FACILITIES PURCHASE AND SALE AGREEMENT

Exhibit 10.2

FACILITIES PURCHASE AND SALE AGREEMENT
BY AND AMONG

SUNRISE SENIOR LIVING INVESTMENTS, INC.,

as Purchaser

AND

FOUNTAINS CANTERBURY LIMITED PARTNERSHIP,
FOUNTAINS ALBEMARLE LIMITED PARTNERSHIP,
FOUNTAINS LA CHOLLA LIMITED PARTNERSHIP,
FOUNTAINS CRYSTAL LAKE LIMITED PARTNERSHIP,
FOUNTAINS CORBY LIMITED PARTNERSHIP,
FOUNTAINS LA JOLLA LIMITED PARTNERSHIP,
FOUNTAINS SENIOR PROPERTIES OF KALAMAZOO, L.L.C.,
THE FOUNTAINS AT LOGAN SQUARE, L.L.C.,
THE FOUNTAINS AT RIVERVUE, L.L.C.,
THE FOUNTAINS OF VIRGINIA, L.L.C.,
THE FOUNTAINS SENIOR PROPERTIES OF CALIFORNIA, L.L.C.,
THE FOUNTAINS SENIOR PROPERTIES OF FLORIDA, L.L.C.,
THE FOUNTAINS SENIOR PROPERTIES OF MICHIGAN, L.L.C.,
THE FOUNTAINS SENIOR PROPERTIES OF NEW YORK, L.L.C.,
THE FOUNTAINS AT GREENBRIAR, INC.
THE FOUNTAINS SEA BLUFFS LEASING, L.L.C.

as Sellers

AND
FOUNTAINS CHARITABLE INCOME TRUST

Dated as of January 19, 2005

TABLE OF CONTENTS

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     The following is a list of Schedules and Exhibits to the Facilities Purchase and Sale Agreement (other than Schedule 1 and Schedule 7.13 which are attached hereto) that have been intentionally omitted. Sunrise Senior Living, Inc. agrees to furnish supplementally a copy of any omitted Schedule or Exhibit upon request of the Securities and Exchange Commission.

Exhibits

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     This FACILITIES PURCHASE AND SALE AGREEMENT dated as of January 19, 2005, by and among (i) Sunrise Senior Living Investments, Inc., a Virginia corporation, (“ Purchaser ”), (ii) each of the entities listed on the attached Schedule 1 (individually, a “ Seller ” and collectively, “ Sellers ”), and (iii) Fountains Charitable Income Trust (the “ Trust ”).

PREAMBLE

      WHEREAS , the Sellers and the Trust, together with Fountains Continuum of Care, Inc., a Delaware corporation (“ FCC ”), directly and indirectly through their respective Subsidiaries, have been engaged in the business of owning, managing and/or leasing Senior Living Facilities (as defined herein) and providing home care services in certain of the states in which its Senior Living Facilities are located (collectively, the “ Business ”);

      WHEREAS , the Sellers own the Senior Living Facilities set forth opposite their names on Schedule 5.12(a) hereto (each a “ Facility ”) and certain other Assets (as defined herein) used in the Business;

      WHEREAS , the Sellers desire to sell, convey, assign and/or transfer to Purchaser, and Purchaser desires to purchase from the Sellers, the Facilities and certain other Assets of the Sellers related to the Business, subject to Purchaser’s assumption of certain specified liabilities of the Sellers related to the Business, all on the terms and subject to the limitations, exclusions and conditions contained in this Agreement;

      WHEREAS , FCC and certain of its directly and indirectly owned Subsidiaries and certain other Persons (collectively the “ APA Sellers ”), have agreed to sell all of their rights, title and interest in and to certain of the Assets of the APA Sellers to the purchaser, pursuant to that certain Asset Purchase Agreement (the “ Asset Purchase Agreement ”) dated as of the date hereof by and among the APA Sellers and the other parties named therein (the “ FCC Sale Transaction ”);

      WHEREAS , the parties intend that prior to the Closing (as defined herein), Fountains Retirement Communities, Inc. and each of the other parties to an Existing Management Agreement (as defined herein) will enter into a new management agreement for each of the Facilities, to become effective subject to and upon the consummation of the closing under the Asset Purchase Agreement, in the form or forms to be provided by Purchaser to Sellers prior to the Closing (the “ New Management Agreements ”) to replace each of the management agreements listed on Schedule 7.10 (the “ Existing Management Agreements ”), as contemplated in Section 7.10 of this Agreement, which New Management Agreements would be assigned to and would be assumed by and would be binding on Purchaser pursuant to this Agreement;

      WHEREAS , the Facilities known as Millbrook, located in Millbrook, New York, (the “ Millbrook Facility ”) and RiverVue, located in Tuckahoe, New York, (the “ RiverVue Facility ”) are leased by the applicable Seller to The Fountains Operating Company (NY), Inc., a New York corporation (“ FOC NY” ) that is owned by Mitchell T. Pozez and David Freshwater (collectively, the “ Greenbriar Stockholders ”), the sole stockholders of the Fountains of Greenbriar, Inc. (“ Greenbriar ”) (one of the Sellers), and Purchaser either desires to acquire the leaseholds with

respect to the Millbrook Facility (the “ Millbrook Lease ”) and the RiverVue Facility (the “ RiverVue Lease ”), require the termination of said leaseholds prior to the Closing or replace such existing leasehold arrangements with new arrangements mutually acceptable to Purchaser and FOC NY;

      WHEREAS , the parties hereto desire to set forth certain representations, warranties and covenants made by each to the other as an inducement to the consummation of the transactions contemplated herein and certain additional agreements related thereto; and

      WHEREAS , certain capitalized terms used in this Agreement are defined on Annex I attached hereto.

      NOW, THEREFORE , in consideration of the premises and the mutual representations, warranties and covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows.

ARTICLE I

PURCHASE AND SALE OF ASSETS

1.1 Transfer of Purchased Assets .

     (a) On the terms and subject to the conditions contained in this Agreement, at the Closing each Seller shall sell, lease, convey, assign, license, transfer and deliver to Purchaser, free and clear of all Encumbrances other than the Permitted Encumbrances identified on Schedule 5.10(b) hereto, and Purchaser shall purchase and acquire from each Seller, all of the right, title and interest in, to and under the Assets included on Schedule 1.1 , wherever located (collectively, the “ Purchased Assets ”).

     (b) In the event the sale, lease, conveyance, assignment, license or transfer of any of the Permits listed on Schedule 1.1 (collectively referred to herein as the “ Assigned Permits ”) is unlawful or is not permissible under any agreement or under any Law, such terms for the purposes of this Agreement with respect to any such Assigned Permits shall be deemed to mean and require (i) the applicable Seller’s relinquishment of all of its right, title, benefit and interest in and to and authority under, such Assigned Permits as of the Closing and (ii) the issuance or grant to Purchaser by the appropriate Governmental Entity or other third Person of a Permit conferring upon Purchaser, as of the Closing, all right, title, benefit, interest and authority at least equal to that relinquished by such Seller, as the case may be, including the right, authority and approval for Purchaser to own and operate the Facilities and the other Purchased Assets from and after the Closing in the same manner as the Sellers prior to the Closing. For clarification purposes, the parties acknowledge and agree that, to the extent permitted by Law, Purchaser shall have the option to acquire or assume any Seller’s Medicare or Medicaid provider numbers used in the operation of the Facilities or the conduct of the Business or submit an application for new Medicare and Medicaid provider numbers with respect to the operation of the Facilities or the conduct of the Business after the Closing.

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1.2 Assets Not Being Transferred .

     Except for the Purchased Assets, on the Closing Date, the Sellers are not selling, leasing, conveying, assigning, licensing, transferring or delivering to Purchaser, and Purchaser is not purchasing or acquiring any other Assets of the Sellers, including any of the Assets listed on Schedule 1.2 .

1.3 Further Assurances .

     Each Seller shall and shall cause each Seller Subsidiary to, at any time and from time to time during the period from and after the Closing until the later of (i) the fourth anniversary of the Closing Date or (ii) such time as all consents of any Governmental Entity or other third Person to the assignment of the Assigned Contracts and Assigned Permits have been obtained, upon the request of Purchaser, do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney or assurances as may be reasonably required to sell, lease, convey, assign, license, transfer and deliver to Purchaser, or to aid and assist in the collection of or reducing to possession by Purchaser, of the applicable Purchased Assets, or to vest in Purchaser good and marketable title to the Purchased Assets, free and clear of any and all Encumbrances other than the Permitted Encumbrances identified on Schedule 5.10(b) .

1.4 Assignment of Contracts, Permits, Rights, Etc.

     (a) Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute an agreement or attempted agreement to transfer, sublease or assign any Assigned Contract (as defined below), any Assigned Permit or Proceeding or right with respect to any benefit arising thereunder or resulting therefrom, if an attempted transfer, sublease or assignment thereof, without the required consent of any other party thereto or of any Governmental Entity or other third Person, would constitute a breach thereof or in any way affect the rights of Purchaser or any Seller thereunder or is unlawful or is not permissible under any agreement or under any Law.

     (b) The parties understand and agree that, without limiting any representation, warranty, condition, or indemnification contained in this Agreement, if, as of the Closing, the Sellers shall not have effectively obtained any or all consents of any third Person set forth on Schedule 5.3 to the assignment of any of the New Management Agreements or any other Contract that is listed on Schedule 1.1 as one of the Purchased Assets to be assigned to Purchaser hereunder (collectively referred to herein as the “ Assigned Contracts ”), in respect of which such third Person’s consent to assign is required in order to preserve the value of such Assigned Contract for Purchaser or otherwise, then the assignment by the applicable Seller and the assumption by Purchaser of such Assigned Contract shall, notwithstanding anything to the contrary in this Agreement, not become effective at the Closing or thereafter until the applicable Seller shall have obtained the requisite consent (which such Seller shall use Commercially Reasonable Efforts to obtain, together with the cooperation of Purchaser), and such assignment and assumption shall become effective as aforesaid subsequent to the Closing pursuant to such documentation as shall be reasonably acceptable to Purchaser and the applicable Seller; and the Sellers shall and shall cause their respective Seller Subsidiaries to not take or permit any action

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which would impair the full force and effect of any such Assigned Contract, or otherwise cause or permit the modification, amendment, or termination of any such Assigned Contract (except insofar as consented to in writing by Purchaser, which consent shall not be unreasonably withheld or delayed) until the effective assignment thereof as aforesaid. The parties understand and agree that the Sellers, subsequent to the Closing, shall not be entitled to any of the rights and privileges under any Assigned Contract, all of which shall accrue to the benefit of Purchaser, and the Sellers shall be deemed to hold any Assigned Contracts subject to this Section 1.4(b) in trust for Purchaser. To the extent, and only to the extent, that Purchaser is able to receive the economic rights and privileges under an Assigned Contract, Purchaser shall be responsible for the Assumed Liabilities, if any, arising under such Assigned Contract. To the extent any Seller is unable to keep an Assigned Contract in full force and effect and to otherwise enable Purchaser to receive the economic rights and privileges under an Assigned Contract in accordance with the foregoing because the Sellers have transferred to Purchaser certain Assets that are reasonably necessary for the performance by such Seller of such Assigned Contract, then Purchaser shall perform such Seller’s obligations under such Assigned Contract using such Assets or otherwise as an independent contractor to such Seller at no additional cost to such Seller. The Sellers shall jointly and severally pay and discharge, and shall indemnify and hold harmless Purchaser from and against, any and all costs, expenses and other Losses of seeking to obtain or obtaining any consent or approval of any third Person set forth on Schedule 5.3 , whether before or after the Closing Date. Nothing in this Section 1.4 shall be deemed a waiver by Purchaser of its right to have received at the Closing an effective assignment of all of the Assigned Contracts and other Purchased Assets nor shall this Section 1.4 be deemed to constitute an agreement to exclude from the Purchased Assets any of the Assets listed on Schedule 1.1 .

ARTICLE II
ASSUMED OBLIGATIONS; EXCLUDED OBLIGATIONS

2.1 Liabilities Being Assumed at Closing .

     On the terms and subject to the conditions contained in this Agreement, simultaneously with the sale, lease, conveyance, assignment, license, transfer and delivery to Purchaser of the Purchased Assets at the Closing, Purchaser shall assume only the Liabilities of each of the Sellers listed on Schedule 2.1 (collectively, the “ Assumed Liabilities ”).

2.2 Liabilities Not Being Assumed .

     NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT OR IN ANY RELATED DOCUMENT, EXCEPT FOR THE ASSUMED LIABILITIES ASSUMED PURSUANT TO SECTION 2.1 , PURCHASER SHALL NOT ASSUME, PAY, BEAR, PERFORM OR DISCHARGE ANY LIABILITIES OF THE SELLERS, THE TRUST OR ANY OF THEIR RESPECTIVE AFFILIATES (INCLUDING ANY SELLER SUBSIDIARY) WHETHER OR NOT ARISING OUT OF OR RELATING TO THE PURCHASED ASSETS OR THE BUSINESS OR ANY OTHER BUSINESS OF THE SELLERS, THE TRUST OR THEIR RESPECTIVE AFFILIATES (INCLUDING ANY SELLER SUBSIDIARY), AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE CLOSING, INCLUDING ANY OF THE LIABILITIES OR OBLIGATIONS LISTED ON

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SCHEDULE 2.2 , ALL OF WHICH LIABILITIES SHALL FROM AND AFTER THE CLOSING REMAIN THE EXCLUSIVE RESPONSIBILITY OF THE SELLERS, THE TRUST OR ANY OF THEIR RESPECTIVE AFFILIATES (INCLUDING ANY SELLER SUBSIDIARY), AS APPLICABLE.

ARTICLE III
PURCHASE PRICE

3.1 Purchase Price .

     The aggregate consideration to be paid by Purchaser to the Sellers for the Purchased Assets (the “ Purchase Price ”) shall be (i) US$416,500,000.00 (the “ Cash Payment ”) subject to adjustment as provided in Sections 3.2, 3.3, 7.14, 10.3(d)(ii) and 10.3(f) , plus (ii) US$55,000,000.00 (the “ Loan Amount ”), plus (iii) the assumption of the Assumed Liabilities. The Purchase Price will be paid as provided in Section 3.4 .

3.2 Adjustments to the Purchase Price .

     (a) All income and expenses of the Sellers with respect to the Purchased Assets identified on the Proration Schedule shall be prorated on a daily basis between the Sellers and Purchaser as of 11:59 p.m. on the Closing Date (the “ Proration Time ”). Such items to be pro rated shall consist of: (i) payments under any Assigned Contract, if any, (ii) rents under the Leases and monthly fees and other fees and charges under the Resident Agreements to which any Seller is a party and other income, if any, including prepaid rents and other amounts, (iii) ad valorem real and tangible personal property Taxes with respect to the Purchased Assets, (iv) utility charges, if any, (v) insurance or other charges with respect to any of the Purchased Assets, or (vi) any other items the parties mutually determine to be necessary. Purchaser and the Sellers shall prepare a proposed schedule or schedules (the “ Proration Schedule ”) prior to the Closing, including the items listed above and any other items the parties mutually determine to be necessary. The Sellers and Purchaser shall use Commercially Reasonable Efforts to finalize and agree on the Proration Schedule at least two Business Days prior to the Closing.

     (b) Any escrow accounts held by any utility companies or other third Persons, any cash deposits made by or on behalf of any of the Sellers prior to the Closing to secure obligations under any Assigned Contracts and any reserve funds which are on deposit for the states of Florida or California, or any other states requiring such reserve deposits, and any funds held in resident trust funds, shall be paid to the Sellers or, if assigned to Purchaser, the Sellers shall receive a credit (i.e., an increase in the Purchase Price) in the amount thereof at the Closing.

     (c) The parties agree that any amounts that may become due under Section 3.2(a) or (b) shall be paid at the Closing as can best be determined. A post-Closing reconciliation of pro-rated items shall be made by the parties within 75 days after the Closing and any amounts due at that time shall be promptly forwarded to Purchaser, on the one hand, or the Representative (as agent for the Sellers), on the other hand, in a lump sum payment. Any additional amounts which may become due after such determination shall be forwarded at the time they are received. Any amounts due under Section 3.2(a) or (b) which cannot be determined within 75 days after the

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Closing shall be reconciled as soon thereafter as such amounts can be determined. Subject to any applicable privileges (including attorney-client privilege), (i) each of the Sellers and the Trust agrees that Purchaser shall have the right to audit the applicable records of the Sellers in connection with any such post-Closing reconciliation, and (ii) Purchaser agrees that the Sellers shall have the right to audit the applicable records of Purchaser in connection with any such post-Closing reconciliation.

     (d) The Sellers shall be responsible for all expenses of the Purchased Assets attributable to the period prior to and including the Proration Time. For the avoidance of doubt, any Entrance Fees or Resident Deposits received by Purchaser after the Closing Date, or Resident Deposits received by Purchaser on or prior to the Closing Date, in either case pursuant to Resident Agreements entered into by any Seller or any Affiliate of any Seller on or prior to the Closing Date shall not be pro rated pursuant to Section 3.2(a) or otherwise subject to payment or reimbursement to Sellers under any other provision of this Agreement (including Section 3.2(b) ).

     (e) Purchaser shall receive all income from the Purchased Assets attributable to the period after the Proration Time and shall, except as otherwise provided for in this Agreement, be responsible for all expenses of the Purchased Assets attributable to the period after the Proration Time. In the event any Seller receives any payment from a resident for rent due for any period after the Proration Time, the Sellers shall promptly forward or cause to be forwarded such payment to Purchaser. In addition, in the event any Seller has received any prepaid rent from a resident for any period from and after the Proration Time, the Sellers shall promptly forward or cause to be forwarded to Purchaser such prepaid rent.

     (f) Notwithstanding anything to the contrary in this Agreement, this Section 3.2 shall not apply to any Purchased Accounts Receivable of the Sellers.

3.3 Entrance Fee Liability Adjustment .

     At the Closing, the Purchase Price shall be reduced in accordance with this Section 3.3 by an amount equal to US$3,300,000.00 less all Entrance Fee refund obligations actually paid by the Sellers after November 1, 2004 and prior to the Closing in respect of the US$2,003,597.00 in Entrance Fee refund obligations at the Logan Square East Facility and the Millbrook Facility, as reflected on Schedule 3.3 , that were triggered prior to November 1, 2004 but not paid prior to November 1, 2004. At least one Business Day prior to the Closing Date, the Sellers shall deliver to Purchaser documentation reasonably acceptable to Purchaser that evidences the actual payment since November 1, 2004 of any such Entrance Fee refund obligations specified on Schedule 3.3 for purposes of determining the amount of the purchase price adjustment under this Section 3.3 .

3.4 Payment of Purchase Price at Closing .

     At the Closing, subject to the satisfaction or waiver (to the extent permitted by applicable Law) of the conditions to Closing set forth in Article X (including the consummation of the arrangements contemplated in Section 10.1(e )), and subject to and in accordance with the other terms and conditions of this Agreement, an amount equal to the Cash Payment (plus or minus the amount of any adjustments pursuant to Section 3.2, 3.3, 7.14, 10.3(d)(ii) or 10.3(f) ) shall be paid

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by Purchaser to or for the benefit of the Sellers by wire transfer of immediately available funds to the account designated in writing by the Representative at least three Business Days prior to the Closing.

3.5 Allocation of Purchase Price .

     Purchaser shall prepare an allocation of the Purchase Price (and all other capitalized costs) among the Purchased Assets in accordance with Code Section 1060 and the Treasury regulations thereunder (and any similar provisions of state, local or foreign Law, as appropriate). Within 15 days of the determination of any adjustments pursuant to Section 3.2(c) or 7.14 , Purchaser shall deliver to the Sellers such allocation. The Sellers shall within 5 days after receipt of such allocation give written notice to Purchaser of their agreement or disagreement with such allocation. If the Sellers object to Purchaser’s allocation, the Sellers shall give Purchaser written notice of the objections and the Sellers and Purchaser shall use Commercially Reasonable Efforts to resolve the differences. If within 30 days after the date on which the Sellers have given Purchaser notice of any objections, the parties have not adopted the allocation, any dispute related thereto shall be referred to an accounting firm selected by Purchaser and the Representative (or, if Purchaser and the Representative are unable to agree, an independent accounting firm selected by Purchaser’s and the Sellers’ independent accounting firms) (such firm, the “ Accounting Firm ”) and resolved within 30 days after such referral. The Accounting Firm’s determination shall be final, binding and conclusive upon Purchaser, the Sellers, and their respective Affiliates. The costs, expenses, and fees of the Accounting Firm shall be borne equally by the parties. The resulting allocation, whether or not objected to by the Sellers or as determined by the Accounting Firm, is referred to as the “ Allocation Agreement ”. Purchaser, each of the Sellers, and their respective Affiliates shall be bound by the Allocation Agreement and shall, as applicable, (a) complete and execute a Form 8594 Asset Acquisition Statement under Code Section 1060 promptly upon receipt of such allocation, in a manner consistent with the Allocation Agreement, (b) file a copy of such form with their respective tax returns for the period which includes the Closing, and (c) act in accordance with such allocation in the preparation of all financial statements and filing of all Tax Returns. None of the parties hereto shall take any action or position or cause their Affiliates to take any action or position inconsistent for tax or accounting purposes with the Allocation Agreement prepared in accordance with this Section 3.5 , unless otherwise required by the relevant taxing authority.

ARTICLE IV
THE CLOSING

4.1 The Closing .

     The closing (the “ Closing ”) of the transactions contemplated by this Agreement shall take place at the offices of Hogan & Hartson L.L.P., 555 Thirteenth Street, N.W., Washington D.C. 20004, at 10:00 a.m. (Washington, D.C. time) on the last Business Day of the month in which the fulfillment or waiver (to the extent permitted by applicable Law) of the conditions set forth in Article X (other than those conditions which by their nature are intended to be fulfilled at the Closing) occurs or such other place or time or on such other date as Purchaser and the Representative may mutually agree in writing (the “ Closing Date ”).

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4.2 Closing Deliveries by the Sellers and the Greenbriar Stockholders .

     At the Closing, the Sellers and/or the Greenbriar Stockholders, as the case may be, shall deliver to Purchaser:

     (a) one or more bills of sale for all of the Purchased Assets which are tangible personal property in substantially the form attached hereto as Exhibit 4.2(a) (the “ Bills of Sale ”), executed by each of the Sellers;

     (b) one or more assignments of all of the Purchased Assets which are intangible personal property in substantially the form attached hereto as Exhibit 4.2(b) , which assignment shall also contain Purchaser’s undertaking and assumption of the Assumed Liabilities (the “ Assignment and Assumption Agreements ”), executed by each of the Sellers;

     (c) (i) such other deeds, bills of sale, assignments, certificates of title, title affidavits, Documents and other instruments of transfer and conveyance as may reasonably be requested by Purchaser, including warranty deeds with respect to the Purchased Real Property, each in form and substance acceptable to Purchaser and its legal counsel (which acceptance shall not be unreasonably withheld or delayed) and executed by each of the Sellers and, (ii) with respect to the Condominium Facilities, such assignments of declarant rights and other assignments necessary to convey to Purchaser all of the rights of the applicable Seller with respect to the Condominium Facilities and under the applicable Condominium Documents, each in form and substance reasonably acceptable to Purchaser and its legal counsel (which acceptance shall not be unreasonably withheld or delayed) and executed by the applicable Seller;

     (d) a certificate of non-foreign status under Section 1445 of the Code, complying with the requirements of the Income Tax Regulations promulgated pursuant to such Section from each Seller conveying Purchased Real Property;

     (e) evidence that the agreements listed on Schedule 4.2(e) have been replaced with new arrangements mutually acceptable to Purchaser and the other parties thereto, assigned to Purchaser or terminated, as Purchaser shall direct; it being understood that with respect to arrangements with FOC NY regarding the Millbrook and RiverVue Facilities, to the extent that Assets of FOC NY that are used in the operation of the Business at the Millbrook and RiverVue Facilities (other than intercompany accounts, whether or not represented by promissory notes) are not included as Purchased Assets under this Agreement, such Assets shall be conveyed to Purchaser at the Closing (or at such later time, if alternative arrangements are entered into between Purchaser and FOC NY as contemplated above), without the payment by Purchaser of additional consideration therefore;

     (f) the certificates, consents and other Documents referred to herein, including in Section 10.2 , as then deliverable by the Sellers, the Trust and the Greenbriar Stockholders;

     (g) such landlord estoppel certificates and property owner association estoppel certificates as Purchaser may reasonably request, executed by the applicable landlord or property owner association; and

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     (h) evidence reasonably satisfactory to Purchaser of the permanent waiver or other cancellation or termination of the right of first refusal previously granted by Episcopal Retirement Community, Inc. to Clinic Building Associates, Ltd. with respect to the Canterbury Facility.

4.3 Closing Deliveries by Purchaser .

     At the Closing, Purchaser shall deliver to or for the benefit of the Sellers (unless otherwise noted):

     (a) an amount equal to the Cash Payment (plus or minus the amount of any adjustments pursuant to Section 3.2, 3.3, 7.14, 10.3(d)(ii) or 10.3(f) ), by wire transfer of immediately available funds to the account designated pursuant to Section 3.4 ;

     (b) the Assignment and Assumption Agreements executed by Purchaser; and

     (c) the certificates, consents and other Documents referred to herein, including in Section 10.4 , as then deliverable by Purchaser.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE TRUST

     Each Seller and the Trust hereby jointly and severally represents and warrants to Purchaser (and in the case of Sections 5.1, 5.2, 5.4 and 5.30 only, the Greenbriar Stockholders severally, but not jointly, represent and warrant to Purchaser, as to Greenbriar) as follows:

5.1 Organization, Power, Authority and Good Standing .

     (a) Each Seller that is a corporation, is duly organized, and each Seller is validly existing and in good standing under the Laws of its jurisdiction of incorporation or organization. Each Seller has the necessary corporate, limited liability company or partnership power and authority to execute, deliver and perform its obligations under this Agreement and each of the Related Documents to which it is or will be a party and to consummate the transactions contemplated hereby and thereby. Each Seller has all necessary corporate, limited liability company, or partnership power and authority and all Permits required to own, lease and operate its Assets and to carry on its business as currently conducted.

     (b) Each Seller is duly qualified and in good standing to transact business as a foreign Person in those jurisdictions set forth opposite its name on Schedule 5.1(b) , which constitute all the jurisdictions in which the character of the property owned, leased or operated by such Seller or the nature of the business or activities conducted by such Seller makes such qualification necessary, except where the failure to be so qualified or in good standing would not reasonably be expected to have a material adverse effect on the business, operations, Assets, liabilities, financial condition or results of operations of such Seller.

     (c) The execution and delivery by each of the Sellers and the Trust of this Agreement and each Related Document to which it is or will be a party, the performance of its obligations

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hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all necessary action on the part of such Seller and the stockholders, members, partners or trustees thereof, none of which actions have been modified or rescinded and all of which actions remain in full force and effect. Each of the Greenbriar Stockholders has the full and unrestricted right, power and authority and the requisite capacity to execute and deliver this Agreement and the Related Documents to which he is or will be a party, to perform his obligations under this Agreement and any Related Document to which he is a party, and to consummate the transactions contemplated hereby and thereby. This Agreement and each Related Document to which any Seller, the Trust or the Greenbriar Stockholders is or will be a party has been or upon the execution thereof will be, duly and validly executed and delivered by a duly authorized representative of each Seller and the Trust and by such Greenbriar Stockholder, and constitutes, or upon its execution and delivery will constitute, a valid and binding obligation of such Seller, the Trust and such Greenbriar Stockholder, enforceable against such Seller, the Trust and such Greenbriar Stockholder in accordance with its terms.

     (d) Each Seller has not, within the last five years, (i) used any trade names or assumed names other than the trade names or assumed names set forth opposite its name on Schedule 5.1(d) or (ii) operated any business other than the Business.

5.2 Authority; No Conflicts .

     Except as set forth on Schedule 5.2 , neither the execution, delivery or performance by any Seller, the Trust or the Greenbriar Stockholders of this Agreement and each Related Document to which it or he is or will be a party, nor the consummation of the transactions contemplated hereby and thereby by any Seller, the Trust or the Greenbriar Stockholders will (with or without notice or lapse of time, or both): (i) breach or violate any provision of the certificate or articles of incorporation, bylaws, operating agreement, partnership agreement or other organizational documents of a Seller or the Trust or any resolution adopted by the board of directors or a stockholder, member, partner or trustee of such Seller or the Trust; (ii) breach or violate any applicable Law; (iii) conflict with, result in a breach of or constitute a default under, or give rise to any right of termination, cancellation, modification or acceleration of, any Contract to which a Seller, the Trust or any of their respective Affiliates is a party or by which any of their respective properties or Assets may be bound or affected; or (iv) result in the imposition or creation of any Liability on any Seller or any Seller Subsidiary or any Encumbrance upon or with respect to any of the Purchased Assets, or result in or permit the acceleration of any indebtedness or other obligation of any Seller or any of its Affiliates pursuant to any of the foregoing.

5.3 Consents and Authorizations .

     Except as set forth on Schedule 5.3 , any filings or approvals required under the Hart-Scott-Rodino Act, and any filings or approvals listed on Schedule 6.4 , no consent, approval, Permit, Order, notification or authorization of, or any exemption from or registration, declaration or filing with, any Governmental Entity or any other third Person is required in connection with the execution, delivery and performance by each Seller, the Trust and the Greenbriar Stockholders of this Agreement or any Related Document to which it is or will be a party or the

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consummation of the transactions contemplated hereby or thereby, including consents, approvals, notifications, authorizations or determinations from parties to Contracts.

5.4 Ownership of the Sellers .

     The Trust owns one hundred percent (100%) of the ownership interests in each Seller, except that the Greenbriar Stockholders own one hundred percent (100%) of the ownership interests in Greenbriar and own one hundred percent (100%) of the ownership interests in FOC NY. All transfers of Equity Interests in the Sellers to the Trust within the 12 months immediately prior to the date of this Agreement were made in accordance with applicable Law.

5.5 Books and Records .

     The Books and Records are true and complete in all material respects and have been maintained in accordance with sound business practices, and reasonably reflect, in reasonable detail, all material transactions involving the Assets of the Sellers and any Seller Subsidiary, including the Purchased Assets, the Assumed Liabilities and the Business. Each Seller and each Seller Subsidiary has made and kept books, records and accounts which, in reasonable detail, accurately reflect, in all material respects, its transactions and the disposition of its Assets to permit preparation of financial statements in conformity with GAAP.

5.6 Financial Information .

     (a)  Schedule 5.6(a) contains true, correct and complete copies of the following: (i) the audited balance sheet of FCC and its consolidated Subsidiaries as of June 30, 2004, and the related audited statements of operations and cash flows of FCC and its consolidated Subsidiaries for the fiscal years then ended, including the footnotes thereto, as audited by (and together with the report of their audit) Ernst & Young LLP (all of foregoing being hereinafter collectively called the “ Audited Seller Financial Statements ”); (ii) the audited balance sheets of (A) the Washington House Facility and (B) the Carlotta Facility as of June 30, 2004, and the related audited statements of operations and cash flows of (A) the Washington House Facility and (B) the Carlotta Facility for the fiscal years then ended, including the footnotes thereto, as audited by (and together with the report of their audit) Ernst & Young LLP (all of foregoing being hereinafter collectively called the “ Audited Facility Financial Statements ”); and (iii) the unaudited balance sheet of the Trust and its consolidated Subsidiaries as of October 31, 2004, and the unaudited statements of operations and cash flows of the Trust and its consolidated Subsidiaries for the three months then ended (all of the foregoing being hereinafter collectively referred to as the “ Unaudited Seller Financial Statements ” and, collectively with the Audited Seller Financial Statements and the Audited Facility Financial Statements, the “ Seller Financial Statements ”).

     (b) The Audited Seller Financial Statements fairly present the financial position of FCC and its consolidated Subsidiaries as of the dates indicated and the results of operations of FCC and its consolidated Subsidiaries for the periods indicated. The Audited Facility Financial Statements fairly present the financial position of (A) the Washington House Facility and (B) the Carlotta Facility as of the dates indicated and the results of operations of (A) the Washington House Facility and (B) the Carlotta Facility for the periods indicated. The Unaudited Seller

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Financial Statements fairly present the financial position of the Trust and its consolidated Subsidiaries as of the dates indicated and the results of operations of the Trust and its consolidated Subsidiaries for the periods indicated. The Seller Financial Statements (x) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby, subject, in the case of the Unaudited Seller Financial Statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be significant) and the absence of notes (that, if presented, would not differ materially from those included in the Audited Seller Financial Statements) and (y) are complete and correct in all material respects and have been prepared in accordance with the Books and Records of the Sellers.

     (c) The historical financial information for each Facility delivered to Purchaser and listed on Schedule 5.6(c) presents fairly in all material respects the financial matters set forth therein for the Facilities covered thereby; it being understood that such information is unaudited and subject to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be significant).

5.7 Absence of Undisclosed Liabilities .

     Except as set forth on Schedule 5.7 , the Sellers have no material Liabilities, whether accrued, contingent or otherwise (and to the knowledge of the Sellers, there are no threatened charges, complaints, Proceedings or demands against any Seller giving rise to any Liability), except for Liabilities disclosed or reserved against in the balance sheets included in the Seller Financial Statements and current liabilities incurred in the ordinary course since the date of the most recent balance sheet included in the Seller Financial Statements (none of which relates to any breach of contract, breach of warranty, tort, infringement, or violation of Law, or arose out of any charge, complaint, Proceeding or demand, or are, either individually or in the aggregate, material).

5.8 Absence of Changes .

     Since June 30, 2004, except as set forth on Schedule 5.8 and except to the extent expressly contemplated or required by this Agreement, the Sellers have operated the Business in the ordinary course, consistent with past practice, and, subject to those exceptions, there has not been:

     (a) any material adverse effect on the Assets, business, operations, financial condition or results of operations of the Sellers or the Business;

     (b) any damage, destruction or loss (whether or not covered by insurance) with respect to any material Assets of any of the Sellers;

     (c) any change by any of the Sellers in its accounting methods, principles or practices;

     (d) any redemption, purchase or other acquisition of any interests in any Seller or any payment by a Seller to any of its Affiliates;

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     (e) any increase in the benefits under, or the establishment or amendment of, any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, option (including the granting of options, appreciation rights, performance awards or restricted stock or membership awards), stock or membership purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to members, stockholders, managers, directors, officers or employees of any Seller, except as set forth on Schedule 5.8 and except for increases in salaries or wages payable or to become payable in the ordinary and usual course to employees of a Seller who are not members, stockholders, managers, directors or officers of such Seller;

     (f) any transaction or Contract material to any Seller or any commitment for the same, entered into by a Seller other than in the ordinary and usual course;

     (g) any transfer, Encumbrance or disposition by any Seller of any of its Assets, other than in the ordinary and usual course and not material, either individually or in the aggregate;

     (h) any receipt by any Seller of written or, to the knowledge of the Sellers, oral, notice that any Contract or arrangement to which such Seller is a party relating to the Purchased Assets, the Assumed Liabilities or the Business has been or will be canceled;

     (i) any issuance by any Seller of any bond, note, option, warrant or other corporate security or membership or partnership interest;

     (j) (i) any individual capital expenditure by any Seller in excess of $250,000 or (ii) any individual commitment by any Seller to make any such capital expenditure in excess of $100,000, in either case not included in the Sellers’ fiscal year 2005 capital expenditure budget attached to Schedule 5.8 (the “ Seller 2005 Capital Expenditure Budget ”);

     (k) any payment of, or incurrence of liability to pay, any Taxes, other than those arising and discharged or to be discharged in the ordinary and usual course;

     (l) any loans made by any Seller to any Person, including any Affiliate, member, stockholder, manager, director, employee or officer of any Seller, in excess of $100,000 individually or $250,000 in the aggregate;

     (m) any incurrence of indebtedness by any Seller for borrowed money or commitment by any Seller to borrow money other than in the ordinary and usual course;

     (n) any payment of management fees to any Affiliate (other than in accordance with the terms of the Existing Management Agreements as they exist on the date hereof); or

     (o) any authorization, approval, agreement or commitment by any Seller to take any action described in subparagraphs (c) through (n) above.

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5.9 Tax Matters .

     Except as set forth on Schedule 5.9,

     (a) All Taxes owed by the Sellers and the Seller Subsidiaries (whether or not shown on any Tax Return) have been paid and will be paid for all periods ending on or prior to the Closing Date. Each of the Sellers and their respective Seller Subsidiaries have properly and timely filed and will, prior to the Closing, properly and timely file, all Tax Returns they were required to file. None of the Sellers or any Seller Subsidiaries is the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Sellers or the Seller Subsidiaries do not file Tax Returns that the Sellers or any Seller Subsidiaries are or may be subject to taxation by that jurisdiction. There are no liens on any of the Assets of the Sellers or any Seller Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax.

     (b) Each of the Sellers and the Seller Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third Person, and all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed.

     (c) Neither the Trust nor any officer or director (or employee responsible for Tax matters) of the Sellers or any Seller Subsidiaries expects any authority to assess additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of the Sellers or any Seller Subsidiaries either (A) claimed or raised by any authority in writing or (B) as to which the Trust or the directors and officers (and employees responsible for Tax matters) of the Sellers or the Seller Subsidiaries has knowledge based upon personal contact with any agent of such authority.

     (d) Neither the Sellers nor any Seller Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

     (e) The unpaid Taxes of the Sellers and the Seller Subsidiaries (A) did not, as of the date of the Unaudited Seller Financial Statements, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Unaudited Seller Financial Statements (rather than any notes thereto) and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of the Sellers and the Seller Subsidiaries in filing their Tax Returns.

     (f) None of the Assumed Liabilities is an obligation to make a payment that is not deductible under Code Section 280G. The Sellers have not been for any tax year for which the statute of limitations is open a party to any Tax allocation or sharing agreement. The Sellers have not been members of any Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was FCC) and have no Liability for the Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, by contract, or otherwise.

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     (g) None of the Purchased Assets is “tax-exempt use property” within the meaning of Section 168(h) of the Code. None of the Sellers or any of Seller Subsidiary is a foreign person within the meaning of Section 1.1445-2(b) of the Regulations under Section 1445 of the Code.

5.10 Title to Purchased Assets and Related Matters .

     (a) Except for the Assets identified on Schedule 5.10(a) , the Purchased Assets constitute all Assets that are necessary for the operation of the Facilities and the conduct of the Business in the manner currently operated and conducted by the Sellers.

     (b) Each of the Sellers has, and at the Closing Purchaser will receive, good and marketable title to all of the Purchased Assets identified on Schedule 1.1 as owned by such Seller, and the Purchased Assets are free and clear of all Encumbrances, except for Permitted Encumbrances existing on the date hereof described on Schedule 5.10(b) and except with respect to those Purchased Assets that constitute Purchased Real Property as to which Section 10.3 shall apply. There are no outstanding rights, options, agreements or other commitments giving any Person any current or future right to require any Seller or, following the Closing Date, Purchaser, to sell or transfer to such Person or to any third Person any interest in any Seller or in any of the Purchased Assets, including any Facility. All of the Purchased Assets which are material to the conduct of the Business at any Facility are in good operating condition and repair (normal wear and tear excepted) and are suitable for the uses for which they are used or intended to be used in the Business and the operation of the Facilities.

     (c) The tangible Purchased Assets are located in the States and at the addresses set forth on Schedule 5.10(c) .

5.11 Leases .

      Schedule 5.11 is a true and complete list of (i) all real property Leases under which any of the Sellers is a lessor or lessee and (ii) all other Leases under which any of the Sellers is a lessor or lessee (A) providing for annual lease payments to or by any Seller or Seller Subsidiary in excess of $100,000 or (B) for a term of more than one year and not terminable by such Seller or Seller Subsidiary by notice of not more than 60 days for a cost of less than $25,000. All such Leases are valid and binding and in full force and effect in accordance with the terms thereof and, except as set forth on such Schedule 5.11 , have not been modified, amended, nor any provision thereof waived and constitute the entire agreement between the lessor and lessee thereunder with respect to the premises demised thereunder. The lessors under the Leases are holding security deposits in the amounts set forth on Schedule 5.11 . None of the Sellers is in default in any material respect under any such Lease, nor to the knowledge of the Sellers, does any condition exist that, with or without notice or lapse of time or both, would constitute a material default thereunder. To the knowledge of the Sellers, no other party to any such Lease (i) is in default thereunder in any material respect or (ii) has threatened to cancel or otherwise terminate any such Lease. All premises leased under the Leases are in appropriate condition and repair and are suitable for the conduct of the Business and the operation of the Facilities. True and complete copies of all Leases listed on Schedule 5.11 shall have been furnished or made available to Purchaser during the Due Diligence Period.

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5.12 Facilities; Management Agreements .

      Schedule 5.12 sets forth a true, correct and complete list of each Senior Living Facility operated, managed or leased by the Sellers or any Seller Subsidiary, and indicates, among other things, the ownership and location thereof as well the number of units occupied/unoccupied as of a recent date set forth on such Schedule, organized by unit type. Except for the Existing Management Agreements and the New Management Agreements, as applicable, no Contract provides for the management or operation of any of the Facilities. There are no currently deferred or accrued distributions or other amounts currently owing or due to any “licensee” under any Existing Management Agreement (whether such currently deferred or accrued distribution or other amounts currently owning or due are payable now or at some future date).

5.13 Assigned Contracts .

     (a)  Schedule 5.13 is a true and complete list, as of the date hereof, of each of the following Contracts relating to the Business to which any Seller or any Seller Subsidiary is a party or by which any Seller (or any Seller Subsidiary) or any of its properties, rights or assets is subject or by which any thereof is bound, other than the Leases and the Existing Management Agreements (collectively, the “ Seller Contracts ”): (i) each Contract to which a Seller or Seller Subsidiary is a party which (A) provides for aggregate annual payments or receipts by a Seller or Seller Subsidiary of $100,000 or more or (B) is not terminable by such Seller or Seller Subsidiary by notice of not more than 60 days for a cost of less than $25,000; (ii) each Contract containing a covenant not to compete or other similar covenant restricting the ability of any Seller or Seller Subsidiary to compete or conduct the Business in any manner or place; (iii) each Contract under which a Seller or Seller Subsidiary has borrowed any money from, or issued any note, bond, debenture or other evidence of indebtedness to, any Person or any other note, bond, debenture or other evidence of indebtedness of such Seller or Seller Subsidiary in any such case which, individually, is in excess of $100,000; (iv) each Contract under which (A) any person has directly or indirectly guaranteed Liabilities of a Seller or Seller Subsidiary or (B) a Seller or Seller Subsidiary has directly or indirectly guaranteed Liabilities of any Person; (v) each Contract providing for (A) indemnification by a Seller or Seller Subsidiary of any current or former employee, officer, director or consultant or (B) indemnification by a Seller or Seller Subsidiary of any Person with respect to material Liabilities relating to any current or former business of a Seller, Seller Subsidiary or any predecessor Person (other than, in the case of (B), contracts providing for indemnification made in the ordinary course of business consistent with past practice); (vi) each Contract for the purchase or sale of any real or material personal property; (vii) each joint venture or partnership agreement or arrangement or other agreement or arrangement involving the sharing of profits or losses; (viii) each health insurance benefit agreement with the United States Department of Health and Human Services; (ix) each Medicare or Medicaid provider agreement with respect to the Facilities; (x) each managed care or other third party payor Contract (e.g., private insurance carriers or health maintenance organizations), in each case which provides for aggregate payments or receipts in excess of $100,000 annually; (xi) each Contract with any hospital, physician, nursing facility, home health entity, durable medical equipment provider or pharmacy or any other Person involving patient care, including physical therapy and home care, in each case which provides for aggregate payments or receipts

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in excess of $100,000 annually; (xii) each Contract with any referral source; or (xiii) and any other Contract that is material to the Business.

     (b) Except as set forth on Schedule 5.13 , all of the Assigned Contracts are duly and validly executed by a Seller and have been executed by the other parties thereto, are in full force and effect, constitute legal, valid and binding obligations of the respective parties thereto, and are enforceable in accordance with their respective terms. Except as set forth on Schedule 5.13 , each Seller (and any Seller Subsidiary party thereto) has in all material respects performed all of the obligations required to be performed by it to date under each such Assigned Contract. Except as set forth on Schedule 5.13 , to the knowledge of the Sellers, no event has occurred which, with or without notice or the passage of time or both, constitutes or would constitute a material breach or default by a Seller or any other party under any Assigned Contract or permit any other party to accelerate, terminate, cancel or modify such Assigned Contract. Except as set for on Schedule 5.13 , to the knowledge of the Sellers, there has been no threatened cancellations by any third Person of any Assigned Contract. None of the parties to any of the Assigned Contracts has a right to terminate the Assigned Contract prior to the expiration of the current term thereof (other than as a result of the breach thereof occurring after the Closing). True and complete copies of all Assigned Contracts, including all amendments, waivers and modifications thereto, shall have been furnished or made available to Purchaser during the Due Diligence Period.

5.14 Resident Agreements.

      Schedule 5.14 sets forth a true and correct “rent roll” for each Facility (collectively, the “ Rent Roll ”) as of the most recent practicable date (as identified on Schedule 5.14 ). All Resident Agreements are evidenced by a written agreement either (i) in one of the forms of resident agreement attached to Schedule 5.14 or (ii) containing terms that are substantially similar to the terms set forth in one of the forms of resident agreement attached to Schedule 5.14 and not containing provisions that impose any obligations on the part of any Seller that differ in any material respect from the type or nature of the obligations on the part of any Seller included in any of the forms of resident agreement attached to Schedule 5.14 . No Seller is in default under any of its obligations under any Resident Agreement, except where such default would not have a material adverse effect on the Assets of such Seller or the Business conducted by such Seller, and, except as set forth on the Rent Roll (or the Closing Rent Roll, as defined in Section 10.2(m) , as applicable), no Seller has any knowledge of any material default on the part of any other party thereto. All of the Resident Agreements identified on the Rent Roll are currently in full force and effect as of the date of the Rent Roll or the Closing Rent Roll, as applicable.

5.15 Real Property .

     (a) Except for the real property listed on Schedule 1.1 as among the Purchased Assets to be transferred to Purchaser hereunder (collectively referred to herein as the “ Purchased Real Property ”), the Sellers and the Seller Subsidiaries do not own any interest in real property. With respect to the Purchased Real Property, except as set forth on Schedule 5.15(a) : (i) no portion thereof is subject to any pending condemnation, fire, health, safety, building, environmental, hazardous substances, pollution control, zoning or other land use regulatory Proceedings or Proceeding by any public or quasi-public authority and there is no threatened

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condemnation or Proceeding with respect thereto which would have a material adverse effect on the use and operation of any portion of the Purchased Real Property for its intended purpose; (ii) there are no Contracts to which any of the Sellers or any of their Affiliates is a party, granting to any party or parties except such Seller the right of use or occupancy of any portion of the parcels of the Purchased Real Property, except for any Contracts useful in the conduct of the Business and (A) for a term of less than one year or terminable by such Seller or Seller Subsidiary by notice of not more than 60 days for a cost of not more than $25,000, or (B) not relating to a portion of the parcels that is material to the principal use of such parcel, or (C) not relating to any use or occupancy that could materially impair the use or occupancy of a parcel by any Seller; (iii) there are no parties in possession of the Purchased Real Property except the Sellers; (iv) no notice of any contemplated special assessment has been received by the Sellers or the Trust and, to the knowledge of the Sellers, there is no threatened special assessment pertaining to any of the Purchased Real Property and (v) none of the Sellers or the Trust has received any notice of a violation or claimed violation of any Real Property Law. All Permits, certificates, easements and rights of way, including proof of dedication, required from all Governmental Entities having jurisdiction over the Purchased Real Property for the use and operation of the Purchased Real Property as currently used and to ensure vehicular and pedestrian ingress to and egress from the Purchased Real Property have been obtained. No portion of the Purchased Real Property has suffered any material damage by fire or other casualty which has not heretofore been repaired. Except as set forth on Schedule 5.15(a) , (i) there are no material physical or mechanical defects in any of the Purchased Real Property and the Purchased Real Property is in good operating condition and repair, reasonable wear and tear excepted; (ii) there are no unsatisfied requests for any material repairs, restorations or improvements to the Purchased Real Property from any Person, including any Governmental Entity; and (iii) there are no ongoing material repairs to the Purchased Real Property being made by or on behalf of any of the Sellers.

     (b) Except as described on Schedule 5.15(b) , each Facility is an independent unit which as of the date hereof does not rely on any facilities (other than the facilities of public utility, sewer and water companies) located on any property not included in such Facility (i) to fulfill any zoning, building code, or other municipal or governmental requirement, or (ii) for structural support or the furnishing of any essential building systems or utilities, including, but not limited to, electric, plumbing, mechanical, heating, ventilating and air conditioning systems. No building or other improvements not included in the Facilities relies on any part of the Facilities to fulfill any zoning, building, code or other municipal or governmental requirement or for structural support or the furnishing of any essential building systems or utilities.

     (c) Each Facility has adequate water supply, storm and sanitary sewer facilities, adequate access to telephone, gas (but only where such Facility is served by a natural gas utility) and electricity connections, adequate fire protection, drainage, means of ingress and egress to and from public highways and, without limitation, other public utilities. The parking facilities located on each Facility meet all applicable requirements imposed by applicable Law or requisite exceptions or variances to such Laws. All such public utilities are installed and operating and all installation and connection charges have been paid in full. All streets and roads necessary for access to and full utilization of each of the Facilities, and every part thereof, have been built, completed, dedicated and accepted for maintenance and public use by the appropriate Governmental Entities or are otherwise owned and maintained by local governments for public

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use. Seller has no knowledge of any fact or condition existing that would result or could result in the termination or reduction of the current access from the Facilities to the existing roads and highways or to sewer or other utility services presently serving the Facilities.

     (d) The current uses of each of the Facilities are permitted under the applicable municipal zoning ordinances, or special exceptions, variances, or conditions thereto, and the Facilities comply, to the extent required (including any waiver or grandfathering), with all conditions, restrictions and requirements of such zoning ordinances and all amendments thereto.

     (e) With respect to the Facilities known as The Fountains at Pacific Regent – Bellevue, The Fountains at Pacific Regent -La Jolla and The Fountains at Sea Bluffs (Dana Point) (the “ Condominium Facilities ”): (i) each of the Condominium Facilities is subject to one or more condominium declarations (each, a “ Condominium Declaration ”) and other Documents related to or entered into pursuant to or in accordance with the Condominium Declaration (collectively, the “ Condominium Documents ”); (ii) the Sellers have provided to Purchaser a true and correct copy of all material Condominium Documents as listed on Schedule 5.15(e) ; (iii) the applicable Seller is in compliance with all of its material obligations under the Condominium Documents; (iv) the applicable Seller is the holder of the rights of the Declarant under each Condominium Declaration, which rights may be duly and validly assigned to Purchaser; and (v) the current uses of each of the Condominium Facilities are permitted under the Condominium Documents and the Condominium Documents provide the applicable Seller with all material easements and other rights necessary for the operation of the applicable Condominium Facility as it is currently being operated.

5.16 Intellectual Property .

     (a)  Schedule 5.16(a) sets forth a true, correct and complete list of all issued patents, patent applications, common law trademarks and service marks (including logos, designs and trade dress), trademark and service mark applications and registrations, trade names, domain names, material copyrights (including proprietary software, templates and forms, manuals, and web site content, architecture and underlying software), and copyright applications and registrations included in Owned Requisite Rights, identifying the jurisdiction, application or serial number, filing or issuance date and owner of record for any and all registered and pending tradenames, trademarks and service marks, patent applications and issued patents, and registered and pending copyrights included in the Purchased Assets (if any). Except as set forth on Schedule 5.16(a) , the Sellers have not licensed or granted any right to use any Requisite Rights to any person.

     (b)  Schedule 5.16(b) sets forth a true, correct and complete list of all Licensed Requisite Rights (including licenses of the “Fountains” name and mark), identifying the licensor of such Licensed Requisite Rights.

     (c) Without limiting any other representations and warranties contained in this Agreement, each Seller owns all Owned Requisite Rights and has licenses to all Licensed Requisite Rights and has full power and authority to make the assignments and to fulfill the obligations with respect to the assignment and transfer of its right, title and interest in and to the

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Requisite Rights pursuant to this Agreement. At the Closing Date, all of the Sellers’ right, title and interest in and to the Requisite Rights shall transfer by the Sellers to Purchaser, free and clear of any and all Encumbrances. The Requisite Rights constitutes all Intellectual Property needed, used or useful for continued operation of the Business and the Facilities. Except as set forth on Schedule 5.16(c) , no consents or licenses are required from any Person for any Seller to transfer to Purchaser all of its right, title and interest in and to the Requisite Rights. No written notice or, to the knowledge of the Sellers, oral notice has been received by the Sellers or any of their Affiliates, nor to the knowledge of the Sellers is any notice anticipated, that any rights being transferred to Purchaser in the Requisite Rights are invalid or unenforceable or that any infringement or misappropriation thereof, in whole or in part, by any third Person has occurred. There are no claims, disputes, investigations or legal Proceedings with respect to any Requisite Rights pending or, to the knowledge of the Sellers, threatened against any Seller which, individually or in the aggregate, is or are likely to materially adversely affect any Seller, the Purchased Assets or the continued operation of the Business or the Facilities or which may involve or result in Damages or restrictions which in the aggregate or individually is material.

5.17 Inventories .

     All items included in the Inventories that are material to the normal operation of the Business consist of items of a quality usable or saleable in the ordinary course of the Business consistent with past practices and are in quantities sufficient for the normal operation of the Business in accordance with past practice. The Inventories set forth on the Seller Financial Statements were properly stated therein at the lesser of cost or fair market value determined in accordance with GAAP. Inventories now on hand that were purchased after September 30, 2004 were purchased in the ordinary course of the Business at a cost not exceeding market prices prevailing at the time of purchase. All of the Inventories are owned by the Sellers free and clear of all Encumbrances.

5.18 Accounts Receivable .

     All Accounts Receivable that are reflected on the most recent balance sheet included in the Seller Financial Statements, the Pre-Closing Accounts Receivable Schedule and the Final Accounts Receivable Schedule (as such terms are defined in Section 7.14 ) represent or will represent valid, bona fide obligations arising from sales actually made or services actually performed by Seller, requiring no further act under any circumstances on the part of any Seller or any of its Affiliates to cause such Accounts Receivable to be due and payable by the account debtor with respect thereto, and arise from arm’s length transactions between unrelated parties in the ordinary course of business of a Seller. No Seller has pledged any such Accounts Receivable, and each Seller owns all of its Accounts Receivable free and clear of all Encumbrances. Except to the extent paid prior to the Closing Date, each such Accounts Receivable is unconditionally owing to the applicable Seller in the face amount thereof, is valid and enforceable against the applicable account debtor and is not subject to any setoffs, discounts, allowances, claims, defenses, counterclaims or disputes arising prior to the Closing. For the sake of clarity, the Sellers are not making any representation or warranty as to the collectibility of the Accounts Receivable.

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5.19 Litigation, Etc.

     Other than as set forth on Schedule 5.19 , no Seller or any of its Affiliates is a party to, and to the knowledge of the Sellers, is subject to, any Order arising out of, in connection with, relating to or otherwise affecting the Business or the Purchased Assets, including, any Order concerning or relating to any federal or state funded health care program, any federal or state licensing Laws, or any federal or state Laws pertaining to the provision of assisted living, skilled nursing, long-term care, home health and other related healthcare and support services. Other than as set forth on Schedule 5.19 , there is no litigation, arbitration, or, to the knowledge of the Sellers, audit or other Proceeding by or before any Governmental Entity or arbitrator pending or, to the knowledge of the Sellers, threatened against a Seller or any of its Affiliates, which relates to the Purchased Assets, the Assumed Liabilities, the FCC Sale Transaction, this Agreement, the Related Documents or the transactions contemplated hereby or thereby. Other than as set forth on Schedule 5.19 , no Governmental Entity, or to the knowledge of the Sellers, any other Person, has at any time challenged, questioned, or commenced or given notice of intention to commence any investigation relating to, the legal right of the Sellers to conduct the Business as now or heretofore conducted by the Sellers or any of the transactions contemplated under this Agreement or the FCC Sale Transaction. Other than as set forth on Schedule 5.19 , there is no litigation, arbitration, or, to the knowledge of the Sellers, audit or other Proceeding or any claim alleging, with respect to a Seller, the Business, the Purchased Assets or the Assumed Liabilities, any violation of any Law.

5.20 Compliance with Laws .

     The operation of the Business by the Sellers, the use of the Purchased Assets, and the Assumed Liabilities have been and are in compliance in all material respects with all applicable Laws. Except as set forth on Schedule 5.20 , each of the Sellers has complied with all federal, state and local Laws affecting the conduct of the Business, the ownership or operation of its properties, and the sale or purchase of its properties, except any non-compliance which would not have a material adverse effect on Purchaser’s ability to conduct the Business in the manner in which it is currently conducted by the Sellers, on the ownership, possession or use of any of the Purchased Assets, on the Assumed Liabilities, or on the consummation of the transactions contemplated by this Agreement, and no Seller has received written notice, or, to the knowledge of Sellers, oral notice, of any non-compliance. Each of the Sellers has filed all forms, reports, statements and other Documents required to be filed with any Governmental Entity, including state and federal health regulatory authorities, except where the failure to file such forms, reports, statements or other Documents would not have a material adverse effect on the operation of the Business, except for matters addressed in Section 5.9 (taxes), Section 5.23 (labor relations), and Section 5.26 (environmental) hereof, which shall be governed by such Section 5.9 (taxes), Section 5.23 (labor relations), and Section 5.26 (environmental), respectively.

5.21 Permits .

     Set forth on Schedule 5.21 is a true and complete description of all of the Operating Licenses and other material required Permits owned or held by or issued to each Seller and all Operating Licenses and other material required Permits owned or held by or issued to any other Seller Subsidiary relating to the Business or the Purchased Assets, and such Operating Licenses

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and such other material required Permits constitute all the Operating Licenses and other Permits necessary for the conduct of the operation of the Business and the Facilities by the Sellers and the use of the Purchased Assets. Each Seller is the duly authorized holder of all the Operating Licenses and other material required Permits set forth under its name on Schedule 5.21 , all of which are in full force and effect and unimpaired. There is no pending or threatened action by or before any Governmental Entity to revoke, cancel, rescind, modify or refuse to renew any of the Operating Licenses or other material required Permits set forth on Schedule 5.21 . Except as otherwise noted on Schedule 5.21 , true and complete copies of all the Operating Licenses and other material required Permits set forth on Schedule 5.21 have been furnished to Purchaser. None of the Sellers or any Seller Subsidiary has received written notice from any Governmental Entity asserting the violation of the terms of any such Operating License or such other material required Permit, or threatening to revoke, cancel, suspend or not renew the terms of any such Operating License or other material required Permits. To the knowledge of the Sellers, no Facility is operating in violation of any material required Permit or any terms or conditions thereof, except for such violations as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the operation of such Facility.

5.22 Insurance .

      Schedule 5.22 contains a true, correct and complete list of all policies of liability, theft, fidelity, life, fire, product liability, workmen’s compensation, health and other forms of insurance for the Business and the Purchased Assets (specifying the insurer, amount of coverage, type of insurance, policy number, deductible or retention amount, premium, policy term and any pending claims thereunder). The Sellers have furnished to Purchaser true, correct and complete copies of the claims history relating to the Business for the five years prior to the date of this Agreement.

5.23 Labor Relations: Employees .

     (a)  Schedule 5.23(a)(i) sets forth a list of (i) all community-level employees of the Sellers or any Seller Subsidiary or any other Affiliate of the Sellers relating to the Business (collectively, the “ Community Employees ”) and (ii) all other employees (corporate and regional employees) of the Sellers or any Seller Subsidiary or any other Affiliate of the Sellers relating to the Business (collectively, the “ Corporate and Regional Employees ,” and together with the Community Employees, the “ Seller Employees ”), together with their current compensation (including salary, wages, bonuses and commissions) and the respective dates on which they commenced employment. Each of the Corporate and Regional Employees is identified as such on Schedule 5.23(a)(i) . To the knowledge of the Sellers, none of the Seller Employees has any plans or intends to terminate his or her employment or engagement and no former key employee has left the service of any of the Sellers or any Seller Subsidiary or other Affiliate within the six (6) months preceding the date of this Agreement. Except as set forth on Schedule 5.23(a)(ii) , all such employees are employees at-will and none of the Sellers or any of their respective Affiliates has any written employment agreement (including executive compensation, severance or retention agreements) or oral employment arrangements with any such employees or with any other Persons relating to the Business.

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     (b) Except as set forth on Schedule 5.23(b) : (i) each of the Sellers and their respective Seller Subsidiaries generally enjoy good relations with their employees, and there is no labor controversy, strike, dispute, disturbance, grievance, slowdown or stoppage actually pending, anticipated by, or, to the knowledge of the Sellers, threatened against or involving the Sellers or any Seller Subsidiary; (ii) none of the Sellers has any knowledge of any facts that would be likely to give rise to such a controversy, strike, dispute, disturbance, grievance, slowdown or stoppage; (iii) none of the Sellers or any Seller Subsidiary is a party to or bound by any collective bargaining agreement or union contract; (iv) there is no collective bargaining or union contract currently being negotiated by any of the Sellers or any Seller Subsidiary and (v) no labor union has taken any action with respect to organizing employees of the Sellers or any Seller Subsidiaries and, to the knowledge of the Sellers, there are no employees of any of the Sellers or any Seller Subsidiary seeking union representation. The relations of the Sellers with their employees are satisfactory, and none of the Sellers has knowledge of any facts that would be likely to adversely affect such relations prior to the Closing Date.

5.24 Pension and Benefit Plans and Compliance with Employment Laws .

     (a) Except as set forth on Schedule 5.24(a) , none of the Sellers or any Seller Subsidiary (i) maintains or has ever maintained any Plan or Other Arrangement; (ii) is or has even been a party to any Plan or Other Arrangement; or (iii) has any obligation under any Plan or Other Arrangement.

     (b) The Sellers shall have furnished or made available to Purchaser during the Due Diligence Period true and complete copies of each of the following documents for each Plan and Other Arrangement, as applicable: (i) the documents setting forth the terms of each Plan and Other Arrangement, and all amendments thereto; (ii) all related agreements, including trust agreements, annuity agreements, insurance contracts (including policies), and any other funding document, and agreements with service providers; (iii) the three most recent annual reports (Form 5500 series) on each Plan that have been filed with any Governmental Entity, if any; (iv) the current summary plan description and subsequent summaries of material modifications for each Plan; (v) the most recent determination letter from the Internal Revenue Service for each Plan which is intended to be a Pension Plan; and (vi) all correspondence within the last three years with any Governmental Body with respect to any Plan or Other Arrangement. No Plan is or has been subject to Title IV of ERISA.

     (c) The Sellers and any Seller Subsidiary, as applicable, have timely made all contributions and other payments required by and due under the terms of each Plan and Other Arrangement.

     (d) The Sellers and any Seller Subsidiary, as applicable, have received a determination letter from the Internal Revenue Service dated after December 31, 2001 that each Plan that is intended to be a Pension Plan complies with the requirements of Section 401(a) of the Code.

     (e) None of the Sellers or any Seller Subsidiary has pending or, to the knowledge of the Sellers, threatened claims arising under the Code, ERISA, the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the

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Americans with Disabilities Act, the Equal Pay Act of 1963, the Fair Labor Standards Act, or threatened unfair labor practice charges, contract grievances under any collective bargaining agreement, other administrative charges, claims, grievances or lawsuits, by or before any Governmental Entity or arbitrator.

     (f) No ERISA Event has occurred or is reasonably expected to occur.

     (g) All Plans that are Welfare Plans that are subject to Section 4980B(f) of the Code and Sections 601 through 609 of ERISA comply with and have been administered in material compliance with the health care continuation-coverage requirements for tax-favored status under Section 4980B(f) of the Code, Sections 601 through 609 of ERISA, and all other applicable Laws regarding continuation and/or conversion coverage. All Welfare Plans listed on Schedule 5.24(g) have, in all material respects, been administered in accordance with their terms and are in material compliance with ERISA, the Code and all other applicable Laws.

5.25 WARN Act .

      Schedule 5.25 lists the full name, job title, job site and unit, date of Employment Loss, and type of Employment Loss (termination, layoff, or reduction in work hours) of each employee of the Sellers or any Seller Subsidiary who has experienced an Employment Loss in the 90 days preceding the date of this Agreement. Except as set forth on Schedule 5.25 and except as expressly contemplated in Section 8.1 , the Sellers do not presently intend to take any action that would result in any Employment Loss by any employee of the Sellers between the date of this Agreement and the Closing. “ Employment Loss ” for this purpose shall mean (a) an employment termination, other than a discharge for cause, voluntary departure, or retirement, (b) a layoff exceeding six (6) months or (c) a reduction in hours of work of more than fifty percent (50%), and “ Employee ” shall mean any employee, including officers, managers and supervisors, but excluding employees who are employed for an average of fewer than twenty (20) hours per week or who have been employed for fewer than six (6) of the preceding twelve (12) months.

5.26 Environmental Matters .

     Except as set forth on Schedule 5.26 , none of the Sellers has generated, stored or disposed of any Hazardous Waste at any of the Purchased Real Property or any other real property owned, operated or leased by any Seller or Seller Subsidiary (collectively, the “ Properties ”) and the Sellers have no knowledge of any previous or present generation, storage, disposal or existence of any hazardous waste at any of the Properties other than in accordance with all applicable Laws. The term “ Hazardous Waste ” shall mean (a) “hazardous waste,” “hazardous substances,” “pollutants or contaminants,” “chemical substances,” “solid waste” or other similar or related terms as defined or used from time to time in the Environmental Laws; (b) asbestos containing materials, polychlorinated biphenyls (“ PCBs ”) and petroleum or any fraction thereof; and (c) any other material, substance or waste that is listed, regulated or defined under any Environmental Law. “ Environmental Law ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq .) (“ CERCLA ”), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et seq .), similar state Laws and any other Law or common law ruling related to protection of human health or the environment. No Seller has filed or, to the Sellers’ knowledge,

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been required to file any notice reporting a release of any Hazardous Waste into the environment, and no notice pursuant to Section 103(a) or (c) of CERCLA or any other applicable Environmental Law has been or was required to be filed. No Seller has received any notice letter under CERCLA or any notice or claim under any Environmental Law, and there is no investigation pending or to Sellers’ knowledge, threatened, to the effect that any Seller is or may be liable under Environmental Law or for or as a result of the release or threatened release of Hazardous Waste into the environment or for the suspected presence of any Hazardous Waste thereon. There are no facts, circumstances or conditions existing, initiated or occurring prior to the Closing that have resulted or will result in Liability of the Sellers or any Seller Subsidiary under any Environmental Law. Except as set forth on Schedule 5.26 , there is no asbestos, fill, PCBs, lead paint, underground or above ground storage tanks or any wetlands at any of the Properties. For sake of clarity and notwithstanding anything herein to the contrary, mold is not included in the foregoing provisions of this Section 5.26 . The Sellers hereby represent and warrant that, except as set forth on Schedule 5.26 , to the Sellers’ knowledge, there is no material mold at any of the Facilities.

5.27 Brokers .

     (a) No agent, broker, investment banker or other person or firm acting on behalf of or under the authority of any of the Sellers or the Trust or any of their respective Affiliates is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, in connection with the transactions contemplated by this Agreement or the Related Documents.

     (b) David Freshwater, one of the Greenbriar Stockholders and a director and/or officer of certain of the Sellers, is licensed as a real estate broker in the State of Arizona. Mr. Freshwater is not and will not be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, in connection with the transactions contemplated by this Agreement or the Related Documents.

5.28 Suppliers and Vendors .

     Except as set forth on Schedule 5.28 , in the ordinary course of business, no material supplier or vendor used in connection with the Business and no Person providing maintenance services to the Business has canceled or otherwise terminated within the two years preceding the date of this Agreement or threatened within the two years preceding the date of this Agreement to cancel or otherwise terminate, its relationship with any of the Sellers or the Business or has during that period decreased, limited or otherwise modified, or, to the knowledge of the Sellers, threatened to decrease, limit or otherwise modify, the services, supplies or materials it provides to any of the Sellers.

5.29 Payments .

     To the knowledge of Sellers, no Seller, Affiliate of any Seller, or agent or representative of any Seller or any Affiliate of any Seller has ever made, directly or indirectly, any contribution, gift or payment in connection with the Business to any Person, which contribution, gift or payment was in violation of applicable Law.

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5.30 Seller Documents .

     No representation or warranty or other statement made by any Seller, the Greenbriar Stockholders or the Trust in this Agreement, the schedules hereto, or the Documents (including any certificates) executed and delivered pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary in order to make any of the statements contained herein or therein, in light of the circumstances in which it was made, not misleading.

5.31 Solvency .

     (a) None of the Sellers or any Seller Subsidiary is now insolvent, and none of the Sellers or any Seller Subsidiary will be rendered insolvent by any of the transactions contemplated hereby or in any of the Related Documents. As used in this Section 5.31 , “insolvent” means that the sum of each Person’s existing and probable Liabilities do not and would not exceed the present fair saleable value of such Person’s assets.

     (b) Immediately after giving effect to the consummation of the transactions contemplated by this Agreement, (i) each of the Sellers and their respective Seller Subsidiaries will be able to pay its Liabilities as they become due in the ordinary course of business, (ii) none of the Sellers or any Seller Subsidiary will have unreasonably small capital with which to conduct its present or proposed business, (iii) each of the Sellers and their respective Seller Subsidiaries will have Assets (calculated at fair market value) that exceed its Liabilities and (iv) taking into account all pending and threatened litigation, final judgments against such Person in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, such Person will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered) as well as all other obligations of each such Person. The cash available to each of the Sellers and their respective Seller Subsidiaries, after taking into account all other anticipated uses of the cash, will be sufficient to pay all such debts and judgments promptly in accordance with their terms.

5.32 Health Regulatory Compliance .

     (a) Each Seller described as being so certified on Schedule 5.32(a) is certified for participation in, and party to, valid provider agreements for payment by the Federal Medicare and all applicable state Medicaid programs (the “ Government Programs ”) for the provision of assisted living, Alzheimer’s care, skilled nursing, or home health care as reflected on Schedule 5.32(a) . All Government Programs in which any Seller or any Seller Subsidiary has participated at any time during the last three years are listed on Schedule 5.32(a) . True and complete copies of all such provider agreements shall have been furnished or made available to Purchaser during the Due Diligence Period. Each Seller and Seller Subsidiary is in good standing in each Government Program and any third party payor program. Except as set forth on Schedule 5.32(a) , none of the Sellers or any Seller Subsidiary has any liabilities to any third party fiscal intermediary or carrier administering the Government Programs, directly to the Government Programs or any Governmental Entity, or to any other third party payor for the recoupment of

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any amounts previously paid to a Seller (or Seller Subsidiary) or any predecessor by any such third party fiscal intermediary, carrier, Government Program or other third party payor. There are no concluded or pending or, to the knowledge of the Sellers, threatened investigations, audits or other actions by any third party fiscal intermediary or carrier administering the Government Programs or any Governmental Entity, by the Department of Health and Human Services, any state Medicaid agency, intermediary or carrier or any third party payor, to recoup, set-off, or suspend payments to, or demand a refund from, or terminate the provider agreements with, or asserting any claim, demand, penalty, fine, or other sanction with respect to any of the activities, practices, policies or claims of, a Seller or any Seller Subsidiary, and there are no grounds to anticipate any such audit, investigation or action. Neither the Sellers nor any Seller Subsidiary has at any time since January 1, 2001 violated any condition for participation, or any rule, regulation, policy or standard of, any Government Program which has not, as of the date hereof, been satisfactorily cleared or resolved to the satisfaction of the Government Program, except for cited deficiencies the time for resolution of which has not yet passed. All Medicare Cost Reports for all periods since January 1, 2001 have been accurately completed in all material respects and timely filed.

     (b) Since January 1, 2001, except as set forth on Schedule 5.32(b) , neither the Sellers nor any Seller Subsidiary, nor to the knowledge of the Sellers, any other Person (i) who has a direct or indirect ownership interest (as those terms are defined in 42 C.F.R. Section 1001.1001(a)(2)) in a Seller, or (ii) who has an ownership or control interest (as defined in 42 C.F.R. Section 420.201) in a Seller, or (iii) who is an officer, director, manager, agent (as defined in 42 C.F.R. Section 1001.1001(a)(2)) or managing employee (as defined in 42 C.F.R. Section 420.201) of a Seller, or (iv) who has an indirect ownership interest (as that term is defined in 42 C.F.R. Section 1001.1001(a)(2)) in a Seller, has submitted any claims which are cause for civil penalties under, or mandatory or permissive exclusion from, Medicare, Medicaid, or any other State Health Care Program or Federal Health Care Program (as those terms are defined in 42 C.F.R. § 1001.2), or has engaged in any activities which are prohibited by 42 U.S.C. Sections 1320a-7a(1)-(7), 1320a-7b(a)(1),(2), (3), and (5), 18 U.S.C. § 1347, 1035, 31 U.S.C. § 3729-3733 (known as the “ Federal Civil False Claims Act ”), 42 U.S.C. § 1320a-7b (the “ Federal Criminal False Claim Act ”), Federal Ethics in Patient Referrals Act, 42 U.S.C. § 1395nn (known as the “ Stark Law ”), the Federal Health Care Program Anti-Kickback Statute, 42 U.S.C § 1320a-7b(b) (known as the “ Anti-Kickback Statute ”), or the regulations promulgated pursuant thereto or any comparable state Laws, or which are prohibited by an private accrediting organization from which a Seller seeks accreditation or by generally recognized standards of care or conduct, including not having engaged in, or experienced, any of the following:

     (i) a civil monetary penalty assessed against it under 42 U.S.C. Section 1320a-7a or any applicable state Laws;

     (ii) been excluded from participation under Medicare, Medicaid or any other State Health Care Program or Federal Health Care Program under 42 U.S.C. Sections 1320a-7 or 1320a-7a ,or any applicable state Laws, or any third-party payor program;

     (iii) been convicted (as that term is defined in 42 C.F.R. Section 1001.2) of any of the offenses described in 42 U.S.C. Sections 1320a-7(a) and (b)(1), (2), (3),or any

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applicable state Law, that could lead to a mandatory or permissive exclusion from any State Health Care Program or Federal Health Care Programs;

     (iv) been suspended, debarred, or excluded from any federal program under 45 C.F.R. Part 76 or from any state program under any applicable state Laws; and

     (v) been subject to any action or investigation under the Federal Criminal False Claim Act or the Federal Civil False Claim Act, or any applicable state false claim or fraud Laws.

     (c) Each Seller, and each Seller Subsidiary, has complied in all material respects with all applicable security and privacy standards regarding protected health information under the Health Insurance Portability and Accountability Act of 1996 (“ HIPAA ”) and, since January 1, 2001, with all applicable regulations promulgated under HIPAA and all applicable state privacy Laws.

5.33 Subsidiaries; Affiliate Transactions .

     Except for the Sellers and the other Persons listed on Schedule 5.33 as “Other Companies”, no other Person is, or during the past six months, has been a Subsidiary of the Trust. Except as set forth on Schedule 5.33 , none of the members, securityholders, managers, directors, officers or employees of a Seller, or any Person controlled by a Seller, or any such member, securityholder, manager, director, officer or employee, or any member of the immediate family of any of the foregoing (a) has, or during the past 12 months has had, any interest in any property (whether real, personal, or mixed and whether tangible or intangible) used in or pertaining to the Business; (b) owns, of record or beneficially, or has owned, an Equity Interest or other financial or profit interest in, or is an owner, sole proprietor, member, securityholder, partner, director, officer, employee, provider, consultant or agent of, any Person that has or, during the past 12 months, has had (i) business dealings or a material financial interest in any transaction with any Seller (including as a consultant, lessor, lessee, customer or supplier of goods or services) or (ii) engaged in competition with any Seller with respect to the Business in any market presently served by any Seller, except for stock holdings not in excess of ten percent (10%) held solely for investment purposes in securities which are listed on a national securities exchange or which are regularly traded in the over-the-counter market, (c) is a party to any Contract with, or has any claim or right against, any Seller; or (d) owns, directly or indirectly, in whole or in part, any real property, leasehold interests, tangible property or intangible property with a fair market value of $50,000 or more which any Seller currently uses in the Business. As used in this Section 5.33 , an individual’s immediate family shall mean such individual’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law and brothers and sisters-in-law.

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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER

          Purchaser hereby represents and warrants to the Sellers as follows:

6.1 Organization; Corporate Authority .

     (a) Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the Commonwealth of Virginia. Purchaser has the necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and each of the Related Documents to which it is or will be a party and to consummate the transactions contemplated hereby and thereby.

     (b) The execution and delivery by Purchaser of this Agreement and each Related Document to which it is or will be a party, the performance of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all necessary action on the part of Purchaser, none of which actions have been modified or rescinded and all of which actions remain in full force and effect. This Agreement and each Related Document to which Purchaser is or will be a party has been or upon the execution thereof will be, duly and validly executed and delivered by a duly authorized representative of Purchaser, and constitutes, or upon its execution and delivery by Purchaser will constitute, a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms.

6.2 Authority; No Conflicts .

     Neither the execution, delivery or performance by Purchaser of this Agreement and each Related Document to which it is or will be a party, nor the consummation by Purchaser of the transactions contemplated hereby and thereby will (with or without notice or lapse of time, or both): (i) breach or violate any provision of the certificate of incorporation, bylaws, or other organizational documents of Purchaser or any resolution adopted by the board of directors or a stockholder of Purchaser; (ii) breach or violate any applicable Law; (iii) conflict with, result in a breach of or constitute a default under, or give rise to any right of termination, cancellation, modification or acceleration of, any Contract to which Purchaser is a party or by which any of its properties or Assets may be bound or affected; or (iv) result in the imposition or creation of any Liability on Purchaser or Encumbrance upon or with respect to any of the Purchaser’s Assets, or result in or permit the acceleration of any indebtedness or other obligation of Purchaser, in each case, which would prohibit Purchaser from consummating the transactions contemplated hereby or performing any of its obligations hereunder.

6.3 Brokers .

     Purchaser has not employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated hereby for which any of the Sellers will have any Liability after the Closing.

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6.4 Consents .

     Except as set forth on Schedule 6.4 and except for any filings or approvals under the Hart-Scott-Rodino Act, no consent, approval, Permit, Order or authorization of, or any exemption from registration, declaration or filing with, any Governmental Entity or any other third Person is required for the execution, delivery and performance by Purchaser of this Agreement or the Related Documents to which Purchaser is or will be a party or the consummation by Purchaser of the transactions contemplated hereby or thereby.

ARTICLE VII
COVENANTS AND AGREEMENTS

7.1 Access to Records and Properties .

     (a) At all reasonable times during the period commencing on the Access Effective Date and expiring at 5:00 P.M. California Time on the 60 ^th calendar day thereafter (the “ Due Diligence Period ”), Purchaser, its agents, and its representatives shall be entitled, at Purchaser’s sole cost and expense, to: (i) enter onto the Facilities, during normal business hours and upon reasonable advance notice to the Sellers, to perform any inspections, investigations, studies and tests of the Facilities (including, without limitation, physical, structural, mechanical, architectural, engineering, soils, geotechnical and environmental tests that Purchaser deems reasonable); (ii) cause environmental assessments of the Purchased Real Property to be performed, upon reasonable advance notice to the Sellers; (iii) review all Books and Records; and (iv) investigate such other matters as Purchaser may request, including the Assets, liabilities, prospects and business of the Sellers relating to the Purchased Assets, the Assumed Liabilities and the Business (including future service obligations) and any regulatory, tax, environmental and/or other legal matters. Purchaser’s entry onto and inspections of the Purchased Real Property in accordance with the terms hereof shall not damage the Purchased Real Property. For the sake of clarity and not as a limitation on any diligence review by Purchasers, Sellers shall present to Purchaser at each Facility, as promptly as practicable following the date of this Agreement, a copy of each the following contracts applicable to one or more Facilities: each managed care or other third party payor Contract, each Contract or grant from any other governmental payment program (e.g., assistance for the elderly or treatment of persons with AIDs), and each Contract with any hospital, physician, nursing facility, home health entity, durable medical equipment provider or pharmacy or any other Person involving patient care, including physical therapy and home care. Any entry by Purchaser onto the Purchased Real Property shall be subject to, and conducted in accordance with, applicable Law.

     (b) Purchaser shall exercise Commercially Reasonable Efforts to minimize, and if reasonably practicable, to avoid interference with the occupancy and use of the Facilities by the Sellers, invitees and lessees of the Sellers, and residents of the Facilities, and to minimize, and if reasonably practicable, to avoid the disturbance of any of the residents or the Sellers’ employees at the Facilities.

     (c) Purchaser shall not, except as may be required by Law, initiate any communications with any Person who at the time of such communication is a resident (or their

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representatives) of any of the Facilities without the prior authorization of Steve Berlin, Don Millican, David Freshwater, Tom Danker or the Representative, which shall not be unreasonably withheld or delayed, but which may be withheld by the Sellers until Purchaser shall have advised the Sellers that Purchaser has not yet discovered or become aware of a Due Diligence Termination Event.

     (d) Subject to Section 11.5 , the investigation contemplated by this Section 7.1 shall not affect or otherwise diminish or obviate in any respect any of the representations and warranties or the indemnification rights of the Purchaser Indemnified Parties contained in this Agreement.

     (e) If Purchaser or its representatives undertake any borings or other disturbances of the soil of the Purchased Real Property, the soil shall, to the extent reasonably practicable, be re-compacted to substantially the same condition as it was in immediately before any such borings or other disturbances were undertaken.

     (f) Purchaser shall from the Access Effective Date through the Due Diligence Termination Date (as hereafter defined) carry, and shall cause its agents and representatives to carry, general liability insurance in the amount of $1,000,000 per occurrence, which insurance shall name the Sellers as additional insured; and upon request, Purchaser shall provide the Sellers with proof of such insurance prior to commencing Purchaser’s physical inspections of the Facilities.

     (g) Purchaser shall keep the Facilities free and clear of any mechanic’s or materialmen’s liens arising out of any entry onto or inspection of the Facilities. Purchaser shall indemnify, protect, defend and hold the Sellers (and the Sellers’ member, directors, partners, shareholders, agents, employees and representatives) harmless from and against any and all Losses (including claims for mechanic’s liens or materialmen’s liens) caused by or arising out of any inspections, investigations, studies or tests carried on by or on behalf of Purchaser pursuant to the terms hereof; provided, however, this indemnity shall not extend to protect the Sellers from any pre-existing Liabilities for matters merely discovered by Purchaser (i.e., latent environmental contamination).

     (h) In the event that this Agreement is terminated pursuant to Section 12.1(f) , (i) Purchaser shall repair any damage to the Purchased Real Property caused by its entry thereon and restore the same, to the extent reasonably practicable, to substantially the same condition as it was in immediately prior to such entry and (ii) Purchaser shall deliver to the Sellers, upon request and without charge therefor, the results and copies of any and all third party inspections, studies, tests, and surveys made by or for Purchaser with respect to the environmental or physical condition of the Purchased Real Property, subject to any third party restrictions on such delivery. Such delivery shall not constitute a representation or warranty of any kind or nature regarding the accuracy or completeness or any other aspect of such inspections, studies, tests, or surveys. The provisions of this Section 7.1(h) shall survive the termination of this Agreement.

     (i) For purposes of this Agreement, “ Due Diligence Termination Date ” shall mean the date of expiration of the Due Diligence Period.

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     (j) For purposes of this Agreement, “ Due Diligence Termination Event ” shall mean (i) any facts, events or circumstances that have resulted in or are reasonably expected to result in (A) a material impairment in the value of the Purchased Assets or a material increase in the amount of the Assumed Liabilities, (B) a material impairment in Purchaser’s ability to operate the Business at any Facility, or (C) a material adverse change in the nature of the Assumed Liabilities, (ii) any material Liability under any Environmental Law or any condition relating to the Purchased Real Property or any Facility, including undisclosed locations, types or levels of mold, that could result in material Liability to Purchaser or its Affiliates, (iii) any material Liability under any of the Laws referenced in Section 5.32 that would reasonably be expected to adversely affect Purchaser, (iv) any actuarially estimated future service obligation Liability (determined in accordance with customary actuarial standards used in the senior living industry to estimate future service obligation Liability) not accurately reflected in the forecasts or projections prepared by or on behalf of Sellers and provided to Purchaser that causes such forecasts or projections to materially overstate forecasted or projected net income, net operating income and/or future cash flows in any fiscal years included in such forecasts or projections, (v) a reasonable determination by Purchaser that the Sellers have unsatisfactory relationships with their employees which adversely and materially affect the value of the Business, or (vi) a reasonable determination by Purchaser that the Sellers have unsatisfactory relationships with their residents which adversely and materially affect the value of the Business; it being understood that, to the extent any such impairments, increases in amount, adverse effects or Liabilities are quantifiable, and the aggregate amount of all such quantifiable impairments, increases in amount, adverse effects and Liabilities equals or exceeds the Termination Threshold (as hereafter defined), such quantifiable impairments, increases in amount, adverse effects and/or Liabilities shall collectively be considered a Due Diligence Termination Event for purposes of this Agreement. No facts, events or circumstances specified on a Seller Disclosure Schedule or on a “Seller Disclosure Schedule” to the Asset Purchase Agreement (each hereafter called an “ Item ”) shall be considered in making the determination whether a Due Diligence Termination Event exists except (i) if an Item is marked with an asterisk on a Seller Disclosure Schedule or on a “Seller Disclosure Schedule” to the Asset Purchase Agreement and the description of the Item on such schedule does not specify an impairment or Liability amount with respect to such Item, then that Item, including the full amount of any Liability or impairment with respect thereto, may be considered in making a determination whether a Due Diligence Termination Event exists or (ii) whether or not an Item is marked with an asterisk on a Seller Disclosure Schedule or on a “Seller Disclosure Schedule” to the Asset Purchase Agreement, if the description of the Item on such schedule specifies an impairment or Liability amount with respect to such Item, then that Item may be considered in making a determination whether a Due Diligence Termination Event exists, but only to the extent the impairment or Liability amount that results therefrom or is reasonably expected to result therefrom exceeds the amount of the impairment or Liability specified on such schedule.

     (k) For purposes of this Agreement, the “ Termination Threshold ” means an amount equal to $5.0 million.

     (l) Notwithstanding any other provision of this Agreement and the delivery of any Books and Records as part of the Purchased Assets, after the Closing Date, Purchaser shall provide to the Sellers and any of their Affiliates (subject to applicable restrictions imposed by

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Law), at no expense to Purchaser, reasonable access during normal business hours and upon reasonable notice to (i) such records included in the Purchased Assets as are reasonably requested by the Sellers or such Affiliates in connection with billing issues, claims, lawsuits, governmental investigations and similar matters (other than Tax matters, which are covered in Article IX ) and (ii) the Hired Employees who continue to be employed by Purchaser at such time for the purpose of discussing such matters, in each case for a period of six years beginning on the Closing Date. During such six-year period, Purchaser shall retain and preserve such records; provided that , during such period (A) the Sellers and their Affiliates may copy and retain in connection with billing issues, claims, lawsuits, governmental investigations and similar matters any Documents which were delivered as part of the Purchased Assets or (B) Purchaser may elect to return all such Documents to the Sellers at Purchaser’s expense.

7.2 Conduct Pending Closing .

     (a) From and after the date hereof until the earlier of the Closing or the termination of this Agreement pursuant to Article XII , each Seller shall and shall cause its Seller Subsidiaries, if any, to, except for those actions expressly contemplated or required to be taken by this Agreement or as consented to by Purchaser in writing: (i) conduct or cause to be conducted the Business, including the operation of the Facilities, as currently conducted and only in the ordinary course consistent with past practice; (ii) use its best efforts to (A) keep available for Purchaser the services of the present officers, employees, consultants, agents and representatives of the Sellers and the Seller Subsidiaries, and (B) preserve the business organization, Assets, ongoing business and goodwill and keep its relationships with its customers, suppliers, licensors, licensees, advertisers, contractors and others having business relations with the Sellers in accordance with past practice; (iii) comply in all material respects with all applicable Laws affecting or relating to the Business; and (iv) maintain in good standing all Operating Licenses and other material required Permits held by such Seller in respect of the Business on a timely basis.

     (b) From and after the date hereof until the earlier of the Closing or the termination of this Agreement pursuant to Article XII , none of the Sellers shall, and the Sellers shall not cause or permit their respective Seller Subsidiaries to, except as expressly contemplated or required by this Agreement or as consented to by Purchaser in writing: (i) take or omit to take any action which would result in the representations and warranties contained in this Agreement or the Related Documents being untrue in any material respect (or in the case of representations and warranties which are qualified as to materiality, untrue in any respect) on the Closing Date; (ii) by action or inaction, abandon, terminate, cancel, forfeit, waive or release any of any Seller’s material rights, in whole or in part, with respect to the Purchased Assets, or sell, lease, license, transfer or otherwise dispose of or mortgage, pledge or otherwise suffer to exist any Encumbrance on any of the Purchased Assets other than the Permitted Encumbrances identified on Schedule 5.10(b) hereto; (iii) modify, amend or terminate any Contract that is included in the Purchased Assets or waive, release or assign any material rights or claims thereunder or permit any of the foregoing to occur; (iv) effect any merger, business combination or similar transaction or take any other action, corporate or otherwise, which might affect any Seller’s abil