ex10_27-1.htm


    
      

    

    
      Exhibit
        10.27.1

       

      AGREEMENT
        TO
        LEASE

       

      This
        agreement ("Agreement") is made between Elkhart Retirement L.L.C., Hobart
        Retirement L.L.C., LaPorte Retirement L.L.C., and Niles Retirement L.L.C.,
        each
        of which is an Indiana limited liability company (collectively referred to
        hereafter as "Lessors" or "Landlord"), Steven L. Garatoni ("Garatoni"), and
        Summerville Senior Living, Inc., a Delaware corporation
        ("Summerville").

       

      RECITALS

       

      A.             Lessors,
        each of which are owned and controlled by Garatoni, are the owners
        of
        the following assisted living facilities ("ALFs") and independent-living
        retirement housing facility ("ILR") (the ALFs and ILR are sometimes referred
        to
        collectively hereafter as the "Facilities"):

       

      
        	
                Bldg

              	
                Facility/Address

              	
                Type

              	
                Units

              
	
                1

              	
                Brentwood
                  Retirement Community 3600 E. Bristol St.

                Elkhart,
                  IN 46514

              	
                ILR

              	
                88

              
	
                2

              	
                Brentwood
                  Assisted Living Community 1420 St. Mary's Circle

                Hobart,
                  IN 46342

              	
                ALF

              	
                66

              
	
                3

              	
                Brentwood
                  Assisted Living Community 2002 Andrew Avenue

                LaPorte,
                  IN 46350

              	
                ALF

              	
                57

              
	
                4

              	
                Brentwood
                  Assisted Living Community 1147 South Third Street

                Niles,
                  MI 49120

              	
                ALF

              	
                64

              


      

       

      B.           Lessors
        and Summerville have agreed on terms for Lessors to lease the Facilities,
        for a
        period of ten years beginning November 1, 2004 (the "Commencement Date")
        with
        options for three five-year extensions, to Summerville 2, LLC, a Delaware
        limited liability company, or to four subsidiaries or affiliates thereof
        (the
        "Tenant" or "Lessee"), which Summerville will create, pursuant to leases
        in the
        form of Exhibits A-D
hereto (the "Leases"),
        conditioned on terms as stated below (such
        leasing, the "Transaction").

       

      C.            Capitalized
        terms not otherwise defined herein have the meaning stated in the
        Leases.

       

      D.            Summerville,
        or a Subsidiary of Summerville or Affiliate of Granger Cobb, shall enter
        into
        management agreements with each Tenant to provide management services relating
        to the operation of the Facilities (the entity which enters into such agreements
        with the Tenant is referred to herein as the "Management Company").

       

      E.            The
        obligation of Summerville to cause the Tenant to enter into the Leases shall
        be
        subject to, among other conditions, Summerville's right to terminate this
        Agreement during the examination period ("Due Diligence Period") described
        below.


      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      F.            The
        obligation of the Lessors to enter into the Leases shall be subject to,
among
        other conditions, approval of Lessors' Mortgagees and HUD.

       

      Now,
        therefore, in consideration of the foregoing premises and the mutual covenants
        of the parties set forth herein, it is hereby agreed as follows:

       

      AGREEMENT

       

      1.            Rent,
        Security Deposit, and
        Replacement Reserve Payments. The Leases shall
        provide, among other matters and as more particularly described therein,
        as
        follows:

       

      (a)            Rent.
        Tenants shall pay Base Rent for the first Lease Year as follows:

       

      
        	
                Facility

              	
                Monthly

              	
                Annual

              
	
                LaPorte

              	
                $23,949.33

              	
                $287,392.00

              
	
                Niles

              	
                $25,344.00

              	
                $304,128.00

              
	
                Hobart

              	
                $40,920.00

              	
                $491,040.00

              
	
                Elkhart

              	
                $43,120.00

              	
                $517,440.00

              
	
                Total

              	
                $133,333.33

              	
                $1,600,000.00

              


      

       

      After
        the
        first Lease Year, the above Base Rent will be subject to annual adjustment
        based
        on the Consumer Price Index as described in Section 6.1 of the Leases. After
        the
        fifth Lease Year, Tenants shall pay, in addition to Base Rent, a Variable
        Rent
        of one half percent (0.5%) of gross revenues, as described in Section 6.2
        of the
        Leases.

       

      (b)            Replacement
        Reserves.
Tenants shall pay Replacement Reserve Installments, in accordance
        with
        Section 7 of the Leases, as follows:

       

      
        	
                Facility

              	
                Monthly

              	
                Annual

              
	
                LaPorte

              	
                $
                  2,137.50

              	
                $
                  25,650.00

              
	
                Niles

              	
                $
                  2,583.33

              	
                $
                  31,000.00

              
	
                Hobart

              	
                $
                  2,475.00

              	
                $
                  29,700.00

              
	
                Elkhart

              	
                $
                  3,300.00

              	
                $
                  39,600.00

              
	
                Total

              	
                $10,495.83

              	
                $125,950.00

              


      

       

      (c)             Security
        Deposits. On
        the Commencement Date, Tenant shall pay Security
        Deposits, in accordance with Section 8 of the Leases, as follows:

       

      
        	
                Facility

              	
                Amount

              
	
                LaPorte

              	
                $
                  180,000

              
	
                Niles

              	
                $
                  190,000

              
	
                Hobart

              	
                $
                  300,000

              
	
                Elkhart

              	
                $
                  330,000

              
	
                Total

              	
                $1,000,000

              


      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (d)            Aggregation.
Security
        Deposits, but not Replacement Reserves or any
        other
        amounts under the Leases, shall be held on an aggregated basis, i.e., the
        Security Deposit for any Facility may be applied against Tenant defaults
        under
        the Lease for another Facility; provided, however, that in the event of the
        sale
        by Landlord of any Facility or Facilities to a party or parties other than
        an
        Affiliate of Landlord, the Facility or Facilities sold shall be excluded
        from
        any aggregation under the Leases (or other provisions whereby Tenant's rights
        under a Lease may be affected by the Other Leases), and the cross-default
        provisions of the Leases shall not apply as to such sold Facility or
        Facilities.

       

      2.            Procedure.

       

      (a)            Due
        Diligence
        Period/Milestones. Summerville has had and shall continue
        to have the opportunity to review all relevant information relating to the
        Facilities and inspect the Facilities during a Due Diligence Period extending
        until 5 p.m., Central Time, on the 21st day after the Examination Date, as
        defined below. Lessor has previously delivered to Summerville certain items
        and
        information described in Exhibit E attached hereto (collectively, the "Due
        Diligence Materials"). The only items listed in Exhibit E (other than those
        which marked as not applicable) which have not been provided to Summerville
        prior to the date of execution of this Agreement by all parties hereto (the
        "Effective Date") are resumes for Facility management staff, which shall
        be
        delivered to Summerville on the Examination Date as described
        below.

       

      (1)            Until
        the 7th day after the Effective Date (the "Examination Date"), Summerville
        shall
        not disclose to Facility employees ("Employees") or Residents the existence
        of
        this Agreement or the pending Transaction. Summerville's agents entering
        the
        Facilities prior to the Examination Date have done so, and shall continue
        to do
        so, as shoppers for ALF/ILR accommodations/services.

       

      (2)             Beginning
        on the Examination Date, Summerville's agents may enter the Facilities for
        purposes of detailed examination of the Premises, and may make disclosures
        to
        and interview Employees in connection with the proposed Transaction. Lessors
        shall cause the Employees to provide unlimited access to the Premises to
        Summerville's agents beginning as of such time.

       

      (3)             Summerville
        may terminate this Agreement if dissatisfied with
        its
        findings as to the following factors, by written notice to Lessors as provided
        in Section 25 of the Leases, on or before the following Due Diligence milestone
        dates:

       

      
        
          	
                  Financial
                    and Market Feasibility

                	
                  completed

                
	
                  Board
                    of Directors/Internal Approvals

                	
                  completed

                
	
                  Physical
                    examination of Premises

                	
                  End
                    of Due Diligence Period

                


        

      

       

      (b)             Lender
        Approval.
Promptly upon execution of this Agreement, Lessors,
        at Lessors' sole cost and expense, shall seek approval from their Mortgagees
        of
        the lease transaction contemplated by this Agreement (the "Transaction").
        Summerville shall reasonably cooperate with Lessors and shall provide Lessors
        with all information about Summerville and its Affiliates which may reasonably
        be requested by the Mortgagees or HUD in connection with Lessors' requests
        for
        approval of the Transaction by the Mortgagees and HUD ("Lender Approval").
        In
        the event that Lender Approval cannot be obtained prior to November 1, 2004,
        the
        Closing (as defined below) and Commencement Date shall be deferred until
        such
        time as Lender Approval has been obtained; provided, however, if such Lender
        approval is not obtained on or before January 1, 2005, either party may
        thereafter terminate this Agreement by giving written notice thereof to the
        other party. Lessors agree to use their best efforts to procure execution
        of a
        subordination, non-disturbance and attornment agreement reasonably satisfactory
        to Summerville ("SNDA") by each and every Mortgagee or holder of a deed of
        trust
        (with the approval of HUD as necessary to make the SNDA legally effective),
        existing as of the Effective Date, agreeing, inter alia, that the rights
        of the Tenant under a Lease shall not be disturbed, regardless of any default
        by
        Lessors under the Mortgages, so long as the Tenant is in compliance with
        its
        duties under such Lease.


      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      


      (c)           License
        Applications.
Prior to the Commencement Date, Summerville shall cause the Tenants
        for
        the Hobart, LaPorte and Niles Facilities to seek Licenses under the ALF
        Licensing Laws applicable to such Facilities. Lessors shall cooperate with
        the
        Tenant and shall provide the Tenant with all information about the Facilities
        which may be requested by the Tenant for such purposes. In the event that
        the
        Licenses cannot be obtained prior to November 1, 2004, the Closing (as defined
        below) and Commencement Date shall be deferred until such time as the Licenses
        have been obtained; provided, that if the Licenses are not obtained by January
        1, 2005, either Lessor or Summerville may terminate this Agreement.
        Alternatively, Landlord and Tenant may elect to enter into an interim management
        agreement that would allow Tenant to operate under the existing licenses
        until
        new licenses are issued.

       

      (d)            Closing.
At
        such time
        as all required Lender Approvals and Licenses have been obtained, the
        Transaction shall be consummated by execution and delivery of the Leases
        and all
        documents described therein) (such execution and delivery is referred to
        hereafter as the "Closing") on a date (the "Closing Date") not less than
        two
        Business Days before the Commencement Date, effective as of the Commencement
        Date.

       

      (1)            Closing
        shall, at the request of any party, be conducted by exchange of documents
        by
        overnight delivery.

       

      (2)            Any
        bills issued to Residents of a Facility prior to the Closing Date for
        accommodations and services for the month beginning on the Commencement Date
        shall be consistent with the procedure used by the Landlord for prior periods,
        i.e., Residents will be directed to deliver payments to the Facility business
        office. If possible, checks for such payments will be deposited directly
        into
        Tenant accounts. If such checks cannot be deposited into Tenant accounts,
        Lessors will deposit such checks and promptly make payment to the Tenant
        of the
        amount of payments received for accommodations and services provided during
        the
        Lease Term. Cash receipts shall be prorated between Landlord and Tenant based
        upon the dates of service for which the payments were intended.


      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      (3)            Operating
        costs, expenses and charges, including but not limited
        to Taxes, shall be prorated between Tenant and Landlord as of the Commencement
        Date,
        with Landlord responsible for such amounts prior to the Commencement Date
        and
        Tenant responsible for such amounts on and after the Commencement Date, and
        shall be paid in cash (or, if a net amount is due to Tenant, deducted from
        Base
        Rent) as of the next due date for Base Rent following the Commencement Date
        (the
        "Adjustment Date"). To the extent that any unpaid expense arising prior to
        the
        Commencement Date or paid expense applicable to the period after the
        Commencement Date cannot be conclusively determined on the Adjustment Date,
        credits and debits shall be used for purposes of such proration based on
        amounts
        determined as of the Adjustment Date, and further adjustment(s) shall be
        made
        when such expenses are more accurately determined, with payment to be made
        to or
        from Tenant, as the case may be, by adjustment of the next installment of
        Base
        Rent.

       

      3.            Evidence
        Of Condition Of
        Facilities. As soon as possible after the Commencement Date, the parties
        shall have a DVD prepared to thoroughly depict the condition of each Facility
        as
        of the Commencement Date (the "Start Date Condition"). The DVD shall be prepared
        by a professional photographer, to be selected by the Landlord. Landlord
        shall
        be responsible for the cost for the preparation of the DVDs. Each party shall
        receive a copy of the DVDs (one for each Facility).

       

      4.            Conveyance
        of Personal
        Property and Service Contracts.

       

      (a)           Personal
        Property.
Landlord agrees to transfer and convey to Tenant as of the Closing
        Date,
        all of Landlord's right, title and interest in and to any furniture, fixtures,
        equipment, supplies and other personal property located at the Facilities
        (the
        "Personal Property"). The Personal Property transferred at Closing shall
        be
        substantially as identified in the Personal Property list provided to
        Summerville as part of the Due Diligence Materials, excepting changes in
        the
        ordinary course of business which do not have a material adverse effect on
        Tenant and shall be sufficient to operate the Facilities in the same manner
        as
        prior to the date of this Agreement.

       

      (b)            Service
        Contracts.
Landlord has delivered to Summerville copies of all agreements with
        third
        party vendors that provide, as of the Effective Date, services to the Facilities
        (the "Service Contracts"), as part of the Due Diligence Materials. Summerville
        shall provide Landlord, on or before the Examination Date, with written notice
        identifying any Service Contracts which are not to be assumed. All Service
        Contracts not identified in such a notice shall be assumed by Tenants as
        to
        matters arising on or after the Commencement Date. Those Service Contracts
        which
        Summerville has identified as not to be assumed shall be terminated by Landlord,
        at its sole cost and expense, effect as of a date prior to the beginning
        of the
        Lease Term. Landlord shall assign to Tenant, at Closing, its rights under
        all
        other Service Contracts.


      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      5.      
Resident
        Deposits &
Resident Records.

       

      (a)           At
        Closing, Landlord shall pay to Tenant, in cash, all refundable move-in fees
        collected from Residents of the Facilities ("Resident Deposits"). A list
        of
        Resident Deposits as of the Effective Date is attached as Exhibit F hereto (and
        incorporated by reference herein). An updated list
        of Resident
Deposits for each Facility as of the Closing Date shall be-provided-to
        each–T-enant-atelosing. Landlord hereby represents and warrants to Tenant that
        Exhibit F contains a
        true, correct and complete list of all Residents that have paid a refundable
        move-in fee to Landlord as of the Effective Date.

       

      (b)            At
        Closing, Landlord shall deliver possession to Tenant at the Facilities of
        any
        and all records or written documents physically located at the Facilities
        and
        relating to Residents of the Facilities, including but not limited to, all
        contracts, applications, and correspondence relating to such
        Residents.

       

      6.      
Management
        Fee.

       

      (a)           Each
        Management Agreement shall provide for payment of a fee ("Management Fee")
        by
        the Tenant to the Management Company on a monthly basis, with the fee for
        each
        month to be payable during the following month, subject to subsection (b)
        and
        subsection (c) below.

       

      (b)           The
        Management Agreements shall provide that during any month, the use of Operating
        Cash Flow shall be in the following priorities for payment: (i) the first
        priority shall be payment of all charges of parties other than the Management
        Company and the Landlord for goods and services provided for the Facility
        ("Facility Expenses") subject to payment terms arranged by Tenant or Management
        Company in their sole discretion; (ii) subject to all Facility Expenses having
        been paid, the second priority shall be payment of Base Rent, Tax Escrow,
        Insurance Escrow, and Replacement Reserve Installment for each Facility as
        described in the Leases ("Lease Expenses"); provided, however, that the priority
        of Facility Expenses over Lease Expenses shall not operate as a waiver of
        any
        Default in payment of Lease Expenses; (iii) payment of any interest or principal
        owed by the Tenant to Summerville or an Affiliate of Summerville for repayment
        of a loan to the Tenant ("Loan Expenses") shall be subordinated to payment
        of
        Lease Expenses, i.e., Loan Expenses shall not be paid unless Lease Expenses
        have
        been paid in full.

       

      (c)             Facility
        Expenses which are the first priority use of Operating Cash Flow
        shall not include any purchase of goods or services from an Affiliate of
        Summerville, Apollo, or Granger Cobb for an amount in excess of fair market
        value or any payment to such parties other than for a bona fide purchase
        of
        goods or services. Tenants' use of Net Operating Cash Flow after satisfaction
        of
        Facility Expenses and Lease Expenses shall not be subject to any
        restriction.


      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (d)            Management
        Fees may be paid from proceeds of loans from Affiliates
        or Subsidiaries of Summerville, Apollo, or the Tenants, without regard to
        the
        sufficiency of Operating Cash Flow for payment of Management Fees; provided,
        however, that Management Fees shall not be paid for any month unless all
        Facility Expenses and Lease Expenses for such month have been paid.

       

      7.            Restriction
        Of Tenant
        Operations. None of the Tenants shall engage in any business other than
        operation of the Facility leased by such Tenant.

       

      8.            Monthly
        And Annual Reports.
Summerville and the Tenant shall have joint responsibility for providing
        Landlord with reports as described below, which reports shall be certified
        as
        true- and correct in all material respects.

       

      (a)            Monthly
        Financial
        Statements. Landlord shall be provided with reports
        ("Monthly Reports") for each Facility for each month within thirty days after
        the end of the month. Monthly Reports shall include unaudited Financial
        Statements (a Financial Statement, for purposes hereof, shall include an
        income
        statement, balance sheet as of the end of the month, and cash flow statement)
        of
        each Facility, in accordance with GAAP, together with additional information
        as
        follows:

      Total
        Resident Days during month.

      
        	
                 

              	
                (ii)

              	
                Resident
                  Census as of last day of month.

              


      

      
        	
                 

              	
                (iii)

              	
                For
                  any Resident Liability Claim asserted against the Facility for
                  an amount
                  in excess of $50,000, the name of the Resident and basis for the
                  claim.

              


      

      
        	
                 

              	
                (iv)

              	
                For
                  any judgment rendered against a Tenant in connection with a Resident
                  Liability Claim which has not been satisfied, the following: (1)
                  date of
                  judgment; (2) amount of judgment; (3) court in which judgment was
                  entered;
                  (4) available insurance for satisfaction of judgment; (5) available
                  liquid
                  net worth of Tenant which may be applied to satisfaction of judgment;
                  (6)
                  status of any appeal from such
                  judgment.

              


      

      
        	
                 

              	
                (v)

              	
                Results
                  of any inspections conducted pursuant to any ALF Licensing Law,
                  including
                  copy of any report by an agency having jurisdiction over the Facility
                  under such law and any response of the Facility to any such
                  report.

              


      

      
        	
              	
                (vi)

              	
                Any
                  need identified for capital expenditures to keep the condition
                  of the
                  Facility consistent with the standard required under the
                  Lease.

              


      

      
        	
              	
                (vii)

              	
                Management
                  Fee paid for such month, and amount of any Deferred Fees unpaid
                  for such
                  month or any preceding month.

              


      

      
        	
              	
                (viii)

              	
                Accounts
                  payable aging as of month-end (identifying the persons
                  owed, the goods/services for which such amount is owed, and the
                  number of
                  days, as of month end, that such debt has been
                  owed).

              


      


      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (b)           Consolidated
        Annual
        Financial Statement. Summerville shall cause the Tenants (if more than
        one) to operate with the same fiscal year (the fiscal year adopted by each
        Tenant is referred to hereafter as the "Fiscal Year"). On an annual basis
        during
        the Lease Term, Summerville and the Tenant shall deliver to Landlord, for
        each
        Fiscal Year, an annual consolidated Financial Statement (the "Consolidated
        Statement"), certified by the CEO and CFO of Summerville and the Tenant,
        including an income statement, balance sheet, and cash flow statement for
        each
        Facility individually and for the Facilities on a consolidated basis, in
        accordance with GAAP. The Consolidated Statement shall be presented within
        ninety (90) days after the end of the Fiscal Year, and shall reflect, for
        each
        Fiscal Year ending after the fifth Lease Year, the Consolidated Revenues
        and the
        Variable Rent calculated thereon.

       

      (c)            Audited
        Statement. On
        an annual basis during the Lease Term, Summerville shall deliver to Landlord
        a
        consolidated audited Financial Statement (the "Audited Statement"), with
        an
        opinion of a certified public accounting firm reasonably acceptable to Landlord
        (the "Auditors"), including an income statement, balance sheet, and cash
        flow
        statement, for Summerville and its subsidiaries. The Audited Statement shall
        be
        presented within one-hundred-twenty (120) days after the end of Summerville's
        fiscal year.

       

      9.    
Cooperation
        In
        Financing.

       

      (a)           Hobart.
Summerville
        and the Tenant acknowledge that the LaPorte and Niles Facilities are financed
        by
        a HUD-insured mortgage, and that Landlord intends to refinance the Hobart
        Facility by a HUD-insured mortgage under Section 232. Summerville and the
        Tenant
        agree to reasonably cooperate with Landlord in connection with this process,
        at
        no cost to Summerville or Tenant, and to sign the FHA certificate (disclosure
        of
        pending and anticipated Section 232 applications within 18-month period,
        per HUD
        Notice H 01-03) required for the Section 232 application for the refinancing
        of
        the Hobart Facility, without regard to any effect which such financing may
        have
        on other HUD/FHA financing of facilities operated by Summerville, the Tenant,
        or
        Affiliates thereof; provided, however, that in connection with the refinancing,
        Landlord shall cause the prospective Mortgagee of the HUD-insured loan, with
        all
        required authorization by HUD, to execute and deliver a SNDA to the Tenant
        of
        the Hobart Facility, prior to the granting of the new Mortgage.

       

      (b)            Elkhart.
Summerville
        acknowledges that Landlord intends to refinance the Elkhart Facility by a
        mortgage to be purchased by the Federal National Mortgage Association ("FNMA"
        or
        "Fannie Mae"). Summerville, the Management Company, and the Tenant of the
        Elkhart Facility shall reasonably cooperate with Landlord in connection with
        this process, at no cost to Summerville, the Management Company, or such
        Tenant;
        provided, however, that in connection with the refinancing, Landlord shall
        cause
        the prospective Mortgagee, with all required authorization by FNMA, to execute
        and deliver a SNDA to the Tenant of the Elkhart Facility, prior to the granting
        of the new Mortgage.


      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (c)            Other
        Refinancing.
Summerville and the Tenant also agree to reasonably
        cooperate with Lessors, at no cost to Summerville or Tenants, in connection
        with
        any other refinancing of any of the Facilities; provided, however, that in
        connection with any refinancing or other financing, Landlord shall procure
        each
        and every Mortgagee or holder of a deed of trust to execute and deliver a
        SNDA
        to the Tenant of the refinanced Facility, with the approval of HUD, Fannie
        Mae,
        or others as legally necessary for the SNDA to be effective to protect such
        Tenant's rights, prior to the granting of any new Mortgage.

       

      10.            Transfer
        Of Employees.
As of the Commencement Date, all Facility Employees
        shall cease to be employees of Lessors. Tenant shall offer employment to
        all
        active Facility Employees (as of the Commencement Date) on an "at-will" basis,
        subject to Tenant's policies and procedures (including those relating to
        the
        "introductory period"). To the extent requested by Tenant, Lessors shall
        use
        their good faith efforts to encourage Facility Employees to become employees
        of
        Tenant (Facility Employees who become employees of Tenant are referred to
        hereafter as "Transferred Employees"). Lessors hereby agree not to solicit,
        directly or indirectly, any Facility Employees to apply for a transfer or
        promotion to any Lessor facility or Lessor-affiliated facility for a one-year
        period following the Commencement Date. All personnel files of Transferred
        Employees of a Facility shall become the property of the Tenant of such Facility
        as of the Commencement Date.

       

      (a)            Payroll
        Administration.
On the Commencement Date, Lessors will cause Facility Employees working
        as of 12:01 am to "clock out" on the Facility time clock at that time, or
        shall
        cause a Facility Employee to run a time card report using the data processing
        equipment at the Facilities at such time; such data shall be used by Lessors
        to
        process payroll for the Facility Employees for the period ending on the
        Commencement Date.

       

      (b)            Terms
        Of Employment of
        Transferred Employees. Effective as of the Commencement Date, and subject
        to subsection (c) below, Tenants shall offer employment to the Facility
        Employees on terms which require each such employee to perform comparable
        services, in a comparable position and at substantially the same base salary
        as
        such employee enjoyed with the Facility prior to the Commencement Date;
        provided, however, Tenants shall not be bound by any previously existing
        bonus
        or commission plans. As to each of the Transferred Employees, Tenant shall
        recognize each such Employee's original hire date and shall continue to employ
        each such Employee for a period of no less than thirty (30) days following
        the
        Commencement Date unless the employment of such Employee is terminated in
        accordance with Tenant's personnel policies or as a result of such Employee's
        resignation.

       

      (c)            Employees
        on Leave of
        Absence or Medical Leave. For any Facility
        Employee on a leave of absence as of the Commencement Date ("LOA Employee"),
        Tenant shall offer employment, if and when they are able to return to work
        from
        such leave of absence, in a comparable position and at substantially the
        same
        base salary as such employee enjoyed with the Facility prior to the leave
        of
        absence, if such a position is available at such time. Lessors shall be
        responsible for any disability or workers' compensation benefits arising
        from
        events prior to the Commencement Date. A list of LOA Employees as
        of
        September 27, 2004 is attached as Schedule 10(c); an updated list shall be
        provided at Closing.


      
        
          
          

        

        
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      (d)            Paid
        Time Off.
Lessors shall calculate the accrued liability for paid time off,
        including vacation pay and sick pay (the "PTO") for the Transferred Employees.
        Lessors shall pay Facility Employees for any amounts in excess of 80 hours
        per
        employee and shall pay Tenant the remaining PTO amounts for Transferred
        Employees on the Commencement Date. Lessors shall, and hereby agree to,
        indemnify Tenant against any damages, costs, expenses, liabilities, obligations
        and claims arising out of any dispute in connection with Lessor's calculation
        of
        the PTO.

       

      (e)            WARN
        Act. The parties
        acknowledge and agree that the provisions of this Section are designed solely
        to
        ensure that Lessors are not required to give notice to the Facility Employees
        of
        the "closure" of a Facility under the Worker Adjustment and Retraining
        Notification Act (the "WARN Act") or under any comparable Indiana or Michigan
        law. Accordingly, Tenants agree to indemnify, defend and hold harmless Lessors
        from any costs that Lessors may incur under the WARN Act or under comparable
        state law in the event of a violation by Tenants of its obligations thereunder,
        including a violation that results from allegations that Tenants constructively
        terminated the Facility Employees as a result of the terms and conditions
        of
        employment offered to the Transferred Employees by Tenants.

       

      (f)    
Tenant
        to Provide Group
        Health Plan.

       

      (i)            Lessors
        to Provide Required
        COBRA Coverage. Lessors shall offer and provide, as appropriate, group
        health plan continuation coverage pursuant to the requirements of Section
        601,
        et seq. of ERISA and Section 498B of the Internal Revenue Code ("COBRA")
        to all
        of the Facility Employees to whom Lessors are required to offer the same
        under
        applicable law as of the Commencement Date. Lessors acknowledges and agree
        that
        Tenants are not assuming any of Lessors' obligations to Facility Employees
        under
        COBRA or otherwise, except as specifically provided in this
        Section.

       

      (ii)            Tenant
        to Provide Health
        Plan. As of the Commencement Date, Tenants shall offer participation in
        a
        group health plan (as defined for purposes of Internal Revenue Code Section
        4980B) established and maintained by Tenant (the "New Plan") for the benefit
        of
        Tenant's employees and their dependents ("Covered Employees") to all Transferred
        Employees who: (i) participate as of the Commencement Date in group health
        insurance coverage sponsored by Lessors, and (ii) become employees of Tenant.
        All such Transferred Employees shall be eligible for coverage under the New
        Plan. Those Transferred Employees who accept such coverage shall become Covered
        Employees and shall be covered under the New Plan without a waiting period
        and
        without regard to any pre-existing condition unless (A) they are under a
        waiting
        period with Lessors at the time of the Commencement Date, in which case they
        shall be required to complete their waiting period while under the New Plan
        or
        (B) they were subject to a pre-existing condition exclusion while under Lessors'
        group health plan, in which case they shall be subject to the same exclusion
        under the New Plan, which exclusion shall, if applicable, be subject to the
        same
        time limitation while in Tenant's employ as was applicable thereto while
        the
        Covered Employees were in Lessors' employ, with the time limit calculated
        from
        the date the same commenced while in Lessors' employ. The parties acknowledge
        and agree that it is the intent of this provision that Lessors shall not
        be
        required to provide continued health coverage under ERISA or COBRA to any
        of the
        Transferred Employees who become employees of Tenant or to any qualified
        beneficiary thereof (as defined for purposes of COBRA).


      
        
          
          

        

        
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      (g)            Third
        Party Rights.
Nothing in this Agreement shall create any rights
        in
        favor of any person not a party hereto, including the Facility Employees,
        or
        constitute an employment agreement or condition of employment for any employee
        of Lessors.

       

      11.           Transfer
        Upon Expiration Of
        Agreement. Upon termination of the Lease Term, (i) Tenant shall transfer
        possession of the Facilities to Landlord or Landlord's nominee on equivalent
        terms as provided herein and in the Leases; (ii) the prorations shall be
        made on
        equivalent terms as provided in Section 2(d)2 and 2(d)(3) of this Agreement;
        and
        (iii) the Employees shall be dealt with on equivalent terms as set forth
        in
        Section 10 of this Agreement.

       

      12.            Trade
        Names. Tenant
        shall operate the Facilities, during the Lease Term, using trade names retaining
        the "Brentwood" name which has been used by Lessors, together with a description
        of the type of accommodations/care provided by the Facility (e.g., "assisted
        living" for Hobart, LaPorte and Niles, "senior living apartments" for Elkhart),
        but may include reference to the association of the Facilities with Summerville,
        such as "a Summerville Community" or a variation thereof.

       

      13.    
Non-Compete.

       

      (a)            Garatoni
        agrees not to compete, directly or indirectly, with any Facility during the
        Lease Term. For purposes of this Section 13, to "compete" with a Facility
        means
        participating in the provision of accommodations and care predominantly for
        persons age 62 or older within a five-mile radius of such Facility;
        "participating" shall mean being involved with a competing establishment
        by
        ownership, management, control or contract services.

       

      (b)            Summerville
        agrees, and shall cause the Tenant to agree, not to compete, directly or
        indirectly, with any Facility during the Lease Term or for two (2) years
        thereafter, without Landlord's consent.

       

      14.            Assignment
        Of Management
        Agreement. The Management Agreements shall
        not
        be assigned to a party that is not an Authorized Assignee as defined in the
        Leases, i.e., an Affiliate of Granger Cobb or a Subsidiary of Summerville,
        without Landlord's prior written consent, which consent Landlord may withhold
        in
        its discretion, nor shall the Tenant enter into an agreement for management
        services with any party that is not an Authorized Assignee, without Landlord's
        prior written consent, which consent Landlord may withhold in its discretion.
        This Agreement and/or the Leases may not be assigned without Landlord's consent
        except as provided by Section 22 of the Leases. Notwithstanding the above,
        the
        Management Agreements may be assigned to a Successor Manager in connection
        with
        a transfer of ownership resulting from a mortgage of Tenant's leasehold,
        pursuant to the terms of Section 22 of the Leases.


      
        
          
          

        

        
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      15.            Recovery
        In Event Of
        Bankruptcy. To the extent permitted by law, in the event of bankruptcy of
        any Tenant or Summerville, Landlord shall be entitled to immediate recovery
        of
        possession of the Facilities. The parties agree that the value of the Facilities
        may decline rapidly if any Tenant or Summerville should become insolvent
        and
        that Landlord shall be entitled to immediate relief from stay in the event
        of
        such bankruptcy proceedings.

       

      16.            Landlord's
        Representations
        And Warranties. Lessors hereby represent and warrant to Summerville and
        Lessee that the statements set forth in this Section 16 are true and correct
        as
        of the Effective Date, as of the Commencement Date and at all times during
        the
        term of the Leases.

       

      (a)           Organization
        and Authority
        of Lessors. Each Lessor is a limited liability company duly organized,
        validly existing and in good standing under the laws of the State of Indiana.
        Lessors have full power and authority to enter into and perform their
        obligations under this Agreement and all other agreements and instruments
        to be
        executed by it pursuant to this Agreement. All appropriate action has been
        taken
        to authorize the individual signing this Agreement on behalf of Lessors as
        the
        lawful and legally binding act of the Lessors. Lessors have the power and
        authority to own the Facilities and assets now owned by them and to conduct
        the
        business presently being conducted by them and as currently proposed to be
        conducted. There are no other agreements of Lessor granting any third party
        the
        right to use or occupy any part of the Facilities (except the rights of the
        Residents of the Facilities and licenses for use of portions of the Facilities
        used for beauty shops and exercise facilities, which licenses have been provided
        to Summerville) and no person, firm or entity other than Lessee has any
        ownership interest or option or right of first refusal to acquire any ownership
        interest in the Facilities or any building or improvements thereon.

       

      (b)            Binding
        Effect. This
        Agreement, when executed by Lessors' representative designated below, shall
        be a
        valid and binding obligation of Lessors.

       

      (c)            Condition
        of Facilities.
To the best of Lessors' knowledge, there are
        no
        defects on the Facilities, including, without limitation, structural defects,
        mold, environmental conditions, or any conditions that might negatively impact
        the operations of the Facilities.


      
        
          
          

        

        
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      (d)            Absence
        of Undisclosed
        Liabilities. To the best of their knowledge, Lessors, as of the date of
        the most recent financial statements provided to Summerville, had no debts,
        liabilities or obligations (whether absolute, accrued, contingent or otherwise)
        of any material nature whatsoever arising out of or relating to the acquisition,
        development, business or operations of Lessors at the Facilities except as
        reflected in such financial statements provided to Summerville by Landlord
        or as
        listed on Exhibit G
        attached hereto.

       

      (e)            Absence
        of Changes or
        Events. Except as specifically set forth in the financial statements or
        other documents delivered in the Due Diligence Materials or as disclosed
        in this
        Agreement, Lessors have not:

       

      (i)           incurred
        any obligation or liability, absolute, accrued, contingent or otherwise,
        whether
        due or to become due, except current liabilities for trade or business
        obligations incurred in connection with the purchase or sale of goods or
        services in the ordinary course of business and consistent with its prior
        practice, none of which liabilities, in any case or in the aggregate, has
        had or
        may have a material adverse impact on the business, liabilities or financial
        condition of the Facilities;

       

      (ii)           mortgaged,
        pledged or subjected to lien, charge, security interest or any other encumbrance
        or restriction on the Facilities, its business or assets, tangible or intangible
        or amended any similar document currently in effect with respect to such
        matters, other than the HUD-insured first mortgages as to the LaPorte and
        Niles
        Facilities and the National City Bank first mortgages as to the Hobart and
        Elkhart Facilities;

       

      (iii)            sold,
        transferred, leased to others or otherwise disposed of any material asset,
        or
        canceled or compromised any material debt or claim, or waived or released
        any
        right of substantial value;

       

      (iv)            received
        any notice of termination of any contract, lease or other agreement or suffered
        any damage, destruction or loss (whether or not covered by insurance) which,
        in
        any case or in the aggregate, has had or may have a material adverse impact
        on
        the assets, operations or prospects of the Facilities;

       

      (v)          encountered
        any labor union organizing activity, had any actual or threatened employee
        strikes, work stoppages, slowdowns or lockouts, or had any material change
        in
        its relations with its employees, customers or suppliers;

       

      (vi)          instituted,
        settled or agreed to settle any litigation, action or proceeding before any
        court or governmental body relating to the Facilities;

       

      (vii)        
        suffered any change, event or condition which, in any case or in the aggregate,
        has had or may have a material adverse impact on the Facilities' condition
        (financial or otherwise), properties, assets, liabilities, operations or
        prospects, including, without limitation, any change in the Facilities'
        revenues, costs, or relations with its employees, residents, or suppliers;
        or


      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (ix)           
        entered into any agreement or made any commitment to take any of the types
        of
        action described in subparagraphs (i) through (vii) above.

       

      (f)            Litigation;
        Threatened
        Claims. There is no claim, legal action, suit,
        arbitration, or other legal or administrative proceeding or governmental
        investigation, nor any order, decree or judgment in progress, pending or
        in
        effect, or threatened, against or relating to the Facilities, and Lessors
        do not
        know or have reason to be aware of any basis for the same. No citations,
        fines
        or penalties have been asserted against Lessors or the Facilities, under
        any
        federal, state or local law.

       

      (g)            Compliance
        with Laws and
        Other Instruments. Lessors have complied with all existing laws, rules,
        regulations, ordinances, licenses, permits, orders, judgments and decrees
        applicable to the Premises. Exhibit H hereto contains
        a
        complete and correct list of any licenses required under any ALF Licensing
        Law
        applicable to the Facilities and all other permits, licenses, and other
        governmental authorizations and approvals which are material to the operation
        of
        the Facilities, all of which have been duly made or obtained and are in full
        force and effect without pending claims of non­compliance and there are no
        proceedings pending or threatened which may result in the denial, revocation,
        cancellation or suspension or any adverse modification, of any of the foregoing.
        Neither the ownership nor use of the Facilities nor the conduct of Lessors'
        business conflicts with the rights of any other person, firm or corporation
        or
        violates, or with or without the giving of notice or the passage of time,
        or
        both, will violate, conflict with or result in a default, right to accelerate
        or
        loss of rights under, any terms or provisions of any lien, lease, agreement,
        law, or regulation, or any order, judgment or decree to which Lessors are
        a
        party or by which they may be bound or affected.

       

      (h)           Title
        to and Condition of
        Facilities; Leases. Lessors have good and marketable
        title to the Facilities in fee simple, which title is subject to no leases,
        subleases, agreements, encumbrances, liens or defects in title other than
        (a)
        licenses authorizing use of portions of the Facilities for beauty shops and
        exercise facilities, copies of which subleases have been provided to
        Summerville; and (b) those encumbrances disclosed in Exhibit I attached hereto,
        which consists of the Schedule B to the most recent title policies obtained
        by
        Landlord with respect to each Facility. The Facilities are in good operating
        condition and there are no restrictive covenants which will prevent Lessees
        from
        conducting their business on the Facilities and there are no known defects
        that
        could have a material adverse impact on Lessees' businesses. The Personal
        Property is in good condition and is sufficient to operate the Facilities
        consistent with applicable ALF Licensing Laws and the ordinary course of
        Lessors' business as of the date of this Agreement and the Closing Date.
        At
        Closing, Lessors will provide, at no cost to Lessees or Summerville, a title
        report as to each Facility, reflecting a title search with an effective date
        of
        three (3) Business Days prior to the Closing Date, confirming that the Lessors'
        title to the Facilities is in accordance with the covenants made by the Lessors
        in this Section 16(h).


      
        
          
          

        

        
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      (i)            Environmental
        Matters.
To the best of Lessors' knowledge, Lessors
        (including their employees and agents) (i) have obtained all applicable permits,
        licenses and other authorization which are required under federal, state
        or
        local laws relating to pollution or protection of the environment, including
        laws relating to emissions, discharges, releases or threatened releases of
        "Hazardous Materials" (defined below) or otherwise relating to the manufacture,
        processing, distribution, use, treatment, storage, disposal, transport, or
        handling of Hazardous Materials; (ii) are in compliance with all terms and
        conditions of such required permits, licenses and authorizations, and also
        are
        in compliance with all other limitations, restrictions, conditions, standards,
        prohibitions, requirements, obligations, schedules and timetables contained
        in
        such laws or contained in any regulation, code, plan, order, decree, judgment,
        notice or demand letter issued, entered, promulgated or approved thereunder;
        (iii) as the date hereof, are not aware of and have not received notice of
        any
        event, condition, circumstances, activity, practice, incident, action or
        plan
        which is reasonably likely to interfere or prevent continued compliance with
        the
        foregoing by Lessors, or which would give rise to any common law or statutory
        liability, or otherwise form the basis of any claim, action, suit or proceeding,
        based on or resulting from Lessors' (or any of its employees or agent's)
        manufacture, processing, distribution, use, treatment, storage, disposal,
        transport, or handling, or the emission, discharge or release into the
        environment, of any pollutant, contaminant, or hazardous or toxic material
        or
        waste; and (iv) have taken all actions necessary under applicable requirements
        of federal, state or local laws, rules or regulations to register any products
        or materials required to be registered by Lessors (or any of its employees
        or
        agents) under any such applicable requirements.

       

      (A)           To
        the best of Lessors' knowledge, the Facilities do not contain, and there
        is not
        located on or about the Facilities, any "Hazardous Materials." No part of
        the
        Facilities are currently used, or have previously been used, for the use,
        storage, treatment, production, manufacture, generation, transportation,
        release
        or disposal of Hazardous Materials. Lessors have not received any complaint,
        order, summons, citation, notice of violation, directive letter or other
        communication from any governmental authority or other person with regard
        to air
        omissions, water discharges, noise emissions or Hazardous Materials, or any
        other environmental, health or safety matters affecting the Facilities, or
        any
        portion thereof. Lessors have complied with all environmental laws affecting
        the
        Facilities, including notification requirements relating to the release of
        Hazardous Materials. Lessors have furnished to Summerville copies of the
        most
        recent "phase I" environmental reports as to the Facilities.

       

      (B)            To
        the best of Lessors' knowledge, there are no claims pending or threatened,
        and
        Lessors know of no basis for any such claim, against Lessors or the Facilities,
        or any portion thereof, by any governmental authority or other person relating
        to any Hazardous Material or pursuant to any environmental law, whether for
        enforcement, clean-up, removal, remediation, assertion of liability, cost
        recovery, compensation, contribution, recovery of damages, injunction or
        other
        equitable relief or otherwise.


      
        
          
          

        

        
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      (C)           Lessors
        have not knowingly undertaken, permitted, authorized or suffered the presence
        or
        suspected presence, use, manufacture, handling, generation, storage, treatment,
        discharge, release, burial or disposal on, under or about the Facilities
        of any
        Hazardous Material, except in compliance with environmental laws, or the
        transportation to or from the Facilities, of any Hazardous Material in violation
        of any environmental laws.

       

      (D)           With
        the exception of an emergency generator, there are no oil burners, incinerators,
        furnaces, fuel-burning devices or other sources of air pollution at the
        Facilities and there is no fuel (other than for an emergency generator) stored
        upon the Facilities.

       

      (E)    For
        purposes
        of this Section 16(i), "Hazardous Material" shall mean any flammable, explosive,
        radioactive or reactive materials, any asbestos (whether friable or
        non-friable), any pollutants, contaminants or other hazardous, dangerous
        or
        toxic chemicals, materials or substances, any petroleum products or substances
        or compounds containing petroleum products, including gasoline, diesel fuel
        and
        oil, any polychlorinated biphenyls or substances or compounds containing
        polychlorinated biphenyls, and any other material or substance defined as
        a
        "hazardous substance," "Hazardous material," "hazardous waste," "toxic
        materials," "contamination," and/or "pollution" within the meaning of any
        federal, state or local law, ordinance, rule, regulation, requirement,
        guideline, code, resolution, order or decree (including consent decrees and
        administrative orders) in effect on the Effective Date, the Commencement
        Date
        and during the term of the Leases which regulates the use, generation, handling,
        storage, treatment, transportation, decontamination, clean-up, removal,
        encapsulation, enclosure, abatement or disposal of any Hazardous Material,
        including the Comprehensive Environmental Response, Compensation and Liability
        Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery
        Act, 42 U.S.C. Sections 6901, et seq., the Toxic Substance Control Act, 15
        U.S.C. Sections 2601, et seq., the Clean Water Act, 33 U.S.C. Sections 1251
        et
        seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802,
        their
        state analogues, and any other federal, state or local statute, law, ordinance,
        resolution, code, rule, regulation, order or decree regulating, relating
        to, or
        imposing liability or standards of conduct concerning any Hazardous
        Materials.

       

      Due
        Diligence Materials.
Each of the Due Diligence Materials are complete and correct. Financial
        statements presented to Lessees have been prepared in accordance with GAAP
        consistently applied and they fairly present the financial condition of the
        Facilities at the respective dates and the results of its operations for
        the
        periods covered thereby.

       

      (k)    Brokers,
        Finders, etc.
Other than Ziegler Capital Markets Group ("Ziegler"), all negotiations
        relating to this Agreement, the Leases and the transactions contemplated
        hereby
        have been carried on without the intervention of any person acting on behalf
        of
        the Lessors in such manner as to give rise to any claim against Lessee for
        any
        brokerage or finder's commission, fee or similar compensation. Landlord shall
        be
        responsible for all compensation of Ziegler in connection with the
        Transaction.


      
        
          
          

        

        
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      17.            Summerville's
        Representations And Warranties. Summerville represents and
        warrants to Landlord as follows:

       

      (a)            Organization
        and Standing.
Summerville is a duly existing corporation and is has the legal power
        to
        enter into this Agreement. Tenant shall as of the Commencement Date be duly
        existing and authorized to conduct business in the states of Michigan and
        Indiana.

       

      (b)            Authority.
        Summerville has the authority to make, execute, deliver and perform
        this
        Agreement, and all actions contemplated by this Agreement have been (or shall
        as
        of the Commencement Date have been) duly authorized by all necessary action
        by
        Summerville and Tenant.

       

      (c)            Binding
        Effect. This
        Agreement, when executed by Summerville, shall
        constitute the valid and binding obligation of Summerville.

       

      18.           Incorporation
        Of Lease
        Representations And Warranties. Landlord represents
        and warrants to Summerville the representations and warranties of Landlord
        under
        Section 30 of the Leases. The Tenant representations and warranties to Landlord
        as stated in Section 31 of the Leases are incorporated herein as part of
        this
        Agreement.

       

      19.    
Interim
        Covenants.

       

      (a)           Authorizations.
        Lessors and Lessee, as promptly as practicable after the Effective
        Date,
        at no cost to Lessors, shall (i) make, or cause to be made, all such filings
        and
        submissions under laws, rules and regulations applicable to each of them,
        respectively, and their respective Affiliates as may be required to consummate
        the transactions contemplated by this Agreement and the Leases, and (ii)
        use
        commercially reasonable efforts and work cooperatively to obtain, or cause
        to be
        obtained, all government approvals and other authorizations, approvals, consents
        and waivers from all persons, necessary to be obtained by it, or its affiliates,
        in order for it to consummate such transactions. Lessors and Lessee will
        coordinate and cooperate with one another in exchanging such information
        and
        supplying such reasonable assistance as may be reasonably requested by each
        in
        connection with the foregoing.

       

      (b)            Operations
        Pending
        Transaction. Prior to the Closing Date, Lessors shall operate the
        Facilities in accordance with its normal and customary business practices,
        including the continued marketing and admission of Residents, management
        of
        Facility Employees, and compliance with governmental regulations. Lessors
        shall
        use commercially reasonable efforts to transition the Facilities to Tenant
        in
        substantially the same condition as exists at the Facilities as of the Effective
        Date.


      
        
          
          

        

        
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      (c)           No
        Publicity. Except
        as required by applicable law, neither Lessors or Lessee shall make any public
        announcements with respect to this Agreement or the Leases or the transactions
        contemplated hereby without the express prior written consent of the other
        party. Each party shall hold in confidence, and use their best efforts to
        have
        all of their officers, directors, employees, trustees and agents hold in
        confidence, the terms of this Agreement and the Leases and the transactions
        contemplated hereby.

       

      (d)            Access
        to Properties, Books
        and Records. Prior to the Commencement Date, Lessors shall afford to
        Lessee full access to the Facilities and to the Facilities' books and records
        under Lessors' control or custody during regular business hours upon reasonable
        notice. Until the Commencement Date, Lessors shall cause their representatives
        to furnish to Lessee updated monthly financial statements including a statement
        of income, balance sheet, rent roster, and a statement of changes in cash
        flow
        and such additional financial and operating data and other information
        (including accountants work papers) relating to Lessors' business, the
        Facilities and financial condition as shall be reasonably requested from
        time to
        time by Lessee. All such information disclosed in connection with this Section
        shall be kept confidential by Lessee unless such disclosure is required by
        applicable law, regulation or court order.

       

      (e)            Further
        Assurances.
After the Commencement Date, and for no further
        consideration, Lessors shall (i) perform all acts (including, without
        limitation, the use of Lessors' commercially reasonable efforts to enable
        Lessee
        to accomplish transfer of licenses, registrations, permits, approvals and
        the
        like as contemplated by this Agreement and the Leases) and execute, acknowledge
        and deliver such assignments, transfers, consents and other documents and
        instruments as Lessee may reasonably request, in each case, to vest in Lessee
        and protect Lessee's interest in, and enjoyment of, the Facilities intended
        to
        be assigned and transferred to Lessee pursuant to this Agreement and the
        Leases,
        (ii) provide Lessee with such information as Lessee reasonably requires related
        to the business of Lessors and the Facilities, and (iii) file such documents
        as
        may be necessary so as to permit Lessee to use Lessors' business and/or
        Facilities' names for its operation of the Facilities.

       

      20.           Conditions
        Precedent To
        Summerville's Obligations. Unless waived by Summerville,
        the obligations of Summerville to consummate the transactions contemplated
        by
        this Agreement is subject to the satisfaction of each of the following
        conditions:

       

      (a)           Representations
        and
        Warranties. The representations and warranties of Lessors contained in
        this Agreement shall be true and correct in all material respects at and
        as of
        the Commencement Date as though such representations and warranties were
        made at
        and as of the Commencement Date. Lessors shall deliver a certification at
        Closing confirming the accuracy of the representations and warranties as
        of the
        Closing Date.

       

      (b)            Licenses.
The
        Tenants
        for the Hobart, Niles and LaPorte Facilities shall have obtained the necessary
        Licenses to operate such Facilities, or written notice from the licensing
        authority having jurisdiction over such a Facility that such License shall
        be
        effective upon Tenant's acquisition of control of the Facility or the parties
        shall have entered into an interim management agreement.


      
        
          
          

        

        
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      (c)           Waiver
        Of Right To
        Terminate. Summerville
        shall not have given notice of termination of this Agreement prior to the
        end of
        the Due Diligence Period.

       

      (d)           Performance
        Of
        Covenants.
Lessors
        shall have performed or complied in all material respects with
        their agreements and conditions required by this Agreement to be performed
        or
        complied with prior to or on the Commencement Date.

       

      (e)            Lender
        Approvals and SNDA.
Lender Approval shall have been obtained
        from each Mortgagee of a Facility as described in Section 2 above, and an
        SNDA
        shall have been executed and delivered to Tenants for each Mortgage applicable
        to a Facility. The approval of HUD as necessary to make the SNDAs as to the
        two
        Facilities financed by HUD-insured Mortgages (Niles and LaPorte) legally
        effective, as referenced in Section 2(b) above, shall have been
        obtained.

       

      21.    
Conditions
        Precedent To
        Landlord's Obligations.

       

      (a)           Representations
        and
        Warranties. The
        representations and warranties of Summerville contained in this Agreement
        shall
        be true and correct in all material respects at and as of the Commencement
        Date
        as though such representations and warranties were made at and as of the
        Commencement Date.

       

      (b)           Performance
        of
        Covenants. Summerville
        shall have performed or complied in all material respects with its agreements
        and conditions required by this Agreement to be performed or complied with
        prior
        to or on the Commencement Date.

       

      (c)            Lender
        Approvals.
Lender Approval shall have been obtained from each
        Mortgagee of a Facility as described in Section 2 above.

       

      22.    Termination

       

      (a)           Termination
        for Cause or By
        Mutual Consent. This
        Agreement
        may be terminated at any time at or prior to the Closing by either party,
        other
        than by Summerville during the Due Diligence Period as provided in Section
        2
        above, only upon the following conditions: (i) a material breach by a party
        has
        not been cured within ten business days of receipt of written notice of default;
        (ii) by the mutual consent of Summerville and Landlord.

       

      (b)           Effect
        of
        Termination. If
        a
        non-breaching party terminates this Agreement pursuant to Section 22(a)(i),
        such
        termination shall not affect the non-breaching party's right to
        damages.


      
        
          
          

        

        
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      23.            Indemnification.

       

      (a)            Indemnification
        by
        Summerville. Summerville shall indemnify and
        defend Landlord and hold it harmless against and with respect to any and
        all
        damage, loss, liability, deficiency, cost and expense (including without
        limitation, reasonable attorney fees and expenses) ("Loss") resulting
        from:

       

      (i)            any
        inaccuracy in any representation or certification, or breach of any warranty
        made by Summerville in this Agreement;

       

      (ii)            breach
        of any covenant or undertaking made by Summerville in this
        Agreement.

       

      (b)            Indemnification
        by Tenant.
Tenant shall indemnify Landlord for liabilities
        arising after the Commencement Date pursuant to Section 32.2 of the Leases.
        Except as expressly set forth in this Agreement or the Leases, Tenant shall
        not
        assume or be responsible to pay, perform or discharge any obligations,
        liabilities, contracts or commitments of Landlord of any kind or nature
        whatsoever.

       

      (c)            Indemnification
        by Landlord.
Landlord shall indemnify and defend
        Summerville and the Tenants and hold them harmless against and with respect
        to
        any and all Loss resulting from:

       

      (i)            any
        inaccuracy in any representation or certification, or breach of any warranty
        made by Landlord in this Agreement;

       

      (ii)            the
        breach of any covenant or undertaking made by Landlord in this
        Agreement;

       

      (iii)           any
        damages, costs, expenses, liabilities, obligations and claims
        of
        any kind or nature, whether arising in contract or tort, at law or in equity,
        or
        otherwise, from or arising out of or in connection with the management and
        operation of the Facilities prior to the Commencement Date, including, but
        not
        limited to, (i) bodily injury or property damage occurring within or about
        the
        Facilities prior to the Commencement Date, (ii) labor disputes, including
        unfair
        labor practice allegations, from acts or occurrences prior to the Commencement
        Date, (iii) accounts payable with respect to goods or services provided to
        the
        Facilities prior to the Commencement Date and which have not been assumed
        by
        Summerville or Tenant under this Agreement, and (iv) claims made by Tenant
        against Landlord with respect to Landlord's indemnification obligations under
        this Agreement, including without limitation claims relating to civil monetary
        penalties relating to the period prior to the Commencement Date.

       

      (d)             Limitations
        on
        Indemnification. Each party's liability under this Section
        23 shall be limited to actual damages, and no party shall be liable to the
        other
        party for special, consequential, incidental, punitive, extra-contractual,
        bad
        faith, exemplary or other damages, fines or penalties, unless such damages,
        fines or penalties are asserted or imposed by a government or private third
        party, in which event, such damages, fines or penalties shall be deemed actual
        damages.


      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      24.     
General
        Provisions.

       

      (a)           Further
        Assurances. Each
        of the
        parties hereto agrees to execute and deliver any and all further agreements,
        documents or instruments necessary to effectuate this Agreement.

       

      (b)            Payment
        of Expenses.
Each party hereto shall bear its own legal, accounting and other expenses
        incurred in connection with the preparation and negotiation of this Agreement
        and the consummation of the transaction contemplated hereby, whether or not
        the
        transaction is consummated.

       

      (c)            Entire
        Agreement. This
        Agreement,
        together with the other agreements referred to herein, constitute the entire
        understanding between the parties with respect to the subject matter hereof,
        superseding all negotiations, prior discussions and preliminary
        agreements.

       

      (d)           Amendment/Waiver.
        This Agreement may not be modified or amended except in writing signed
        by
        the parties hereto. No waiver of any term, provision or condition of this
        Agreement in any one or more instances, shall be deemed to be or be construed
        as
        a further or continuing waiver of any such term, provision or condition of
        this
        Agreement. No failure to act shall be construed as a waiver of any term,
        provision, condition or rights granted hereunder.


      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      (e)            Notices.
All
        notices
        to be given by either party to this Agreement to the other party hereto shall
        be
        in accordance with Section 25 of the Leases.

       

      Joint
        Venture; Third Party
        Beneficiaries. Nothing
        contained herein shall be construed as forming a joint venture or partnership
        between the parties hereto with respect to the subject matter hereof. The
        parties hereto do not intend that any third party shall have any rights under
        this Agreement.

       

      (g)           Arbitration. The
        provisions
        of Section 43 of the Leases as to arbitration and dispute resolution are
        incorporated herein as part of this Agreement.

       

      (h)            Governing
        Law. This
        Agreement
        shall be governed by the laws of the State of Indiana.

       

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        In
          witness whereof, the parties have executed this Agreement as set forth
          below.

      

      


      
        	
                Summerville
                  Senior Living,
                  Inc.

              	 	
                Elkhart
                  Retirement
                  L.L.C.

              
	 	 	 	 	 
	
                By:

              	 	 	
                By:

              	
                /s/
                  Steven L. Garatoni

              
	
                Name:

              	 	 	
                Name:
                  Steven L. Garatoni

              
	
                Title:

              	 	 	
                Title:
                  Manager/Sole Member

              
	
                Date:
                  October 1, 2004

              	 	
                Date:
                  October 1, 2004

              
	 	 	 	 	 
	 	 	 	 	 
	
                Niles
                  Retirement
                  L.L.C.

              	 	
                Hobart
                  Retirement
                  L.L.C.

              
	 	 	 	 	 
	
                By:

              	
                /s/
                  Steven L. Garatoni

              	 	
                By:

              	
                /s/
                  Steven L. Garatoni

              
	
                Name:

              	
                Steven L.
                  Garatoni

              	 	
                Name:
                  Steven L. Garatoni

              
	
                Title:

              	
                Manager/Sole
                  Member

              	 	
                Title:
                  Manager/Sole Member

              
	
                Date:

              	
                October
                  1, 2004

              	 	
                Date:
                  October 1, 2004

              
	 	 	 	 	 
	 	 	 	 	 
	
                /s/
Steven L.
                  Garatoni

              	 	
                LaPorte
                  Retirement
                  L.L.C.

              
	
                STEVEN L.
                  GARATONI

              	 	 	 
	 	 	 	
                By:

              	
                /s/
                  Steven L. Garatoni

              
	
                Date:
                  October 1, 2004

              	 	
                Name:
                  Steven L. Garatoni

              
	 	 	 	
                Title:
                  Manager/Sole Member

              
	 	 	 	
                Date:
                  October 1, 2004

              


      

      
        


      

       

    

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