowledge and belief, the following representations made to you during your audit:

1.          The financial statements referred to above are fairly presented in conformity with U.S. generally accepted accounting principles.

2.          We have made available to you:

a. All financial records and related data.

b. All minutes of the meetings of boards, or summaries of actions of recent meetings for which minutes have not yet been prepared.

3.          There are no:

a. Violations or possible violations of laws or regulations, whose effects should be considered for disclosure in the combined financial statements or as a basis for recording a loss contingency.

b. We are not aware of any pending or threatened litigation, claims, or assessments or unasserted claims or assessments that are required to be accrued or disclosed in the financial statements in accordance with FASB ASC 450, Contingencies, and we have not consulted a lawyer concerning litigation, claims, or assessments.

c. Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by FASB ASC 450, Contingencies.

d. Material transactions that have not been properly recorded in the accounting records underlying the financial statements.

e. Events that have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the financial statements, except as disclosed.

4.          There are no uncorrected financial statement misstatements.

5.          We acknowledge our responsibility for the design and implementation of programs and controls to prevent, deter and detect fraud. We understand that the term "fraud" includes misstatements arising from fraudulent financial reporting and misstatements arising from misappropriation of assets.

6.          We have no knowledge of any fraud or suspected fraud affecting the entity involving:

a. Management

b. Employees who have significant roles in internal control over financial reporting, or

c. Others where the fraud could have a material effect on the financial statements.

7.          We have no knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, short sellers, or others.

8.          The Property has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities.

9.          We have no knowledge of any officer or trustee of the Property, or any other person acting under the direction thereof, having taken any action to fraudulently influence, coerce, manipulate or mislead you during your audit.

10.         The following have been properly recorded or disclosed in the financial statements:

a. Related party transactions including sales, purchases, loans, transfers, leasing arrangements, guarantees, ongoing contractual commitments and amounts receivable from or payable to related parties.

The term "related party" refers to affiliates of the enterprise; entities for which investments in their equity securities would, absent the election of the fair value option under FASB ASC 825, Financial Instruments, be required to be accounted for by the equity method by the enterprise; trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; principal owners of the enterprise; its management; members of the immediate families of principal owners of the enterprise and its management; and other parties with which the enterprise may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another party also is a related party if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

b. Guarantees, whether written or oral, under which the Property is contingently liable, including guarantee contracts and indemnification agreements pursuant to FASB ASC 460, Guarantees.

c. Significant estimates and material concentrations known to management that are required to be disclosed in accordance with FASB ASC 275, Risks and Uncertainties.

Significant estimates are estimates at the balance sheet date, which could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets or geographic areas for which it is reasonably possible that events could occur which would significantly disrupt normal finances within the next year.

d. Significant common ownership or management control relationships requiring disclosure.

11.         The Property has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets, nor has any asset been pledged as collateral, except as disclosed.

12.         The Property has complied with all aspects of contractual agreements that would have a material effect on the combined financial statements in the event of noncompliance.

13.         There have been no:

a. Instances of fraud involving others that could have a material effect on the adjustments.

b. Allegations, either written or oral, of misstatements or other misapplication of accounting principles in the Property’s adjustments that have not been disclosed to you in writing.

c. Allegations, either written or oral, of deficiencies in internal control that could have a material effect on the Property’s adjustments that have not been disclosed to you in writing.

d. False statements affecting the Property’s adjustments made to you, our internal auditors, or other auditors who have audited entities under our control upon whose work you may be relying in connection with your audit.

14.         There are no material transactions that have not been properly recorded in the accounting records underlying the adjustments.

15.         Receivables reported in the combined financial statements represent valid claims against debtors for sales or other charges arising on or before the balance sheet date and have been appropriately reduced to their estimated net realizable value.

16.         The Portfolio has appropriately grouped long-lived assets together for purposes of assessing impairment in accordance with FASB ASC 360, Property, Plant and Equipment. We have reviewed long-lived assets, including amortizable intangible assets, to be held and used, for impairment whenever events or changes in circumstances have indicated that the carrying amount of the assets might not be recoverable. Provision has been made for any material adjustments to long-lived assets including amortizable intangible assets.

17.         We are responsible for making the fair value measurements and disclosures included in the combined financial statements in accordance with FASB ASC 820, Fair Value Measurement and Disclosures, including determining the fair value of assets and liabilities for which there has been a significant decrease in the volume and level of activity in relation to the normal market activity for those assets or liabilities (or similar assets or liabilities) or for which transactions are deemed not orderly. As part of fulfilling this responsibility, we have established an accounting and financial reporting process for determining the fair value measurements and disclosures, in accordance with the fair value techniques included in FASB ASC 820, considered the appropriateness of valuation techniques, adequately supported any significant assumptions used, and ensured that the presentation and disclosure of the fair value measurements are in accordance with U.S. generally accepted accounting principles including the disclosure requirements of FASB ASC 820. We believe the assumptions and techniques used by us, including those used by specialists engaged by us, are in accordance with the definition of fair value in FASB ASC 820 and the disclosures adequately describe the level of the inputs used in the fair value measurement, in accordance with the fair value hierarchy in FASB ASC 820.

18.         The Portfolio is responsible for determining the fair value of financial instruments as required by FASB ASC 825, Financial Instruments. The amounts disclosed represent the Portfolio’s best estimate of fair value of financial instruments required to be disclosed under the FASB ASC 825. The Portfolio also has disclosed the methods and significant assumptions used to estimate the fair value of financial instruments and any changes to those methods and significant assumptions, if any, as required by FASB ASC 825.

19.         Uncertain tax positions have been accounted for in accordance with the provisions of FASB ASC 740, Income Taxes.

Further, we confirm that we are responsible for the fair presentation in the financial statements of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles.

Very truly yours,

[SELLER]

[NAME]

[TITLE]

EXHIBIT O

BULK SALES TAX ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this “Agreement”) is made as of _________ by and among [___________], a [____________], having an address at [___________________] (“Escrow Agent”), [_________], a [____________], having an address at [__________] (“Seller”) and [___________], a [______________], having an address at [_________________] (“Purchaser”).

PRELIMINARY STATEMENT

Seller and Purchaser are parties to that certain Agreement of Sale, dated [________] (the “Contract”), relating to certain real property known and located at [________________].

Section [__] of the Contract provides that simultaneously with the conveyance of the Property to Purchaser, Purchaser shall post an escrow (the “Tax Escrow”) required by the New Jersey Division of Taxation (the “Division”) on Seller’s behalf. This Agreement shall govern the terms of such escrow and the disbursement of amounts from such escrow.

Capitalized terms used in this Agreement, which are not defined in this Agreement, shall have the meanings given to such terms in the Contract.

NOW, THEREFORE, for and in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.          Tax Escrow Funds. Simultaneously herewith, Purchaser has deposited the sum of $[___________], which amount has been withheld from the Purchase Price, to be held by Escrow Agent as the Tax Escrow, in accordance with the provisions hereof. [Simultaneously herewith, Seller has deposited the sum of $[___________], which amount represents the difference between the amount of the Deficiency and the Purchase Price, to be held by Escrow Agent as the Tax Escrow, in accordance with the provisions hereof.] Escrow Agent shall hold the Escrowed Sums (as hereinafter defined) in an interest bearing trust account at [INSERT an FDIC insured banking institution authorized to do business in New Jersey, with offices located in New Jersey, which is acceptable to Seller and Purchaser]. As used herein, the term “Escrowed Sums” shall mean the amount of the initial deposit hereunder, as increased by any interest earned thereon and as decreased by any sums which have been disbursed from escrow in accordance with the terms hereof.

2.          Payment to Division of Taxation. Within five (5) days after receipt from the Division, Seller or Purchaser, as the case may be, shall forward to Escrow Agent and the other party hereunder a copy of any written instructions of the Division regarding the disbursement of Escrowed Sums (“Disbursement Instructions”). No sooner than five (5) days after receipt, Escrow Agent shall disburse all or a portion of the Escrowed Sums in accordance with such Disbursements Instructions.

3.          Release of Funds to Seller. Within five (5) days after receipt from the Division, Seller or Purchaser, as the case may be, shall forward to Escrow Agent and the other party hereunder a copy of any written confirmation (“Release Authorization”) from the Division that the Deficiency has been paid in full or that Purchaser has no further liability for the Deficiency. Upon receipt of such Release Authorization, Escrow Agent shall release to Seller any Escrowed Sums which remain in escrow (and which the Division has not required to be paid to the Division pursuant to any Disbursement Instructions or Release Authorization); provided, however, that Escrow Agent shall not release any Escrowed Sums to Seller until at least ten (10) days after Escrow Agent receives the Release Authorization, nor thereafter if Escrow Agent shall have received written notice of objection from Purchaser within such ten (10) day period.

4.          Objection to Disbursement. If Escrow Agent shall receive any objection from Purchaser to the release of any Escrowed Sums to Seller pursuant to Paragraph 3, then Escrow Agent shall release any undisputed amount and shall continue to hold the disputed amount in escrow under the terms and conditions hereof, until the earlier of (a) receipt by Escrow Agent of joint instructions signed by Seller and Purchaser regarding the release or disbursement of the disputed sums, or (b) receipt by Escrow Agent of a final, unappealable judgment, order or decree from a court of competent jurisdiction instructing Escrow Agent as to release and/or disbursement of the disputed sum.

5.          Reliance; Duties. Escrow Agent may act in reliance on any writing or instrument or signature which it believes to be genuine, and may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument and may assume that any person purporting to give any writing, notice, advice or instruction in connection with the provisions hereof has been duly authorized to do so.

6.          Dispute. In the event of any dispute between the parties regarding the Escrowed Sums, Escrow Agent, at its option, may disregard all instructions received and either (i) hold the Escrowed Sums until the dispute is mutually resolved and Escrow Agent is advised of this fact in writing by both Seller and Purchaser, or Escrow Agent is otherwise instructed by a final unappealable judgment of a court of competent jurisdiction, or (ii) deposit the Escrowed Sums into a court of competent jurisdiction (whereupon Escrow Agent shall be released and relieved of any and all liability and obligations hereunder from and after the date of such deposit).

7.          Uncertainty. In the event Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive conflicting instructions, claims or demands from the parties hereto, or instructions which conflict with any of the provisions of this Agreement or the Contract, Escrow Agent shall be entitled (but not obligated) to refrain from taking any action other than to keep safely the Escrowed Sums until Escrow Agent shall be instructed otherwise in writing signed by both Seller and Purchaser, or by final judgment of a court of competent jurisdiction.

8.          Indemnity. Seller and Purchaser shall jointly and severally hold Escrow Agent harmless against any loss, damage, liability or expense incurred by Escrow Agent, arising out of or in connection with its entering into this Agreement and the carrying out of its duties hereunder, including the reasonable costs and expenses of defending itself against any claim of liability or participating in any legal proceeding. Escrow Agent may consult with counsel of its choice, and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel.

9.          Resignation. Escrow Agent may resign at will and be discharged from its duties or obligations hereunder by giving notice in writing of such resignation specifying a date when such resignation shall take effect; provided, however, that (i) prior to the effective date of such resignation a substitute escrow agent is approved in writing by Seller and Purchaser, which approval shall not be unreasonably withheld or delayed, or (ii) Escrow Agent shall deposit the Escrowed Sums with a court of competent jurisdiction. After such resignation, Escrow Agent shall have no further duties or liability hereunder.

10.         Termination. Purchaser and Seller, together, shall have the right to terminate the appointment of Escrow Agent hereunder by giving to it notice of such termination, specifying the date upon which such termination shall take effect and designating a replacement Escrow Agent, who shall sign a counterpart of this Agreement. Upon demand of such successor Escrow Agent, the Escrowed Sums shall be turned over and delivered to such successor Escrow Agent, who shall thereupon be bound by all of the provisions hereof. Escrow Agent’s agreements and obligations hereunder shall terminate and Escrow Agent shall be discharged from further duties and obligations hereunder upon final payment of the Escrowed Sums in accordance with the terms of this Agreement.

11.         Continued Representation of a Party. Notwithstanding that Escrow Agent is acting as an escrow agent for the Escrowed Sums, and, further, notwithstanding any subsequent dispute which may arise between the parties related to this Agreement, the Contract, the Escrowed Sums or otherwise, if Escrow Agent is legal counsel to a party hereunder, each party agrees that Escrow Agent may continue to represent such party as legal counsel in connection with this Agreement, the Contract and the transactions contemplated hereby or thereby and/or with respect to any dispute or litigation arising out of the Contract or this Agreement.

12.         Entire Agreement. This Agreement embodies the entire understanding and agreement of the parties to this Agreement concerning Escrow Agent’s obligations, and supersedes all prior and contemporaneous agreements, understandings, negotiations, offers and expressions of intent, whether oral or written. None of the terms and conditions of this Agreement may be modified except by a writing, signed by Seller, Purchaser and Escrow Agent. In the event of any inconsistency between this Agreement and the Contract, the terms of this Agreement shall control.

13.         Binding Effect. This Agreement shall be binding upon and inure to the benefit of Seller, Purchaser and Escrow Agent and their respective successors in interest.

14.         Notices. Any demand, notice or other communication required or permitted to be given hereunder shall be in writing, and shall be delivered personally, by recognized overnight national courier service (such as Federal Express) for next business day delivery, by telecopy (with a hard copy and a transmission confirmation sent by a recognized overnight national courier service), or by certified mail, return receipt requested, first-class postage prepaid to the parties at the addresses set forth below (or to such other addresses as the parties may specify by due notice to the other):

To Purchaser:

copy to:

To Seller:

copy to:

To Escrow Agent:

Any notice delivered to a party’s designated address by (a) personal delivery, (b) recognized overnight national courier service, or (c) certified mail, return receipt requested, shall be deemed to have been received by such party at the time the notice is delivered to such party. Any notice sent by fax to the party’s designated fax number shall be effective upon receipt, provided receipt occurs before 5:00 PM on a business day in the State of New Jersey. Confirmation by the courier delivering any notice given pursuant to this Paragraph 14 shall be conclusive evidence of receipt of such notice. Each party hereby agrees that it will not refuse or reject delivery of any notice given hereunder, that it will acknowledge, in writing, receipt of the same upon request by any other party and that any notice rejected or refused by it shall be deemed for all purposes of this Agreement to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service. Any notice given by an attorney for a party shall be effective for all purposes.

15.         Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey.

16.         Section Headings. The respective section and subsection headings contained in this Agreement are for convenience of reference only, and shall not be deemed to modify, limit, define or describe in any respect any of the provisions of this Agreement.

17.         Execution in Counterparts. This Agreement may be executed in several counterparts, all of which when taken together shall constitute a single Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date of this Agreement.

ESCROW AGENT:
[_____________]
By:
	Name:
	Title:
SELLER:
[______________]
By:
	Name:
	Title:
PURCHASER:
[________________]
By:
	Name:
	Title:

EXHIBIT P

INCOME SUPPORT AGREEMENT

SCHEDULE 1

Retained Computer Software

SCHEDULE 2

Property Agreements

SCHEDULE 3

Environmental Reports

SCHEDULE 4

Exclusions to Noncompete

SCHEDULE 5

Property of Existing Manager

SCHEDULE 6

Insurance

SCHEDULE 7

Licenses

SCHEDULE 8

Litigation

EX-10.2

FIRST AMENDMENT TO
AGREEMENT OF SALE

THIS FIRST AMENDMENT TO AGREEMENT OF SALE (the “Amendment”) is entered into as of the 9 day of August, 2013, between THREE WM REAL ESTATE, LLC, THREE WM OPERATING, LLC, FOUR WM REAL ESTATE, LLC, FOUR WM OPERATING, LLC, each a Delaware limited liability company (individually and collectively, the “Seller”) and WOODBURY MEWS III, LLC, WOODBURY MEWS IV, LLC, WOODBURY MEWS LAND PARCELS, LLC (each a Delaware limited liability company (individually and collectively, the “Purchaser”).

RECITALS:

A.           Seller and Purchaser are parties to that certain Agreement of Sale dated June 26, 2013 (the “Agreement”), pursuant to which Seller agreed to sell, and Purchaser agreed to purchase, certain real property located at 122 and 124 Green Avenue, Woodbury, New Jersey, as more particularly described in the Agreement.

B.           Seller and Purchaser desire to amend the Agreement, upon the terms and conditions set forth in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

AGREEMENTS:

1.    Recitals, Definitions. The foregoing recitals are true and correct and are incorporated herein by reference. Capitalized but undefined terms used in this Amendment shall have the meanings given to them in the Agreement.

2.    The Definition of “Due Diligence Deadline” is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

“Due Diligence Deadline” means 5 P.M. Eastern Standard Time on August 23^rd, 2013 the date which is forty-five (45) days after the Effective Date of this Agreement.

3.    Section 4(b)(1) shall be inserted to read as follows:

Notwithstanding anything in this Agreement to the contrary, Purchaser shall be entitled, on or before the Due Diligence Deadline, to provide written notice to Seller of any Title Defect identified on the Survey.

4.   Section 9(a) is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

1

Closing Date. The closing of the sale of the Property (“Closing”) shall take place at 1:00 p.m. (New York time) at the office of Escrow Agent or at another place mutually agreed upon by the parties, or by mail, on the later of (i) the first Business Day occurring thirty (30) days after the Due Diligence Deadline September 25^th, 2013, or (ii) the first Business Day occurring fifteen (15) days after the consent of the City to the assignment of the PILOT Agreement is granted pursuant to Section 26 below (“Closing Date”), or such earlier date as to which the parties have mutually agreed; provided, however, in no event shall the Closing Date occur after October 31, 2013. For the purpose of allocating revenue and expense, the parties agree that 12:01 a.m. (New York time) on the day of Closing shall be the cut-off time. The parties shall not attend the Closing in person and shall close the transaction contemplated by this Agreement through escrow with Escrow Agent pursuant to written closing escrow instructions, which instructions shall be reasonably satisfactory to Seller and Purchaser, and shall be consistent with the terms hereof.

5.    Section 10(a)(xv) is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

An Assignment of the Tax Sale Certificates in the form of Exhibit F-2; or a Deed from WMA to Purchaser for the Adjacent Land, as provided in Section 25.

6.    Effect of Amendment. To the extent any provisions contained herein conflict with the Agreement or any other agreements between Seller and Buyer, oral or otherwise, the provisions contained herein shall supersede such conflicting provisions contained in the Agreement or other agreements. Except as specifically modified by this Amendment, the Agreement remains in full force and effect and is in all events ratified, confirmed and approved.

7.     Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which, together, shall constitute one and the same instrument. Delivery of signatures by e-mail or facsimile shall be valid and binding.

(signature page to follow)

2

IN WITNESS WHEREOF, the Purchaser has executed this Amendment on the date first above written.

PURCHASER:
Woodbury Mews III, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews IV, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews Land Parcels, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory

3

IN WITNESS WHEREOF, the Seller has executed this Amendment on the date first above written.

SELLER:
THREE WM REAL ESTATE, LLC, a Delaware limited liability company
By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:  Ken Assiran
		Title:  President
THREE WM OPERATING, LLC,
a Delaware limited liability company
By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name: Ken Assiran
		Title:President

[SIGNATURES CONTINUE ON FOLLOWING PAGE.] 

4

SELLER:
FOUR WM REAL ESTATE, LLC, a Delaware limited liability company
By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:Ken Assiran
		Title:President
FOUR WM OPERATING, LLC,
a Delaware limited liability company
By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:Ken Assiran
		Title: President

EX-10.3

SECOND AMENDMENT TO
AGREEMENT OF SALE

THIS SECOND AMENDMENT TO AGREEMENT OF SALE (the “Amendment”) is entered into as of the 23^rd day of August, 2013, between THREE WM REAL ESTATE, LLC, THREE WM OPERATING, LLC, FOUR WM REAL ESTATE, LLC, FOUR WM OPERATING, LLC, each a Delaware limited liability company (individually and collectively, the “Seller”) and WOODBURY MEWS III, LLC, WOODBURY MEWS IV, LLC, WOODBURY MEWS LAND PARCELS, LLC (each a Delaware limited liability company (individually and collectively, the “Purchaser”).

RECITALS:

A.           Seller and Purchaser are parties to that certain Agreement of Sale dated June 26, 2013, as amended by that certain First Amendment to Agreement of Sale dated August 9, 2013 (collectively, the “Agreement”), pursuant to which Seller agreed to sell, and Purchaser agreed to purchase, certain real property located at 122 and 124 Green Avenue, Woodbury, New Jersey, as more particularly described in the Agreement.

B.           Seller and Purchaser desire to amend the Agreement, upon the terms and conditions set forth in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

AGREEMENTS:

1.      Recitals, Definitions. The foregoing recitals are true and correct and are incorporated herein by reference. Capitalized but undefined terms used in this Amendment shall have the meanings given to them in the Agreement.

2.      The Definition of “Due Diligence Deadline” is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

“Due Diligence Deadline” means 5 P.M. Eastern Standard Time on August 23^rd28th, 2013.

3.      Purchase Price (a) Section 2(a) of the Agreement is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

The purchase price (the “Purchase Price”) for the Property shall be THIRTY NINE MILLION and 00/100 DOLLARS ($39,000,000.00), subject to prorations and the adjustments expressly set forth in this Agreement; provided, however, that if the City adopts a reallocation of the payments under the PILOT Agreement, then the Purchase Price shall be reduced by the PILOT Price Adjustment (as hereinafter defined). The “PILOT Price Adjustment” shall be calculated as follows: (i) the net increase in the annual payments under the PILOT Agreement adopted by the City with respect to Lots 2, 3, 4 and 5 for 2013 shall be divided by 0.077; and (ii) the sum of $30,000 shall be subtracted from the quotient calculated pursuant to clause (i) of this sentence; ; provided, however, that in no event shall the PILOT Price Adjustment be greater than $1,048,000.00. Prior to the expiration of the Due Diligence Period, Seller and Purchaser shall agree on a reasonable allocation of the Purchase Price payable for each individual property described on Exhibit A-2 (each, an “Individual Property”) which shall be allocated in the form set forth on Exhibit B (each such allocated portion, an “Allocated Purchase Price”). In addition, Seller and Purchaser shall agree on a reasonable further allocation of the Purchase Price as between (a) the Land and the Improvements, (b) the Personalty, and (c) the Intangibles prior to the expiration of the Due Diligence Period.

1

4.      Management Agreements. Seller, Addit and Purchaser have agreed to the form of Management Agreements attached to this Amendment as Exhibit G, and Seller and Purchaser have waived any right to terminate the Agreement pursuant to Section 4(g) thereof.

5.      Conditions to Closing.

(a)     Section 5(b)(vi) is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

Seller shall have obtained (i) the consent to the assignment of the PILOT Agreement from the City to Purchaser with respect to (i) the Three Land and Four Land, and (ii) only in the event WMA has taken fee ownership of the Adjacent Land, the Adjacent Land, and (ii) an amendment to the PILOT Agreement (or amended and restated PILOT Agreement), including a reallocation of the payments with respect to the Land and the Adjacent Land, each in the form submitted by Seller and Purchaser to the City, without changes that materially and adversely affect the legality, scope or economics thereof, (iii) an ordinance from the City approving the consent and the amendment, and (iv) the twenty (20) day appeal period to the amended PILOT Agreement (the “PILOT Appeal Period”) shall have expired without an appeal by a third party having been filed (or, if any appeal is filed, with such appeal having been conclusively adjudicated in favor of the PILOT Amendment or settled in a manner acceptable to Purchaser, in its reasonable discretion.

(b)    Section 5(b)(ix) is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

Seller shall have caused Capital Funding Group, Inc. Capital Health Group, LLC (the “Guarantor”) to execute and deliver the guaranty in the form attached as Exhibit D to this Agreement (the “Guaranty”) and the Income Support Agreement in the form annexed as Exhibit P to this Agreement (the “Income Support Agreement”).

(c)    Section 5(b)(xii) shall be created to read as follows:

No party shall have filed a motion to vacate the judgments in the Tax Foreclosure Actions or exercised a statutory right of redemption on the Adjacent Land on or before September 25, 2013, or if any such motion is filed or exercise occurs, the matter is conclusively resolved in a manner that insures, in Purchaser’s reasonable discretion, that the Three Land and Four Land continue to receive the benefit of the easements contain in Deed Book 4843, Page 193.

2

6.      Section 5(c) shall be created to read as follows:

If the conditions to Closing set forth in this Section 5 have not been fulfilled or waived (as provided for above) as of December 31, 2013, Purchaser or Seller, in their sole discretion, may elect to terminate this Agreement, in which case the Deposit shall be returned to Purchaser and neither party shall have any further obligations to the other party hereunder, except as otherwise provided herein.

7.      Section 9(a) is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

Closing Date. The closing of the sale of the Property (“Closing”) shall take place at 1:00 p.m. (New York time) at the office of Escrow Agent or at another place mutually agreed upon by the parties, or by mail, on the later of (i) the first Business Day occurring thirty (30) days after the Due Diligence Deadline September 25^th, 2013, or (ii) the first Business Day occurring fifteen (15) days after all conditions to Closing in Section 5 have been satisfied or waived in accordance with Section 5) (“Closing Date”), or such earlier date as to which the parties have mutually agreed; provided, however, in no event shall the Closing Date occur after October December 31, 2013. For the purpose of allocating revenue and expense, the parties agree that 12:01 a.m. (New York time) on the day of Closing shall be the cut-off time. The parties shall not attend the Closing in person and shall close the transaction contemplated by this Agreement through escrow with Escrow Agent pursuant to written closing escrow instructions, which instructions shall be reasonably satisfactory to Seller and Purchaser, and shall be consistent with the terms hereof.

8.     Exhibits. Seller and Purchaser acknowledge that they have agreed upon the form of Interim Licensure Arrangements attached to this Amendment as Exhibit K and the form of Income Support Agreement attached to this Amendment as Exhibit P, and the foregoing exhibits are hereby incorporated into the Agreement.

9.     Future Approvals. Seller hereby agrees to reasonably cooperate with Purchaser in connection with the pursuit by Purchaser after the Closing of approvals or agreements from the City of Woodbury with respect to the development of the Adjacent Land and capital improvements to the Three Land and Four Land, including without limitation, a new financial agreement with the City of Woodbury with respect to the Adjacent Land and the Three Land and Four Land; provided, however, Seller shall not be obligated to take any action which would increase Seller’s obligations or liabilities or result in a out-of-pocket cost to Seller. Purchaser shall indemnify, defend and hold Seller harmless from and against all costs, claims, damages or liabilities incurred by Seller in connection with or by reason of Seller’s cooperation pursuant to this Section 9 or any approvals or agreements from the City obtained by Purchaser pursuant to this Section 9. The provisions of this Section 9 shall survive the Closing.

10.   Effect of Amendment. To the extent any provisions contained herein conflict with the Agreement or any other agreements between Seller and Buyer, oral or otherwise, the provisions contained herein shall supersede such conflicting provisions contained in the Agreement or other agreements. Except as specifically modified by this Amendment, the Agreement remains in full force and effect and is in all events ratified, confirmed and approved.

11.  Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which, together, shall constitute one and the same instrument. Delivery of signatures by e-mail or facsimile shall be valid and binding.

(signature page to follow)

3

IN WITNESS WHEREOF, the Purchaser has executed this Amendment on the date first above written.

PURCHASER:
Woodbury Mews III, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews IV, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews Land Parcels, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory

4

IN WITNESS WHEREOF, the Seller has executed this Amendment on the date first above written.

SELLER:
THREE WM REAL ESTATE, LLC, a Delaware limited liability company
By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:Ken Assiran
		Title: President
THREE WM OPERATING, LLC,
a Delaware limited liability company
By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:Ken Assiran
		Title:President

[SIGNATURES CONTINUE ON FOLLOWING PAGE.] 

5

SELLER:
FOUR WM REAL ESTATE, LLC, a Delaware limited liability company
By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:Ken Assiran
		Title: President
FOUR WM OPERATING, LLC,
a Delaware limited liability company
By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name: Ken Assiran
		Title:President

EXHIBIT B

PURCHASE PRICE ALLOCATION

Facility	Amount
Three Facility	$___________
Four Facility	$___________
[OTHER ALLOCABLE ITEMS]	$___________
TOTAL PURCHASE PRICE	$

2

EXHIBIT G

FORM OF MANAGEMENT AGREEMENT

3

EXHIBIT K

FORM OF INTERIM LICENSURE ARRANGEMENTS

4

EXHIBIT P

INCOME SUPPORT AGREEMENT

5

EX-10.4

THIRD AMENDMENT TO
AGREEMENT OF SALE

THIS THIRD AMENDMENT TO AGREEMENT OF SALE (the “Amendment”) is entered into as of the 28^th day of August, 2013, between THREE WM REAL ESTATE, LLC, THREE WM OPERATING, LLC, FOUR WM REAL ESTATE, LLC, FOUR WM OPERATING, LLC, each a Delaware limited liability company (individually and collectively, the “Seller”) and WOODBURY MEWS III, LLC, WOODBURY MEWS IV, LLC, WOODBURY MEWS LAND PARCELS, LLC (each a Delaware limited liability company (individually and collectively, the “Purchaser”).

RECITALS:

A.           Seller and Purchaser are parties to that certain Agreement of Sale dated June 26, 2013, as amended by that certain First Amendment to Agreement of Sale dated August 9, 2013, and that certain Second Amendment to Agreement of Sale dated August 23, 2013 (collectively, the “Agreement”), pursuant to which Seller agreed to sell, and Purchaser agreed to purchase, certain real property located at 122 and 124 Green Avenue, Woodbury, New Jersey, as more particularly described in the Agreement.

B.           Seller and Purchaser desire to amend the Agreement, upon the terms and conditions set forth in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

AGREEMENTS:

1.     Recitals, Definitions. The foregoing recitals are true and correct and are incorporated herein by reference. Capitalized but undefined terms used in this Amendment shall have the meanings given to them in the Agreement.

2.     Conditions to Closing.

(a)          Section 5(b)(vi) is hereby deleted in its entirety and replaced with the following:

Seller shall have obtained (i) the consent to the assignment of the PILOT Agreement from the City to Purchaser with respect to the Three Land and Four Land, and the Adjacent Land, and (ii) an amendment to the PILOT Agreement (or amended and restated PILOT Agreement, which shall include, at a minimum, an amended and restated Financial Agreement (the “Financial Agreement”)), including a reallocation of the payments with respect to the Land and the Adjacent Land, each in the form submitted by Seller and Purchaser to the City, without changes that materially and adversely affect the legality, scope or economics thereof, as determined by Seller and Purchaser; provided, however, that for purposes of this Agreement, the Purchaser and Seller agree and acknowledge that any deviation from the forms submitted to the City by Purchaser and Seller to (x) the definition of “Total Project Cost” (as defined by Financial Agreement, which shall reflect the total Purchase Price under this Agreement, as amended), (y) the “Annual Service Charges” (as defined in Section 3.2 and Exhibit B of the Financial Agreement) which results in (A) a net aggregate reallocation to Lots 2, 3, 4 and 5 of more than $86,536 for the year 2013 or (B) an increase in the total Annual Service Charges payable with respect to the Land and the Adjacent Land for any year from the amounts shown in the column labeled “Total” on the schedule attached hereto as Exhibit Q (other than with respect to new development); or (z) the ability of the Purchaser to submit consolidated financials to the City under the Financial Agreement, shall be considered a material and adverse change for purposes of this Agreement; (iii) an ordinance from the City approving the consent and the amendment, in form acceptable to Seller and Purchaser; and (iv) the statutory appeal period to the amended PILOT Agreement (the “PILOT Appeal Period”) shall have expired without an appeal by a third party having been filed (or, if any appeal is filed, with such appeal having been conclusively adjudicated in favor of the PILOT Amendment or settled in a manner acceptable to Purchaser, in its reasonable discretion. Purchaser acknowledges that if Purchaser is provided with a commercially reasonable opinion from a New Jersey licensed attorney at Drinker Biddle & Reath LLP that the applicable statutory appeal period is 20 days, then the statutory appeal period shall be 20 days for purposes of this Section 5(b)(vi).

1

(b)          Section 5(b)(xii) shall be created to read as follows:

(i) Seller shall have obtained amended final judgments in the Tax Foreclosure Actions for Lots 1 and 5 of the Adjacent Land, correcting the legal descriptions attached thereto, and either (y) the court confirms in the amended final judgments that the statutory three (3) month appeal period relates back to the entry of the original final judgment; or (z) either (A) no party shall have filed a motion to vacate the judgments in the Tax Foreclosure Actions or exercised a statutory right of redemption on Lots 1 and 5 on or before three (3) months following the entry of the amended final judgments in the Tax Foreclosure Actions for Lots 1 and 5 of the Adjacent Land (the “Appeal Period”), or if any such motion is filed or exercise occurs, the matter is conclusively resolved in a manner that insures, in Purchaser’s reasonable discretion, that the Three Land and Four Land continue to receive the benefit of the easements contain in Deed Book 4843, Page 193 (the “Easements”); or (B) Seller shall have agreed to indemnify, defend and hold harmless Purchaser for any amounts required to paid to insure that the Three Land and Four Land continue to receive the benefit of the Easements arising as a result of a successful appeal filed by a party within the Appeal Period, pursuant to an indemnity agreement mutually acceptable to Seller and Purchaser, in which case Purchaser shall waive all of the conditions set forth in this Section 5(b)(xii) and proceed to Closing, notwithstanding that the Appeal Period has not yet expired; and (ii) no party shall have filed a motion to vacate the judgments in the Tax Foreclosure Actions or exercised a statutory right of redemption on the Adjacent Land on or before September 25, 2013, or if any such motion is filed or exercise occurs, the matter is conclusively resolved in a manner that insures, in Purchaser’s reasonable discretion, that the Three Land and Four Land continue to receive the benefit of the Easements.

3.     Section 18(b)(iv) shall be created to read as follows:

(iv) Any and all tax liabilities (including, but not limited to those under the PILOT Agreement) with respect to the Real Property and/or the Adjacent Land which relate to periods prior to the Closing, regardless of when they are asserted.

2

4.     Exhibits. Seller and Purchaser acknowledge that they have agreed upon (i) the price allocation attached to this Amendment as Exhibit B; (ii) the form of Guaranty Agreement attached to this Amendment as Exhibit D; (iii) the form of Management Agreement attached to this Amendment as Exhibit G; (iv) the form of Interim Licensure Arrangements attached to this Amendment as Exhibit K; and (v) the form of Income Support Agreement attached to this Amendment as Exhibit P, and the foregoing exhibits are hereby incorporated into the Agreement.

5.     Effect of Amendment. To the extent any provisions contained herein conflict with the Agreement or any other agreements between Seller and Buyer, oral or otherwise, the provisions contained herein shall supersede such conflicting provisions contained in the Agreement or other agreements. Except as specifically modified by this Amendment, the Agreement remains in full force and effect and is in all events ratified, confirmed and approved.

6.     Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which, together, shall constitute one and the same instrument. Delivery of signatures by e-mail or facsimile shall be valid and binding.

IN WITNESS WHEREOF, the Purchaser has executed this Amendment on the date first above written.

PURCHASER:
Woodbury Mews III, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews IV, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews Land Parcels, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory

3

IN WITNESS WHEREOF, the Seller has executed this Amendment on the date first above written.

SELLER:
THREE WM REAL ESTATE, LLC, a Delaware limited liability company
By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name: Ken Assiran
		Title: President
THREE WM OPERATING, LLC,
a Delaware limited liability company
By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:Ken Assiran
		Title: President

[SIGNATURES CONTINUE ON FOLLOWING PAGE.]

4

SELLER:
FOUR WM REAL ESTATE, LLC, a Delaware limited liability company
By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name: Ken Assiran
		Title: President
FOUR WM OPERATING, LLC,
a Delaware limited liability company
By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name: Ken Assiran
		Title: President

EXHIBIT B

PURCHASE PRICE ALLOCATION

Facility	Amount
Three Facility	$	22,775,000
Four Facility	$	15,184,000
Adjacent Parcels	$	1,040,000
TOTAL PURCHASE PRICE	$	39,000,000

2

EXHIBIT D

FORM OF GUARANTY AGREEMENT

3

EXHIBIT G

FORM OF MANAGEMENT AGREEMENT

4

EXHIBIT K

FORM OF INTERIM LICENSURE ARRANGEMENTS

5

EXHIBIT P

FORM OF INCOME SUPPORT AGREEMENT

6

EXHIBIT Q

PROJECTED ANNUAL SERVICE CHARGES

7

EX-10.5

FOURTH AMENDMENT TO
AGREEMENT OF SALE

THIS FOURTH AMENDMENT TO AGREEMENT OF SALE (the “Amendment”) is entered into as of the 21 day of October, 2013, between THREE WM REAL ESTATE, LLC, THREE WM OPERATING, LLC, FOUR WM REAL ESTATE, LLC, FOUR WM OPERATING, LLC, each a Delaware limited liability company (individually and collectively, the “Seller”) and WOODBURY MEWS III URBAN RENEWAL, LLC (f/k/a WOODBURY MEWS III, LLC), Woodbury Mews IV Urban Renewal, LLC (f/k/a WOODBURY MEWS IV, LLC), Woodbury Mews Urban Renewal Land Parcels, LLC (f/k/a WOODBURY MEWS LAND PARCELS, LLC) and WM Land Urban Renewal TRS, LLC (each a Delaware limited liability company (individually and collectively, the “Purchaser”).

RECITALS:

A.           Seller and Purchaser are parties to that certain Agreement of Sale dated June 26, 2013, as amended (collectively, the “Agreement”), pursuant to which Seller agreed to sell, and Purchaser agreed to purchase, certain real property located at 122 and 124 Green Avenue, Woodbury, New Jersey, as more particularly described in the Agreement.

B.           Seller and Purchaser desire to amend the Agreement, upon the terms and conditions set forth in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

AGREEMENTS:

1.     Recitals, Definitions. The foregoing recitals are true and correct and are incorporated herein by reference. Capitalized but undefined terms used in this Amendment shall have the meanings given to them in the Agreement.

1.     The Definition of “Purchaser”. In order to reflect Purchaser’s updated organizational structure and the amendment to the legal name of the Purchasers, all references in the Agreement to “Purchaser” shall now refer to: WOODBURY MEWS III URBAN RENEWAL, LLC (f/k/a WOODBURY MEWS III, LLC), Woodbury Mews IV Urban Renewal, LLC (f/k/a WOODBURY MEWS IV, LLC), Woodbury Mews Urban Renewal Land Parcels, LLC (f/k/a WOODBURY MEWS LAND PARCELS, LLC) and WM Land Urban Renewal TRS, LLC.

2.     Purchase Price (a) Section 2(a) of the Agreement is hereby amended to read as follows (additions are shown as double-underlined and deletions are shown as struck through):

The purchase price (the “Purchase Price”) for the Property shall be THIRTY EIGHT MILLION ONE HUNDRED TWENTY SIX THOUSAND AND ONE HUNDRED FIFTY SIX DOLLARS ($38,126,156.00) THIRTY NINE MILLION and 00/100 DOLLARS ($39,000,000.00), subject to prorations and the adjustments expressly set forth in this Agreement; provided, however, that if the City adopts a reallocation of the payments under the PILOT Agreement, then the Purchase Price shall be reduced by the PILOT Price Adjustment (as hereinafter defined). The “PILOT Price Adjustment” shall be calculated as follows: (i) the net increase in the annual payments under the PILOT Agreement adopted by the City with respect to Lots 2, 3, 4 and 5 for 2013 shall be divided by 0.077; and (ii) the sum of $30,000 shall be subtracted from the quotient calculated pursuant to clause (i) of this sentence. Prior to the expiration of the Due Diligence Period, Seller and Purchaser shall agree on a reasonable allocation of the Purchase Price payable for each individual property described on Exhibit A-2 (each, an “Individual Property”) which shall be allocated in the form set forth on Exhibit B (each such allocated portion, an “Allocated Purchase Price”). In addition, Seller and Purchaser shall agree on a reasonable further allocation of the Purchase Price as between (a) the Land and the Improvements, (b) the Personalty, and (c) the Intangibles prior to the expiration of the Due Diligence Period.

1

3.    Exhibits. Seller and Purchaser acknowledge that they have agreed upon the price allocation attached to this Amendment as Exhibit B which exhibit is hereby incorporated into the Agreement.

4.    Effect of Amendment. To the extent any provisions contained herein conflict with the Agreement or any other agreements between Seller and Buyer, oral or otherwise, the provisions contained herein shall supersede such conflicting provisions contained in the Agreement or other agreements. Except as specifically modified by this Amendment, the Agreement remains in full force and effect and is in all events ratified, confirmed and approved.

5.    Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which, together, shall constitute one and the same instrument. Delivery of signatures by e-mail or facsimile shall be valid and binding.

2

IN WITNESS WHEREOF, the Purchaser has executed this Amendment on the date first above written.

PURCHASER:
Woodbury Mews III Urban Renewal, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
WOODBURY MEWS IV URBAN RENEWAL, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
Woodbury Mews URBAN RENEWAL Land Parcels, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory
WM LAND URBAN RENEWAL TRS, LLC
By:	/s/ John Mark Ramsey
Name: John Mark Ramsey
Its:  Authorized Signatory

3

IN WITNESS WHEREOF, the Seller has executed this Amendment on the date first above written.

SELLER:
THREE WM REAL ESTATE, LLC, a Delaware limited liability company
By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:  Ken Assiran
		Title:  President
THREE WM OPERATING, LLC,
a Delaware limited liability company
By:	WMRE THREE, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name:  Ken Assiran
		Title: President

[SIGNATURES CONTINUE ON FOLLOWING PAGE.]

4

SELLER:
FOUR WM REAL ESTATE, LLC, a Delaware limited liability company
By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By: /s/ Ken Assiran
		Name: Ken Assiran
		Title: President
FOUR WM OPERATING, LLC,
a Delaware limited liability company
By:	WMRE FOUR, LLC, a Delaware limited liability company, its sole member and manager
	By:	CHG WMRE, LLC, a Delaware limited
		liability company, its manager
		By:  /s/ Ken Assiran
		Name: Ken Assiran
		Title:  President

EXHIBIT B

PURCHASE PRICE ALLOCATION

Facility	Amount
Three Facility	$	22,251,694
Four Facility	$	14,834,462
Adjacent Parcels	$	1,040,000
Lots 1&6	$	940,000
Lots 4&5	$	100,000
TOTAL PURCHASE PRICE	$	38,126,156

2

EX-10.6

Execution

Term Loan Agreement

dated as of October 21, 2013

among

Woodbury Mews III Urban Renewal, LLC,

And

Woodbury Mews IV Urban Renewal, LLC

as the Borrowers

the Lenders from time to time parties hereto,

as Lenders

and

KeyBank National Association,

as a Lender and Agent

SECTION 1.	DEFINITIONS	1
1.1	Definitions	1
1.2	Other Interpretive Provisions	18
SECTION 2.	COMMITMENTS OF THE LENDERS; BORROWING  PROCEDURES	19
2.1	Commitments	19
2.2	Loan Procedures	19
2.3	Commitments Several	19
2.4	Certain Conditions	19
2.5	Joint and Several	19
SECTION 3.	EVIDENCING OF LOANS	22
3.1	Notes	22
3.2	Recordkeeping	22
SECTION 4.	INTEREST	23
4.1	Interest Rates	23
4.2	Interest Payment Dates	24
4.3	Setting and Notice of LIBOR Rates	24
4.4	Computation of Interest	24
4.5	Hedging Agreements	24
4.6	Late Charge	24
SECTION 5.	FEES	25
5.1	Upfront Fees	25
5.2	Exit Fee	25
SECTION 6.	PREPAYMENTS	25
6.1	Prepayments	25
6.2	Manner of Prepayments	26
6.3	Term of the Loan	26
6.4	Required Principal Repayments	27
SECTION 7.	MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES	27
7.1	Making of Payments	27
7.2	Application of Certain Payments	27
7.3	Due Date Extension	27
7.4	Setoff	27
7.5	Proration of Payments	28

i

7.6	Taxes	28
SECTION 8.	INCREASED COSTS; SPECIAL PROVISIONS FOR LIBOR LOANS	30
8.1	Increased Costs	30
8.2	Basis for Determining Interest Rate Inadequate or Unfair	31
8.3	Changes in Law Rendering LIBOR Loans Unlawful	32
8.4	Funding Losses	32
8.5	Right of Lenders to Fund through Other Offices	32
8.6	Discretion of Lenders as to Manner of Funding	32
8.7	Mitigation of Circumstances; Replacement of Lenders	33
8.8	Conclusiveness of Statements; Survival of Provisions	33
SECTION 9.	REPRESENTATIONS AND WARRANTIES	34
9.1	Organization	34
9.2	Authorization; No Conflict	34
9.3	Validity and Binding Nature	34
9.4	Financial Condition	35
9.5	Governmental and Other Approvals	35
9.6	Compliance with Laws; Permits	35
9.7	Title to Properties; Liens	35
9.8	Registrations, etc	36
9.9	Litigation; Compliance with Laws	36
9.10	Federal Reserve Regulations	36
9.11	Governmental Regulation	36
9.12	Use of Proceeds	36
9.13	Tax Returns	36
9.14	No Misstatements	36
9.15	ERISA	37
9.16	Environmental Compliance	37
9.17	Project	38
9.18	Utilities, etc	38
9.19	[Intentionally Omitted]	38
9.20	Insurance	38
9.21	Flood Hazard Areas	38
9.22	Solvency	38

S-ii

9.23	Filings	38
9.24	Casualty; Eminent Domain	38
SECTION 10.	COVENANTS	39
10.1	Existence, Etc	39
10.2	Insurance	39
10.3	Taxes, Claims for Labor and Materials; Compliance with Laws	39
10.4	Nature of Business	40
10.5	Visitation Rights	40
10.6	Financial Information	40
10.7	Responsible Officer’s Certificate	43
10.8	Financial Covenants	43
10.9	Borrower Merger, etc	44
10.10	Liens	44
10.11	Indebtedness	45
10.12	Loans and Investments	45
10.13	Transactions with Affiliates	45
10.14	Use of Proceeds; Margin Stock	45
10.15	Contingent Obligations	46
10.16	Compliance with ERISA	46
10.17	Restricted Payments	46
10.18	Change in Structure	46
10.19	Related Documents	46
10.20	Environmental	46
10.21	Management and Consulting Arrangements	47
10.22	Compliance With Laws	47
10.23	Payment and Performance of Obligations	47
10.24	Capital Expenditures	47
10.25	Leasing Restrictions	47
10.26	Books and Records	47
10.27	Maintenance of Properties	47
10.28	Fiscal Year	48
10.29	Sale of Assets	48
10.30	Facility Lease Agreement	48

S-iii

10.31	Bank Accounts	48
10.32	Post Closing Lien Searches	48
SECTION 11.	CASUALTIES AND CONDEMNATION	48
11.1	Agent’s Election to Apply Proceeds on Indebtedness	48
11.2	Borrowers’ Obligation to Rebuild and Use of Proceeds Therefor	49
SECTION 12.	EFFECTIVENESS; CONDITIONS OF LENDING, ETC	49
12.1	Closing Date	49
SECTION 13.	[Intentionally Omitted]	53
SECTION 14.	EVENTS OF DEFAULT AND THEIR EFFECT	53
14.1	Events of Default	53
14.2	Effect of Event of Default	54
SECTION 15.	The Agent	56
15.1	Appointment and Authorization	56
15.2	[Intentionally Omitted]	56
15.3	Delegation of Duties	56
15.4	Exculpation of Agent	57
15.5	Reliance by Agent	57
15.6	Notice of Default	57
15.7	Credit Decision	58
15.8	Indemnification	58
15.9	Agent in Individual Capacity	59
15.10	Successor Agent	59
15.11	Collateral Matters	59
15.12	Agent May File Proofs of Claim	60
15.13	Other Agents; Arrangers and Managers	60
SECTION 16.	GENERAL	61
16.1	Waiver; Amendments	61
16.2	Confirmations	61
16.3	Notices	61
16.4	Computations	61
16.5	Costs and Expenses	62
16.6	Assignments; Participations	62
16.7	Register	64

S-iv

16.8	GOVERNING LAW	64
16.9	Severability	64
16.10	Nature of Remedies	64
16.11	Entire Agreement	65
16.12	Counterparts	65
16.13	Successors and Assigns	65
16.14	Captions	65
16.15	Patriot Act Notification	65
16.16	Indemnification by the Borrowers	65
16.17	Nonliability of Lenders	66
16.18	FORUM SELECTION AND CONSENT TO JURISDICTION	67
16.19	WAIVER OF JURY TRIAL	67
16.20	Modification, Waiver in Writing	67

S-v

ANNEXES
ANNEX A	Lenders and Pro Rata Shares
ANNEX B	Addresses for Notices
SCHEDULES
SCHEDULE 9.1	Subsidiaries
SCHEDULE 9.2	Conflicts
SCHEDULE 9.4	Financial Statements
SCHEDULE 9.6	Permits/Licenses
SCHEUDLE 10.11	PMSI/Capital Leases
SCHEDULE 10.13	Affiliate Transactions
SCHEDULE 10.25	Operating Leases
EXHIBITS
EXHIBIT A	Form of Note (Section 3.1)
EXHIBIT B	Form of Assignment Agreement (Section 16.6.1)
EXHIBIT C	Form of Notice of Borrowing (Section 2.2)
EXHIBIT D	Form of Notice of Conversion (Section 4.1)
EXHIBIT E	Form of Account Control Agreement
EXHIBIT F	Legal Description of Property
EXHIBIT G	Form of Compliance Certificate
EXHIBIT H	Form of Real Estate Report

S-vi

Term Loan Agreement

This Term Loan Agreement dated as of October 21, 2013 (this “Agreement”) is entered into among (a) Woodbury Mews III Urban Renewal, LLC, a Delaware limited liability company (“Three”), (b) Woodbury Mews IV Urban Renewal, LLC, a Delaware limited liability company (“Four” and collectively with Three, the “Borrowers” and individually, a “Borrower”), (c) the several financial institutions from time to time party to this Agreement, as Lenders (the “Lenders”); and (d) KeyBank National Association, as a Lender (in such capacity, “Key”), and as Agent (in such capacity, the “Agent”) as provided herein.

Recitals

The Lenders have agreed to make available to the Borrowers a term loan upon the terms and conditions set forth herein.

Each of the Borrowers will receive substantial, tangible and direct benefit from the making of the term loan contemplated hereby.

In consideration of the mutual agreements herein contained, the parties hereto agree as follows:

SECTION 1. DEFINITIONS.

1.1           Definitions. When used herein the following terms shall have the following meanings:

“Account Control Agreements” means the Account Control Agreements among any Borrower, the Agent and the financial institution party thereto with respect to the bank accounts of the Borrowers.

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person (other than the Borrower or any currently existing Subsidiary thereof), (b) the acquisition of in excess of fifty percent (50%) of the Equity Interests of any Person or otherwise causing any Person to become a Subsidiary of any Borrower other than the Borrower or any currently existing Subsidiary thereof), or (c) a merger or consolidation or any other combination with another Person.

“Affected Loan” - see Section 8.3.

“Affiliate” of any Person means (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person, and (b) with respect to any Lender, any entity administered or managed by such Lender or an Affiliate or investment advisor thereof and which is engaged in making, purchasing, holding or otherwise investing in commercial loans. A Person shall be deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Unless expressly stated otherwise herein, neither the Agent nor any Lender shall be deemed an Affiliate of any Loan Party.

-1-

“Agent” means Key in its capacity as administrative agent for the Lenders hereunder and any successor thereto in such capacity.

“Agreement” - see the Preamble.

“AL Portion” means that portion of the Project described as Parcel One on Exhibit F attached hereto.

“Applicable Law” means all Federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting the Loan Parties, the Loan Documents (and the transactions and agreements contemplated thereby) or the Project or the demolition, construction, use, operation or alteration thereof, whether now or hereafter enacted and in force, including any that require repairs, modifications or alterations in or to the Project or in any way limit the use and enjoyment thereof (including all building, zoning and fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. § 1201 et seq. and any other similar Federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including all Environmental Laws), and all permits, certificates of occupancy, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are either of record or known to the Loan Parties affecting the Loan Parties, the Loan Documents (and the transactions and agreements contemplated thereby) and the Project, the rights appurtenant thereto and any easements, licenses or other agreements entered into.

“Applicable Margin” means, with respect to (a) any LIBOR Loan, as of any date of determination, 300 basis points (3.00%) and (b) Base Rate Loans, as of any date of determination, 300 basis points (3.00%).

“Applicable Rate” - see Section 4.1.1.

“Appraisal” means an appraisal of the Project conducted in accordance with the standards of the Appraisal Institute by an Appraiser and certified by such Appraiser as having been prepared in accordance with the requirements of the Standards of Professional Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, as well as the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended.

“Appraised Value” means the value of the Project as determined by an Appraisal.

“Appraiser” means an independent appraiser, selected by the Agent that is in good standing of the Appraisal Institute and that is certified or licensed in the State of New Jersey and who has a minimum of five (5) years’ experience in the appraisal of comparable properties in the geographic area in which the Project is located.

-2-

“Assignee” - see Section 16.6.1.

“Assignment Agreement” - see Section 16.6.1.

“Assignment of Leases and Rents” means the Assignment of Leases and Rents dated as of the date hereof, from the Owner and Operator to the Agent for the benefit of the Lenders, as amended, restated, supplemented or otherwise modified from time to time.

“Attorney Costs” means, with respect to any Person, all reasonable fees and charges of any counsel to such Person, all reasonable disbursements of such counsel and all court costs and similar legal expenses.

“Available Units” means the two hundred twenty eight (228) units at the Facility.

“Bank Product Agreements” means those certain cash management service agreements, if any, entered into from time to time between any Loan Party and a Lender or its Affiliates in connection with any of the Bank Products.

“Bank Product Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by any Loan Party to any Lender or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that a Loan Party is obligated to reimburse to the Agent or any Lender as a result of the Agent or such Lender purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products provided to the Loan Parties pursuant to the Bank Product Agreements; provided, however, that Bank Products Obligations shall not include any of the above with respect to Guarantor if the same are not (or were not) incurred in connection with the Loan.

“Bank Products” means any service or facility extended to any Loan Party by the Agent or any Lender or its Affiliates including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, (f) cash management, including controlled disbursement, accounts or services, or (g) Hedging Agreements.

“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. § 101 et. seq.) or any replacement or supplemental Federal statute dealing with the bankruptcy of debtors.

“Base Rate” means, for any day, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the greatest of (i) the rate of interest established by KeyBank National Association, from time to time, as its "prime rate,” whether or not publicly announced, which interest rate may or may not be the lowest rate charged by it for commercial loans or other extensions of credit; (ii) the Federal Funds Effective Rate in effect from time to time, determined one Business Day in arrears, plus 1/2 of 1% per annum; and (iii) the then-applicable LIBOR Rate for one month interest periods, plus 1.00% per annum.

“Base Rate Loan” means any portion of the Loan which bears interest at or by reference to the Base Rate.

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“Base Rate Option” – see Section 4.1.1.

“Borrower” and “Borrowers” – see the Preamble.

“Breakage Costs” – see Section 8.4.

“BSA” - see Section 10.3.

“Business Day” means any day on which Key is open for commercial banking business in Cleveland, Ohio and, in the case of a Business Day which relates to a LIBOR Loan, on which dealings are carried on in the London interbank eurodollar market.

“Capital Lease” means a lease required to be capitalized under GAAP.

“Cash” or “Cash Equivalents” means assets properly classified as “marketable securities”, “cash”, “cash equivalents” or “short term investments” under GAAP.

“Casualty” means any damage or destruction of all or any portion of the Project as a result of a fire, flood, earthquake or other casualty.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986.

“Change of Control” means the occurrence or existence of any one or more of the following without Agent’s prior written consent (which consent, if given, shall be provided without additional fees or costs, other than the reasonable out-of-pocket costs and expenses of the Agent (including Attorney Costs) incurred in connection with granting such consent):

(a)   the Borrowers cease to own the Property;

(b)   Four ceases to operate the IL Portion of the Property;

(c)   WM III TRS, LLC ceases to operate the AL Portion of the Property;

(d)   Service Provider ceases to provide services under the Service Contract;

(e)   100% of the Equity Interests in each of Operator, Service Provider, and each Borrower ceases to be owned (directly or indirectly) as follows:

(i) 50% or more by the Guarantor or, 40% or more by the Guarantor if (A) the Take-Out/Management Criteria are satisfied, and, (B) at such time Guarantor has and thereafter maintains (1) Cash Equivalents of not less than $5,000,000 and (2) a consolidated tangible net worth of not less than $50,000,000, and

(ii) the balance thereof by Sentinel RE Investment Holdings LP (“Sentinel”) or any other Affiliates of Sentinel, KKR & Co., L.P. or KKR Financial Holdings, LLC (together with Sentinel, the “KKR Entities”); or

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(f)   the KKR Entities, without Agent’s prior written consent (which shall not be unreasonably withheld), (i) own (directly or indirectly) 50% or more of the Equity Interests in Guarantor or (ii) otherwise have the ability to control the appointment of a majority of the Guarantor’s board of directors; provided, however, that neither (f)(i) nor (f)(ii) above shall constitute a Change of Control if the Take-Out/Management Criteria are satisfied.

As used herein, the term “Take-Out/Management Criteria” means (a) the applicable proposed changes do not render the Loan Parties (or the Properties) ineligible to participate in any Permanent Loan involving a Governmental Agency, and (b) the Guarantor is managed (or continues to be managed) by either a management team led by John Mark Ramsey or an experienced seniors housing management team reasonably acceptable to Agent. Notwithstanding anything to the contrary contained in this Agreement, the Take-Out/Management Criteria must only be satisfied at the time that (i) an event occurs that causes less than 50% of Equity Interests in any of Operator, Service Provider and each Borrower to be owned (directly or indirectly) by Guarantor or (ii) an event described in clause (f)(i) or (f)(ii) occurs. For the avoidance of doubt, the Take-Out/Management Criteria shall not be deemed an ongoing covenant of the Borrowers.

As used herein, the term "consolidated tangible net worth" means the excess of the consolidated assets of Guarantor, over the consolidated liabilities Guarantor, less the sum of all intangible assets (as defined by GAAP), and less amounts due from officers and from mortgage servicing rights.

“Closing Date” – see Section 12.1.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means all assets of the Borrowers in which a Lien has been granted to the Agent for the benefit of the Lenders pursuant to the Collateral Documents to secure the payment and performance of the Obligations.

“Collateral Documents” means, collectively, the Security Agreements, the Mortgage, the Assignment of Leases and Rents, the Account Control Agreement(s), if any, the Environmental Indemnity Agreement and any other agreement or instrument pursuant to which any Borrower or any other Person grants or purports to grant collateral to the Agent for the benefit of the Lenders to secure the performance of any Obligations or otherwise relates to any Collateral.

“Commitment” means $25,000,000, and, as to any Lender, such Lender’s commitment to make the Loan under this Agreement. The initial amount of each Lender’s commitment to make the Loan is set forth on Annex A, or in the Assignment Agreement pursuant to which such Lender shall have assumed its Commitment, as applicable.

“Computation Period” means the three (3) consecutive fiscal months ending on December 31, 2013 and each period of three (3) consecutive fiscal months thereafter.

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“Condemnation” means any condemnation, requisition, confiscation, seizure or other taking or sale of the use, access, occupancy, easement rights or title to the Project or any part thereof, wholly or partially (temporarily or permanently), by or on account of any actual or threatened eminent domain, proceeding or other taking of action by any Person having the power of eminent domain, including an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, the Project or alter the pedestrian or vehicular traffic flow to the Project so as to result in change in access to the Project, or by or on account of an eviction by paramount title or any transfer made in lieu of any such proceeding or action. A “Condemnation” shall be deemed to have occurred on the earliest of the dates that use, occupancy or title vests in the condemning authority.

“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of such Person: (a) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (b) with respect to any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for reimbursement of drawings; (c) under any Hedging Agreements; (d) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed or supported.

“Debt Service Coverage Ratio” means for any period, the ratio of (i) the net income before taxes of the Borrowers for such period, plus, to the extent deducted in determining such net income, the sum (without duplication) of (1) income taxes, (2) interest expense, (3) depreciation, (4) amortization, (5) rental expense and (6) actual management fees paid to the Manager in cash (and permitted to be paid pursuant to Section 10.21 of this Agreement) pursuant to the Management Agreement, less (A) an amount equal to five percent (5%) of Gross Revenues for such period, and (B) an amount equal to the greater of (1) $350 per Available Unit annual repair and replacement reserve, or (2) the actual per unit cost for replacement reserves as required by the Property Condition Report, to (ii) principal payments due on the Borrowers’ long-term Indebtedness (such principal payments to be calculated on an assumed thirty (30) year amortization period) during the period measured, plus the Borrowers’ interest expense (including any payments in connection with any Hedging Agreement or Hedging Obligation) (such interest expense to be calculated at an assumed interest rate of the greater of (i) six percent (6%) per annum, or (ii) the current rate for United States Treasury Notes with a ten (10) year maturity plus 2.50%.

“Default Rate” means at any time the Base Rate plus the Applicable Margin plus three percent (3.0%).

“Disposition” or “Dispose” means the sale, transfer, license or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal with or without recourse of any notes or accounts receivable or any rights and claims associated therewith.

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“Dollar” and the sign “$” mean lawful money of the United States of America.

“Environmental Audit” means a Phase One environmental site assessment (the scope and performance of which meets or exceeds the then most current ASTM Standard Practice E1527-93 Standard Practice for Environmental Site Assessments: Phase One Environmental Site Assessment Process) of the Project.

“Environmental Indemnity Agreement” means that certain Environmental and Hazardous Substances Indemnity Agreements dated as of the date hereof, executed by the Borrowers in favor of the Agent for the benefit of the Lenders, as amended, restated, supplemented or otherwise modified from time to time.

“Environmental Laws” means any and all applicable Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or other legal requirement regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment or the use, storage, recycling, handling, disposal, discharge, transport, treatment or generation of Hazardous Materials, as now or may at any time be in effect, including CERCLA, RCRA, the Clean Air Act, 42 USC §7401 et seq., the Toxic Substances Control Act 15 USC §2601 et seq. and any rules and regulations promulgated thereunder.

“Equity Interests” means the membership interests, partnership interests, capital stock of any class or any other equity interest of any Person and options, warrants and other rights to acquire membership interests, partnership interests, capital stock of any class or any other equity interest of such Person.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control of any Loan Party within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate.

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“Event of Default” means any of the events described in Section 14.1.

“Excluded Taxes” means taxes based upon, or measured by, a Lender’s or the Agent’s (or a branch of a Lender’s or the Agent’s) overall net income, overall net receipts, or overall net profits (including franchise taxes imposed in lieu of such taxes), but only to the extent such taxes are imposed by the United States or a taxing authority (a) in a jurisdiction in which such Lender or the Agent is organized, (b) in a jurisdiction which such Lender’s or the Agent’s principal office is located, or (c) in a jurisdiction in which such Lender’s or the Agent’s lending office (or branch) in respect of which payments under this Agreement are made is located.

“Exit Fee” – see Section 5.2.

“Extension Option” – see Section 6.3.1.

“Facility” means the independent living, assisted living and Alzheimer care facility located on the Property currently consisting of 228 units and 256 beds and known as Woodbury Mews.

“Facility Lease Agreement” means, with respect to the AL Portion, that certain Lease Agreement dated as of October 21, 2013 between Three, as lessor, and Operator, as lessee.

“Facility Lease Subordination Agreement” means that certain Subordination Agreement dated as of the date hereof, between Operator and the Agent, and acknowledged by Three, as amended, restated, supplemented or otherwise modified from time to time.

“Finally Paid” or “Final Payment”, when used in connection with any debt, means the full payment in cash of all of the obligations with respect to such debt (other than contingent indemnity obligations not expected to be incurred) and the irrevocable termination of all commitments related thereto.

“Final Maturity Date” – see Section 6.3.1(a).

“Financing Statements” means UCC financing statements appropriately completed and executed for filing in the applicable jurisdiction in order to protect and perfect the Liens created under the Collateral Documents.

“FRB” means the Board of Governors of the Federal Reserve System or any successor thereto.

“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession).

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“Governmental Action” means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law, and shall include, without limitation, all environmental and operating permits and licenses that are required for the full use, occupancy, zoning and operation of the Project.

“Governmental Agency” means Fannie Mae, Freddie Mac, or HUD.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

“Gross Revenue” means, with respect to the Project, the total of all rents, revenues, income and receipts (less any refunds) of every kind derived from the operation of the Project and all departments and parts thereof, including: (i) all amounts actually paid as rent and other amounts under lease, license or occupancy agreements relating to the Project; (ii) all amounts payable by Medicaid with respect to the relevant period; (iii) business interruption insurance proceeds allocable to the applicable reporting period; and (iv) all other amounts (to the extent not covered pursuant to clauses (i) through (iii) of this sentence) which in accordance with GAAP, are included in the Borrower’s annual financial statements as income attributable to the Project.

“Guarantor” means Sentio Healthcare Properties, Inc., a Maryland corporation.

“Guaranty” means that certain Guaranty dated as of the date hereof, executed and delivered by Guarantor in favor of the Agent and the Lenders, as amended, restated, supplemented or otherwise modified from time to time.

“Hazardous Materials” means any hazardous or toxic materials, substances, chemicals, wastes or pollutants that from time to time are defined by or pursuant to or are regulated under any Environmental Laws, including asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives or by-products, other hydrocarbons, urea formaldehyde and any material, substance, pollutant or waste that is defined as a hazardous waste under RCRA or defined as a hazardous substance under CERCLA.

“Hedging Agreement” means any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices, entered into in connection with the Loan.

“Hedging Obligation” means, with respect to any Person, any liability of such Person under any Hedging Agreement. The amount of any Person’s obligation in respect of any Hedging Obligation shall be deemed to be the incremental obligation that would be reflected in the financial statements of such Person in accordance with GAAP.

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“IL Portion” means that portion of the Project described as Parcel Two on Exhibit F attached hereto.

“Implied Debt Service” – see Section 2.1.

“Indebtedness” of any Person means, without duplication: (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business or accrued expenses paid on customary terms in the ordinary course of business); (c) all reimbursement or payment obligations (whether or not contingent) with respect to letters of credit, surety bonds and other similar instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by such Person (even though the rights and remedies of the seller or the Person providing financing under such agreement in the event of default are limited to repossession or sale of the Property); (f) all Capital Lease obligations; (g) earn outs and similar obligations; (h) all obligations under Hedging Agreements; (i) all Indebtedness and obligations referred to in clauses (a) through (h) above secured by (or for which the holder of such Indebtedness or obligations has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness or obligations; and (j) all Contingent Obligations described in clause (a) of the definition thereof in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above.

“Indemnified Liabilities” - see Section 16.16.

“Initial Maturity Date” means the earlier to occur of (a) October 21, 2014 or (b) such other date on which the Loans are repaid or are required to be paid pursuant to Section 6 or 14.

“Insurance Requirements” means all terms and conditions of any insurance policy required hereunder to be maintained by the Borrowers, and all requirements of the issuer of any such policy.

“Interest Period” means, as to any LIBOR Loan, the period commencing on the date such Loan is borrowed or continued as, or converted into, a LIBOR Loan and ending on the date one (1) month thereafter; provided that:

(a)     if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day;

(b)     any Interest Period that begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of the calendar month at the end of such Interest Period; and

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(c)     Borrowers may not select an Interest Period which would extend beyond the scheduled Maturity Date.

“Investment” – see Section 10.12.

“IRS” means the Internal Revenue Service or any other governmental authority succeeding to any of the principal functions thereof.

“Knowledge” or “knowledge” means, when referring to the “Knowledge” or “knowledge” of any Person or any similar phrase or qualification based on knowledge or awareness with respect to such Person, (i) the actual knowledge of such Person, and (ii) the knowledge that any such Person, as a prudent business person, would have obtained in the conduct of his or her business.

“Key” - see the Preamble.

“KKR” Transaction” – means the transaction(s) anticipated by that certain Securities Purchase Agreement dated as of February 10, 2013 (the “SPA”) among Guarantor, Sentio Healthcare Properties OP, L.P. (the “Partnership”) and Sentinel RE Investment Holdings LP (“Investor”), providing for Investor’s investment of up to $150,000,000 in aggregate equity interests in the Guarantor and the Partnership.

“Late Charge” – see Section 4.6.

“Lender” - see the Preamble. For the purpose of identifying the Persons entitled to share in the Collateral and the proceeds thereof under, and in accordance with the provisions of, this Agreement and the Collateral Documents, the term “Lender” shall include any Affiliates of a Lender providing a Bank Product.

“Lender Party” - see Section 16.16.

“LIBOR Loan” means any portion of the Loan which bears interest at a rate determined by reference to the LIBOR Rate.

“LIBOR Office” means with respect to any Lender the office or offices of such Lender which shall be making or maintaining the LIBOR Loans of such Lender hereunder. A LIBOR Office of any Lender may be, at the option of the Lender, either a domestic or foreign office.

“LIBOR Rate” means the rate of interest equal to the rate as shown in Dow Jones Markets (formerly Telerate) (Page 3750) at which deposits in U.S. dollars are offered by first class banks in the London Interbank Market at approximately 11:00 a.m. (London time) on the day that is two (2) Business Days prior to the first day of such Interest Period for a LIBOR Loan with a maturity approximately equal to such Interest Period and in an amount approximately equal to the amount to which such Interest Period relates, adjusted for reserves and taxes if required by future regulations. If Dow Jones Markets no longer reports such rate or the Agent determines in good faith that the rate so reported no longer accurately reflects the rate available to the Agent in the London Interbank Market, the Agent may select a replacement index.

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“Lien” means, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person (including an interest in respect of a Capital Lease) which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, title retention lien, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.

“Loan” – see Section 2.1.

“Loan Documents” means this Agreement, the Notes, the Collateral Documents, the Management Fee Subordination Agreement, the Facility Lease Subordination Agreement, the Service Contract Subordination Agreement, the Guaranty, the Environmental Indemnity Agreement, any Hedging Agreements entered into by any Borrower with the Agent or any Lender, and all other documents, instruments and agreements delivered by a Loan Party in connection with the foregoing.

“Loan Party” means each Borrower and Guarantor.

“Management Agreement” means collectively, (i) that certain Management Agreement dated as of October 21, 2013, between the Manager and Operator, and (ii) that certain Management Agreement dated as of October 21, 2013, between the Manager and Four.

“Management FeeSubordination Agreement” means that certain Subordination Agreement dated as of the date hereof, between the Manager and Agent and acknowledged by Four, as amended, restated, supplemented or otherwise modified from time to time.

“Manager” means CHG Management Woodbury, LLC, a Delaware limited liability company.

“Margin Stock” means any “margin stock” as defined in Regulation U.

“Material Adverse Change” or “material adverse change” means, if, in Agent’s reasonable good faith discretion, the business, prospects, operations or financial condition of a Person, entity or property has changed in a manner which would reasonably be expected to impair the value of Agent’s security for the Loan, prevent timely repayment of the Loan or otherwise prevent the applicable Person or entity from timely performing any of its material obligations under the Loan Documents.

“Material Adverse Effect” means (a) a material impairment of the ability of any Loan Party to perform any of its obligations under any Loan Document to which it is or will be a party or (b) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document or (c) a material adverse effect on the value or condition of the Property or the Facility.

“Maturity Date” means the earlier to occur of (a) October 21, 2014; provided, if the Borrowers timely satisfy the conditions to extend the term of the Loans pursuant to Section 6.3.1, then the Maturity Date shall be extended to the Final Maturity Date or (b) such other date on which the Loan is repaid or are required to be paid pursuant to Section 6 or 13.

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“Mortgage” with respect to the Project, means that certain Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of the date hereof, from the Borrowers to the Agent for the benefit of the Lenders, granting a Lien on the Project, as amended, restated, supplemented or otherwise modified from time to time.

“Multiemployer Plan” means any Plan which is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).

“Non-U.S. Participant” - see Section 7.5(e)(i).

“Note” means a promissory note substantially in the form of Exhibit A.

“Notice of Borrowing” - see Section 2.2.

“Notice of Conversion” - see Section 4.1.2.

“Obligations” means all obligations (monetary (including post-petition interest, allowed or not) or otherwise) of any Loan Party under this Agreement and any other Loan Document including Attorney Costs, all Hedging Obligations permitted hereunder which are owed to any Lender or its Affiliate, and all Bank Products Obligations, all in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due.

“OFAC” - see Section 10.3.

“Operating Account” means a deposit account opened and maintained by Borrowers with the Agent, to be utilized in the manner set forth in Section 2.1.

“Operator” means WM III TRS, LLC, a Delaware limited liability company, with respect to the AL Portion.

“Participant” - see Section 16.6.2.

“Payment Conditions”means, with respect to any Restricted Payment, that at the time of such Restricted Payment (a) no Unmatured Event of Default or Event of Default has occurred and is continuing or would occur as a result thereof and (b) as of the date of such Restricted Payment, such Restricted Payment, when aggregated with (x) all payments of principal and interest on the Loan (including any payments in connection with any Hedging Agreement or Hedging Obligation), and (y) all other Restricted Payments made prior to or concurrently with such Restricted Payment, would not cause the Debt Service Coverage Ratio of the Borrowers to be less than 1.00 to 1.00 (based on the most recent financial statements delivered pursuant to Section 10.6 giving pro forma effect to the payments described in clauses (x) and (y) as of the last day of the fiscal quarter then most recently ended).

“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

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“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

“Permanent Loan” – see Section 5.2.

“Permitted Liens” means, (a) with respect to the Project, any of the following:

(i)          the respective rights and interests of the parties to the Loan Documents as provided in the Loan Documents;

(ii)         Liens for Taxes that either are not yet subject to interest or penalties or are being contested in accordance with the provisions of Section 10.3;

(iii)        Liens arising by operation of law, materialmen’s, mechanics’, workers’, repairmen’s, employees’, carriers’, warehousemen’s and other like Liens in connection with any modifications or improvements to the Project or arising in the ordinary course of business for amounts that either are not more than sixty (60) days past due or are being diligently contested in good faith by appropriate proceedings, so long as such proceedings satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 10.3;

(iv)        Liens of any of the types referred to in clause (iii) above that have been bonded for not less than the full amount in dispute (or as to which other security arrangements satisfactory to the Agent have been made), which bonding (or arrangements) shall comply with applicable Requirements of Law, and has effectively stayed any execution or enforcement of such Liens;

(v)         Liens arising out of judgments or awards with respect to which appeals or other proceedings for review are being prosecuted in good faith and for the payment of which adequate reserves have been provided as required by GAAP or other appropriate provisions have been made, so long as such proceedings have the effect of staying the execution of such judgments or awards and satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 10.3;

(vi)        Liens created by a Borrower with the consent of the Required Lenders;

(vii)       Liens described on the title insurance policy delivered with respect to the Project pursuant to Section 12.1.11, other than Liens described in clause (iii) or (v) above;

(viii)      all encumbrances, exceptions, restrictions, easements, rights of way, servitudes, encroachments and irregularities in title, other than Liens which, in the reasonable assessment of the Agent, materially impair the value, use or marketability of the Project or the use of the Project for its intended purpose; and

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(ix)         Liens on equipment securing purchase money Indebtedness or Capital Leases incurred to finance the purchase of equipment permitted by Section 10.11(b); and

(b)          with respect to any other Collateral, Liens described in clauses (a)(i), (iii), (v), (vi) and (ix) above.

“Person” means any natural person, corporation, partnership, trust, limited liability company, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.

“Plan” shall mean any employee pension benefit plan (as such term is defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by any Loan Party or any ERISA Affiliate.

“Pooling Agreement” – see Section 10.21.

“Proceeds” - see Section 11.1(a).

“Project” means, collectively, the Property and the Facility.

“Pro Rata Share” means with respect to a Lender’s obligation to make a Loan and receive payments of interest, fees, and principal with respect thereto, (x) prior to the making of the Loans, the percentage obtained by dividing (i) such Lender’s Commitment, by (ii) the aggregate amount of all Commitments, and (y) from and after the making of the Loans, the percentage obtained by dividing (i) the principal amount of such Lender’s Loan by (ii) the principal amount of all Loans of all Lenders.

“Property” means that parcel of real property located at 122 and 124 Green Avenue, in the City of Woodbury, County of Gloucester, State of New Jersey and is legally described in Exhibit F attached hereto.

“Property Condition Report” – see Section 12.1.19.

“RCRA” means the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. §§6901 et seq.

“Register” - see Section 16.7.

“Regulation T” means Regulation T of the FRB.

“Regulation U” means Regulation U of the FRB.

“Regulation X” means Regulation X of the FRB.

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“Related Documents” means, collectively, the Management Agreement, the Facility Lease Agreement, the Service Contract, the TRS Service Contract, the Pooling Agreement and any and all agreements, documents and instruments executed and delivered thereunder or in connection therewith, each as amended, modified, supplemented or restated in accordance with the terms hereof.

“Release” means any release, pumping, pouring, emptying, injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or emission of a Hazardous Material.

“Replacement Lender” - see Section 8.7(b).

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the thirty (30) day notice period has been waived.

“Required Lenders” means, at any time, Lenders whose Pro Rata Shares exceed 66-2/3%.

“Requirement of Law” means, as to any Person (a) the partnership agreement, certificate of incorporation, bylaws, operating agreement or other organizational or governing documents of such Person, and (b) all Federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting the Project or the demolition, construction, use or alteration thereof, whether now or hereafter enacted and in force, including any that require repairs, modifications or alterations in or to the Project or in any way limit the use and enjoyment thereof (including all building, zoning and fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. S 1201 et seq. and any other similar federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including all Environmental Laws), and all permits, certificates of occupancy, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are either of record or known to the Borrowers affecting the Project and any rights appurtenant thereto.

“Responsible Officer” of any Person means the chief executive officer, chief operating officer, chief financial officer, treasurer or chief accounting officer of such Person or any other officer of such Person involved principally in its financial administration or its controllership function.

“Restoration” - see Section 11.1(b).

“Restricted Payment” means (i) any Investment by any Borrower described in Section 10.12(c), (ii) any payment or action described in Section 10.17, and (iii) any payment to the Manager permitted by Section 10.21.

“SEC” means the Securities and Exchange Commission or any other governmental authority succeeding to any of the principal functions thereof.

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“Security Agreements” means that certain Security Agreement dated as of the date hereof, between each Borrower and the Agent for the benefit of the Lenders, as amended, restated, supplemented or otherwise modified from time to time.

“Service Contract” means that certain Service Contract dated as of October 21, 2013 between Four and Service Provider.

“Service Contract Subordination Agreement” means that certain Subordination Agreement dated as of the date hereof, between the Service Provider and Agent and acknowledged by Four, as amended, restated, supplemented or otherwise modified from time to time.

“Service Provider” means WM IV TRS, LLC, a Delaware limited liability company.

“Solvent” means, with respect to any Person on any date, that on such date (a) the fair value of the property of such Person is greater than the fair value of the liabilities (including contingent, subordinated, matured and unliquidated liabilities) of such Person, (b) the present fair saleable value of the assets of such Person is greater than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in or about to engage in business or transactions for which such Person’s property would constitute an unreasonably small capital.

“State” means the State of New Jersey.

“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which such Person owns, directly or indirectly, such number of outstanding capital securities as have more than 50% of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited liability company or other entity. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Borrowers.

“Taxes” means any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges or withholdings, and any and all liabilities (including interest and penalties and other additions to taxes) with respect to the foregoing, but excluding Excluded Taxes.

“Title Company” means Acres Land Title Agency, Inc. or such other title insurance company licensed in the State of New Jersey as may be approved in writing by the Agent.

“Title Policy” has the meaning specified in Section 12.1.11.

“TRS Service Contract” means that certain Service Contract dated as of October 21, 2013 between Manager and Service Provider.

“UCC” means the Uniform Commercial Code as in effect in any applicable jurisdiction.

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“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

“Unmatured Event of Default” means any event that, if it continues uncured, will, with lapse of time or notice or both, constitute an Event of Default.

“Withholding Certificate” - see Section 7.5(e)(i).

1.2           Other Interpretive Provisions. (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(b)     “Section”, “Annex”, “Schedule” and “Exhibit” references are to this Agreement unless otherwise specified.

(c)     The term “including” is not limiting and means “including without limitation.”

(d)     In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.”

(e)     Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement and the other Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements and other modifications thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation.

(f)     This Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and each shall be performed in accordance with its terms.

(g)     This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Loan Parties, the Agent, the Lenders and the other parties thereto and are the products of all parties. Accordingly, they shall not be construed against the Agent or the Lenders merely because of the Agent’s or the Lenders’ involvement in their preparation.

(h)     Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent (except for such changes approved by the Borrowers’ independent public accountants) with the most recent audited financial statements of the Borrowers and the Guarantor delivered pursuant to Section 10.6(c).

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SECTION 2. COMMITMENTS OF THE LENDERS; BORROWING PROCEDURES.

2.1           Commitments. On and subject to the terms and conditions of this Agreement, each of the Lenders, severally and for itself alone, agrees to make a term loan to Borrowers in the aggregate amount not to exceed $25,000,000.00 which shall be made on the Closing Date (such advance referred to as a “Loan” and sometimes referred to collectively as the “Loan” or “Loans”). The total Commitment of all Lenders under this Agreement to make Loans (the “Committed Amount”) shall not exceed $25,000,000.00 (assuming that (a) the current real property taxes owing in year one of the Loan under the PILOT Program Tax Benefit (“PPTB”) do not exceed by $324,717 for the Borrowers, and (b) the term of the tax relief provided in the PPTB continues until December 31, 2037). The Commitments of the Lenders to the Loan to Borrowers shall expire concurrently with the making of such Loan on the Closing Date. Once prepaid or repaid, the Loan may not be reborrowed. The Loan shall be repaid in accordance with Section 6 hereof.

2.2           Loan Procedures. The Borrowers shall give a written notice (such written notice, a “Notice of Borrowing”) substantially in the form of Exhibit C attached hereto to the Agent of the proposed borrowing not later than 11:00 A.M., Cleveland time, at least three (3) Business Days prior to the proposed date of borrowing (which proposed borrowing date shall be on a Business Day). The notice shall be effective upon receipt by the Agent, shall be irrevocable, and shall specify the date, amount and type of the borrowing. Promptly upon receipt of such notice, the Agent shall advise each Lender thereof.

2.3           Commitments Several. The failure of any Lender to make a requested Loan on the borrowing date shall not relieve any other Lender of its obligation (if any) to make a Loan on such date, but no Lender shall be responsible for the failure of any other Lender to make any Loan to be made by such other Lender.

2.4           Certain Conditions. Notwithstanding any other provision of this Agreement, no Lender shall have an obligation to permit the continuation (past the then existing Interest Period) of or any conversion into any LIBOR Loan, if an Event of Default or Unmatured Event of Default exists.

2.5           Joint and Several. (a) The obligations of each Borrower under this Agreement and the other Loan Documents shall be joint and several and, to the fullest extent permitted by Applicable Law, shall not be affected by (i) the failure of the Agent or any Lender, or any of their respective successors or assigns, or any holder of the Notes or any of the Obligations to assert any claim or demand or to exercise or enforce any right, power or remedy against any other Borrower or the Collateral or otherwise, (ii) any extension or renewal for any period (whether or not longer than the original period) or exchange of any of the Obligations or the release or compromise of any obligation of any nature of any Person with respect thereto, (iii) the surrender, release or exchange of all or any part of any property (including without limitation the Collateral) securing payment, performance and observance of any of the Obligations or the compromise or extension or renewal for any period (whether or not longer than the original period) of any obligations of any nature of any Person with respect to the Property, (iv) the invalidity or unenforceability or disallowance of any of the Obligations (including those for post-petition interest) as against any other Borrower, any Guarantor, any other guarantor thereof or any other Person, and (v) any other act, matter or thing which would or might, in the absence of this provision, operate to release, discharge or otherwise prejudicially affect the obligations of Borrowers, other than Final Payment.

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(b)          To the fullest extent permitted by applicable law and except to the extent that any of the following are expressly required by the provisions of any of the Loan Documents, each Borrower hereby waives (i) presentment, demand for payment and protest of nonpayment of any of the Obligations, and notices of protest, dishonor or nonperformance, (ii) notice of any Event of Default or Unmatured Event of Default or the Agent’s or any Lender’s inability to enforce performance of the other Borrowers’ obligations to any holder of Obligations, (iii) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies with respect to any security for the Obligations or against the other Borrowers or any other Loan Party or other guarantor of, the Obligations pursuant to this Agreement or any other Loan Document or otherwise, and any requirements of diligence or promptness on the part of the Agent, any Lender or any holder of the Obligations in connection therewith, (iv) any action or nonaction on the part of the Agent or any Lender or any holder of Obligations which may impair or prejudice the rights of any Borrower, including without limitation subrogation rights or rights to obtain exoneration, contribution, indemnification or any other reimbursement or compensation from any other Borrower, any Guarantor, any other guarantor or borrowers in respect of the Obligations or any other Person, (v) failure or delay to perfect or continue the perfection of any security interest in any Collateral, (vi) any action which harms or impairs the value of, or any failure to preserve or protect the value of, any Collateral, (vii) any defense based upon an election of remedies by the Agent, any Lender or the holders of the Obligations, (viii) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal, (ix) any and all demands and notices of every kind and description, including notice of the creation of any of the Obligations, with respect to the foregoing or which may be required to be given by any statute or rule of law and (x) all defenses (other than indefeasible payment in full) which any other Borrower may now or hereafter have to the payment of the Obligations which could otherwise be asserted by such Borrower. No delay or omission on the part of the Agent, any Lender or any holder of any Obligation or with respect to the Collateral shall operate as a waiver or relinquishment of such right. No action which the Agent, any Lender, the holder of any Obligation, any Borrower or any other Loan Party may take or refrain from taking with respect to the Obligations, including any amendments thereto or modifications thereof or waivers with respect thereto, shall affect the provisions of this Agreement or the obligations of Borrowers hereunder. None of the rights of the Agent, any Lender or of any holder of any Obligation shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any of them or any Borrower or any other Loan Party, by any noncompliance by any Borrower with the terms, provisions and covenants of this Agreement, regardless of any knowledge thereof which the Agent, any Lender or any holder of the Obligations may have or otherwise be charged with. Each Borrower hereby agrees to waive, and does hereby absolutely and irrevocably waive and relinquish the benefit and advantage of, and does hereby covenant not to assert, any appraisement, valuation, stay, extension, redemption or similar guarantor protection laws, now or at any time hereafter in force, which might delay, prevent or otherwise impede the performance or enforcement of this Agreement or any other Loan Document or the Obligations. Each Borrower’s obligations under this Section 2.5 shall not be affected by the invalidity or unenforceability of any of the Obligations as against any other Borrower, any other guarantor thereof or any other Person. For purposes of this Section 2.5, the Obligations shall be due and payable when and as the same shall be so due and payable under the terms of any Loan Document, notwithstanding the fact that the collection or enforcement thereof may be stayed or enjoined under the Bankruptcy Code, as from time to time in effect, or other applicable law, regulation or order.

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(c)          To the fullest extent permitted by Applicable Law, each Borrower hereby grants to the Agent full power in its sole discretion, without notice to such Borrower, such notice being hereby expressly waived, and without in any way affecting the joint and several liability of such Borrower under this Agreement:

(i)          To waive compliance with, and any Event of Default or Unmatured Event of Default under, and to consent to any amendment to or modification of any term or provision of, or to give any waiver in respect of, this Agreement, any other Loan Document, the Collateral, the Obligations or any guarantee thereof (each as from time to time in effect);

(ii)         To grant any one or more extensions or renewals of the Obligations (for any period, no matter how long), or any total or partial release (by operation of law or otherwise), discharge, compromise or settlement with respect to the obligations of any Borrower or any other Person in respect of the Obligations, whether or not rights against the other Borrowers under this Section 2.5 are reserved in connection therewith;

(iii)        To take security in any form for the Obligations, and to the extent permitted in any security agreement to consent to (A) the addition to, (B) the substitution, exchange, surrender, release or other disposition of, or (C) deal in any other manner with, all or any part of any property contained in the Collateral whether or not the property, if any, received upon the exercise of such power shall be of a character or value the same as or different from the character or value of any property disposed of, and to obtain, modify or release any present or future guarantees of the Obligations and at any time after the occurrence and during the continuance of an Event of Default to proceed against any of the Collateral or such guarantees in any order;

(iv)        To, at any time after the occurrence and during the continuance of an Event of Default, collect or liquidate any of the Obligations or the Collateral in any manner or to refrain from collecting or liquidating any of the Obligations or the Collateral; and

(v)         To extend credit under this Agreement or any other Loan Document, or otherwise, in such amount as the Agent may determine, even though the condition of the Borrowers (financial or otherwise on an individual or consolidated basis) may have deteriorated since the date hereof.

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(d)          Each Borrower acknowledges and agrees that it has made such investigation as it deems desirable of the risks undertaken by such Borrower in entering into this Agreement and the other Loan Documents and is fully satisfied that it understands all such risks. Each Borrower hereby waives any obligation which may now or hereafter exist on the part of the Agent, any Lender or any holder of any Obligation to inform such Person of the risks being undertaken by entering into this Agreement and the other Loan Documents or of any changes in such risks and, from and after the date hereof, each Borrower undertakes to keep itself informed of such risks and any changes therein. Further, each Borrower hereby expressly waives any duty which may now or hereafter exist on the part of the Agent, any Lender or any holder of any Obligation to disclose to such Borrower any matter related to the business, operations, character, collateral, credit or condition (financial or otherwise) of any Loan Party (including the other Borrowers) or Affiliates or its or their properties or management, whether now or hereafter known by the Agent, any one or more of the Lenders or any holder of any Obligation. Each Borrower represents, warrants and agrees that it assumes sole responsibility for obtaining from each other Borrower all information concerning this Agreement and all other Loan Documents and all other information as to any other Loan Party and Affiliates or their properties or management or anything relating to any of the above as such Borrower deems necessary or desirable.

(e)          Each Borrower hereby covenants and agrees that (i) it will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights with respect to the Obligations against any Person, including without limitation any other guarantor of the Obligations or the other Borrowers, prior to the payment in full of the Obligations and the termination of the Commitments hereunder, and (ii) all debt, claims and obligations now or hereafter owing by the other Borrowers to such Borrower are hereby subordinated to the prior payment in full of the Obligations and are subordinated as a claim against the other Borrowers or any of their assets, whether such claim be in the ordinary course of business or in the event of voluntary or involuntary liquidation, dissolution, insolvency or bankruptcy.

SECTION 3. EVIDENCING OF LOANS.

3.1           Notes. The Loan of each Lender to Borrowers shall be evidenced by a Note from the Borrowers, with appropriate insertions, payable to the order of such Lender in a face principal amount equal to the portion of such Lender’s Commitment.

3.2           Recordkeeping. Each Lender shall record in its records, the date and amount of each Loan made by such Lender, each repayment or conversion thereof and, in the case of each LIBOR Loan, the dates on which each Interest Period for such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttably presumptive evidence of the principal amount of the Loans owing and unpaid. The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the Obligations of the Borrowers hereunder or under any Note to repay the actual principal amount of the Loans hereunder, together with all interest accruing thereon.

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SECTION 4. INTEREST.

4.1           Interest Rates. Borrowers promise to pay interest on the unpaid principal amount of the Loan for the period commencing on the date each portion of the Loan is advanced until the Loan is paid in full as set forth in this Section 4.1.

4.1.1. Subject to Sections 8.2 and 8.3, the Loan will bear interest at the Applicable Rate, unless the Default Rate is applicable as set forth in Section 4.1.5. The LIBOR Rate plus the Applicable Margin shall be the “Applicable Rate”, except when the Base Rate plus the Applicable Margin shall be the “Applicable Rate” with respect to portions of the Loan as to which a Base Rate Option is then in effect or at any time the Default Rate is applicable. Borrowers shall have the option (the “Base Rate Option”) to elect from time to time in the manner and subject to the conditions hereinafter set forth the Base Rate as the Applicable Rate for the Loan.

4.1.2. The only manner in which Borrowers may exercise the Base Rate Option is by giving Agent irrevocable notice (which may be verbal notice provided that Borrowers deliver to Agent facsimile confirmation in the form of Exhibit D attached hereto (such written notice, a “Notice of Conversion”) within twenty-four (24) hours) of such exercise not later than 11:00 a.m. Cleveland time on the third Business Day prior to the end of the relevant LIBOR Rate Interest Period, which written notice shall specify: (i) the portion of the Loan with respect to which Borrowers are electing the Base Rate Option and (ii) the Business Day upon which the Base Rate is to commence. The Applicable Rate for any portion of the Loan with respect to which Borrowers have elected the Base Rate Option shall not revert back to the LIBOR Rate unless Borrowers shall elect to convert to the LIBOR Rate as provided in Section 4.1.3. If no notice is received by Agent by 11:00 a.m. Cleveland time as specified above, the Loan shall continue to bear interest at the LIBOR Rate.

4.1.3. In order to convert any portion of the Loan bearing interest at the Base Rate to the LIBOR Rate, the Borrowers must give Agent irrevocable notice (which may be verbal notice provided that the Borrowers deliver to Lender facsimile confirmation in the form of Exhibit D attached hereto within twenty-four (24) hours) of such exercise not later than 11:00 a.m. Cleveland time on the third LIBOR Business Day prior to the proposed commencement of the relevant LIBOR Rate Interest Period, which written notice shall specify: (i) the portion of the Loan with respect to which Borrowers are electing the LIBOR Rate and (ii) the LIBOR Business Day upon which the applicable LIBOR Rate Interest Period is to commence.

4.1.4. Borrowers shall pay all Breakage Costs incurred from time to time by any Lender upon demand.

4.1.5. The Loan shall bear interest at the Default Rate at any time at which an Event of Default shall exist.

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4.2           Interest Payment Dates. Accrued interest on each Base Rate Loan shall be payable in arrears on the first day of each calendar month and at maturity. Accrued interest on each LIBOR Loan shall be payable on the first day of each calendar month, upon a prepayment of Loan, and at maturity. After maturity, and at any time an Event of Default exists, accrued interest on the Loan shall be payable on demand.

4.3           Setting and Notice of LIBOR Rates. The applicable LIBOR Rate for each Interest Period shall be determined by the Agent, and notice thereof shall be given by the Agent promptly to the Borrowers and each Lender. Each determination of the applicable LIBOR Rate by the Agent shall be conclusive and binding upon the parties hereto, in the absence of demonstrable error. The Agent shall, upon written request of the Borrowers and any Lender, deliver to the Borrowers or such Lender a statement showing the computations used by the Agent in determining any applicable LIBOR Rate hereunder.

4.4           Computation of Interest. Computation of interest on the Loan when the Applicable Rate is the Base Rate and when the Base Rate is determined by the Agent’s “prime rate” shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed. Computation of all other types of interest and all fees shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to the Lenders than a method based on a year of 365 or 366 days. The applicable interest rate for the Loan when the Base Rate applies shall change simultaneously with each change in the Base Rate.

4.5           Hedging Agreements.

4.5.1. Any indebtedness incurred pursuant to a Hedging Agreement entered into by any Borrower and the Agent or any Lender shall constitute Obligations secured by the Collateral Documents and the other Loan Documents to the same extent and effect as if the terms and provisions of such Hedging Agreement were set forth herein, whether or not the aggregate of such Obligations, together with the disbursements made by the Agent or any Lender of the proceeds of the Loans, shall exceed the face amount of the Notes or the maximum principal amount of the Loans hereunder.

4.5.2. Each Borrower hereby collaterally assigns to the Agent for the benefit of the Lenders any and all Hedging Agreements purchased or to be purchased by such Borrower in connection with the Loan, as additional security for the Loans, and agrees to provide the Agent with any additional documentation requested by the Agent in order to confirm or perfect such security interest during the term of the Loans. If a Borrower obtains a Hedging Agreement from a party other than the Agent, such Borrower shall deliver to the Agent such third party’s consent to such collateral assignment. No Hedging Agreement purchased from a third party may be secured by an interest in any Borrower or the Project.

4.6           Late Charge. Any and all amounts due hereunder or under the other Loan Documents which remain unpaid more than five (5) days after the date said amount was due and payable shall incur a fee (the “Late Charge”) of four percent (4%) of said amount, which payment shall be in addition to all of the Agent’s and the Lenders’ other rights and remedies under the Loan Documents.

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SECTION 5. FEES.

5.1           Upfront Fees. On the Closing Date, Borrowers agree to pay to each Lender an upfront fee in the amount of one-half of one percent (0.50%) of such Lender’s Commitment in respect of Loans to Borrowers as set forth on Annex A hereto.

5.2           Exit Fee. Upon repayment in full of any Loan (whether pursuant to Section 6 or Section 14 or otherwise), the Borrowers will pay to the Agent an exit fee equal to one percent (1.0%) of the difference between the Committed Amount less any principal prepayments made pursuant to Section 6.4 hereof (the “Exit Fee”); provided, however, that Borrowers shall not be required to pay the Exit Fee if the Loan is repaid with a new permanent loan provided by Key or an Affiliate of Key or the Loan is repaid with a permanent loan arranged by Key or an affiliate of Key through another investor or lender including, but not limited to, Fannie Mae, Freddie Mac, or HUD (each a “Governmental Agency”) (each such permanent loan is referred to herein as a “Permanent Loan”). The Exit Fee shall be deemed to be earned upon the execution of this Agreement but is not due and payable until repayment in full of the Loan.

Notwithstanding the foregoing, in the event the Borrowers submit to Key (or an affiliate of Key) a properly completed application for a Permanent Loan and (a) Key (or an affiliate of Key) does not provide a proposal (a “Proposal”) for a Permanent Loan within forty-five (45) days of its receipt of such properly completed application(s) or (b) Borrowers determine that the Proposal is not competitive with other comparable options then available in the market, then Borrowers may seek permanent financing (similar to a Permanent Loan) from other lenders (any such written proposal/term sheet from another lender is referred to as an “Alternative Proposal”).

If Borrowers obtain an Alternative Proposal they hereby agree to provide promptly to Key (or an affiliate of Key) such Alternative Proposal (in writing) and Key (or an affiliate of Key) shall have a period of five (5) Business Days after receipt thereof to meet or decline to meet the substantive terms of such Alternative Proposal.

In the event Key (or an affiliate of Key) elects in writing to meet the terms of any Alternative Proposal (a “Matched Proposal”) then Borrowers agree to proceed with such Permanent Loan from Key (or an affiliate of Key) as set forth in such Matched Proposal.

In the event Key (or an affiliate of Key) declines in writing to meet the terms of any Alternative Proposal then Borrowers may proceed to close such permanent loan consistent with the Alternative Proposal and the Exit Fee will thereafter be waived.

SECTION 6. PREPAYMENTS.

6.1           Prepayments.

6.1.1. Voluntary. Upon notice to the Agent not later than 11:00 A.M., Cleveland time, on the day of such prepayment (which shall be a Business Day), the Borrowers may at any time voluntarily prepay the Loan in part in an amount equal to $1,000,000 or a higher integral multiple of $250,000 or in full, without premium or penalty other than as otherwise provided in Section 5.2. The Agent will promptly notify each Lender thereof and of such Lender’s Pro Rata Share of such prepayment. Any prepayment of the Loan shall be accompanied by all accrued interest on the amount being prepaid, and, in the case of any LIBOR Loan, the amounts forth in Section 8.4. Amounts prepaid may not be reborrowed.

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6.1.2. Hedging Agreements Unaffected. Any repayment or prepayment made pursuant to this Section 6.1 shall not affect any party’s obligation to continue to make payments under any Hedging Agreement, which shall remain in full force and effect notwithstanding such repayment or prepayment, subject to the terms of such Hedging Agreement.

6.2           Manner of Prepayments. Any prepayment shall include interest on the principal amount being repaid and, with respect to any LIBOR Loan, shall be accompanied with a payment to the related Lender of all sums due and payable to such Lender pursuant to Section 8.4. Except as otherwise provided by this Agreement, all principal payments in respect of the Loan shall be applied first, to repay outstanding Base Rate Loans and then to repay outstanding LIBOR Loans in direct order of Interest Period maturities.

6.3           Term of the Loan. (a) All principal, interest and other sums due under the Loan shall be due and payable in full on the Maturity Date. All references herein to the Maturity Date shall mean Initial Maturity Date, provided that (subject to the requirements of Section 6.3(b) below) the Borrowers shall have the right to extend the Maturity Date for two (2) additional twelve (12) month terms (each, an “Extension Option”), and the first Extension Option shall extend the Maturity Date by an additional twelve (12) months from the anniversary of the Initial Maturity Date (i.e., extended to October 21, 2015) and the second Extension Option shall extend the Maturity Date by an additional twelve (12) months thereafter (ending twelve (12) months from the anniversary of the Initial Maturity Date) (i.e., extended to October 21, 2016) (such ending date, the “Final Maturity Date”).

(b)          The Borrowers may only exercise the Extension Option upon satisfying the following conditions:

(i)          The Borrowers shall have delivered to the Agent written notice of such election of the Extension Option no earlier than ninety (90) days and no later than thirty (30) days prior to the Initial Maturity Date (or, in the case the second Extension Option is exercised, no earlier than ninety (90) days and no later than thirty (30) days prior to October 21, 2015);

(ii)         The Agent shall have received the Borrowers’ current financial statements (which may be year-end, unaudited financial statements prepared by the Borrowers if audited statements are not available), certified as correct by the Borrowers;

(iii)        Each Extension Option notice shall be accompanied by an extension fee in an amount equal to twenty-five basis points (0.25%) of the aggregate principal amount of the Loan outstanding at the time each such Extension Option notice is delivered to the Agent; and

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(iv)        No Event of Default and no Unmatured Event of Default shall exist under the Loan Documents.

6.4           Required Principal Repayments. If the Extension Option is exercised, the principal amount of the Loan shall be paid in monthly installments commencing on October 1, 2014, payable monthly (on the first day of each calendar month thereafter) based on a 25-year level payment (mortgage-style) amortization calculated using an assumed interest rate of six percent (6%) per annum. Unless sooner paid in full, the outstanding principal balance of the Loan shall be paid in full on the Maturity Date.

SECTION 7. MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.

7.1           Making of Payments. All payments of principal or interest on the Loans, and of all fees, shall be made by the Borrowers to the Agent in immediately available funds at the office specified by the Agent not later than noon, Cleveland time, on the date due; and funds received after that hour shall be deemed to have been received by the Agent on the following Business Day. The Agent shall promptly remit to each Lender its share of all such payments received in collected funds by the Agent for the account of such Lender. All payments under Section 8.1 shall be made by the Borrowers directly to the Lender entitled thereto without setoff, counterclaim or other defense.

7.2           Application of Certain Payments. So long as no Event of Default has occurred and is continuing, (a) payments matching specific scheduled payments then due shall be applied to those scheduled payments and (b) voluntary and mandatory prepayments shall be applied as set forth in Sections 6.2 and 6.4. After the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent or any Lender as proceeds from the sale of, or other realization upon, all or any part of the Collateral shall be applied as the Agent shall determine in its discretion or, in the absence of a specific determination by the Agent, as set forth in Section 14.2 hereof. Concurrently with each remittance to any Lender of its share of any such payment, the Agent shall advise such Lender as to the application of such payment.

7.3           Due Date Extension. If any payment of principal or interest with respect to the Loan, or of any fees or other amounts, falls due on a day which is not a Business Day, then such due date shall be extended to the immediately following Business Day (unless, in the case of a LIBOR Loan, such immediately following Business Day is the first Business Day of a calendar month, in which case such due date shall be the immediately preceding Business Day) and, in the case of principal, additional interest shall accrue and be payable for the period of any such extension.

7.4           Setoff. Borrowers agree that the Agent and each Lender has all rights of set-off and bankers’ lien provided by Applicable Law, and in addition thereto, the Borrowers agree that at any time any Event of Default exists, the Agent and each Lender may apply to the payment of any Obligations of the Borrowers hereunder, whether or not then due, any and all balances, credits, deposits, accounts or moneys of any Borrower then or thereafter with the Agent or such Lender, excluding any trust accounts or accounts with funds held for the benefit of third parties (such as residents). Agent and each Lender will provide prompt notice to Borrowers after exercise of such rights.

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7.5           Proration of Payments. Subject to Section 16 hereof, if any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise, on account of principal of or interest on the Loan, but excluding (a) any payment pursuant to Section 8.7 or 15.6 and (b) payments of interest on any Affected Loan) in excess of its applicable Pro Rata Share of payments and other recoveries obtained by all Lenders on account of principal of and interest on the Loan (or any participation) then held by them, then such Lender shall purchase from the other Lenders such participations in the Loan held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery

7.6           Taxes.

(a)    All payments made by the Borrowers hereunder or under any Loan Documents shall be made without setoff, counterclaim, or other defense. To the extent permitted by Applicable Law, all payments hereunder or under the Loan Documents (including any payment of principal, interest, or fees) to, or for the benefit, of any Person shall be made by the Borrowers free and clear of and without deduction or withholding for, or account of, any Taxes now or hereinafter imposed by any taxing authority.

(b)    If the Borrowers make any payment hereunder or under any Loan Document in respect of which it is required by applicable law to deduct or withhold any Taxes, the Borrowers shall increase the payment hereunder or under any such Loan Document such that after the reduction for the amount of Taxes withheld (and any taxes withheld or imposed with respect to the additional payments required under this Section 7.6(b)), the amount paid to the Agent or the Lenders equals the amount that was payable hereunder or under any such Loan Document without regard to this Section 7.6(b). To the extent the Borrowers withhold any Taxes on payments hereunder or under any Loan Document, the Borrowers shall pay the full amount deducted to the relevant taxing authority within the time allowed for payment under Applicable Law and shall deliver to the Agent within thirty (30) days after they have made payment to such authority a receipt issued by such authority (or other evidence satisfactory to the Agent) evidencing the payment of all amounts so required to be deducted or withheld from such payment.

(c)    If the Agent or any Lender is required by law to make any payments of any Taxes on or in relation to any amounts received or receivable hereunder or under any other Loan Document, or any Tax is assessed against the Agent or a Lender with respect to amounts received or receivable hereunder or under any other Loan Document, the Borrowers will indemnify such person against (i) such Tax (and any reasonable counsel fees and expenses associated with such Tax) and (ii) any taxes imposed as a result of the receipt of the payment under this Section 7.6(c); provided that if the Borrowers reasonably believe that such Taxes were not correctly or legally asserted and if the Borrowers paid such Taxes to the taxing authority or reimbursed the Agent or a Lender in the amount of such Taxes, the Agent or such Lender will use reasonable efforts to cooperate with the Borrowers to obtain a refund of such Taxes so long as such efforts would not, in the sole determination of the Agent or such Lender, as the case may be, result in any additional costs, expenses or risks or be otherwise disadvantageous to it. A certificate prepared in good faith as to the amount of such payment by the Agent or such Lender shall, absent manifest error, be final, conclusive, and binding on all parties.

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(d)    Each of the Agent and the Lenders agrees that if it subsequently recovers, or receives a permanent net tax benefit with respect to, any amount of Taxes (i) previously paid by it and as to which it has been indemnified by or on behalf of the Borrowers or (ii) previously deducted by the Borrowers (including, without limitation, any Taxes deducted from any additional sums payable under clause (i) of subsection (c) above), the Agent or such Lender, as the case may be, shall, so long as no Event of Default has occurred and is continuing, reimburse the Borrowers to the extent of the amount of any such recovery or permanent net tax benefit (but only to the extent of indemnity payments made, or additional amounts paid, by or on behalf of the Borrowers under this Section 7.6 with respect to the Taxes giving rise to such recovery or tax benefit less any Taxes paid by the Agent or the applicable Lender with respect to such indemnity payments or such additional amounts paid, by or on behalf of the Borrowers under this Section 7.6); provided, however that the Borrowers, upon the request of the Agent or such Lender, agree to repay to the Agent or such Lender, as the case may be, the amount paid over to the Borrowers (together with any penalties, interest or other charges), in the event the Agent or such Lender is required to repay such amount to the relevant taxing authority.

(e) (i)    To the extent permitted by applicable law, each Lender that is not a United States person within the meaning of Code section 7701(a)(30) (a “Non-U.S. Participant”) shall deliver to the Borrowers and the Agent on or prior to the Closing Date (or in the case of a Lender that is an Assignee, on the date of such assignment to such Lender) two accurate and complete original signed copies of IRS Form W-8BEN, W-8ECI, or W-8IMY (or any successor or other applicable form prescribed by the IRS) certifying to such Lender’s entitlement to a complete exemption from, or a reduced rate in, United States withholding tax on interest payments to be made hereunder or on the Loan. If a Lender that is a Non-U.S. Participant is claiming a complete exemption from withholding on interest pursuant to Sections 871(h) or 881(c) of the Code, such Lender shall deliver (along with two accurate and complete original signed copies of IRS Form W-8BEN) a certificate in form and substance reasonably acceptable to the Agent (any such certificate, a “Withholding Certificate”). In addition, such Lender that is a Non-U.S. Participant agrees that from time to time after the Closing Date, (or in the case of a Lender that is an Assignee, after the date of the assignment to such Lender), when a lapse in time (or change in circumstances occurs) renders the prior certificates hereunder obsolete or inaccurate in any material respect, such Lender shall, to the extent permitted under applicable law, deliver to the Borrowers and the Agent two new and accurate and complete original signed copies of an IRS Form W-8BEN, W-8ECI, or W-8IMY (or any successor or other applicable forms prescribed by the IRS), and if applicable, a new Withholding Certificate, to confirm or establish the entitlement of such Lender to an exemption from, or reduction in, United States withholding tax on interest payments to be made hereunder or on the Loan.

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(ii)         Each Lender that is not a Non-U.S. Participant (other than any such Lender which is taxed as a corporation for U.S. federal income tax purposes) shall provide two properly completed and duly executed copies of IRS Form W-9 (or any successor or other applicable form) to the Borrowers and the Agent certifying that such Lender is exempt from United States backup withholding tax. To the extent that a form provided pursuant to this Section 7.6(e)(ii) is rendered obsolete or inaccurate in any material respects as result of change in circumstances with respect to the status of a Lender, such Lender shall, to the extent permitted by applicable law, deliver to the Borrowers and the Agent revised forms necessary to confirm or establish the entitlement to such Lender’s exemption from United States backup withholding tax.

(iii)        The Borrowers shall not be required to pay additional amounts to a Lender, or indemnify any Lender, under this Section 7.6 to the extent that such obligations would not have arisen but for the failure of such Lender to comply with Section 7.6(e). Each Non-U.S. Participant will promptly notify the Borrowers and the Agent of any changes in circumstances that would modify or render invalid any claimed exemption or reduction under this Section 7.6.

(iv)        Each Lender agrees to indemnify the Agent and hold the Agent harmless for the full amount of any and all present or future Taxes and related liabilities (including penalties, interest, additions to tax and expenses, and any Taxes imposed by any jurisdiction on amounts payable to the Agent under this Section 7.6) which are imposed on or with respect to principal, interest or fees payable to such Lender hereunder and which are not paid by the Borrowers pursuant to this Section 7.6, whether or not such Taxes or related liabilities were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the date the Agent makes written demand therefor.

SECTION 8. INCREASED COSTS; SPECIAL PROVISIONS FOR LIBOR LOANS.

8.1           Increased Costs.

(a)  If, after the date hereof, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration of any applicable law, rule or regulation by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall impose, modify or deem applicable any reserve (including any reserve imposed by the FRB, but excluding any reserve included in the determination of the LIBOR Rate pursuant to Section 4), Tax (except for income taxes), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by such Lender; or (ii) shall impose on any Lender any other condition affecting its LIBOR Loans, its Note(s) or its obligation to make LIBOR Loans; and the result of anything described in clauses (i) and (ii) above is to increase the cost to (or to impose a cost on) such Lender (or any LIBOR Office of such Lender) of making or maintaining any LIBOR Loan, or to reduce the amount of any sum received or receivable by such Lender (or its LIBOR Office) under this Agreement or under its Note(s) with respect thereto, within three (3) Business Days after receiving written demand from such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to the Agent), the Borrowers agree to pay directly to such Lender such additional amount as will compensate such Lender for such increased cost or such reduction, so long as such amounts have accrued on or after the day which is 180 days prior to the date on which such Lender first made demand therefor.

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(b)  If any Lender shall reasonably determine that any change in, or the adoption or phase-in of, any Applicable Law, rule or regulation regarding capital adequacy, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or the compliance by any Lender or any Person controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s or such controlling Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person could have achieved but for such change, adoption, phase-in or compliance (taking into consideration such Lender’s or such controlling Person’s policies with respect to capital adequacy) by an amount deemed by such Lender or such controlling Person to be material, then from time to time, within three (3) Business Days after receiving written demand from such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to the Agent), the Borrowers agree to pay to such Lender such additional amount as will compensate such Lender or such controlling Person for such reduction so long as such amounts have accrued on or after the day which is 180 days prior to the date on which such Lender first made demand therefor.

8.2           Basis for Determining Interest Rate Inadequate or Unfair. If the Agent or any Lender reasonably determines in good faith (which determination shall be binding and conclusive on the Borrowers) that (a) by reason of circumstances affecting the interbank LIBOR market adequate and reasonable means do not exist for ascertaining the applicable LIBOR Rate for any Interest Period or (b) the LIBOR Rate as determined by the Agent will not adequately and fairly reflect the cost to such Lender of maintaining or funding LIBOR Loans for such Interest Period (taking into account any amount to which such Lender may be entitled under Section 8.1) or that the making or funding of LIBOR Loans has become impracticable as a result of an event occurring after the date of this Agreement which in the opinion of such Lender materially affects the Loan, then such Lender shall promptly notify the other parties thereof and, so long as such circumstances shall continue, (i) such Lender shall not be under any obligation to make or convert any Base Rate Loans into LIBOR Loans and (ii) on the last day of the current Interest Period for each LIBOR Loan, the Loan shall, unless then repaid in full, automatically convert to a Base Rate Loan.

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8.3           Changes in Law Rendering LIBOR Loans Unlawful. If, after the date hereof, any change in, or the adoption of any new, law or regulation, or any change in the interpretation of any applicable law or regulation by any governmental or other regulatory body charged with the administration thereof, should make it (or in the good faith judgment of any Lender cause a substantial question as to whether it is) unlawful for any Lender to make, maintain or fund LIBOR Loans, then such Lender shall promptly notify each of the other parties hereto and, so long as such circumstances shall continue, (a) such Lender shall have no obligation to make or convert any Base Rate Loan into a LIBOR Loan and (b) on the last day of the current Interest Period for each LIBOR Loan of such Lender (or, in any event, on such earlier date as may be required by the relevant law, regulation or interpretation), such LIBOR Loan shall, unless then repaid in full, automatically convert to a Base Rate Loan. Each Base Rate Loan made by a Lender which, but for the circumstances described in the foregoing sentence, would be a LIBOR Loan (an “Affected Loan”) shall remain outstanding for the Interest Period.

8.4           Funding Losses. The Borrowers hereby agree that (i) simultaneously with any prepayment of the Loan (or any portion thereof) and (ii) otherwise within three (3) Business Days after receiving written demand from any Lender (which demand shall be accompanied by a statement setting forth the basis and, if requested, calculation, for the amount being claimed, a copy of which shall be furnished to the Agent), the Borrowers will pay to each Lender an amount equal to any net loss or expense which such Lender may sustain or incur (including any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain any LIBOR Loan), as reasonably determined by such Lender, as a result of (a) any payment, prepayment or conversion of any LIBOR Loan of such Lender on a date other than the last day of an Interest Period for such LIBOR Loan (including any conversion pursuant to Section 8.3) or (b) any failure of the Borrowers to borrow, convert or continue the Loan (or any portion thereof) on a date specified therefore in a Notice of Borrowing or a Notice of Conversion pursuant to this Agreement (“Breakage Costs”). For this purpose, all notices to the Agent pursuant to this Agreement shall be deemed to be irrevocable.

8.5           Right of Lenders to Fund through Other Offices. Each Lender may, if it so elects, fulfill its commitment as to any LIBOR Loan by causing a foreign branch or Affiliate of such Lender to make such LIBOR Loan; provided that in such event for the purposes of this Agreement such LIBOR Loan shall be deemed to have been made by such Lender and the obligation of the applicable Borrower to repay such LIBOR Loan shall nevertheless be to such Lender and shall be deemed held by it, to the extent of such LIBOR Loan, for the account of such branch or Affiliate.

8.6           Discretion of Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its LIBOR Loan in any manner it sees fit, it being understood, however, that for the purposes of this Agreement (except for the indemnity obligations) all determinations hereunder shall be made as if such Lender had actually funded and maintained each LIBOR Loan during each Interest Period for such LIBOR Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the LIBOR Rate for such Interest Period.

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8.7           Mitigation of Circumstances; Replacement of Lenders.

(a) Each Lender shall promptly notify the Borrowers of any event of which it has knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Lender’s sole judgment, otherwise disadvantageous to such Lender) to mitigate or avoid, (i) any obligation by the Borrowers to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any circumstances described in Section 8.2 or 8.3 (and, if such Lender has given notice of any such event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Lender shall promptly so notify the Borrowers and the Agent). Without limiting the foregoing, each Lender will provide to the Borrowers or file any document or instrument or designate a different funding office if such designation will avoid (or reduce the cost to the Borrowers of) any event described in clause (i) or (ii) above and providing or filing such document or instrument or making such designation will not, in such Lender’s sole judgment, be otherwise disadvantageous to such Lender.

(b) If the Borrowers become obligated to pay additional amounts to the Lender pursuant to Section 7.6 or 8.1, or any Lender gives notice of the occurrence of any circumstances described in Section 8.2 or 8.3, the Borrowers may designate another bank which is acceptable to the Agent in its reasonable discretion (such other bank being called a “Replacement Lender”) to purchase the Loan of such Lender and such Lender’s rights hereunder, without recourse to or warranty by, or expense to, such Lender, for a purchase price equal to the outstanding principal amount of the Loan payable to such Lender plus any accrued but unpaid interest on the Loan and all accrued but unpaid fees owed to such Lender and any other amounts payable to such Lender under this Agreement, and to assume all the obligations of such Lender hereunder, and, upon such purchase and assumption (pursuant to an Assignment Agreement), such Lender shall no longer be a party hereto or have any rights hereunder (other than rights with respect to indemnities and similar rights applicable to such Lender prior to the date of such purchase and assumption) and shall be relieved from all obligations to the Borrowers hereunder, and the Replacement Lender shall succeed to the rights and obligations of such Lender hereunder. The parties hereto agree that any Loan purchase made by a Replacement Lender will not constitute, in and of itself, repayment of the Loan for purposes of Section 5.2.

8.8           Conclusiveness of Statements; Survival of Provisions. Determinations and statements of any Lender pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be conclusive absent demonstrable error. Lenders may use reasonable averaging and attribution methods in determining compensation under Sections 8.1 and 8.4, and the provisions of such Sections shall survive repayment of the Obligations, cancellation of any Notes and termination of this Agreement.

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SECTION 9. REPRESENTATIONS AND WARRANTIES.

To induce the Agent and the Lenders to enter into this Agreement and to induce the Lenders to make Loan, each Borrower hereby represents and warrants to the Agent and the Lenders that, both before and after giving effect to the transactions contemplated hereby, as of the Closing Date (and each other date upon which such representations and warranties are deemed to be made hereunder):

9.1           Organization. (a) Each Loan Party (i) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted and (ii) has the organizational power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument, if any, contemplated thereby to which it is or will be a party hereunder.

(b)          (i) Each Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and (ii) Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland.

(c)          Except as set forth on Schedule 9.1 hereto, neither the Guarantor nor any Borrower has any Subsidiaries.

(d)          Borrowers are qualified to do business in the state of New Jersey and in each other jurisdiction where the failure to qualify would reasonably be likely to have a Material Adverse Effect.

(e)          The chief executive office of (i) the Borrowers is c/o the Guarantor at 189 South Orange Avenue, Suite 1700, Orlando, Florida 32801, and (ii) Guarantor is 189 South Orange Avenue, Suite 1700, Orlando, Florida 32801.

9.2           Authorization; No Conflict. The execution, delivery and performance by each Loan Party of each of the Loan Documents to which it is a party (i) have been duly authorized by all requisite corporate or limited liability company, as the case may be, and, if required, shareholder or member, as the case may be, action and (ii) except as set forth in Schedule 9.2(ii)(with respect to the KKR Transactions), will not (A) violate (x) any provision of law, statute, rule or regulation, or of the articles of incorporation, articles of organization or other constitutive documents or bylaws or operating agreement of such Loan Party, (y) any order, writ, ruling, injunction or decree of any Governmental Authority binding on it or (z) any provision of any indenture, agreement or other instrument to which such Loan Party is a party or by which such Loan Party, or any of its property is or may be bound, (B) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, agreement or other instrument or (C) result in the creation or imposition of (or the obligation to create or impose) any Lien upon or with respect to any property or assets now owned or hereafter acquired by such Loan Party except pursuant to the Loan Documents.

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9.3           Validity and Binding Nature.

(a) Each of this Agreement and each other Loan Document to which any Loan Party is a party has been duly executed and delivered by each such Loan Party, as the case may be, and each such Loan Document constitutes a legal, valid and binding obligation of such Loan Party enforceable against such party in accordance with its terms, except as such enforceability may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(b) Each of the Financing Statements, the Mortgage and the other Collateral Documents creates, or upon their execution, recordation and filing will create, valid security interests in and mortgage liens on the Project or other Collateral purported to be covered thereby, which security interests and mortgage liens are, and will remain, perfected security interests and mortgage liens, prior to all Liens other than Permitted Liens.

9.4           Financial Condition. The financial statements and information listed on Schedule 9.4, copies of which have been delivered to the Agent and the Lenders, fairly present, in all material respects, in conformity with GAAP, the financial position of the Persons reported thereon at the applicable date set forth on Schedule 9.4 and their results of operations and cash flows for such period. Since December 31, 2012, there has been no material adverse change in the business, financial position, results of operations or prospects of the Loan Parties, considered as a whole.

9.5           Governmental and Other Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority having jurisdiction over any Loan Party or the Project is required in connection with the activities of the Loan Parties pursuant to the transactions contemplated hereby or the enforceability of any Loan Document to which any Loan Party is a party against any such Loan Party, except for the filing or recording of the Loan Documents referred to in Section 12.1.13 hereof and the Financing Statements with the appropriate Governmental Authorities and except such as have been made or obtained and are in full force and effect.

9.6           Compliance with Laws; Permits. Except as set forth on Schedule 9.6, Borrowers are the lawful owner of all permits necessary for the proper and lawful operation of the Project under applicable Requirements of Law. As of the Closing Date, each Borrower is in material compliance and at all times will remain in material compliance with the applicable provisions of residential care, personal care, adult care, boarding home and/or assisted living facility laws, rules, regulations and published interpretations to which the Project is subject. No waivers of any laws, rules, regulations or requirements (including, but not limited to minimum square foot requirements per bed) are required for the Project to operate in compliance with applicable Requirements of Law.

9.7           Title to Properties; Liens. Each Borrower has good, marketable and indefeasible title to its respective real properties (including, without limitation, with respect to the Owners, the Project) and good title to all of its other respective properties and assets, including the properties and assets reflected in the most recent audited balance sheet referred to in Section 9.4 (other than properties and assets disposed of in the ordinary course of business), subject, in each case, only to Permitted Liens.

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9.8           Registrations, etc. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party, and the consummation by such Persons of the transactions contemplated thereby, do not and will not require any registration, filing, license, qualification or permit with, consent or approval of, or notice or obligation to, or any other action to, with or by any federal, state or governmental authority or regulatory body having jurisdiction over the ownership, licensing, permitting or operation of the Project.

9.9           Litigation; Compliance with Laws. There is no action, suit, investigation or proceeding pending or, to the knowledge of the Borrowers, threatened in writing against any Loan Party or any of their Subsidiaries, or any properties or rights of any Loan Party or any of their Subsidiaries, by or before any court, arbitrator or administrative or governmental body that could be reasonably expected to result in a Material Adverse Effect.

9.10         Federal Reserve Regulations. (i) No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock; and (ii)  no part of the proceeds of the Loan will be used by the Borrowers, whether directly or indirectly, and whether immediately, incidentally or ultimately, (A) to the purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (B) for any purpose which entails a violation of, or which is inconsistent with the provisions of the Regulations of the FRB, including Regulation T, U or X.

9.11         Governmental Regulation. No Loan Party is an “investment company” or a company “controlled” by an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940 or subject to regulation under the Public Utility Holding Company Act of 2005.

9.12         Use of Proceeds. The proceeds of the Loan shall be used to finance acquisition of the Project.

9.13         Tax Returns. Each Loan Party has filed all Federal, state and other income tax returns which are required to be filed or have obtained extensions for the filing of such returns, and each has paid all taxes as shown on such returns and on all assessments received by it to the extent that such taxes have become due, except such taxes (i) as are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP or (ii) the non-payment of which (a) could not be reasonably expected to have a Material Adverse Effect, and (b) does not result in the creation of any Lien on the Project or other Collateral other than Permitted Liens. Agent acknowledges that Borrowers are currently negotiating payment-in-lieu of taxes agreements with the City of Woodbury.

9.14         No Misstatements. Neither the Loan Documents nor any other document, certificate or statement furnished to the Lenders by or on behalf of the Loan Parties in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not materially misleading.

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9.15         ERISA. No accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC has been or is expected by any Loan Party or any ERISA Affiliate to be incurred with respect to any Plan (other than a Multiemployer Plan) by any Loan Party, any Subsidiary, or any ERISA Affiliate which would have a Material Adverse Effect. No Loan Party, nor any ERISA Affiliate has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan which is or would be materially adverse to the business, property or assets, condition (financial or otherwise) or operations of the Loan Parties taken as a whole. The execution and delivery of the Loan Documents and the consummation of the transactions contemplated hereby will be exempt from or will not involve any transaction which is subject to the prohibitions of section 406 of ERISA and will not involve any transaction in connection with which a penalty could be imposed under Section 502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code.

9.16         Environmental Compliance.

(a) Each Loan Party and its Affiliates and all of their respective properties and facilities have complied (or upon knowledge of a violation, have taken such steps as are necessary to comply) at all times and in all material respects with all applicable federal, state, local and regional statutes, laws, ordinances and judicial or administrative orders, judgments, rulings and regulations relating to protection of the environment which could have a Material Adverse Effect.

(b) (i) No violation of any Environmental Law has been committed by any Loan Party or at the Project, including without limitation, a violation relating to Releases, to air, surface water, land or groundwater, or to the withdrawal or use of groundwater, which could have a Material Adverse Effect, (ii) no administrative or judicial complaint or order has been filed against any Loan Party alleging violations of any Environmental Law or requiring any Loan Party to take any action in connection with the Release of any Hazardous Material into the environment at, to or from the Project, which could have a Material Adverse Effect, (iii) no written notice from a Federal, state, or local governmental agency or private party has been received by any Loan Party alleging that any Loan Party is or may be liable or responsible for costs associated with a response to or cleanup of a Release of any Hazardous Material into the environment at, to or from the Project or any damages caused thereby, (iv) no Loan Party has received any notice that such Loan Party is subject to Federal, state or local inquiry or investigation evaluating whether any removal or remedial action is needed to respond to the Release of any Hazardous Materials into the environment at, to or from the Project, (v) except as set forth in the Environmental Audit, no Loan Party has any Knowledge of any past ownership or use of the Project, after all appropriate inquiry consistent with good commercial and customary practice in an effort to minimize liability which takes into account the “innocent landowner” provision set forth at 42 U.S.C. §9601(35), that resulted in a Release of Hazardous Materials onto the Project, (vi) all permits, licenses and approvals necessary for operating the Facility have been obtained and are in good standing, and (vii) no environmental health or safety condition exists at the Project or any other property owned by any Loan Party which could have a Material Adverse Effect.

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9.17         Project. The Project and the contemplated use thereof by the Borrowers and their agents, assignees, employees, lessees, sublessees, licensees, tenants and subtenants are in material compliance with all Requirements of Law (including, without limitation, all zoning and land use laws and Environmental Laws) and Insurance Requirements. There is no action, suit or proceeding (including any proceeding in condemnation or eminent domain or under any Environmental Law) pending or, to the best of each Borrower’s knowledge, threatened in writing with respect to any Borrower, or the Project which adversely affects the title to, or the use, operation or value of, the Project. References in the Survey, a Facility Lease and certain other miscellaneous documents to a Property with a street address of “160 Green Avenue, Woodbury, New Jersey” refer to the same Property also known as “124 Green Avenue, Woodbury, New Jersey.”

9.18         Utilities, etc. All utilities required to adequately service the Project for its intended use are available pursuant to adequate permits (including any that may be required under applicable Environmental Laws). The Project has available all material services of public facilities and other utilities necessary for use and operation of the Facility for its intended purpose including, without limitation, adequate water and electricity. All utilities serving the Project or proposed to serve the Project are located in, and vehicular access to the Project is provided by, public rights-of-way and easements abutting the Property. The Borrowers have obtained (or will obtain prior to the Closing Date) all appropriate Governmental Action, and have and will keep in full force and effect, all material operating permits necessary to allow for the Facility to be operated in accordance with their intended use.

9.19         [Intentionally Omitted].

9.20         Insurance. The Borrowers have obtained insurance coverage covering the Project which meets the requirements of Section 10.2, and such coverage is in full force and effect on the date hereof.

9.21         Flood Hazard Areas. Except as otherwise identified on the applicable survey, plat or map delivered pursuant to Section 12.1.15, no portion of the Property will be located within an area identified as a special flood hazardous area by the Federal Emergency Management Agency.

9.22         Solvency. Each Loan Party is Solvent.

9.23         Filings. As of the Closing Date, all filings necessary or desirable to perfect the security interest of the Agent in and to the Project and the other Collateral as against creditors of and purchasers from the Borrowers will have been made.

9.24         Casualty; Eminent Domain. The Project has not incurred any undisclosed Casualty or Condemnations since the date of the Property Condition Report delivered pursuant to Section 12.1.19.

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SECTION 10. COVENANTS.

Until the expiration or termination of the Commitments and thereafter until all Obligations hereunder and under the other Loan Documents are Finally Paid, the Borrowers agree that, unless at any time the Required Lenders shall otherwise expressly consent in writing:

10.1         Existence, Etc. Each Borrower will preserve and keep in full force and effect, and will cause each of its Subsidiaries (if any) to preserve and keep in full force and effect, its corporate or limited liability company existence, as the case may be, and all licenses and permits necessary to the proper conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect. Each Borrower will, and will cause each of its Subsidiaries (if any) to, obtain, maintain and preserve and take all necessary action to timely renew, all permits, licenses, authorizations, approvals, entitlements and accreditations which are (i) necessary in the proper conduct of its business, or (ii) to the extent material, useful in the proper conduct of its business.

10.2         Insurance. The Borrowers will maintain insurance coverage by financially sound and reputable insurers and in such forms and amounts and against such risks as are reasonably required by the Agent and in any event consistent with the insurance coverage maintained by the Borrowers and their Affiliates who own or operate similar properties and in any event on such terms and amounts that are no less favorable than insurance maintained by the Borrowers and their Affiliates with respect to similar properties that they own or operate. The Agent shall be named as an additional insured and mortgagee/loss payee with respect to property, casualty and business interruption insurance. The Borrowers will maintain flood hazard insurance acceptable to the Agent in its sole discretion with respect to any portion of the Project identified on the survey, plat or map delivered pursuant to Section 12.1.15 as being within an area identified as a special flood hazardous area by the Federal Emergency Management Agency.

10.3         Taxes, Claims for Labor and Materials; Compliance with Laws. Each Borrower will (i) promptly pay and discharge, and will cause each of its Subsidiaries promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon it or such Subsidiary (if any), respectively, or upon or in respect of all or any part of its property or business or of such Subsidiary (if any), all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any of its property or such Subsidiary (if any); provided it or such Subsidiary (if any) shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (1) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of it or such Subsidiary (if any) or any material interference with the use thereof by it or such Subsidiary, and (2) it or such Subsidiary shall set aside on its books, reserves deemed by it to be adequate with respect thereto; and (ii) promptly comply, and will cause each of its Subsidiaries (if any) to promptly comply, in all material respects, with all Requirements of Law (including all Environmental Laws).

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Without limiting the above, each Borrower will (a) ensure, and cause each other Loan Party to ensure, that no person who owns a controlling interest in or otherwise controls a Loan Party is or shall be (i) listed on the Specially Designated Nationals and Blocked Person List maintained by the Office of Foreign Assets Control (“OFAC”), Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation or (ii) a person designated under Section 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders, and (b) comply, and cause each other Loan Party to comply, with all applicable Bank Secrecy Act (“BSA”) and anti-money laundering laws and regulations.

10.4         Nature of Business. No Borrower nor any of its Subsidiaries (if any) will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by such Borrower and its Subsidiaries (if any) would be materially changed from the general nature of the business engaged in by such Borrower and its Subsidiaries (if any) on the date hereof.

10.5         Visitation Rights. Each Borrower will, and will cause each of its Subsidiaries (if any) to, permit the Agent and the Lenders and representatives of the Agent or any Lender at any time (and so long as no Event of Default has occurred and is continuing, with reasonable prior notice) and from time to time during normal business hours, at the expense of such Borrower (but such right to be exercised not more frequently than one (1) time every twelve (12) months unless an Event of Default shall have occurred), to examine and make copies of and abstracts from its records and books of account, to visit and inspect its properties, to verify leases, notes, accounts receivable, deposit accounts and its other assets, to conduct audits, physical counts, valuations, appraisals, or examinations, and to discuss its affairs, finances and accounts with any of its directors, officers, managerial employees, independent accountants or any of its other representatives.

10.6         Financial Information. The Borrowers shall each provide the following information and statements to the Agent and each Lender:

(a)  [Intentionally Omitted].

(b)  Quarterly Statements – as soon as available, and in any event, within forty-five (45) days after the end of each quarterly fiscal period in each fiscal year of the Borrowers (other than the last quarterly fiscal period of each such fiscal year), copies of:

(i)          balance sheets of the following Persons as at the end of such quarter:

A.           each Borrower;

B.           Operator and Service Provider, and

C.           Guarantor;

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(ii)         consolidated statements of income of the following Persons, and, with respect to the Guarantor only, changes in shareholders’ or members’ equity, as applicable, and cash flows of the following Persons for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Responsible Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments:

A.           each Borrower;

B.           Operator and Service Provider; and

C.           Guarantor;

(iii)        utilization reports (including number of bed days available and actual patient days incurred for such quarterly fiscal period), quarterly census information for the Facility as of the end of such quarterly fiscal period in sufficient detail to show patient-mix, occupancy, payor mix and per diems (private pay, Medicare, Medicaid and other), setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year.

(c)  Annual Statements – as soon as available, and in any event, within one hundred twenty (120) days after the end of each fiscal year of the Borrowers, copies of,

(i)          consolidated balance sheets of the following Persons as at the end of such year:

A.           each Borrower;

B.           Operator and Service Provider; and

C.           Guarantor;

(ii)         consolidated statements of income of the following Persons, and, with respect to the Guarantor only, changes in shareholders’ or members’ equity, as applicable, and cash flows, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and (with respect to the Guarantor only) accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances:

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A.           each Borrower;

B.           Operator and Service Provider; and

C.           Guarantor; and

(iii)        utilization reports (including number of bed days available and actual patient days incurred for such annual period), annual census information for the Facility as of the end of such annual period in sufficient detail to show patient-mix, occupancy, payor mix and per diems (private pay, Medicare, Medicaid and other), setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year.

(d)  Tax Returns - as soon as available, and in any event within thirty (30) days after filing, the annual federal income tax return (for each tax year) of each Borrower (to the extent they are not consolidated with the Guarantor’s tax returns) and each Guarantor;

(e)  SEC and Other Reports - promptly upon their becoming available, one copy (if any) of (i) each financial statement, report, notice or proxy statement sent by any Borrower or Guarantor to public securities holders generally, and (ii) each regular or periodic report, each registration statement that shall have become effective (without exhibits except as expressly requested by such holder), and each final prospectus and all amendments thereto filed by any Borrower or Guarantorwith the SEC, all of which shall be considered delivered to Lender once posted to the Guarantor’s website at http://www.sentiohealthcareproperties.com/sentio-healthcare-investor/secFilings.php ;

(f)  Notice of Default or Event of Default - promptly, and in any event within three (3) Business Days after a Responsible Officer becoming aware of the existence of any Unmatured Event of Default or Event of Default, a written notice specifying the nature and period of existence thereof and what action the Borrowers are taking or propose to take with respect thereto;

(g)  [Intentionally Omitted];

(h) Surveys – upon request, copies of all New Jersey Department of Health and Senior Services surveys with respect to the Facility, including follow-up revisits, plans of corrective actions and letters indicating that the Facility is in substantial compliance with the requirements of the New Jersey Department of Health and Senior Services;

(i)  [Intentionally Omitted];

(j)  Schedule of Real Estate - as soon as available, and in any event, within one hundred twenty (120) days after the end of each fiscal year of the Borrowers, a schedule detailing all real estate operated, owned and/or leased by Guarantor and substantially in the form of Exhibit H attached hereto; and

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(k) Requested Information - with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Loan Parties or relating to the ability of the Loan Parties to perform their obligations under the Loan Documents as from time to time may be reasonably requested by any such Person.

10.7         Responsible Officer’s Certificate. As soon as available, and in any event, within forty-five (45) days after the end of each quarterly fiscal period in each fiscal year of the Borrowers (including the last quarterly fiscal period of each such fiscal year), the Borrowers shall deliver to the Agent and each Lender a certificate of a Responsible Officer of the Borrowers setting forth:

(a)          Covenant Compliance - the information (including detailed calculations) required in order to establish whether the Borrowers were in compliance with the requirements of Section 10.8 hereof during such quarterly fiscal period (including with respect to such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Section, and the calculation of the amount, ratio or percentage then in existence) presented in substantially the form of Exhibit G attached hereto;

(b)          Event of Default - a statement that such Responsible Officer has reviewed the relevant terms of the Loan Documents and has made a review of the transactions and conditions of the Borrowers and their Subsidiaries (if any), as the case may be, from the beginning of such quarterly fiscal period to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes an Unmatured Event of Default or an Event of Default or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Borrowers shall have taken or propose to take with respect thereto; and

(c)          Restricted Payments - a statement setting forth all Restricted Payments made by the Borrowers during such quarterly fiscal period, including the information (including detailed calculations) required in order to establish whether the Borrowers were in compliance with the Payment Conditions at the time such Restricted Payments were made.

10.8         Financial Covenants.

(a)          Occupancy. Commencing with the calendar quarter ending March 31, 2014, the Borrowers shall maintain a quarterly average occupancy level of the Available Units at the Facility for each fiscal quarter at not less than the percentage amounts set forth below for such Computation Period:

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Computation Period With Fiscal Quarter Ending	Minimum Percentage of Available Units Occupied
March 31, 2014		75	%
June 30, 2014		75	%
September 30, 2014		80	%
December 31, 2014		80	%
March 31, 2015 and each fiscal quarter thereafter		85	%

(b)          Debt Service Coverage Ratio. Commencing with the calendar quarter ending March 31, 2014, the Borrowers will not permit its Debt Service Coverage Ratio for any Computation Period to be less than the amounts set forth below for each such Computation Period:

Computation Period With Fiscal Quarter Ending	Minimum Debt Service Coverage Ratio
March 31, 2014	1.20 to 1:00
June 30, 2014	1.25 to 1.00
September 30, 2014	1.30 to 1.00
December 31, 2014	1.35 to 1.00
March 31, 2015	1.40 to 1.00
June 30, 2015 and each fiscal quarter thereafter	1.45 to 1.00

10.9         Borrower Merger, etc. No Borrower shall consolidate with or merge with or into any corporation or other business entity or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person.

10.10         Liens. No Borrower shall, nor shall such Borrower permit any of its Subsidiaries (if any) to, create, incur, assume or suffer to exist any Lien on any of its assets, including the Project, other than Permitted Liens. No Borrower shall, nor shall such Borrower permit any of its Subsidiaries (if any) to, permit the filing of any financing statement naming such Borrower or any Subsidiary as debtor, except for financing statements filed with respect to the Permitted Liens.

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10.11         Indebtedness. No Borrower shall, nor shall such Borrower permit any of its Subsidiaries (if any) to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any obligations, payables or Indebtedness, except for any of the following: (a) the Obligations; (b) Capital Leases and purchase money Indebtedness (including Capital Leases and purchase money Indebtedness listed on Schedule 10.11) not to exceed $100,000 in the aggregate at any time outstanding; (c) trade obligations and normal accruals in the ordinary course of business not yet due and payable, or with respect to which such Borrower or such Subsidiary is contesting in good faith the amount or validity thereof by appropriate proceedings, and then only to the extent that Borrower or such Subsidiary (if any) has set aside on its books adequate reserves therefor, if appropriate under GAAP; and (d) Indebtedness incurred in connection with Hedging Agreements permitted by Section 4.5. Except as otherwise expressly permitted by this Agreement, no Borrower shall, nor shall such Borrower permit any of its Subsidiaries (if any) to, pay any obligations or Indebtedness before the same is due, except for the early payment of trade obligations in the ordinary course of business.

10.12         Loans and Investments. No Borrower shall, nor shall such Borrower permit any of its Subsidiaries (if any)to (a) purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, including the establishment or creation of a Subsidiary or enter into any joint ventures, or (b) make or commit to make any Acquisitions, or any other acquisition of all or substantially all of the assets of another Person, or of any business or division of any Person, including, by way of merger, consolidation or other combination, or (c) make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate of such Borrower or any Subsidiary (the items described in clauses (a), (b) and (c) are referred to as “Investments”), except for: (i) Investments in Cash and Cash Equivalents; and (ii) Hedging Agreements permitted by Section 4.5.

10.13         Transactions with Affiliates. No Borrower shall, and shall not suffer or permit any of its Subsidiaries (if any) to, enter into any transaction with, or pay any compensation or other amounts to, any Affiliate of such Borrower or any Affiliate of any of its Subsidiaries (if any), except (a) as specifically described on Schedule 10.13, (b) for transactions and payments expressly permitted by Section 10.21, and (c) for transactions in the ordinary course of business of the Borrowers which are at arms’ length and for fair value. The term “Affiliate” as used in this Section 10.13 shall have the meaning given in Section 1.1 and also shall include any officer, manager, member, partner, director or stockholder of (i) any Borrower or (ii) any Affiliate of any Subsidiary of any Borrower.

10.14         Use of Proceeds; Margin Stock. Borrowers shall not and shall not suffer or permit any of their Subsidiaries (if any) or Affiliates to use any portion of the Loan proceeds, directly or indirectly, to purchase or carry Margin Stock or repay or otherwise refinance Indebtedness of the Borrowers or any of their Subsidiaries (if any) or others incurred to purchase or carry Margin Stock, or otherwise in any manner which is in contravention of any Requirement of Law or in violation of this Agreement.

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10.15         Contingent Obligations. No Borrower shall, and shall not suffer or permit any of its Subsidiaries (if any) to, create, incur, assume or suffer to exist any Contingent Obligations except in respect of the Obligations and except: (a) endorsements for collection or deposit in the ordinary course of business; (b) Hedging Agreements permitted pursuant to Section 10.11(d); (c) Contingent Obligations incurred in the ordinary course of business with respect to surety and appeal bonds, performance bonds and other similar obligations; and (d) guaranties in favor of the Agent for the benefit of the Agent and the Lenders.

10.16         Compliance with ERISA. No Borrower shall, and shall not suffer or permit any ERISA Affiliate to, (a) cause or permit to exist any ERISA Event or any other event or condition, which could reasonably be expected to have a Material Adverse Effect; or (b) permit any Pension Plan to have vested Unfunded Benefit Liabilities (using the actuarial assumptions utilized by the PBGC upon termination of the Pension Plan), all determined as of the most recent valuation date for each such Pension Plan.

10.17         Restricted Payments. No Borrower shall, and shall not suffer or permit any of its Subsidiaries (if any) to, (a) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any units of any class of its Equity Interests, (b) purchase, redeem or otherwise acquire for value any units of its Equity Interests or any rights or options to acquire such units, interests or securities now or hereafter outstanding, or (c) otherwise make any Restricted Payment; provided that any Borrower may make any payment or take any action listed above so long as at the time such payment is made or such action is taken, the Payment Conditions are satisfied.

10.18         Change in Structure. No Borrower shall and shall not permit any of its Subsidiaries (if any) to (a) amend any of its organizational documents, or (b) except for the KKR Transaction (to the extent the same does not constitute a Change of Control) make any changes in its equity capital structure (including in the terms of its outstanding Equity Interests).

10.19         Related Documents. No Borrower shall, and shall not permit any of its Subsidiaries (if any), to, without the prior written consent of the Required Lenders, (a) enter into or consent to any modification or alteration of any Related Document or otherwise amend, modify, cancel or supplement in any respect any provisions of any Related Document or any document related thereto in any material respect, or (b) fail to comply with its obligations and liabilities under any Related Document.

10.20         Environmental. No Borrower shall, and shall not permit any of its Subsidiaries (if any) to, fail to conduct its business so as to comply in all material respects with all Environmental Laws as the same may be amended from time to time; provided, however, that nothing contained in this Section 10.20 shall prevent such Borrower or such Subsidiary from contesting, in good faith by appropriate legal proceedings, any such law, regulation, interpretation thereof or application thereof, provided, further, that no Borrower nor any of its Subsidiaries shall fail to comply with the order of any court or other Governmental Authority of applicable jurisdiction relating to such laws unless such Borrower or such Subsidiary shall currently be prosecuting an appeal or proceedings for review and shall have secured a stay of enforcement or execution or other arrangement postponing enforcement or execution pending such appeal or proceedings for review.

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10.21         Management and Consulting Arrangements. No Borrower shall, and shall not suffer or permit any of its Subsidiaries (if any) to, (a) enter into any management or consulting arrangement with respect to the Facility, other than the Management Agreement, the Service Contract or the TRS Service Contract (as in effect on the date hereof), or (b) at any time pay or accrue any management, consulting or similar fees with respect to the Facility, except that, (i) so long as at the time of such payment, the Payment Conditions are satisfied, and (ii) only to the extent expressly permitted by the Management Fee Subordination Agreement, each Owner may pay the Manager a management fee when due and payable pursuant to the terms of the Management Agreement (as in effect on the date hereof) and that certain Pooling Agreement among Four, Operator and Manager (the “Pooling Agreement”), in an aggregate amount not in excess of 5% (exclusive of incentive fees provided for in the Management Agreement and the Pooling Agreement) of the Gross Revenues from the operations of the Facility from the most recently ended prior calendar month.

10.22         Compliance With Laws. Each Borrower shall, and cause each of its Subsidiaries (if any) to comply with all applicable requirements (including applicable laws) of any Governmental Authority having jurisdiction over any Borrower or any of such Borrower’s Subsidiaries unless such Borrower (or, as the case may be, Subsidiary) is contesting such requirements in a manner similar to that set forth in Section 10.20 above relating to Environmental Laws.

10.23         Payment and Performance of Obligations. Each Borrower will, and will cause its Subsidiaries (if any) to, pay and discharge at or before maturity, all of its material obligations and liabilities, (i) will maintain in accordance with GAAP, appropriate reserves for the accrual of all of its obligations and liabilities and (ii) will not breach or permit to exist any default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets are bound.

10.24         Capital Expenditures. The Borrowers will take all appropriate steps and actions to address the deferred maintenance and “immediate repair” items as outlined in the Property Condition Report delivered pursuant to Section 12.1.19 in the normal course of each Borrower’s business but in no event later than one hundred twenty (120) days after the Closing Date.

10.25         Leasing Restrictions. The Borrowers shall not (i) enter into any additional operating leases other than (a) the leases listed on Schedule 10.25 and the Facility Lease Agreement, (b) residency leases with residents of the Project and (c) other leases for ancillary service providers such as barbers and physical rehabilitation service providers (including office space for such physical rehabilitation service providers and also including the potential future rehabilitation center proposed to be located on the ground floor), or (ii) materially modify, materially amend or terminate any operating lease listed on Schedule 10.25.

10.26         Books and Records. Each Borrower will, and will cause each Subsidiary (if any) to, keep adequate records and books of account, with complete entries made to permit the preparation of financial statements in accordance with GAAP.

10.27         Maintenance of Properties. Each Borrower will, and will cause each of its Subsidiaries (if any) to, maintain and preserve all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, in all material respects, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.

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10.28         Fiscal Year. Each Borrower will cause the fiscal year of such Borrower and each of its Subsidiaries (if any) to end on December 31^st of each calendar year.

10.29         Sale of Assets. The Borrowers will not, and will not permit any Subsidiary (if any) to, make any Dispositions except (a) as my be otherwise permitted in Sections 10.11, 10.12, 10.13, 10.17 and 10.21, (b) a Borrower may dispose of equipment that is either broken, worn out or obsolete in the ordinary course of business provided that any such Borrower replaces such equipment with new equipment of at least comparable value and utility, or (c) a Borrower may dispose of equipment (for fair market value) that is no longer necessary (in the good faith business judgment of a Responsible Officer of Borrower) for the operation of the Facility.

10.30         Facility Lease Agreement. The Borrowers will comply with the covenants contained in (a) the Facility Lease Agreement, (b) the Facility Lease Subordination Agreement, (c) the Management Fee Subordination Agreement, and (d) the Service Contract Subordination Agreement.

10.31         Bank Accounts. Borrowers shall establish (within thirty (30) days of the Closing Date) and maintain all of their banking accounts with KeyBank National Association.

10.32         Post Closing Lien Searches. Without limiting Borrower’s obligations under Section 16.5 hereof, Borrowers agree, within ten (10) days of Agent’s written demand, to reimburse Agent for all expenses (not to exceed $1,000 in any twelve (12) month period) incurred by Agent in periodically (up to two (2) times per year) verifying Borrowers’ performance of its obligations under the Loan Documents and the security and priority of the Mortgage, including without limitation expenses incurred by Agent for title searches, title updates and endorsements, tax and judgment lien searches, litigation searches, and UCC searches.

SECTION 11. CASUALTIES AND CONDEMNATION.

11.1         Agent’s Election to Apply Proceeds on Indebtedness. (a) Subject to the provisions of Section 11.1(b) below, Agent may elect to collect, retain and apply upon the indebtedness of Borrowers under this Agreement or any of the other Loan Documents all proceeds of insurance or condemnation (individually and collectively referred to as “Proceeds”) after deduction of all expenses of collection and settlement, including attorneys’ and adjusters’ fees and charges. Any proceeds remaining after repayment of the indebtedness under the Loan Documents shall be paid by Agent to the Borrowers.

(b)          Notwithstanding anything in Section 11.1(a) to the contrary, in the event of any casualty to the Facility or any condemnation of part of the Project, Agent agrees to make available the Proceeds to restoration and repair (the “Restoration”) of the Facility if (i) no Event of Default exists, (ii) all Proceeds are deposited with Agent, (iii) in Agent’s reasonable judgment, the amount of Proceeds available for restoration of the Facility (together with any sums or other security acceptable to Agent deposited with Agent by Borrowers for such purpose) is sufficient to pay the full and complete costs of such restoration, (iv)  if the cost of restoration exceeds ten percent (10%) of the amount of the Loan, in Agent’s sole determination after completion of Restoration the amount of the Loan will not exceed seventy-five percent (75%) of the fair market value of the Project, (v) in Agent’s reasonable determination, the Project can be restored to an architecturally and economically viable project in compliance with Applicable Laws, (vi) each Guarantor reaffirms its Guaranty in writing, and (vii) in Agent’s reasonable determination, such Restoration is likely to be completed not later than three (3) months prior to the Maturity Date.

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11.2         Borrowers’ Obligation to Rebuild and Use of Proceeds Therefor. In case Agent does not elect to apply or does not have the right to apply the Proceeds to the Obligations, as provided in Section 11.1 above, the relevant Borrower shall:

(a)          Proceed with diligence to make settlement with insurers or the appropriate Governmental Authorities and cause the Proceeds to be deposited with Agent;

(b)          In the event of any delay in making settlement with insurers or the appropriate Governmental Authorities or effecting collection of the Proceeds, deposit with Agent the full amount required to complete Restoration as aforesaid;

(c)          In the event the Proceeds are insufficient to assure the Agent that the Restoration can be completed, promptly deposit with Agent any additional amount necessary to pay for such Restoration;

(d)          Promptly proceed with the Restoration of the Facility, including the repair of all damage resulting from such fire, condemnation or other cause and restoration to its former condition; and

(e)          Promptly provide to Agent such showings, certificate, lien waivers, permits and similar documentation as Agent shall reasonably request.

SECTION 12. EFFECTIVENESS; CONDITIONS OF LENDING, ETC.

The obligation of each Lender to make its Loan is subject to the following conditions precedent:

12.1         Closing Date. The obligation of the Lenders to make the Loan is subject to the conditions precedent that the Agent shall have received all of the following, each duly executed and dated the Closing Date (or such earlier date as shall be satisfactory to the Agent), in form and substance satisfactory to the Agent (and the date on which all such conditions precedent have been satisfied or waived in writing by the Agent and the Lenders is called the “Closing Date”):

12.1.1. Notes. A Note for each Lender.

12.1.2. Authorization Documents. For each Loan Party, such Person’s (a) articles of organization, certified by the appropriate governmental authority; (b) good standing certificates in its state of formation, the state where the Projects are located and in each other state requested by the Agent; (c) operating agreement (or similar governing document); (d) resolutions of its members approving and authorizing such Person’s execution, delivery and performance of the Loan Documents to which it is party and the transactions contemplated thereby; and (e) signature and incumbency certificates of its officers executing any of the Loan Documents (it being understood that the Agent and each Lender may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein), all certified by its secretary or an assistant secretary (or similar officer) as being in full force and effect without modification.

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12.1.3. Consents, Permits, etc. Certified copies of all documents evidencing any necessary limited liability company action, consents and governmental approvals (if any) required for the execution, delivery and performance by the Loan Parties of the documents referred to in this Section 12 and copies of all permits, licenses and approvals necessary for the acquisition, ownership and operation of the Project by the Borrowers.

12.1.4. Letter of Direction. A letter of direction containing funds flow information with respect to the proceeds of the Loan on the Closing Date.

12.1.5. Loan Documents. Counterparts of each Guaranty, the Mortgage, each Security Agreement, the Assignment of Leases and Rents and each other Collateral Document, each executed by the appropriate Loan Party.

12.1.6. Opinions of Counsel. Opinions of counsel for each Loan Party, including local counsel, satisfactory to the Agent.

12.1.7. Insurance. Evidence of the existence of insurance required to be maintained pursuant to Section 10.2, together with evidence that the Agent has been named as a lender’s loss payee and the Agent has been named as an additional insured on all related insurance policies, as appropriate.

12.1.8. Payment of Fees. Evidence of payment by the Borrowers of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, including, without limitation, costs associated with the Property Condition Report, closing, documenting and underwriting the transaction, due diligence, title premiums, surveys, the Appraisal and recording the Mortgage, the fixture filing and the Financing Statements, together with all Attorney Costs of the Agent to the extent invoiced prior to the Closing Date, plus such additional amounts of Attorney Costs as shall constitute the Agent’s reasonable estimate of Attorney Costs incurred or to be incurred by the Agent through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Borrowers and the Agent).

12.1.9. Search Results; Lien Terminations. Certified copies of Uniform Commercial Code search reports dated a date reasonably near to the Closing Date, listing all effective financing statements which name any Loan Party (under their present names and any previous names) as debtors, together with (a) copies of such financing statements, (b) Lien releases in respect of Liens in favor of Column Financial, Inc. or its subsidiaries, and (c) such other Uniform Commercial Code termination statements as the Agent may reasonably request.

12.1.10. Appraisal. On or prior to the Closing Date, the Agent shall have received an Appraisal of the Project, which shall be reasonably acceptable to the Agent.

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12.1.11. Title Insurance. On or prior to the Closing Date, the Borrowers shall have delivered to the Agent a commitment to deliver an ALTA Lenders title insurance policy covering the Projects in favor of the Agent, such policy to be in the amount not less than the Committed Amount and to be reasonably satisfactory to the Agent with such customary endorsements and affirmative assurances issued by the title company as a routine matter (the “Title Policy”).

12.1.12. Environmental Audit; Health Surveys. At least ten (10) Business Days prior to the Closing Date, the Agent shall have received (a) an Environmental Audit for the Property addressed to the Agent and each Lender or accompanied by a letter allowing such Persons to rely thereon, and (b) copies of the most recent New Jersey Department of Health and Senior Services surveys, including follow-up revisits, plans of corrective actions and letters indicating that the Project is in substantial compliance with the requirements of the New Jersey Department of Health and Senior Services, each in form and substance reasonably satisfactory to the Agent.

12.1.13. Filings, Registrations and Recordings. The Agent shall have received each document (including Financing Statements, fixture filings and the Mortgage) required by the Collateral Documents or under law or reasonably requested by the Agent to be filed, registered or recorded in order to create in favor of the Agent, for the benefit of the Lenders, a perfected Lien on the collateral described therein, prior to any other Liens (subject only to Permitted Liens), which shall be in proper form for filing, registration or recording.

12.1.14. Closing Certificate. If the Closing Date occurs after the date of this Agreement, a certificate executed by an officer of each Borrower (on behalf of such Borrower) certifying the matters set forth in Section 12.1.25 as of the Closing Date.

12.1.15. Survey. At least five (5) Business Days prior to the Closing Date, Borrowers shall have delivered to the Agent an ALTA/ACSM survey of the Project reasonably acceptable to the Agent and caused any exceptions to the related title insurance delivered on the Closing Date pursuant to Section 12.1.11 with respect to the non-delivery of such survey on the Closing Date to be removed.

12.1.16. Notice of Borrowing. The Agent shall have received a fully completed Notice of Borrowing, duly executed by the Borrowers.

12.1.17. Related Documents. The Agent shall have received a copy of each of the SPA, the Management Agreement, the Service Contract, the Pooling Agreement and the Facility Lease Agreement, each certified as true, correct and complete by the Borrowers and Guarantor.

12.1.18. Management Fee Subordination Agreement. The Agent shall have received the (a) Management Fee Subordination Agreement, duly executed by the Borrowers and the Manager and (b) Service Contract Subordination Agreement, duly executed by the Borrowers and Four.

12.1.19. Property Condition Report. The Agent shall have received a property condition report (the “Property Condition Report”) from a third party consultant with respect to the Project, which report shall be in form and substance acceptable to the Agent.

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12.1.20. Flood Hazard. The Agent shall have received evidence that the Project is not located in an area designated by the Secretary of Housing and Urban Development as a special flood zone area, or flood hazard insurance acceptable to Agent in its sole discretion.

12.1.21. Financial Information; Projections. The Loan Parties shall have provided to the Agent and the Lenders each Borrower’s historical income statements, balance sheets and cash flow statements for the one (1) year period preceding the Closing Date and projections regarding the same for fiscal years 2013 and 2014.

12.1.22. PILOT Program Tax Benefit. The Loan Parties shall have provided to the Agent and the Lenders evidence that (a) the current real property taxes owing in year one of the Loan under the PILOT Program Tax Benefit (“PPTB”) do not exceed by $324,717 for the Borrowers, and (b) the term of the tax relief provided in the PPTB continues until December 31, 2037.

12.1.23. [Intentionally Omitted].

12.1.24. [Intentionally Omitted].

12.1.25. Account Control Agreements. The Borrowers shall deliver to the Agent (a) evidence that all of their bank accounts have been moved to Key, (b) evidence that all of their bank accounts located at institutions other than Key have been closed and (c) to the extent required by Agent, a fully executed Account Control Agreement, each of which shall be in form and substance acceptable to the Agent.

12.1.26. Other. Such other documents as the Agent may reasonably request.

12.1.27. Compliance with Warranties, No Default, etc. Both before and after giving effect to the borrowing the following statements shall be true and correct (and the Borrowers hereby certify that such statements are true and correct):

(a)  the representations and warranties of each Loan Party set forth in this Agreement and the other Loan Documents shall be true and correct in all material respects with the same effect as if then made (except to the extent stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date);

(b)  no Unmatured Event of Default or Event of Default shall have then occurred and be continuing; and

(c)  no material adverse change in the financial condition, business or prospects of any Loan Party shall have occurred since December 31, 2012.

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SECTION 13. [Intentionally Omitted].

SECTION 14. EVENTS OF DEFAULT AND THEIR EFFECT.

14.1         Events of Default. Each of the following shall constitute an Event of Default under this Agreement:

14.1.1. Non-Payment of the Loans, etc. (a) Default in the payment when due of the principal of any Loan; or (b) default and continuance thereof for three (3) Business Days in the payment when due of any interest, fee or other amount payable by the Borrowers hereunder or under any other Loan Document.

14.1.2. Bankruptcy, Insolvency, etc. Any Loan Party becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or any Loan Party applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for such Loan Party or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for any Loan Party or for a substantial part of the property of any thereof and is not discharged within sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is commenced in respect of any Loan Party, and if such case or proceeding is not commenced by such Loan Party, it is consented to or acquiesced in by such Loan Party, or remains for sixty (60) days undismissed; or any Loan Party takes any action to authorize, or in furtherance of, any of the foregoing.

14.1.3. Non-Compliance with Loan Documents. (a) Failure by any Loan Party to comply with or to perform any covenant set forth in Section 10.1, 10.2, 10.8, 10.9, 10.10, 10.11, 10.12, 10.14. 10.17 or 10.18 of this Agreement; or (b) failure by any Loan Party to comply with or to perform any other provision of this Agreement or any other Loan Document (and not constituting an Event of Default under any other provision of this Section 14) and continuance of such failure described in this clause (b) for thirty (30) days.

14.1.4. Representation and Warranties. Any representation or warranty made by any Loan Party herein or any other Loan Document is breached or is false or misleading in any material respect, or any schedule, certificate, financial statement, report, notice or other writing (other than projections and budgets) furnished by any Loan Party to the Lenders in connection herewith is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified.

14.1.5. Judgments. Final judgments which (exclusive of amounts covered by valid and collectible insurance other than self insurance in respect thereof by a Person that has acknowledged its obligation to make such payment) exceed an aggregate of $150,000 shall be rendered against any Loan Party and shall not have been paid, discharged or vacated or had execution thereof stayed pending appeal within sixty (60) days after entry or filing of such judgments.

14.1.6. Invalidity of Loan Documents, etc. Any Loan Document shall cease to be in full force and effect; or any Loan Party (or any Person by, through or on behalf of any Loan Party) shall contest in any manner the validity, binding nature or enforceability of any Loan Document.

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14.1.7. Indebtedness. If any Loan Party shall fail to pay any debt in excess of $500,000 owed by such Loan Party or any Loan Party is in default under any agreement in excess of $500,000 with the Agent, any Lender or any other Person and such failure or default continues after any applicable grace period specified in the instrument or agreement relating thereto.

14.1.8. Material Adverse Effect. If a Material Adverse Effect (including, without limitation, the termination of any Medicare or Medicaid certification for the Facility or the imposition of any material ban, limit, delay or moratorium on further admissions to the Facility).

14.1.9. Related Documents. (i) The occurrence of any other event or circumstance denominated as an Event of Default in this Agreement, or (ii) any breach, default, event of default, “Default”, or “Event of Default” (in each case beyond any notice of cure periods applicable thereto) shall occur under any other Loan Document or any Person shall, or shall attempt to, terminate, discontinue or revoke any of its obligations thereunder.

14.1.10. Change of Control. A Change of Control shall occur.

14.1.11. ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC; (ii) any Unfunded Pension Liability exists with respect to any Pension Plan; or (iii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan.

14.1.12. Licenses and Permits. Any license or permit required by any Governmental Authority with respect to the ownership or operation of the Project is revoked or is not renewed; provided, however, that with respect to licenses or permits that the revocation or non-renewal thereof does not prevent, prohibit or otherwise materially interfere with the use or operation of the Projects, the same shall not constitute an Event of Default unless such revocation or non-renewal continues for a period of thirty (30) or more days.

14.1.13. Guarantor. (i) A default by Guarantor under the Guaranty, or (ii) Guarantor shall, or shall attempt to, terminate or revoke Guarantor’s obligations under the Guaranty.

14.1.14. Management Agreements. If the Management Agreement expires (and the same is not replaced by a new Management Agreement complying with the terms hereof) prior to the Maturity Date.

14.2         Effect of Event of Default. Upon the occurrence of any Event of Default, Agent may, and at the request of the Required Lenders shall, pursue any one or more of the following remedies concurrently or successively, it being the intent hereof that none of such remedies shall be to the exclusion of any other:

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(a)          Take possession of the Project and do anything which is necessary or appropriate in its sole judgment to fulfill the obligations of Borrowers under this Agreement and the other Loan Documents, including either the right to avail itself of and procure performance of existing contracts or let any contracts with the same contractors or others. Without restricting the generality of the foregoing and for the purposes aforesaid, Borrowers hereby appoint and constitute Agent as their lawful attorney-in-fact with full power of substitution in the Project; to retain or employ new general contractors, subcontractors, architects, engineers and inspectors as shall be required for said purposes; to pay, settle or compromise all existing bills and claims, which may be liens or security interests, or to avoid such bills and claims becoming liens against the Project; to execute all applications and certificates in the name of Borrowers prosecute and defend all actions or proceedings in connection with the Project; to execute instruments of release and satisfaction; and to do any and every act which the Borrowers might do in its own behalf; it being understood and agreed that this power of attorney shall be a power coupled with an interest and cannot be revoked;

(b) Declare the Loan and all other Obligations to be immediately due and payable;

(c)          Use and apply any monies or letters of credit deposited by Borrowers with Agent, regardless of the purposes for which the same was deposited, to cure any such default or to apply on account of any indebtedness under this Agreement which is due and owing to Lenders;

(d)          Exercise or pursue any other remedy or cause of action permitted under this Agreement or any other Loan Documents, or conferred upon Agent or Lenders by operation of law.

Notwithstanding the foregoing, if any Event of Default described in Section 14.1.2 shall occur in respect of any Loan Party, the Loan and all other Obligations hereunder shall become immediately due and payable without presentment, demand, protest or notice of any kind.

The Agent shall promptly advise the Borrowers of any such declaration, but failure to do so shall not impair the effect of such declaration.

Notwithstanding any other provisions of this Agreement, after the Loan (with accrued interest thereon) and all other Obligations hereunder and under the Loan Documents shall have become due and payable, all amounts collected or received by the Agent or any Lender on account of amounts outstanding under any of the Loan Documents or in respect of the Collateral shall be paid over or delivered as follows:

First, to the payment of all fees, costs, expenses and indemnities of the Agent (in its capacity as such), including Attorney Costs, and any other Obligations owing to the Agent (in its capacity as such) in respect of sums advanced by the Agent (in its capacity as such) to preserve the Collateral or to preserve its security interest in the Collateral, until paid in full;

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Second, to the payment of fees, costs, expenses and indemnities (including Attorney Costs) of the Lenders, pro rata, until paid in full;

Third, to the payment of all of the Obligations (other than Bank Product Obligations and Hedging Obligations) consisting of accrued and unpaid interest owing to any Lender, pro rata, until paid in full;

Fourth, to the payment of all of the Obligations (other than Bank Product Obligations and Hedging Obligations) consisting of principal owing to any Lender, pro rata, until paid in full;

Fifth, to the payment of all Bank Product Obligations and Hedging Obligations owing to any Lender or its Affiliates, pro rata, until paid in full;

Sixth, to the payment of all other Obligations owing to each Lender, pro rata, until paid in full; and

Seventh, to the payment of any remaining proceeds, if any, to whomever may be lawfully entitled to receive such amounts, including, without limitation, Borrowers.

SECTION 15. The Agent.

15.1         Appointment and Authorization. Each Lender hereby irrevocably (subject to Section 14.10) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duty or responsibility except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in other Loan Documents with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

15.2         [Intentionally Omitted].

15.3         Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

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15.4         Exculpation of Agent. None of the Agent nor any of its directors, officers, employees or agents shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except to the extent resulting from its own gross negligence or willful misconduct in connection with its duties expressly set forth herein as determined by a final, non-appealable judgment by a court of competent jurisdiction), or (b) be responsible in any manner to any Lender or Participant for any recital, statement, representation or warranty made by any Loan Party or Affiliate of the Loan Parties, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document (or the creation, perfection or priority of any Lien or security interest therein), or for any failure of the Borrowers or any other party to any Loan Document to perform their Obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Loan Parties or any of their Subsidiaries or Affiliates.

15.5         Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, electronic mail message, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or all of the Lenders or any affected Lender if such action is required to be consented to by all of Lenders or any affected Lender pursuant to the terms of Section 16.1) as it deems appropriate and, if it so requests, confirmation from the Lenders of their obligation to indemnify the Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon each Lender. For purposes of determining compliance with the conditions specified in Section 12, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Agent shall have received written notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

15.6         Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or any Borrower referring to this Agreement, describing such Event of Default or Unmatured Event of Default and stating that such notice is a “notice of default”. The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Event of Default or Unmatured Event of Default as may be requested by the Required Lenders in accordance with Section 14; provided that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default or Unmatured Event of Default as it shall deem advisable or in the best interest of the Lenders so long as it is not in conflict with any express provision of this Agreement or any other Loan Document.

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15.7         Credit Decision. Each Lender acknowledges that the Agent has not made any representation or warranty to it, and that no act by the Agent hereafter taken, including any consent and acceptance of any assignment or review of the affairs of the Loan Parties, shall be deemed to constitute any representation or warranty by the Agent to any Lender as to any matter, including whether the Agent has disclosed material information in its possession. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties, and made its own decision to enter into this Agreement and to extend credit to the Borrowers hereunder. Each Lender also represents that it will, independently and without reliance upon the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrowers. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of the Borrowers which may come into the possession of the Agent.

15.8         Indemnification. Whether or not the transactions contemplated hereby are consummated, each Lender shall indemnify upon demand the Agent and its directors, officers, employees and agents (to the extent not reimbursed by or on behalf of the Borrowers and without limiting the obligation of the Borrowers to do so), according to its applicable Pro Rata Share, from and against any and all Indemnified Liabilities (as hereinafter defined); provided that no Lender shall be liable for any payment to any such Person of any portion of the Indemnified Liabilities to the extent determined by a final, nonappealable judgment by a court of competent jurisdiction to have resulted from the applicable Person’s own gross negligence or willful misconduct. No action taken in accordance with the directions of the Required Lenders (or all of the Lenders or any affected Lender if such action is required to be consented to by all of Lenders or any affected Lender pursuant to the terms of Section 16.1) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs and Taxes) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The undertaking in this Section shall survive repayment of the Loans, cancellation of the Notes, any foreclosure under, or modification, release or discharge of, any or all of the Collateral Documents, termination of this Agreement and the resignation or replacement of the Agent.

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15.9         Agent in Individual Capacity. Key and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Loan Parties and their Affiliates as though Key were not the Agent hereunder and without notice to or consent of any Lender. Each Lender acknowledges that, pursuant to such activities, Key or its Affiliates may receive information regarding the Loan Parties or their Affiliates (including information that may be subject to confidentiality obligations in favor of such Persons) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to their Loans (if any), Key and its Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though Key were not the Agent, and the terms “Lender” and “Lenders” include Key and its Affiliates, to the extent applicable, in their individual capacities.

15.10         Successor Agent. The Agent may resign as Agent upon thirty (30) days’ notice to the Lenders. If the Agent resigns under this Agreement, the Required Lenders shall, with (so long as no Event of Default exists) the consent of the Borrowers (which shall not be unreasonably withheld or delayed), appoint from among the Lenders a successor agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Borrowers, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “Agent” shall mean such successor agent, and the retiring Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 15 and Section 16.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

15.11         Collateral Matters. The Lenders irrevocably authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent under any Collateral Document (i) upon termination of the Commitments and payment in full of all Loans and all other obligations of the Borrowers hereunder; (ii) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder; or (iii) subject to Section 16.1, if approved, authorized or ratified in writing by the Required Lenders. Upon request by the Agent at any time, the Lenders will confirm in writing the Agent’s authority to release particular types or items of Collateral pursuant to this Section 15.11.

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15.12         Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agent shall have made any demand on the Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a)          to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Agent and their respective agents and counsel and all other amounts due the Lenders and the Agent under Sections 5, 15.5 and 15.17) allowed in such judicial proceedings; and

(b)          to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Agent and, in the event that the Agent shall consent to the making of such payments directly to the Lenders, to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent and its agents and counsel, and any other amounts due the Agent under Sections 5, 15.5 and 15.17.

Nothing contained herein shall be deemed to authorize the Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Agent to vote in respect of the claim of any Lender in any such proceeding.

15.13         Other Agents; Arrangers and Managers. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “co-agent,” “book manager,” “lead manager,” “arranger,” “lead arranger” or “co-arranger”, if any, shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

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SECTION 16. GENERAL.

16.1         Waiver; Amendments. No delay on the part of the Agent or any Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the other Loan Documents shall in any event be effective unless the same shall be in writing and acknowledged by and consented to in writing by the Required Lenders, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent shall (a) extend or increase the Commitment of any Lender without the written consent of such Lender, (b) extend the date scheduled for payment of any principal (excluding mandatory prepayments) of or interest on the Loans or any fees payable hereunder without the written consent of each Lender directly affected thereby, (c) reduce the principal amount of the Loan, the rate of interest thereon or any fees payable hereunder, without the consent of each Lender directly affected thereby (other than the waiver of the 3% increase in interest rate due to the occurrence of an Event of Default); or (d) release any party from its obligations under any Guaranty or the Collateral Documents or all or any substantial part of the Collateral granted under the Collateral Documents, change the definition of “Required Lenders”, any provision of this Section 15.1 or reduce the aggregate Pro Rata Share required to effect an amendment, modification, waiver or consent, without, in each case, the written consent of all Lenders. No provision of Section 15 or other provision of this Agreement affecting the Agent in its capacity as such shall be amended, modified or waived without the consent of the Agent.

16.2         Confirmations. The Borrowers and each holder of a Note agree from time to time, upon written request received by it from the other, to confirm to the other in writing (with a copy of each such confirmation to the Agent) the aggregate unpaid principal amount of the Loans then outstanding under such Note.

16.3         Notices. Except as otherwise provided in Section 4.1, all notices hereunder shall be in writing and shall be sent to the applicable party at its address shown on Annex B or at such other address as such party may, by written notice received by the other parties, have designated as its address for such purpose. Notices sent by mail shall be deemed to have been given three (3) Business Days after the date when sent by registered or certified mail, postage prepaid; and notices sent by hand delivery or overnight courier service shall be deemed to have been given when received. For purposes of Section 4.1, the Agent shall be entitled to rely on telephonic instructions from any person that the Agent in good faith believes is an authorized officer or employee of the Borrowers, and the Borrowers agree to hold the Agent and each other Lender harmless from any loss, cost or expense resulting from any such reliance.

16.4         Computations. Where the character or amount of any asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made, for the purpose of this Agreement, such determination or calculation shall, to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with GAAP, consistently applied; provided that if the Borrowers notify the Agent that the Borrowers wish to amend any covenant in Section 10 (or any related definition) to eliminate or to take into account the effect of any change in GAAP on the operation of such covenant (or if the Agent notifies the Borrowers that the Required Lenders wish to amend Section 10 (or any related definition) for such purpose), then the Borrowers’ compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant (or related definition) is amended in a manner satisfactory to the Borrowers and the Required Lenders.

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16.5         Costs and Expenses. The Borrowers agree to pay on demand all reasonable out-of-pocket costs and expenses of the Agent (including Attorney Costs) in connection with the preparation, execution, syndication, delivery and administration (including perfection and protection of any Collateral and the costs of Intralinks or SyndTrak (or similar service), if applicable) of this Agreement, the other Loan Documents and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith (including any amendment, supplement or waiver to any Loan Document), and also including, without limiting the generality of the foregoing, all recording, filing and registration fees and charges, mortgage or documentary taxes, environmental assessment costs, all insurance premiums, title insurance premiums and other charges of the title insurer, printing and photocopying expenses, survey fees and charges, cost of certified copies of instruments, costs and chargers of any escrowee for administering disbursements, costs of the Property Condition Report, all fees and disbursements of any consultant, all appraisal fees, insurance consultant’s fees, environmental consultant’s fees, and costs, travel related expenses and all costs and expenses incurred by Agent in connection with the determination of whether or not Borrowers have performed the obligations undertaken by Borrowers hereunder, whether or not the transactions contemplated hereby or thereby shall be consummated, and all reasonable out-of-pocket costs and expenses (including Attorney Costs) incurred by the Agent and each Lender after an Event of Default in connection with the collection of the Obligations or the enforcement of this Agreement the other Loan Documents or any such other documents or during any workout, restructuring or negotiations in respect thereof. In addition, the Borrowers agree to pay and to save the Agent and the Lenders harmless from all liability for, any fees of the Borrowers’ auditors in connection with any reasonable exercise by the Agent and the Lenders of their rights pursuant to Section 10.5. All Obligations provided for in this Section 16.5 shall survive repayment of the Loans, cancellation of the Notes and termination of this Agreement.

16.6         Assignments; Participations.

16.6.1. Assignments.

(a)  Any Lender may at any time assign to one or more Persons (any such Person, an “Assignee”) all or any portion of such Lender’s Loans, with the prior written consent of the Agent and, so long as no Event of Default exists, the Borrowers (which consents shall not be unreasonably withheld or delayed and shall not be required for an assignment by a Lender to another Lender or an Affiliate of a Lender). Except as the Agent and the Borrowers may otherwise agree, any such assignment (i) shall be in a minimum aggregate amount equal to $500,000 or, if less, the remaining Loans held by the assigning Lender, (ii) shall be a pro rata assignment of the assigning Lender’s Loans to each Borrower, and (iii) if such assignment is a partial assignment of a Lender’s Loans, shall not cause there to be more than two (2) unaffiliated Lenders holding such Loans. Borrowers and the Agent shall be entitled to continue to deal solely and directly with a Lender in connection with the interests so assigned to an Assignee until the Agent shall have received and accepted an effective assignment agreement in substantially the form of Exhibit B hereto (an “Assignment Agreement”) executed, delivered and fully completed by the applicable parties thereto and a processing fee of $3,500. No assignment may be made to any Person if at the time of such assignment Borrowers would be obligated to pay any greater amount under Section 7.6 or 8 to the Assignee than Borrowers are then obligated to pay to the assigning Lender under such Sections (and if any assignment is made in violation of the foregoing, the Borrowers will not be required to pay such greater amounts). Any attempted assignment not made in accordance with this Section 16.6.1 shall be treated as the sale of a participation under Section 16.6.2. Borrowers shall be deemed to have granted their consent to any assignment requiring their consent hereunder unless the Borrowers have expressly objected to such assignment within five (5) Business Days after notice thereof.

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(b)  From and after the date on which the conditions described above have been met, (i) such Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned to such Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (ii) the assigning Lender, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, shall be released from its rights (other than its indemnification rights) and obligations hereunder. Upon the request of the Assignee (and, as applicable, the assigning Lender) pursuant to an effective Assignment Agreement, each Borrowers shall execute and deliver to the Agent for delivery to the Assignee (and, as applicable, the assigning Lender) a Note in the principal amount of the Assignee’s Loans to such Borrower (and Notes in the principal amount of the Pro Rata Share of the principal amount of the Loans retained by the assigning Lender). Each such Note shall be dated the effective date of such assignment. Upon receipt by the assigning Lender of such Note, the assigning Lender shall return to the Borrowers any prior Notes held by it.

(c)  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

16.6.2. Participations. Any Lender may at any time sell to one or more Persons participating interests in its Loans or other interests hereunder (any such Person, a “Participant”); provided that in no event shall there be more than two (2) unaffiliated Participants in such Loans at any time. In the event of a sale by a Lender of a participating interest to a Participant, (a) such Lender’s obligations hereunder shall remain unchanged for all purposes, (b) the Borrowers and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations hereunder, (c) all amounts payable by the Borrowers shall be determined as if such Lender had not sold such participation and shall be paid directly to such Lender and (d) for purposes of monitoring the number of Participants hereunder such Lender shall promptly notify the Agent of such sale. No Participant shall have any direct or indirect voting rights hereunder except with respect to any event described in Section 16.1 expressly requiring the unanimous vote of all Lenders or, as applicable, all affected Lenders. Each Lender agrees to incorporate the requirements of the preceding sentence into each participation agreement which such Lender enters into with any Participant. The Borrowers agree that if amounts outstanding under this Agreement are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that such right of set-off shall be subject to the obligation of each Participant to share with the Lenders, and the Lenders agree to share with each Participant, as provided in Section 7.6. The Borrowers also agree that each Participant shall be entitled to the benefits of Section 7.6 or 8 as if it were a Lender (provided that on the date of the participation no Participant shall be entitled to any greater compensation pursuant to Section 7.6 or 8 than would have been paid to the participating Lender on such date if no participation had been sold and that each Participant complies with Section 7.6(d) as if it were an Assignee).

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16.7         Register. The Agent shall maintain a copy of each Assignment Agreement delivered and accepted by it and register (the “Register”) for the recordation of names and addresses of the Lenders and the Commitment of each Lender from time to time and whether such Lender is an original Lender or an Assignee. No assignment shall be effective unless and until the Assignment Agreement is accepted and registered in the Register. All records of transfer of a Lender’s interest in the Register shall be conclusive, absent manifest error, as to the ownership of the interests in the Loans. The Agent shall not incur any liability of any kind with respect to any Lender with respect to the maintenance of the Register.

16.8         GOVERNING LAW. THIS AGREEMENT AND EACH NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES EXCEPT TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW, OTHER THAN WITH RESPECT TO PROPERTY-SPECIFIC MATTERS SUCH AS, BY WAY OF EXAMPLE AND NOT LIMITATION, ZONING AND OTHER LOCAL LAWS, WHICH SHALL BE GOVERNED BY LAWS OF THE STATE.

16.9         Severability. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. All obligations of the Borrowers and rights of the Agent and the Lenders expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by applicable law.

16.10         Nature of Remedies. All Obligations of the Borrowers and rights of the Agent and the Lenders expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by applicable law. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

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16.11         Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the parties hereto and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof and any prior arrangements made with respect to the payment by the Borrowers of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Agent or the Lenders.

16.12         Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Receipt of an executed signature page to this Agreement by facsimile or other electronic transmission shall constitute effective delivery thereof. Electronic records of executed Loan Documents maintained by the Lenders shall deemed to be originals.

16.13         Successors and Assigns. This Agreement shall be binding upon the Borrowers, the Agent and the Lenders and their respective successors and assigns, and shall inure to the benefit of the Borrowers, the Lenders and the Agent and the successors and assigns of the Lenders and the Agent. No other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. No Borrower may assign or transfer any of its rights or Obligations under this Agreement without the prior written consent of the Agent and each Lender.

16.14         Captions. Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.

16.15         Patriot Act Notification. As required by federal law and Key’s policies and practices, Key may need to collect certain customer identification information and documentation in connection with opening or maintaining accounts, or establishing or continuing to provide services. Borrowers hereby agree to cooperate with Key and promptly supply all such requested information upon Key’s request.

16.16         INDEMNIFICATION BY THE BORROWERS. IN CONSIDERATION OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY THE AGENT AND THE LENDERS AND THE AGREEMENT TO EXTEND THE COMMITMENTS PROVIDED HEREUNDER, BORROWERS HEREBY AGREE TO INDEMNIFY, EXONERATE AND HOLD THE AGENT, EACH LENDER AND EACH OF THE OFFICERS, DIRECTORS, EMPLOYEES, AFFILIATES AND AGENTS OF THE AGENT AND EACH LENDER (EACH A “LENDER PARTY”) FREE AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, LOSSES, LIABILITIES, DAMAGES AND EXPENSES, INCLUDING ATTORNEY COSTS (COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”), INCURRED BY THE LENDER PARTIES OR ANY OF THEM AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (A) THE USE, HANDLING, RELEASE, EMISSION, DISCHARGE, TRANSPORTATION, STORAGE, TREATMENT OR DISPOSAL OF ANY HAZARDOUS MATERIAL AT ANY PROPERTY OWNED OR LEASED BY ANY LOAN PARTY, (B) ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO CONDITIONS AT ANY PROPERTY OWNED OR LEASED BY ANY LOAN PARTY OR THE OPERATIONS CONDUCTED THEREON, (C) THE INVESTIGATION, CLEANUP OR REMEDIATION OF OFFSITE LOCATIONS AT WHICH ANY LOAN PARTY OR THEIR RESPECTIVE PREDECESSORS ARE ALLEGED TO HAVE DIRECTLY OR INDIRECTLY DISPOSED OF HAZARDOUS MATERIALS OR (D) THE EXECUTION, DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BY ANY OF THE LENDER PARTIES, EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES ARISING ON ACCOUNT OF THE APPLICABLE LENDER PARTY’S GROSS NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT AS DETERMINED BY A FINAL, NONAPPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION. IF AND TO THE EXTENT THAT THE FOREGOING UNDERTAKING MAY BE UNENFORCEABLE FOR ANY REASON, THE BORROWERS HEREBY AGREE TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE LAW. ALL OBLIGATIONS PROVIDED FOR IN THIS SECTION 16.16 SHALL SURVIVE REPAYMENT OF THE LOANS, CANCELLATION OF THE NOTES, ANY FORECLOSURE UNDER, OR ANY MODIFICATION, RELEASE OR DISCHARGE OF, ANY OR ALL OF THE COLLATERAL DOCUMENTS AND TERMINATION OF THIS AGREEMENT.

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16.17         Nonliability of Lenders. The relationship between the Borrowers on the one hand and the Agent and the Lenders on the other hand shall be solely that of borrower and lender. Neither the Agent nor the Lender has any fiduciary relationship with or duty to any Loan Party arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Loan Parties, on the one hand, and the Agent and the Lender, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. Neither the Agent nor any Lender undertakes any responsibility to any Loan Party to review or inform any Loan Party of any matter in connection with any phase of any Loan Party’s business or operations. The Borrowers agree, on behalf of themselves and each other Loan Party, that neither the Agent nor any Lender shall have liability to any Loan Party (whether sounding in tort, contract or otherwise) for losses suffered by any Loan Party in connection with, arising out of, or in any way related to the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence, bad faith or willful misconduct of the party from which recovery is sought. NO LENDER PARTY SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY OTHERS OF ANY INFORMATION OR OTHER MATERIALS OBTAINED THROUGH INTRALINKS OR OTHER SIMILAR INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT, NOR SHALL ANY LENDER PARTY HAVE ANY LIABILITY WITH RESPECT TO, AND BORROWERS ON BEHALF OF ITSELF AND EACH OTHER LOAN PARTY, HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ARISING OUT OF ITS ACTIVITIES IN CONNECTION HEREWITH OR THEREWITH (WHETHER BEFORE OR AFTER THE CLOSING DATE). Each Borrower acknowledges that it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party. No joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lender or among the Loan Parties and the Lenders.

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16.18         FORUM SELECTION AND CONSENT TO JURISDICTION. TO THE GREATEST EXTENT PERMITTED BY LAW, EACH BORROWER HEREBY WAIVES ANY AND ALL RIGHTS TO REQUIRE MARSHALLING OF ASSETS BY LENDER. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), EACH BORROWER IRREVOCABLY (A) SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. EACH BORROWER FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY COURT REFERRED TO ABOVE MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO SUCH BORROWER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF SUCH BORROWER SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

16.19         WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

16.20         Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, the Notes, or of any other Loan Document, nor consent to any departure by any Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on any Borrower, shall entitle any Borrower to any other or future notice or demand in the same, similar or other circumstances.

[signature pages follow]

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The parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first set forth above.

Woodbury Mews III Urban Renewal, LLC
Woodbury Mews IV Urban Renewal, LLC
By	/s/ John Mark Ramsey
	John Mark Ramsey
	Its Authorized Signatory

S-1

KeyBank National Association,
as Lender and Agent
By:	/s/ Amy Maclearie
Title:	AVP - Closer

S-2

ANNEX A

LENDERS AND PRO RATA SHARES

Lender	Commitment		Pro Rata Shares
KeyBank National Association	$	25,000,000		100	%
TOTAL LOAN	$	25,000,000		100	%

A-1

ANNEX B

ADDRESSES FOR NOTICES

Borrowers

c/o Sentio Healthcare Properties, Inc.

189 South Orange Avenue

Suite 1700

Orlando, Florida 32801

Attention: Sharon C. Kaiser

Telephone: 407.999.2437

Facsimile: 407.999.5210

With a copy to:

Foley & Lardner LLP

111 North Orange Avenue

Suite 1800

Orlando, Florida 32801

Attention: Michael A. Okaty

Telephone: 407.244.3229

Facsimile: 407.648.1743

Lender and Agent

KeyBank National Association, as Agent and a Lender

Real Estate Capital - Healthcare
Mailcode OH-01-51-0311
4910 Tiedeman Road, 3rd Floor
Brooklyn, Ohio 44144
Attention: Amy L. MacLearie
Telephone: (216) 813-6935
Facsimile: (216) 813-6383

With a copy to:

Schiff Hardin LLP

233 South Wacker Drive

Suite 6600

Chicago, Illinois 60606

Attention: Sean T. Maloney

Telephone: (312) 258-5505

Facsimile: (312) 258-5700

B-1

SCHEDULE 9.1

SUBSIDIARIES

See Attached

SCHEDULE 9.2(ii)

CONFLICTS

Section 5.4 of the Securities Purchase Agreement by and between Sentio Healthcare Properties, Inc., Sentio Healthcare Properties OP, L.P., (the “Sentio Parties”) and Sentinel RE Investment Holdings LP provides as follows:

Other Agreements and Other Financings. The Sentio Parties will not enter into, announce or recommend any agreement, plan, arrangement or transaction the terms of which would restrict, materially delay or conflict with the ability or right of the Sentio Parties or any of their Subsidiaries to perform its obligations under this Agreement or the Related Documents, including, without limitation, the obligation of the Sentio Parties to deliver Securities to the Investor in respect of Put Exercise Notices that may be delivered from time to time pursuant to this Agreement.

Due to the Change of Control provisions set forth in this Agreement and the requirement to obtain Agent and Lender consent in the event of a Change of Control, failure to timely obtain consent could delay or conflict with the Sentio Parties’ ability to perform under the Securities Purchase Agreement in violation of Section 5.4.

SCHEDULE 9.4

FINANCIAL STATEMENTS

See Attached.

Schedule 9.6

PERMITS/LICENSES

1. As of October 21, 2013, the Operator will not possess that certain license necessary to operate the Facility as an Assisted Living Residence issued by the New Jersey Department of Health, Division of Health Facilities Evaluation and Licensing (“Licensing Agency”). However, Operator has received confirmation from the Licensing Agency that the license will be granted upon delivery of proof that the purchase of the Facilities has closed.

2. Operator does not possess a Medicaid Provider ID for the Facility, as the Provider ID cannot be provided until the Assisted Living Residence License has been issued by the Licensing Agency.

SCHEDULE 10.11

PMSI/CAPITAL LEASES

None

SCHEDULE 10.13

AFFILIATE TRANSACTIONS

1. That certain Services Agreement between Woodbury Mews IV Urban Renewal, LLC and WM IV TRS, LLC

2. That certain Lease between Woodbury Mews III Urban Renewal, LLC and WM III TRS, LLC

SCHEDULE 10.25

OPERATING LEASES

None

EXHIBIT A

FORM OF

TERM LOAN NOTE

R-	________ __, 20__
$

Each of the undersigned, for value received, promises to pay to the order of ______________ (the “Lender”) at the principal office of KeyBank National Association in Cleveland, Ohio the aggregate unpaid amount of all Loans made to the undersigned by the Lender pursuant to the Loan Agreement referred to below (as shown in the records of the Lender), such principal amount to be payable on the dates set forth in the Loan Agreement.

Each of the undersigned, further promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Loan Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America.

This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Loan Agreement, dated as of October 21, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”; terms not otherwise defined herein are used herein as defined in the Loan Agreement), among the undersigned and the Lender, to which Loan Agreement reference is hereby made for a statement of the terms and provisions under which this Note may or must be paid prior to its due date or its due date accelerated.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

A-1

This Note is made under and governed by the laws of the State of New York applicable to contracts made and to be performed entirely within such State, without regard to conflict of laws principles except Title 14 of Article 5 of the New York General Obligations Law.

Woodbury Mews III Urban Renewal, LLC
Woodbury Mews IV Urban Renewal, LLC
By
	John Mark Ramsey
	Its Authorized Signatory

A-2

EXHIBIT B

Form of Assignment and Assumption Agreement

This Assignment and Assumption Agreement (this “Assignment Agreement”) between ____________ (the “Assignor”) and ____________ (the “Assignee”) is dated as of ____________, 201___. The parties hereto agree as follows:

1.          PRELIMINARY STATEMENT. The Assignor is a party to a Term Loan Agreement (which, as it may be amended, modified renewed or extended from time to time is herein called the “Loan Agreement”) described in Item 1 of Schedule 1 attached hereto (“Schedule 1”). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Loan Agreement.

2.          ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, the percentage interest, specified in Item 3 of Schedule 1, in and to the Assignor’s rights and obligations under the Loan Agreement and all other Loan Documents. Schedule 1 also sets forth: (a) the respective Pro Rata Shares of the Assignor and the Assignee after giving effect hereto, and (b) the principal amount of the Notes to be issued to the Assignor and the Assignee, respectively, after giving effect hereto.

3.          EFFECTIVE DATE. The effective date of this Assignment Agreement (the “Effective Date”) shall be the later of the date specified in Item 6 of Schedule 1 or two Business Days (or such shorter period agreed to by the Agent) after a Notice of Assignment substantially in the form of Annex I attached hereto has been delivered to the Agent. In no event will the Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Effective Date under Sections 4 and 5 hereof are not made on the proposed Effective Date. As of the Effective Date, (i) the Assignee shall have the rights and obligations of a Lender under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder and (ii) the Assignor shall relinquish its rights and be released from its corresponding obligations under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder.

4.          PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee shall be entitled to receive from the Agent all payments of principal, interest and fees with respect to the interest assigned hereby. The Assignee shall advance funds directly to the Agent with respect to all Loans and reimbursement payments made on or after the Effective Date with respect to the interest assigned hereby. [In consideration for the sale and assignment of the Loans hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an amount equal to the principal amount of the portion of all Loans assigned to the Assignee hereunder.]^* In the event that either party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement, then the party receiving such amount shall promptly remit it to the other party hereto.

^*     Each Assignor may insert its standard payment provisions in lieu of the payment terms included in this Exhibit.

B-1

[5.          FEES PAYABLE BY THE ASSIGNEE.^** The Assignee shall pay to the Assignor a fee on each day on which a payment of interest or commitment fees is made under the Loan Agreement with respect to the amounts assigned to the Assignee hereunder (other than a payment of interest or commitment fees for the period prior to the Effective Date which the Assignee is obligated to deliver to the Assignor pursuant to Section 4 hereof). The amount of such fee shall be the difference between (i) the interest or commitment fee, as applicable, paid with respect to the amounts assigned to the Assignee hereunder and (ii) the interest or commitment fee, as applicable, which would have been paid with respect to the amounts assigned to the Assignee hereunder if each interest rate was ____ of 1% less than the interest rate paid by the Borrowers or if the commitment fee was ____ of 1% less than the commitment fee paid by the Borrowers, as applicable.]

6.          REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR’S LIABILITY. The Assignor represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim. It is understood and agreed that the assignment and assumption hereunder are made without recourse to the Assignor and that the Assignor makes no other representation or warranty of any kind to the Assignee. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency, value or collectibility of any Loan Document, including without limitation, documents granting the Agent a security interest in assets of the Loan Parties, (ii) any representation, warranty or statement made in or in connection with any of the Loan Documents, (iii) the financial condition or creditworthiness of any Loan Party, (iv) the performance of or compliance with any of the terms or provisions of any of the Loan Documents, (v) inspecting any of the properties, books or records of the Loan Parties, (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Obligations or (vii) any mistake, error of judgment, or action taken or omitted to be taken in connection with any of the Loans, the Letters of Credit or any of the Loan Documents.

^**Section 5 is optional and may be inserted if mutually acceptable to the Assignor and the Assignee with the blanks filled in accordingly.

B-2

7.          REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has received a copy of the Loan Agreement, together with copies of the financial statements requested by the Assignee and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement, (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender, (v) agrees that its payment instructions and notice instructions are as set forth in the attachment to Schedule 1, [and (vi) attaches the forms prescribed by the Internal Revenue Service of the United States certifying that the Assignee is entitled to receive payments under the Loan Documents without deduction or withholding of any United States federal income taxes].^***

8.          INDEMNITY. The Assignee agrees to indemnify and hold the Assignor harmless against any and all losses, costs and expenses (including, without limitation, reasonable attorneys’ fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee’s non-performance of the obligations assumed under this Assignment Agreement.

9.          SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall have the right subject to and pursuant to Section 16.6.1 of the Loan Agreement to assign the rights which are assigned to the Assignee hereunder to any entity or person, provided that (i) any such subsequent assignment does not violate any of the terms and conditions of any of the Loan Documents or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Loan Documents has been obtained and (ii) unless the prior written consent of the Assignor is obtained, the Assignee is not thereby released from its obligations to the Assignor hereunder, if any remain unsatisfied, including, without limitation, its obligations under Sections 4, [5] and 8 hereof.

10.         ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of Assignment embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings between the parties hereto relating to the subject matter hereof.

11.         GOVERNING LAW. THIS ASSIGNMENT AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES EXCEPT TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

^***To be inserted if the Assignee is not incorporated under the laws of the United States, or a state thereof.

B-3

IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written.

[NAME OF ASSIGNOR]

By:

Title:

[NAME OF ASSIGNEE]

By:

Title:

B-4

SCHEDULE 1

to Assignment and Assumption Agreement

1.          Description and Date of Term Loan Agreement: Loan Agreement dated as of October 21, 2013

2.          Date of Assignment and Assumption Agreement: ____________, 201___

3.          Percentage Interest Purchased

      by Assignee hereunder                              _____%

4.          Pro Rata Shares (after giving

effect hereto)

a.           Assignor’s Pro Rata Share                _____%

b.           Assignee’s Pro Rata Share                _____%

5.          Principal Amount of Note to be issued to Assignor                 $_________

(i.e., Assignee’s Commitment)

6.          Proposed Effective Date: ____________

Accepted and Agreed:

[NAME OF ASSIGNOR]	[NAME OF ASSIGNEE]
By:	By:
Title:	Title:

B-5

Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT

B-6

EXHIBIT C

FORM OF

NOTICE OF BORROWING

To: KeyBank National Association, as Agent

Please refer to the Loan Agreement dated as of October 21, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) among (a) Woodbury Mews III Urban Renewal, LLC, a Delaware limited liability company (“Three”), (b) Woodbury Mews IV Urban Renewal, LLC, a Delaware limited liability company (“Four” and collectively with Three, the “Borrowers” and individually, a “Borrower”); (c) the several financial institutions from time to time party to this Agreement, as Lenders (the “Lenders”); and (d) KeyBank National Association, as a Lender (in such capacity, “Key”), and as Agent (in such capacity, the “Agent”). Terms used but not otherwise defined herein are used herein as defined in the Loan Agreement.

Each of the undersigned hereby gives irrevocable notice, pursuant to Section 2.2 of the Loan Agreement, of a request hereby for a borrowing as follows:

(i)          The requested borrowing date for the proposed borrowing (which is a Business Day) is _____________ ___, 2013.

(ii)         The aggregate amount of the proposed borrowing is $______________.

(iii)        The type of Loans comprising the proposed borrowing are [Base Rate] [LIBOR] Loans.

The undersigned hereby certifies that on the date hereof and on the date of borrowing set forth above, and immediately after giving effect to the borrowing requested hereby: (i) there exists and there shall exist no Unmatured Event of Default or Event of Default under the Loan Agreement; and (ii) each of the representations and warranties contained in the Loan Agreement and the other Loan Documents is true and correct as of the date hereof, except to the extent that such representation or warranty expressly relates to another date and except for changes therein expressly permitted or expressly contemplated by the Loan Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

The undersigned has caused this Notice of Borrowing to be executed and delivered by its officer thereunto duly authorized on ________ __, 2013.

Woodbury Mews III Urban Renewal, LLC
Woodbury Mews IV Urban Renewal, LLC
By
	John Mark Ramsey
	Its Authorized Signatory

C-2

EXHIBIT D

FORM OF NOTICE OF CONVERSION

To: KeyBank National Association, as Agent

Please refer to the Loan Agreement dated as of October 21, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) among (a) Woodbury Mews III Urban Renewal, LLC, a Delaware limited liability company (“Three”), (b) Woodbury Mews IV Urban Renewal, LLC, a Delaware limited liability company (“Four” and collectively with Three, the “Borrowers” and individually, a “Borrower”), (c) the several financial institutions from time to time party to this Agreement, as Lenders (the “Lenders”); and (d) KeyBank National Association, as a Lender (in such capacity, “Key”), and as Agent (in such capacity, the “Agent”). Terms used but not otherwise defined herein are used herein as defined in the Loan Agreement.

The undersigned hereby gives irrevocable notice, pursuant to Section 4.1 of the Loan Agreement, of its request to on [INSERT DATE] convert the aggregate outstanding principal amount of the Loan, bearing interest at the [LIBOR] [Base] Rate, into a [LIBOR Loan(s)] [Base Rate Loan(s)].

Each of the undersigned hereby represents and warrants that all of the conditions contained in Section 12.1.25 of the Loan Agreement have been satisfied on and as of the date hereof, and will continue to be satisfied on and as of the date of the conversion requested hereby, before and after giving effect thereto.

[Remainder of Page Left Intentionally Blank]

Each of the undersigned has caused this Notice of Conversion to be executed and delivered by its officer thereunto duly authorized on ___________, ______.

Woodbury Mews III Urban Renewal, LLC
Woodbury Mews IV Urban Renewal, LLC
By
	John Mark Ramsey
	Its Authorized Signatory

D-2

EXHIBIT E

Account Control Agreement

This Account Control Agreement, dated as of __________, 201__ (this “Agreement”), among KeyBank National Association, a national banking association, as Agent (the “Agent”) for the Lenders (as defined below); [___________________],a ____________ limited liability company (the “Pledgor”); and [___________________], a _____________ (the “Depositary Bank”).

Witnesseth:

Whereas, Depositary Bank has established an account, number ________________, in the name of the Pledgor (together with any other account or accounts to which sums contained therein are transferred, the “Account”);

Whereas, pursuant tothat certain Security Agreement dated as of the date hereof (the “Security Agreement”), between the Pledgor and the Agent, the Pledgor has granted the Agent a security interest in the Account;

Whereas, it is a condition to the financing of the Project (as defined in the Loan Agreement) contemplated by that certain Loan Agreement dated as of October 21, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) by and among the Agent, the Pledgor, the other Borrowers party thereto and the lenders from time to time party thereto (the “Lenders”) that the Agent obtain and continue to maintain a perfected first priority security interest in the Account; capitalized terms used in this Agreement which are defined in the Loan Agreement and not otherwise defined herein shall have the meanings given to them in the Loan Agreement;

Whereas, the Agent and the Depositary Bank are entering into this Agreement to perfect the security interest of the Agent in the Account;

Now, Therefore, the parties hereto hereby agree as follows:

Section 1.          The Account. The Depositary Bank hereby represents and warrants to the Agent and the Pledgor that (a) in the ordinary course of its business, the Depositary Bank maintains cash accounts for others, (b) the Account has been established in the name of the Pledgor as recited above and (c) except for the claims and interest of the Agent and the Pledgor in the Account (subject to any claim in favor of the Depositary Bank permitted under Section 2), the Depositary Bank does not know of any claim to or interest in the Account. All parties agree that the Account is a “deposit account” within the meaning of Article 9 of the Uniform Commercial Code of the State of New York (the “UCC”) and that all property held by the Depositary Bank in the Account will be treated as financial assets under the UCC.

Section 2.          Priority of Lien. The Depositary Bank hereby acknowledges the security interest granted to the Agent by the Pledgor. The Depositary Bank hereby confirms that the Account is a cash account and that it will not advance any margin or other credit to the Pledgor nor hypothecate any securities carried in the Account except in connection with the settlement of trading activity permitted to be conducted by the Pledgor hereunder. The Depositary Bank hereby subordinates all liens, encumbrances, claims and rights of setoff it may have, now or in the future, against the Account or any property carried in the Account or any free credit balance in the Account other than in connection with activities in which the Pledgor is permitted to engage hereunder, including the payment of the Depositary Bank’s customary fees, commissions and other charges pursuant to its agreement with the Pledgor and for payment or delivery of financial assets purchased or sold for or from the Account. The Depositary Bank will not agree with any third party that the Depositary Bank will comply with entitlement orders concerning the Account originated by such third party without the prior written consent of the Agent and the Pledgor.

Section 3.          Control. The Depositary Bank will comply with entitlement orders originated by the Agent concerning the Account without further consent by the Pledgor. In furtherance of the foregoing, the Depositary Bank will comply with all orders from the Agent directing the Depositary Bank to hold, transfer or dispose of all amounts and other financial assets in the Account as the Agent may from time to time specify, in each case, without obtaining the consent from the Pledgor. During any period when no Unmatured Event of Default or Event of Default has occurred and is continuing, the Depositary Bank may, to the extent permitted by Section 4 below, distribute to the Pledgor principal amounts and interest accrued at the rate set forth in such Section 4 on property in the Account. Upon the occurrence and during the continuation of an Unmatured Event of Default or a Event of Default, the Depositary Bank will cease distributing interest on property in the Account. The Depositary Bank shall be entitled to rely on any notice from the Agent regarding the occurrence and continuance of an Unmatured Event of Default or Event of Default.

Section 4.          Limited Withdrawals. After the Depositary Bank has received notice of an Unmatured Event of Default or an Event of Default from the Agent, the Depositary Bank shall not comply with any entitlement order from the Pledgor requiring a free delivery of any financial assets from the Account nor deliver any such financial assets to the Pledgor nor pay any free credit balance or other amount owing from the Depositary Bank to the Pledgor with respect to the Account (each such delivery or payment being herein referred to as a “withdrawal”) but shall instead only comply with the instructions of the Agent.

Section 5.          Statements, Confirmations and Notices of Adverse Claims. The Depositary Bank will send copies of all statements and confirmations concerning the Account to each of the Pledgor and the Agent at the address set forth in Section 15 of this Agreement. Upon receipt of written notice of any lien, encumbrance or adverse claim against the Account or in any financial asset carried therein, the Depositary Bank will make reasonable efforts promptly to notify the Agent and the Pledgor thereof.

Section 6.          Limited Responsibility of the Depositary Bank. Except for permitting a withdrawal in violation of Section 3 or 4 above or advancing margin or other credit to the Pledgor in violation of Section 2 above, the Depositary Bank shall have no responsibility or liability to the Agent. The Depositary Bank shall have no responsibility or liability to the Agent with respect to the value of the Account or any asset held therein. This Agreement does not create any obligation or duty of the Depositary Bank other than those expressly set forth herein.

E-2

Section 7.          Indemnification of the Depositary Bank. The Pledgor, by its acknowledgement hereof, agrees to indemnify and hold harmless the Depositary Bank, its directors, officers, agents and employees against any and all claims, causes of action, liabilities, lawsuits, demands and damages, including, without limitation, any and all court costs and reasonable attorney’s fees, in any way related to or arising out of or in connection with this Agreement or any action taken or not taken pursuant hereto, except to the extent resulting from the Depositary Bank’s gross negligence or willful misconduct.

Section 8.          Customer Agreement. In the event of a conflict between this Agreement and any other agreement between the Depositary Bank and the Pledgor, the terms of this Agreement will prevail.

Section 9.          Termination. Unless earlier terminated by the Depositary Bank pursuant to this Section, this Agreement shall continue in effect until the Agent has notified the Depositary Bank in writing that this Agreement, or its security interest in the Account, is terminated. Upon receipt of such notice the obligations of the Depositary Bank under Sections 2, 3, 4 and 5 above with respect to the operation and maintenance of the Account after the receipt of such notice shall terminate, the Agent shall have no further right to originate entitlement orders concerning the Account. The Depositary Bank reserves the right, unilaterally, to terminate this Agreement, such termination to be effective 30 business days after written notice thereof is given to the Pledgor and the Agent.

Section 10.         Complete Agreement. This Agreement and the instructions and notices required or permitted to be executed and delivered hereunder set forth the entire agreement of the parties with respect to the subject matter hereof, and, subject to Section 8 above, supersede any prior agreement and contemporaneous oral agreements of the parties concerning its subject matter.

Section 11.         Amendments. No amendment, modification or (except as otherwise specified in Section 9 above) termination of this Agreement, nor any assignment of any rights hereunder (except to the extent contemplated under Section 13 below), shall be binding on any party hereto unless it is in writing and is signed by each of the parties hereto, and any attempt to so amend, modify, terminate or assign except pursuant to such a writing shall be null and void. No waiver of any rights hereunder shall be binding on any party hereto unless such waiver is in writing and signed by the party against whom enforcement is sought.

Section 12.         Severability. If any term or provision set forth in this Agreement shall be invalid or unenforceable, the remainder of this Agreement, other than those provisions held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted.

E-3

Section 13.         Successors. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives. This Agreement may be assigned by the Agent to any successor of the Agent under the Security Agreement; provided that written notice thereof is given by the Agent to the Depositary Bank. This Agreement may not be assigned by the Pledgor to any entity without the prior written consent of the Agent, in its sole and absolute discretion. Any permitted assignee of the Pledgor will concurrently with such assignment affirm in writing that the assignment is subject to the terms of this Agreement.

Section 14.         Notices. Except as otherwise expressly provided herein, any notice, order, instruction, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error-free receipt is received or upon receipt of notice sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Any party may change its address for notices in the manner set forth above. Notices hereunder shall be addressed:

to the Depositary Bank at:

_______________________

_______________________

_______________________

Attention: _____________

Telephone: _____________

Facsimile: _____________

to the Pledgor at:

______________________
______________________
______________________
Attention: _____________
Telephone: _____________
Facsimile: _____________

to the Agent at:

KeyBank National Association, as Agent
Mailcode OH-01-51-0311
4910 Tiedeman Road, 3rd Floor
Brooklyn, Ohio 44144
Attention:      Amy L. MacLearie
Telephone:    (216) 813-6935
Facsimile:       (216) 813-6943

Section 15.         Counterparts. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts.

E-4

Section 16.         Choice of Law. Regardless of any provision in any other agreement relating to the Account, the parties hereto agree that, subject to Section 8 of this Agreement, the establishment and maintenance of the Account, and all interests, duties and obligations with respect to the Account, shall be governed by the internal laws of the State of New York applicable to contracts made and to be performed entirety within such state, without regard to conflict of laws principles except Title 14 of Article 5 of the New York General Obligations Law. Without limiting the foregoing, the Pledgor, the Depositary Bank and the Agent agree that New York is the Depositary Bank’s jurisdiction for purposes of Section 9-304(b)(1) of the Uniform Commercial Code with respect to the Account.

[Signature page follows]

E-5

Accepted and agreed to as of the date first above written.

[Name of Pledgor]
By:
	Name:
	Title:
[Depository Bank]
By:
	Printed Name:
	Title:
KeyBank National Association, as Agent
By:
	Its Vice President

E-6

EXHIBIT F

Legal Description of the Property

ALL THAT CERTAIN TRACT, PARCEL AND LOT OF LAND LYING AND BEING SITUATE IN THE CITY OF WOODBURY, COUNTY OF GLOUCESTER, STATE OF NEW JERSEY, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL ONE (Woodbury Mews III Urban Renewal, LLC):

COMMENCING AT A POINT IN THE SOUTHWESTERLY PROLONGATION OF THE EXISTING EASTERLY RIGHT OF WAY LINE OF GREEN AVENUE (41 FEET WIDE, 26 FEET FROM CENTERLINE) WHERE THE SAME IS INTERSECTED BY THE NORTHWESTERLY PROLONGATION OF THE EXISTING NORTHERLY RIGHT OF WAY LINE OF EAST BARBER AVENUE, ALSO KNOWN AS COUNTY ROAD #663 (57 FEET WIDE, 32 FEET FROM CENTERLINE) AS SHOWN ON A CERTAIN MAP ENTITLED "WOODBURY MEWS FINAL MAJOR SUBDIVISION PLAN, LOTS 1, 2, 3, 4, 5 AND 6, BLOCK 142, EXISTING LOTS 1, 2, 3, 4, 5, 5.01, 6 AND 6.02, BLOCK 142, CITY OF WOODBURY, GLOUCESTER COUNTY, NEW JERSEY", AS PREPARED BY MAITRE ASSOCIATES, P.C. AND DATED JULY 21, 1999, RUNNING; THENCE

A. ALONG THE AFORESAID SOUTHWESTERLY PROLONGATION OF THE EXISTING EASTERLY RIGHT OF WAY LINE OF GREEN AVENUE, IN THE REVERSE DIRECTION, NORTH 17 DEGREES 56 MINUTES 40 SECONDS EAST, PASSING THROUGH A CONCRETE MONUMENT AT 30.99 FEET AND THROUGH ANOTHER CONCRETE MONUMENT AT 187.44 FEET, A TOTAL OF 219.85 FEET TO A POINT WHERE THE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOT 2 ON THE NORTH AND LOT 1 ON THE SOUTH IN BLOCK 142 AND THE POINT OF BEGINNING FOR THIS DESCRIPTION; THENCE

1. ALONG THE AFORESAID EXISTING EASTERLY RIGHT OF WAY LINE OF GREEN AVENUE, NORTH 17 DEGREES 56 MINUTES 40 SECONDS EAST 294.99 FEET TO A POINT WHERE THE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOT 2 ON THE SOUTH AND LOT 3 ON THE NORTH IN BLOCK 142; THENCE

2. ALONG SAID DIVISION LINE BETWEEN LOTS 2 AND 3 IN BLOCK 142, SOUTH 72 DEGREES 04 MINUTES 32 SECONDS EAST 273.48 FEET TO A POINT WHERE THE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOT 2 ON THE WEST AND LOT 6 ON THE EAST IN BLOCK 142; THENCE

3. ALONG SAID DIVISION LINE BETWEEN LOTS 2 AND 6, BLOCK 142, SOUTH 17 DEGREES 55 MINUTES 28 SECONDS WEST, 295.30 FEET TO A POINT WHERE THE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOT 2 ON THE NORTH AND LOT 1 ON THE SOUTH IN BLOCK 142; THENCE

4. ALONG SAID DIVISION LINE BETWEEN LOTS 2 AND 1, BLOCK 142, NORTH 72 DEGREES 00 MINUTES 38 SECONDS WEST, 273.58 FEET TO THE POINT OR PLACE OF BEGINNING.

BEING KNOWN AS LOT 2, BLOCK 142, AS SHOWN ON A CERTAIN MAP ENTITLED "WOODBURY MEWS FINAL MAJOR SUBDIVISION PLAN, LOTS 1, 2, 3, 4, 5 AND 6, BLOCK 142, EXISTING LOTS 1, 2, 3, 4, 5, 5.01, 6 AND 6.02, BLOCK 142, CITY OF WOODBURY, GLOUCESTER COUNTY, NEW JERSEY" FILED IN THE GLOUCESTER COUNTY CLERK'S OFFICE ON MAY 18, 2001, AS MAP NO. 3210.

.

PARCEL TWO (Woodbury Mews IV Urban Renewal, LLC):

COMMENCING AT A POINT IN THE SOUTHWESTERLY PROLONGATION OF THE EXISTING EASTERLY RIGHT OF WAY LINE OF GREEN AVENUE (41 FEET WIDE, 26 FEET FROM CENTERLINE) WHERE THE SAME IS INTERSECTED BY THE NORTHWESTERLY PROLONGATION OF THE EXISTING NORTHERLY

RIGHT OF WAY LINE OF EAST BARBER AVENUE, ALSO KNOWN AS COUNTY ROUTE # 663 (57 FEET WIDE, 32 FEET FROM THE CENTERLINE) AS SHOWN ON A CERTAIN MAP ENTITLED "WOODBURY MEWS FINAL MAJOR SUBDIVISION PLAN, LOTS 1, 2, 3, 4, 5 AND 6, BLOCK 142, EXISTING LOTS 1, 2, 3, 4, 5, 5.01, 6 AND 6.02 BLOCK 142, CITY OF WOODBURY, GLOUCESTER COUNTY, N.J."

AS PREPARED BY MAITRA ASSOCIATES, P.C. AND DATED JULY 21, 1999, RUNNING THENCE

A. ALONG THE AFORESAID SOUTHWESTERLY PROLONGATION OF THE EXISTING EASTERLY RIGHT OF WAY LINE OF GREEN AVENUE, IN THE REVERSE DIRECTION, NORTH 17 DEGREES 56 MINUTES 40 SECONDS EAST, PASSING THROUGH A CONCRETE MONUMENT AT 30.99 FEET AND THROUGH ANOTHER CONCRETE MONUMENT AT 187.44 FEET, A TOTAL OF 514.84 FEET TO A POINT WHERE THE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOT 3 ON THE NORTH AND LOT 2 ON THE SOUTH, IN BLOCK 142, ANDTHE POINT OF BEGINNING FOR THIS DESCRIPTION THENCE

1. ALONG THE AFORESAID EXISTING EASTERLY RIGHT OF WAY LINE OF GREEN AVENUE, NORTH 17 DEGREES 56 MINUTES 40 SECONDS EAST, 88.10 FEET TO AN ANGLE POINT IN THE SAME; THENCE

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2. STILL ALONG THE SAME, NORTH 20 DEGREES 30 MINUTES 39 SECONDS EAST, 203.35 FEET TO A POINT WHERE THE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOT 3 ON THE SOUTH AND LOT 4 ON THE NORTH IN BLOCK 142; THENCE

3. ALONG SAID DIVISION LINE BETWEEN LOTS 3 AND 4 IN BLOCK 142, SOUTH 69 DEGREES 35 MINUTES 02 SECONDS EAST, 232.29 FEET TO AN NGLE POINT IN THE SAME; THENCE

4. STILL ALONG THE SAME, SOUTH 26 DEGREES 24 MINUTES 46 SECONDS EAST, 35.44 FEET TO AN ANGLE POINT IN THE SAME; THENCE

5. STILL ALONG THE SAME, SOUTH 68 DEGREES 52 MINUTES 12 SECONDS EAST, 98.96 FEET TO A POINT WHERE THE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOT 3 ON THE WEST AND LOT 6 ON THE EAST IN BLOCK 142; THENCE

6. ALONG SAID DIVISION LINE BETWEEN LOT 3 AND 6 IN BLOCK 142, SOUTH, 21 DEGREES 11 MINUTES 00 SECONDS WEST, 162.55 FEET TO AN ANGLE POINT AND CONCRETE MONUMENT; THENCE

7. STILL ALONG THE SAME, SOUTH 17 DEGREES 36 MINUTES 20 SECONDS WEST, 87.98 FEET TO A POINT WHERE THE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOT 3 ON THE NORTH AND LOT 6 ON THE SOUTH IN BLOCK 142; THENCE

8. ALONG SAID DIVISION LINE BETWEEN LOTS 3 AND 6 AND THEN LOTS 3 AND 2 IN BLOCK 142, NORTH 72 DEGREES 04 MINUTES 32 SECONDS WEST, 356.10 FEET TO THE POINT OR PLACE OF BEGINNING.

BEING KNOWN AND DESIGNATED AS LOT 3 IN BLOCK 142, AS SHOWN ON A CERTAIN FILED MAP ENTITLED "WOODBURY MEWS FINAL MAJOR SUBDIVISION PLAN, LOTS 1, 2, 3, 4, 5 AND 6 AND 6.02 BLOCK 142, CITY OF WOODBURY, GLOUCESTER COUNTY, N.J.", PREPARED BY MAITRA

ASSOCIATES, P.C., DATED JULY 21, 1999 DULY FILED IN THE OFFICE OF THE CLERK/REGISTER OF GLOUCESTER COUNTY, ON MAY 18, 2001 AS MAP NO. 3210.

TOGETHER WITH ACCESS EASEMENT SET FORTH IN DEED BOOK 4843 PAGE 287.

THE FOREGOING DESCRIPTION BEING IN ACCORDANCE WITH A SURVEY PREPARED BY MILLMAN SURVEYING, INC., DATED FEBRUARY 16, 2010.

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EXHIBIT G

COMPLIANCE CERTIFICATE

[Date]

KeyBank National Association, as Agent
c/o KeyBank Real Estate Capital
4200 West Cypress Street
Suite 490
Tampa, Florida 33607

Ladies and Gentlemen:

The undersigned, (a) Woodbury Mews III Urban Renewal, LLC, a Delaware limited liability company (“Three”), (b) Woodbury Mews IV Urban Renewal, LLC, a Delaware limited liability company (“Four” and collectively with Three, the “Borrowers” and individually, a “Borrower”), each hereby deliver this Compliance Certificate pursuant to Section 10.7 of the Loan Agreement dated as of October 21, 2013 (as amended, modified or supplemented from time to time, the “Loan Agreement”) among the Borrowers, the lenders from time to time party thereto (the “Lenders”) and KeyBank National Association, as agent for the Lenders (“Agent”). Terms used but not otherwise defined herein are used herein as defined in the Loan Agreement.

I.           Covenant Compliance. Each Borrower hereby certifies and warrants to the Agent and the Lenders that the following is a true and complete computation of the following ratios and/or financial restrictions contained in the Section 10.8 of the Loan Agreement (each of the line items to be computed in accordance with the provisions more particularly set forth in Section 10.8 of the Loan Agreement):

A.           Section 10.8(a) (Occupancy) – Average occupancy of Available Units at the Facility for the fiscal quarter ending           __________ __, 201__.

1.          Average Occupancy:                 ___%

2.          Minimum Required:

Computation Period With Fiscal Quarter Ending	Minimum Required Percentage of Available Units Occupied
March 31, 2014		75	%
June 30, 2014		75	%
September 30, 2014		80	%
December 31, 2014		80	%
March 31, 2015 and each fiscal quarter thereafter		85	%

B.           Section 10.8(b) (Debt Service Coverage Ratio) – Actual Debt Service Coverage Ratio for the fiscal quarter ending __________ __, 201__.

1.	Net income before taxes	$________
	Plus: Interest expense	$________
	Plus: Depreciation	$________
	Plus: Amortization	$________
	Plus: Rental expense	$________
	Plus: Management fees	$________
	Less: 5% X ____ [Gross Revenues]	$________
	Less: $350 X ___ [Available Units]	$________
	Equals:		$________

2.	Borrower A’s and its Subsidiaries’ principal payments due on  its long-term indebtedness	$________
	Plus: Borrowers’ interest expense
	(including any payments in
	connection with any Hedging
	Agreement or Hedging Obligation)	$________

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	Equals:	$________
3.	Ratio of 1 to 2	____ to 1.00
4.	Minimum Required

Computation Period With Fiscal Quarter Ending	Minimum Debt Service Coverage Ratio
March 31, 2014	1.20 to 1:00
June 30, 2014	1.25 to 1.00
September 30, 2014	1.30 to 1.00
December 31, 2014	1.35 to 1.00
March 31, 2015	1.40 to 1.00
June 30, 2015 and each fiscal quarter thereafter	1.45 to 1.00

II.          Event of Default. On behalf of each Borrower, I hereby certify to the Agent and the Lenders that I have reviewed the relevant terms of the Loan Documents and have made a review of the transactions and conditions of the Borrowers and their Subsidiaries, as the case may be, from the beginning of the [fiscal quarter ending on [________ ___, _____] [fiscal year ending on _______ ___, _____]¹ through the date hereof [and such review has not disclosed the existence during such period of any condition or event that constitutes an Unmatured Event of Default or an Event of Default] [and such review has disclosed the existence during such period of the following [condition] [and event] that constitute[s] [an Unmatured Event of Default][an Event of Default].²

III.         Restricted Payments. Each Borrower hereby certifies and warrants to the Agent and the Lenders that set forth below is a description³ of all Restricted Payments made by the Borrowers pursuant to Section 10.17 of the Loan Agreement during the [fiscal quarter ending on [________ ___, _____] [fiscal year ending on _______ ___, _____]⁴ and that the Borrowers were in compliance with the Payment conditions at the time of each Restricted Payment was made.

¹ Insert the period the Compliance Certificate covers.

² If an Unmatured Event of Default or an Event of Default exists specify in the space below item II the nature and period of the existence of such Unmatured Event of Default or Event of Default and what action the Borrowers shall have taken or propose to take with respect thereto.

³ Must include all information (including detailed calculations) required to establish whether the Borrowers were in compliance with the payment conditions set forth in Section 10.17 of the Loan Agreement at the time such Restricted Payments were made.

⁴ Insert the period the Compliance Certificate covers.

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IV.          Surveys. Each Borrower hereby certifies and warrants to the Agent and the Lenders that set forth below is a description of all New Jersey Department of Health and Senior Services surveys with respect to the Facility, including follow-up revisits, plans of corrective actions and letters received by any Borrower during the period of the [fiscal quarter ending on [________ ___, _____] [fiscal year ending on _______ ___, _____]⁵:

⁵ Insert the period the Compliance Certificate covers.

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IN WITNESS WHEREOF, each Borrower has caused this Compliance Certificate to be executed and delivered by its duly authorized officer on _________, ____.

Woodbury Mews III Urban Renewal, LLC
Woodbury Mews IV Urban Renewal, LLC
By
	John Mark Ramsey
	Its Authorized Signatory

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Exhibit H

Real Estate Schedule

Name Address City State

EX-10.7

Execution 

Guaranty Agreement

Dated as of October 21, 2013

Re:    Woodbury Mews III Urban Renewal, LLC and Woodbury Mews IV Urban Renewal, LLC

Guaranty

Table of Contents

(Not a part of the Agreement) 

Section 1.	Definitions	1
Section 2.	Guaranty of Notes and Loan Agreement	2
Section 3.	Guaranty of Payment and Performance	2
Section 4.	General Provisions Relating to the Guaranty	3
Section 5.	Representations and Warranties of the Guarantor	8
Section 6.	Amendments, Waivers and Consents	10
Section 7.	Notices	11
Section 8.	Miscellaneous	11

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Guaranty Agreement

Re: Woodbury Mews III Urban Renewal, LLC and Woodbury Mews IV Urban

             Renewal, LLC 

This Guaranty Agreement dated as of October 21, 2013 (this “Guaranty”) is entered into by Sentio Healthcare Properties, Inc., together with any entity which may become a party hereto (hereinafter referred to as “Guarantor”).

Recitals

A.           Guarantor, directly or indirectly, is the holder of 100% of the Equity Interests of Woodbury Mews III Urban Renewal, LLC and Woodbury Mews IV Urban Renewal, LLC, each a limited liability company organized under the laws of the State of Delaware (collectively, the “Borrower”).

B.           The Borrower has entered into that certain Term Loan Agreement dated as of the date hereof (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Loan Agreement”) among the Borrower, KeyBank National Association, as Agent (the “Agent”) and each of the Lenders from time to time parties thereto (the “Lenders”), providing for, among other things, a Term Loan to the Borrower of up to $25,000,000 (herein, and as defined in the Loan Agreement, the “Loans”).

C.           The Agent and the Lenders have required as a condition of their making Loans that the Borrower cause the Guarantor to enter into this Guaranty, and the Borrower has agreed to cause the Guarantor to execute this Guaranty in order to induce the Agent and the Lenders to make the Loans and thereby benefit the Guarantor and its Subsidiaries by providing funds to the Borrower for the purposes described in Schedule 9.12 of the Loan Agreement.

Now, therefore, as required by Section 12.1.4 of the Loan Agreement and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged, the Guarantor does hereby covenant and agree as follows:

Section 1.          Definitions.

Capitalized terms used herein shall have the meanings set forth in the Loan Agreement unless otherwise defined herein.

Guaranty

Section 2.          Guaranty of Notes and Loan Agreement.

Guarantor does hereby irrevocably, absolutely and unconditionally guarantee, as primary obligor and not as surety, unto the Agent and the Lenders: (1) the full and prompt payment of (i) the principal of (but not more than 25% of such principal), and interest on the Notes from time to time outstanding, as and when such payments shall become due and payable whether by lapse of time, upon redemption or prepayment, by extension or by acceleration or declaration or otherwise (including, to the extent permitted by applicable law, interest due on overdue payments of principal, or interest at the rate set forth in the Loan Agreement) and (ii) all fees (including, without limitation, any Fees) that shall become due and payable under the terms of the Loan Agreement, in each case, in federal or other immediately available funds of the United States of America which at the time of payment or demand therefor shall be legal tender for the payment of public and private debts, (2) the full and prompt performance and observance by the Borrower of each and all of the obligations, covenants and agreements required to be performed or owed by the Borrower and the Loan Parties under the terms of the Loans, the Loan Agreement and all other Loan Documents to which the Borrower or any other Loan Party is a party, and (3) the full and prompt payment, (i) upon demand by Agent or any Lender of all costs and expenses, legal or otherwise (including reasonable attorneys’ fees), if any, as shall have been expended or incurred in the protection or enforcement of any rights, privileges or liabilities in favor of the Lenders under or in respect of the Loans, the Loan Agreement, the other Loan Documents or under this Guaranty or in any consultation or action in connection therewith or herewith and (ii) all other Obligations (as defined in the Loan Agreement). All amounts due, debts, liabilities and other obligations described in this Section 2 shall be hereinafter collectively referred to as the “Guaranteed Obligations.”

Guarantor agrees that its guarantee hereunder is continuing in nature and applies to all Guaranteed Obligations whether currently existing or hereafter incurred or created.

Section 3.          Guaranty of Payment and Performance.

This is an irrevocable, absolute and unconditional guarantee of payment and performance (but not of collection) and Guarantor hereby waives, to the fullest extent permitted by law, any right to require that any action on or in respect of any Loan, the Loan Agreement, any other Loan Document or any other Guaranteed Obligation be brought against the Borrower or any other Person or that resort be had to any direct or indirect security for the Guaranteed Obligations or for this Guaranty or any other remedy. Agent and any Lender may, at its option, proceed hereunder against any Guarantor in the first instance to collect monies when due, the payment of which is guaranteed hereby, without first proceeding against the Borrower or any other Person and without first resorting to any direct or indirect security for the Guaranteed Obligations or for this Guaranty or any other remedy. The liability of Guarantor hereunder shall in no way be affected or impaired by any acceptance by Agent or any Lender of any direct or indirect security for, or other guaranties of, any Indebtedness, liability or obligation of the Borrower or any other Person to Agent or any Lender or by any failure, delay, neglect or omission by Agent or any Lender to realize upon or protect any such guarantees, Indebtedness, liability or obligation or any notes or other instruments evidencing the same or any direct or indirect security therefor or by any approval, consent, waiver, or other action taken, or omitted to be taken by Agent or any such Lender.

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Guaranty

Section 4.          General Provisions Relating to the Guaranty.

(a)          Guarantor hereby consents and agrees that Agent or any Lender or Lenders from time to time, with or without any further notice to or assent from any other Guarantor may, without in any manner affecting the liability of Guarantor under this Guaranty, and upon such terms and conditions as Agent any such Lender or Lenders may deem advisable:

(1)         extend in whole or in part (by renewal or otherwise), modify, change, compromise, release or extend the duration of the time for the performance or payment of any Indebtedness, liability or obligation of the Borrower or of any other Person (including, without limitation, any other Guarantor) secondarily or otherwise liable for any Indebtedness, liability or obligation of the Borrower on the Guaranteed Obligations, or waive any Default or Event of Default with respect thereto, or waive, modify, amend or change any provision of the Loan Agreement, any other Loan Document, any other agreement or waive this Guaranty; or

(2)         sell, release, surrender, modify, impair, exchange or substitute any and all property, of any nature and from whomsoever received, held by, or for the benefit of, Agent or any such Lender as direct or indirect security for the payment or performance of any Indebtedness, liability or obligation of the Borrower or of any other Person (including, without limitation, any other Guarantor) secondarily or otherwise liable for any Indebtedness, liability or obligation of the Borrower on the Guaranteed Obligations; or

(3)         settle, adjust or compromise any claim of the Borrower against any other Person (including, without limitation, any other Guarantor) secondarily or otherwise liable for any Indebtedness, liability or obligation of the Borrower on the Guaranteed Obligations.

Guarantor hereby ratifies and confirms any such extension, renewal, change, sale, release, waiver, surrender, exchange, modification, amendment, impairment, substitution, settlement, adjustment or compromise and that the same shall be binding upon it, and hereby waives, to the fullest extent permitted by law, any and all defenses, counterclaims or offsets which it might or could have by reason thereof, it being understood that Guarantor shall at all times be bound by this Guaranty and remain liable hereunder.

(b)          Guarantor hereby waives, to the fullest extent permitted by law:

(1)         notice of acceptance of this Guaranty by the Agent or the Lenders or of the creation, renewal or accrual of any liability of the Borrower, present or future, or of the reliance of Agent or such Lenders upon this Guaranty (it being understood that every Indebtedness, liability and obligation described in Section 2 hereof shall conclusively be presumed to have been created, contracted or incurred in reliance upon the execution of this Guaranty);

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Guaranty

(2)         notice of the making of any additional Loans pursuant to the Loan Agreement;

(3)         demand of payment by Agent or any Lender from the Borrower or any other Person (including, without limitation, any other Guarantor) indebted in any manner on or for any of the Indebtedness, liabilities or obligations hereby guaranteed; and

(4)         presentment for the payment by Agent or any Lender or any other Person of the Notes or any other instrument, protest thereof and notice of its dishonor to any party thereto and to Guarantor.

The obligations of Guarantor under this Guaranty and the rights of Agent and any Lender to enforce such obligations by any proceedings, whether by action at law, suit in equity or otherwise, shall not be subject to any reduction, limitation, impairment or termination, whether by reason of any claim of any character whatsoever or otherwise and shall not be subject to any defense, set-off, counterclaim (other than any compulsory counterclaim), recoupment or termination whatsoever.

(c)          The obligations of Guarantor hereunder shall be binding upon the Guarantor and its successors and assigns, and shall remain in full force and effect irrespective of:

(1)         the genuineness, validity, regularity or enforceability of the Loans, the Loan Agreement, any other Loan Document or any other agreement or any of the terms of any thereof, the continuance of any obligation on the part of the Borrower or any other Person on or in respect of the Loan or under the Loan Agreement, any other Loan Document or any other agreement or the power or authority or the lack of power or authority of the Borrower to execute and deliver the Loan Agreement, any other Loan Document to which it is a party or any other agreement or of Guarantor to execute and deliver this Guaranty or to perform any of its obligations hereunder or the existence or continuance of the Borrower or any other Person as a legal entity; or

(2)         any default, failure or delay, willful or otherwise, in the performance by the Borrower, any Guarantor or any other Person of any obligations of any kind or character whatsoever under Guaranteed Obligations, the Loans, the Loan Agreement, this Guaranty, any other Loan Document, or any other agreement; or

(3)         any creditors’ rights, bankruptcy, receivership or other insolvency proceeding of the Borrower, any Guarantor or any other Person or in respect of the property of the Borrower, any Guarantor or any other Person or any merger, consolidation, reorganization, dissolution, liquidation, the sale of all or substantially all of the assets of or winding up of the Borrower, any Guarantor or any other Person; or

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Guaranty

(4)         impossibility or illegality of performance on the part of the Borrower, any Guarantor or any other Person of its obligations (including, without limitation, the Guaranteed Obligations) under the Loans, the Loan Agreement, this Guaranty, any other Loan Document, or any other agreements; or

(5)         in respect of the Borrower or any other Person, any change of circumstances, whether or not foreseen or foreseeable, whether or not imputable to the Borrower or any other Person, or other impossibility of performance through fire, explosion, accident, labor disturbance, floods, droughts, embargoes, wars (whether or not declared), civil commotion, acts of God or the public enemy, delays or failure of suppliers or carriers, inability to obtain materials, action of any Federal or state regulatory body or agency, change of law or any other causes affecting performance, or any other force majeure, whether or not beyond the control of the Borrower or any other Person and whether or not of the kind hereinbefore specified; or

(6)         any attachment, claim, demand, charge, Lien, order, process, encumbrance or any other happening or event or reason, similar or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments, expenses, Indebtedness, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or against the Borrower, any Guarantor or any other Person or any claims, demands, charges or Liens of any nature, foreseen or unforeseen, incurred by the Borrower, any Guarantor or any other Person, or against any sums payable in respect of the Guaranteed Obligations, the Loans, under the Loan Agreement, this Guaranty or any other Loan Document, so that such sums would be rendered inadequate or would be unavailable to make the payments herein provided; or

(7)         any order, judgment, decree, ruling or regulation (whether or not valid) of any court of any nation or of any political subdivision thereof or any body, agency, department, official or administrative or regulatory agency of any thereof or any other action, happening, event or reason whatsoever which shall delay, interfere with, hinder or prevent, or in any way adversely affect, the performance by the Borrower, any Guarantor or any other Person of its respective obligations under or in respect of the Guaranteed Obligations, the Loans, the Loan Agreement, this Guaranty, any other Loan Document, or any other agreement; or

(8)         the failure of Guarantor to receive any benefit from or as a result of its execution, delivery and performance of this Guaranty; or

(9)         any failure or lack of diligence in collection or protection, failure in presentment or demand for payment, protest, notice of protest, notice of default and of nonpayment, any failure to give notice to any Guarantor of failure of the Borrower, any Guarantor or any other Person to keep and perform any Guaranteed Obligation, any other obligation, covenant or agreement under the terms of the Loans, the Loan Agreement, this Guaranty, any other Loan Document, or any other agreement or failure to resort for payment to the Borrower, any Guarantor or to any other Person or to any other guaranty or to any property, security, Liens or other rights or remedies; or

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Guaranty

(10)        the acceptance of any additional security or other guaranty, the advance of additional money to the Borrower or any other Person, the renewal or extension of the Loans or amendments, modifications, consents or waivers with respect to the Loans, the Loan Agreement, any other Loan Document or any other agreement, or the sale, release, substitution or exchange of any security for the Guaranteed Obligations; or

(11)        any merger or consolidation of the Borrower, any Guarantor or any other Person into or with any other Person or any sale, lease, transfer or other disposition of any of the assets of the Borrower, any Guarantor or any other Person to any other Person, or any change in the ownership of any shares or other equity interests of the Borrower, any Guarantor or any other Person; or

(12)        any defense whatsoever that: (i) the Borrower or any other Person might have to the payment of the Loans (including, principal, Fees or interest) or any other Guaranteed Obligations, other than payment thereof in Federal or other immediately available funds or (ii) the Borrower or any other Person might have to the performance or observance of any of the provisions of the Loans, the Loan Agreement, any other Loan Document or any other Guaranteed Obligations, whether through the satisfaction or purported satisfaction by the Borrower or any other Person of its debts due to any cause such as bankruptcy, insolvency, receivership, merger, consolidation, reorganization, dissolution, liquidation, winding-up or otherwise; or

(13)        any act or failure to act with regard to the Loans, the Loan Agreement, this Guaranty, any other Loan Document or any other agreement or Guaranteed Obligation or anything which might vary the risk of the Guarantor or any other Person; or

(14)        any other circumstance which might otherwise constitute a defense available to, or a discharge of the Guarantor or any other Person in respect of the obligations (including, without limitations, the Guaranteed Obligations) of Guarantor under this Guaranty or any other agreement or of the Guarantor or other Person under or any other agreement;

provided that the specific enumeration of the above-mentioned acts, failures or omissions shall not be deemed to exclude any other acts, failures or omissions, though not specifically mentioned above, it being the purpose and intent of this Guaranty and the Guarantor that the obligations of Guarantor shall be absolute and unconditional and shall not be discharged, impaired or varied except by the payment and performance of the Guaranteed Obligations in accordance with their respective terms whenever the same shall become due and payable as in the Loan Agreement provided, at the place specified in and all in the manner and with the effect provided in the Loan Agreement, as each may be amended or modified from time to time. Without limiting the foregoing, it is understood that repeated and successive demands may be made and recoveries may be had hereunder as and when, from time to time, the Borrower shall default under or in respect of the terms of the Loans or the Loan Agreement or any other Loan Document to which the Borrower is a party and that notwithstanding recovery hereunder for or in respect of any given default or defaults by the Borrower under the Loans or the Loan Agreement or any other Loan Document to which the Borrower is a party, this Guaranty shall remain in full force and effect and shall apply to each and every subsequent default.

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Guaranty

(d)          All rights of Agent and any Lender under this Guaranty shall be considered to be transferred or assigned at any time or from time to time upon the transfer of any Loan (or portion thereof) held by such Lender whether with or without the consent of or notice to the Guarantor under this Guaranty or to the Borrower.

(e)          To the extent of any payments made under this Guaranty, the Guarantor shall be subrogated to the rights of the Agent or any Lenders upon whose Guaranteed Obligations such payment was made, but Guarantor covenants and agrees that such right of subrogation and any and all claims of Guarantor against the Borrower, any endorser or other Guarantor or against any of their respective properties shall be junior and subordinate in right of payment to the prior indefeasible final payment in cash in full of all of the Guaranteed Obligations and satisfaction by the Borrower of its Obligations under the Loan Agreement and the other Loan Documents to which the Borrower is a party and by the Guarantor of its obligations under this Guaranty and the other Loan Documents to which Guarantor is a party, and the Guarantor shall not take any action to enforce such right of subrogation, and the Guarantor shall not accept any payment in respect of such right of subrogation, until all of the Guaranteed Obligations payable by the Guarantor hereunder have indefeasibly been finally paid in cash in full and all of the Guaranteed Obligations of the Borrower and the Guarantor under this Guaranty and the other Loan Documents to which Guarantor is a party have been satisfied. Notwithstanding any right of any Guarantor to ask, demand, sue for, take or receive any payment from the Borrower, all rights, Liens and security interests of Guarantor, whether now or hereafter arising and howsoever existing, in any assets of the Borrower shall be and hereby are subordinated to the rights, if any, of the Agent and the Lenders in those assets. Guarantor shall not have any right to possession of any such asset or to foreclose upon any such asset, whether by judicial action or otherwise, unless and until all of the Guaranteed Obligations shall have been paid in cash in full and satisfied.

(f)          Guarantor agrees that to the extent the Borrower or any other Person makes any payment on any Guaranteed Obligation, which payment or any part thereof is subsequently invalidated, voided, declared to be fraudulent or preferential, set aside, recovered, rescinded or is required to be retained by or repaid to a trustee, receiver, or any other Person under any bankruptcy code, common law, or equitable cause, then and to the extent of such payment, the obligation or the part thereof intended to be satisfied shall be revived and continued in full force and effect with respect to Guarantor’s obligations hereunder, as if said payment had not been made. The liability of Guarantor hereunder shall not be reduced or discharged, in whole or in part, by any payment to Agent or any Lender from any source that is thereafter paid, returned or refunded in whole or in part by reason of the assertion of a claim of any kind relating thereto, including, but not limited to, any claim for breach of contract, breach of warranty, preference, illegality, invalidity or fraud asserted by any account debtor or by any other Person.

(g)          Neither Agent nor any Lender shall be under any obligation: (1) to marshall any assets in favor of the Guarantor (or Borrower) or in payment of any or all of the liabilities of the Borrower under or in respect of Guaranteed Obligations or under any Loan Documents or (2) to pursue any other remedy that the Guarantor (or Borrower) may or may not be able to pursue themselves and that may lighten the Borrowers’ (or Guarantor’s) burden, any right to which Guarantor hereby expressly waives.

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Guaranty

(h)          Guarantor expressly authorizes the Agent to take and hold security for the payment and performance of the Guaranteed Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Guaranteed Obligations, all without affecting the obligations of Guarantor hereunder. To the fullest extent permitted by applicable law, Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party of the unenforceability of Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Guaranteed Obligations. The Agent may, at its election, foreclose on any security held by it by one or more judicial or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise ay other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of Guarantor hereunder except to the extent the Guaranteed Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of Guarantor against the Borrower or any other Loan Party, as the case may be, or any security.

Section 5.          Representations and Warranties of the Guarantor.

Guarantor represents and warrants to Agent and each Lender that:

(a)          Guarantor is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on (1) the business, operations, affairs, financial condition, assets or properties of Guarantor and the Borrower and its subsidiaries, taken as a whole, or (2) the ability of Guarantor to perform its obligations under this Guaranty or (3) the validity or enforceability of this Guaranty (herein in this Section 5, a “Material Adverse Effect”). Guarantor has the power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Guaranty and the other Loan Documents to which Guarantor is a party and to perform the provisions hereof and thereof.

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Guaranty

(b)          Each subsidiary of Guarantor is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each subsidiary of Guarantor has the power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

(c)          This Guaranty and each Loan Document to which Guarantor is a party has been duly authorized by all necessary action on the part of Guarantor, and this Guaranty and each Loan Document to which Guarantor is a party constitutes a legal, valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by (1) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (2) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(d)          The execution, delivery and performance by Guarantor of this Guaranty and each Loan Document to which Guarantor is a party will not (1) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien (other than the Liens contemplated by the Loan Documents) in respect of any property of Guarantor or any of its subsidiaries under any indenture, mortgage, deed of trust, loan, purchase or Loan Agreement, lease, organizational document or any other agreement or instrument to which Guarantor or any of its subsidiaries is bound or by which Guarantor or any of its subsidiaries or any of their respective properties may be bound or affected, (2) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to Guarantor or any of its subsidiaries or (3) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to Guarantor or any of its subsidiaries.

(e)          No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by Guarantor of this Guaranty and each Loan Document to which Guarantor is a party.

(f)          (1) There are no actions, suits or proceedings pending or, to the knowledge of Guarantor, threatened against or affecting Guarantor or any of its subsidiaries or any property of Guarantor or any of its subsidiaries in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

(2)         Neither Guarantor nor any of its subsidiaries is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws and Regulations) of any Governmental Authority, which default or violation, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

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Guaranty

(g)          Guarantor expects to derive a direct benefit (and its board of directors or other governing body had determined that it may reasonably be expected to derive such benefit) from: (1) the Loans to finance its business; (2) the successful operations of Borrower individually and as a group; (3) its rights of contribution and subrogation against the Borrower as provided herein or under applicable law; and (4) the Loan Agreement and the other Loan Documents.

(h)          Guarantor is solvent, has capital not unreasonably small in relation to its business or any contemplated or undertaken transaction and has assets having a value both at fair valuation and at present fair salable value greater than the amount required to pay its debts as they become due and greater than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured. Guarantor does not intend to incur, or believe or should have believed that it will incur, debts beyond its ability to pay such debts as they become due. Guarantor will not be rendered insolvent by the execution and delivery of, and performance of its obligations under, this Guaranty. Guarantor does not intend to hinder, delay or defraud its creditors by or through the execution and delivery of, or performance of its obligations under, this Guaranty.

Section 6.          Amendments, Waivers and Consents.

(a)          This Guaranty may be amended, and the observance of any term hereof may be waived (either retroactively or prospectively), with (and only with) the written consent of Guarantor and the Required Lenders, except that (but subject to the terms of Section 16.1 of the Loan Agreement) (1) no amendment or waiver of any of the provisions of Sections 3, 4 or 5, or any defined term (as it is used therein), will be effective as to Agent or any Lender unless consented to by Agent or such Lender in writing, and (2) no such amendment or waiver may, without the written consent of each Lender, (i) change the percentage of the principal amount of the Loans which are required to consent to any such amendment or waiver or (ii) amend Section 2 or this Section 6.

(b)          The Guarantor will provide Agent and each Lender (irrespective of the amount of Loans then held by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable Agent and such Lender to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof. The Guarantor will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 6 to Agent and each Lender promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the Required Lenders.

(c)          Any amendment or waiver consented to as provided in this Section 6 applies equally to Agent and all Lenders affected thereby and is binding upon them and upon each future Lender and upon the Guarantor. No such amendment or waiver will extend to or affect any obligation, covenant or agreement not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Guarantor, Agent and any Lender nor any delay in exercising any rights hereunder shall operate as a waiver of any rights of Agent or any Lender. As used herein, the term “this Guaranty” and references thereto shall mean this Guaranty as it may from time to time be amended or supplemented.

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Guaranty

Section 7.          Notices.

All notices and communications provided for hereunder shall be in writing and sent (a) by telefacsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), (b) by registered or certified mail with return receipt requested (postage prepaid) or (c) by a recognized overnight delivery service (charges prepaid). Any such notice must be sent:

(1)         if to Agent or a Lender, to Agent or such Lender or its nominee at the address specified for such communications in Section 16.3 of the Loan Agreement or at such other address as Agent or such Lender shall have specified to Guarantor or the Borrower in writing, or

(2)         if to Guarantor, c/o the Borrower at its address set forth in Annex B of the Loan Agreement to the attention of each of the Chief Financial Officer of the Borrower, or at such other address as Guarantor shall have specified to the Agent and Lenders in writing.

Notices under this Section 7 will be deemed given in accordance with the provisions of Section 16.3 of the Loan Agreement.

Section 8.          Miscellaneous.

(a)          No Remedy Exclusive. No remedy herein conferred upon or reserved to Agent or any Lender is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Guaranty now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle Agent or any Lender to exercise any remedy reserved to it under this Guaranty, it shall not be necessary for Agent or such Lender to physically produce its Note in any proceedings instituted by it or to give any notice, other than such notice as may be herein expressly required.

(b)          Payments. Guarantor will pay all sums becoming due under this Guaranty by the method and at the address specified for such purpose for Agent or such Lender in Article 2 and Section 10.3 of the Loan Agreement, or by such other method or at such other address as Agent or any Lender shall have from time to time specified to Guarantor or the Borrower on behalf of Guarantor in writing for such purpose, without the presentation or surrender of this Guaranty or any Note.

(c)          [Intentionally Omitted.

(d)          [Intentionally Omitted.

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Guaranty 

(e)          Partial Unenforceability. Any provision of this Guaranty that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

(f)          Continued Enforceability. If the whole or any part of this Guaranty shall be now or hereafter become unenforceable against Guarantor for any reason whatsoever, this Guaranty shall nevertheless be and remain fully binding upon and enforceable against each other Guarantor as if it had been made and delivered only by such other Guarantor.

(g)          Successors and Assigns. This Guaranty shall be binding upon Guarantor and its successors and assigns and shall inure to the benefit of Agent and each Lender and its successors and assigns so long as its Loans and the other Guaranteed Obligations remain outstanding and unpaid.

(h)          Counterparts. This Guaranty may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

(i)          Choice of Law. This Guaranty shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

(j)          Submission to Jurisdiction. Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any State of New York court or any federal court located in New York County, New York, New York for the adjudication of any matter arising out of or relating to this Guaranty, and consents to the service of all writs, process and summonses by registered or certified mail out of any such court or by service of process on Guarantor at its address to which notices are to be given pursuant to Section 7 hereof and hereby waives any requirement to have an agent for service of process in the State of New York. Nothing contained herein shall affect the right of Agent or any Lender to serve legal process in any other manner or to bring any proceeding hereunder in any jurisdiction where Guarantor may be amenable to suit. Guarantor hereby irrevocably waives any objection to any suit, action or proceeding in any New York court or federal court located in New York County, New York, New York on the grounds of venue and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

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Guaranty

In witness whereof, the undersigned has caused this Guaranty to be duly executed by an authorized representative as of the date first written above.

Sentio Healthcare Properties, Inc.

By:   /s/ John Mark Ramsey                                                     

Printed Name: John Mark Ramsey                                 

Its Authorized Representative

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, John Mark Ramsey, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Sentio Healthcare Properties, 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;
	(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 controls 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.

	/s/ JOHN MARK RAMSEY
Date: November 8, 2013	John Mark Ramsey
	President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Sharon C. Kaiser, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Sentio Healthcare Properties, 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;
	(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 controls 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.

	/s/ SHARON C. KAISER
Date: November 8, 2013	Sharon C. Kaiser
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. Sec.1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

John Mark Ramsey does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge, the Quarterly Report of Sentio Healthcare Properties, Inc. on Form 10-Q for the three-month period ended September 30, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Sentio Healthcare Properties, Inc. 

	/s/ JOHN MARK RAMSEY
Date: November 8, 2013	John Mark Ramsey
	President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. Sec.1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Sharon C. Kaiser does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of her knowledge, the Quarterly Report of Sentio Healthcare Properties, Inc. on Form 10-Q for the three-month period ended September 30, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Sentio Healthcare Properties, Inc.

	/s/ SHARON C. KAISER
Date: November 8, 2013	Sharon C. Kaiser
	Chief Financial Officer (Principal Financial Officer)

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

11. Commitments and Contingencies

We monitor our properties for the presence of hazardous or toxic substances. We are not currently aware of any environmental liability with respect to the properties that we believe would have a material effect on our financial condition, results of operations and cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Our commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In the opinion of management, these matters are not expected to have a material impact on our condensed consolidated financial position, cash flows and results of operations. We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against the Company which if determined unfavorably to us would have a material adverse effect on our cash flows, financial condition or results of operations.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Revenue:
Rental revenue	$ 8,499,000		$ 8,422,000		$ 25,373,000		$ 24,525,000
Resident services and fee income	6,195,000		3,655,000		18,115,000		8,243,000
Tenant reimbursements and other income	403,000		312,000		1,212,000		1,121,000
Total revenues	15,097,000		12,389,000		44,700,000		33,889,000
Expenses:
Property operating and maintenance	9,181,000		7,473,000		26,899,000		20,921,000
General and administrative expenses	523,000		423,000		1,186,000		1,632,000
Asset management fees and expenses	732,000		559,000		2,125,000		1,543,000
Real estate acquisition costs and contingent consideration	0		1,016,000		0		1,229,000
Depreciation and amortization	1,528,000		1,689,000		6,317,000		4,653,000
Total expenses	11,964,000		11,160,000		36,527,000		29,978,000
Income from operations	3,133,000		1,229,000		8,173,000		3,911,000
Other (income) expense:
Interest expense, net	2,031,000		1,788,000		6,121,000		4,808,000
Loss on debt extinguishment and other expense	0		0		0		151,000
Equity in loss (income) from unconsolidated entities	56,000	[1],[2]	(14,000)	[1],[2]	(24,000)	[1],[2]	363,000	[1],[2],[3]
Gain on remeasurement of investment in unconsolidated entity	0		0		0		(1,282,000)
Gain on disposition of investment in unconsolidated entity	(1,701,000)		0		(1,701,000)		0
Net income (loss)	2,747,000		(545,000)		3,777,000		(129,000)
Net income (loss) attributable to noncontrolling interests	215,000		(16,000)		260,000		108,000
Net income (loss) attributable to common stockholders	$ 2,532,000		$ (529,000)		$ 3,517,000		$ (237,000)
Basic and diluted net income (loss) per common share attributable to common stockholders	$ 0.20		$ (0.04)		$ 0.28		$ (0.02)
Basic and diluted weighted average number of common shares	12,673,194		12,853,483		12,756,221		12,877,929

[1] The Physicians Centre MOB joint venture was acquired in April 2012 and was accounted for under the equity method of accounting beginning with the second quarter of 2012.

[2] Littleton Specialty Rehabilitation Facility was completed in April 2012 and the single tenant began paying rent in July 2012, in accordance with the lease. Tenant operations commenced upon licensure of the facility in July 2012 and Littleton Specialty Rehabilitation Facility was accounted for under the equity method of accounting. On December 17, 2012, our joint venture partner noticed the Company of their intent to exercise their promote monetization right. The Company elected to satisfy the monetization provision through a sale of the property. The property was sold on August 8, 2013 for $11.3 million, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013. The Company’s equity in income from the Littleton Specialty Rehabilitation Facility is included in the statement of operations through the date of the sale.

[3] The Company acquired the controlling interest in the operations of Rome LTACH in April 2012 and as a result, Rome LTACH was consolidated in the second quarter of 2012. Accordingly, Rome LTACH was accounted for under the equity method of accounting during the three months ended March 31, 2012.

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Investments in Unconsolidated Entities

9 Months Ended

Sep. 30, 2013

Investments In Unconsolidated Entities [Abstract]

Investments In Unconsolidated Entities

4. Investments in Unconsolidated Entities

As of September 30, 2013, the Company owns an interest in the following entity that is accounted for under the equity method of accounting:

Entity(1)	Property Type	Acquired	Investment(2)		Ownership%
Physicians Center MOB	Medical Office Building	April 2012		1,458,000		71.9

(1)	This entity is not consolidated because the Company exercises significant influence, but does not control or direct the activities that most significantly impact the entity’s performance.
(2)	Represents the carrying value of the Company’s investment in the unconsolidated entity.

Summarized combined financial information for the Company’s unconsolidated entities is as follows:

	September 30, 2013(2)		December 31, 2012(1)(2)
Cash and cash equivalents	$	370,000	$	423,000
Investments in real estate, net		8,949,000		16,312,000
Other assets		173,000		549,000
Total assets	$	9,492,000	$	17,284,000
Notes payable		7,240,000		12,504,000
Accounts payable and accrued liabilities		252,000		219,000
Other liabilities		26,000		99,000
Total stockholders’ equity		1,974,000		4,462,000
Total liabilities and equity	$	9,492,000	$	17,284,000

	Three Months Ended September 30,				Nine Months Ended September 30,
		2013(1)(2)		2012(1)(2)		2013(1)(2)		2012(1)(2)(3)
Total revenues	$	505,000	$	689,000	$	1,898,000	$	1,754,000
Net loss		(81,000)		(15,000)		(22,000)		(486,000)
Company’s equity in loss (income) from unconsolidated     entities		56,000		(14,000)		(24,000)		363,000

(1)	Littleton Specialty Rehabilitation Facility was completed in April 2012 and the single tenant began paying rent in July 2012, in accordance with the lease. Tenant operations commenced upon licensure of the facility in July 2012 and Littleton Specialty Rehabilitation Facility was accounted for under the equity method of accounting. On December 17, 2012, our joint venture partner noticed the Company of their intent to exercise their promote monetization right. The Company elected to satisfy the monetization provision through a sale of the property. The property was sold on August 8, 2013 for $11.3 million, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013. The Company’s equity in income from the Littleton Specialty Rehabilitation Facility is included in the statement of operations through the date of the sale.
(2)	The Physicians Centre MOB joint venture was acquired in April 2012 and was accounted for under the equity method of accounting beginning with the second quarter of 2012.
(3)	The Company acquired the controlling interest in the operations of Rome LTACH in April 2012 and as a result, Rome LTACH was consolidated in the second quarter of 2012. Accordingly, Rome LTACH was accounted for under the equity method of accounting during the three months ended March 31, 2012.

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2013

Notes Payable [Abstract]

Principal payments due on notes payable

Principal payments due on our notes payable for October 1, 2013 to December 31, 2013 and each of the subsequent years is as follows:

Year	Principal amount
October 1, 2013 to December 31, 2013	$	604,000
2014		8,596,000
2015		25,420,000
2016		9,030,000
2017		2,098,000
2018 and thereafter		97,447,000
	$	143,195,000
Add: premium		410,000
	$	143,605,000

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Immaterial Corrections to Prior Period Financial Statements

9 Months Ended

Sep. 30, 2013

Immaterial Corrections To Prior Period Financial Statements [Abstract]

Additional Financial Information Disclosure

12. Immaterial Correction to Prior Period Financial Statements

In the third quarter of 2013, we revised our disclosure related to the consolidated statement of cash flows for the nine months ended September 30, 2012 to reflect i) a decrease in cash provided by operating activities of $ 3.0 million and ii) a decrease in cash used in investing activities of $3.0 million. This adjustment was made after completing an analysis that determined the change in accounts payable and accrued liabilities improperly reflected payments which primarily relate to the buyout of the Company’s partners in Rome LTH in April 2012.

The Company has determined that the cash flow statement for the year ended December 31, 2012, is correct as reported. After evaluating the quantitative and qualitative effects of this adjustment, we have concluded that the impact on the Company’s prior interim period financial statements was not material.

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Subsequent Events (Details Textual) (USD $) In Millions, except Share data, unless otherwise specified			1 Months Ended					1 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Oct. 18, 2013 Subsequent Event [Member]	Oct. 21, 2013 Subsequent Event [Member]	Oct. 21, 2013 Subsequent Event [Member] Woodbury Loan [Member]	Oct. 21, 2013 Subsequent Event [Member] Series B Preferred Stock [Member]	Oct. 18, 2013 Subsequent Event [Member] Series B Preferred Stock [Member]	Oct. 21, 2013 Subsequent Event [Member] Series C Preferred Stock [Member]
Subsequent Event [Line Items]
Investment Securities Purchase Price			$ 14.3
Stock Issued During Period, Shares, New Issues						142,000		1,000
Convertible Preferred Stock, Shares Issued upon Conversion							1,417,166
Notes Payable, Net	143.2	145.0			25.0
Debt Instrument, Description of Variable Rate Basis					The Woodbury Loan has an initial term of twelve months with two 12-month extensions available assuming certain criteria are met, and bears interest at a rate of one month LIBOR plus 3.0%.
Debt Instrument, Payment Terms					If the extension option is exercised, payments will consist of interest plus principal amortization payments based upon a 25-year amortization schedule.
Payments to Acquire Real Estate, Total				$ 38.1

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Segment Reporting (Details Textual) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Segment Reporting (Textual) [Abstract]
Goodwill	$ 5,965,000	$ 5,965,000
Senior living operations [Member]
Segment Reporting (Textual) [Abstract]
Goodwill	$ 6,000,000	$ 6,000,000

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Organization (Details Textual)	9 Months Ended
	Sep. 30, 2013
Sentio Investments, LLC [Member]
Organization [Line Items]
Formation date	December 20, 2011
Sentio Healthcare Properties OP, LP [Member]
Organization [Line Items]
Formation date	October 17, 2006
Operating Partnership and the HC Operating Partnership, LP [Member]
Organization [Line Items]
Percentage of interest owned	100.00%

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

The fees and expense reimbursements payable to the Advisor under the advisory agreement for the three and nine months ended September 30, 2013 and September 30, 2012 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2013		2012		2013		2012
Asset management fees	$	732,000	$	559,000	$	2,125,000	$	1,543,000

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Related Party Transactions (Details Textual)	9 Months Ended
	Sep. 30, 2013
Related Party Transactions (Additional Textual) [Abstract]
Management Fee, Description	management fees and expenses and operating expenses totaled did not exceed the greater of 2% of our average invested assets and 25% of our net income.
Percentage of average invested assets	2.00%
Percentage of net income	25.00%
Percentage Of Management Fee Exceeded Then Invested Assets	2.00%

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Investments in Unconsolidated Entities (Details Textual) (USD $) In Millions, unless otherwise specified	0 Months Ended	3 Months Ended
	Aug. 08, 2013	Sep. 30, 2013
Proceeds from Sale of Property, Plant, and Equipment, Total	$ 11.3
Repayments of Debt	3.5
Gain (Loss) on Disposition of Property Plant Equipment, Total		$ 1.7

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Notes Payable (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Principal payments due on notes payable
Principal amount	$ 143,195,000
Add: premium	410,000
Notes payable	143,605,000	145,364,000
October 1, 2013 to December 31, 2013 [Member]
Principal payments due on notes payable
Principal amount	604,000
2014 [Member]
Principal payments due on notes payable
Principal amount	8,596,000
2015 [Member]
Principal payments due on notes payable
Principal amount	25,420,000
2016 [Member]
Principal payments due on notes payable
Principal amount	9,030,000
2017 [Member]
Principal payments due on notes payable
Principal amount	2,098,000
2018 and Thereafter [Member]
Principal payments due on notes payable
Principal amount	$ 97,447,000

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Investments in Unconsolidated Entities (Details) (Physicians Center Mob [Member], Medical Office Building [Member], USD $)	9 Months Ended
	Sep. 30, 2013
Physicians Center Mob [Member] | Medical Office Building [Member]
Investment	$ 1,458,000	[1],[2]
Ownership	71.90%	[2]
Acquired	Apr. 30, 2012

[1] Represents the carrying value of the Company’s investment in the unconsolidated entity.

[2] This entity is not consolidated because the Company exercises significant influence, but does not control or direct the activities that most significantly impact the entity’s performance.

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Stockholders' Equity (Details 1) (USD $)	9 Months Ended	3 Months Ended
	Sep. 30, 2013	Mar. 31, 2013 First Quarter [Member]	Jun. 30, 2013 Second Quarter [Member]	Sep. 30, 2013 Third Qarter [Member]
Summary of repurchased shares
Total Number of Shares Redeemed	192,465	60,432	30,153	101,880
Average Price Paid per Share		$ 9.98	$ 10.02	$ 10.02

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2013

Stockholders' Equity [Abstract]

Summary of distributions declared

The following are the distributions declared during the nine months ended September 30, 2013 and 2012:

	Distributions Declared						Cash Flow from
Period	Cash		Reinvested		Total		Operations
First quarter 2012	$	801,000	$	—	$	801,000	$	1,277,000
Second quarter 2012		799,000				799,000		214,000
Third quarter 2012		807,000		—		807,000		2,930,000
First quarter 2013		1,493,000		—		1,493,000		2,643,000
Second quarter 2013		1,585,000		—		1,585,000		2,522,000
Third quarter 2013		1,544,000		52,000		1,596,000		2,413,000

Summary of repurchased shares

During the nine months ended September 30, 2013, we repurchased shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share
First quarter 2013		60,432	$	9.98
Second quarter 2013		30,153		10.02
Third quarter 2013		101,880		10.02
		192,465

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012
Cash flows from operating activities:
Net income (loss)	$ 3,777,000		$ (129,000)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of deferred financing costs	308,000		356,000
Depreciation and amortization	6,317,000		4,653,000
Straight-line rent and above/below market lease amortization	(487,000)		(527,000)
Gain on disposition of investment in unconsolidated entity	(1,701,000)		0
Amortization of loan premium	(52,000)		0
Real estate contingent consideration	0		110,000
Gain on remeasurement of investment in unconsolidated entity	0		(1,282,000)
Equity in (income) loss from unconsolidated entities	(24,000)	[1],[2]	363,000	[1],[2],[3]
Bad debt expense	27,000		40,000
Deferred tax (benefit)	(569,000)		(191,000)
Change in operating assets and liabilities:
Tenant and other receivables	(285,000)		205,000
Deferred costs and other assets	152,000		441,000
Restricted cash	9,000		95,000
Prepaid rent and security deposits	105,000		142,000
Accounts payable and accrued liabilities	1,000		145,000
Net cash provided by operating activities	7,578,000		4,421,000
Cash flows from investing activities:
Real estate acquisitions	0		(18,151,000)
Additions to real estate	(489,000)		(383,000)
Purchase of an interest in an unconsolidated entity	0		(2,490,000)
Proceeds from disposition of investment in unconsolidated entity	3,534,000		0
Changes in restricted cash	(57,000)		47,000
Acquisition deposits	(886,000)		0
Distributions from unconsolidated entities	342,000		143,000
Net cash provided by (used in) investing activities	2,444,000		(20,834,000)
Cash flows from financing activities:
Redeemed shares	(1,924,000)		(719,000)
Proceeds from notes payable	0		40,763,000
Repayments of notes payable	(1,707,000)		(25,529,000)
Offering costs	(84,000)		0
Deferred financing costs	(107,000)		(1,247,000)
Noncontrolling interest contribution	0		603,000
Payment of real estate contingent consideration	0		(980,000)
Distributions paid to stockholders	(4,611,000)		(2,407,000)
Distributions paid to noncontrolling interests	(769,000)		(302,000)
Prepaid preferred stock offering costs	(4,062,000)		0
Net cash (used in) provided by financing activities	(13,264,000)		10,182,000
Net (decrease) in cash and cash equivalents	(3,242,000)		(6,231,000)
Cash and cash equivalents - beginning of period	21,507,000		27,972,000
Cash and cash equivalents - end of period	18,265,000		21,741,000
Supplemental disclosure of cash flow information:
Cash paid for interest	5,808,000		4,694,000
Cash paid for income taxes	367,000		549,000
Supplemental disclosure of non-cash financing and investing activities:
Distributions declared not paid	1,544,000		807,000
Accrued offering costs	8,000		0
Notes payable assumed and non-cash equity contribution in connection with real estate acquisition	$ 0		$ 50,236,000

[1] The Physicians Centre MOB joint venture was acquired in April 2012 and was accounted for under the equity method of accounting beginning with the second quarter of 2012.

[2] Littleton Specialty Rehabilitation Facility was completed in April 2012 and the single tenant began paying rent in July 2012, in accordance with the lease. Tenant operations commenced upon licensure of the facility in July 2012 and Littleton Specialty Rehabilitation Facility was accounted for under the equity method of accounting. On December 17, 2012, our joint venture partner noticed the Company of their intent to exercise their promote monetization right. The Company elected to satisfy the monetization provision through a sale of the property. The property was sold on August 8, 2013 for $11.3 million, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013. The Company’s equity in income from the Littleton Specialty Rehabilitation Facility is included in the statement of operations through the date of the sale.

[3] The Company acquired the controlling interest in the operations of Rome LTACH in April 2012 and as a result, Rome LTACH was consolidated in the second quarter of 2012. Accordingly, Rome LTACH was accounted for under the equity method of accounting during the three months ended March 31, 2012.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Summary Of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

For more information regarding our significant accounting policies and estimates, please refer to “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2012.

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In accordance with the guidance for the consolidation of variable interest entities (“VIEs”), we analyze our variable interests, including investments in partnerships and joint ventures, to determine if the entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews, based on our review of the design of the entity, its organizational structure including decision-making ability, risk and reward sharing experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions and financial agreements. We also use quantitative and qualitative analyses to determine if we must consolidate a variable interest entity as the primary beneficiary.

Interim Financial Information

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Our accompanying interim condensed consolidated financial statements should be read in conjunction with our audited condensed consolidated financial statements and the notes thereto included on our 2012 Annual Report on Form 10-K, as filed with the SEC.

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Income Taxes

9 Months Ended

Sep. 30, 2013

Income Taxes [Abstract]

Income Taxes

5. Income Taxes

For federal income tax purposes, we have elected to be taxed as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our taxable year ended December 31, 2008. REIT status imposes limitations related to operating assisted-living properties. Generally, to qualify as a REIT, we cannot directly operate assisted-living facilities. However, such facilities may generally be operated by a taxable REIT subsidiary (“TRS”) pursuant to a lease with the Company. Therefore, we have formed Master HC TRS, LLC (“Master TRS”), a wholly owned subsidiary of HC Operating Partnership, LP, to lease any assisted-living properties we acquire and to operate the assisted-living properties pursuant to contracts with unaffiliated management companies. Master TRS and the Company have made the applicable election for Master TRS to qualify as a TRS. Under the management contracts, the management companies have direct control of the daily operations of these assisted-living properties.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would not be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would establish a valuation allowance which would reduce the provision for income taxes.

The Master TRS recognized a $0.1 million expense and a $0.1 million expense for Federal and State income taxes in the three months ended September 30, 2013 and 2012, respectively, and a $0.1 million benefit and a $0.1 million expense for Federal and State income taxes in the nine months ended September 30, 2013 and 2012, respectively, which have been recorded in general and administrative expenses. Net deferred tax assets related to the TRS entities totaled approximately $1.9 million at September 30, 2013 and $1.3 million at December 31, 2012, respectively, related primarily to book and tax basis differences for straight-line rent and accrued liabilities. Realization of these deferred tax assets is dependent in part upon generating sufficient taxable income in future periods. These deferred tax assets are included in deferred costs and other assets in our condensed consolidated balance sheets. We have not recorded a valuation allowance against our deferred tax assets as of September 30, 2013, as we have determined that the future projected taxable income from the operations of the TRS entities are sufficient to cover the additional future expenses resulting from these book tax differences.

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Investments in Real Estate

9 Months Ended

Sep. 30, 2013

Investments In Real Estate [Abstract]

Investments in Real Estate

3. Investments in Real Estate

As of September 30, 2013, accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements		Furniture, fixtures and equipment		Intangible lease assets
Cost	$	23,193,000	$	167,224,000	$	5,270,000	$	14,757,000
Accumulated depreciation and amortization		—		(12,785,000)		(2,484,000)		(11,423,000)
Net	$	23,193,000	$	154,439,000	$	2,786,000	$	3,334,000

As of December 31, 2012, accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements		Furniture, fixtures and equipment		Intangible lease assets
Cost	$	23,193,000	$	166,996,000	$	5,118,000	$	14,757,000
Accumulated depreciation and amortization		—		(9,151,000)		(1,803,000)		(9,374,000)
Net	$	23,193,000	$	157,845,000	$	3,315,000	$	5,383,000

Depreciation expense associated with buildings and improvements, site improvements and furniture and fixtures for the three months ended September 30, 2013 and 2012 was approximately $1.4 million and $1.2 million, respectively. Depreciation expense associated with buildings and improvements, site improvements and furniture and fixtures for the nine months ended September 30, 2013 and 2012 was approximately $4.3 million and $3.2 million, respectively.

Amortization associated with intangible assets for the three months ended September 30, 2013 and 2012 was $0.1 million and $0.5 million, respectively. Amortization associated with intangible assets for the nine months ended September 30, 2013 and 2012 was $2.0 million and $1.5 million, respectively.

Estimated amortization for October 1, 2013 through December 31, 2013 and each of the subsequent years is as follows:

	Intangible assets
October 1, 2013 — December 31, 2013	$	82,000
2014		330,000
2015		330,000
2016		329,000
2017		328,000
2018		328,000
2019 and thereafter		1,607,000

The estimated useful lives for intangible assets range from approximately three to sixteen years. As of September 30, 2013, the weighted-average amortization period for intangible assets was eleven years.

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Notes Payable (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Notes Payable (Additional Textual) [Abstract]
Notes payable	$ 143,605,000		$ 143,605,000		$ 145,364,000
Notes Payable, net of premium	143,200,000		143,200,000		145,000,000
Fixed rate debt	112,400,000		112,400,000		113,800,000
Fixed rate debt, notes payable	79.00%		79.00%		79.00%
Variable rate debt	30,800,000		30,800,000		31,100,000
Variable rate debt, notes payable	21.00%		21.00%		21.00%
Deferred Costs	1,500,000		1,500,000		1,700,000
Deferred financing costs	$ 2,000,000	$ 1,800,000	$ 6,100,000	$ 4,800,000
Fixed and variable rate secured mortgage loans with average effective interest rate	5.45%		5.45%		5.45%
Fixed rate debt, weighted average interest rate	5.35%		5.35%		5.35%
Variable rate debt, weighted average interest rate	5.83%		5.83%		5.83%
Maximum [Member]
Notes Payable (Additional Textual) [Abstract]
Fixed and variable rate secured mortgage loans with average effective interest rate	6.50%		6.50%		6.50%
Minimum [Member]
Notes Payable (Additional Textual) [Abstract]
Fixed and variable rate secured mortgage loans with average effective interest rate	2.80%		2.80%		2.80%

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Investments in Real Estate (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Net	$ 183,752,000	$ 189,736,000
Land [Member]
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Cost	23,193,000	23,193,000
Accumulated depreciation and amortization	0	0
Net	23,193,000	23,193,000
Buildings and improvements [Member]
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Cost	167,224,000	166,996,000
Accumulated depreciation and amortization	(12,785,000)	(9,151,000)
Net	154,439,000	157,845,000
Furniture, fixtures and equipment [Member]
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Cost	5,270,000	5,118,000
Accumulated depreciation and amortization	(2,484,000)	(1,803,000)
Net	2,786,000	3,315,000
Intangible lease assets [Member]
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Cost	14,757,000	14,757,000
Accumulated depreciation and amortization	(11,423,000)	(9,374,000)
Net	$ 3,334,000	$ 5,383,000

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Investments in Unconsolidated Entities (Details 1) (USD $)	Sep. 30, 2013		Dec. 31, 2012
Equity Method Investment, Summarized Financial Information, Assets	$ 9,492,000	[1]	$ 17,284,000	[1],[2]
Equity Method Investment Summarized Financial Information, Equity	1,974,000	[1]	4,462,000	[1],[2]
Equity Method Investment, Summarized Financial Information, Liabilities and Equity	9,492,000	[1]	17,284,000	[1],[2]
Cash and Cash Equivalents [Member]
Equity Method Investment, Summarized Financial Information, Assets	370,000	[1]	423,000	[1],[2]
Other Assets [Member]
Equity Method Investment, Summarized Financial Information, Assets	173,000	[1]	549,000	[1],[2]
Other Liabilities [Member]
Equity Method Investment Summarized Financial Information, Equity	26,000	[1]	99,000	[1],[2]
Investments In Real Estate Net [Member]
Equity Method Investment, Summarized Financial Information, Assets	8,949,000	[1]	16,312,000	[1],[2]
Notes Payable [Member]
Equity Method Investment Summarized Financial Information, Equity	7,240,000	[1]	12,504,000	[1],[2]
Accounts Payable and Accrued Liabilities [Member]
Equity Method Investment Summarized Financial Information, Equity	$ 252,000	[1]	$ 219,000	[1],[2]

[1] The Physicians Centre MOB joint venture was acquired in April 2012 and was accounted for under the equity method of accounting beginning with the second quarter of 2012.

[2] Littleton Specialty Rehabilitation Facility was completed in April 2012 and the single tenant began paying rent in July 2012, in accordance with the lease. Tenant operations commenced upon licensure of the facility in July 2012 and Littleton Specialty Rehabilitation Facility was accounted for under the equity method of accounting. On December 17, 2012, our joint venture partner noticed the Company of their intent to exercise their promote monetization right. The Company elected to satisfy the monetization provision through a sale of the property. The property was sold on August 8, 2013 for $11.3 million, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013. The Company’s equity in income from the Littleton Specialty Rehabilitation Facility is included in the statement of operations through the date of the sale.

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Segment Reporting (Details 1) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Investments in real estate:
Total reportable segments	$ 183,752,000	$ 189,736,000
Reconciliation to consolidated assets:
Cash and cash equivalents	18,265,000	21,507,000	21,741,000	27,972,000
Deferred financing costs, net	1,496,000	1,697,000
Investment in unconsolidated entities	1,458,000	3,529,000
Tenant and other receivable, net	2,912,000	1,988,000
Deferred costs and other assets	8,249,000	2,987,000
Restricted cash	3,869,000	3,821,000
Goodwill	5,965,000	5,965,000
Total assets	225,966,000	231,230,000
Medical office building [Member]
Investments in real estate:
Total reportable segments	7,933,000	8,171,000
Senior living operations [Member]
Investments in real estate:
Total reportable segments	133,296,000	137,784,000
Reconciliation to consolidated assets:
Goodwill	6,000,000	6,000,000
Triple-net leased properties [Member]
Investments in real estate:
Total reportable segments	$ 42,523,000	$ 43,781,000

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Related Party Transactions (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Related Party Transactions [Abstract]
Asset management fees	$ 732,000	$ 559,000	$ 2,125,000	$ 1,543,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	580,000,000	580,000,000
Common stock, shares issued	12,615,208	12,807,673
Common stock, shares outstanding	12,615,208	12,807,673

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Notes Payable

9 Months Ended

Sep. 30, 2013

Notes Payable [Abstract]

Notes Payable

8. Notes Payable

Notes payable were $143.6 million ($143.2 million, net of premium) and $145.4 million ($145.0 million, net of premium) as of September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013, we had fixed and variable rate secured mortgage loans with effective interest rates ranging from 2.80% to 6.50% per annum and a weighted average effective interest rate of 5.45% per annum. As of September 30, 2013, notes payable consisted of $112.4 million of fixed rate debt, or approximately 79% of notes payable, at a weighted average interest rate of 5.35% per annum and $30.8 million of variable rate debt, or approximately 21% of notes payable, at a weighted average interest rate of 5.83% per annum. As of December 31, 2012, we had fixed and variable rate secured mortgage loans with effective interest rates ranging from 2.80% to 6.50% per annum and a weighted-average effective interest rate of 5.45% per annum. As of December 31, 2012, notes payable consisted of $113.8 million of fixed rate debt, or 79% of notes payable, at a weighted average interest rate of 5.35% per annum and $31.1 million of variable rate debt, or 21% of notes payable, at a weighted average interest rate of 5.83% per annum.

We are required by the terms of the applicable loan documents to meet certain financial covenants, such as debt service coverage ratios, rent coverage ratios and reporting requirements. As of September 30, 2013, we were in compliance with all such covenants and requirements.

Principal payments due on our notes payable for October 1, 2013 to December 31, 2013 and each of the subsequent years is as follows:

Year	Principal amount
October 1, 2013 to December 31, 2013	$	604,000
2014		8,596,000
2015		25,420,000
2016		9,030,000
2017		2,098,000
2018 and thereafter		97,447,000
	$	143,195,000
Add: premium		410,000
	$	143,605,000

Interest Expense and Deferred Financing Cost

For the three months ended September 30, 2013 and 2012, the Company incurred interest expense, including amortization of deferred financing costs of, $2.0 million and $1.8 million, respectively. For the nine months ended September 30, 2013 and 2012, the Company incurred interest expense, including amortization of deferred financing costs of, $6.1 million and $4.8 million, respectively. As of September 30, 2013 and December 31, 2012, the Company’s net deferred financing costs were approximately $1.5 million and $1.7 million, respectively. All deferred financing costs are capitalized and amortized over the life of the respective loan agreement.

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $)	Total	Common Stock	Common Stock, Additional Paid-In Capital	Common Stock, Accumulated Deficit	Common Stock, Total Stockholders' Equity	Noncontrolling interests
Balance at Dec. 31, 2011	$ 80,859,000	$ 129,000	$ 96,542,000	$ (17,054,000)	$ 79,617,000	$ 1,242,000
Balance (in shares) at Dec. 31, 2011		12,916,612
Redeemed shares (in shares)		(76,293)
Redeemed shares	(719,000)	0	(719,000)	0	(719,000)	0
Noncontrolling interest contribution	3,444,000	0	0	0	0	3,444,000
Distributions	(2,709,000)	0	(2,407,000)	0	(2,407,000)	(302,000)
Net income (loss)	(129,000)	0	0	(237,000)	(237,000)	108,000
Balance at Sep. 30, 2012	80,746,000	129,000	93,416,000	(17,291,000)	76,254,000	4,492,000
Balance (in shares) at Sep. 30, 2012		12,840,319
Balance at Dec. 31, 2012	77,909,000	128,000	91,589,000	(17,936,000)	73,781,000	4,128,000
Balance (in shares) at Dec. 31, 2012		12,807,673
Redeemed shares (in shares)	(192,465)	(192,465)
Redeemed shares	(1,924,000)	(2,000)	(1,922,000)	0	(1,924,000)	0
Offering costs	(92,000)	0	(92,000)	0	(92,000)	0
Distributions	(5,391,000)	0	(4,622,000)	0	(4,622,000)	(769,000)
Net income (loss)	3,777,000	0	0	3,517,000	3,517,000	260,000
Balance at Sep. 30, 2013	$ 74,279,000	$ 126,000	$ 84,953,000	$ (14,419,000)	$ 70,660,000	$ 3,619,000
Balance (in shares) at Sep. 30, 2013		12,615,208

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 18,265,000	$ 21,507,000
Investments in real estate:
Land	23,193,000	23,193,000
Buildings and improvements, net	154,439,000	157,845,000
Furniture, fixtures and equipment, net	2,786,000	3,315,000
Intangible lease assets, net	3,334,000	5,383,000
Total Investment In Real Estate	183,752,000	189,736,000
Deferred financing costs, net	1,496,000	1,697,000
Investment in unconsolidated entities	1,458,000	3,529,000
Tenant and other receivable, net	2,912,000	1,988,000
Deferred costs and other assets	8,249,000	2,987,000
Restricted cash	3,869,000	3,821,000
Goodwill	5,965,000	5,965,000
Total assets	225,966,000	231,230,000
Liabilities:
Notes payable, net	143,605,000	145,364,000
Accounts payable and accrued liabilities	4,554,000	4,545,000
Prepaid rent and security deposits	1,984,000	1,879,000
Distributions payable	1,544,000	1,533,000
Total liabilities	151,687,000	153,321,000
Commitments and contingencies
Equity:
Common stock, $0.01 par value per share; 580,000,000 shares authorized; 12,615,208, and 12,807,673 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively	126,000	128,000
Additional paid-in capital	84,953,000	91,589,000
Accumulated deficit	(14,419,000)	(17,936,000)
Total stockholders’ equity	70,660,000	73,781,000
Noncontrolling interests	3,619,000	4,128,000
Total equity	74,279,000	77,909,000
Total liabilities and equity	$ 225,966,000	$ 231,230,000

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Investments in Real Estate (Details 1) (USD $)	Sep. 30, 2013
Estimated amortization
October 1, 2013 — December 31, 2013	$ 82,000
2014	330,000
2015	330,000
2016	329,000
2017	328,000
2018	328,000
2019 and thereafter	$ 1,607,000

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Reconciliation of segment activity to consolidated net income

The following tables reconcile the segment activity to consolidated net income for the three months ended September 30, 2013 and 2012:

	Three Months Ended September 30, 2013								Three Months Ended September 30, 2012
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated		Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenue	$	6,976,000	$	1,309,000	$	214,000	$	8,499,000	$	6,910,000	$	1,298,000	$	214,000	$	8,422,000
Resident services and fee income		6,195,000		—		—		6,195,000		3,655,000		—		—		3,655,000
Tenant reimbursements and other     income		103,000		226,000		74,000		403,000		15,000		222,000		75,000		312,000
	$	13,274,000	$	1,535,000	$	288,000	$	15,097,000	$	10,580,000	$	1,520,000	$	289,000	$	12,389,000
Property operating and maintenance		8,875,000		227,000		79,000		9,181,000		7,159,000		220,000		94,000		7,473,000
Net operating income	$	4,399,000	$	1,308,000	$	209,000	$	5,916,000	$	3,421,000	$	1,300,000	$	195,000	$	4,916,000
General and administrative     expenses								523,000								423,000
Asset management fees and     expenses								732,000								559,000
Real estate acquisition costs and     contingent consideration								—								1,016,000
Depreciation and amortization								1,528,000								1,689,000
Interest expense, net								2,031,000								1,788,000
Equity in loss (income) from     unconsolidated entities								56,000								(14,000)
Gain on disposition of investment in     unconsolidated entity								(1,701,000)								—
Net income (loss)							$	2,747,000							$	(545,000)

	Nine Months Ended September 30, 2013								Nine Months Ended September 30, 2012
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated		Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenue	$	20,805,000	$	3,928,000	$	640,000	$	25,373,000	$	20,453,000	$	3,436,000	$	636,000	$	24,525,000
Resident services and fee income		18,115,000		—		—		18,115,000		8,243,000		—		—		8,243,000
Tenant reimbursements and other     income		328,000		663,000		221,000		1,212,000		294,000		593,000		234,000		1,121,000
	$	39,248,000	$	4,591,000	$	861,000	$	44,700,000	$	28,990,000	$	4,029,000	$	870,000	$	33,889,000
Property operating and maintenance		25,987,000		682,000		230,000		26,899,000		20,084,000		594,000		243,000		20,921,000
Net operating income	$	13,261,000	$	3,909,000	$	631,000	$	17,801,000	$	8,906,000	$	3,435,000	$	627,000	$	12,968,000
General and administrative     expenses								1,186,000								1,632,000
Asset management fees and     expenses								2,125,000								1,543,000
Real estate acquisition costs and     contingent consideration								—								1,229,000
Depreciation and amortization								6,317,000								4,653,000
Interest expense, net								6,121,000								4,808,000
Loss on debt extinguishment and     other expense								—								151,000
Equity in (income) loss from     unconsolidated entities								(24,000)								363,000
Gain in remeasurement of     investment in unconsolidated     entity								—								(1,282,000)
Gain on disposition of investment in     unconsolidated entity								(1,701,000)								—
Net income (loss)							$	3,777,000							$	(129,000)

Reconciliation of segment activity to consolidated financial position

The following table reconciles the segment activity to consolidated financial position as of September 30, 2013 and December 31, 2012.

	September 30, 2013		December 31, 2012
Assets
Investment in real estate:
Senior living operations	$	133,296,000	$	137,784,000
Triple-net leased properties		42,523,000		43,781,000
Medical office building		7,933,000		8,171,000
Total reportable segments	$	183,752,000	$	189,736,000
Reconciliation to consolidated assets:
Cash and cash equivalents		18,265,000		21,507,000
Deferred financing costs, net		1,496,000		1,697,000
Investment in unconsolidated entities		1,458,000		3,529,000
Tenant and other receivables, net		2,912,000		1,988,000
Deferred costs and other assets		8,249,000		2,987,000
Restricted cash		3,869,000		3,821,000
Goodwill		5,965,000		5,965,000
Total assets	$	225,966,000	$	231,230,000

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Stockholders' Equity (Details Textual) (USD $)	1 Months Ended	3 Months Ended	9 Months Ended						1 Months Ended			1 Months Ended	3 Months Ended
	Feb. 10, 2013	Mar. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Jun. 19, 2013	Dec. 31, 2012	Jun. 19, 2013 Dividend Reinvestment Plan [Member]	Feb. 10, 2013 Series A Preferred Stock [Member]	Feb. 10, 2013 Series B Preferred Stock [Member]	Oct. 21, 2013 Series B Preferred Stock [Member] Subsequent Event [Member]	Feb. 10, 2013 Series C Preferred Stock [Member]	Oct. 21, 2013 Series C Preferred Stock [Member] Subsequent Event [Member]	Sep. 30, 2013 Distribution reinvestment plan [Member]
Stockholders' Equity (Textual) [Abstract]
Common stock, shares authorized			580,000,000			580,000,000
Common stock, par value			$ 0.01			$ 0.01
Preferred stock, shares authorized			20,000,000
Preferred stock, par value			$ 0.01								$ 0.01
Proceeds from issuance of common stock			$ 132,300,000
Annualized rate		$ 0.475	$ 0.50	$ 0.50
Percentage of annualized rate		4.75%	5.00%	5.00%
Annualized rate per share		$ 10	$ 10	$ 10
Period Of Distribution		365
Common Stock Reinvested			13,300,000
Equity Commitment Value	150,000,000
Proceeds from Issuance of Private Placement	100,000								149,900,000
Percentage Of Senior Cumulative Preferred Stock								3.00%
Senior Cumulative Preferred Stock Percentage											3.00%
Preferred Stock, Dividend Rate, Percentage	10.00%
Annual Rate Of Liquidation Preference			10.00%
Aggregate Return Of Common Stock			7.50%
Stock value Registered Under Dividend Reinvestment Plan					$ 99,000,000
Sale of Stock, Price Per Share							$ 10.02
Sale Of Stock Price Per Share Percentage Of Estimated Per Share Value							100.00%
Equity Commitment Preferred Stock Shares Issued Or Issuable	1,000
Stock Issued During Period, Shares, New Issues										142,000		1,000	5,205

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Fair Value Measurements (Details Textual) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Notes Payable, Fair Value Disclosure	$ 143.7	$ 146.2
Notes payable, net	143.2	145.0
Carrying Value Of Notes Payable	$ 143.6	$ 145.4

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Income Taxes (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Deferred State and Local Income Tax Expense (Benefit)	$ 0.1	$ 0.1	$ 0.1	$ 0.1
Deferred Tax Assets, Net	$ 1.9		$ 1.9		$ 1.3

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Segment Reporting (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Reconciliation of segment activity to consolidated net income
Rental revenue	$ 8,499,000		$ 8,422,000		$ 25,373,000		$ 24,525,000
Resident services and fee income	6,195,000		3,655,000		18,115,000		8,243,000
Tenant reimbursements and other income	403,000		312,000		1,212,000		1,121,000
Total revenues	15,097,000		12,389,000		44,700,000		33,889,000
Property operating and maintenance	9,181,000		7,473,000		26,899,000		20,921,000
Net operating income	5,916,000		4,916,000		17,801,000		12,968,000
General and administrative expenses	523,000		423,000		1,186,000		1,632,000
Asset management fees and expenses	732,000		559,000		2,125,000		1,543,000
Real estate acquisition costs and contingent consideration	0		1,016,000		0		1,229,000
Depreciation and amortization	1,528,000		1,689,000		6,317,000		4,653,000
Interest expense, net	2,031,000		1,788,000		6,121,000		4,808,000
Loss on debt extinguishment and other expense					0		151,000
Equity in (income) loss from unconsolidated entities	56,000	[1],[2]	(14,000)	[1],[2]	(24,000)	[1],[2]	363,000	[1],[2],[3]
Gainin remeasurement of investmentin unconsolidated entity					0		(1,282,000)
Gain on disposition of investment in unconsolidated entity	(1,701,000)		0		(1,701,000)		0
Net income (loss)	2,747,000		(545,000)		3,777,000		(129,000)
Medical office building [Member]
Reconciliation of segment activity to consolidated net income
Rental revenue	214,000		214,000		640,000		636,000
Resident services and fee income	0		0		0		0
Tenant reimbursements and other income	74,000		75,000		221,000		234,000
Total revenues	288,000		289,000		861,000		870,000
Property operating and maintenance	79,000		94,000		230,000		243,000
Net operating income	209,000		195,000		631,000		627,000
Senior living operations [Member]
Reconciliation of segment activity to consolidated net income
Rental revenue	6,976,000		6,910,000		20,805,000		20,453,000
Resident services and fee income	6,195,000		3,655,000		18,115,000		8,243,000
Tenant reimbursements and other income	103,000		15,000		328,000		294,000
Total revenues	13,274,000		10,580,000		39,248,000		28,990,000
Property operating and maintenance	8,875,000		7,159,000		25,987,000		20,084,000
Net operating income	4,399,000		3,421,000		13,261,000		8,906,000
Triple-net leased properties [Member]
Reconciliation of segment activity to consolidated net income
Rental revenue	1,309,000		1,298,000		3,928,000		3,436,000
Resident services and fee income	0		0		0		0
Tenant reimbursements and other income	226,000		222,000		663,000		593,000
Total revenues	1,535,000		1,520,000		4,591,000		4,029,000
Property operating and maintenance	227,000		220,000		682,000		594,000
Net operating income	$ 1,308,000		$ 1,300,000		$ 3,909,000		$ 3,435,000

[1] The Physicians Centre MOB joint venture was acquired in April 2012 and was accounted for under the equity method of accounting beginning with the second quarter of 2012.

[2] Littleton Specialty Rehabilitation Facility was completed in April 2012 and the single tenant began paying rent in July 2012, in accordance with the lease. Tenant operations commenced upon licensure of the facility in July 2012 and Littleton Specialty Rehabilitation Facility was accounted for under the equity method of accounting. On December 17, 2012, our joint venture partner noticed the Company of their intent to exercise their promote monetization right. The Company elected to satisfy the monetization provision through a sale of the property. The property was sold on August 8, 2013 for $11.3 million, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013. The Company’s equity in income from the Littleton Specialty Rehabilitation Facility is included in the statement of operations through the date of the sale.

[3] The Company acquired the controlling interest in the operations of Rome LTACH in April 2012 and as a result, Rome LTACH was consolidated in the second quarter of 2012. Accordingly, Rome LTACH was accounted for under the equity method of accounting during the three months ended March 31, 2012.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures

7. Fair Value Measurements

FASB Accounting Standards Codification (“ASC”) 825-10, “Financial Instruments” , requires the disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and International Financial Reporting Standards and change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.

Level 1.  Quoted prices in active markets for identical instruments.

Level 2.  Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3.  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument.

We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets when such information is available or using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.

Our balance sheets include the following financial instruments: cash and cash equivalents, tenant and other receivables, restricted cash, security deposits, accounts payable and accrued liabilities, distributions payable, and notes payable. We consider the carrying values of our financial instruments, other than notes payable, to approximate fair value because they generally expose the Company to limited credit risk and because of the short period of time between origination of the financial assets and liabilities and their expected settlement.

The fair value of the Company’s notes payable is estimated by discounting future cash flows of each instrument at rates that reflect the current market rates available to the Company for debt of the same terms and maturities. The fair value of the notes payable was determined using Level 2 inputs of the fair value hierarchy. Based on the estimates used by the Company, the fair value of notes payable was $143.7 million and $146.2 million, compared to the carrying values of $ 143.6 ($143.2 million, net of premium) million and $145.4 ($145.0 million, net of premium) million at September 30, 2013 and December 31, 2012, respectively.

There were no transfers between Level 1 or 2 during the three and nine months ended September 30, 2013.

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Investments in Real Estate (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Property, Plant and Equipment [Line Items]
Real Estate Accumulated Depreciation, Depreciation Expense	$ 1.4	$ 1.2	$ 4.3	$ 3.2
Finite-Lived Intangible Assets, Remaining Amortization Period			11 years
Amortization of Intangible Assets	$ 0.1	$ 0.5	$ 2.0	$ 1.5
Minimum [Member]
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life			3 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life			16 years

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Stockholders' Equity (Details) (USD $)	3 Months Ended						9 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2013	Sep. 30, 2012
Summary of distributions declared
Distributions Declared	$ 1,544,000	$ 1,585,000	$ 1,493,000	$ 807,000	$ 799,000	$ 801,000	$ 1,544,000	$ 807,000
Distributions Declared, Reinvested	52,000	0	0	0		0
Distributions Declared, Total	1,596,000	1,585,000	1,493,000	807,000	799,000	801,000
Cash Flow From Operations	$ 2,413,000	$ 2,522,000	$ 2,643,000	$ 2,930,000	$ 214,000	$ 1,277,000

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Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

10. Related Party Transactions

The Company has no employees. Our Advisor is primarily responsible for managing our business affairs and carrying out the policies established by our board of directors. We are party to an advisory agreement that entitles the Advisor to specified fees upon the provision of certain services to us.

Advisory Agreement and Transition to Internal Management Agreement

Sentio Investments, LLC became our Advisor on January 1, 2012, pursuant to an advisory agreement dated December 22, 2011. As required by our charter, that advisory agreement had a one-year term that ended on December 31, 2012. Effective January 1, 2013, we renewed the advisory agreement on substantially similar terms for an additional one-year term ending on December 31, 2013.

Under the terms of the current advisory agreement, the Advisor is required to use commercially reasonable efforts to present to us investment opportunities to provide a continuing and suitable investment program consistent with the investment policies and objectives adopted by our board of directors. The advisory agreement calls for the Advisor to provide for our day-to-day management and to retain property managers and leasing agents, subject to the authority of our board of directors, and to perform other duties.

On February 10, 2013 in connection with the execution of the KKR Equity Commitment (See Note 9), we entered into a Transition to Internal Management Agreement (the “Transition Agreement”) with our Advisor and KKR. The Transition Agreement provides, following the satisfaction of certain conditions, for certain amendments to the advisory agreement between us and the Advisor and sets forth the terms for our transition to an internal management structure.

The terms of our advisory agreement with our Advisor and the terms of the Transition Agreement are more fully outlined in our Annual Report on Form 10-K for the year ended December 31, 2012 and in the proxy statement related to our 2013 annual meeting of stockholders as filed with the SEC on April 9, 2013.

The fees and expense reimbursements payable to the Advisor under the advisory agreement for the three and nine months ended September 30, 2013 and September 30, 2012 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2013		2012		2013		2012
Asset management fees	$	732,000	$	559,000	$	2,125,000	$	1,543,000

 

Consistent with limitations set forth in our charter, the advisory agreement further provides that, commencing four fiscal quarters after the acquisition of our first real estate asset, we shall not reimburse the Advisor at the end of any fiscal quarter management fees and expenses and operating expenses that, in the four consecutive fiscal quarters then ended exceed (the “Excess Amount”) the greater of 2% of our average invested assets or 25% of our net income for such year (the “2%/25% Guidelines”) unless the Independent Directors Committee of our board of directors determines that such excess was justified, based on unusual and nonrecurring factors which it deems sufficient. If the Independent Directors Committee does not approve such excess as being so justified, the advisory agreement requires that any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. In addition, our charter provides that, if the Independent Directors Committee does not determine that the Excess Amount is justified, the Advisor shall reimburse us the amount by which the aggregate annual expenses paid to the Advisor during the four consecutive fiscal quarters then ended exceed the 2%/25% Guidelines.  

For the four quarters ended September 30, 2013, our management fees and expenses and operating expenses totaled did not exceed the greater of 2% of our average invested assets and 25% of our net income.

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Segment Reporting

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Reporting

6. Segment Reporting

As of September 30, 2013, we operated in three reportable business segments: senior living operations, triple-net leased properties, and medical office building (“MOB”) properties. Our senior living operations segment primarily consists of investments in senior housing communities located in the United States for which we engage independent third-party managers. Our triple-net leased properties segment consists of investments in skilled nursing and hospital facilities in the United States. These facilities are leased to healthcare operating companies under long-term “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our medical office building operations segment primarily consists of investing in medical office buildings and leasing those properties to healthcare providers under long-term leases, which may require tenants to pay property-related expenses.

We evaluate performance of the combined properties in each segment based on net operating income. Net operating income is defined as total revenue less property operating and maintenance expenses. There are no intersegment sales or transfers. We use net operating income to evaluate the operating performance of our real estate investments and to make decisions concerning the operation of the property. We believe 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 depreciation and amortization, asset management fees and expenses, real estate acquisition costs, interest expense and corporate general and administrative expenses. Additionally, net operating income as we define it may not be comparable to net operating income as defined by other REITs or companies.

The following tables reconcile the segment activity to consolidated net income for the three months ended September 30, 2013 and 2012:

	Three Months Ended September 30, 2013								Three Months Ended September 30, 2012
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated		Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenue	$	6,976,000	$	1,309,000	$	214,000	$	8,499,000	$	6,910,000	$	1,298,000	$	214,000	$	8,422,000
Resident services and fee income		6,195,000		—		—		6,195,000		3,655,000		—		—		3,655,000
Tenant reimbursements and other     income		103,000		226,000		74,000		403,000		15,000		222,000		75,000		312,000
	$	13,274,000	$	1,535,000	$	288,000	$	15,097,000	$	10,580,000	$	1,520,000	$	289,000	$	12,389,000
Property operating and maintenance		8,875,000		227,000		79,000		9,181,000		7,159,000		220,000		94,000		7,473,000
Net operating income	$	4,399,000	$	1,308,000	$	209,000	$	5,916,000	$	3,421,000	$	1,300,000	$	195,000	$	4,916,000
General and administrative     expenses								523,000								423,000
Asset management fees and     expenses								732,000								559,000
Real estate acquisition costs and     contingent consideration								—								1,016,000
Depreciation and amortization								1,528,000								1,689,000
Interest expense, net								2,031,000								1,788,000
Equity in loss (income) from     unconsolidated entities								56,000								(14,000)
Gain on disposition of investment in     unconsolidated entity								(1,701,000)								—
Net income (loss)							$	2,747,000							$	(545,000)

	Nine Months Ended September 30, 2013								Nine Months Ended September 30, 2012
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated		Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenue	$	20,805,000	$	3,928,000	$	640,000	$	25,373,000	$	20,453,000	$	3,436,000	$	636,000	$	24,525,000
Resident services and fee income		18,115,000		—		—		18,115,000		8,243,000		—		—		8,243,000
Tenant reimbursements and other     income		328,000		663,000		221,000		1,212,000		294,000		593,000		234,000		1,121,000
	$	39,248,000	$	4,591,000	$	861,000	$	44,700,000	$	28,990,000	$	4,029,000	$	870,000	$	33,889,000
Property operating and maintenance		25,987,000		682,000		230,000		26,899,000		20,084,000		594,000		243,000		20,921,000
Net operating income	$	13,261,000	$	3,909,000	$	631,000	$	17,801,000	$	8,906,000	$	3,435,000	$	627,000	$	12,968,000
General and administrative     expenses								1,186,000								1,632,000
Asset management fees and     expenses								2,125,000								1,543,000
Real estate acquisition costs and     contingent consideration								—								1,229,000
Depreciation and amortization								6,317,000								4,653,000
Interest expense, net								6,121,000								4,808,000
Loss on debt extinguishment and     other expense								—								151,000
Equity in (income) loss from     unconsolidated entities								(24,000)								363,000
Gain in remeasurement of     investment in unconsolidated     entity								—								(1,282,000)
Gain on disposition of investment in     unconsolidated entity								(1,701,000)								—
Net income (loss)							$	3,777,000							$	(129,000)

The following table reconciles the segment activity to consolidated financial position as of September 30, 2013 and December 31, 2012.

	September 30, 2013		December 31, 2012
Assets
Investment in real estate:
Senior living operations	$	133,296,000	$	137,784,000
Triple-net leased properties		42,523,000		43,781,000
Medical office building		7,933,000		8,171,000
Total reportable segments	$	183,752,000	$	189,736,000
Reconciliation to consolidated assets:
Cash and cash equivalents		18,265,000		21,507,000
Deferred financing costs, net		1,496,000		1,697,000
Investment in unconsolidated entities		1,458,000		3,529,000
Tenant and other receivables, net		2,912,000		1,988,000
Deferred costs and other assets		8,249,000		2,987,000
Restricted cash		3,869,000		3,821,000
Goodwill		5,965,000		5,965,000
Total assets	$	225,966,000	$	231,230,000

As of September 30, 2013 and December 31, 2012, goodwill had a balance of approximately $6.0 million, all of which related to the senior living operations segment. The Company historically has not recorded any impairment charges for goodwill.

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Organization

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Organization

1. Organization

Sentio Healthcare Properties, Inc., a Maryland corporation, was formed on October 16, 2006 under the Maryland General Corporation Law for the purpose of engaging in the business of investing in and owning commercial real estate. As used in this report, the “Company”, “we”, “us” and “our” refer to Sentio Healthcare Properties, Inc. and its consolidated subsidiaries, except where context otherwise requires. Our business is managed by Sentio Investments, LLC, a Florida limited liability company that was formed on December 20, 2011 (the “Advisor”), which is majority-owned and controlled by John Mark Ramsey, our Chief Executive Officer. Beginning with the taxable year ended December 31, 2008, Sentio Healthcare Properties, Inc. has elected to be taxed as a real estate investment trust (“REIT”).

Sentio Healthcare Properties OP, LP, a Delaware limited partnership (the “Operating Partnership”), was formed on October 17, 2006. At September 30, 2013, we owned 100% of the interest in the Operating Partnership and the HC Operating Partnership, LP, a subsidiary of the Operating Partnership. We anticipate that we will conduct substantially all of our operations through the Operating Partnership. Our financial statements and the financial statements of the Operating Partnership are consolidated in the accompanying condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.

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Immaterial Corrections to Prior Period Financial Statements (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash Flow From Operations	$ 7,578,000	$ 4,421,000
Cash used in investing activities	2,444,000	(20,834,000)
Restatement Adjustment [Member]
Cash Flow From Operations	3,000,000
Cash used in investing activities	$ 3,000,000

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Investments in Unconsolidated Entities (Details 2) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Total revenues	$ 505,000	[1],[2]	$ 689,000	[1],[2]	$ 1,898,000	[1],[2]	$ 1,754,000	[1],[2],[3]
Net income (Loss)	(81,000)	[1],[2]	(15,000)	[1],[2]	(22,000)	[1],[2]	(486,000)	[1],[2],[3]
Equity in loss (income) from unconsolidated entities	$ 56,000	[1],[2]	$ (14,000)	[1],[2]	$ (24,000)	[1],[2]	$ 363,000	[1],[2],[3]

[1] The Physicians Centre MOB joint venture was acquired in April 2012 and was accounted for under the equity method of accounting beginning with the second quarter of 2012.

[2] Littleton Specialty Rehabilitation Facility was completed in April 2012 and the single tenant began paying rent in July 2012, in accordance with the lease. Tenant operations commenced upon licensure of the facility in July 2012 and Littleton Specialty Rehabilitation Facility was accounted for under the equity method of accounting. On December 17, 2012, our joint venture partner noticed the Company of their intent to exercise their promote monetization right. The Company elected to satisfy the monetization provision through a sale of the property. The property was sold on August 8, 2013 for $11.3 million, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013. The Company’s equity in income from the Littleton Specialty Rehabilitation Facility is included in the statement of operations through the date of the sale.

[3] The Company acquired the controlling interest in the operations of Rome LTACH in April 2012 and as a result, Rome LTACH was consolidated in the second quarter of 2012. Accordingly, Rome LTACH was accounted for under the equity method of accounting during the three months ended March 31, 2012.

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Subsequent Events

9 Months Ended

Sep. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

On October 21, 2013, through wholly-owned subsidiaries, we acquired real estate property (“Woodbury Mews”) from Three WM Real Estate, LLC, Three WM Operating, LLC, Four WM Real Estate, LLC and Four WM Operating, none of which are affiliated with us, for a purchase price of $38.1 million plus closing costs. We funded the purchase of Woodbury Mews with proceeds from the sale of Series C Preferred Stock and Series B Preferred Units in our Operating Partnership to KKR, pursuant to the KKR Equity Commitment (See Note 9) and with proceeds from a mortgage loan from Key Bank National Association, Inc.

On October 18, 2013, in connection with our acquisition of Woodbury Mews, Sentinel RE Investment Holdings, LP, an affiliate of KKR, completed the first put exercise under the KKR Equity Commitment, purchasing the following securities for an aggregate purchase price of $14.3 million:

• 1,000 shares of newly issued Series C Preferred Stock and 

• 142,000 newly-issued Series B Preferred Units of the Operating Partnership, which are convertible into approximately 1,417,166 shares of the Company’s common stock at the currently effective conversion price.

On October 21, 2013, also in connection with our acquisition of Woodbury Mews, we entered into a mortgage agreement with Key Bank National Association, Inc. (“Key”), an unaffiliated lender, with an outstanding principal balance of approximately $25.0 million (the “Woodbury Loan”), which is secured by Woodbury Mews. The Woodbury Loan has an initial term of twelve months with two 12-month extensions available assuming certain criteria are met, and bears interest at a rate of one month LIBOR plus 3.0%. Payments on the loans are due monthly and consist of accrued interest-only during the initial term. If the extension option is exercised, payments will consist of interest plus principal amortization payments based upon a 25-year amortization schedule.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Equity

9. Stockholders’ Equity

Common Stock

Our charter authorizes the issuance of 580,000,000 shares of common stock with a par value of $0.01 per share and 20,000,000 shares of preferred stock with a par value of $0.01 per share. As of September 30, 2013, including distributions reinvested, we had issued approximately 13.3 million shares of common stock for a total of approximately $132.3 million of gross proceeds in our initial and follow-on public offerings.

Preferred Stock and OP Units

On February 10, 2013, we entered into a series of agreements with Sentinel RE Investment Holdings LP, an affiliate of Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”) for the purpose of obtaining up to a $150 million equity commitment to be used to finance future real estate acquisitions (such investment and the related agreements, are referred to herein collectively as the “KKR Equity Commitment”). Pursuant to the KKR Equity Commitment, the Company may issue up to 1,000 shares of 3% Senior Cumulative Preferred Stock, Series A, $0.01 par value per share (the “Series A Preferred Stock”), or 3% Senior Cumulative Preferred Stock, Series C, $0.01 par value per share (the “Series C Preferred Stock”), in either case representing up to an aggregate issuance amount of $100,000. The Operating Partnership may issue 7.5% Series B Convertible Preferred Units (the “Series B Preferred Units”) up to an aggregate issuance amount of $149.9 million. Subject to certain limitations, the Series B Preferred Units may be converted into common stock of the Company. The obligations of KKR to fund and the Company to draw funds under the KKR Equity Commitment are subject to various conditions, limitations and penalties as more fully outlined in our Annual Report on Form 10-K for the year ended December 31, 2012 and in the proxy statement related to our 2013 annual meeting of stockholders as filed with the SEC on April 9, 2013.

The Series A Preferred Stock and the Series C Preferred Stock will rank senior to the Company’s common stock with respect to dividend rights and rights on liquidation. The holders of the Series A Preferred Stock and the Series C Preferred Stock will be entitled to receive dividends, as and if authorized by our board of directors out of funds legally available for that purpose, at an annual rate equal to 3% of the liquidation preference for each share. Dividends on the Series A Preferred Stock and the Series C Preferred Stock will be payable annually in arrears.

The Series B Preferred Units will rank senior to the Operating Partnership’s common units with respect to distribution rights and rights on liquidation. The Series B Preferred Units will be entitled to receive cash distributions at an annual rate equal to 7.5% of the Series B liquidation preference to any distributions paid to common units of the Operating Partnership. If the Operating Partnership is unable to pay cash distributions, distributions will be paid in kind at an annual rate of 10% of the Series B liquidation preference. After payment of the preferred distributions, additional distributions will be paid first to the common units until they have received an aggregate return of 7.5% per unit in annual distributions commencing from February 10, 2013, and thereafter to the common units and Series B Preferred Units pro rata.

As of September 30, 2013, no shares or units had been issued pursuant to the KKR Equity Commitment. On October 21, 2013, in connection with the first put exercise pursuant to the KKR Equity Commitment, we issued 1,000 shares of our Series C Preferred Stock and 142,000 Series B Preferred Units in our Operating Partnership to KKR (See Note 13).

Distributions

The following are the distributions declared during the nine months ended September 30, 2013 and 2012:

	Distributions Declared						Cash Flow from
Period	Cash		Reinvested		Total		Operations
First quarter 2012	$	801,000	$	—	$	801,000	$	1,277,000
Second quarter 2012		799,000				799,000		214,000
Third quarter 2012		807,000		—		807,000		2,930,000
First quarter 2013		1,493,000		—		1,493,000		2,643,000
Second quarter 2013		1,585,000		—		1,585,000		2,522,000
Third quarter 2013		1,544,000		52,000		1,596,000		2,413,000

Effective October 1, 2012, our board of directors declared distributions for daily record dates occurring in the first quarter of 2013 in amounts per share that, if declared and paid each day for a 365 -day period, would equate to an annualized rate of $.475 per share (4.75 % based on share price of $ 10.00). Effective July 1, 2013, our board of directors declared distributions for daily record dates occurring in the third quarter of 2013 in amounts per share that, if declared and paid each day for a 365-day period, would equate to an annualized rate of $.50 per share (5.00 % based on a share price of $ 10.00).

The declaration of distributions is at the discretion of our board of directors and our board will determine the amount of distributions on a regular basis. The amount of distributions will depend on our funds from operations, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and other factors our board of directors deems relevant.

On June 19, 2013, we filed a registration statement on Form S-3 to register up to $ 99,000,000 of shares of common stock to be offered to our existing stockholders pursuant to an amended and restated distribution reinvestment plan (the “DRIP offering”). The DRIP offering shares will initially be offered at a purchase price of $10.02, which is 100% of the current estimated per-share value of our common stock. The distributions declared in the third quarter of 2013 to be reinvested in the Company’s common stock will result in approximately 5,205 shares of common stock issued in October 2013.

Stock Repurchase Program

In 2007, we adopted a stock repurchase program for investors who had held their shares for at least one year. Under our stock repurchase program, the repurchase price varies depending on the purchase price paid by the stockholder and the number of years the shares are held. Our board of directors may amend, suspend or terminate the program at any time with 30 days prior notice to stockholders. We have no obligation to repurchase our stockholders’ shares. In 2009, our board of directors waived the one-year holding period in the event of the death of a stockholder and adjusted the repurchase price to 100% of such stockholder’s purchase price if the stockholder held the shares for less than three years.

On April 29, 2011, we informed our stockholders that our Independent Directors Committee had directed us to suspend our public offering, our dividend reinvestment program and our stock repurchase program (except for repurchases due to death). As a result our stock repurchase program has been suspended since May 29, 2011 for all repurchases, except repurchases due to death of a stockholder.

During the nine months ended September 30, 2013, we repurchased shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share
First quarter 2013		60,432	$	9.98
Second quarter 2013		30,153		10.02
Third quarter 2013		101,880		10.02
		192,465

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Investments in Unconsolidated Entities (Tables)

9 Months Ended

Sep. 30, 2013

Investments In Unconsolidated Entities [Abstract]

Schedule of Equity Method Accounting

As of September 30, 2013, the Company owns an interest in the following entity that is accounted for under the equity method of accounting:

Entity(1)	Property Type	Acquired	Investment(2)		Ownership%
Physicians Center MOB	Medical Office Building	April 2012		1,458,000		71.9

(1)	This entity is not consolidated because the Company exercises significant influence, but does not control or direct the activities that most significantly impact the entity’s performance.
(2)	Represents the carrying value of the Company’s investment in the unconsolidated entity.

Schedule of Combined Financial Information For Unconsolidated Entities

Summarized combined financial information for the Company’s unconsolidated entities is as follows:

	September 30, 2013(2)		December 31, 2012(1)(2)
Cash and cash equivalents	$	370,000	$	423,000
Investments in real estate, net		8,949,000		16,312,000
Other assets		173,000		549,000
Total assets	$	9,492,000	$	17,284,000
Notes payable		7,240,000		12,504,000
Accounts payable and accrued liabilities		252,000		219,000
Other liabilities		26,000		99,000
Total stockholders’ equity		1,974,000		4,462,000
Total liabilities and equity	$	9,492,000	$	17,284,000

	Three Months Ended September 30,				Nine Months Ended September 30,
		2013(1)(2)		2012(1)(2)		2013(1)(2)		2012(1)(2)(3)
Total revenues	$	505,000	$	689,000	$	1,898,000	$	1,754,000
Net loss		(81,000)		(15,000)		(22,000)		(486,000)
Company’s equity in loss (income) from unconsolidated     entities		56,000		(14,000)		(24,000)		363,000

(1)	Littleton Specialty Rehabilitation Facility was completed in April 2012 and the single tenant began paying rent in July 2012, in accordance with the lease. Tenant operations commenced upon licensure of the facility in July 2012 and Littleton Specialty Rehabilitation Facility was accounted for under the equity method of accounting. On December 17, 2012, our joint venture partner noticed the Company of their intent to exercise their promote monetization right. The Company elected to satisfy the monetization provision through a sale of the property. The property was sold on August 8, 2013 for $11.3 million, which resulted in the Company receiving cash proceeds, net of debt repayment, of approximately $3.5 million. The Company recorded a gain of $1.7 million in the quarter ended September 30, 2013. The Company’s equity in income from the Littleton Specialty Rehabilitation Facility is included in the statement of operations through the date of the sale.
(2)	The Physicians Centre MOB joint venture was acquired in April 2012 and was accounted for under the equity method of accounting beginning with the second quarter of 2012.
(3)	The Company acquired the controlling interest in the operations of Rome LTACH in April 2012 and as a result, Rome LTACH was consolidated in the second quarter of 2012. Accordingly, Rome LTACH was accounted for under the equity method of accounting during the three months ended March 31, 2012.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Summary Of Significant Accounting Policies [Abstract]

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In accordance with the guidance for the consolidation of variable interest entities (“VIEs”), we analyze our variable interests, including investments in partnerships and joint ventures, to determine if the entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews, based on our review of the design of the entity, its organizational structure including decision-making ability, risk and reward sharing experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions and financial agreements. We also use quantitative and qualitative analyses to determine if we must consolidate a variable interest entity as the primary beneficiary.

Interim Financial Information

Interim Financial Information

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Our accompanying interim condensed consolidated financial statements should be read in conjunction with our audited condensed consolidated financial statements and the notes thereto included on our 2012 Annual Report on Form 10-K, as filed with the SEC.

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Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 04, 2013
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Entity Common Stock, Shares Outstanding		12,609,784
Entity Registrant Name	Sentio Healthcare Properties Inc
Entity Central Index Key	0001378774
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company

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Investments in Real Estate (Tables)

9 Months Ended

Sep. 30, 2013

Investments In Real Estate [Abstract]

Schedule Of Cost and Accumulated Depreciation and Amortization Related To Real Estate Assets and Related Lease Intangibles

As of September 30, 2013, accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements		Furniture, fixtures and equipment		Intangible lease assets
Cost	$	23,193,000	$	167,224,000	$	5,270,000	$	14,757,000
Accumulated depreciation and amortization		—		(12,785,000)		(2,484,000)		(11,423,000)
Net	$	23,193,000	$	154,439,000	$	2,786,000	$	3,334,000

As of December 31, 2012, accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements		Furniture, fixtures and equipment		Intangible lease assets
Cost	$	23,193,000	$	166,996,000	$	5,118,000	$	14,757,000
Accumulated depreciation and amortization		—		(9,151,000)		(1,803,000)		(9,374,000)
Net	$	23,193,000	$	157,845,000	$	3,315,000	$	5,383,000

Schedule of Finite Lived Intangible Assets Future Amortization Expense

Estimated amortization for October 1, 2013 through December 31, 2013 and each of the subsequent years is as follows:

	Intangible assets
October 1, 2013 — December 31, 2013	$	82,000
2014		330,000
2015		330,000
2016		329,000
2017		328,000
2018		328,000
2019 and thereafter		1,607,000