**Exhibit2.8**

 

**PURCHASE AND SALE AGREEMENT**

 

BY AND AMONG

 

**FIVE STAR QUALITY CARE, INC.,**

AS PURCHASER,

 

and

 

**FRANCISCAN MANOR ASSOCIATES, LLC,**

**MUIRFIELD ASSOCIATES, LLC,**

**PRESTWICKE ASSOCIATES, LLC,**

**ROYAL ABERDEEN ASSOCIATES, LLC,**

**TROON ASSOCIATES, LLC,**and

**TURNBERRY ASSOCIATES, LLC**AS SELLER

 

___________________________

 

JANUARY 21, 2005

 

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Table of Contents

 
| SECTION I.   DEFINITIONS                                                  |   |
|--------------------------------------------------------------------------------|--------|
| 1.1.   “Agreement”                                              |   |
| 1.2.   “Assigned Assets”                                        |   |
| 1.3.   “Broker”                                                 |   |
| 1.4.   “Business Day”                                           |   |
| 1.5.   “Closing”                                                |   |
| 1.6.   “Closing Date”                                           |   |
| 1.7.   “Code”                                                   |   |
| 1.8.   “Contracts”                                              |   |
| 1.9.   “Deposit”                                                |   |
| 1.10.   “ERISA Affiliate”                                       |   |
| 1.11.   “Escrow Agent”                                          |   |
| 1.12.   “Employee Benefit Plan”                                 |   |
| 1.13.   “ERISA”                                                 |   |
| 1.14.   “FF&E”                                              |   |
| 1.15.   “Facility”                                              |   |
| 1.16.   “Files and Records”                                     |   |
| 1.17.   “GAAP”                                                  |   |
| 1.18.   “Gordon”                                                |   |
| 1.19.   “Healthcare Licenses”                                   |   |
| 1.20.   “Improvements”                                          |   |
| 1.21.   “Indemnification Claim”                                 |   |
| 1.22.   “Indemnified Parties” and “Indemnified Party” |   |
| 1.23.   “Inspection Period”                                     |   |
| 1.24.   “Intangible Property”                                   |   |
| 1.25.   “Intellectual Property”                                 |   |
| 1.26.   “Inventory”                                             |   |
| 1.27.   “Knowledge”                                             |   |
| 1.28.   “Land”                                                  |   |
| 1.29.   “Leases”                                                |   |
| 1.30.   “Licenses and Permits”                                  |   |
| 1.31.   “Objection Notice”                                      |   |
| 1.32.   “Other Personal Property”                               |   |
| 1.33.   “Payable Holdback Amount”                               |   |
| 1.34.   “Permitted Exceptions”                                  |   |
| 1.35.   “Person”                                                |   |
| 1.36.   “Property”                                              |   |
| 1.37.   “Purchase Price”                                        |   |
| 1.38.   “Purchaser”                                             |   |
| 1.39.   “Purchaser Claims”                                      |   |
| 1.40.   “Resident Agreements”                                   |   |
| 1.41.   “Resident”                                              |   |

 

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| 1.42.   “Resident Deposit”                                 |   |
|---------------------------------------------------------------------------|--------|
| 1.43.   “Seller” and “Sellers”                   |   |
| 1.44.   “Seller Benefit Arrangement”                       |   |
| 1.45.   “Seller Employee”                                  |   |
| 1.46.   “Seller Employee Benefit Plan”                     |   |
| 1.47.   “Seller Financial Statements”                      |   |
| 1.48.   “Subsidiaries”                                     |   |
| 1.49.   “Survey”                                           |   |
| 1.50.   “Tenant”                                           |   |
| 1.51.   “Title Commitment”                                 |   |
| 1.52.   “Title Company”                                    |   |
| 1.53.   “Title Policy”                                     |   |
| 1.54.   “Trade Payables”                                   |   |
| 1.55.   “Voluntary Lien”                                   |   |
| 1.56.   “Warranties”                                       |   |
| SECTION II.   PURCHASE AND SALE; CLOSING                             |   |
| 2.1.   Purchase and Sale.                                            |   |
| 2.2.   Closing.                                                      |   |
| 2.3.   Purchase Price.                                               |   |
| 2.4.   Duties of Escrow Agent.                                       |   |
| 2.5.   Bulk Sales Waiver.                                            |   |
| SECTION III.  DILIGENCE, ETC.                                        |   |
| 3.1.   Diligence Inspections.                                        |   |
| 3.2.   Title and Survey Matters.                                     |   |
| 3.3.   Seller’s Diligence Materials.                            |   |
| 3.4.   Other Diligence Materials.                                    |   |
| 3.5.   Confidentiality.                                              |   |
| 3.6.   Termination of Agreement.                                     |   |
| SECTION IV.   CONDITIONS TO THE PURCHASER’S OBLIGATION TO CLOSE |   |
| 4.1.   Closing Documents.                                            |   |
| 4.2.   Condition of Property, Etc.                                   |   |
| 4.3.   Title Policy.                                                 |   |
| SECTION V.   CONDITIONS TO THE SELLER’S OBLIGATION TO CLOSE     |   |
| 5.1.   Purchase Price.                                               |   |
| 5.2.   Closing Documents.                                            |   |
| 5.3.   Representations.                                              |   |
| SECTION VI.   REPRESENTATIONS AND WARRANTIES OF THE SELLERS          |   |
| 6.1.   Representations of the Sellers.                               |   |
| 6.2.   Survival of the Seller’s Representations.                |   |
| 6.3.   Purchaser’s Right to Indemnification.                    |   |
| 6.4.   “As Is”.                                            |   |
| SECTION VII.  REPRESENTATIONS AND WARRANTIES OF THE  PURCHASER       |   |
| 7.1.   Representations of the Purchaser.                             |   |
| 7.2.   Survival, Etc.                                                |   |

 

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| SECTION VIII.  COVENANTS OF THE SELLERS                      |   |
|-------------------------------------------------------------------|--------|
| 8.1.   Compliance with Laws, Etc.                            |   |
| 8.2.   Approval of Agreements.                               |   |
| 8.3.   Compliance with Agreements.                           |   |
| 8.4.   Notice of Material Changes or Untrue Representations. |   |
| 8.5.   Operation of Property.                                |   |
| 8.6.   Insurance.                                            |   |
| 8.7.   Employees.                                            |   |
| 8.8.   Cooperation.                                          |   |
| 8.9.   Licensing Approval.                                   |   |
| 8.10.   Bulk Sales.                                          |   |
| SECTION IX.   APPORTIONMENTS AND OTHER ADJUSTMENTS           |   |
| 9.1.   Real Property Apportionments and Other Adjustments.   |   |
| 9.2.   Closing Costs.                                        |   |
| 9.3.   Receivables and Payables.                             |   |
| SECTION X.   DAMAGE TO OR CONDEMNATION OF PROPERTY           |   |
| 10.1.   Casualty.                                            |   |
| 10.2.   Condemnation.                                        |   |
| SECTION XI.   DEFAULT                                        |   |
| 11.1.   Default by the Seller.                               |   |
| 11.2.   Default by the Purchaser.                            |   |
| SECTION XII.  MISCELLANEOUS                                  |   |
| 12.1.   Allocation of Liability.                             |   |
| 12.2.   Brokers.                                             |   |
| 12.3.   Publicity.                                           |   |
| 12.4.   Financials.                                          |   |
| 12.5.   Notices.                                             |   |
| 12.6.   Waivers, Etc.                                        |   |
| 12.7.   Assignment; Successors and Assigns.                  |   |
| 12.8.   Severability.                                        |   |
| 12.9.   Counterparts, Etc.                                   |   |
| 12.10.   Performance on Business Days.                       |   |
| 12.11.   Attorneys Fees.                                     |   |
| 12.12.   Section and Other Headings.                         |   |
| 12.13.   Time of Essence.                                    |   |
| 12.14.   GOVERNING LAW.                                      |   |

 

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**PURCHASE AND SALE AGREEMENT**

 

**THIS PURCHASE AND SALE AGREEMENT** is made andentered into as of January 21, 2005 by and among **FIVE STARQUALITY CARE, INC.**, a Maryland corporation, as purchaser (the “Purchaser”),and each of the limited liabilitycompanies identified as a “Seller” on the signature page hereof (each, a“Seller” and, collectively, the “Sellers”).

 

**WITNESSETH:**

 

**WHEREAS**, theSellers are the owners of the Properties (this and other capitalized terms usedand not otherwise defined herein shall have the meanings given such terms in Section1); and

 

**WHEREAS**, thePurchaser desires to purchase the Properties from the Sellers, and the Sellersdesire to sell the Properties to the Purchaser, subject to and upon the termsand conditions hereinafter set forth;

 

**NOW, THEREFORE**, inconsideration of the mutual covenants herein contained and other good andvaluable consideration, the mutual receipt and legal sufficiency of which arehereby acknowledged, the Sellers and the Purchaser, intending to be legallybound, hereby agree as follows:

 

# **SECTION I**.  DEFINITIONS

 

Capitalized terms usedin this Agreement shall have the meanings set forth below or in the section ofthis Agreement referred to below:

 

## 1.1.          “**Agreement**”  shall mean thisPurchase and Sale Agreement, together with all of the Schedules and Exhibitsattached hereto, as it and they may be amended from time to time as hereinprovided.

##  

## 1.2.          **“AssignedAssets”  shall** mean, withrespect to any Property, collectively, the Contracts, Intangible Property,Intellectual Property, Leases, Licenses and Permits, Resident Agreements,Resident Deposits and Warranties related to such Property.

##  

## 1.3.          “**Broker**”  shall mean Marcus& Millichap of Chicago.

##  

## 1.4.          “**Business Day**”  shall mean any dayother than a Saturday, Sunday or any other day on which banking institutions 

 

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## in TheCommonwealth of Massachusetts or The Commonwealth of Pennsylvania areauthorized by law or executive action to close.

##  

## 1.5.          “**Closing**”  shall have themeaning given such term in Section 2.2.

##  

## 1.6.          “**Closing Date**”  shall have themeaning given such term in Section 2.2.

##  

## 1.7.          **“Code” shall** mean the Internal Revenue Code of 1986.

##  

## 1.8.          **“Contracts” shall** mean, with respect to any Property,collectively, all contracts and agreements to which any Seller is a partyrelating to the ownership, use, operation or maintenance of such Property.

##  

## 1.9.          “**Deposit**”  shall have themeaning given such term in Section 2.3.

##  

## 1.10.        **“ERISAAffiliate”  shall** mean a Personand/or such Person’s Subsidiaries or any trade or business (whether or notincorporated) which is under common control with such Person or such Person’sSubsidiaries or which is treated as a single employer with such Person or anySubsidiary of such Person under Section 414(b), (c), (m) or (o) of the Code orSection 4001(b)(1) of ERISA.

##  

## 1.11.        “**Escrow Agent**”  shall mean the NewYork office of Lawyers Title Insurance Corporation or such other person asshall be reasonably acceptable to the Purchaser and the Sellers.

##  

## 1.12.        **“EmployeeBenefit Plan”  shall** mean anyemployee benefit plan, as defined in Section 3(3) of ERISA.

##  

## 1.13.        **“ERISA” shall** mean the Employee Retirement IncomeSecurity Act of 1974.

##  

## 1.14.        **“FF&E” shall** mean, with respect to each Property,collectively, all fixtures, furniture, equipment, artwork, machinery, systemsowned by the Seller which is the owner of such Property and attached orappurtenant to, located on or used in connection with the ownership, use,operation or maintenance of such Property. The FF&E for each Property shall include any motor vehicles whichare being used in connection with the ownership, use, operation or maintenanceof such Property.  In no event shall theFF&E include any item which is owned by any Resident at any Property.

 

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## 1.15.        **“Facility”  shall** mean, with respect to any Property, theassisted living facility and/or Alzheimer’s care facility currently beingoperated on such Property.

##  

## 1.16.        **“Filesand Records”  shall** mean, with respect toany Property, collectively, all books, records, files, and papers, whether inhard copy or computer format, used in connection with the operation of suchProperty, including, without limitation, sales, marketing and advertisingmaterials, lists of present suppliers and personnel and employment records,books of account and other financial records. In no event shall the Files and Records include any minute books or otherdocuments pertaining exclusively to the organization or governance of anySeller.

##  

## 1.17.        **“GAAP” shall** mean United States generally acceptedaccounting principles as in effect on the date of the applicable SellerFinancial Statements being referenced.

##  

## 1.18.        **“Gordon” shall** have the meaning given such term in Section6.3.

##  

## 1.19.        **“HealthcareLicenses”  shall** have themeaning given such term in Section 6.1(l).

##  

## 1.20.        “**Improvements**”  shall mean, withrespect to any Property, collectively, all buildings, fixtures and otherimprovements located on the Land relating to such Property, together with allfixtures and other property affixed thereto.

##  

## 1.21.        **“IndemnificationClaim”  shall** have themeaning given such term in Section 6.3.

##  

## 1.22.        **“IndemnifiedParties”** and **“IndemnifiedParty”  shall** have themeanings given such terms in Section 6.3.

##  

## 1.23.        “**Inspection Period**”  shall mean theperiod expiring on 8:00 p.m., local time at the Property, on February 3, 2005.

##  

## 1.24.        **“IntangibleProperty”  shall** mean, with respect toeach Property, collectively, all of the intangible property owned by the Sellerwhich is the owner of such Property and which arises from or is used inconnection with the ownership, use, operation or maintenance of suchProperty.  The Intangible Property shallinclude, without limitation, the following: (i) all good will; and (ii) allaccounts receivable representing amounts owed to the Seller which is the ownerof such Property for goods and services provided by Seller or on its behalf atsuch Property.

 

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## 1.25.        **“IntellectualProperty”  shall** have themeaning given such term in Section 6.1(q).

##  

## 1.26.        **“Inventory” shall** mean, with respect to any Property,collectively, any consummables, inventories, stocks, supplies and other relateditems owned by the Seller which is the owner of such Property and which areused in connection with the operation or maintenance of such Property or theprovision of services to the Residents of such Property.

##  

## 1.27.        **“Knowledge” shall** mean the actual knowledge of any Person(except as otherwise specifically provided) after diligent inquiry andinvestigation.

##  

## 1.28.        **“****Land”  shall** mean the parcels ofland described in Schedule 1.22 attached hereto and made a part hereof,together with all easements, rights of way, and appurtenances which the Sellersmay now own or hereafter acquire with respect thereto.

##  

## 1.29.        “**Leases**”  shall mean, withrespect to any Property, collectively, any leases or other agreements pursuantto which a third party occupies space at such Property.

##  

## 1.30.        “**Licensesand Permits”**  shall mean,with respect to any Property, any certificates of occupancy and othertransferable licenses, permits, registrations, authorizations, use agreements,orders, or approvals of governmental or quasi-governmental agencies andauthorities (whether federal, state, local, municipal, or foreign) or privateparties relating to the construction, use, operation, or enjoyment of suchProperty.

##  

## 1.31.        “**Objection Notice**”  shall have themeaning given such term in Section 3.2.

##  

## 1.32.        “**Other Personal Property**”  shall mean, withrespect to any Property, collectively, all of the personal property (other thanthe FF&E and Files and Records) which is owned by the Seller that owns suchProperty and which is used in connection with the ownership, use, operation ormaintenance of such Property.  In noevent shall the Other Personal Property include any item which is owned by anyResident at any Property or any petty cash on hand at any Property.

##  

## 1.33.        **“PayableHoldback Amount”  shall** have the meaninggiven such term in Section 9.3(b).

##  

## 1.34.        “**Permitted Exceptions**”  shall mean,collectively, (a) liens for taxes, assessments and governmental charges not

 

4

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## yet due andpayable or due and payable but not yet delinquent; and (b) such other nonmonetary encumbrances with respect to the Property which are not objected to bythe Purchaser in accordance with Section 3.2.

##  

## 1.35.        **“Person” shall** mean an individual, partnership, jointventure, corporation, limited liability company, real estate investment trust,any other form of business organization, and any government or governmentalauthority.

##  

## 1.36.        “**Property**”  shall mean,collectively, the FF&E, the Facility, the Files and Records, the Improvements,the Intangible Property, the Inventory, the Land, the Licenses and Permits, theOther Personal Property, the Resident Agreements, the Resident Deposits and theWarranties.

##  

## 1.37.        “**Purchase Price**”  shall have themeaning given such term in Section 2.3.

##  

## 1.38.        “**Purchaser**”  shall have themeaning given such term in the preambles to this Agreement, together with anypermitted successors and assigns.

##  

## 1.39.        **“PurchaserClaims”  shall** have themeaning given such term in Section 6.3.

##  

## 1.40.        **“ResidentAgreements”  shall** mean, withrespect to any Property, collectively, all resident agreements and otheragreements or arrangements for the use or occupancy of any units, beds or otherfacilities provided, meals served, goods sold or services provided, in eachcase, on or at such Property, or any portion thereof, or in connection with theoperation of the Facility on such Property.

##  

## 1.41.        “**Resident**”  shall mean aresident under a Resident Agreement.

##  

## 1.42.        **“ResidentDeposit”  shall** mean anydeposit or other form of security given by a Resident pursuant to a ResidentAgreement.

##  

## 1.43.        “**Seller**” and“**Sellers**”  shall have the meanings given suchterms in the preambles to this Agreement.

##  

## 1.44.        **“SellerBenefit Arrangement”  shall** mean anyemployment, consulting, severance or other similar contract, arrangement orpolicy and each plan, arrangement (written or oral), program, agreement orcommitment providing for insurance

 

5

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## coverage(including any self-insured arrangements), workers’ compensation, disabilitybenefits, supplemental unemployment benefits, vacation benefits, retirementbenefits, life, health, disability or accident benefits (including, withoutlimitation, any “voluntary employees’ beneficiary association” as defined inSection 501(c)(9) of the Code providing for the same or other benefits) or fordeferred compensation, profit-sharing bonuses, stock options, stockappreciation rights, stock purchases or other forms of incentive compensationor post-retirement insurance, compensation or benefits which (i) is not aSeller Employee Benefit Plan, (ii) is entered into, maintained, contributed toor required to be contributed to, as the case may be, by any Seller, or anyERISA Affiliate of such Seller, and (iii) covers any employees, formeremployees, directors or former directors of such Seller or any of its ERISAAffiliates.

##  

## 1.45.        **“SellerEmployee”  shall** have themeaning given such term in Section 8.7.

##  

## 1.46.        **“SellerEmployee Benefit Plan”** shall mean any Employee Benefit Plan that is sponsored or contributed toby any Seller or any of its ERISA Affiliates (or that has been maintained bysuch Person within the preceding 6 years) covering employees or formeremployees of such Seller or any of its ERISA Affiliates.

##  

## 1.47.        **“SellerFinancial Statements”  shall** have themeaning given such term in Section 6.1(e).

##  

## 1.48.        **“Subsidiaries” shall** mean all corporations, associations orother entities of which a Person owns, directly or indirectly, more than twentypercent (20%) of the voting stock or other voting equity interests of suchcorporation, association or other entity.

##  

## 1.49.        “**Survey**”  shall have themeaning given such term in Section 3.2.

##  

## 1.50.        “**Tenant**”  shall mean eachtenant under a Lease.

##  

## 1.51.        “**Title Commitment**”  shall have themeaning given such term in Section 3.2.

##  

## 1.52.        “**Title Company**”  shall mean the NewYork office of Lawyers Title Insurance Corporation or such other title companyas may be selected by the Purchaser.

 

6

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## 1.53.        **“TitlePolicy”  shall** have themeaning given such term in Section 4.3

##  

## 1.54.        **“TradePayables”  shall** mean amountspayable to suppliers of goods and services in the ordinary course of business.

##  

## 1.55.        “**Voluntary Lien**”  shall mean anymortgage, deed or trust or other consensual monetary lien (other than aPermitted Exception), as well as any non-consensual lien that results from abreach by any Seller of its obligations under this Agreement.

##  

## 1.56.        **“Warranties” shall** mean, with respect to any Property,collectively, all assignable warranties or guaranties, if any, presently ineffect from contractors, suppliers or manufacturers of the Improvements or theFF&E with respect to such Property.

##  

**SECTION II****.****  PURCHASE AND SALE; CLOSING**

 

## 2.1.          **Purchase and Sale**.  In consideration of the payment of thePurchase Price by the Purchaser to the Sellers and for other good and valuableconsideration, the Sellers hereby agree to sell to the Purchaser, and thePurchaser hereby agrees to purchase from the Sellers, the Properties for thePurchase Price, subject to and in accordance with the terms and conditions ofthis Agreement.  The obligations of theSellers under this Agreement are joint and several.  If any Seller fails to fulfill itsobligations under this Agreement, the Purchaser may, at its election, berelieved of all further obligations this Agreement without thereby waiving anyrights it may have by reason of such failure.

##  

## 2.2.          **Closing**.  The purchase and sale of the Property shallbe consummated at a closing (the “Closing”) to be held at the offices ofSullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts02109, or at such other location as the Seller and the Purchaser may agree, at10:00 a.m., local time at the Properties, on the later to occur of (i) the datewhich is one (1) Business Day following the date on which the Inspection Periodexpires or (ii) February 4, 2005 (the “Closing Date”).

##  

## 2.3.          **Purchase Price**.  

##  

### (a)           The purchase price to be paid for theProperty (the “Purchase Price”) shall be SIXTY THREE MILLION FIVEHUNDRED THOUSAND DOLLARS ($63,500,000). The Purchase Price shall be paid as follows:

 

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#### (i)            Within two (2) Business Days afterthe execution of this Agreement by all parties, the Purchaser shall depositwith the Escrow Agent the sum of ONE MILLION DOLLARS ($1,000,000) (such amount,together with all interest earned thereon, the “Deposit”); and

####  

#### (ii)           The balance of the Purchase Price,subject to adjustment as provided in Article 9, shall be paid by thePurchaser to the Sellers at the Closing as set forth in Schedule 2.3(a)(ii).

####  

### (b)           The Purchase Price shall be payablein immediately available federal funds by wire transfer to an account oraccounts to be designated by each of the Sellers.

###  

## 2.4.          **Duties of Escrow Agent**.  

##  

### (a)           The Escrow Agent shall hold theDeposit in an interest-bearing account designated by the Purchaser and shallpay the Deposit to the party entitled thereto in accordance with the terms ofthis Agreement.

###  

### (b)           The acceptance by the Escrow Agent ofits duties as such under this Agreement is subject to the following terms andconditions, which all parties to this Agreement hereby agree shall govern andcontrol with respect to the rights, duties, liabilities and immunities of theEscrow Agent:

###  

#### (i)            The Escrow Agent acts hereunder as adepositary only, and is not responsible or liable in any manner whatever forthe sufficiency of any amounts deposited with it;

####  

#### (ii)           The Escrow Agent shall not be liablefor acting upon any notice, request, waiver, consent, receipt or otherinstrument or document which the Escrow Agent in good faith believes to begenuine and what it purports to be;

####  

#### (iii)          The Escrow Agent shall not be liablefor any error in judgment, or any act done or step taken or omitted by it ingood faith, or any mistake of fact or law, or anything which it may do orrefrain from doing in connection herewith, except its own bad faith, grossnegligence or willful misconduct;

 

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#### (iv)          The Escrow Agent may consult with, andobtain advice from, legal counsel in the event of any dispute or question as tothe construction of any of the provisions hereof or its duties hereunder, andit shall incur no liability and shall be fully protected in acting in goodfaith in accordance with the opinion and advice of such counsel;

####  

#### (v)           The Escrow Agent shall be entitled torely upon any document, instrument or signature believed by it to be genuineand signed by either of the other parties hereto or their successors;

####  

#### (vi)          The EscrowAgent may assume that any person purporting to give any notice of instructionsin accordance with the provisions hereof has been duly authorized to do so; and

####  

#### (vii)         The Sellers and the Purchaser herebyrelease the Escrow Agent from any act done or omitted to be done by the EscrowAgent in good faith in the performance of its duties hereunder.

####  

### (c)           The Sellers and the Purchaser maycollectively remove the Escrow Agent at any time upon not less than five (5) BusinessDays’ prior notice to the Escrow Agent; in such case, the Purchaser, by noticeto the Sellers, shall appoint a successor Escrow Agent, who shall (1) bereasonably satisfactory to the Sellers and (2) accept such appointment andagree in writing to be bound by the terms of this Agreement.  If no successor Escrow Agent is appointed andacting hereunder within five (5) Business Days after the removal of the EscrowAgent or there is a dispute among the parties with respect to payment of theDeposit, the Escrow Agent may deliver the Deposit into a court of competentjurisdiction.  Upon delivery of theDeposit to a successor agent or court of competent jurisdiction, the EscrowAgent shall be released and discharged from all further obligations hereunder.

###  

### (d)           The Escrow Agent agrees to servewithout compensation for its services; provided, however, thatthe Purchaser, on the one hand, and the Sellers, on the other hand, herebyagree to reimburse, or to advance to, the Escrow Agent one-half (1/2) allreasonable expenses of the Escrow Agent incurred in the performance of itsduties hereunder.

###  

## 2.5.          **BulkSales Waiver.**  The partiesagree to waive: (a) notice to the Department of Revenue of the transfers

 

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## contemplated hereinwithin ten (10) days prior to Closing; and (b) the furnishing of a bulk salescertificate under Section 1403 of the Pennsylvania Fiscal Code, as amended.

##  

# **SECTIONIII**.  DILIGENCE, ETC.

 

## 3.1.          **Diligence Inspections**.  From and after the date of this Agreement,the Sellers shall permit the Purchaser and its representatives to perform suchdue diligence with respect to the Properties as the Purchaser deems necessaryor advisable in its sole discretion, subject to the terms and conditions ofthis Agreement.  Such due diligence mayinclude, without limitation, inspections of the Properties (including, withoutlimitation, all roofs, electric, mechanical and structural elements, and HVACsystems), soil analysis and environmental investigations, examinations of theSellers’ records with respect to the Properties (and the right to make copiesof the same), all at such reasonable times as the Purchaser or itsrepresentatives may request.  Any suchdue diligence shall be performed in a manner consistent with this Agreement andso as to minimize any interference with the Residents.  To the extent that the Purchaser damages ordisturbs any Property, the Purchaser shall, to the extent practicable, returnsuch Property to substantially the same condition which existed immediatelyprior to such damage or disturbance.  ThePurchaser shall indemnify, defend and hold harmless the Sellers from andagainst any and all expense, loss or damage which the Sellers may incur as aresult of any act or omission of the Purchaser or its representatives, agentsor contractors, other than any expense, loss or damage to the extent arisingfrom any Seller’s negligence or any act or omission of any Seller during anysuch inspection.  Such indemnificationagreement shall survive the termination of this Agreement for a period of one(1) year.

##  

## 3.2.          **Title and Survey Matters**.  

##  

### (a)           Promptly upon execution of thisAgreement, the Purchaser shall order from the Title Company and direct theTitle Company promptly to deliver to the Purchaser and the Sellers one or morepreliminary title commitments, having an effective date after the date of thisAgreement, for one or more ALTA extended owner’s policies of title insurancewith respect to the Properties, together with copies of all instruments anddocuments referred to therein as exceptions to title (collectively, the “TitleCommitment”).

###  

### (b)           Promptly upon execution of thisAgreement, the Purchaser may arrange for the preparation of one or more ALTA

 

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### surveys withrespect to the Properties (collectively, the “Survey”) by a licensedsurveyor in the jurisdiction(s) in which the Properties are located.  Alternatively, the Purchaser may arrange tohave any existing surveys in the possession of the Seller recertified to thePurchaser as of a current date or the Purchaser may request that the Sellersprovide the Title Company with an affidavit, in form and substance reasonablysatisfactory to the Sellers, which certifies that no changes have been made withrespect to the location of the Improvements and other matters shown on suchexisting surveys since the date of the same. In either such case, the existing surveys in the possession of theSellers shall be deemed to be the “Survey” for purposes of this Agreement.

###  

### (c)           Prior to the expiration of theInspection Period, the Purchaser shall give the Sellers notice of any titleexceptions or survey matters (other than Permitted Exceptions) as to which thePurchaser objects (an “Objection Notice”).  Subject to Section 3.2(c), if, for anyreason, the Sellers are unable or unwilling to take such actions as may berequired to cause such exceptions to be removed from the Title Commitment orthe Survey, or to otherwise remedy such matters, the Sellers shall give the Purchasernotice thereof; it being understood and agreed that the failure of the Sellersto give such notice within two (2) Business Days after receiving an ObjectionNotice shall be deemed an election by the Sellers to cause such removal andremedy (and, if necessary, the Closing Date shall be extended until the datewhich is two (2) Business Days after the date on which the Sellers deliver orare deemed to have delivered to such notice). If the Sellers shall be unable or unwilling (or the Sellers are deemedunable or unwilling) to remove any title defects or remedy any survey mattersto which the Purchaser has objected, the Purchaser may elect (i) to terminatethis Agreement by written notice given to the Sellers at or prior to Closing or(ii) to consummate the transactions contemplated hereby notwithstanding suchdefect, without any abatement or reduction in the Purchase Price on account ofsuch defect.

###  

### (d)           In all events, at or prior toClosing, the Sellers shall cure (i) all Voluntary Liens and (ii) all otherexceptions identified in an Objection Notice provided the aggregate cost ofcuring such other exceptions does not exceed SIXTY THREE THOUSAND FIVE HUNDREDDOLLARS ($63,500).  Nothing contained inthis Section 3.2(d) shall be deemed to permit either party to extend theClosing Date, it being acknowledged and agreed that if the Sellers are unableto cure any exception

 

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### referredto in clause (ii) above prior to Closing, the Purchaser shall only have theright to terminate this Agreement in accordance with Section 3.2(c) orto consummate the transactions contemplated hereby, notwithstanding suchdefect, except that an amount reasonably estimated to be necessary to cure suchdefect (which amount shall in no event exceed $63,500) shall be retained by theEscrow Agent and paid to the Purchaser to reimburse it for any amounts paid byit to cure such defect.

###  

### (e)           Further, the Sellers shall usecommercially reasonable efforts (such as furnishing the Title Company with anaffidavit which may be required to establish that a lease or other instrumentis no longer in effect or applicable to a Property) to have all matters that donot appear to be valid exceptions to any Seller’s title to its Propertyincluding, without limitation, references to instruments or documents which ontheir face or by law are no longer effective and matters which have no apparentapplicability to a Property), omitted as exceptions in the Title Commitment.

###  

## 3.3.          **Seller’sDiligence Materials.**  Onor prior to the date of this Agreement, the Sellers shall deliver (or shallhave delivered) to the Purchaser true, correct and complete copies of alldocuments required to be delivered by the Sellers under this Agreement,including, without limitation, all Resident Agreements, Leases, Files andRecords, Licenses and Permits, environmental reports, title insurance policies,title reports, title commitments and surveys with respect to the Properties asmay be in the Seller’s possession or control.

##  

## 3.4.          **Other Diligence Materials**.  Throughout the Inspection Period andthereafter until the Closing or earlier termination of this Agreement, theSellers shall permit the Purchaser and its representatives to review andexamine all environmental assessment reports, building evaluations, financialdata and other investigations and materials pertaining to the Properties as arein the possession or control of the Sellers and shall permit the Purchaser tomake copies of any such materials as the Purchaser or its representatives mayrequest.  The Purchaser shall coordinatewith the Sellers to schedule such reviews and examinations at such reasonabletimes and in such reasonable places as the parties may reasonably agree upon.  In the event that the Closing does not takeplace as herein contemplated for any reason, the Purchaser shall either (a)return all such copies to the Seller or (b) destroy all such copies.

##  

## 3.5.          **Confidentiality. **The Purchaser agrees to treat anyinformation which it obtains pursuant to this Article III as

 

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## confidentialand shall not disclose any such information to any Person, provided there shallbe no obligation to treat as confidential information that (a) was publiclyknown or otherwise known to the Purchaser prior to the time of such disclosureor (b) subsequently becomes known through no act or omission by thePurchaser.  Notwithstanding theforegoing, the Purchaser may deliver copies of such information to (i) thePurchaser’s directors, officers, employees, and to its agents and professionalconsultants, (ii) any Person to whom the Purchaser offers to sell any of theProperties, provided that said Persons agree to be bound by the terms hereofregarding such information, (iii) any federal or state regulatory authorityhaving jurisdiction over the Purchaser and which requires such disclosure or(iv) any other Person to which such disclosure or disclosure may be necessaryor appropriate (A) in compliance with any law, rule, regulation or order applicableto such Person, (B) in response to any subpoena or other legal process, or (C)to the extent that the Purchaser reasonably determines disclosure is necessaryin the enforcement of or for the protection of its rights and remedies underthis Agreement.

##  

## 3.6.          **Termination of Agreement**.  If the results of the inspections performedby or on behalf of the Purchaser with respect to any Property pursuant to this ArticleIII shall be unsatisfactory to the Purchaser in any respect or if thePurchaser otherwise shall determine not to proceed to Closing, then thePurchaser shall have the right, in the Purchaser’s sole and absolutediscretion, to terminate this Agreement in whole but not in part at any timeprior to the expiration of the Inspection Period by giving written noticethereof to the Sellers, in which event this Agreement shall terminate and be ofno further force and effect and neither party shall have any liability to theother hereunder and the Escrow Agent shall refund the Deposit to the Purchaserpromptly upon its receipt of the Purchaser’s request therefor.  In the event that the Purchaser shall fail toterminate this Agreement as aforesaid, the Purchaser shall have no furtherright to terminate this Agreement pursuant to this Section 3.6.

 

# **SECTIONIV**. CONDITIONS TO THE PURCHASER’S OBLIGATION TO CLOSE

 

The obligation of thePurchaser to acquire the Properties shall be subject to the satisfaction of thefollowing conditions precedent on and as of the Closing Date:

 

## 4.1.          **Closing Documents**.  Each of the Sellers shall have delivered tothe Purchaser the following:

 

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### (a)           Good and sufficient grant deeds withcovenants against grantor’s acts with respect to each Property, in properstatutory form for recording, duly executed and acknowledged by the Sellerwhich owns such Property, conveying title to the Land and Improvements, freefrom all liens and encumbrances other than the Permitted Exceptions andotherwise substantially in the form attached hereto as Exhibit A(collectively, the “Deeds”);

###  

### (b)           An assignment from each Seller and anassumption by the Purchaser, duly executed by such Seller, with respect to theAssigned Assets with respect to the Property owned by such Seller and otherwisesubstantially in the form attached hereto as Exhibit B;

###  

### (c)           Bills of sale from each Seller, dulyexecuted by such Seller, with respect to the FF&E, the Files and Records,the Inventory and the Other Personal Property with respect to the Propertyowned by such Seller and otherwise substantially in the form attached hereto asExhibit C;

###  

### (d)           A non-competition agreement, dulyexecuted by Scott Gordon, substantially in the form attached hereto as ExhibitD;

###  

### (e)           Any agreement with respect to thePurchaser’s operation of the Properties under the Sellers’ Healthcare Licenses,the form and substance of which shall be negotiated and agreed upon during theInspection Period;

###  

### (f)            Duly executed original copies of theAssigned Assets;

###  

### (g)           An affidavit dated as of the ClosingDate, in respect of Section 1445 of the Internal Revenue Code of 1986, asamended, sufficient to provide one exemption under subdivision (b) thereof;

###  

### (h)           To the extent the same are in theSellers’ possession or control, original, fully executed copies of all materialdocuments and agreements, plans and specifications and contracts, licenses andpermits pertaining to each Property, including, without limitation,certificates of occupancy with respect to each Property;

###  

### (i)            Evidence of each Seller’s authorityto consummate the transactions contemplated this Agreement, in form andsubstance reasonably satisfactory to the Purchaser and the Title Company; and

 

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### (j)            A parties inpossession affidavit, a mechanic’s lien affidavit, a gap indemnity and suchother conveyance documents, certificates, deeds and other instruments as thePurchaser, the Sellers or the Title Company may reasonably require and as arecustomary in like transactions in the county in which the Properties arelocated.

 

## 4.2.          **Condition of Property,Etc. **

 

### (a)           The Properties, including allimprovements located thereon, shall be in substantially the same physicalcondition as on the date of this Agreement, ordinary wear and tear and damageby casualty or condemnation excepted (except as otherwise expressly providedpursuant to this Agreement);

###  

### (b)           The Sellers shall have fully paid forand installed new carpet and new furniture costing approximately $130,000 inthe Facility commonly known as Franciscan Manor;

###  

### (c)           No notice of default shall have beengiven or received by any Seller under any material Contract or other agreementbenefiting or affecting the Properties in any respect (including any Lease orResident Agreement) and all such agreements, Leases and Resident Agreementsshall be in full force and effect (the Sellers agreeing to issue defaultnotices in a commercially reasonable manner consistent with past practices);

###  

### (d)           All material licenses, permits andother authorizations necessary for the current use, occupancy and operation ofthe Properties shall be in full force and effect; and

###  

### (e)           All representations and warranties ofthe Sellers herein shall be true, correct and complete in all material respectson and as of the Closing Date and the Sellers shall have performed allcovenants and obligations required to be performed by the Sellers on or beforethe Closing Date; including, without limitation, the curing of all title andsurvey matters which the Sellers shall have undertaken to perform.

###  

## 4.3.          **Title Policy**.  The Title Company shall be prepared, subjectonly to payment of the usual and customary premium, to issue one or more titleinsurance policies to the Purchaser, insuring title to the Properties is vestedin the Purchaser, subject only to the Permitted Exceptions, or such otherexceptions as may be approved by the Purchaser in accordance

 

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## withSection3.2, with such endorsements as shall be required by the Purchaser andotherwise in form and substance consistent with the Title Commitment(collectively, the “Title Policy”).

 

# **SECTIONV**. CONDITIONS TO THE SELLER’S OBLIGATION TO CLOSE

 

The obligation of theSellers to convey the Properties to the Purchaser is subject to thesatisfaction of the following conditions precedent on and as of the ClosingDate:

 

## 5.1.          **Purchase Price**.  The Purchaser shall deliver to the Sellersthe Purchase Price payable hereunder.

##  

## 5.2.          **Closing Documents**.  The Purchaser shall deliver to the Sellersduly executed and acknowledged counterparts of the documents described in Section4.1 (as applicable) and evidence of the Purchaser’sauthority to consummate the transactions contemplated this Agreement, in formand substance reasonably satisfactory to the Sellers and the Title Company.

##  

## 5.3.          **Representations**.  All representations and warranties of thePurchaser herein shall be true, correct and complete in all material respectson and as of the Closing Date and the Purchaser shall have performed allcovenants and obligations required to be performed by the Purchaser on orbefore the Closing Date**.**

 

# **SECTIONVI**. REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

## 6.1.          **Representations of theSellers**.  To induce thePurchaser to enter into this Agreement, the Sellers, jointly and severally,represent and warrant to the Purchaser as follows: 

##  

### (a)           **Status and Authority ofthe Sellers, Etc.**  EachSeller is a limited liability company, duly organized, validly existing and ingood standing under the laws of its state of formation, and has all requisitepower and authority under the laws of such state and its charter documents toenter into and perform its obligations under this Agreement and to consummatethe transactions contemplated hereby. Each Seller is duly qualified to do business in The Commonwealth ofPennsylvania.

###  

### (b)           **Action of the Sellers,Etc.** Each Seller hastaken all necessary action to authorize the execution, delivery and performanceof this Agreement, and upon the execution and delivery of any document to bedelivered by such Seller on or prior to the Closing Date, this Agreement andsuch document shall constitute the valid and binding obligation and agreement

 

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### of suchSeller, enforceable against such Seller in accordance with its terms, except assuch enforceability may be limited by bankruptcy, insolvency, reorganization,moratorium or similar laws of general application affecting the rights andremedies of creditors.

###  

### (c)           **No Violations ofAgreements**.  Neither theexecution, delivery or performance of this Agreement by any Seller, norcompliance with the terms and provisions hereof, will result in any breach ofthe terms, conditions or provisions of, or conflict with or constitute adefault under, or result in the creation of any lien, charge or encumbranceupon any of the Properties pursuant to the terms of any indenture, mortgage,deed of trust, note, evidence of indebtedness or any other agreement orinstrument by which any Seller is bound.

###  

### (d)           **Litigation**.  Except as set forth on Schedule 6.1(d)attached hereto and made a part hereof, no investigation, action or proceedingis pending, and, to the Sellers’ knowledge, no action or proceeding isthreatened and no investigation looking toward any such action or proceedinghas begin, against any Seller and no investigation, action or proceeding ispending and, to the Sellers’ knowledge, no action or proceeding is threatenedand no investigation looking toward such an action or proceeding has begun,which (i) questions the validity of this Agreementor any action taken or to be taken pursuant hereto, (ii)could reasonably be expected to result in any material adverse change in thebusiness, operation, affairs or condition of any of the Properties, (iii) could reasonably be expected to result in orsubject any of the Properties to a material liability, or(iv) involves condemnation or eminent domain proceedings against anypart of the Properties.  

###  

### (e)           **FinancialStatements.**  The Sellershave delivered to the Purchaser complete and accurate copies of the financialstatements of each of the Sellers for the twelve (12) month period endedDecember 31, 2004 (collectively, the “Seller Financial Statements”).  The Seller Financial Statements, including ineach case the notes thereto, have been prepared in accordance with GAAP appliedon a consistent basis throughout the periods covered thereby, except asotherwise noted therein (and except with respect to the deletion ofamortization and depreciation and the insertion of bed reserves), are completeand accurate, do not contain any untrue statement of a material fact or omit tostate a material fact required by GAAP to be stated therein or necessary inorder to make the statements contained therein not misleading, and fairlypresent the results of operations of the Sellers on the bases therein stated,as of

 

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### the respectivedates thereof, and for the respective periods covered thereby subject to normalyear-end audit adjustments and accruals not material in amount.

###  

### (f)            **NoUndisclosed Liabilities.** Except as set forth in the Seller Financial Statements, as of December31, 2004, none of the Sellers has any obligations, indebtedness or liabilitiesof any nature which would have been required by GAAP to be reflected on thebalance sheet of such Seller as of December 31, 2004 or described in the notesthereto, that are not shown on such balance sheet or the notes to such balancesheet. Except as set forth in such balance sheet, no Seller has, on the date ofthis Agreement, outstanding any material obligation, indebtedness or liability,and no Seller knows of any basis for the assertion against any Seller of anysuch obligation, indebtedness or liability, other than those incurred sinceDecember 31, 2004, in the ordinary course of business.

###  

### (g)           **Leases and ResidentAgreements.**  Other thanthe Leases and the Resident Agreements listed on Schedule 6.1(g)  attached hereto and made a part hereof, noSeller has entered into any contract or agreement with respect to the occupancyof any of the Properties which will be binding on the Purchaser after theClosing.  The copies of the Leases andthe Resident Agreements heretofore delivered by the Sellers to the Purchaserare a true, correct and complete copies thereof; theLeases and the Resident Agreements have not been amended except as evidenced byamendments similarly delivered and constitute the entire agreement between theSellers and the Tenants or Residents thereunder.  Schedule 6.1(g) identifies theProperty and unit number where each Resident resides, the current monthly feecharged to such Resident, and the amount of any Resident Deposit provided bysuch Resident.  Except as otherwise setforth in Schedule 6.1(g): (i) to each Seller’s knowledge, each of the Leasesand the Resident Agreements is in full force and effect on the terms set forththerein, there are no defaults or circumstances which, with the giving ofnotice, the passage of time or both, would constitute a default by either partythereunder; (ii) to each Seller’s knowledge, each Tenant and each Resident islegally required to pay all sums and perform all material obligations set forththerein without concessions, abatements, offsets, defenses or other basis forrelief or adjustment; (iii) no Tenant or Resident has asserted in writing or,to the Sellers’ knowledge, has any defense to, offsets or claims against, rentpayable by it or the performance of its other obligations under its Lease orResident Agreement; and (iv) no Tenant or Resident has prepaid any rent orother charge

 

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### more than thirty(30) days in advance of its due date. The other information set forth in the Schedule 6.1(g) is true,correct and complete in all material respects.

###  

### (h)           **Contracts, Etc.**  Other than the Leases, the ResidentAgreements and the Contracts listed on Schedule 6.1(h) attachedhereto and made a part hereof, no Seller has entered into any contract oragreement with respect to any Property or otherwise.  The copies of the Contracts heretoforedelivered by the Sellers to the Purchaser are true, correct and complete copiesthereof.  To each Seller’s knowledge, no Seller nor any other party to any Contract is in defaultof any of its obligations thereunder.

###  

### (i)            **FF&Eand Other Personal Property.** Schedule 6.1(i) attached hereto and made a part hereof containsgeneral description of the FF&E and the Other Personal Property located ateach Property and shows the current title holder, make, model and VIN for allmotor vehicles which are being used in connection with the ownership, use,operation or maintenance of each Property.

###  

### (j)            **Utilities, Etc.**  To the Sellers’ knowledge, all utilities andservices necessary for the use and operation of each Property (including,without limitation, road access, gas, water, electricity and telephone) areavailable thereto.  To the Sellers’knowledge, no fact, condition or proceeding exists which would result in thetermination or impairment of the furnishing of such utilities to any Property.

###  

### (k)           **Compliance With Law; No Defaults**.  To the Sellers’ knowledge (i) none of theProperties violates in any material respect any material federal, state,municipal and other governmental statutes, ordinances, by-laws, rules,regulations or any other legal requirements, including, without limitation,those relating to construction, occupancy, zoning, adequacy of parking,environmental protection, occupational health and safety and fire safetyapplicable thereto and (ii) there are presently in effect all materiallicenses, permits and other authorizations necessary for the current use,occupancy and operation thereof.  NoSeller has received written notice of any threatened request, application,proceeding, plan or study which would materially adversely affect the presentuse or zoning of any of the Properties or which would modify or realign anyadjacent street or highway.  No Seller isin default or, to any Seller’s knowledge, alleged to be in default, withrespect to any judgment, order, writ, injunction or decree of any court or anyfederal, state, municipal or other governmental

 

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### authority,department, commission, board or agency or other governmental entity.

###  

### (l)            **HealthcareLicensing.**  The Sellershave obtained all licenses which are necessary and appropriate to permit theProperties to be operated as home care centers and to permit the Sellers toprovide the services which they currently provide to the current Residents ofthe Properties (the “Healthcare Licenses”).  The Sellers have provided the Purchaser withtrue, correct and complete copies of the last two (2) annual compliance surveysrelated to such Healthcare Licenses for each Property.  Each of the Healthcare Licenses is in fullforce and effect and no Seller has received any written notice regarding, orhas any knowledge of, any circumstance at any Property which needs to berectified in connection with such Healthcare Licenses.  To the Sellers’ knowledge, each Property isin compliance with all applicable licensing requirements with respect to suchProperty.  No Seller has taken any actionwhich might jeopardize the effectiveness or good standing of any HealthcareLicenses.  No Seller is aware of anycircumstances which might prevent the Purchaser from obtaining any suchlicenses for the Property in its own name.

###  

### (m)          **Taxes**.  Except as set forth on Schedule 6.1(m)attached hereto and made a part hereof, to each Seller’s knowledge, other thanthe amounts disclosed by tax bills, no taxes or special assessments of any kind(special, bond or otherwise) are or have been levied with respect to anyProperties, or any portion thereof, which are outstanding or unpaid, other thanamounts not yet due and payable or, if due and payable, not yet delinquent, and,to each Seller’s knowledge, no such taxes or special assessments are pending orthreatened.  All matters disclosed on Schedule6.1(m) as aforesaid shall be paid and settled by the Escrow Agent or thePurchaser out of the proceeds to be received by Seller at Closing.

###  

### (n)           **Hazardous Substances**.  Except as disclosed to the Purchaser inwriting, to each Seller’s knowledge, without independent inquiry, no Seller norany Tenant, Resident or other occupant or user of any Property, or any portionthereof, has stored or disposed of (or engaged in the business of storing ordisposing of) or has released or caused the release of any hazardous waste,contaminants, oil, radioactive or other material on such Property, or anyportion thereof, in violation of any applicable Federal, state or localstatutes, laws, ordinances, rules or regulations, and, to each Seller’sknowledge, without independent inquiry, except as so disclosed

 

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### to thePurchaser, each Property is free from any such hazardous waste, contaminants,oil, radioactive and other materials, except for any such materials maintainedin accordance with applicable law.

###  

### (o)           **Insurance**.  Schedule 6.1(o) to this Agreement setsforth a complete and accurate list of all insurance policies and other suretyarrangements of any kind or nature whatsoever which are in force and to whichany Seller is a named party or beneficiary, specifying the insurance carrier,the type of insurance coverage, the policy number, the date through whichpremiums have been paid, the aggregate amount of insurance coverage per claimor per occurrence, as the case may be, applicable self-retention limits and/orself- or co-insurance requirements, and describing in reasonable detail eachpending claim under each such policy. Such insurance provides coverage against, among other matters, propertydamage and other casualty loss (including loss or destruction arising fromearthquakes), personal injury, workers’ compensation claims, general liability,and other similar risks and matters incident to the conduct of the business ofthe Sellers and similarly situated businesses and in a manner and in an amountthat is consistent with industry practice. No Seller has received written notice from any insurance carrier ofdefects or inadequacies at any Property which, if uncorrected, would result ina termination of insurance coverage or an increase in the premiums chargedtherefor.

###  

### (p)           **EmploymentContracts; Labor Matters.** Schedule 6.1(p)-1 to this Agreement sets forth a complete andaccurate list of all employment contracts or consulting contracts between anySeller and any Person and the Sellers have delivered to the Purchaser completeand accurate copies of all such contracts, together with all amendments, waivers,modifications, supplements or side letters affecting the obligations of anyparty thereunder.  Schedule 6.1(p)-2to this Agreement sets forth a complete and accurate list of all employees ofthe Sellers and the annual salary, benefit entitlements and other compensationpaid to them or accrued as of the date of this Agreement.  Except as set forth on said Schedule6.1(p)-2, no employees of any Seller are represented by any labororganization, and no labor organization or group of employees of any Sellerhave made a pending demand for recognition or have filed a petition seeking arepresentation proceeding with the National Labor Relations Board within thelast two (2) years.

###  

### (q)           **IntellectualProperty.**  Schedule6.1(q) of this Agreement sets forth a complete and accurate list of all the

 

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### trademarks and servicemarks (whether or not registered) and trademark and service mark registrationsand applications, patent and patent applications, copyright and copyrightapplications, trade dress, trade and product names (collectively, the “IntellectualProperty”) owned or licensed by any of the Sellers.  Except as set forth in Schedule 6.1(q),the Sellers own or have the perpetual right to use all rights under any suchIntellectual Property without consideration. To the Sellers’ knowledge, no Seller is infringing or alleged to beinfringing upon the rights of any third party with respect to any ofIntellectual Property, and no Seller knows of any basis for the assertionagainst any Seller of a claim for such infringement.  Schedule 6.1(q) sets forth a completeand accurate list of all software computer programs and databases owned by theSeller which have been purchased from third parties, other than third party softwaregenerally commercially available on a “shrink wrap” license or similar basis.

###  

### (r)            **Inventory. **All items of each Seller’s Inventory reflected on the SellerFinancial Statements or thereafter acquired and not subsequently disposed of inthe ordinary course of business are suitable and useable in the ordinary courseof business and include, and will on the Closing Date include, a sufficient butnot excessive quantity of each type of such inventory and supplies in order tomeet the normal requirements of each Seller’s business at each Property.  Without limiting the foregoing, suchInventory shall include, as of the Closing Date, a sufficient quantity of foodand grocery items at each Property to provide for the needs of the Residentsfor at least one (1) week.

 

(s)           **Pension and Benefit Plans.**  Schedule 6.1(s) of this Agreementlists each Seller Employee Benefit Plan and Seller Benefit Arrangement.  The Sellers have delivered to the Purchaserwith respect to each such Seller Employee Benefit Plan and Seller BenefitArrangement complete and accurate copies of (i) all written documentscomprising such plans and arrangements (including amendments and individual,trust or insurance agreements relating thereto); (ii) the two (2) most recentFederal Form 5500 series (including all schedules thereto) filed with respectto each such Seller Employee Benefit Plan; (iii) the two (2) most recentfinancial statements and actuarial reports, if any, pertaining to each suchplan or arrangement; (iv) the summary plan description currently in effect andall material modifications thereto, if any, for each such Seller Employee BenefitPlan; and (v) written communications to employees to the extent the substanceof any Seller Employee

 

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Benefit Plan described therein differs materially from the otherdocumentation furnished under this Section.

 

### (t)            **Accounts Receivable****.**  Schedule 6.1(t) attached heretocontains a true and correct list of all accounts receivable representingamounts owed to the Sellers as of December 31, 2004 for goods and servicesprovided by the Sellers or on their behalf at the Properties, the face amountof such receivables, the periods as to which such receivables relate, and theamount of time such receivables have been outstanding.

###  

### (u)           **Trade Payables****.**  Schedule 6.1(u) attached heretocontains a true and correct list of all Trade Payables representing amountsowed by the Sellers as of December 31, 2004 for goods and services provided tothe Sellers or on their behalf at the Properties, the face amount of suchpayables, the periods as to which such payables relate, and the amount of timesuch payables have been outstanding.

###  

### (v)           **Not a Foreign Person**.  No Seller is a “foreign person” within themeaning of Section 1445 of the Internal Revenue Code of 1986, as amended, andthe regulations promulgated thereunder.

###  

### (w)          **Disclosure****.**  None of the information concerning any Selleror its business, condition (financial or otherwise), assets, liabilities,properties, prospects, personnel, products, plans and policies containedherein, in any Exhibits, Schedules or in the Seller Financial Statementscontains an untrue statement of a material fact or omits to state a materialfact necessary to make the statements contained herein or therein, in light ofthe circumstances under which they were made, not misleading.

###  

## 6.2.          **Survival of the Seller’sRepresentations**. The representations and warranties made in this Agreement by the Sellersshall be continuing and shall be deemed remade by the Sellers as of the ClosingDate, with the same force and effect as if made on, and as of, the ClosingDate.  All representations and warrantiesmade in this Agreement by the Sellers shall survive the Closing, provided noaction based thereon shall be commenced after the first (1st)anniversary of the Closing.

##  

## 6.3.          **Purchaser’s Right toIndemnification****. **Scott W.Gordon (“Gordon”), Chief Operating Officer of Gordon Health Ventures,LLC, the sole member of each Seller, shall indemnify and hold harmless the Purchaser,its successors and assigns (collectively, “Indemnified Parties” or eachan “Indemnified

 

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## Party”) from andagainst any and all losses, obligations, liabilities, damages, claims, costsand expenses (including but not limited to all reasonable legal and otherexpenses incurred by them) (collectively, “Purchaser Claims”) resultingfrom a material breach of any representation or warranty made by any Seller inthis Section VI; provided, however, that Gordon’s liabilityhereunder shall not exceed One Million Dollars ($1,000,000.00) in the aggregateand provided, further, that Gordon shall not be liable to theIndemnified Parties for punitive damages or consequential damages.  Notwithstanding anything to the contrary inthis Agreement, Gordon shall have no liability to indemnify any of theIndemnified Parties for the first Five Thousand ($5,000.00) Dollars ofPurchaser Claims.  No Purchaser Claimsmay be asserted, and no action based thereon may be commenced, after the first(1st) anniversary of the Closing. An Indemnified Party shall promptly give notice to Gordon after becomingaware of any claim which might give rise to a claim for indemnificationhereunder (“Indemnification Claim”) containing a description of thefacts giving rise to the Indemnification Claim, together with suchdocumentation as the Indemnified Party may have with respect to theIndemnification Claim.  If theIndemnification Claim arises from the claim of a third party, Gordon shall bepermitted to assume the defense of any such claim and any litigation or otherproceeding resulting therefrom with counsel reasonably acceptable to theapplicable Seller Indemnified Party.  Inno event may Gordon settle or compromise any third party claim without theconsent of the Indemnified Parties, which consent shall not be unreasonablywithheld or delayed.

##  

## 6.4.          **“As Is”**.  Except as otherwise expressly provided inthis Agreement or any documents to be delivered to the Purchaser at theClosing, the Sellers have not made and the Purchaser has not relied upon, anyinformation, promise, representation or warranty, express or implied, regardingthe Properties, whether made by any Seller, on any Seller’s behalf orotherwise, including, without limitation, the physical condition of theProperties, title to or the boundaries of the Properties, pest control matters,soil conditions, the presence, existence or absence of hazardous wastes, toxicsubstances or other environmental matters, compliance with building, health,safety, land use and zoning laws, regulations and orders, structural and otherengineering characteristics, traffic patterns, market data, economic conditionsor projections, and any other information pertaining to the Properties or themarket and physical environments in which they are located.  The Purchaser acknowledges that, except asotherwise expressly provided in 

 

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## thisAgreement or any documents to be delivered to the Purchaser hereunder, it (i)has entered into this Agreement with the intention of making and relying uponits own investigation or that of third parties with respect to the physical,environmental, economic and legal condition of the Properties and (ii) is notrelying upon any statements, representations or warranties of any kind, otherthan those specifically set forth in this Agreement or in any document to bedelivered to the Purchaser at the Closing, made (or purported to be made) byany Seller or anyone acting or claiming to act on any Seller’s behalf.

##  

# **SECTIONVII**.  REPRESENTATIONS AND WARRANTIES OF THEPURCHASER

 

## 7.1.          **Representations of the Purchaser**.  To induce the Seller to enter in thisAgreement, the Purchaser represents and warrants to the Sellers as follows:

##  

### (a)           **Status and Authority of thePurchaser**. The Purchaser is a corporation, duly organized, validly existing and ingood standing under the laws of the State of Maryland, and has all requisitetrust power and authority under the laws of the State of Maryland its charterdocuments to enter into and perform its obligations under this Agreement and toconsummate the transactions contemplated hereby.

###  

### (b)           **Action of the Purchaser**.  The Purchaser has taken all necessary actionto authorize the execution, delivery and performance of this Agreement, andupon the execution and delivery of any document to be delivered by thePurchaser on or prior to the Closing Date, this Agreement and such documentshall constitute the valid and binding obligation and agreement of the Purchaser,enforceable against the Purchaser in accordance with its terms, except as suchenforceability may be limited by bankruptcy, insolvency, reorganization,moratorium or similar laws of general application affecting the rights andremedies of creditors.

###  

### (c)           **No Violations of Agreements**.  Neither the execution, delivery orperformance of this Agreement by the Purchaser, nor compliance with the termsand provisions hereof, will result in any breach of the terms, conditions orprovisions of, or conflict with or constitute a default under, or result in thecreation of any lien, charge or encumbrance upon any property or assets of thePurchaser pursuant to the terms of any indenture, mortgage, deed of trust,note, evidence of indebtedness or any other agreement or instrument by whichthe Purchaser is bound.

 

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### (d)           **Litigation**.  No investigation, action or proceeding ispending and, to the Purchaser’s knowledge, no action or proceeding isthreatened and no investigation looking toward such an action or proceeding hasbegun, which questions the validity of this Agreement or any action taken or tobe taken pursuant hereto.

###  

## 7.2.          **Survival, Etc.**  The representations and warranties made inthis Agreement by the Purchaser shall be continuing and shall be deemed remadeby the Purchaser as of the Closing Date with the same force and effect as ifmade on, and as of, such date.  Allrepresentations and warranties made in this Agreement by the Purchaser shallsurvive the Closing, provided no action based thereon shall be commenced afterthe first (1st) anniversary of the Closing.

##  

# **SECTIONVIII**.  COVENANTS OF THE SELLERS

 

The Sellers herebycovenant with the Purchaser between the date of this Agreement and the ClosingDate as follows:

 

## 8.1.          **Compliance with Laws, Etc.**  To comply in all material respects with (a) all laws, regulations and other requirements fromtime to time applicable of every governmental body having jurisdiction over anySeller or any Property or the use or occupancy thereof and(b) all material terms, covenants and conditions of all agreementsaffecting any Seller or any Property.

##  

## 8.2.          **Approval of Agreements**.  Not to enter into, modify, amend or terminateany of the Contracts, Leases, Resident Agreements or any other agreement withrespect to any Property or to which any Seller is a party, without in eachinstance obtaining the prior written consent of the Purchaser.

##  

## 8.3.          **Compliance with Agreements**.  To comply with each and every material term,covenant and condition contained in the Contracts, the Leases, the ResidentAgreements and any other material document or agreement affecting any Propertyor to which any Seller is a party and to monitor compliance thereunderconsistent with past practices.

##  

## 8.4.          **Notice of Material Changes orUntrue Representations**. Upon learning of any material change in any condition with respect toany Property or of any event or circumstance which makes any representation orwarranty of any Seller under this Agreement untrue or misleading, to promptlynotify the Purchaser thereof.

 

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## 8.5.          **Operation of Property**.  To continue to operate each Property in agood and businesslike fashion consistent with the Sellers’ current practicesand to maintain each Property in good working order and condition in a mannerconsistent with the Sellers’ current practices.

##  

## 8.6.          **Insurance**.  To maintain “all risk” property insurance ona replacement cost basis with respect to all of the Improvements.

##  

## 8.7.          **Employees****.**

 

### (a)           Immediatelyprior to the Closing, each Seller will terminate the employment of eachemployee of such Seller (each a “Seller Employee” and, collectively, the“Seller Employees”) and immediately after the Closing, the Purchaserwill offer each of the Seller Employees the opportunity to continue his/heremployment, as an “at will” employee, with base compensation equal to thatprovided to the Seller Employees immediately prior to the Closing and withbonus opportunities, incentive compensation and pension and health and welfarebenefits comparable to those provided to similarly situated employees of thePurchaser immediately prior to the Closing. Notwithstanding the foregoing, the Purchaser shall have the right, inthe exercise of it managerial discretion, to modify compensation, bonusprograms, incentive compensation and pension andhealth and welfare benefits from time to time and to terminate the employmentof any Person.  Nothing in this Agreementshall be construed as granting any Person any rights of continuing employment,compensation or benefits other than as provided by contract.

###  

### (b)           Immediatelyprior to the Closing, upon the written request of the Purchaser, each Sellershall take all action necessary to cause each Seller Employee Benefit Plan andeach Seller Benefit Arrangement identified in such notice to be transferred tothe Purchaser.  Such actions may include,but shall not be limited to, such actions as are necessary to permit thePurchaser to either assume sponsorship of the Sellers’ tax-qualified retirementplan/tax-qualified 401(k) plan or to consummate a plan-to-plan transfer of theassets of such plan to a qualified plan that the Purchaser sponsors that willoffer comparable benefits to the Seller Employees.

###  

### (c)           For purposesof all plans, programs or arrangements, maintained, sponsored or contributed toby the Purchaser in which any Seller Employee shall be eligible to participate(i) each such plan, program or arrangement will

 

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### treatthe prior service of each Seller Employee with each Seller (or predecessoremployers to the extent such Seller provides past service credit) as servicerendered to the Purchaser for purposes of eligibility and vesting (but not forpurposes of benefit accruals under any defined benefit pension plan), except tothe extent such treatment would result in the duplication of benefits withrespect to the same period of service or to the extent such service was notrecognized under the applicable Seller Benefit Arrangement or Seller EmployeeBenefit Plan, and (ii) the Purchaser shall cause any pre-existing conditions orlimitations and eligibility waiting periods under any such plans to be waivedwith respect to the Seller Employees and their eligible dependents to the sameextent waived under the applicable Seller Benefit Arrangement or SellerEmployee Benefit Plan and give each Seller Employee credit for the plan year inwhich the transition from the Seller Benefit Arrangements and the SellerEmployee Benefit Plans to the Purchaser’s plans occurs, for amounts paidtowards applicable deductibles and annual out-of-pocket limits for expensesincurred prior to the Closing (or such later transition date).

###  

### (d)           Except tothe extent set forth in Section 8.7(b) above, the Sellers shall havefull responsibility for, and the Purchaser shall not assume or otherwise haveany liability, obligation or expense with respect to, (i) any wages, severanceor employment related obligations with respect to any employee of any Seller or(ii) any bonus, pension, profit sharing, 401(k), stock option, deferredcompensation, hospitalization, medical, vision or dental, post-retirementmedical, sickness, accident, severance pay, vacation pay, disability, deathbenefits, insurance and other plans, programs, funds, contracts or arrangementsproviding benefits to the employees, former employees or their dependentssponsored or maintained by any Seller or any predecessor of any Seller or towhich any Seller contributes or is obligated to make contributions.

###  

## 8.8.          **Cooperation****.**  Each Seller shall use reasonable efforts tocooperate with Purchaser and to take such actions as may be reasonablynecessary in order to consummate the transactions contemplated by thisAgreement.  Without limiting theforegoing, each Seller shall use reasonable efforts to terminate or assign anyContracts to which it is a party as the Purchaser may indicate should beterminated or assigned after the expiration of the due diligence period.  In addition, each Seller shall cooperate withthe Purchaser to ensure that all motor vehicles which are acquired by thePurchaser hereunder are properly

 

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## transferred to thePurchaser.  The Sellers’ obligationsunder this Section 8.8 shall survive the Closing.

##  

## 8.9.          **Licensing Approval****.**  Without limiting the Sellers’ obligationsunder Section 8.8, each Seller shall use best efforts to assist thePurchaser in obtaining appropriate licenses from the applicable licensingauthorities which authorize the Purchaser to operate the Properties and theFacilities in the same manner and with the same number of units and beds asthey are currently being operated. Without limiting the foregoing, each Seller shall provide the licensingauthorities which such information as they may require in connection with theissuance of the new licenses to the Purchaser and such Seller shall sign anyapplications or other documents required by the applicable licensingauthorities in connection with the issuance of such licenses.  The Sellers’ obligations under this Section8.9 shall survive the Closing.

##  

## 8.10.        **Bulk Sales****. **The Sellers covenant with the Purchaseras follows: the Sellers shall hold Purchaser harmless and indemnified againstany unpaid taxes related to periods prior to Closing which are owed theCommonwealth of Pennsylvania for which the Purchaser becomes liable underSection 1403 of the Pennsylvania Fiscal Code, as amended.

##  

# **SECTIONIX**. APPORTIONMENTS AND OTHER ADJUSTMENTS

 

## 9.1.          **Real Property Apportionments and Other Adjustments**.  

##  

### (a)           Thefollowing items shall be apportioned at the Closing as of 11:59 p.m. local timeat the Properties on the day immediately preceding the Closing Date:

###  

#### (i)            all other itemsof income and expense normally apportioned in sales of property in similarsituations;

####  

#### (ii)           annual rents,common area maintenance charges and other fixed charges payable under theContracts, Leases and Resident Agreements;

####  

#### (iii)          percentage rents andother unfixed charges payable under the Contracts, Leases and ResidentAgreements;

####  

#### (iv)          fuel, electric,water and other utility costs;

 

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#### (v)           municipal assessmentsand governmental license and permit fees;

####  

#### (vi)          real estatetaxes and assessments other than special assessments, based on the rates andassessed valuation applicable in the fiscal year for which assessed;

####  

#### (vii)         water rates andcharges; and

####  

#### (viii)        sewer and vaulttaxes and rents.

####  

If any of the foregoingcannot be apportioned at the Closing because of the unavailability of theamounts which are to be apportioned, such items shall be apportioned on thebasis of a good faith estimate by the parties and reconciled as soon aspracticable after the Closing Date but, in any event, no later than one (1)year after the Closing Date.

 

### (b)           If there arewater, gas or electric meters located at the Property, the Sellers shall obtainreadings thereof to a date not more than thirty (30) days prior to the ClosingDate and the unfixed water rates and charges, sewer taxes and rents and gas andelectricity charges, if any, based thereon for the intervening time shall beapportioned on the basis of such last readings. If such readings are not obtainable by the Closing Date, then, at theClosing, any water rates and charges, sewer taxes and rents and gas andelectricity charges which are based on such readings shall be prorated basedupon the per diem charges obtained by using the most recent period for whichsuch readings shall then be available. Upon the taking of subsequent actual readings, the apportionment of suchcharges shall be recalculated and the Sellers or the Purchaser, as the case maybe, promptly shall make a payment to the other based upon suchrecalculations.  The parties agree tomake such final recalculations without sixty (60) days after the Closing Date.

###  

### (c)           If anyrefunds of real property taxes or assessments, water rates and charges or sewertaxes and rents shall be made after the Closing, the same shall be held intrust by the Sellers or the Purchaser, as the case may be, and shall first beapplied to the unreimbursed costs incurred in obtaining the same, then to anyrequired refunds to Tenants and Residents, and the balance, if any, shall bepaid to the Sellers (for the period prior to the Closing Date) and to thePurchaser (for the period commencing with the Closing Date).

 

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### (d)           If, on theClosing Date, any Property shall be or shall have been affected by any specialor general assessment or assessments or real property taxes payable as a lumpsum or which are or may become payable in installments of which the firstinstallment is then a charge or lien and has become payable, the Sellers shallpay or cause to be paid at the Closing the unpaid installments of suchassessments, including those which are to become due and payable after theClosing Date.

###  

### (e)           No insurancepolicies of the Sellers are to be transferred to the Purchaser, and noapportionment of the premiums therefor shall be made.

###  

### (f)            At theClosing, the Sellers, on the one hand, and the Purchaser, on the other hand,shall each be responsible for one-half (1/2) of the costs associated with thepurchase and installment of new carpet for the Facility commonly known asOverlook Green, which costs are expected to be approximately $60,000.

###  

### (g)           At theClosing, the Sellers shall transfer to the Purchaser the amount of allunapplied Resident Deposits or other unapplied security deposits held pursuantto the terms of the Leases or the Resident Agreements.

###  

### (h)           If a netamount is owed by the Sellers to the Purchaser pursuant to this Section 9.1,such amount shall be credited against the Purchase Price.  If a net amount is owed by the Purchaser tothe Sellers pursuant to this Section 9.1, such amount shall be paidtogether with the Purchase Price.

###  

Theprovisions of this Section 9.1 shall survive the Closing.

 

## 9.2.          **Closing Costs**.

##  

### (a)           The Sellersshall pay (i) one-half (1/2) of all charges for the Title Commitment, the TitlePolicy (including any endorsements requested by the Purchaser); (ii) one-half(1/2) of all excise, sale, use, value added, registration, stamp, recording,documentary, conveyance, franchise, transfer, gains and similar taxes andimpositions incurred in connection with the transactions contemplated by thisAgreement; (iii) one-half (1/2) of all recording charges for the Deeds; and(iv) all recording charges for instruments removing liens or otherwise curingtitle and survey matters.

 

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### (b)           ThePurchaser shall pay (i) one-half (1/2) of all charges for the Title Commitment,the Title Policy (including any endorsements requested by the Purchaser); (ii)one-half (1/2) of all excise, sale, use, value added, registration, stamp,recording, documentary, conveyance, franchise, transfer, gains and similartaxes and impositions incurred in connection with the transactions contemplatedby this Agreement; (iii) one-half (1/2) of all recording charges for the Deeds;and (iv) all other costs incurred by the Purchaser in connection with thisAgreement.

###  

### (c)           Each partyshall pay the fees and expenses of its attorneys and other consultants.  Any charges and expenses incurred by EscrowAgent in effecting Closing shall be shared equally by the parties unless due tothe fault of one of them (in which case the party at fault shall pay for allsuch charges).

###  

## 9.3.          **Receivables and Payables****.**

 

### (a)           On the datethat is two (2) Business Days prior to the Closing Date, the Sellers shallprovide the Purchaser with a schedule which identifies all of the accountsreceivable related to goods or services provided at the Properties by theSellers or their agents with respect to periods prior to the Closing which arethen outstanding, the face amount thereof, the amount of time such receivableshave been outstanding, and the value of such receivable as calculated pursuantto this Section 9.3(a).  TheSellers shall certify to the Purchaser that the schedule is true and correctand shall provide Purchaser with appropriate backup documentation evidencingsuch receivables (including, without limitation, copies of any applicableinvoices).  The schedule provided underthis Section 9.3(a) shall replace Schedule 6.1(t).  The Purchase Price shall be increased by anamount equal to the value of the accounts receivable reflected on the Scheduleprovided under this Section 9.3(a) as follows: Receivables which have been outstanding for thirty (30) or fewer daysshall be valued at one hundred percent (100%) of their face value (as the samemay be prorated to relate only to periods prior to the Closing Date);receivables which have been outstanding for between thirty-one (31) and sixty(60) days shall be valued at seventy-five percent (75%) of their face value (asthe same may be prorated to relate only to periods prior to the Closing Date);receivables which have been outstanding for between sixty-one (61) and ninety(90) days shall be valued at fifty percent (50%) of their face value (as thesame may be prorated to relate only to periods prior to the

 

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### ClosingDate); and receivables which have been outstanding for more than ninety (90)days shall have no value.

###  

### (b)           On the datethat is two (2) Business Days prior to the Closing Date, the Sellers shallprovide the Purchaser with a schedule which identifies all Trade Payables whichare then outstanding, the face amount thereof and the amount of time suchpayables have been outstanding.  TheSellers shall certify to the Purchaser that the schedule is true and correctand shall provide Purchaser with appropriate backup documentation evidencingsuch payables (including, without limitation, copies of any applicableinvoices).  The schedule provided under thisSection 9.3(b) shall replace Schedule 6.1(u).  The Purchase Price shall be reduced by anamount equal to one hundred ten percent (110%) of the total of the accountspayable identified in the schedule provided under this Section 9.3(b)(the “Payable Holdback Amount”) in order to provide for the payment ofall such accounts payable and may be applied to any other accounts payablerelated to the period prior to the Closing Date.  The Purchaser shall pay all Trade Payablesreferred to in the schedule provided under this Section 9.3(b) in a timelyfashion in accordance with the Purchaser’s usual and customary practices.  On the date that is ninety (90) days afterthe Closing Date, the Purchaser shall provide the Sellers with an accountingwhich identifies all such Trade Payables which have been paid by the Purchaser,and specifies when such accounts payable were paid, together with appropriatebackup documentation evidencing such payment (including, without limitation,copies of any applicable checks).  To theextent that any portion of the Payable Holdback Amount has not been applied toany such accounts payable, the Purchaser shall remit such portion of thePayable Holdback Amount to the Sellers together with such accounting.

###  

# **SECTION X**.  DAMAGE TO OR CONDEMNATION OF PROPERTY

 

## 10.1.        **Casualty**.  If, prior to the Closing, all or any part ofany Property is destroyed or damaged by fire or other casualty, the Sellersshall promptly notify the Purchaser of such fact.  If any such casualty shall damage all or anymaterial portion of such Property, then the Purchaser shall have the right toterminate this Agreement in its entirety or with respect to such affectedProperty by giving notice thereof to the Sellers not later than ten (10) daysafter the date on which the Purchaser receives the Sellers’ notice as aforesaid(and, if necessary, the Closing Date shall be extended until two (2) BusinessDays after the expiration of such ten-day period).  If the Purchaser elects to terminate thisAgreement in its entirety

 

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## as aforesaid,then the Escrow Agent shall return the Deposit to the Purchaser, and, upon thePurchaser’s receipt of the Deposit, this Agreement shall terminate and be of nofurther force and effect and neither party shall have any liability to the otherhereunder.  If the Purchaser elects toterminate this Agreement only with respect to the affected Property asaforesaid, then the Escrow Agent shall retain the entire Deposit (subject tothe terms of this Agreement), the Sellers and the Purchaser shall reasonablyagree upon the portion of the Purchase Price allocated to the affected Propertyand this Agreement shall terminate with respect to the affected Property onlyand all other terms and conditions of this Agreement shall remain in full forceand effect, except that the Purchase Price hereunder shall be reduced by theportion of the Purchase Price allocated to the affected Property.  If any such casualty shall damage less than amaterial portion of any Property or if the Purchaser shall not elect toterminate this Agreement as aforesaid, then there shall be no abatement of thePurchase Price and the applicable Seller shall assign to the Purchaser at theClosing all of such Seller’s rights to the insurance proceeds, if any, undersuch Seller’s insurance policies covering the Property with respect to suchdamage or destruction and there shall be credited against the Purchase Pricefollowing:  (a) the amounts of anyapplicable insurance deductibles; (b) the amounts of any proceeds previouslyreceived by such Seller; and (c) the amounts of any deficiency of proceeds.

##  

## 10.2.        **Condemnation**.  If, prior to the Closing,all or any part of any Property is taken by eminent domain (or is the subjectof a pending taking which has not yet been consummated), the Sellers shallpromptly notify the Purchaser of such fact.  If such taking affects all or any materialportion of such Property (including any access or parking), then the Purchasershall have the right to terminate this Agreement in its entirety or withrespect to such affected Property by giving notice thereof to the Sellers notlater than ten (10) days after the date on which the Purchaser receives theSellers’ notice as aforesaid (and, if necessary, the Closing Date shall beextended until two (2) Business Days after the expiration of such ten-dayperiod).  If the Purchaser elects toterminate this Agreement in its entirety as aforesaid, then the Deposit shallbe returned to the Purchaser, and, upon the Purchaser’s receipt of the Deposit,this Agreement shall terminate and be of no further force and effect andneither party shall have any liability to the other hereunder.  If the Purchaser elects to terminate thisAgreement only with respect to the affected Property as aforesaid, then theEscrow Agent shall retain the entire Deposit (subject to the

 

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## termsof this Agreement), the Sellers and the Purchaser shall reasonably agree uponthe portion of the Purchase Price allocated to the affected Property and thisAgreement shall terminate with respect to the affected Property only and allother terms and conditions of this Agreement shall remain in full force andeffect, except that the Purchase Price hereunder shall be reduced by theportion of the Purchase Price allocated to the affected Property.  If less than a material portion of theProperty shall be affected by a taking or if the Purchaser shall not elect toterminate this Agreement as aforesaid, the sale of the Property shall beconsummated as herein provided without any adjustment to the Purchase Price(except to the extent of any condemnation award received by the Seller prior tothe Closing) and the applicable Seller shall assign to the Purchaser at theClosing all of such Seller’s right, title and interest in and to all awards, ifany, for the taking, and the Purchaser shall be entitled to receive and keepall awards for the taking of the Property or portion thereof.

##  

10.3         **S****urvival**.  The parties’ obligations, if any, under this Article10 shall survive the Closing.

 

# **SECTIONXI**. DEFAULT

 

## 11.1.        **Default by the Seller**.  If any Seller shall have made anyrepresentation or warranty herein which shall be untrue or misleading in anymaterial respect, or if any Seller shall fail to perform any of the materialcovenants and agreements contained herein to be performed by such Seller, thenthe Purchaser, as its sole and exclusive remedy, may elect to either (a)terminate this Agreement and receive a refund of the Deposit and receive fromthe Seller reimbursement for the Purchaser’s out-of-pocket expenses incurred inconnection with this Agreement or (b) pursue a suit for specific performance; provided,however, if the Purchaser is unsuccessful in its suit for specificperformance it shall nevertheless be entitled to the remedies provided inclause (a) above.  Nothing contained inthis Section 11.1 shall preclude the Purchaser from availing itself ofany remedy available to it at law or in equity with respect to any breach ofrepresentation or warranty or any failure to perform any covenant or agreementrequired to be performed by any Seller which occurs or is discovered after theClosing.

##  

## 11.2.        **Default by the Purchaser**.  If the Purchaser shall have made anyrepresentation or warranty herein which shall be untrue or misleading in anymaterial respect, or if the Purchaser shall fail to perform any of thecovenants and

 

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## agreements containedherein to be performed by it, the Seller, as its sole and exclusive remedyprior to Closing, may terminate this Agreement and retain the Deposit, asliquidated damages and not as a penalty. Nothing contained in this Section 11.2 shall preclude the Sellersfrom availing themselves of any remedy available to it at law or in equity withrespect to any breach of representation or warranty or any failure to performany covenant or agreement required to be performed by the Purchaser whichoccurs or is discovered after the Closing.

##  

# **SECTIONXII**.  MISCELLANEOUS

 

## 12.1.        **Allocation of Liability**.  It is expressly understood and agreed thatthe Sellers shall be liable to third parties for any and all obligations,claims, losses, damages, liabilities and expenses arising out of events,contractual obligations, acts, or omissions of the Sellers that occurred inconnection with the ownership or operation of the Properties prior to theClosing and the Purchaser shall be liable to third parties for any and allobligations, claims, losses, damages, liabilities and expenses arising out ofevents, contractual obligations, acts, or omissions of the Purchaser that occurin connection with the ownership or operation of the Properties after theClosing.  The provisions of this Section12.1 shall survive the Closing.

##  

## 12.2.        **Brokers**.  Each of the parties hereto represents to theother parties that it dealt with no broker, finder or like agent in connectionwith this Agreement or the transactions contemplated hereby other than theBroker, payment to such broker being the sole responsibility of the Seller.  Each party shall indemnify and hold harmlessthe other and its respective legal representatives, heirs, successors andassigns from and against any loss, liability or expense, including, reasonableattorneys’ fees, arising out of any claim or claims for commissions or othercompensation for bringing about this Agreement or the transactions contemplatedhereby made by any other broker, finder or like agent, if such claim or claimsare based in whole or in part on dealings with the indemnifying party.

##  

## 12.3.        **Publicity**.  The parties agree that, except as required bylaw or the rules of the American Stock Exchange applicable to Purchaser, noparty shall, with respect to this Agreement and the transactions contemplatedhereby, make any public pronouncements, issue press releases or otherwisefurnish information regarding this Agreement or the transactions contemplatedto any third party without the consent of the other party, which consent

 

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## shall not beunreasonably withheld.  No Seller shalltrade in the securities of the Purchaser until a public announcement of thetransactions contemplated by this Agreement has been made.  No party shall record this Agreement or anynotice thereof.

##  

## 12.4.        **Financials**.  The Sellers shall provide the Purchaser withaccess to the books and records of the Seller for the purpose of preparingaudited financial statements for the Property with respect to the 2002, 2003,2004 calendar years and the stub 2005 period, such financial statements to beprepared at the Purchaser’s sole cost and expense.  The Sellers shall provide the Purchaser andits accountants with such certifications with respect to such financials asthey shall from time to time reasonably require.  The provisions of this Section 12.4 shallsurvive the Closing hereunder.

##  

## 12.5.        **Notices**.

##  

### (a)           Any and allnotices, demands, consents, approvals, offers, elections and othercommunications required or permitted under this Agreement may be given by theattorneys of the parties and shall be deemed adequately given if in writing andthe same shall be delivered either in hand, by telecopier with electronicconfirmation of receipt, or by mail or Federal Express or similar expeditedcommercial carrier, addressed to the recipient of the notice, postpaid andregistered or certified with return receipt requested (if by mail), or with allfreight charges prepaid (if by Federal Express or similar carrier).

###  

### (b)           All noticesrequired or permitted to be sent hereunder shall be deemed to have been givenfor all purposes of this Agreement upon the date of the electronic confirmationof receipt, in the case of a notice by telecopier, and, in all other cases,upon the date of receipt or refusal, except that whenever under this Agreementa notice is either received on a day which is not a Business Day or is requiredto be delivered on or before a specific day which is not a Business Day, theday of receipt or required delivery shall automatically be extended to the nextBusiness Day.  Any notice which shall bedelivered by telecopier to Donna J. Naab shall bedeemed to have been simultaneously delivered by telecopier to the Sellers.

 

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### (c)           All suchnotices shall be addressed,

###  

if to the Sellers or Gordon, to:

 

c/o Scott W. Gordon

510Fifth Avenue (PH)

BeaverFalls, PA 15010

 

with a copy to:

 

FoxRothschild LLP

625Liberty Avenue, 29th Floor

Pittsburgh,Pennsylvania 15222-3115

Attn:  Donna J. Naab, Esq.

TelecopierNo.:  (412) 391-6984

 

If tothe Purchaser, to:

 

c/o Five Star Quality Care, Inc.

400Centre Street

Newton,Massachusetts  02158

Attn:  Mr. Evrett W. Benton

TelecopierNo.:  (617) 796-8385

 

with a copy to:

 

Sullivan& Worcester LLP

OnePost Office Square

Boston,Massachusetts  02109

Attn:  John M. Steiner, Esq.

Telecopier No. (617) 338-2880

 

### (d)           by noticegiven as herein provided, the parties hereto and their respective successor andassigns shall have the right from time to time and at any time during the termof this Agreement to change their respective addresses effective upon receiptby the other parties of such notice and each shall have the right to specify asits address any other address within the United States of America.

###  

## 12.6.        **Waivers, Etc.**  Any waiver of any term or condition of thisAgreement, or of the breach of any covenant, representation or warrantycontained herein, in any one instance, shall not operate as or be deemed to beor construed as a further or continuing waiver of any other breach of suchterm, condition, covenant, representation or warranty or any other term,condition, covenant, representation or warranty, nor shall any failure at anytime or times to enforce or require

 

38

----

 

## performanceof any provision hereof operate as a waiver of or affect in any manner suchparty’s right at a later time to enforce or require performance of suchprovision or any other provision hereof. This Agreement may not be amended, nor shall any waiver, change,modification, consent or discharge be effected, exceptby an instrument in writing executed by or on behalf of the party against whomenforcement of any amendment, waiver, change, modification, consent ordischarge is sought.

##  

## 12.7.        **Assignment; Successors andAssigns**. This Agreement and all rights and obligations hereunder shall not beassignable by any party without the written consent of the other, except thatthe Purchaser may assign this Agreement, in whole or in part, to any entitywholly owned, directly or indirectly, by the Purchaser. If the Purchaser shallassign this Agreement to any entity wholly owned, directly or indirectly, bythe Purchaser, the Purchaser named herein shall remain liable for theobligations of the “Purchaser” hereunder. In addition, the Purchaser shall have the right, by notice given to theSellers at least two (2) Business Days prior to the Closing Date, to direct theSellers to deliver all or any portion of the Property (including, withoutlimitation, the Land, the Improvements and the FF&E) to Senior HousingProperties Trust or its affiliate, in which case the Sellers shall execute anddeliver such documents as are described in Section 4.1 as may beappropriate directly to Senior Housing Properties Trust (or its affiliate) andSenior Housing Properties Trust (or its affiliate) shall be entitled to relyupon the representations and warranties made by Seller in connection with suchProperty.  This Agreement shall bebinding upon and shall inure to the benefit of the parties hereto and their respectivelegal representatives, successors and permitted assigns.  This Agreement is not intended and shall notbe construed to create any rights in or to be enforceable in any part by anyother persons.

##  

## 12.8.        **Severability**.  If any provision of this Agreement shall beheld or deemed to be, or shall in fact be, invalid, inoperative orunenforceable as applied to any particular case in any jurisdiction orjurisdictions, or in all jurisdictions or in all cases, because of the conflictof any provision with any constitution or statute or rule of public policy orfor any other reason, such circumstance shall not have the effect of renderingthe provision or provisions in question invalid, inoperative or unenforceablein any other jurisdiction or in any other case or circumstance or of renderingany other provision or provisions herein contained invalid, inoperative orunenforceable to the extent that such other provisions are not

 

39

----

 

themselves actually in conflict with such constitution, statute or ruleof public policy, but this Agreement shall be reformed and construed in anysuch jurisdiction or case as if such invalid, inoperative or unenforceableprovision had never been contained herein and such provision reformed so thatit would be valid, operative and enforceable to the maximum extent permitted insuch jurisdiction or in such case.

##  

## 12.9.        **Counterparts, Etc**.  This Agreement may be executed in two (2) ormore counterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.  Any such counterparts may be delivered byfacsimile.  This Agreement constitutesthe entire agreement of the parties hereto with respect to the subject matterhereof and shall supersede and take the place of any other instrumentspurporting to be an agreement of the parties hereto relating to the subjectmatter hereof.

##  

## 12.10.      **Performance on Business Days**.  In the event the date on which performance orpayment of any obligation of a party required hereunder is other than aBusiness Day, the time for payment or performance shall automatically beextended to the first (1st) Business Day following such date.

##  

## 12.11.      **Attorneys Fees**.  Notwithstanding anything contained herein tothe contrary, if any lawsuit or arbitration or other legal proceeding arises inconnection with the interpretation or enforcement of this Agreement, theprevailing party therein shall be entitled to receive from the other party theprevailing party’s costs and expenses, including reasonable attorneys’ feesincurred in connection therewith, in preparation therefor and on appealtherefrom, which amounts shall be included in any judgment therein.

##  

## 12.12.      **Section and Other Headings**.  The headings contained in this Agreement arefor reference purposes only and shall not in any way affect the meaning orinterpretation of this Agreement.

##  

## 12.13.      **Time of Essence**.  Time shall be of the essence with respect tothe performance of each and every covenant and obligation, and the giving ofall notices, under this Agreement.

##  

## 12.14.      **GOVERNING LAW**.  THIS AGREEMENT IS TO BE CONSTRUED ANDENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNEDBY, THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ANYLAWS OR RULES RELATING TO CONFLICTS OF LAWS THAT WOULD CAUSE THE APPLICATION

 

40

----

 

## OFTHE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF MASSACHUSETTS).**** TO THE EXTENTPERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY ABSOLUTELY AND IRREVOCABLYCONSENT AND SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THECOMMONWEALTH OF MASSACHUSETTS AND THE COURTS OF THE COMMONWEALTH OFPENNSYLVANIA AND OF ANY FEDERAL COURT LOCATED IN SAID JURISDICTIONS INCONNECTION WITH ANY ACTIONS OR PROCEEDINGS BROUGHT AGAINST ANY OF THEM BY ANYHOLDER ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS ANDHEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION ORPROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT.  EACH PARTY HEREBY WAIVES AND AGREES NOT TOASSERT IN ANY SUCH ACTION OR PROCEEDING, IN EACH CASE, TO THE FULLEST EXTENTPERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (A) IT IS NOT PERSONALLY SUBJECT TOTHE JURISDICTION OF ANY SUCH COURT, (B) IT IS IMMUNE FROM ANY LEGAL PROCESS(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT INAID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR ITS PROPERTY,(C) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, OR(D) SUCH TRANSACTION DOCUMENT MAY NOT BE ENFORCED IN OR BY ANY SUCH COURT.  IN ANY SUCH ACTION OR PROCEEDING, TO THEFULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY ABSOLUTELY AND IRREVOCABLY WAIVE TRIAL BY JURY ANDPERSONAL IN HAND SERVICE OF ANY SUMMONS, COMPLAINT, DECLARATION OR OTHERPROCESS AND HEREBY ABSOLUTELY AND IRREVOCABLY AGREE THAT THE SERVICE MAY BEMADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO ITAT ITS ADDRESS SET FORTH IN OR FURNISHED PURSUANT TO THE PROVISIONS OF THISAGREEMENT, OR BY ANY OTHER MANNER PROVIDED BY LAW.

 

41

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**IN WITNESS WHEREOF**, theparties have caused this Agreement to be executed as a sealed instrument as ofthe date first above written.

 
| ** ** | **SELLERS:**                              |
|------------|-------------------------------------------|
| ** ** | ** **                                |
|       | FRANCISCAN MANOR ASSOCIATES, LLC, a       |
|       | Pennsylvania limited liability company    |
|       |                                      |
|       | By:                                       | Gordon Health Ventures, LLC, |
|       |                                      | its member |
|       |                                      |   |
|       |                                      | By: | /s/ Scott W. Gordon |   |
|       |                                      |   |  Scott W.  Gordon |
|       |                                      |   |  Chief  Operating Officer |
|       |                                      |   |
|       | MUIRFIELD ASSOCIATES, LLC, a Pennsylvania |
|       | limited liability company                 |
|       |                                      |   |
|       | By:                                       | Gordon Health Ventures, LLC, |
|       |                                      | its member |
|       |                                      |   |
|       |                                      | By: | /s/ Scott W. Gordon |   |
|       |                                      |   |  Scott W.  Gordon |
|       |                                      |   |  Chief  Operating Officer |
|       |                                      |   |
|       |                                      |   |
|       | PRESTWICKE ASSOCIATES, LLC, a             |
|       | Pennsylvania lmited liability company     |
|       |                                      |   |
|       | By:                                       | Gordon Health Ventures, LLC, |
|       |                                      | its member |
|       |                                      |   |
|       |                                      | By: | /s/ Scott W. Gordon |   |
|       |                                      |   |  Scott W.  Gordon |
|       |                                      |   |  Chief  Operating Officer |
|       |                                      |   |
|       | ROYAL ABERDEEN ASSOCIATES, LLC, a         |
|       | Pennsylvania limited liability company    |
|       |                                      |   |
|       | By:                                       | Gordon Health Ventures, LLC, |
|       |                                      | its member |
|       |                                      |   |
|       |                                      | By: | /s/ Scott W. Gordon |   |
|       |                                      |   |  Scott W.  Gordon |
|       |                                      |   |  Chief  Operating Officer |

 

42

----

 
|       | TROON ASSOCIATES, LLC, a Pennsylvania     |
|------------|-------------------------------------------|
|       | limited liability company                 |
|       |                                      |   |
|       | By:                                       | Gordon Health Ventures, LLC, |
|       |                                      | its member |
|       |                                      |   |
|       |                                      | By: | /s/ Scott W. Gordon |   |
|       |                                      |   |  Scott W.  Gordon |
|       |                                      |   |  Chief  Operating Officer |
|       |                                      |   |
|       | TURNBERRY ASSOCIATES, LLC, a Pennsylvania |
|       | limited liability company                 |
|       |                                      |   |
|       | By:                                       | Gordon Health Ventures, LLC, |
|       |                                      | its member |
|       |                                      |   |
|       |                                      |   |
|       |                                      | By: | /s/ Scott W. Gordon |   |
|       |                                      |   |  Scott W.  Gordon |
|       |                                      | ** ** |  Chief  Operating Officer |
| ** ** | ** **                                | ** ** |
| ** ** | ** **                                | ** ** |
| ** ** | **PURCHASER:**                            |
| ** ** | ** **                                | ** ** |
|       | FIVE STAR QUALITY CARE, INC.,             |
|       | a Maryland corporation                    |
| ** ** | ** **                                | ** ** |
| ** ** | By:                                       | /s/ Evrett W. Benton | ** ** |
|       |                                      | Evrett W. Benton |
|       |                                      | President |
|            |                                           |  |  |  |  |  |

 

THE UNDERSIGNED HEREBYACKNOWLEDGES AND

AGREES TO BE BOUND BY THEPROVISIONS OF

SECTION2.4 OF THE FOREGOING AGREEMENT.

 

**LAWYERS TITLEINSURANCE CORPORATION**

 

 
| By:    | /s/ Kathryn  Andriko   |   |
|--------|------------------------|--------|
|   | Name: Kathryn  Andriko |
|   | Its: Vice  President   |

 

43

----

 

THE UNDERSIGNED HEREBYACKNOWLEDGES AND

AGREES TO BE BOUND BY THEPROVISIONS OF

SECTION6.3 OF THE FOREGOING AGREEMENT.

 
| /s/ Scott W.  Gordon |   |
|----------------------|--------|
| Scott W. Gordon      |

 

44

----

 

**[The following schedulesand exhibits have been omitted and will be supplementally furnished to theSecurities and Exchange Commission upon request:]**

 
| SCHEDULE 1.22       |   | THE LAND                                                                |
|---------------------|--------|-------------------------------------------------------------------------|
| SCHEDULE 2.3(a)(ii) |   | PURCHASE PRICE ALLOCATION                                               |
| SCHEDULE 6.1(d)     |   | LITIGATION                                                              |
| SCHEDULE 6.1(g)     |   | LEASES AND RESIDENT AGREEMENTS                                          |
| SCHEDULE 6.1(h)     |   | CONTRACTS                                                               |
| SCHEDULE 6.1(i)     |   | FF&E AND OTHER PERSONAL PROPERTY                                    |
| SCHEDULE 6.1(m)     |   | TAXES                                                                   |
| SCHEDULE 6.1(o)     |   | INSURANCE                                                               |
| SCHEDULE 6.1(p)-1   |   | EMPLOYMENT CONTRACTS AND CONSULTING CONTRACTS                           |
| SCHEDULE 6.1(p)-2   |   | EMPLOYEES                                                               |
| SCHEDULE 6.1(q)     |   | INTELLECTUAL PROPERTY                                                   |
| SCHEDULE 6.1(s)     |   | SELLER EMPLOYEE BENEFIT PLANS AND SELLER  EMPLOYEE BENEFIT ARRANGEMENTS |
| SCHEDULE 6.1(t)     |   | ACCOUNTS RECEIVABLE                                                     |
| SCHEDULE 6.1(u)     |   | ACCOUNTS PAYABLE                                                        |
|                |   |                                                                    |
|                |   |                                                                    |
| EXHIBIT A           |   | FORM OF DEED                                                            |

 

----

**EXHIBIT B**

 

**FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT**

 

[See attached copy.]

 

----

 

**ASSIGNMENT AND ASSUMPTION AGREEMENT**

 

**THIS ASSIGNMENT AND ASSUMPTION AGREEMENT**(this “Agreement”) is made and entered into as of [                   ,2005], by and between               ,a                               (the “Assignor”), and                     ,a                      (the “Assignee”).

 

**WITNESSETH:**

 

**WHEREAS,** theAssignor and the Assignee are parties to that certain Purchase and SaleAgreement, dated as of [               ],(the “Purchase Agreement”), pursuant to which the Assignor has agreed tosell, and the Assignee has agreed to purchase, certain land and other property,including, without limitation, the real property described on Exhibit Aattached hereto (the “Property”);

 

**WHEREAS,**inconnection with the closing of the sale contemplated by the Purchase Agreement,the Assignor has agreed to assign, and the Assignee has agreed to assume, amongother things the Assigned Assets (as hereinafter defined), subject to and uponthe terms and conditions hereinafter set forth.

 

**NOW, THEREFORE,** forgood and valuable consideration, the receipt and sufficiency of which is herebymutually acknowledged, the Assignor and the Assignee agree as follows:

 

1.             Capitalizedterms used and not otherwise defined herein shall have the meanings ascribedthereto in the Purchase Agreement.

 

2.             TheAssignor hereby assigns to the Assignee all of the Assignor’s right, title andinterest in and to the following (collectively, the “Assigned Assets”):

 

### (a)        all Contractsrelated to the Property and described on Exhibit B attached hereto;

###  

### (b)       all Leases andResident Agreement related to the property and described on Exhibit Cattached hereto;

###  

### (c)        all of theResident Deposits and other forms of security related to the ResidentAgreements and the Leases described on Exhibit C;

 

----

 

### (d)       all of theIntangible Property related to the Property;

###  

### (e)        all of theIntellectual Property related to the Property;

###  

### (f)        all of theLicenses and Permits related to the Property; and

###  

### (g)       all of theWarranties related to the Propery.

###  

3.             TheAssignor hereby indemnifies the Assignee and agrees to hold harmless theAssignee from and against all of the obligations, liabilities, claims andexpenses arising under the Assigned Assets prior to the date hereof.

 

4.             TheAssignee hereby indemnifies the Assignor and agrees to hold the Assignorharmless from and against all of the obligations, liabilities, claims andexpenses arising under the Assigned Assets from and after the date hereof.

 

5.             ThisAssignment shall be binding on, and inure to the benefit of, the partieshereto, their respective successors in interest, and their respective assigns.

 

6.             ThisAssignment shall be governed by, and construed in accordance with, the laws ofThe Commonwealth of Pennsylvania.

 

7.             ThisAssignment may be executed in two or more counterparts, all of which shall beconstrued together as a single instrument.

 

[Signature page follows]

 

B-2

----

 

IN WITNESS WHEREOF, Assignor and Assignee haveexecuted this Assignment as a sealed instrument as of the day and year firsthereinabove written.

 
|       | **ASSIGNOR**: |
|------------|---------------|
|       |          |
|       |          | , |
|       | a             |   |   |
|       |          |
|       | By:           |   | , |
|       |          | Name: |   |   |
|       |          | Title: |   |   |
|       |          |
| ** ** | **ASSIGNEE:** |
| ** ** | ** **    |
|       |          | , |
|       | a             |   |   |
|       |          |
|       | By:           |   | , |
|       |          | Name: |   |   |
|       |          | Title: |   |   |
|            |               |  |  |  |  |  |  |  |  |  |

 

 

[INSERT APPROPRIATE NOTARY BLOCKS]

 

B-3

----

 

**EXHIBIT A**

 

**LAND**

 

[To be attached.]

 

----

 

**EXHIBIT C**

 

**FORM OFBILL OF SALE**

 

[See attached copy.]

 

----

 

**BILL OF SALE**

 

                           ,a                         (the “Seller”), for good and valuable consideration paid by                              ,a                                (the “Purchaser”), the receipt and sufficiency of which is herebyacknowledged, by these presents does  BARGAIN, SELL, ASSIGN AND DELIVER untoPurchaser all of Seller’s right, title and interest in and to the following(collectively, the “Personal Property”):

 

### (a)           all fixtures, furniture, equipment,machinery, systems and other items of personal property owned by the Seller andattached or appurtenant to, located on or used in connection with theownership, use, operation or maintenance of the real property and improvementsthereon located at the personal care home located at [INSERT STREET ADDRESS](the “Facility”);

###  

### (b)           [INSERT DESCRIPTION OF MOTOR VEHICLESAND VINS IF APPLICABLE];

###  

### (c)           all books, records, files, andpapers, whether in hard copy or computer format, used in connection with theoperation of the Facility, including without limitation, sales, marketing andadvertising materials, lists of present suppliers and personnel and employmentrecords;

###  

### (d)           any consummables, inventories,stocks, supplies and other related items owned by the Seller and used inconnection with the operation or maintenance of the Facility or the provisionof services to the Residents of the Facility; and

###  

### (e)           all of the other personal propertywhich is owned by the Seller and used in connection with the ownership, use,operation or maintenance of the Facility.

###  

THE SELLER HEREBY WARRANTS TO THE PURCHASER THAT THESELLER IS THE LAWFUL OWNER OF THE PERSONAL PROPERTY AND THE PERSONAL PROPERTYIS FREE FROM THE RIGHTS AND CLAIMS OF OTHERS, BUT MAKES NO OTHER REPRESENTATIONOR WARRANTY WITH RESPECT TO THE PERSONAL PROPERTY, EXCEPT TO THE EXTENT SETFORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BETWEEN THE SELLER AND THEPURCHASER DATED AS OF                               (THE “AGREEMENT”).  THE SELLERMAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE WITH RESPECT TOTHE PERSONAL PROPERTY, AND THE SAME IS SOLD IN AN “AS IS, WHERE IS” CONDITION,WITH ALL FAULTS AND THAT

 

----

 

THERE ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESSEDOR IMPLIED, EXCEPT TO THE EXTENT SET FORTH IN THE AGREEMENT.

 

TO HAVE AND TO HOLD thePersonal Property unto the Purchaser, its successors and assigns forever.

 

This instrument shall be governed by, and construed inaccordance with, the laws of the Commonwealth of Pennsylvania.

 

C-2

----

 

IN WITNESS WHEREOF, this Bill of Sale has been dulyexecuted as a sealed instrument effective as of the         day of                      ,2005.

 
|   |   | ,      |
|--------|--------|--------|
|   | a      |   |   |
|   |   |
|   | By:    |   | , |
|   |   | Name:  |   |   |
|   |   | Title: |   |   |
|        |        |        |  |  |  |  |

 

C-3

----

 

**EXHIBIT D**

 

**FORM OFNONCOMPETITION AGREEMENT**

 

[See attached copy.]

 

----

 

**NON-COMPETITION AGREEMENT**

**(Scott Gordon)**

 

**THIS NON-COMPETITION AGREEMENT**(this “Agreement”) is made and entered into as of January          ,2005, by and between FIVE STAR QUALITY CARE, INC., a Maryland corporation, onbehalf of itself and its wholly-owned subsidiaries it may designate to acquireor part of the properties pursuant to the Purchase Agreement referred to below(collectively, the “Purchaser”) and SCOTT GORDON, a person of the age ofmajority residing in                        ,                    (“Gordon”).

 

**WITNESSETH:**

** **

**WHEREAS,** Five StarQuality Care, Inc. and [                       ](the “Seller”) have entered into that certain Purchase and SaleAgreement, dated as of January      , 2005 (the “PurchaseAgreement”), pursuant to which, among other things, the Seller has agreedto sell, and the Purchaser has agreed to purchase, the Properties (as such termis defined in the Purchase Agreement);

 

**WHEREAS,**Gordon hasbeen involved in the management and operation of the Properties;

 

**WHEREAS,** it is acondition of the Purchaser’s obligations to consummate the transactionscontemplated by the Purchase Agreement that Gordon enter into this Agreement;and

 

**WHEREAS,** Gordonowns [the equity interest in the Seller] and the consummation of thetransaction contemplated by the Purchase Agreement will result in a direct,material benefit to Gordon;

 

**NOW, THEREFORE,** inconsideration of the Purchaser’s consummation of the transactions contemplatedby the Purchase Agreement and other good and valuable consideration, thereceipt, adequacy and sufficiency of which are hereby acknowledged, the partieshereto, intending to be legally bound, do covenant and agree as follows:

 

Section 1.               Definitions.  Terms used in this Agreement which are notdefined herein but which are defined in the Purchase Agreement shall have therespective meanings so defined in the Purchase Agreement.

 

“Affiliate” shallmean, when used with respect to any Person, (a) any other Person at the timedirectly or indirectly

 

----

 

controlling, controlled by or under direct or indirect common controlwith such Person, (b) any other Person of which such Person at the time owns,or has the right to acquire, directly or indirectly, five percent (5%) or moreon a consolidated basis of the equity or beneficial interest, (c) any otherPerson which at the time owns, or has the right to acquire, directly orindirectly, five percent (5%) or more of any class of the capital stock orbeneficial interest of such Person, (d) any executive officer or director ofsuch Person, and (e) when used with respect to an individual, shall include aspouse, any ancestor or descendant, or any other relative (by blood, adoptionor marriage), within the third degree of such individual any member of suchindividual’s Immediate Family. A Person shall be deemed to be “controlled by”any other Person if such other Person possesses, directly or indirectly, powerto direct or cause the direction of the management or policies of such Personor the disposition of its assets or properties, whether by stock, equity orother ownership, by contract, arrangement or understanding, or otherwise.  Notwithstanding the foregoing, in no eventshall the term “Affiliate” be deemed to refer to Health Care REIT, Inc.

 

“Covered Territory” shall mean all areas thatare within the following counties in the Commonwealth of Pennsylvania:Allegheny County, Beaver County and Washington County.

 

“Entity” shall mean any corporation, firm,unincorporated organization, limited liability company, association,partnership, a trust (inter vivos or testamentary), an estate of a deceased,insane or incompetent individual, business trust, joint stock company, jointventure or other organization, entity or business, whether acting in anindividual, fiduciary or other capacity, or any governmental authority.

 

“Immediate Family” shall mean spouses, childrenand parents, whether related by blood or by marriage.  Notwithstanding the foregoing, in no eventshall the term “Immediate Family” include Gordon’s spouse, Jennifer Gordon.

 

“Legal Action” shall mean, with respect to anyPerson, any litigation or legal or other actions, arbitrations, investigations,proceedings or suits, at law or in arbitration, equity or admiralty (whether ornot purported to be brought on behalf of such Person) affecting such Person orany of its business or property or assets.

 

“Person”shall mean any natural individual or any Entity.

 

D-2

----

 

“Proscribed Activity” shall mean any and allactivities related to the ownership, operation, leasing, construction ormanagement of nursing homes, assisted living facilities, Alzheimer’s carecenters.  The Proscribed Activity shallinclude soliciting employment from any Seller Employees.

 

“Restricted Period” shall mean a period endingon the third (3rd) anniversary of the date hereof.

 

Section 2.               Restriction.Gordon agrees that during the Restricted Period:

 

(a)           Neither he nor any member of hisImmediate Family will be interested, directly or indirectly, as an investor inany other Entity, business or enterprise within the Covered Territory, which isengaged in any Proscribed Activity (except as an investor in securities listedon a national securities exchange or actively traded over the counter so longas such investments are in amounts not significant as compared to his totalinvestments and do not exceed one percent (1%) of the outstanding securities ofthe issuer of the same class or issue);

 

(b)           He will not, directly or indirectly,for his own account or as employee, officer, director, partner, trustee,principal, member, joint venturer, agent, adviser, consultant or otherwise,engage within the Covered Territory, in any phase of any Proscribed Activity;and

 

(c)           He will not, directly or indirectly,solicit business for a Proscribed Activity within the Covered Territory fromany Person, business or enterprise which is, or proposes to be, a tenant of thePurchaser or any of its Affiliates within the Covered Territory, or induce anysuch Person, business or enterprise not to undertake, or to curtail or cancelbusiness with the Purchaser or any of its Affiliates, or induce or attempt toinduce any employee of the Purchaser, any Affiliate of the Purchaser or any oftheir respective successors or assigns to terminate his employment therewith.

 

Gordon and the Purchaser are of the belief that theRestricted Period, the Proscribed Activity and the Covered Territory hereinspecified are reasonable, in light of the circumstances as they exist on thedate upon which this Agreement has been executed, including without limitationthe nature of the business in which the Purchaser is engaged.  However, if such period, activity or areashould be adjudged unreasonable in any Legal Action, whether at law or inequity,

 

D-3

----

 

then the Restricted Period shall be reduced by suchperiod of time, the Proscribed Activity shall be reduced by such activities, orthe Covered Territory shall be reduced by such area, or any combinationthereof, as are deemed unreasonable, so that this covenant may be enforced insuch area, with respect to such activities and during such period of time as isadjudged to be reasonable.

 

Section 3.               MiscellaneousProvisions.

 

(a)           Assignment; Successors and Assigns.  In the event that the Purchaser shall bemerged with, or consolidated into, any other Entity, or in the event that itshall sell and transfer substantially all of its assets to another Entity, theterms of this Agreement shall inure to the benefit of, and be assumed by, theEntity resulting from such merger or consolidation, or to which the Purchaser’sassets shall be sold and transferred. This Agreement shall not be assignable by Gordon, but it shall bebinding upon Gordon’s heirs, executors, administrators and legalrepresentatives to the extent they constitute members of his ImmediateFamily.  Nothing in this Agreementexpressed or implied is intended to and shall not be construed to confer uponor create in any person (other than the parties hereto and their permittedsuccessors and assigns) any rights or remedies under or by reason of thisAgreement.

 

(b)           Specific Performance; Other Rightsand Remedies.  Gordon recognizes andagrees that the Purchaser’s remedy at law for any breach of the provisions ofthis Agreement, including without limitation Section 2 would be inadequate, andhe agrees that for breach of such provisions, the Purchaser shall, in additionto such other remedies as may be available to it at law or in equity or asprovided in this Agreement, be entitled to seek and obtain injunctive reliefand to enforce its rights by an action for specific performance to the extentpermitted by applicable law.  The partiesagree, in pursuing any other remedies available to it or him for such breach orthreatened breach, not to seek recovery of any damages other than actualdamages.

 

(c)           Entire Agreement.  This Agreement constitutes the entireagreement between the Purchaser and Gordon with respect to the subject matterhereof, and supersedes all prior agreements, arrangements, covenants, promises,conditions, understandings, inducements, representations and negotiations,expressed or implied, oral or written, among them as to such subject matter.

 

D-4

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(d)           Waivers; Amendments. Anyprovision of this Agreement to the contrary notwithstanding, changes in oradditions to this Agreement may be made, or compliance with any term, covenant,agreement, condition or provision set forth herein may be omitted or waived(either generally or in a particular instance and either retroactively orprospectively) with, but only with, the consent in writing of the partieshereto.  Any consent may be given subjectto satisfaction of conditions stated therein. The failure to insist upon the strict provisions of any covenant, term,condition or other provision of this Agreement or to exercise any right orremedy thereunder shall not constitute a waiver of any such covenant, term,condition or other provision thereof or default in connection therewith.  The waiver of any covenant, term, conditionor other provision thereof or default thereunder shall not affect or alter thisAgreement in any other respect, and each and every covenant, term, condition orother provision of this Agreement shall, in such event, continue in full forceand effect, except as so waived, and shall be operative with respect to anyother then existing or subsequent default in connection therewith.

 

(e)           Notices.  All notices and other communications which byany provision of this Agreement are required or permitted to be given shall begiven in writing and shall be (i) mailed by first-class or express mail,postage prepaid, (ii) sent by facsimile with electronic confirmation of receipt,or (iii) personally delivered to the receiving party (which if other than anindividual shall be an officer or other responsible party of the receivingparty).  All such notices andcommunications shall be mailed, sent or delivered as follows:

 
| To Purchaser:                                           |   | c/o Five Star  Quality Care, Inc.       |
|---------------------------------------------------------|--------|-----------------------------------------|
|                                                    |   | 400 Centre  Street                      |
|                                                    |   | Newton,  Massachusetts  02458      |
|                                                    |   | Attn:  Evrett W. Benton, President |
|                                                    |   | Tel. No.:  (617) 796-8387          |
|                                                    |   | Telecopier  No.:  (617) 796-8385   |
|                                                    |   |                                    |
| with a copy to  (which shall not constitute notice) to: |
|                                                    |   |                                    |
|                                                    |   | Sullivan &  Worcester LLP           |
|                                                    |   | One Post Office  Square                 |
|                                                    |   | Boston,  Massachusetts  02109      |
|                                                    |   | Attn.:  John M. Steiner, Esq.      |
|                                                    |   | Tel. No.:  (617) 338-2800          |
|                                                    |   | Telecopier  No.:  (617) 338-2880   |

 

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| To Gordon:                                          |   | Scott W. Gordon                       |
|-----------------------------------------------------|--------|---------------------------------------|
|                                                |   | 510 Fifth Avenue (PH)                 |
|                                                |   | Beaver Falls, Pennsylvania 15010      |
|                                                |   |                                  |
| with a copy (which shall not constitute notice) to: |
|                                                |   |                                  |
|                                                |   | Fox Rothschild LLP                    |
|                                                |   | 625 Liberty Avenue, 29th Floor        |
|                                                |   | Pittsburgh, Pennsylvania 15222-3115   |
|                                                |   | Attn:  Donna  J. Naab, Esq.      |
|                                                |   | Telecopier No.:   (412) 391-6984 |

 

and/orto such other person(s), addresses or facsimile number(s) as the party toreceive any such communication or notice may have designated by written noticeto the other parties.

 

(f)            Severability.  If any provision of this Agreement shall beheld or deemed to be, or shall in fact be, invalid, inoperative, illegal orunenforceable as applied to any particular case in any jurisdiction orjurisdictions, or in all jurisdictions or in all cases, because of the conflictingof any provision with any constitution or statute or rule of public policy orfor any other reason, such circumstance shall not have the effect of renderingthe provision or provisions in question invalid, inoperative, illegal orunenforceable in any other jurisdiction or in any other case or circumstance orof rendering any other provision or provisions herein contained invalid,inoperative, illegal or unenforceable to the extent that such other provisionsare not themselves actually in conflict with such constitution, statute or ruleof public policy, but this Agreement shall be reformed and construed in anysuch jurisdiction or case as if such invalid, inoperative, illegal orunenforceable provision had never been contained herein and such provision reformedso that it would be valid, operative and enforceable to the maximum extentpermitted in such jurisdiction or in such case, except when such reformationand construction could operate as an undue hardship on either party, orconstitute a substantial deviation from the general intent and purpose of suchparty as reflected in this Agreement. The parties shall endeavor in good faith negotiations to replace theinvalid, inoperative, illegal or unenforceable provisions with valid,operative, legal and enforceable provisions the economic effect of which comesas close as possible to that of the invalid, inoperative, illegal orunenforceable provisions.

 

(g)           Counterparts.  This Agreement may be executed in severalcounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same

 

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instrument, bindingupon all the parties hereto.  In pleadingor proving any provision of this Agreement, it shall not be necessary toproduce more than one of such counterparts.

 

(h)           Section Headings.  The headings contained in this Agreement arefor reference purposes only and shall not in any way affect the meaning orinterpretation of this Agreement.

 

(i)            Governing Law.  The validity, interpretation, constructionand performance of this Agreement shall be governed by the applicable laws ofthe United States of America and the domestic substantive laws of theCommonwealth of Massachusetts without giving effect to any choice or conflictof laws provision or rule that would cause the application of domesticsubstantive laws of any other jurisdiction. Anything in this Agreement to the contrary notwithstanding, in the eventof any dispute between the parties which results in a Legal Action, theprevailing party shall be entitled to receive from the non-prevailing partyreimbursement for reasonable legal fees and expenses incurred by suchprevailing party in such Legal Action.

 

(j)            Further Acts.  Each party agrees that at any time, and fromtime to time, before and after the consummation of the transactionscontemplated by this Agreement, it will do all such things and execute anddeliver all such agreements, assignments, instruments, other documents andassurances, as any other party or its counsel reasonably deems necessary ordesirable in order to carry out the terms and conditions of this Agreement andthe transactions contemplated hereby or to facilitate the enjoyment of any ofthe rights created hereby or to be created hereunder.

 

(k)           Gender.  Whenever used herein the singular numbershall include the plural, the plural shall include the singular, and the use ofany gender shall include all genders.

 

(l)            Consultation with Counsel; NoRepresentations.  Gordon agrees andacknowledges that he has had a full and complete opportunity to consult withcounsel of his own choosing concerning the terms, enforceability andimplications of this Agreement, and that the Purchaser has made norepresentations or warranties to him concerning the terms, enforceability orimplications of this Agreement other than as are reflected in this Agreement.

 

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**IN WITNESS WHEREOF,**the parties hereto have executed this Agreement, all pursuant to authorityheretofore granted, as of the date and year first above written.

 

 
|       | PURCHASER:                    |
|------------|-------------------------------|
|       |                          |
|       | FIVE STAR QUALITY CARE, INC., |
| ** ** | a Maryland corporation        |
| ** ** | ** **                    |
|       | By:                           |   |
|       |                          | Name: |   |
|       |                          | Its: |   |
|       |                          |
|       |                          |
|       | GORDON:                       |
|       |                          |
|       |                          |
|       | Scott Gordon                  |
|            |                               |  |  |  |  |

 

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