Item
1.01 Entry into a Material Definitive Agreement.
Clearday,
Inc. (the “Company” or “Clearday”), through its subsidiary MCA Naples, LLC, on October
25, 2021 entered into a purchase agreement (“Purchase Agreement”) to sell undivided interests in the land and
improvements (the “Naples Property”) that are used for its Memory Care of Naples care facility that is located
in Naples, Florida (the “Naples Facility”). The Purchase Agreement provides that an aggregate amount of $5,350,000
was received by Clearday for the sale of undivided interests equal to 67.36% of the aggregate interests in the Naples Property. The remaining
32.64% of the undivided interests in the Naples Property will be retained by MCA Naples, LLC. The closing of the purchase and sale of
the undivided interests in the Naples Property under the Purchase Agreement will occur upon the satisfaction of customary conditions
precedent and deliveries including the consent to purchase and sale by the existing mortgage lender or refinancing of the mortgage
debt. The Purchase Agreement provides for customary indemnification by the parties, which is subject to certain limitations including
that the aggregate amount of losses, other than for fraud or third party claims, are recoverable after the amount of losses exceeds 1%
of the aggregate purchase price, the aggregate amount recoverable is limited to 5% of the aggregate purchase price and that claims
need to be asserted within one year after the closing. Any disputes among the parties under the Purchase Agreement will be determined
by arbitration. The sale of the undivided interests in the Naples Property is intended to permit the purchasers to have the benefit of
a so-called like-kind exchange (the “Exchange”) pursuant to Section 1031 of the Internal Revenue Code of 1986,
as amended (the “Code”), and the parties agreed to reasonably cooperate with each other with respect to an
Exchange. The Purchase Agreement provided for a non-refundable advance of the purchase price. Accordingly, the aggregate purchase price
amount has been received by Clearday.
At
the closing of this Purchase Agreement each of the purchasers of the undivided interest in the Naples Property and MCA Naples LLC will
hold all of the undivided interests in the Naples Property as tenants in common and will be party to a Tenant in Common Agreement
(“TIC Agreement”). The TIC Agreement provides customary terms and provisions for such agreements, including
that the purchasers of the undivided interests in the Naples Property as well as MCA Naples, LLC will hold their respective undivided
tenancy in common interests in the Naples Property as tenants-in-common and not as partners or joint venturers and that each such tenant
in common will elect to be excluded from the provisions of Subchapter K of Chapter 1 of the Code, with respect to the tenancy in common
ownership of the Naples Property. The Naples Property will be managed by Clearday Management Ltd., a subsidiary of Clearday, in
its capacity as the property manager (“Property Manager”), in accordance with the terms of a Management and
Leasing Agreement (“Property Management Agreement”) that will be mutually acceptable to the tenants in common
and the Property Manager and entered into concurrently with the TIC Agreement. It is expected that the Property Management Agreement
will limit the Property Manager’s services to customary services typically performed to manage the Property on behalf of the tenants
in common, such as collecting rents, paying property taxes and insurance premiums, arranging for repair and maintenance of the Naples
Property, utilities, heat, air conditioning, trash removal, parking for the Naples Property and paying such expenses, and providing other
customary services. The amount of rent paid by a lessee shall not be based on a percentage of net income, cash flow, increases in equity,
or otherwise depend in whole or in part on the income or profits derived by the lessee. The Property Manager, on behalf of the tenants
in common, shall open and maintain all accounts necessary or desirable in connection with ownership of the Naples Property, shall maintain
adequate books and records of the Naples Property operations, and shall provide monthly reports to the tenants in common on the operations
of the Naples Property. The Naples Property is subject to a lease to MCA Naples Operating Company, LLC, a subsidiary of Clearday, and
such lease will not be effected or modified by the sale of the undivided interests in the Naples Property or the TIC Agreement. The Company
expects to continue to operate the Naples Facility and pay the holders of the tenant in common interests a return based on the payments
under such lease.
Under
the TIC Agreement, the unanimous approval of all of the tenants in common shall be required for any of the following: (i) decisions
of the Property Manager regarding leases or subleases, deed restrictions, or grants of easement of/on all or any portion of the Property,
provided that the conveyance of leases or subleases or portions of the Property pursuant to contracts with third parties that have been
previously approved by the Tenants in Common shall not require the further approval of the Tenants in Common, (ii) any sale or exchange
of the Property, (iii) any indebtedness or loan, and any negotiation or refinancing thereof, secured by a lien on the Property, (iv)
any successor or replacement Property Manager, (v) annual budgets for development and operations of the Property, (vi) any contracts,
renewals and amendments thereof, and any transactions with parties affiliated with any Tenant in Common or the Property Manager including
the Property Management Agreement, and (vii) any successor or replacement Property Manager. Whenever this Agreement provides that the
Tenants in Common shall be entitled to vote upon a matter, each Tenant in Common shall be entitled to vote in proportion to its TIC Percentage.
Clearday
entered into the Purchase Agreement after the expiration and/ or termination of the Contract for Sale and Purchase of the MCA
Naples Facility by and among MCA Naples LLC and Naples Property Ventures, LLC dated as of September 9, 2021 in accordance with its terms,
which agreement was reported by Clearday in its Current Report on Form 8K that was filed on September 15, 2021.
The
foregoing description of each of the Purchase Agreement and the TIC Agreement is a summary only, is not intended to be complete, and
is qualified in its entirety by reference to the full text of each such agreement that is filed as an exhibit to this Current Report
on Form 8-K.
Forward
Looking Statements
This
communication contains forward-looking statements (including within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and Section 27A of the Securities Act of 1933, as amended) concerning the Company. These statements may discuss goals, intentions
and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs
of the management of the Company, as well as assumptions made by, and information currently available to, management. Forward-looking
statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include
words such as “may,” “will,” “should,” “would,” “expect,” “anticipate,”
“plan,” “likely,” “believe,” “estimate,” “project,” “intend,”
and other similar expressions. Statements that are not historical facts are forward-looking statements. Forward-looking statements are
based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual
results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without
limitation: the risks regarding the Company and its business, generally; risks related to the Company’s ability to correctly estimate
and manage its operating expenses and develop its innovate non-acute care businesses and the acceptance of its proposed products and
services, including with respect to future financial and operating results; the ability of the Company to protect its intellectual property
rights; competitive responses to the Company’s businesses including its innovative non-acute care business; unexpected costs, charges
or expenses; regulatory requirements or developments; changes in capital resource requirements; and legislative, regulatory, political
and economic developments. The foregoing review of important factors that could cause actual events to differ from expectations should
not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the
risk factors included in the Company’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed with the SEC and the registration statement regarding the Company’s previously announced merger, that was filed
and declared effective. The Company can give no assurance that the actual results will not be materially different than those based on
the forward looking statements. Except as required by applicable law, the Company undertakes no obligation to revise or update any forward-looking
statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
