EXHIBIT 10.86.1 PURCHASE SALE AGREEMNT

THIS PURCHASE AND SALE AGREEMENT (“this Agreement”) is made and entered into as of the 5th day of August, 2005 (the “Execution Date”), by and between CAMLU REAL ESTATE DEVELOPMENT LIMITED PARTNERSHIP, a Nevada limited partnership (“Seller”) and EMERITUS CORPORATION, a Washington corporation, and/or its assigns (“Buyer”).

A.   Seller owns the real property described in Exhibit 1.1(a) , the improvements constructed thereon, which include an ninety-three (93) unit retirement and residential care facility operated as the “Willow Brook Retirement Community,” with a street address of 5501 Duncan Road, Fort Smith, Arkansas and certain personal property used in conjunction with the operation thereof.

B.   Buyer and Cheridan, Inc., a Washington corporation (“Cheridan”), an affiliate of Seller, have concurrently entered into a separate agreement dated the 5 ^th day of August, 2005 for the purchase and sale of the real property described in Exhibit A owned by Cheridan (the “Wildflower Purchase Agreement”).

C.   Buyer and Cheridan have concurrently entered into a separate agreement dated the 5 ^th day of August, 2005 for the purchase and sale of the real property described in Exhibit B (the “Trillium Park Purchase Agreement”).

D.   Seller has agreed to sell to Buyer all of Seller’s right, title and interest in the real property and improvements constructed or situated thereon, and certain of Seller’s personal property used in the operation of the real property and improvements thereon located at 5501 Duncan Road, Fort Smith, Arkansas and Buyer has agreed to purchase same from Seller subject to the terms and conditions hereinafter set forth.

In consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree as follows:

1.    The Property

1.1    Assets . Subject to the terms of this Agreement, Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller, all of Seller’s right, title and interest in and to the following described property (it being understood and agreed that such property shall specifically exclude the Excluded Assets (as defined below) in accordance with the terms hereof:

(a)    the real property situated in Fort Smith, Arkansas which is more particularly described in Exhibit 1.1(a) attached hereto together with the ninety-three (93) unit retirement and residential care facility located thereon and commonly known as the “Willow Brook Retirement Community” (the “Facility”) and all other improvements and fixtures thereon (hereinafter collectively referred to as the “Real Property”);

(b)    all equipment, computer hardware and computer software (but only to the extent such software is not proprietary to Seller and the licenses with respect to any non proprietary software are, at Buyer’s election and cost, assigned to Buyer at Closing), vehicles, furniture, and fixtures, inventory, linens, dietary supplies, housekeeping supplies, food and other consumable inventories owned by Seller and located at the Facility or used in connection with the operation of the Facility, all of which is more particularly described on Exhibit 1.1(b) (hereinafter collectively referred to as “Personal Property”);

(c)    all intangibles of Seller used in the operation of the Facility including, without limitation, telephone numbers, all of Seller’s interest in the name “Willow Brook” or “Willow Brook Retirement Community”, as well as any licenses, governmental approvals or permits to the extent assignable or transferable without cost to Seller and any other rights or privileges appurtenant to the Real Property or related to the business operated thereon or thereat (hereinafter collectively referred to as “Intangibles”);

(d)    all leases, rental or occupancy agreements with the residents of the Facility and any amendment or modification thereto (the “Resident Leases”) and any other agreements granting any person or entity the right to use or occupy any space situated in the Facility or any portion thereof (the “Commercial Leases” and together with the Resident Leases, the “Leases”), if and to the extent Buyer agrees to assume the same in accordance with the terms of this Agreement (the “Assumed Leases”);

(e)    all resident records and files and marketing databases used in conjunction with the operation of the business conducted upon the Real Property by Seller (hereinafter collectively referred to as “Records”);

(f)    all contracts, oral or written, to which the Seller is a party for the Seller’s operation of the Facility, including but not limited to contract rights, equipment leases, maintenance contracts, service contracts and other contracts, and operating or service manuals, warranties or guarantees relating to all or any portion of the Real Property or any item of the Personal Property subject to this Agreement (the “Contracts”), if and to the extent Buyer agrees to assume the same in accordance with the terms of this Agreement (hereinafter collectively referred to as “Assumed Contracts”);

(g)    the Prepaid Rents (as defined below).

The assets and property interests of Seller described in Sections 1.1(a) through 1.1(g) above being sold pursuant hereto shall hereinafter collectively be referred to as the “Assets”.

1.2    Excluded Assets .   Seller shall not sell, convey, transfer or assign to Buyer, and Buyer shall not purchase or acquire from Seller, any of the following assets (the “Excluded Assets”), which shall remain the sole and exclusive property of Seller:

(a)    all insurance policies relating to Seller’s business, Facility or the Assets and the rights thereunder;

(b)    all cash, cash equivalents and accounts receivables earned for the period prior to the Closing Date and all deposits (other than the Resident Deposits and any refundable deposits held by Seller with respect to any commercial spaces in the Facility which are leased to third parties), bank accounts, checking accounts, petty cash, computer software programs (unless such software is proprietary to Seller or unless the licenses with respect to any non-proprietary software are not assigned, at Buyer’s election, to Buyer at Closing), utility deposits or interest thereon, and Wenatchee, Washington central office equipment and personal property located in Seller’s Wenatchee, Washington central office or in the corporate office of Seller’s Manager (as defined below), a list of which is attached hereto as Exhibit 1.2(b) (the “Corporate Assets”), or insurance or tax reserves relating to the Assets being sold pursuant hereto, and the other assets disclosed on Exhibit 1.2(b) ; and

(c)    refunds of real estate taxes allocated to the period prior to the Closing if, and to the extent, the Purchase Price was not prorated therefor.

1.3    No Assumption of Liabilities . Notwithstanding anything in this Agreement to the contrary, Seller shall retain, and Buyer shall not assume, or in any way be liable or responsible for, any obligations or liabilities of Seller or the Facility whatsoever, whether fixed, contingent or otherwise, and whether known or unknown, including, without limitation:

(a)    all liabilities and obligations arising from events occurring or conditions existing on or prior to the Closing Date, with respect to the ownership or operation of the Facility, the other Assets or otherwise, including, without limitation, rent, accounts payable and notes payable;

(b)    except as otherwise specifically provided in Section 19, all liabilities and obligations with respect to Seller’s employees, including accrued salaries, wages, vacation, payroll taxes, retirement plan payables and any obligations with respect to any other employee benefit or retirement plan or policy that arise from services performed by such employees prior to Closing; and

(c)    all liabilities and obligations for the payment of taxes which relate to tax periods ending on or prior to the Closing Date;

provided , however , nothing herein shall be construed as imposing any obligation on Seller to perform any obligations related to the ownership or operation of the Facility where such obligation to perform first arises after the Closing Date.

2.    Seller’s Purchase Price

2.1    Purchase Price .   The purchase price for the Assets is Five Million Three Hundred Thousand and 00/100 Dollars ($5,300,000.00) (“Purchase Price”). At the Closing, the Buyer shall deliver to Escrow Agent in immediately available United States funds, the amount of the Purchase Price (a) less the Deposit (defined below); (b) plus all Closing costs and prorations required to be paid by Buyer pursuant to Sections 15 and 16 hereof.

2.2    Allocation of Purchase Price . The Purchase Price shall be allocated among the Assets as provided on Exhibit 2.2 Buyer and Seller agree that each will report the transaction subject to this Agreement in accordance with such allocation and each will not take a position inconsistent with such allocation without the prior written consent of the other party to this Agreement , which consent shall not be unreasonably withheld.

2.3    Contingent Payment . Contingent Payment . At the end of the twelve (12) month period (Period 1) or the twelve (12) month period following Period 1 (Period 2) selected by Seller, following the Closing Date, Buyer shall calculate the amount of the NOI Improvement (as defined below) within thirty (30) days thereafter and Buyer shall pay to Seller an amount determined in accordance with this Section. The “NOI Improvement” shall be the amount that the NOI for the period selected by Seller, following the Closing Date exceeds the Baseline NOI. The Parties agree for purposes of this Section, the “Baseline NOI” equals Five Hundred Fifty-Eight Thousand Five Hundred Seventy Dollars ($558,570.00). “NOI” shall mean the pre-tax net income of the Facility for the twelve (12) month period selected by Seller, plus (a) the amount of the provision for depreciation and amortization; plus (b) the amount of the provision for interest and loan payments, if any; plus (c) the amount of the provision for rent payments, if any; minus (d) five percent (5%) of gross revenues as a provision for management fees; and minus (e) Three Hundred Fifty Dollars ($350.00) per unit for capital expenditure reserve. The difference between the NOI for the twelve (12) month period selected by Seller and the Baseline NOI shall be divided by a capitalization rate of .1053 and fifty percent (50%) of such amount shall be paid to Seller within seven (7) days of the determination of the amount due Seller, if any.

3.    Escrow .  Within three (3) business days after the Execution Date (“Opening of Escrow”), Buyer shall deliver to Chicago Title Insurance Company whose address is 32001 32 ^nd  Avenue South, Suite 400, Federal Way, WA 98001, Attn: Brenda Sporcic, telephone number: (253) 945-9140 (“Escrow Agent”), Fifty Thousand Dollars ($50,000.00) earnest money deposit (the “Deposit”) to be held subject to the terms of this Agreement. If Buyer at the end of the Feasibility Period (defined below), has not elected to terminate this Agreement, then, subject to the terms of this Agreement, the Deposit shall become nonrefundable. If the purchase and sale contemplated by this Agreement is completed, then at Closing, the Escrow Agent will credit the Deposit against the Purchase Price, and the Deposit shall be remitted to Seller along with the balance of the Purchase Price. If the purchase and sale contemplated by this Agreement fails to close, the Deposit shall be remitted to Buyer or Seller, as appropriate, in accordance with the terms of this Agreement. All interest or other earnings on the Deposit, if any, shall become part of the Deposit and shall be disbursed to the party who becomes entitled to the Deposit pursuant to the terms of this Agreement.

4.    Title . At Closing, Seller shall deliver to Buyer by limited warranty deed title to the Real Property subject only to the Permitted Exceptions (as defined in Section 5(b) below).

5.    Title Commitment/Survey/Litigation and Lien Searches

(a)    Within ten (10) days after the Execution Date (the “Title Delivery Period”), Seller shall direct Escrow Agent to provide Buyer with a preliminary commitment (“Title Commitment”) for an extended coverage owner’s title insurance policy to be issued by

Chicago Title Insurance Company (“Title Company”) describing the Real Property, with coverage in the amount of the Purchase Price, together with a legible and complete copy (to the extent available to the Title Company) of each of the documents forming the basis for each exception therein (the “Exception Documents” and together with the Title Commitment, the “Title Documents”). Buyer shall pay the difference in the additional premium cost between the cost of a standard owner’s policy of title insurance (including any endorsements required to remove or cure objections in the Title Objection Notice that Seller elects to remove or cure pursuant to Section 5(b)) and the cost of the title policy actually issued, inclusive of endorsements. Seller will provide the Title Company with any indemnity agreement in form acceptable to Seller to enable the Title Company to remove policy exceptions, which would not be removed if the Title Policy was an owner’s standard title insurance policy. Buyer agrees, at its sole cost and expense, to pay any and all costs associated with obtaining any additional items including, without limitation, any ALTA survey, which are required by the Title Company as a condition of its issuance of an owner’s extended coverage title insurance policy. If Buyer fails to satisfy the Title Company's requirements of Buyer for the issuance of an owner's extended coverage title insurance policy, then Buyer shall accept a standard owner's policy of title insurance.

(b)    Buyer shall have a period of twenty (20) days from receipt of the Title Documents to approve or disapprove the Title Documents (the “Title Review Period”) by written notice to Seller setting forth in reasonable detail the nature of Buyer’s Title objections (the “Title Objection Notice”). Any exceptions or other items set forth in the Title Commitment to which Buyer does not object within the Title Review Period, it being understood and agreed that Buyer shall not have the right to object to exceptions for liens for local real estate taxes and assessments not yet due or payable, shall hereinafter be deemed to be “Permitted Exceptions”. With regard to items to which Buyer does object within the Title Review Period, Seller shall notify Buyer in writing within ten (10) days after Seller’s receipt of the Title Objection Notice of any exceptions to title which Seller is unwilling to remove or otherwise resolve (the “Title Response Notice”) and Buyer may, at Buyer’s option, to be exercised on or before 5:00 p.m. Pacific Time on the fifth (5 ^th ) day after receipt of the Title Response Notice from Seller, either (i) waive the objections set forth in the Title Objection Notice which Seller is unwilling to remove or otherwise resolve in accordance with the terms of the Title Response Notice, in which case such items shall be deemed to be included in within the Permitted Exceptions or (ii) terminate this Agreement by written notice to Seller. If Buyer timely elects to terminate this Agreement, Escrow Agent shall immediately return the Deposit to Buyer and this Agreement will terminate except for those provisions of this Agreement which specifically survive termination. In the event Seller elects to cure or remove the items identified in the Title Objection Notice but fails by Closing to take such action as may be necessary to cure or remove the items identified in the Title Objection Notice, then Buyer shall have the option of either waiving the applicable items set forth in the Title Objection Notice, in which event such items shall be deemed to be included within the Permitted Exceptions, or terminating this Agreement by delivery of written notice of termination to Seller within five (5) days after Seller’s act or omission giving rise to such termination right, and the Deposit shall be returned to Buyer and thereafter neither Buyer nor Seller shall have any further rights or obligations hereunder, except under those provisions of this Agreement which specifically survive termination. In the event any supplement to the Title Commitment shows an additional exception, Buyer shall accept or disapprove the same and

Seller shall respond to Buyer’s objection in the same manner as above with the exception that each of the time periods involved shall be shortened to five (5) days.

(c)    Within ten (10) days after the Execution Date, Buyer shall order an ALTA survey of the Real Property (the “Survey”), prepared by a duly licensed land surveyor reasonably acceptable to the Title Company and Buyer and Buyer shall cause the same to be delivered to Buyer and Seller within thirty (30) days after the Execution Date (the “Survey Delivery Period”). The Survey shall be dated and certified not earlier than the Execution Date, shall show the location of the Real Property, the improvements located thereon, building and set-back lines, fences, ponds, creeks, streams, rivers, officially designated 100-year flood plains, easements, roads, rights-of-way, encroachments and such other exceptions located on the Real Property as may be described in the Title Commitment, and shall contain a legal description of the boundaries of the Real Property metes and bounds which shall also include a reference to the recorded plat, if any. The Survey and certificate shall be completed in accordance with the Minimum Standard Detail Requirements for any ALTA/ACSM land title survey as adopted by the American Congress of Surveying and Mapping and the American Land Title Association, pursuant to the accuracy requirements of a Class A Urban Survey. Buyer shall have a period of ten (10) days from receipt of the Survey to approve or disapprove the Survey (the “Survey Review Period”) by written notice to Seller setting forth in reasonable detail the nature of Buyer’s Survey objections (the “Survey Objection Notice”). In the event that Buyer disapproves any or all items referred to in the Survey (including, without limitation, any encroachments, discrepancies in property lines, gaps, gores, or other matters which constitute a defect in the Real Property as determined by Buyer), Seller shall have a period of ten (10) days after receipt of the Survey Objection Notice (the “Survey Response Period”) within which to notify Buyer in writing whether Seller is willing or able to take such action as may be necessary by Closing to cure or remove, or to cause the surveyor to revise the Survey in a manner which is responsive to, the items identified in the Survey Objection Notice (the “Survey Response Notice”). In the event Seller notifies Buyer within the Survey Response Period that it is unable or unwilling to take such action as may be necessary to cure or remove, or to cause the surveyor to revise the Survey as to the items in the Survey Objection Letter, Buyer may, at Buyer’s option, to be exercised on or before 5:00 p.m. Pacific Time on the fifth (5 ^th ) day after receipt of the Survey Response Notice, either waive the objections set forth in the Survey Objection Notice which will not be resolved as provided in the Survey Response Notice, in which event such items shall be deemed to be included within the Permitted Exceptions or (ii) terminate this Agreement by written notice to Seller. If Buyer timely elects to terminate this Agreement, Escrow Agent shall immediately return the Deposit to Buyer and this Agreement will terminate except for those provisions of this Agreement which specifically survive termination. In the event Seller elects to cure or remove the items objected to by Buyer in the Survey Objection Notice but fails by Closing to take such action as may be necessary to cure or remove, or to cause the surveyor to revise the Survey in a manner which is responsive to, the items identified in the Survey Objection Notice, then Buyer shall have the option of either waiving the applicable items set forth in the Survey Objection Notice, in which event such items shall be deemed to be included within the Permitted Exceptions, or terminating this Agreement by delivery of written notice of termination to Seller within five (5) days after Seller’s act or omission giving rise to such termination right, and the Deposit shall be returned to Buyer and thereafter neither Buyer nor Seller shall have any further rights or obligations hereunder, except under those provisions of this Agreement which specifically survive termination.

(d)    Within the Title Delivery Period Seller shall also cause to be prepared and furnished to Buyer a litigation, bankruptcy, judgment and security interest search in the names of Seller and the Facility conducted in the state and county in which the Facility is located, the State of Washington and the County in which the Seller maintains its principal place of business (the “Litigation and Lien Search”). In the event that Buyer disapproves any or all items referred to in the Litigation and Lien Search, Buyer shall so advise Seller in writing prior to the end of the Title Review Period (the “Litigation and Lien Objection Notice”). Seller shall have a period of ten (10) days after receipt of the Litigation and Lien Objection Notice (the “Lien Response Period”) within which to notify Buyer in writing whether Seller is willing or able to take such action as may be necessary by Closing to cure or remove the items identified in the Litigation and Lien Objection Notice (the “Lien Response Notice”). In the event Seller notifies Buyer within the Lien Response Period that it is unable or unwilling to take such action as may be necessary to cure or remove by Closing the items identified in the Litigation and Lien Objection Notice, Buyer may, at Buyer’s option, to be exercised on or before 5:00 p.m. Pacific Time on the fifth (5 ^th ) day after receipt of the Lien Response Notice, either (i) waive the objections set forth in the Litigation and Lien Objection Notice which will not be resolved as provided in the Lien Response Notice or (ii) terminate this Agreement by written notice to Seller. If Buyer timely elects to terminate this Agreement, Escrow Agent shall immediately return the Deposit to Buyer and this Agreement will terminate except for those provisions of this Agreement which specifically survive termination. In the event Seller elects to cure or remove the items objected to by Buyer in the Litigation and Lien Objection Notice but fails by Closing to take such action as may be necessary to cure or remove the items identified in the Litigation and Lien Objection Notice, then Buyer shall have the option of either waiving the applicable items set forth in the Survey Objection Notice, in which event such items shall be deemed to be included within the Permitted Exceptions, or terminating this Agreement by delivery of written notice of termination to Seller within five (5) days after Seller’s act or omission giving rise to such termination right, and the Deposit shall be returned to Buyer and thereafter neither Buyer nor Seller shall have any further rights or obligations hereunder, except under those provisions of this Agreement which specifically survive termination. Any liens reflected on the Litigation and Lien Search which are not objected to by Buyer or as to which any objection is later waived by Buyer shall be included within the Permitted Exceptions.

(e)    The costs of the Title Commitment, Survey and Litigation and Lien Search shall be borne by Seller and Buyer in the manner set forth in Section 15(c).

(f)    For purposes of this Section 5, the obligations of the parties set forth in Section 7(b) and in Section 18 of this Agreement shall be deemed to be obligations which specifically survive termination of this Agreement.

6.    Information

(a)    Within ten (10) days after the Execution Date Seller shall deliver to Buyer the information described in Exhibit 6 hereto (the “Due Diligence Materials”) if to the extent the same is in the possession of Seller or Frontier Management, LLC (“Seller’s Manager”). In the event that any of the Due Diligence Materials that are in the possession of Seller or Seller’s Manager shall not be delivered within the aforesaid ten (10) day period, the Feasibility Period (as defined below) shall automatically be extended, day for day, until all of the Due Diligence

Materials are delivered. Buyer shall acknowledge in writing the receipt of all of the Due Diligence Materials within one (1) day of receipt of same. Further, Seller shall provide such other information that is in the possession of Seller or Seller’s Manager that Buyer may reasonably request from time to time that pertain to the Assets; provided , however , that to the extent any such request is made after the expiration of the ten (10) day period described in the first sentence hereof, the Seller’s delivery of the requested information shall not serve in any manner to extend the Feasibility Period.

(b)    In addition to what was delivered pursuant to Section 6(a) above, Seller has offered to make available to Buyer for review Seller’s records which are in the possession of Seller or Seller’s Manager which relate to the ownership, condition or operation of the Real Property (the “Books and Records”). The Books and Records will be made available to Buyer at (i) Seller’s business office located at 625 Okanogan Avenue, Wenatchee, Washington 98801, or (ii) Seller’s Manager’s office located at The Woodlands, Suite 230, 17400 SW Upper Boones Ferry Road, Durham, Oregon or (iii) at the Facility, as designated by Seller.

(c)    Notwithstanding Sections 6(a) or 6(b) above, Seller shall not be obligated to disclose (i) any information that is subject to attorney-client privilege, or that if disclosed to Buyer would cause the same or other information to not be protected by attorney-client privilege, (ii) any information the disclosure of which is conditioned upon Seller’s receipt of consent from the issuer thereof who has restricted the redelivery thereof to any person other than Seller without its consent; Bprovided , however , upon Buyer’s request Seller shall use reasonable efforts to secure such consent, (iii) any tax returns of Seller, or (iv) any purchase offers or purchase and sale agreements delivered to or received by Seller relating to a potential sale of the Assets to any third party.

(d)    The financial, other information and records provided by Seller to Buyer in connection with Buyer’s inspection and examination of the Assets and the business conducted therewith, including those provided pursuant to this Section 6, shall be subject to the terms of Section 18 hereof.

7.    Feasibility Period

(a)    Buyer shall have until 5 p.m. Pacific Time, on the forty fifth (45 ^th ) day after all of the Schedules have been completed and all of the Exhibits have been agreed to by the parties, as confirmed in writing by both Buyer and Seller (the “Feasibility Period”), within which to conduct Buyer’s due diligence review of the Assets and the business conducted therewith. Such due diligence review may include, but not be limited to, a review of the Due Diligence Materials, matters related to the construction and the operation of the Real Property and its compliance with law, zoning investigations, soil studies, environmental assessments, surveys, structural inspections, pest inspections, seismic assessments, wetlands reports, assessment of the needs and the propriety of residency by current residents, the Financial Statements (as defined below) and Census Reports (as defined below), policies and procedures, advertising, the Books and Records, the Leases, the Contracts, accounts payable records, rent rolls, operating statements, and labor costs. If within fourteen (14) days after the Effective Date Buyer and Seller have not agreed to the Schedules and Exhibits, either party may terminate this Agreement.

Such termination shall be treated as if Buyer elected to terminate the Agreement as provided in Section 7(c) hereof.

(b)    During the Feasibility Period, Buyer shall be permitted reasonable access to the Real Property during normal business hours to complete inspections and tests subject to the rights of residents in possession. Seller shall have the right to designate a representative for purposes of coordinating and overseeing Buyer’s on-site due diligence investigation. Buyer shall give Seller’s designated representative, if any, advance notice of its investigation of the Real Property, describing the nature of the review work to be undertaken and the estimated duration of the review. A representative of Seller shall have the right to accompany Buyer and its agents, representatives and contractors that are performing tests on or about the Real Property in connection with such testing and to limit the duration, frequency and means of such testing to the extent necessary to avoid disruption of residents of the Real Property providing that no such limitation shall unreasonably interfere with Buyer’s ability to conduct such tests or to have the same conducted on Buyer’s behalf. Buyer covenants that it will conduct its tests and other due diligence activities in a professional manner and in a manner which minimizes interference with residents of the Real Property. Buyer shall indemnify, defend and hold Seller harmless from and against all losses, damages, liabilities, claims, fines, penalties, causes of action and expenses arising from or out of the presence or activities of Buyer or its agents, employees, representatives, consultants, or contractors on the Real Property, both before and after Closing and, if Buyer does not purchase the Assets, Buyer shall repair any damage to the Real Property caused by such presence or activities. The terms of this Section 7(b) shall survive Closing or termination of this Agreement.

(c)    In the event that at or prior to the end of the Feasibility Period Buyer concludes, in its sole and absolute discretion, that it is not satisfied with its due diligence review Buyer may terminate this Agreement upon Buyer’s delivery of a written notice of termination to Seller on or before the expiration of the Feasibility Period, after which neither party shall have any further obligation to the other hereunder with the exception of Buyer’s obligations under this Section 7 and Section 18 and Buyer’s right to secure the immediate return of the Deposit. If Buyer fails to notify Seller in writing of Buyer’s election to terminate this Agreement at or prior to the expiration of the Feasibility Period, Buyer shall be deemed to have elected to have waived its right to terminate this Agreement pursuant to this Section 7 and Section 7 of the Related Agreements (as defined below).

8.    Contracts and Leases . Attached hereto as Exhibit 8 is a copy of the Contracts and Leases. Prior to the expiration of the Feasibility Period Buyer shall notify Seller in writing as to which of the Contracts and Leases Buyer will agree to assume and those which Buyer wants terminated by Seller at Closing.

9.    Representations and Warranties of Seller . Seller represents and warrants to Buyer as follows:  

(a)    Seller is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Nevada, has received all necessary approval and authority to own its property and to carry on its business as now owned and operated by Seller and is duly qualified to do business in the State of Arkansas.

(b)    Seller is not a foreign person (as that term is defined in the Internal Revenue Code and Income Tax Regulations) and Seller agrees to execute a certification of nonforeign status pursuant to Section 1445 of the Internal Revenue Code prior to Closing.

(c)    The person executing this Agreement on behalf of Seller has the requisite power and authority to execute and deliver this Agreement in the name of Seller.

(d)    The execution, delivery and performance of this Agreement by the person executing the same on behalf of Seller, have been duly and validly authorized, and this Agreement and the other agreements and instruments contemplated hereby to be executed or delivered by Seller constitute legal, valid and binding obligations of Seller, enforceable in accordance with their respective terms except as such enforceability may be limited by creditors rights laws and general principles of equity. Seller does not require the consent of any third party to consummate the transaction provided for herein.

(e)    Except as set forth in Exhibit 9(e) , neither the execution of this Agreement nor the consummation of the transactions contemplated hereby shall result in a breach of or constitute a default under any agreement, document, instrument, or other obligation to which Seller is a party or by which Seller may be bound, or to Seller's knowledge, under any law, statute, ordinance, rule, governmental regulation or any writ, injunction, order or decree of any court or governmental body, applicable to Seller or to the Property where such breach or default would prevent or invalidate Seller’s execution of this Agreement or would prevent Seller from consummating the transactions contemplated hereby.

(f)    Except as set forth in Exhibit 9(f) , Seller has not received any written notice, and has no knowledge, of any investigations, suits, actions, administrative or arbitration proceedings pending, whether involving a governmental authority or a private party, to which Seller is a party or in connection with the Assets. 

(g)    Except as set forth in Exhibit 9(g) , Seller has not received any written notice from any governmental authority, and has no knowledge of, any alleged violation of any fire, zoning, health, safety, sanitation, environmental or any federal, state or local law with respect to the Property.

(h)    Except as set forth in Exhibit 9(h) , Seller has not received any written notice, and has no knowledge, that the Real Property is subject to any existing, pending or threatened investigation or lien by any governmental authority under, any federal, state or local law, statute, ordinance, regulation or order pertaining to hazardous substances including, but not limited to: The Resource Conservation and Recovery Act of 1976, 42 U.S.C. ‘6901 et . seq ., and the rules, regulations and orders promulgated thereunder (“RCRA”); the Clean Air Act (42 U.S.C. ‘7401 et . seq .); the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. ‘9601 et . seq .) (“CERCLA”); the Federal Hazardous Substances Act (15 U.S.C. ‘1261 et . seq .); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ‘136 et . seq .); the Federal Water Pollution Control Act (33 U.S.C. ‘1251 et . seq .); and the Toxic Substances Control Act (15 U.S.C. ‘2601 et . seq .). Except as set forth in Exhibit 9(h) , Seller has not, and Seller has no knowledge that any predecessor in interest of Seller or any other person or entity has, generated, manufactured, stored, transported, treated, recycled, disposed of

or otherwise handled in any way any Hazardous Substances on, beneath or about any of the Real Property (other than medical and infectious wastes and other Hazardous Substances disposed of in accordance with applicable laws). Except as set forth in Exhibit 9(h) , Seller has not, and Seller has no knowledge that any predecessor in interest of Seller or any other person or entity has, released or discharged, as such terms are defined in applicable environmental, health and safety laws, rules and regulations, in violation of applicable law, any Hazardous Substance into the soil, surface waters, groundwater, drinking water supplies, navigable waters, land, surface or subsurface strata, ambient air or other environmental medium related to the Real Property. Except as set forth in Exhibit 9(h) , there are no other locations where any Hazardous Substances generated from the operation of the Facility or the ownership of the Real Property or any of the other Assets have been stored, treated, recycled or disposed of, whether by Seller or, to the knowledge of Seller, any other person or entity on behalf of Seller, other than locations where medical and infectious wastes have been disposed of in accordance with applicable law. “Hazardous Substances” is any substance, material and/or waste which is regulated under applicable local, state or federal law, or which is classified as hazardous, toxic, or otherwise harmful under federal, state or local laws or regulations.

(i)    No underground storage tank (as defined in RCRA,) or any above-ground storage tank for storing or dispending any hydrocarbon on or at the Real Property have been installed on, or removed from, the Real Property by Seller.

(j)    The Real Property is all of the real property that is currently used in connection with the ownership and operation of the Facility. Seller has not received any written notice of any pending condemnation proceedings and Seller has no knowledge of any threatened condemnation proceedings against the Real Property or any part thereof. Seller has received no written notice, and has no knowledge, of the intent of any public authority or public or quasi-public utility to take or use the Real Property or any part thereof.

(k)    To Seller’s knowledge, neither Seller nor any other party to any of the Contracts or the Leases, is in default of any terms or obligations under the Contracts or the Leases nor to Seller’s knowledge has any event occurred which, with the passage of time or the giving of notice or both would constitute such a default.

(l)    Except as set forth in Exhibit 9(l) and except with respect to the Permitted Exceptions, Seller has good and marketable title to the Assets and, subject to the rights of the residents of the Facility and any possessory rights granted to parties to the Contracts and Leases and to Seller’s Manager, has sole possession of and control over the Assets. Seller acknowledges and agrees that nothing in this Section 9(l) shall affect Seller’s obligation to deliver title to the Assets in accordance with the provisions of Section 5.

(m)    The Facility is currently licensed by the Arkansas Department of Human Services (the "Department") for sixty four (64) licensed residential care beds and the Facility currently operates thirty four (34) units as residential care and fifty nine (59) units as unlicensed independent living units. Seller has no written notice or knowledge that any licenses, permits and certificates necessary to operate the Facility in compliance with applicable law have not been obtained by Seller or are not in full force and effect. Exhibit 9(m) provides a correct and complete list of all licenses, permits, approvals, qualifications, registrations, certifications and

other authorizations of any governmental authority held by Seller with respect to the Facility and its operation as of the Execution Date (the “Operating Licenses and Certifications”) and copies of all such Operating Licenses and Certifications have been provided to Buyer or will be provided to Buyer as part of the Due Diligence Materials. Except as set forth in Exhibit 9(m) , Seller has no written notice or knowledge of any pending action by any governmental authority or other party to suspend, revoke, terminate or challenge any of the Operating Licenses and Certifications or claiming that Seller is not in compliance in all material respects with all such Operating Licenses and Certifications and Seller has no knowledge of the threat of the commencement of any such action.

(n)    Except as set forth in Exhibit 9(n) , to Seller’s knowledge the Assets and the Corporate Assets constitute all material assets and properties currently used to operate the Facility consistent with past practices, except for assets and properties disposed of in the ordinary course of business that have in the aggregate been replaced by items of comparable use and function in all material respects. Except as set forth in Exhibit 9(n) , to Seller’s knowledge each item of Personal Property is in working condition and usable for its intended purpose in the operation of the Facility. Seller represents to Buyer that at Closing, the Facility will have inventory levels which comply with applicable law and are sufficient to carry on the continued operations of the Facility following the Closing in substantially the same manner as conducted prior to the Closing.

(o)    Attached hereto as Exhibit 9(o) are (i) Seller’s unaudited internally prepared annual income statements for the Facility for the year 2004, and the balance sheet of Seller as of December 31, 2004, and (ii) Seller’s unaudited internally prepared income statement for the Facility for the five-month period ended May 31, 2005, together with the balance sheets of Seller as of the end of such five-month period (the “Financial Statements”). To Seller’s knowledge, the Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied, except that the depreciation amounts are recorded using the Federal Method instead of Book Method and to Seller’s knowledge accurately reflect in all material respects and fairly present the financial condition and results of operations of Seller and the Facility as of the dates and for the periods indicated thereon.

(p)    To Seller’s knowledge attached hereto as Exhibit 9(p) are correct and complete copies of the annual census statements for the Facility for calendar years 2003 and 2004 and for the five-month period ended May 31, 2005 (the “Census Reports”). To Seller’s knowledge, each of the Census Reports provides a correct and complete census of residents at the Facility for the dates reflected thereon.

(q)    Except as disclosed on Exhibit 9(q) , Seller has no written notice or knowledge of any claim or liability against the Facility or Seller with respect to its ownership or operation of the Facility of any nature whatsoever, whether absolute, accrued, contingent or otherwise, that alone or combined with all claims or liabilities would reasonably be expected to have a material adverse effect upon the Facility or any of the other Assets.

(r)    All federal, state and other tax returns and reports required to be filed in connection with the Facility or any of the other Assets have been filed by Seller or will be timely filed in accordance with the requirements of applicable law, and all taxes and other assessments

and levies (including all interest and penalties), including, without limitation, income, franchise, real estate, sales, gross receipts, use, excise and service taxes and employee withholding taxes, accrued by Seller in connection with the ownership of the Assets or the operation of the Facility have been paid by Seller or will be timely paid by Seller in accordance with the requirements of applicable law. Seller has not waived any statute of limitation with respect to any tax or other assessment or levy applicable to Seller, the Facility or the other Assets and all such taxes and other assessments and levies that Seller is required by law to withhold or to collect have been duly withheld and collected and have been paid over to the proper governmental authorities or segregated and set aside for such payment and, if so segregated and set aside, shall be so paid by Seller as required by applicable Law. Except as may be reflected in the Title Documents or in the Litigation and Lien Search, neither the Internal Revenue Service nor any other taxing authority is now asserting or, to Seller’s knowledge, has threatened to asset against Seller any deficiency or claim for additional taxes or interest thereon or penalties in connection therewith. Except as may be reflected in the Title Documents or in the Litigation and Lien Search, Seller has no knowledge that any of the Assets is subject to any lien for payment of any tax or assessment, other than taxes and assessments not yet due and payable.

(s)    There is no action, suit, claim, proceeding or investigation pending against Seller or, to Seller’s knowledge, against Seller’s Manager (and Seller has no written notice or knowledge of any threat thereof) affecting (i) Seller’s ability to perform its obligations under this Agreement, (ii) the Facility, or (iii) any of the other Assets arising out of or relating to Seller’s care for any of the residents located at any time at the Facility. Seller has no life care or fixed or limited fee agreements with any of its residents.

(t)    Exhibit 9(t) contains a correct and complete list of all persons currently employed at the Facility, together with the present compensation rate (including commissions and bonuses), accrued vacation days and accrued sick days for each such person. With respect to the employees of Seller or Seller’s Manager employed at the Facility, neither Seller nor to Seller’s knowledge, Seller’s Manager, has recognized any labor organization, nor has any such organization been certified as the exclusive bargaining agent of any such employees. There has been no demand on behalf of any labor organization to represent any such employees and Seller has no knowledg