ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (“Agreement”), is made effective as of January 29,
2015, by and among BARREN COUNTY HEALTH CARE CENTER, INC., a Kentucky
corporation (“Seller”), DIVERSICARE OF GLASGOW, LLC, a Delaware limited
liability company (“Buyer”), and, solely for the purposes of Sections 5.18 and
11.2, Steve Brown, John L. Beam, Linda Beam, Nancy A. Mollett, James B. Hurst,
Thomas S. Hurst, Jr., Peggy Hurst Greenwell, Beth Hurst Hawkins and Sallie Hurst
Schrieber, individuals and residents of the Commonwealth of Kentucky
(collectively, the “Shareholders”).
A.    Seller owns and operates a certain skilled nursing facility located at 300
Westwood Street, Glasgow, Kentucky 42141, known as “Barren County Health Care
Center” (the “Facility”).
B.    Seller desires to sell and transfer the assets of the Facility including
all rights in the Real Estate (as defined below) and Buyer (or an affiliate of
Buyer) desires to purchase the same from Seller subject to the terms and
conditions of this Agreement.
In consideration of the mutual covenants contained in this Agreement and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties intending to be legally bound hereby agree as
follows:
ARTICLE 1. PURCHASE AND SALE
1.1.    Purchase and Sale. Seller agrees at Closing (as defined herein), to
sell, transfer, assign, convey and deliver to Buyer, and Buyer agrees to
purchase, acquire and accept from Seller all right, title and interest in and to
certain assets of Seller related to the Facility (collectively, the “Assets”),
as set forth below, but expressly excluding the “Excluded Assets” (as defined in
Section 1.2 below):
(1)    All right, title and interest, in and to all of the land and real estate
owned by Seller and used in connection with the Facility as described on Exhibit
1.1(1) attached hereto and in and to all structures, improvements, fixed assets
and fixtures including fixed machinery and fixed equipment situated thereon or
forming a part thereof (collectively, the “Real Estate”), together with all
appurtenances, easements and rights-of-way related thereto;
(2)    All tangible personal property, medical and other equipment, machinery,
data processing and computer hardware and software, furniture, furnishings,
appliances, vehicles and other tangible personal property and located at the
Facility (collectively, the “Equipment and Furnishings”);
(3)    All inventory of goods and supplies used or maintained in connection with
the Facility including food, cleaning materials, disposables, linens,
consumables, office supplies, and medical supplies (collectively, the
“Inventory”);
(4)    All personnel, resident/occupant and other records related to the
Facility (including hard, electronic and microfiche copies) and all manuals,
books and records used in operating the Facility including, without limitation,
personnel policies and files and manuals, accounting records, and computer
files;
(5)    To the extent transferable, all licenses, permits, registrations,
certificates, accreditations and approvals necessary to operate the Facility;
(6)    All plans and surveys, including “as-built” plans, those relating to
utilities, easements and roads, and plats, specifications, engineers’ drawings,
architectural renderings and similar items in Seller’s possession;
(7)    All goodwill and, to the extent assignable by Seller, all warranties
(express or implied) and, except as otherwise excluded hereinbelow, rights and
claims related to the Assets or the operation of the Facility, including the
“Barren County Health Care Center” name;
(8)    All resident escrows and deposits of any prepaid rent or any other fees
paid by Facility residents related to the Facility (the “Deposits”), as set
forth on Exhibit 1.1(8) attached hereto;
(9)    The Assumed Contracts, as defined in Section 3.9, and as set forth on
Exhibit 3.9 attached hereto;
(10)    all other properties and assets of every kind, character and
description, tangible or intangible, owned by Seller and used in connection with
the Facility, whether or not similar to the items specifically set forth above;
(11)    Seller’s Medicare provider number; and
(12)    All interests in the admissions agreements with residents of the
Facilities (“Admission Agreements”).
1.2.    Excluded Assets. Seller is not selling and Buyer is not purchasing or
assuming obligations with respect to the following (collectively, the “Excluded
Assets”):
(1)    Seller’s corporate and fiscal records and other records that Seller is
required by law to retain in its possession and that are not included in Section
1.1(4) above;
(2)    All accounts not included in Section 1.1(8) above, notes and other
receivables, specifically including but not limited to, promissory notes from
residents and accounts receivable for services provided to residents at the
Facility prior to the Closing, including those from non-governmental third party
payors and those from governmental third-party, including Medicare and Medicaid;
(3)    All cash, cash equivalents, cash deposits and escrows, bank accounts,
money market accounts, other accounts, certificates of deposit and other
investments of Seller other than the Facility’s petty cash;
(4)    Seller’s provider agreements with Medicaid or any other state
governmental payor program and any corresponding provider numbers;
(5)    All Contracts not included in the Assumed Contracts;
(6)    Seller’s provider agreements with Medicaid or any other state
governmental payor program and any corresponding provider numbers;
(7)    Rights to settlements and retroactive adjustments, if any, whether
arising under a cost report of Seller or otherwise, for cost reporting periods
ending on or before the Closing Date, whether open or closed, arising from or
against the United States government under the terms of the Medicare program or
the TRICARE, formerly Civilian Health and Medical Program of the Uniformed
Services (“CHAMPUS”), or against the State of Kentucky under the Medicaid
program, and against any third party payor programs which settle upon a basis
other than an individual claims basis;
(8)    All inventory and prepaid expenses disposed of or exhausted prior to the
Closing in the ordinary course of business;
(9)    Any records related solely to Excluded Assets or Excluded Liabilities;
(10)    Any records which Seller is required by law to retain in its possession;
(11)    Any proprietary information of Seller, including without limitation that
information contained in Seller’s employee or operations manuals, Seller’s
third-party reimbursement systems and manuals and all information that does not
pertain to the continuing operations of the Facility;
(12)    Claims against third parties related to the operation of the Facility
prior to the Closing;
(13)    Rights to tax refunds or claims related to the Seller, the Facility or
the Assets for the periods ending prior to Closing;
(14)    Computer software and programs which are licensed from third party
providers and/or are proprietary to Seller, including but not limited to,
PointClickCare and other billing programs;
(15)    Any reimbursement from Medicaid and Medicare as a result of any loss by
Seller on the disposal of the Assets for purposes of Medicaid and Medicare
reimbursement;
(16)    Subject to Sections 5.5 and 5.6, rights to insurance proceeds or the
equivalent relative to the Assets; and
(17)    Any other items listed on Exhibit 1.2 attached hereto.
1.3.    Disclaimer of Warranties. Except as expressly set forth in Article 3
hereof, the Assets will be transferred to Buyer and Buyer agrees to accept said
Assets and their condition as of the date of Closing “AS IS”, “WHERE IS” AND
“WITH ALL FAULTS”, “WITH NO WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY
WARRANTIES REGARDING HABITABILITY, FITNESS FOR HABITATION OR CONDITION, WITH
RESPECT TO LAND, BUILDINGS AND IMPROVEMENTS, AND WITH NO WARRANTIES, INCLUDING
WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE MACHINERY, EQUIPMENT AND INVENTORY, AND
SUPPLIES, ANY AND ALL OF WHICH WARRANTIES (BOTH EXPRESS AND IMPLIED) SELLER
HEREBY DISCLAIMS.
1.4.    Assumed Contracts and Liabilities.
(1)    At Closing, Buyer will assume and agree to pay or perform, as the case
may be, those obligations of Seller (i) arising after Closing under the Assumed
Contracts and (ii) arising from all accrued vacation, sick leave and paid time
off (vested and unvested) for Employees (as defined in Section 3.13) who are
hired by Buyer or Buyer’s agent at Closing, to the extent that Buyer receives a
credit for such liabilities against the Purchase Price (as defined in Section
2.1 below) (herein, the “Employee Obligations”) (items (i) and (ii) are
collectively, the “Assumed Liabilities”).
(2)    Except for the Assumed Liabilities, Buyer shall not assume, and shall not
be liable for, any debt, liability or obligation of Seller of any type or
description whatsoever, whether related or unrelated to the Assets, the Facility
or the transactions contemplated within this Agreement and Seller shall remain
liable and responsible for the payment or performance, as the case may be, of
all such debts, liabilities and obligations.
1.5.    Excluded Liabilities. Without limiting the foregoing, Seller shall
remain responsible for all debts, liabilities and obligations not expressly
assumed by Buyer (collectively, the “Excluded Liabilities”), including but not
limited to the following:
(1)    All obligations pursuant to or related to any loan or debt obligations;
(2)    Liabilities, indebtedness, commitments or obligations and
responsibilities of any kind whatsoever (other than the Assumed Liabilities) of
Seller arising from operations of the Facility relating to the time prior to
Closing;
(3)    All liabilities and commitments relating to the time periods through
Closing for income tax and other taxes; all employee (and former employee)
wages, salaries and benefits (unless specifically referred to in Section
1.3(1)),
(4)    any liability of the Seller arising out of the injury to or death of any
person, or damage to or destruction of any property, whether based on
negligence, breach of warranty, strict liability, enterprise liability or any
other legal or equitable theory arising from or related to services provided by
the Seller, to the extent any of such liabilities arose on or prior to the
Closing; and
(5)    amounts owed by Seller to any third party payors, including Medicare and
Medicaid, for the periods through Closing as a result of any settlement or other
adjustment process used by such third party payors, including cost reports filed
or to be filed.
ARTICLE 2.     PURCHASE PRICE; ALLOCATIONS;
ACCOUNTS RECEIVABLE AND RESIDENT FUNDS
2.1.    Purchase Price.
(18)    The purchase price payable by Buyer to Seller for the Assets shall be
Seven Million and No/100 Dollars ($7,000,000.00) (the “Purchase Price”) minus an
amount equal to One Hundred Fifty Thousand Dollars ($150,000.00) (the “Escrow
Holdback”), which shall be paid to First Tennessee Bank, N.A. (the “Escrow
Agent”) and held in accordance with the Escrow Agreement (herein so called) in
the form attached as Exhibit A. The Purchase Price, plus or minus credits and
prorations as set forth in this Agreement, shall be payable at Closing by wire
transfer to an account designated by Seller of immediately available, same day
funds. For purposes of determining the credit given to Buyer at Closing for
assuming the Employee Obligations, the amount of Employee Obligations assumed by
Buyer shall be estimated in good faith by the parties at Closing, subject to a
final adjustment in accordance with Section 2.2 in the event of any variation in
the amounts estimated at Closing and the actual amount of Employee Obligations
assumed by Buyer.
(19)    Upon execution of this Agreement, Buyer shall deliver to a nationally
recognized title insurance company reasonably acceptable to Buyer (the “Title
Company”), as escrow agent (the “Escrow Agent”), the sum of Fifty Thousand and
No/100 Dollars ($50,000.00) as a deposit (the “Earnest Money Deposit”), which
shall be held in an escrow account and paid by Title Company in accordance with
this Agreement. All interest accrued on the Earnest Money Deposit shall be added
to and become a part of the Earnest Money Deposit. If Closing occurs, at the
Closing the Escrow Agent shall release the Earnest Money Deposit and any accrued
interest to Seller to be applied in partial satisfaction of the Purchase Price.
If the Agreement is terminated pursuant to Section 6.2(1)(b), the Escrow Agent
shall release the Earnest Money Deposit and any accrued interest to Seller. If
the Agreement is terminated for any other reason, the Escrow Agent shall release
the Earnest Money Deposit and any accrued interest to Buyer.
2.2.    Apportionable Income and Expenses. All income and expense attributable
to the operation of the Facility (measured on an accrual basis) through 11:59
p.m. on the day preceding the Closing Date shall be for the account of Seller.
Thereafter, such income and expense shall be for the account of Buyer. All
apportionable items of operating income and expense applicable to any periods
commencing before Closing and continuing after Closing shall be prorated between
Seller and, to the extent they are included within the Assumed Liabilities,
Buyer. Apportionable operating income and expenses shall include, but shall not
be limited to, such items as prepaid income, power and utility charges, personal
property taxes, real estate taxes and rents. Buyer will be responsible for any
and all sales taxes incurred as a result of this transaction.
If final prorations cannot be made at Closing for any item being prorated under
this Section 2.2, Buyer and Seller agree to allocate such items on a fair and
equitable basis as soon as invoices or bills are available and applicable
reconciliation have been completed, with final adjustment to be made as soon as
reasonably possible after the Closing (but in no event later than ninety (90)
days after the Closing, except that adjustments arising from any tax protest
shall not be subject to such ninety (90) day limitation, but shall be made as
soon as reasonably possible), to the effect that income and expenses are
received and paid by the parties on an accrual basis with respect to their
period of ownership. Payments in connection with the final adjustment shall be
due no later than ninety (90) days after the Closing, except that adjustments
arising from any tax protest shall not be subject to such 90-day limitation, but
shall be made as soon as reasonably possible. Seller shall have reasonable
access to, and the right to inspect and audit, Buyer’s books to confirm the
final prorations for a period of one (1) year after the Closing. To the extent
invoices or bills for the current real estate tax year are not yet issued, the
parties shall prorate such taxes on the basis of the most recent tax year and
will adjust such proration within five (5) business days after Seller or Buyer
receive the real estate tax invoice for the current tax year.
2.3.    Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in the manner set forth in Exhibit 2.3 attached hereto (the
“Allocation”). The parties to this Agreement agree that the Allocation shall be
used by them for all purposes including tax, reimbursement and other purposes.
Each party to this Agreement agrees that it will report the transaction
completed pursuant to this Agreement in accordance with the Allocation,
including any report made under Section 1060 of the Internal Revenue Code of
1986, as amended (the “Code”), and that no party will take a position
inconsistent with the Allocation except with the prior written consent of the
other parties hereto.
2.4.    Accounts Receivable.
(6)    Seller is not selling, and shall retain all right, title and interest in
and to all unpaid accounts receivable with respect to the Facility which relate
to the period prior to the Closing Date, including, but not limited to, any
accounts receivable arising from rate adjustments which relate to the period
prior to the Closing Date even if such adjustments occur after the Closing Date
(“Seller’s A/R”). Buyer (i) shall not interfere with any of Seller’s rights with
respect to the Seller’s A/R, including but not limited to, the right to collect
the same and to enforce any and all of Seller’s rights with respect to Seller’s
A/R; provided the Seller shall not initiate any litigation for collections
against parties who continue to be residents of the Facility after Closing
without Buyer’s consent, with the exception of Seller enforcing any promissory
notes signed by, or for the benefit of, residents in favor of Seller for amounts
due for services rendered prior to Closing, and (ii) agrees that if it receives
any proceeds with respect to the Seller’s A/R, Buyer will hold such proceeds in
trust for Seller and shall promptly turn over those proceeds to Seller without
demand, in the form received.
(7)    Within thirty (30) days following the Closing Date, Seller shall provide
Buyer with a schedule setting forth by patient its outstanding accounts
receivable with respect to the Facility as of the Closing Date.
(8)    In furtherance and not in limitation of the requirements set forth in
Section 2.4, payments received by Buyer from and after the Closing Date from
third party payors, including but not limited to Medicare, Medicaid, managed
care and health insurance, shall be handled as follows:
(a)    If such payments specifically indicate on the accompanying remittance
advice, or the parties otherwise agree, that they relate to the period prior to
the Closing Date, the payments (if received by Buyer) shall be forwarded to
Seller by Buyer, along with the applicable remittance advice, promptly, but in
no event more than five (5) business days, after receipt thereof;
(b)    If such payments indicate on the accompanying remittance advice, or the
parties otherwise agree, that they relate to the period on or after the Closing
Date, they shall be retained by Buyer if received by Buyer, and paid to Buyer
promptly but in no event later than five (5) business days, if received by
Seller; and
(c)    If the period(s) for which such payments are made is not indicated on the
accompanying remittance advice, and the parties are unable to agree as to the
periods for which such payments relate, the parties shall assume that each
payment received within ninety (90) days after the Closing Date relates to the
oldest outstanding unpaid receivables for reimbursement and, based on such
assumption, the portion thereof which relates to the period on and after the
Closing Date shall be retained by Buyer and the balance shall be remitted to
Seller promptly, but in no event more than five (5) business days, after receipt
thereof. After said ninety (90) day period, such payments which fail to
designate the period to which they relate shall be first applied to current
balances with any excess applied to reduce pre-Closing balances and, based on
such assumption, the portion thereof which relates to the post-Closing period
shall be retained by or promptly (within five (5) business days) remitted to
Buyer and the balance shall be retained by or promptly (within five (5) business
days) remitted to Seller.
(9)    Any payments received within ninety (90) days after the Closing Date from
or on behalf of private pay patients with outstanding balances as of the Closing
Date which fail to designate the period to which they relate, will first be
applied to reduce the patients’ pre-Closing Date balances owed to Seller, with
any excess applied to reduce any balances due for services rendered by Buyer
after the Closing Date, except, however, those amounts due and paid on any
promissory note executed by any resident in favor of Seller for services
rendered prior to Closing, which shall be paid to Seller under the terms of said
note.
(10)    In the event the parties mutually determine that they misapplied any
payment hereunder, or any remittance was made to the wrong party, the party that
erroneously received the payment shall remit it to the other party promptly, but
in no event more than five (5) business days, after the determination of
misapplication is made. For a period of one (1) year after the Closing, Buyer
and Seller shall, upon reasonable notice and during normal business hours and at
reasonable intervals, have the right to inspect all cash receipts of the other
respective party in order to confirm the other party’s compliance with the
obligations imposed on it under this Section 2.4.
(11)    The obligations of the parties to forward the accounts receivable
payments pursuant to this Section 2.4 are absolute and unconditional and
irrespective of any circumstances whatsoever which might constitute a legal or
equitable discharge, offset, counterclaim or defense of the parties, the right
to assert any of which is hereby waived.
2.5.    Transfer of Resident Trust Funds.
(1)    Upon execution of this Agreement, Seller shall prepare and deliver to
Buyer a current true, correct, and complete accounting and inventory (properly
reconciled) of any resident trust funds and residents’ property held by Seller
in trust for residents at the Facility (collectively the “Resident Trust
Funds”). Not less than ten (10) days prior to Closing, Seller shall prepare and
deliver to Buyer an updated true, correct and complete accounting and inventory
(properly reconciled as of the previous month-end) of the Resident Trust Funds.
(2)    As of the Closing Date, Seller hereby agrees to transfer to Buyer the
Resident Trust Funds and Buyer hereby agrees that it will accept such Resident
Trust Funds in trust for the residents/responsible parties and be solely
accountable to the residents/responsible parties for such Resident Trust Funds
in accordance with the terms of this Agreement and applicable statutory and
regulatory requirements.
(3)    Within five (5) days after the Closing Date, Seller shall prepare a final
reconciliation comparing the actual Resident Trust Fund balance on the Closing
Date to the amount of the Resident Trust Funds transferred to Buyer at the
Closing and to the extent the former exceeds the latter, Seller shall remit such
excess to Buyer or to the extent the latter exceeds the former, Buyer shall
remit such excess to Seller.
(4)    Seller shall have no responsibility to the applicable
resident/responsible party and regulatory authorities with respect to any
Resident Trust Funds delivered to Buyer, and Buyer will hold Seller harmless for
same.
ARTICLE 3.    REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, Seller hereby represents and warrants to
Buyer and its permitted assignees, which representations and warranties shall be
true and correct on the date hereof and as of the date of Closing, as follows:
3.1.    Organization, Qualification and Authority. Seller is a corporation
organized, validly existing and in good standing in the Commonwealth of
Kentucky. Seller has full power and authority to own and operate the Facility
and its Assets as presently owned and operated and to carry on its business as
it is now being conducted. Seller has the full right, power and authority to
execute, deliver and carry out the terms of this Agreement and all documents and
agreements necessary to give effect to the provisions of this Agreement and to
consummate the transactions contemplated on the part of Seller hereby. The
execution, delivery and consummation of this Agreement, and all other agreements
and documents executed in connection herewith by Seller, have been duly
authorized by all necessary action on the part of Seller and Seller has provided
Buyer certified copies of resolutions or consents of Seller evidencing such
authorizations. Except as set forth on Exhibit 3.1-A, no other action, consent
or approval on the part of Seller or any other person or entity is necessary to
authorize Seller’s due and valid execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection
herewith. The Shareholders are, collectively, the holders of all outstanding
equity ownership of any kind of the Company, and their respective ownership is
set forth on Exhibit 3.1-B. This Agreement and all other agreements and
documents executed in connection herewith by Seller, upon execution and delivery
thereof, constitute the valid and binding obligations of Seller, enforceable in
accordance with their respective terms.
3.2.    Absence of Default. The execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection herewith
by Seller will not constitute a material violation of, or be in conflict with,
and will not, with or without the giving of notice or the passage of time, or
both, result in a material breach of, constitute a material default under, or
create or cause the acceleration of the maturity of any material debt,
indenture, obligation or liability affecting the Assets or the Facility pursuant
to, or result in the creation or imposition of any security interest, lien,
charge or other encumbrance upon any of the Assets under: (1) any term or
provision of the governing documents of Seller; (2) any contract, lease,
purchase order, agreement, document, instrument, indenture, mortgage, pledge,
assignment, permit, license, approval or other commitment to which Seller is a
party or by which Seller and/or the Assets are bound; (3) any judgment, decree,
order, regulation or rule of any court or regulatory authority; or (4) any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority or arbitration tribunal to which Seller and/or
the Assets are subject.
3.3.    Financial Statements. Attached hereto as Exhibit 3.3 are true and
correct copies of the unaudited balance sheets for the Facility as of the fiscal
years ending September 30, 2012 and 2013, and unaudited income statements for
the fiscal years then ending, and the interim unaudited balance sheet and income
statement of the Facility for the one (1) month period ended October 31, 2014
(collectively, the “Financial Statements”). The Financial Statements are based
on the books and records of Seller and present fairly and accurately the
financial position of the Facility as of the periods specified, the results of
its operation, and all costs and expenses for the periods specified. The
Financial Statements are true, complete and correct and contain no untrue or
misleading statements and do not omit anything which would cause them to be
misleading or inaccurate in any respect. The Financial Statements have been
prepared in compliance with generally accepted accounting principles on an
accrual basis, except that they (a) are subject to year-end audit adjustments,
(b) do not contain footnotes, (c) were prepared without physical inventories,
(d) are not restated for subsequent events, (e) may not contain a statement of
construction in process, and (f) may not fully reflect the following
liabilities: (i) liabilities payable in connection with workers’ compensation
claims, (ii) liabilities payable to any employee welfare benefit plan (within
the meaning of Section 3(1) of ERISA) maintained by Seller or its affiliates on
account of Seller’s employees, (iii) federal, state and local income or
franchise taxes and (iv) bonuses payable to certain employees.
3.4.    Operations Since June 30, 2014. To the knowledge of Seller, since June
30, 2014, there has been no:
(5)    Material change in the condition, financial or otherwise, of Seller, the
Facility or the Assets that has, or could reasonably be expected to have, a
material adverse effect on any of the Assets, the Facility or future prospects
of the Facility, or the results of the operations of Seller;
(6)    Uninsured loss, damage or destruction in excess of $10,000.00 of or to
any of the Assets;
(7)    Sale, lease, transfer or other disposition by Seller of, or mortgages or
pledges of or the imposition of any lien or encumbrance on, any portion of the
Assets;
(8)    Material increase in the compensation payable by Seller to any of its
employees other than those made in the ordinary course of business, or any
increase in, or institution of, any bonus, insurance, pension, profit-sharing or
other employee benefit plan or arrangements;
(9)    Strike, work stoppage or other labor dispute at the Facility;
(10)    Material amendment to or change in the terms of any of the Assumed
Contracts or termination, waiver or cancellation of any rights or claims of
Seller thereunder;
(11)    Assumption or creation of any liability outside of Seller’s ordinary
course of business in excess of $10,000.00; or
(12)    Institution or settlement of any litigation, action or proceeding before
any court or governmental body relating to Seller, the Facility or the Assets,
except as set forth on Exhibit 3.4(8) attached hereto.
3.5.    Employment Discrimination. Except as disclosed in Exhibit 3.5 attached
hereto, no person or party (including, without limitation, any governmental
agency) has asserted, or to Seller’s knowledge, threatened to assert, any claim
for any action or proceeding against Seller (or any officer, director, employee,
agent or member of Seller) arising out of any statute, ordinance or regulation
relating to wages, collective bargaining, discrimination in employment or
employment practices or occupational safety and health standards including,
without limitation, the Fair Labor Standards Act, Title VII of the Civil Rights
Act of 1964, as amended, the Occupational Safety and Health Act, the Age
Discrimination in Employment Act of 1967, the Americans With Disabilities Act
and the Family and Medical Leave Act, and Seller has no knowledge of any acts or
omissions which could give rise to any such claims.
3.6.    Licenses and Permits. The Facility has all licenses, permits,
registrations, certificates and accreditations (collectively, the “Licenses and
Permits”) necessary for Seller to occupy and operate the Facility as a skilled
nursing and rehabilitation facility. There is no material default under any of
the Licenses and Permits, nor does Seller know of any grounds for revocation,
suspension or limitation of any of the Licenses or Permits. No written or verbal
notices have been received by Seller with respect to any pending or, to Seller’s
knowledge, threatened or pending revocation, termination, suspension or
limitation of any of the Licenses and Permits.
3.7.    Compliance with Zoning, Land Use and Other Laws. None of the Real Estate
is in violation, in any material respects, of any zoning, public health,
building code or other similar law applicable thereto or to the ownership,
occupancy and/or operation thereof, or there exist applicable variances,
conditional use permits, waivers or exemptions relating to the Real Estate with
respect to any non-conforming use or other zoning or building codes matters. To
Seller’s knowledge, the consummation of the transactions contemplated herein
will not result in the termination of any applicable zoning variance,
conditional use permit, waiver or exemption relating to the Real Estate with
respect to any such non-conforming use or other zoning, land use or building
codes matters. There are no conditions, restrictions, ordinances or other
limitations that would make the Real Estate unusable for its current use or
materially restrict or impair its current use.
3.8.    Title to Assets.
(1)    Seller is the sole legal and beneficial owner of, or has the exclusive,
unrestricted right and authority to use and transfer to Buyer, the personal
property included in the Assets, free and clear of all mortgages, security
interests, liens, leases, covenants, assessments, easements, options, rights of
refusal, restrictions, reservations, defects in the title, encroachments and
other encumbrances. The Inventory and Equipment and Furnishings are: (i) in good
repair and good operating condition, ordinary wear and tear excepted; (ii)
suitable for immediate use in the ordinary course of business; and (iii) to
Seller’s knowledge, free from latent and patent defects. No item of Inventory or
Equipment and Furnishings is in need of repair or replacement other than as part
of routine maintenance in the ordinary course of business. All Inventory and
Equipment and Furnishings are in the possession or control of Seller.
(2)    The descriptions of the Real Estate contained in Exhibit 1.1(1) hereto
include all real property owned by Seller in connection with the Facility. At
Closing, Seller will be the sole and exclusive holder of all right, title and
interest in the Real Estate and at Closing will convey to Buyer good and
marketable title, free and clear of all mortgages and liens, subject to (i) any
lien to secure the payment of real estate taxes, including special assessments,
not delinquent, (ii) all applicable laws, ordinances, rules and governmental
regulations affecting the use and occupancy of the Real Estate, (iii) easements,
restrictions and other matters applicable to the Real Estate that do not hinder,
interfere with or prohibit the use and occupancy of the Real Estate as a skilled
nursing facility, and (iv) matters shown by the Existing Title Work deemed to be
Permitted Exceptions under Section 3.8(2) hereof and those additional matters
described on Exhibit 3.8(2) attached hereto (the “Permitted Exceptions”). Seller
has, and will at Closing have, the full right and authority to transfer and
convey the Real Estate to Buyer (or an affiliate of Buyer) as contemplated by
the terms of this Agreement, and to vest in Buyer good, marketable and fee
simple title and the lawful right to possess and use the Real Estate.
(3)    No other person or entity owns any interest in any of the Assets.
3.9.    Contracts.
(1)    Exhibit 3.9 attached hereto sets forth a complete and accurate list of
all contracts, agreements, purchase orders, and commitments, oral or written,
and all assignments, amendments, schedules, exhibits and appendices thereof,
affecting or relating to the Facility or any Asset to which either Seller is a
party or by which Seller, the Assets or the Facility is bound or affected,
including, without limitation, service contracts, management agreements and
equipment leases (collectively, the “Contracts”). At least five (5) business
days after the end of the date of the execution of this Agreement, Buyer shall
notify Seller of which Contracts it intends to assume, and such Contracts shall
hereinafter be the “Assumed Contracts”; provided, however that any Contracts not
included in the Assumed Contracts shall be retained by Seller. Neither the
Facility nor any of the Assets are subject to any leases, subleases or options
to purchase or sell.
(2)    None of the Contracts have been modified, amended, assigned, transferred
or subordinated except as described on Exhibit 3.9 and each is in full force and
effect and is valid, binding and enforceable in accordance with its respective
terms.
(3)    To Seller’s knowledge, no event or condition has happened or presently
exists that (i) constitutes a default or breach by Seller or against any other
party thereto, or (ii) after notice or lapse of time or both, would constitute a
default or breach by Seller or against any other party thereto, under any of the
Assumed Contracts. To Seller’s knowledge, there are no counterclaims or offsets
under any of the Assumed Contracts.
3.10.    Environmental Matters.
(1)    Hazardous Substances. As used in this Section, the term “Hazardous
Substances” means any hazardous or toxic substance, medical or biologic material
or waste or other material or waste including, but not limited to, those
substances, materials, and wastes defined in Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(“CERCLA”), listed in the United States Department of Transportation Table (49
CFR 172.101) or by the Environmental Protection Agency as hazardous substances
pursuant to 40 CFR Part 302, or which are regulated under any other
Environmental Law (as defined herein), or any hydrocarbons, petroleum, petroleum
products, asbestos, polychlorinated biphenyls, formaldehyde, radioactive
substances, flammables or explosives.
(2)    Compliance with Laws and Regulations. All operations, use or occupancy of
the Real Estate, or any portion thereof, by Seller and any agent, contractor or
employee of any agent or contractor of Seller (collectively, “Agents”), or any
tenant or subtenant of Seller of any part of the Real Estate, have been in
compliance in all material respects with any and all federal, state or local
laws, statutes, regulations, orders, codes, judicial decisions, decrees,
licenses, permits and other applicable requirements of governmental authorities
with respect to Hazardous Substances, pollution or protection of human health
and safety (collectively, “Environmental Law”) including, but not limited to,
the release, emission, discharge, storage and removal of Hazardous Substances.
Seller, its affiliates and Agents have kept the Real Estate free of any lien
imposed pursuant to Environmental Law.
(3)    No Investigation or Inquiry. Seller: (i) has not either received or been
issued a notice, demand, request for information, citation, summons or complaint
regarding an alleged failure to comply with Environmental Law; or (ii) is not
subject to any existing, pending, or, to Seller’s knowledge, threatened
investigation or inquiry by any governmental authority for failure to comply
with, or any remedial obligations under, Environmental Law, and there are no
circumstances known to Seller which could serve as a basis therefor. Seller has
not assumed any liability of any third party for clean up under, or
noncompliance with, Environmental Law.
(4)    No Disposal, Discharge or Release. Seller has not disposed of, discharged
or released any Hazardous Substances on, in, under or upon, or from the Real
Estate, except for uses and temporary storage of Hazardous Substances reasonably
necessary to the customary operation of a skilled nursing facility in compliance
with applicable Environmental Laws.
(5)    OSHA. To Seller’s knowledge there is no asbestos located in or on the
Facility.
Seller shall promptly notify Buyer in writing of any order of which either is
aware, receipt of any notice of violation or noncompliance with any
Environmental Law, any threatened or pending action of which either is aware by
any regulatory agency or governmental authority, or any claims made by any third
party of which it is aware relating to Hazardous Substances on, emanations on or
from, releases on or from, the Real Estate; and shall promptly furnish Buyer
with copies of any written correspondence, notices or legal pleadings and
written summaries of any oral communications or notices in connection therewith.
3.11.    Condemnation. No part of the Real Estate is currently subject to
condemnation proceedings and, to Seller’s knowledge, no condemnation or taking
is threatened or contemplated. To Seller’s knowledge, no part of the Real Estate
is subject to any pending or threatened plans to modify or realign any street or
highway that would result in the taking of all or any part of any adjacent
street or highway that would adversely affect the current use of the Real
Estate.
3.12.    Litigation. Seller has received no notice of any violation of any law,
rule, regulation, ordinance or order of any court or federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality. There are no lawsuits, proceedings, actions, arbitrations,
governmental investigations, claims, inquiries or proceedings pending or, to
Seller’s knowledge, threatened involving Seller, any of the Assets or the
Facility and Seller knows of no basis therefor. A list of each lawsuit,
administrative proceeding, governmental investigation, arbitration or other
action commenced against Seller or involving the Real Estate or Assets commenced
or pending during the past five (5) years is set forth on Exhibit 3.12 attached
hereto. Seller is not a party to nor otherwise bound by any order, judgment,
injunction, decree or settlement agreement under which it may have continuing
obligations as of the date hereof.
3.13.    Seller’s Employees. Exhibit 3.13 attached hereto sets forth: (1) a
complete list of all of Seller’s employees at the Facility, including all
employees on leave of absence, including but not limited to leaves arising from
injury or workers compensation claims, Family and Medical Leave Act, or similar
basis, (collectively, the “Employees”) and rates of pay; (2) categorization of
each such person as a full-time or part-time employee of Seller; (3) the
employment dates and job titles of each such person; and (4) true and complete
copies of any and all fringe benefits and personnel policies. For purposes of
this Section, “part-time employee” means an employee who is employed for an
average of fewer than twenty (20) hours per week or who has been employed for
fewer than six (6) of the twelve (12) months preceding the date on which notice
is required pursuant to the Worker Adjustment and Retraining Notification Act
(“WARN”), 29 U.S.C. § 2102 et seq. Seller has no employment agreements with the
Employees and all such Employees are employed on an “at will” basis. Seller will
terminate all of the Employees at Closing. The parties expressly agree that
Seller shall retain responsibility for and timely pay all salaries and wages,
related payroll taxes and all retention bonuses, retirement and other fringe
benefits that have accrued to the Employees through Closing; provided that Buyer
shall assume accrued vacation and paid time off obligations (vested and
unvested) pursuant to Section 1.3(1) above. No officer, director, agent or
managing employee (as that term is defined in 42 U.S.C. § 1320a-5(b)) of the
Seller has been (i) excluded from participating in the Programs (as defined in
Section 3.23 below), (ii) subject to sanction pursuant to 42 U.S.C. § 1320a-7a
or 1320a-8, (iii) convicted of, a criminal offense under the Anti-Kickback
Statute (42 U.S.C. § 1320a-7b) or (iv) charged with or, to the Seller’s
knowledge, investigated, for any violation of laws related to fraud, theft,
embezzlement, breach of fiduciary responsibility, financial misconduct,
obstruction of any investigation, or controlled substances.
3.14.    Labor Relations. Seller is not a party to any labor contract,
collective bargaining agreement, contract, Letter of Understanding, or any other
arrangement, with any labor union or organization which obligates such Seller to
compensate its employees at prevailing rates or union scale nor are any of its
employees represented by any labor union or organization. To Seller’s knowledge,
there is no pending or threatened labor dispute, work stoppage, unfair labor
practice complaint, strike, administrative or court proceeding or order between
Seller and any present or former employee(s) of Seller.
3.15.    Insurance. A complete list of all insurance policies held by Seller
with respect to the Facility is set forth on Exhibit 3.15 attached hereto. True
and complete copies of such policies have previously been provided to Buyer.
Exhibit 3.15 also sets forth a summary of Seller’s current insurance coverage
(listing type, carrier and limits), and includes a list of any pending insurance
claims relating to Seller. Seller is not in default or breach with respect to
any provision of any such insurance policies nor has Seller failed to give any
notice or to present any claim thereunder in due and timely fashion. In the
event Seller’s professional and general liability insurance is written on a
claims made basis, Seller shall purchase or provide continuing coverage,
otherwise known as an Extended Reporting Endorsement or “tail” coverage, for the
mutual benefit of both Buyer and Seller, with minimum limits of no less than $1
million per occurrence and $3 million in the annual aggregate. Such required
liability coverage will remain in force for a minimum of two (2) years from the
date of Closing. In the event any of such aggregate liability insurance limits
are eroded during the two (2) year period when such insurance is required to be
maintained, Seller agrees to reinstate such limits at the beginning of each year
during the two (2) year period. Seller further agrees to add Buyer as an
Additional Insured to any of its required liability coverage.
3.16.    Broker’s or Finder’s Fee. Neither Seller nor Buyer has employed and
neither is liable for the payment of any fee to any finder, broker, consultant
or similar person in connection with the transactions contemplated by this
Agreement.
3.17.    Motor Vehicles. No motor vehicles are including in the Assets.
3.18.    Employee Benefit Plans.
(1)    Welfare Benefit Plans. Exhibit 3.18(1) attached hereto contains a true,
accurate and complete list of each “employee welfare benefit plan” (as defined
in Section 3(1) of the Employee Retirement Income Security Act of 1974 as
amended (“ERISA”)) maintained by Seller or to which Seller contributes or is
required to contribute (such employee welfare benefit plans being hereinafter
collectively referred to as the “Welfare Benefit Plans”). Complete and accurate
copies of all Welfare Benefit Plans have previously been provided to Buyer.
(2)    Pension Benefit Plans. Exhibit 3.18(2) attached hereto contains a true
and complete list of each “employee pension benefit plan” (as defined in Section
3(2) of ERISA) maintained by Seller, to which Seller contributes or is required
to contribute, or which covered any employee of Seller during the period of
their employment with any predecessor of Seller, including any multi-employer
pension plan as defined under Section 414(f) of the Code (such employee pension
benefit plans being hereinafter collectively referred to as the “Pension Benefit
Plans”). Complete and accurate copies of all Pension Benefit Plans have
previously been provided to Buyer.
(3)    Liabilities. There are no unfunded liabilities under any Welfare Benefit
Plans or Pension Benefit Plans. Buyer shall not be liable or responsible for any
debt, obligation, responsibility or liability of Seller under any such plans.
Seller shall be liable under its Welfare Benefit Plans and Pension Benefit Plans
for all claims due and unpaid at Closing and for all claims incurred before
Closing, whether or not paid or presented before Closing.
(4)    COBRA Coverage. Seller has provided or caused to be provided notice of
the availability of continuation coverage within the meaning of Section 4980B of
the Code (“COBRA coverage”) for all of either present and former employees and
their dependents entitled to such notice because of a qualifying event occurring
before Closing, and for providing COBRA coverage as required by law for all such
employees, or their dependents, who elect or have elected such coverage. As of
the day after Closing, Buyer agrees to have in place its health insurance
program providing benefits substantially equivalent to those of the Seller;
provided that Seller acknowledges that Buyer will not continue Seller’s employer
funding program.
3.19.    Compliance with Laws. Seller has received no written or, to Seller’s
knowledge, verbal notices of non-compliance with any laws, rules and regulations
applicable to the Assets or Facility. To Seller’s knowledge, Seller is in
compliance with all federal, state and local laws, rules and regulations which
relate to the operations of the Facility.
3.20.    WARN Act. Within the period ninety (90) days prior to Closing, Seller
has not temporarily or permanently closed or shut down any single site of
employment or any facility or any operating unit, department or service within a
single site of employment, as such terms are used in WARN.
3.21.    Tax Returns; Taxes. Seller is current with its filings of required
federal, state and local tax returns and tax reports and will continue to keep
current on its required filings. To Seller’s knowledge, there is no pending tax
examination or audit of, nor any action, suit, investigation or claim asserted
or, to the knowledge of Seller, threatened against Seller by any federal, state
or local authority. All tax returns are (and with respect to the final returns
will be) at the time of filing complete and accurate and in accordance with the
tax laws applicable thereto and disclose all taxes required to be paid for the
periods covered thereby. Seller has not committed any material violation of any
federal, state or local tax laws. Proper amounts have been collected or withheld
by Seller for all income, franchise, property, sales, employment or other taxes
payable or anticipated to be payable and for the payment of all other taxes
(including without limitation all employment, sales or use taxes). Proper
amounts have been withheld or collected from each payment made or to be made to
each employee of Seller for all taxes required to be withheld therefrom.
3.22.    Deposits. The Deposits currently held by Seller are listed on Exhibit
3.22 attached hereto. All funds held with respect to such Deposits are in
balance and will be in balance at Closing. Exhibit 3.22 will be updated to
Closing by Seller for purposes of crediting any additional Deposits to Buyer’s
account.
3.23.    Medicaid. In connection with the Facility, Seller participates in the
Medicaid Program (the “Program”) under valid Medicaid contracts and
reimbursement agreements (collectively, the “Program Agreements”). Seller is in
compliance, in all material respects, with rules and policies respecting the
Program, including all certification, billing, reimbursement and documentation
requirements, and there is no threatened or pending revocation, suspension,
termination, probation, restriction, limitation or non-renewal affecting any of
Seller’s Program Agreements or third-party payor contracts.
3.24.    Accreditation; Survey Reports. Seller has not received any written
notice of material deficiency from The Joint Commission or any other crediting
organization with respect to the Facility’s current accreditation period that
require any material action or response by the Seller that have not been
corrected or otherwise remedied. Seller has made available to Buyer a true and
complete copy of (i) Facility’s most recent Joint Commission or other
accreditation survey report and deficiency list, if any and (ii) Facility’s (A)
most recent Statement and Deficiencies and Plan of Correction on Form HCFA-2567,
(B) most recent state licensing report and list of deficiencies, if any, and (C)
the most recent fire marshal’s survey and deficiency list, if any, and the
corresponding plans of correction or other responses.
3.25.    Intellectual Property. Seller is the sole and exclusive owner of all of
Seller’s right, title and interest in and to all of the Intellectual Property
Assets (defined below). “Intellectual Property Assets” means all trade secrets,
names, assumed names, registered or unregistered trade names, patents,
inventions or discoveries that may be patentable, registered or unregistered
trademarks, registered or unregistered service marks, registered or unregistered
copyrights, registered or unregistered brands, applications for any of the
foregoing, and proprietary rights in internet web sites and internet domain
names, as owned, used or licensed by Seller in connection with the Facility.
Intellectual Property Assets shall not include any computer hardware or
software. The Intellectual Property Assets owned by Seller have not been subject
to any adverse claim, or challenged or to Seller’s knowledge, threatened in any
way, and to Seller’s knowledge, do not infringe, misappropriate, violate or
conflict with any patent, copyright, trademark, trade secret or any other
intellectual property or proprietary right of any other person.
3.26.    Workers’ Compensation. Seller is in good standing and compliance, in
all material respects, with coverage for workers’ compensation and unemployment
compensation of the Commonwealth of Kentucky and all other jurisdictions in
which Seller engages in business or has employees. Except as set forth on
Exhibit 3.26, there are no outstanding or pending, and to the knowledge of
Seller no threatened claims against Seller for workers’ compensation or
unemployment compensation, and no workers’ compensation claims which can be
reopened. Seller shall remain responsible for all workers’ compensation claims
which arise out of any workplace injury occurring on or before the Closing Date.
3.27.    Residency Agreements; Admission Agreements. A true, correct and
complete copy of the Facility’s standard form of residency agreement and/or
admission agreement has been made available to Buyer and, except for agreements
whose material terms are consistent with such standard residency agreement
and/or admission agreement, there are no agreements or contracts between Seller
and any Patient or resident of the Facility.
3.28.    Compliance with Medicare and Other Third Party Payor Programs. With
respect to the federal Medicare programs and other third party payor programs:
(1)    The Facility is qualified as a provider of, and is in compliance, in all
material respects, with all conditions for participation in Medicare.
(2)    Seller has timely filed all cost reports required to be filed in
connection with Medicare, and has delivered to Buyer true, correct and complete
copies of all such cost reports filed for each of the last three (3) completed
fiscal years of Seller, together with all claims and adjustments asserted by the
applicable governmental authority and any settlement thereof.
(3)    Except for reviews conducted by the applicable regulatory authorities in
the ordinary course of business, Seller has not been notified of any validation
review or program integrity review related to the Facility, and no such review
has been conducted or is currently pending by any regulatory authority relating
to Medicare.
(4)    Neither Seller nor, to the Seller’s knowledge any employee of Seller, has
been convicted of or pleaded guilty or no contest to any criminal offense
related to the operation of the Facility, and, to the knowledge of Seller, no
person has committed any offense that could serve as the basis for suspension,
restriction or exclusion of the Facility from Medicare.
(5)    Seller has not received written notice of any proceeding, and Seller has
no knowledge or reason to believe that any proceeding has been recommended or is
threatened by any applicable regulatory authority to investigate, revoke, limit,
suspend or take any adverse action against Seller’s participation in Medicare.
3.29.    Intentionally omitted
3.30.    Absence of Certain Business Practices; Fraud and Abuse Matters. To
Seller’s knowledge, no former or present partner, officer, employee or agent of
Seller or persons who provide professional services under agreements with
Seller, acting alone or together, has, directly or indirectly, overtly or
covertly, (i) knowingly and willfully received any prohibited remuneration,
rebates, payments, commissions, promotional allowances or any other prohibited
gifts or benefits, from any customer, supplier, physician, health care employee,
governmental employee or other person with whom Seller has done business
directly or indirectly; (ii) knowingly and willfully given or agreed to give any
prohibited remuneration, rebates, payments, commissions, promotional allowances,
or any other prohibited gifts or benefits to any customer, supplier, physician,
health care employee, governmental employee or other person who is or may be in
a position to help or hinder the business of Seller (or Seller in connection
with any actual or proposed transaction) or (iii) engaged in any activities that
are prohibited, or are cause for civil penalties or permissive exclusion from
Medicare or Medicaid, under Title 42 of the United States Code (“Title 42”) or
Title 31 of the United States Code, or the regulations promulgated thereunder,
that, in the case of any of clause (i), (ii) or (iii), (A) would subject Seller
to any claims, liabilities or penalties in any civil, criminal or governmental
investigation, litigation or proceeding brought by any regulatory authority, (B)
if continued in the future, would have a material adverse effect or (C) are
prohibited by any private accrediting organization from which the Facility seeks
or has accreditation or by generally recognized professional standards of care
or conduct, including without limitation the following activities:
(1)    knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or payment;
(2)    knowingly and willfully making or causing to be made any false statement
or representation of a material fact for use in determining rights to any
benefit or payment;
(3)    presenting or causing to be presented a claim for reimbursement under
Medicare, Medicaid or other federal or state health care program that is (i) for
an item or service that the person presenting or causing to be presented knows
or should know was not provided as claimed, (ii) for an item or service that the
person presenting knows or should know that the claim is false or fraudulent or
(iii) for an item or service that the person presenting knows or should know is
not medically necessary;
(4)    knowingly and willfully making or causing to be made or inducing or
seeking to induce the making of any false statement or representation (or
omitting to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading) or a material fact with
respect to (i) the conditions or operations of the Facility in order that such
Facility may qualify for Medicare, Medicaid or other federal or state health
care program certification or (ii) information required to be provided under
Section 1320a-7 of Title 42 or any regulations promulgated thereunder; or
(5)    currently is, or within the preceding five (5) years, been subject to any
corporate integrity agreement with the Office of Inspector General, or any other
type of oversight program that could cause the facility to incur obligations or
liabilities or that could restrict, impair, limit, jeopardize, or suspend
participation in the Medicare program.
3.31.    Undisclosed Liabilities. All material liabilities of Seller related to
the Facility and the Business are identified on the Financial Statements, or the
Schedules to this Agreement except for (a) liabilities reflected or reserved
against in the financial statement balance sheets of Seller, (b) current
liabilities incurred in the ordinary course of business of Seller, (c) expenses
incurred by the Seller in connection with the transactions contemplated by this
Agreement, or (d) contractual and similar liabilities incurred in the ordinary
course of business consistent with past practice which are not required to be
reflected on a balance sheet (including in the notes thereto) prepared in
accordance with GAAP as historically applied by Seller, and Seller knows of no
other material liabilities.
ARTICLE 4.    REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate the
transactions contemplated herein, Buyer hereby represents and warrants to
Seller, which representations and warranties shall be true and correct on the
date hereof and on the date of Closing, as follows:
4.1.    Organization, Qualification and Authority. Buyer is a limited liability
company duly organized under the laws of the State of Delaware, and qualified to
do business under the laws of the Commonwealth of Kentucky. Buyer has the full
power and authority to own, lease and operate its properties and assets as
presently owned, leased and operated and to carry on its business as it is now
being conducted. Buyer has the full right, power and authority to execute,
deliver and carry out the terms of this Agreement and all documents and
agreements necessary to give effect to the provisions of this Agreement and to
consummate the transactions contemplated on the part of Buyer hereby. The
execution, delivery and consummation of this Agreement and all other agreements
and documents executed in connection herewith by Buyer has been duly authorized
by all necessary action on the part of Buyer. No other action on the part of
Buyer or any other person or entity is necessary to authorize the execution,
delivery and consummation of this Agreement and all other agreements and
documents executed in connection herewith. This Agreement, and all other
agreements and documents executed in connection herewith by Buyer, upon due
execution and delivery thereof, shall constitute the valid binding obligations
of Buyer, enforceable in accordance with their respective terms.
4.2.    Absence of Default. The execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection herewith
by Buyer will not constitute a violation of, be in conflict with, or, with or
without the giving of notice or the passage of time, or both, result in a breach
of, constitute a default under, or create (or cause the acceleration of the
maturity of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets (except in the ordinary course pursuant to
Buyer’s existing credit agreements) under: (1) any term or provision of the
governing documents of Buyer; (2) any contract, lease, agreement, indenture,
mortgage, pledge, assignment, permit, license, approval or other commitment to
which Buyer is a party or by which Buyer is bound; (3) any judgment, decree,
order, regulation or rule of any court or regulatory authority; or (4) any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority or arbitration tribunal to which Buyer is
subject.
4.3.    Broker’s or Finder’s Fee. Buyer has not employed and is not liable for
the payment of any fee to any finder, broker, government official, consultant or
similar person in connection with the transactions contemplated by this
Agreement. Buyer shall indemnify and hold Seller harmless from any breach of
this representation.
4.4.    Financing. As of the date of this Agreement, Buyer has received
reasonable assurances from its primary lender that it will provide the financing
necessary to effect the purchase of the Assets pursuant to the terms hereof.
ARTICLE 5.    COVENANTS OF PARTIES
5.1.    Inspection; Preservation of Facility and Assets. Buyer, its agents,
employees, consultants and contractors (“Buyer Parties”), shall have the right
to come onto the Real Estate and to have access to the Assets and the Facility
from time to time for the purpose of conducting its due diligence investigation
and review of the Assets and the Facility; provided, that any inspection,
examination, test or study conducted by or on behalf of Buyer shall be solely at
Buyer’s expense, shall be conducted at reasonable times and upon reasonable
advance notice, and shall not interfere with the operation of the Facility by
Seller. Seller shall have a right to have a representative present during any
visits to or inspections of the Facility by Buyer Parties. From the date hereof
through Closing, Seller shall use its best efforts and shall do or cause to be
done all such acts and things as may be necessary to preserve, protect and
maintain intact the operation of the Facility and Assets as a going concern
consistent with prior practice and not other than in the ordinary course of
business and to preserve, protect and maintain for Buyer the goodwill of the
clinical staff, suppliers, employees, clientele, patients and others having
business relations with the Facility. Seller shall use its best efforts to
obtain all documents called for by this Agreement. Buyer and Seller shall use
its best efforts to facilitate the consummation of the transactions contemplated
under this Agreement. Until termination of this Agreement, Seller agrees that it
will not sell or transfer, or negotiate the sale or transfer of, the Assets or
the Facility. From the date hereof until Closing, Seller will not sell, discard
or dispose of any of the Assets other than in the ordinary course of business.
From the date hereof through Closing, Seller will not perform any material
grading or excavation, construction or removal of any improvement, or make any
other material change or improvement upon or about the Real Estate without the
prior written consent of Buyer. From the date hereof through Closing, Seller and
any party in possession of all or any part of the Assets will maintain and keep
the Assets in a sanitary, well-maintained condition and in good order and
repair.
5.2.    Absence of Material Change. From the date hereof through Closing, Seller
shall not make any material change in the operations of the Facility or and in
the utilization of the Assets and shall not enter into any other material
contract or commitment or any other transaction with respect to the Facility or
the Assets without the prior written consent of Buyer.
5.3.    WARN Act. Buyer shall be required to and shall employ such number of
Seller’s employees at the Facility, and shall retain for a period of ninety (90)
days following the Closing such number of Seller’s employees at the Facility, as
shall be necessary to avoid any potential liability by Seller for a violation of
the Workers Adjustment Retraining and Notification Act (the “WARN Act”) (or any
similar law of the Commonwealth of Kentucky) attendant to Seller’s failure to
notify such employees of a “mass layoff” or “plant closing” as defined in the
WARN Act (or any similar law of the Commonwealth of Kentucky). For purposes of
determining compliance by Buyer with the foregoing provisions, employees
terminated by Seller at the Facilities during the period of ninety (90) days
immediately prior to the Closing for other than cause, retirement or voluntary
departure, shall be taken into consideration so long as Seller notifies Buyer of
such terminations. Seller shall notify Buyer in writing regarding all employees
terminated by Seller during said ninety (90) day period. In order to determine
compliance with this Section 5.3, Buyer shall advise Seller in writing on or
before five (5) days prior to the Closing of those employees of Seller that
Buyer has elected not to employ. Nothing herein contained shall be deemed either
to affect or to limit in any way the management prerogatives of Buyer with
respect to employees, or to create or to grant to such employees any third party
beneficiary rights or claims or causes of action of any kind or nature. The
provisions of this Section 5.3 shall survive the closing of the transactions
contemplated herein. Notwithstanding the foregoing Buyer shall be entitled to
offer employment to therapists who work at the Facility and are employees of
Seller or its affiliates, and Seller and/or its affiliates shall consent to such
employment and shall release Buyer and its affiliates, and the affected
employees, from any non-competition covenants or similar restrictions.
5.4.    Access to Books and Records.
(1)    From the date hereof through Closing, Seller shall give Buyer and Buyer’s
counsel, accountants and other representatives full access to all of Seller’s
offices, properties, books, contracts, commitments, records and affairs relating
to the Assets or the Facility so that Buyer may inspect and audit them and shall
furnish to Buyer a copy of all documents and information concerning the
properties and affairs of Seller, the Facility or the Assets as Buyer may
request. If any such books, records and materials are in the custody of third
parties, Seller shall direct such third parties to promptly provide them to
Buyer. Copies of documents furnished to Buyer by Seller will be returned by
Buyer upon request if the transaction is not consummated. The Buyer and Seller
currently have in place a Non-Disclosure Agreement, the terms of which are
incorporated herein by reference, and all information exchanged related in any
way to this transaction shall be subject to the terms of said Agreement. Seller
shall provide Buyer promptly with interim financial statements of Seller and any
other management reports, as and when they are available.
(2)    Following Closing, Buyer shall permit Seller’s representatives
(including, without limitation, its counsel and auditors), during normal
business hours, to have reasonable access to, and examine and make copies of,
all books and records of the Facility which relate to transactions or events
occurring through Closing. Buyer’s reasonable out-of-pocket costs associated
with the delivery of the requested documents shall be paid by Seller.
(3)    Following Closing, Seller shall permit Buyer and its representatives
(including, without limitation, its counsel and auditors), to have access to,
and examine and make copies of, all books and records relating to the Facility
or Assets, which books and records are retained by Seller and which relate to
transactions or events occurring prior to Closing. For a period of five (5)
years after Closing or such longer period as may be mandated by law, Seller
agrees that, prior to the destruction or disposition of any such books or
records, Seller shall provide not less than forty-five (45) days, nor more than
ninety (90) days, prior written notice to Buyer of such proposed destruction or
disposal. If Buyer desires to obtain any such documents or records, it may do so
by notifying Seller in writing at any time prior to the date scheduled for such
destruction or disposal. In such event, Seller shall not destroy such documents
or records and the parties shall then promptly arrange for the delivery of such
documents or records to Buyer, its successors or assigns. Seller’s reasonable
out-of-pocket costs associated with the delivery of the requested documents or
records shall be paid by Buyer.
(4)    For a period of eighteen (18) months following Closing, to the extent
requested by Buyer in connection with (a) any audit of the financial statements
of Seller relating to the Facility; (b) any separate presentation to be prepared
by Buyer or any of its affiliates of the financial statements relating to the
Facility (including, without limitation, any such separate presentation of the
Facility as a “significant subsidiary” or a “Facility acquired” within the
meaning of the accounting rules of the Securities Act and/or the Exchange Act
(each as defined below), and/or the rules and regulations promulgated under
either such act); or (c) any presentation to be prepared by Buyer or any of its
affiliates of the pro forma effects of Buyer’s acquisition of the Facility, in
each case, Seller shall, and shall cause its accountants to, (i) cooperate in
the preparation of such financial statements or pro forma presentation,
including, the execution and delivery of any management or other audit letters
reasonably requested by Buyer’s auditors, and (ii) provide, or cause to be
provided, any records or other information requested by Buyer or any of its
affiliates in connection therewith, to the extent they are not included in the
Assets, as well as access to, and the cooperation of, Seller’s accountants and
work papers relating to financial statements of Seller, at the cost and expense
of Buyer.
5.5.    Risk of Loss. In the event there is any damage to or loss of any of the
Assets (whether by fire, theft, vandalism, terrorism, act of God or other cause
or casualty, damage or loss) between the date hereof and Closing, the Purchase
Price shall be reduced by the amount necessary to repair the damage, which
reduction shall be offset by any amounts paid by Seller’s insurance company and
assigned to Buyer; provided, however, that in the event of a material casualty
that affects the Facility and renders it unusable for its intended purposes,
Buyer may elect to either: (i) terminate this Agreement in its entirety, without
any further penalty or obligation and no remaining obligations of either party
to the other; or (ii) complete the Closing on the terms stated herein, subject
to the right to either receive all insurance proceeds, or obtain a reduction in
the Purchase Price with regard to such insurance proceeds received by Seller.
5.6.    Condemnation. From the date hereof through Closing, in the event the
Facility becomes subject to or is threatened with any condemnation or eminent
domain proceedings that threatens to render the Facility unusable for its
intended purposes then Buyer, in its sole discretion, may elect to terminate
this Agreement in its entirety without obligation or penalty. In the event Buyer
does not elect to terminate the Agreement, the transaction shall proceed towards
Closing, provided that the Purchase Price shall be reduced by any condemnation
award received by Seller or Buyer shall be assigned all such claims. In the
event that the Facility becomes subject to or is threatened with any
condemnation or eminent domain proceedings which do not threaten to render the
Facility unusable for its intended purposes, then the parties shall proceed to
Closing and Buyer shall be entitled to any condemnation award or damages paid
with respect to such proceeding.
5.7.    Preserve Accuracy of Representations and Warranties. Seller shall
refrain from taking any action which would render any representation and
warranty contained in Article 3 hereof untrue, inaccurate or misleading as of
Closing. Seller will promptly notify Buyer of any lawsuit, claim, administrative
action or other proceeding asserted or commenced against Seller that may involve
or relate in any way to Seller, the Assets or the operation of the Facility.
Seller shall promptly notify Buyer of any facts or circumstances that come to
Seller’s attention and that cause, or through the passage of time or the giving
of notice or either, may cause any of Seller’s representations and warranties to
be untrue or misleading at any time from the date hereof through Closing.
5.8.    Maintain Books and Accounting Practices. From the date hereof through
Closing, Seller shall maintain its books of account in the usual, regular and
ordinary manner on a basis consistent with prior years and shall make no change
in its accounting methods or practices.
5.9.    Indebtedness; Liens. Other than in the ordinary course of Seller’s
business consistent with past practice, from the date hereof through Closing,
Seller shall not create, incur, assume, guarantee or otherwise become liable or
obligated with respect to any indebtedness for borrowed money, nor make any loan
or advance to, or any investment in, any person or entity, nor create any lien,
security interest, mortgage, right or other encumbrance in any of the Assets,
without Buyer’s prior written approval.
5.10.    Compliance with Laws and Regulatory Consents. From the date hereof
through Closing: (1) Seller shall comply with all applicable statutes, laws,
ordinances and regulations; (2) Seller shall keep, hold and maintain all
certificates, accreditations, participations, licenses, and other permits
necessary for operation of the Facility; (3) Seller shall use reasonable efforts
and shall cooperate with Buyer to obtain all consents, approvals, exemptions and
authorizations of third parties, whether governmental or private, necessary to
consummate the transactions contemplated by this Agreement; and (4) Seller shall
make and cause to be made all filings and give and cause to be given all notices
which may be necessary or desirable under all applicable laws and under
applicable contracts, agreements and commitments in order to consummate the
transactions contemplated by this Agreement.
5.11.    Maintain Insurance Coverage. From the date hereof through Closing,
Seller shall maintain and cause to be maintained the existing insurance on the
Assets and the operations of the Facility.
5.12.    Licensure and Certification. Buyer shall within ten (10) business days
of the date hereof file all initial applications and other documents required by
the Commonwealth of Kentucky (the “State”) for the issuance of the licenses,
certificates of need, certifications and approvals required by the State for the
operation of the Facility by Buyer (the “Licensure Approvals”) and Buyer shall
diligently proceed with securing the Licensure Approvals, including providing
the State with any supplemental or additional information required for the State
to deem any such applications to be complete. Buyer shall not use or bill under
any Medicaid provider numbers used by Seller, and Buyer shall be responsible for
obtaining a new Medicaid provider agreement and number and/or Medicaid
certification as may be necessary for the continued operations of the Facility
(“New Provider Number”). Seller’s Medicaid provider account numbers for the
Facility shall remain the sole and exclusive property of Seller.
5.13.    Performance. Seller and Buyer shall take all appropriate steps to
satisfy their respective obligations, and the conditions to Closing, including
without limitation the application for necessary licenses and permits.
5.14.    WARN Act; Hiring of Employees. Prior to Closing, Seller will not
temporarily or permanently close or shut down any “single” site of “employment”
or any “facility” or any “operating unit,” department or service within a single
site of employment, as such terms are used in WARN. At Closing, Buyer shall
offer employment to a sufficient number of the Employees, and on such terms, and
for such periods, as may be necessary to avoid triggering any obligations on
behalf of either Seller under WARN or any similar state law or regulation. Buyer
shall also offer group health plan coverage to such Employees that accept
employment and are otherwise eligible for such coverage under the terms of
Buyer’s plan effective immediately after Closing.
5.15.    Consents. Seller shall use reasonable efforts to obtain all consents
required in form and substance for the assignment of the Assumed Contracts and
Buyer shall assist Seller in such efforts. Anything contained herein to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any of the Contracts if an attempted assignment thereof without the
consent of another party thereto would constitute a breach thereof, unless such
consent is obtained. If such consent is not obtained, or if an attempted
assignment would be ineffective or would materially affect Seller’s rights
thereunder so that Buyer would not in fact receive all such rights, Seller shall
cooperate in any reasonable arrangement designed to provide Buyer the benefit
under any such Assumed Contracts, including without limitation enforcement, at
no out-of-pocket cost to Seller, of any and all rights of Seller against the
other party or parties thereto arising out of the breach or cancellation by such
other party or otherwise.
5.16.    Medicare/Medicaid Cost Reports.
(5)    Seller acknowledges and agrees that it shall be responsible for all
Medicare and Medicaid billing and cost reports filed with Medicare and Medicaid
with respect to the Facilities prior to the Closing Date and is responsible for
terminating cost reports that include periods up to the Closing Date. Seller
acknowledges and agrees that it shall remain liable for any claims for
overpayments under any of Seller’s Medicare or Medicaid provider agreements for
periods prior to the Closing Date. Seller shall timely file all required
Medicare credit balance reports, responses to open cost report audits and
settlements, and terminating cost reports. Buyer acknowledges and agrees that
following the Closing Date, Seller shall continue to be entitled to receive any
refund or other benefit which may result from the filing of said reports,
including, without limitation, rights to settlements and retroactive adjustments
and the Seller Bad Debt (as defined below), if any, arising under a cost report
of Seller or its affiliates, for cost report periods ending on or prior to the
Closing Date, whether open or closed. After the Closing Date, Buyer shall assist
Seller in any way reasonably necessary or required of Buyer to complete such
cost reports in a timely manner; provided that any costs or expenses related
thereto shall be borne by Seller.
(6)    After the Closing Date, Seller shall promptly and diligently provide
Buyer with reasonable and appropriate documentation regarding the Medicare bad
debts associated with the Facility incurred by Seller for dates of services
prior to the Closing Date (the “Seller Bad Debt”) for purposes of facilitating
Buyer’s preparation of related cost reports.
(7)    Buyer shall timely prepare and file with the CMS and the appropriate
state agency, its initial cost report for the fiscal year commencing with the
fiscal year in which the Closing Date occurs, and will include in its initial
cost report the Seller Bad Debt.
(8)    Seller shall provide to Buyer for filing by the day following closure of
the certificate of need file, a completed and signed CMS 855A (Sections 1A, 2F,
13, 15 or 16, assuming the Seller has submitted an 855 application at some point
such as revalidation and the Authorized/Delegated Person has not changed from
the last submission). If the Authorized/Delegated Person has changed or if none
is on file with the MAC, then Section 6 shall be completed for both the old and
new Authorized/Delegated Person. As an alternative, the Seller can provide all
the information needed to complete the Seller’s CMS 855A and a completed and
signed Section 15 or 16.
(9)    In the event Buyer receives any notices of settlement of claims from
Medicaid and/or Medicare for dates of services rendered prior to Closing, Buyer
shall notify Seller within ten (10) business days.
5.17.    Prohibited Actions Pending Closing. Unless otherwise expressly provided
for herein or approved by Buyer in writing, from the date of this Agreement
until the Closing Date, Seller shall not:
(1)    Accept any advance payment for more than thirty (30) days of any rent or
residents’ occupancy fees under any lease included in the Assumed Contracts or
occupancy agreement; or waive, reduce or forgive any rent or occupancy fees
required to be paid under any occupancy agreement, or grant any lease or other
concessions or free rent periods under any occupancy agreement;
(2)    Make any capital improvements to the Real Estate in excess of $10,000 or
incur any other obligations in excess of $10,000;
(3)    Make any commitments or representations to any applicable governmental
authority, any adjoining or surrounding property owners, any civic association,
any utility or any other person or entity that would in any manner be binding
upon Buyer;
(4)    Sell or otherwise dispose of, or agree to sell or dispose of any of the
Assets, except in the ordinary course of business as permitted by this
Agreement; and
(5)    Take any action prior to the Closing Date which would breach any of the
representations and warranties contained in this Agreement or otherwise take any
action outside of the ordinary course of business of Seller.
5.18.    Restrictive Covenants. In consideration of the Purchase Price and the
benefits the Seller and the Shareholders will receive under this Agreement, and
to protect Buyer’s legitimate business interests in the operation of the
Facility, Seller and the Shareholders shall not, directly or indirectly, do any
of the following:
(1)    For a period beginning at Closing and ending on the third anniversary of
Closing, engage in, or invest in (other than as a passive shareholder of less
than five percent (5%) of the securities of a publicly traded entity), own,
manage, operate, finance, control, be employed by, associated with or in any
manner connected with, or render services or advice or other aid to, any person
engaged in or planning to become engaged in, any Competing Business (defined
below) within the Restricted Area (defined below); or
(2)    For a period beginning at Closing and ending on the first anniversary of
Closing, induce or attempt to induce any employee or independent contractor of
Buyer or any of its affiliates to leave the employ or service of Buyer or any of
its affiliates, in any way interfere with the relationship between Buyer or any
of its affiliates and any such employee or independent contractor, or solicit,
offer employment to, otherwise attempt to hire, employ, or otherwise engage as
an employee, independent contractor, or otherwise, any such employee or
independent contractor.
For purposes hereof, (i) “Competing Business” shall mean any business engaged in
the ownership and/or operation of skilled nursing facilities, and (ii)
“Restricted Area” shall mean any area within a ten (10) mile radius of the
Facility
Buyer and Seller agree that this Section 5.18 shall not restrict Steve Brown
from working for Buyer at the Facility after Closing.
5.19.    Medicare Billing Assistance. Following the Closing Date, Buyer will
cooperate and assist Seller in the preparation and execution of Medicare
billings for services provided by Seller to residents of the Facility for months
(or portions of months) ending prior to the Closing Date and any associated
forms for new or discharged residents, which may need to be signed by the
Facility’s administrator. After the Closing Date, Buyer shall allow the field
auditor/accountant of Seller to have reasonable onsite access to the Facility
and the records of the Facility for the billing month in question for the
purpose of preparing, completing and submitting the Medicare billings and any
associated forms to the appropriate Medicare offices for payment to the account
of Seller. Buyer will allow Seller to utilize its biller and any other staff
and/or employees on a reasonable basis and as may be necessary by Seller for
billing and collection purposes for up to ninety (90) days following Closing.
5.20.    Collection Assistance. Buyer shall cooperate with Seller in collecting
accounts receivable which relate to periods prior to the Closing Date, but shall
not be responsible for actively collecting such receivables for Seller. Until
the earlier of: (i) Seller receives payment of all of Seller’s A/R; or (ii) the
date which is twelve (12) months after the Closing Date, Buyer shall provide
Seller with an accounting by the 20th day of each month setting forth all
amounts received by Buyer during the preceding month with respect to Seller’s
A/R which are set forth in the schedule provided by Seller pursuant to Section
2.4. Seller shall have the right to inspect all cash receipts of Buyer related
to payment for services rendered to residents of the Facility prior to the
Closing Date, during weekday business hours, in order to confirm Buyer’s
compliance with the obligations imposed on it under this Section.
5.21.    Notices. Buyer agrees to notify Seller within ten (10) business days of
its receipt of any correspondence received by Buyer after the Closing which
relates in any way to periods of time, events, services, and/or operations prior
to Closing.
ARTICLE 6.    CLOSING
6.1.    Closing. If all of the conditions to Closing set forth in Articles 7 and
8 hereof are satisfied, then the closing of the transaction contemplated by this
Agreement (the “Closing”) shall occur promptly following the satisfaction or
waiver of the closing conditions set forth in Articles 7 and 8 (the “Closing
Date”). The parties shall use commercially reasonable efforts to close the
transactions contemplated hereby on or before February 1, 2015 Closing shall
take place at the offices of Harwell Howard Hyne Gabbert & Manner, P.C.,
Nashville, Tennessee, or at such other time or place as the parties may mutually
agree. Upon consummation, the Closing shall be deemed to be effective, and the
transfer of the Assets shall be deemed to have occurred, as of 12:01 a.m. local
time on the Closing Date. On the day of Closing, Buyer shall pay to Seller or
their designee (pursuant to wire instructions given to Buyer by Seller) funds in
an amount equal to the Purchase Price.
6.2.    Termination. Notwithstanding anything in this Agreement to the contrary,
this Agreement and the obligations of the parties hereunder may be terminated at
or prior to Closing as follows:
(1)    By Seller: (a) in the event the transactions contemplated by this
Agreement have been prohibited or enjoined by reason of any final judgment,
decree or order entered or issued by a court of competent jurisdiction in
litigation or proceedings involving either Buyer or Seller; or (b) in the event
Buyer breaches or violates any material provision of this Agreement or fails to
perform any material covenant or agreement to be performed by Buyer under the
terms of this Agreement and such breach, violation or failure is not cured prior
to Closing or waived by Seller at or prior to Closing.
(2)    By Buyer: (a) in the event the transactions contemplated by this
Agreement have been prohibited or enjoined by reason of any final judgment,
decree or order entered or issued by a court of competent jurisdiction in
litigation or proceedings involving either Buyer or Seller; (b) pursuant to
Section 5.5, 5.6 or 5.12; or (c) in the event Seller breaches or violates any
material provision of this Agreement or fails to perform any material covenant
or agreement to be performed by either under the terms of this Agreement and
such breach, violation or failure is not cured prior to Closing or waived by
Buyer at or prior to Closing.
(3)    By Buyer or Seller if Closing hereunder shall not have taken place within
ninety (90) days after the date of this Agreement, or by such later date as
shall be agreed upon by an appropriate amendment to this Agreement if the
parties agree in writing to an extension, provided that a party shall not have
the right to terminate under this Section 6.2(3) if the conditions precedent to
such party’s obligation to close have been fully satisfied and such party has
failed or refused to close after being requested in writing to close by the
other party.
ARTICLE 7.    SELLER’S CONDITIONS TO CLOSE
The obligations of Seller under this Agreement are subject to the satisfaction
on or prior to Closing, of the following conditions (which may be waived in
writing by Seller in whole or in part):
7.1.    Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Buyer contained in this
Agreement (including the Exhibits hereto) or in any certificate or document
delivered by Buyer to Seller pursuant hereto shall be deemed to have been made
again at Closing and shall then be true in all material respects; and Buyer
shall have performed and complied with all material covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at Closing.
7.2.    No Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body shall have been instituted to restrain or
prohibit the transaction herein contemplated, and no governmental agency or body
or other entity shall have taken any other action as a result of which to
proceed with the transactions hereunder will constitute a violation of law.
7.3.    Order Prohibiting Transaction. No order shall have been entered in any
action or proceeding before any court or governmental agency, and no preliminary
or permanent injunction by any court shall have been issued which would have the
effect of: (1) making the transactions contemplated by this Agreement illegal;
or (2) otherwise preventing consummation of such transactions. There shall have
been no United States federal or state statute, rule or regulations enacted or
promulgated after the date of this Agreement that results in any of the
consequences referred to in this Section.
ARTICLE 8.    BUYER’S CONDITIONS TO CLOSE
The obligations of Buyer under this Agreement are subject to the satisfaction,
on or prior to Closing, of the following conditions (which may be waived in
writing by Buyer in whole or in part):
8.1.    Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Seller contained in this
Agreement (including the Exhibits hereto) or in any certificate or document
delivered to Buyer in connection herewith, shall be deemed to have been made
again at Closing and shall then be true in all material respects; and Seller
shall have performed and complied with all material covenants, agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or at Closing.
8.2.    No Loss, Damage of Destruction. In the event there is any damage to or
loss of any of the Assets (whether by fire, theft, vandalism or other cause or
casualty), the terms of Sections 5.5 and 5.6 shall have been complied with.
8.3.    Regulatory Approvals. Buyer shall have obtained or have reasonable
assurance that it will obtain (at its own cost) (a) certification for
participation in the Medicaid Programs of the State under a new provider
agreement and provider number, and (b) all other licenses, permits, approvals or
certificates necessary for the ownership and operation of the Facility; provided
that Buyer has promptly made application for such certifications, consents,
licenses, etc. Buyer acknowledges and agrees that it shall not be entitled to
use Seller’s Medicaid provider account numbers for the Facility, which shall
remain the sole and exclusive property of the Seller.
8.4.    No Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body shall have been instituted to restrain or
prohibit the transaction herein contemplated, and no governmental agency or body
or other entity shall have taken any other action as a result of which to
proceed with the transactions hereunder constitute a violation of law.
8.5.    Material Adverse Change. There shall not have occurred a material
adverse change with respect to the assets, financial condition or operations of
the Facility, taken as a whole. Expressly excluded from the definition of
“material adverse change” hereunder are changes (a) generally affecting the
skilled nursing and nursing home industries, including changes due to actual or
proposed changes in law or regulations, (b) that result from political or
economic turmoil, or (c) that result from the announcement or pendency of the
transaction contemplated by this Agreement.
8.6.    Status of License and Certification. Buyer shall be satisfied in its
sole but reasonable discretion that the nursing home license, and
Medicare/Medicaid certification, for the operation of the Facility is in
substantial compliance and valid and in good standing, and not subject to any
regulatory or remedial conditions or restrictions nor otherwise subject to or in
risk of suspension or termination. In the event Closing cannot occur due to the
inability of Buyer to receive the licenses or certifications as a result of lack
of the Facility’s substantial compliance with Medicare or Medicaid requirements
for skilled nursing facilities, then Seller agrees to use its best efforts to
correct such issues and the Closing Date will be extended for such additional
time as may be reasonably necessary for such corrective measures.
8.7.    Title Work and Surveys; Defects and Cure; Title Policy; Environmental
Inspections. The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment prior to or
at Closing of each of the following conditions, any and all of which may be
waived, in whole or in part, by Buyer to the extent permitted by applicable Law:
(1)    Title Work. Seller has furnished to Buyer copies of all existing title
work in Seller’s possession or control insuring title to the Real Estate listed
on Exhibit 8.7 attached hereto (the “Existing Title Work”). Within five (5) days
following the date of this Agreement, Buyer may, at Buyer’s option and expense,
order commitments from the title insurance company issuing the existing Title
Work (the “Title Company”) to issue (i) updates to the Existing Title Work or
(ii) new policies of title insurance for those portions of the Real Estate as to
which there is no existing Title Work, together with legible copies of all
exceptions to title referenced therein (the “New Title Work”). The New Title
Work shall set forth the state of title as of each commitment’s Closing to the
Real Estate together with all exceptions or conditions to such title, and all
other encumbrances of record affecting such Real Estate, which would appear in
an owner’s or lender’s title policy of title insurance, if issued. Buyer shall
furnish Seller with copies of any updated title work and New Title Work.
(2)    Survey. Seller has furnished to Buyer copies of all existing land title
surveys of the Real Estate in Seller’s possession or control listed on Exhibit
8.7 (the “Existing Surveys”). Within five (5) days following the date of this
Agreement, Buyer may, at Buyer’s option and expense, order (i) updates to the
Existing Surveys or (ii) current, as-built surveys for those portions of the
Real Estate as to which there are no Existing Surveys (the “New Surveys”)
meeting the 2011 Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Survey of comparable properties, including such Table A optional items as Buyer
elects. The updated surveys and New Surveys shall contain the surveyor’s
ALTA/ACSM certification to Buyer, Buyer’s lender, Seller and the Title Company.
Buyer shall furnish Seller with copies of any updated surveys and New Surveys.
(3)    Defects and Cure. The Existing Title Work, the New Title Work, the
Existing Survey and the New Survey are collectively referred to as “Title
Evidence”. Buyer shall notify Seller in writing within five (5) days after its
receipt of the last of the Title Evidence of any claims, encumbrances,
exceptions or defects disclosed in the Title Evidence, other than Permitted
Exceptions, to which Buyer objects (the “Defects”). Any matters disclosed in the
Title Evidence as to which Buyer does not so object shall be deemed to be
Permitted Exceptions. For purposes of this Agreement, any encumbrance, exception
or other matter reflected on any Existing Title Work or Existing Survey, other
than mortgages or liens to be released at Closing, shall be deemed a Permitted
Exception. Seller, at its sole cost and expense, may elect to cure any such
Defects on or before Closing (“cure” shall include, but is not limited to, an
endorsement by the Title Company reasonably acceptable to Buyer or its lender,
either eliminating the Defect, insuring over the Defect or insuring against the
effect of the Defect) or Seller may elect to not cure the Defect and shall give
written notice to Buyer within ten (10) days of its receipt of Buyer’s notice of
Defects of its decision. Within ten (10) days of Buyer’s receipt of Seller’s
election not to cure any Defects, Buyer may, at its election, (i) waive such
uncured Defects and close, or (ii) terminate this Agreement. If Seller fails to
timely give such notice, Seller shall be deemed to have elected not to cure the
Defects, whereupon Buyer may waive such Defects and close or may terminate this
Agreement as provided in the immediately preceding sentence.
(4)    Title Policy. At the Closing, Buyer may obtain a current ALTA Form
Owner’s Policy of Title Insurance (the “Title Policy”) for the Real Estate
issued by the Title Company. The Title Policy shall be issued as of the Closing
Date in an amount equal to the portion of the Purchase Price being allocated to
the Real Estate and shall insure to Buyer good and marketable fee simple title
to the Real Estate, subject only to (i) Permitted Exceptions and (ii) taxes for
the current and subsequent years “not yet due and payable.” At Buyer’s request,
the Title Policy shall have all standard and general exceptions deleted so as to
afford full “extended form coverage” and shall contain such available
endorsements as Buyer or Buyer’s lender shall reasonably require in connection
with its review of the Title Evidence. Seller shall execute such certificates
and affidavits as may be reasonably necessary in connection with the issuance of
the Title Policy as described in this Section 8.7(4). Buyer shall pay all
premiums, costs and expenses of the Title Policy, including the premiums, costs
and expenses of any mortgage title insurance required of any lender of Buyer.
(5)    Environmental Inspections. For a period of forty-five (45) days following
the execution of this Agreement (the “Environmental Inspection Period”), Buyer
and Buyer’s agents, representatives and contractors (or those of Buyer’s lender)
shall have the right to enter upon the Real Estate for the purpose of conducting
such tests, assessments, evaluations and investigations as Buyer may determine
in its sole discretion, in order to evaluate and determine the current
environmental condition of the Real Estate, including without limitation Phase I
or Phase II environmental assessments of the Real Estate. Within five (5) days
after the expiration of the Environmental Inspection Period, Buyer shall give
written notice to Seller if Buyer has identified any existing, potential or
suspect environmental conditions, risks or liabilities on or in respect of the
Real Estate (“Environmental Conditions”). Buyer shall provide Seller with a copy
of Buyer’s Environmental Inspections reflecting such Environmental Conditions.
If Buyer gives notice of any Environmental Conditions to Seller, then Seller (i)
shall, at its sole cost and expense, cure or remedy such Environmental
Conditions to Buyer’s reasonable satisfaction on or before Closing or (ii) may
elect not to cure or remedy such Environmental Conditions, and shall give
written notice of its election to Buyer within ten (10) days after Buyer’s
notice of Environmental Conditions. Within ten (10) days of Buyer’s receipt of
Seller’s notice that Seller has elected not to cure or remedy any Environmental
Conditions, Buyer may elect to (i) waive such Environmental Conditions and close
or (ii) elect to terminate this Agreement. If Seller fails to timely give notice
of its election as herein provided, Seller shall be deemed to have elected not
to cure or remedy the Environmental Conditions, whereupon Buyer may elect to
waive such Environmental Conditions and close or terminate this Agreement as
provided in the immediately preceding sentence.
8.8.    Financing. Buyer shall have obtained the financing necessary to effect
the purchase of the Assets pursuant to the terms hereof.
8.9.    [Deleted].
8.10.    Admission Agreements. Buyer and Seller will enter into an Assignment
and Assumption Agreement in the form attached hereto, pursuant to which Seller
will assign to Buyer, and Buyer will assume all of Seller’s right, title and
interest in and to and obligations arising after the Closing Date under the
Admissions Agreements with the persons who are residing at the Facility on the
Closing Date (“Assigned Admission Agreements”). Any claims arising under the
Assigned Admission Agreements prior to the Closing shall be and remain the
liability and obligation of Seller as provided in Sections 1.3(2) and 11.2.
ARTICLE 9.    OBLIGATIONS OF SELLER AT CLOSING
At Closing, Seller shall deliver or cause to be delivered to Buyer the following
in form and substance reasonably satisfactory to Buyer:
9.1.    Performance of Covenants. Seller shall have performed the covenants and
obligations required of Seller by this Agreement in all material respects.
9.2.    Documents Relating to Title. Seller shall execute, acknowledge, deliver
and cause to be executed, acknowledged and delivered to Buyer, or to its
designee:
(4)    A special warranty deed, duly executed and acknowledged by Seller, in
recordable form conveying fee simple title to the Real Estate to Buyer (or an
affiliate of Buyer) free and clear of all liens, claims and encumbrances made,
created or suffered by Seller or those claiming by, through or under Seller,
except for Permitted Exceptions.
(5)    One or more Bill of Sale and Assignment Agreements, in form and substance
satisfactory to Buyer, warranting and conveying to Buyer (or an affiliate of
Buyer) good, valid and marketable title to all Assets, free and clear of all
liens, mortgages, pledges, encumbrances, security interests, covenants,
easements, rights of way, equities, options, rights of first refusal
restrictions, special tax or governmental assessments, defects in title,
encroachments and other burdens, except for those expressly acceptable to Buyer.
(6)     Intentionally omitted
(7)    Assignment of Admission Agreements, in the form and substance
satisfactory to Buyer.
9.3.    Possession. Seller shall deliver to Buyer full possession and control of
the Facility and Assets, free and clear of all liens, mortgages, pledges,
security interests, restrictions, encumbrances and burdens of any kind
whatsoever, including, without limitation, limitations on use and rights of
reclamation by donees, subject only to the Permitted Exceptions.
9.4.    Corporate Good Standing and Resolutions. Seller shall deliver to Buyer a
certificate of good standing from the Commonwealth of Kentucky, certified copy
of the Certificate of Organization and other governing documentation of Seller
(all dated the most recent practical date prior to Closing), certified copies of
the resolutions of the shareholders of Seller authorizing the execution,
delivery and consummation of this Agreement and the execution, delivery and
consummation of all other agreements and documents executed in connection
herewith.
9.5.    Closing Certificate. Seller shall deliver to Buyer certificates of
officers of Seller, dated as of Closing, certifying that: (1) each covenant and
obligation of Seller has been complied with by Seller; and (2) each
representation and warranty of Seller is true and correct at Closing as if made
on and as of Closing.
9.6.    Taxes and Other Payments. Seller shall deliver to Buyer:
(6)    A certificate of non-foreign status signed by the appropriate party and
sufficient in form and substance to relieve Buyer of all withholding obligations
under Section 1445 of the Code. In the event that Seller cannot furnish such a
certificate or Buyer is not entitled to rely upon such a certificate under the
provisions of Section 1445 and the regulations thereunder, Seller shall take
and/or permit Buyer or Buyer’s nominee to take any and all steps necessary to
allow Buyer or Buyer’s nominee to satisfy the requirements of Section 1445.
(7)    Executed releases of all mortgages, security interests, liens, pledges,
restrictions or other encumbrances on or applicable to the Assets, other than
the Permitted Exceptions.
9.7.    Closing Statement. The parties shall execute a mutually agreeable form
of Closing Statement as of the Closing Date of this transaction.
9.8.    Escrow Agreement. The parties shall execute and deliver the Escrow
Agreement.
ARTICLE 10.    OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer shall deliver or cause to be delivered to Seller the following
in a form and substance reasonably satisfactory to Seller:
10.1.    Performance of Covenants. Buyer shall have performed the covenants and
obligations required of Buyer by this Agreement in all material respects.
10.2.    Purchase Price. Buyer shall pay to Seller the Purchase Price upon the
terms specified in Section 2.1 hereof.
10.3.    Certificate of Existence and Resolutions. Buyer shall deliver to Seller
certificates of good standing from the Secretary of State of Delaware and
Kentucky, dated the most recent practical date prior to Closing, together with a
certified copy of the resolutions of Buyer approving this Agreement and the
consummation of the transactions intended hereby.
10.4.    Closing Certificate. Buyer shall deliver to Seller a certificate of
officers of Buyer, dated as of Closing, certifying that: (1) each covenant and
obligation of Buyer has been complied with by Buyer; and (2) each representation
and warranty of Buyer is true and correct at Closing as if made on and as of
Closing.
10.5.    Assumption of Liabilities. Buyer shall covenant to perform and comply
with all of the Assumed Liabilities, subject to the provisions of this
Agreement, from and after Closing.
ARTICLE 11.    SURVIVAL OF PROVISIONS AND INDEMNIFICATION
11.1.    Survival. The covenants, obligations, representations and warranties of
Buyer and Seller contained in this Agreement, or in any certificate or document
delivered pursuant to this Agreement, shall be deemed to be material and to have
been relied upon by the parties hereto notwithstanding any investigation prior
to Closing, and shall not be merged into any documents delivered in connection
with Closing.
11.2.    Indemnification by Seller and Shareholders. Subject to Section 11.4,
Seller and Shareholders individual shall, jointly and severally, promptly
indemnify, defend, and hold harmless Buyer, the directors, officers,
shareholders, employees and agents of Buyer (the “Buyer Indemnified Parties”),
and the Assets against any and all losses, costs, and expenses (including
reasonable costs of investigation, court costs and legal fees) and other damages
resulting from: (1) any breach by Seller or Shareholders of any of the
covenants, obligations, representations or warranties contained in this
Agreement or any certificate or document of Seller delivered pursuant to this
Agreement; (2) the Excluded Liabilities or any liability of Seller not expressly
assumed by Buyer pursuant to Section 1.3 hereof; (3) the determination by
Medicare, Medicaid, any fiscal intermediary, or any federal or state
governmental authority that any amounts paid to Seller by Medicare, Medicaid,
any fiscal intermediary, or any federal or state governmental authority for any
services provided by the Facility prior to the Closing resulted in an
overpayment or other determination by Medicare, Medicaid, any fiscal
intermediary, or any federal or state governmental authority that funds
previously paid by Medicare, Medicaid, any fiscal intermediary, or any federal
or state governmental authority to Seller must be repaid, which determination
results in (i) an offset against amounts owed to Buyer, or (ii) any penalty,
sanction or repayment obligations being assessed against Buyer and (4) any claim
(whether or not disclosed herein) that is brought or asserted by any third
party(s) against Buyer arising out of the ownership, licensing, operation, or
conduct of the Facility or Assets or the conduct of any of Seller’s employees,
agents or independent contractors, relating to all periods of time prior to
Closing.
11.3.    Indemnification by Buyer. Subject to Section 11.4, Buyer shall promptly
indemnify, defend, and hold Seller harmless against any and all losses, costs,
and expenses (including reasonable cost of investigation, court costs and legal
fees) and other damages resulting from: (1) any breach by Buyer of any of its
covenants, obligations, representations or warranties or breach or untruth of
any representation, warranty, fact or conclusion contained in this Agreement or
any certificate or document of Buyer delivered pursuant to this Agreement; (2)
any claim which is brought or asserted by any third party(s) against Seller for
failure to pay or perform any of the Assumed Liabilities; and (3) subject to the
other provisions of this Agreement, any claim that is brought or asserted by any
third party(s) against Seller arising out of or relating to the ownership,
licensing, operation or conduct of the Facility or Assets or the conduct of any
of Buyer’s employees, agents or independent contractors, relating to all periods
of time subsequent to Closing.
11.4.    Procedure for Indemnification.
(8)    Notice. Unless otherwise stated herein, within thirty (30) days after
receipt of written or actual notice of any action or claim (the “Claim”) as to
which it asserts a right to indemnification, the party seeking indemnification
hereunder (the “Indemnitee”) shall give written notice thereof (the “Notice”) to
the person from whom indemnification is sought (the “Indemnitor”), provided that
the failure of the Indemnitee to give the Indemnitor notice within the specified
number of days shall not relieve the Indemnitor of any of its obligations
hereunder, but may create a cause of action for breach for damages directly
attributable to such delay.
(9)    Third Party Claims.
(a)    If any claim for indemnification by Indemnitee arises out of a Claim by a
person other than Indemnitee, the Indemnitor shall be entitled to assume the
defense thereof, by written notice to the Indemnitee within ten (10) days after
receipt of the Notice. Indemnitor shall thereupon undertake to take all steps or
proceedings to defeat or compromise any such Claim, including retaining counsel
reasonably satisfactory to the Indemnitee. Except as otherwise provided herein,
all costs, fees and expenses with respect to any such Claim shall be borne by
Indemnitor. If the Indemnitor assumes the defense of a Claim, it shall not
settle such Claim unless such settlement includes as an unconditional term
thereof a release by the claimant of the Indemnitee, reasonably satisfactory to
the Indemnitee and except that Indemnitor shall not, without the prior written
consent of Indemnitee, directly or indirectly require Indemnitee to take or
refrain from taking any action, or make any public statement, or consent to any
settlement, which it reasonably considers to be against its interest. Indemnitee
shall have the right to participate at its own expense, in such proceedings, but
control of such proceedings shall remain exclusively with Indemnitor.
(b)    If the Indemnitor shall fail to notify the Indemnitee of its desire to
assume the defense of any such claim or action within the prescribed period of
time, then the Indemnitee may assume such defense in such manner as it may deem
appropriate, and the Indemnitor shall be bound by any determinations made or any
settlements thereof effected by the Indemnitee. The Indemnitor shall be
permitted, at its own expense, to join in such defense and to employ its own
counsel but control of such proceedings shall remain exclusively with
Indemnitee.
(c)    Indemnitor and Indemnitee agree to make available to each other, their
counsel and other representatives, all information and documents reasonably
available to them reasonably requested by the other which relate to any such
claim or action, and to render to each other such reasonable assistance as may
be reasonably requested in order to insure the proper and adequate defense of
such claim or action, but any costs or expenses related thereto shall be borne
by Indemnitor; and provided that any failure (after written notice with
specificity and an opportunity to cure) shall not relieve the Indemnitor of any
of its obligations hereunder but may create a cause of action for breach for
damages directly attributable to such failure.
(10)    Straddle Resident Claims. Any claim by a resident relating to
professional negligence or similar matters involving a resident of Facility
served both prior to and subsequent to the Closing Date will be the
responsibility of either Buyer or Seller in accordance with the following
guidelines: (a) if it is a claim in which the incident giving rise to liability
arose prior to the Closing Date, Seller shall be obligated for such claim and
shall pay the defense expenses and damages assessed; (b) if it is a claim in
which the incident giving rise to liability arose subsequent to the Closing
Date, then Buyer shall be obligated for such claim and shall pay the defense
expenses and damages assessed; and (c) in the event that it is not clear whether
or not the incident giving rise to liability occurred prior to or subsequent to
the Closing Date, then Seller and Buyer will jointly defend the case and each
will fully cooperate with the other in such defense. In the event of any joint
defense hereunder, the parties will (x) attempt in good faith to agree upon a
single counsel to represent both parties in the defense of such claim, and (y)
share equally in all costs incurred and damages assessed against the parties in
connection with such claim. Once the case is resolved, if Seller and Buyer
cannot agree to the allocation of both liability and expenses, then the issue
shall be submitted to binding arbitration in accordance with the rules and
procedures of the American Health Lawyers Association.
(11)    Payment of Claims. Amounts payable by the Indemnitor to the Indemnitee
shall be payable by the Indemnitor as incurred by the Indemnitee. In the event
Indemnitor fails to pay, timely and fully, any such amounts, Indemnitee may pay
such Claim. In such event, the Indemnitee may recover from the Indemnitor, in an
addition to the amount so paid, reasonable attorneys’ fees in connection with
the enforcement of any payment due hereunder.
(12)    Limitations on Indemnification. No Indemnitor shall have any liability
for any Claims hereunder until the total of all Claims against such Indemnitor
exceeds Ten Thousand Dollars ($10,000.00) (the “Threshold”) after which
Indemnitor shall be liable for Claims above said Threshold. No claim for
indemnification may be asserted hereunder unless the party seeking
indemnification gives the other party notice of such claim on or before eighteen
(18) months after the Closing Date. The total aggregate amount of claims to
which any Indemnitor shall be subject hereunder shall be capped at Two Million
Dollars ($2,000,000.00) (the “Cap”). Notwithstanding the forgoing, the Threshold
and the Cap shall not apply to Claims arising under Section 11.2(2), (3) or (4),
or Section 11.3(2) or (3). In addition to the limitations specified above, the
maximum liability of any Shareholder under this Article 11 shall not exceed the
Purchase Price multiplied by the ownership percentage of such Shareholder set
forth on Exhibit 3.1-B.
(13)    Insurance Benefit. No Indemnitor shall have any liability for Claims
hereunder to the extent of any Claim that is covered by insurance policy held by
the Indemnitee (or to the extent Indemnitee has been named as an additional
insured) with respect to cash proceeds of such policy actually received by
Indemnitee; provided, however, that (i) this provision shall not apply and the
Indemnitee shall be entitled to indemnification with respect to the amount of
any Claim that is in excess of the cash proceeds actually received by such
Indemnitee (after deducting reasonable costs and expenses incurred in connection
with the recovery of such insurance proceeds, including attorneys’ fees and
premium increases) pursuant to such insurance, (ii) this limitation shall not
apply to any self-insurance arrangement maintained by Indemnitee, and (iii) this
provision shall not be deemed to require Indemnitee to file a claim with respect
to any insurance coverage if Indemnity reasonably determines that such claim
would result in a cancellation of any policy held by or benefiting Indemnitee or
any of its affiliates.
(14)    Damages. Neither party, nor any of its affiliates, shall have any
liability hereunder for consequential, incidental, special or punitive damages.
(15)    Escrow Holdback. The Escrow Holdback shall be applied to Claims payable
to any Buyer Indemnified Party in accordance with the terms of the Escrow
Agreement. Eighteen (18) months after the Closing Date, the Escrow Holdback,
minus (i) any amount paid to any Buyer Indemnified Party under this Article 11,
plus (ii) the amount of any pending claims by any Buyer Indemnified Party under
this Article 11 shall be released to Seller. In the event that any amount is
withheld by the Escrow Agent due to any pending claim, the portion of such
amount that is not applied to a pending claim shall be released to Seller as
soon as practicable following resolution of such Claim
(16)    Exclusive Remedy. The sole and exclusive remedy for any damages incurred
by either party as a result of any breach of the representations, warranties,
covenants and agreements of the other party contained in this Agreement shall be
the remedies contained in this Article 11.
ARTICLE 12.    SHAREHOLDER REPRESENTATIVE
12.1.    Appointment. All of the Shareholders collectively and irrevocably
constitute and appoint the Shareholder Representative as their agent and
representative to take all actions contemplated to be taken by the Shareholder
Representative hereunder and otherwise to act from and after the date hereof and
to do any and all things and execute any and all documents on behalf of the
Shareholders which may be necessary, convenient or appropriate to facilitate the
consummation of the transactions contemplated by this Agreement, including: (1)
execution of the documents and certificates pursuant to this Agreement; (1)
administration of the provisions of this Agreement; (1) giving or agreeing to,
on behalf of all or any of the Shareholders, any and all consents, waivers,
amendments or modifications under this Agreement and the execution or delivery
of any documents in connection therewith; (1) amending this Agreement or any of
the instruments to be delivered to the Buyer pursuant to this Agreement; (1) (A)
disputing or refraining from disputing, on behalf of each Shareholder relative
to any amounts to be received by such Shareholder under this Agreement or any
agreements contemplated hereby, any claim made by the Buyer under this Agreement
or other agreements contemplated hereby, (B) negotiating and compromising, on
behalf of each such Shareholder, any dispute that may arise under, and
exercising or refraining from exercising any remedies available under, this
Agreement or any other agreement contemplated hereby and (C) executing, on
behalf of each such Shareholder, any settlement agreement, release or other
document with respect to such dispute or remedy and (1) engaging attorneys,
accountants, agents or consultants on behalf of the Shareholders in connection
with this Agreement or any other agreement contemplated hereby and paying any
fees related thereto; provided, however, that, except to the extent otherwise
set forth in Section 12.2, the Shareholder Representative shall not take any
actions on behalf of the Shareholders pursuant to the powers delegated to the
Shareholder Representative hereunder that require the Shareholder Representative
to exercise discretion without the prior approval of the Shareholders given in
accordance with the provisions of Section 12.2 hereof. For the avoidance of
doubt, the following actions shall not constitute the exercise of discretion by
the Shareholder Representative and thus may be taken by the Shareholder
Representative without the approval of Shareholders: (i) the receipt of payments
under or pursuant to this Agreement and disbursement thereof to the Shareholders
and others, as contemplated by this Agreement; (ii) payment of any undisputed
amounts due to the Buyer under this Agreement; and (iii) the receipt of written
notices and communications hereunder and the forwarding of such written notices
and communications to the Shareholders pursuant to this Agreement.
12.2.    Direction. Whenever the Shareholder Representative believes that it is
advisable to take an action hereunder requiring the exercise of discretion, or
in the event the Shareholder Representative desires to seek the direction of the
Shareholders, the Shareholder Representative shall notify the Shareholders
requesting direction as to the course of action to be taken, and to the extent
the Shareholder Representative in good faith so acts or refrains from acting in
accordance with any directions provided by the Shareholders pursuant hereto, the
Shareholder Representative shall be authorized hereunder to take such action and
shall not be liable on account of such action to the Shareholders or any other
Person. If the Shareholder Representative shall not have received appropriate
directions within three (3) Business Days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances), the Shareholder Representative may, but shall be under
no duty to, take or refrain from taking such action as he shall deem to be in
the best interests of the Shareholders, and the Shareholder Representative shall
have no liability to the Shareholders or any other Person for such action or
inaction, so long as such action or inaction does not constitute fraud, gross
negligence or willful misconduct. With respect to any action for which the
Shareholder Representative seeks directions from the Shareholders hereunder, the
determination by Shareholders owning two-thirds or more of the Company’s stock
prior to Closing shall be binding on all of the Shareholders and shall
constitute the authorization by the Shareholders. Upon receiving a determination
from the Shareholders in the manner set forth in this Section 12.2, the
Shareholder Representative shall be authorized to act in reliance on such
determination and shall be deemed to have been granted all power and authority
to take any action reasonably necessary or prudent to accomplish the purpose and
intent of such determination and the Shareholder Representative shall have no
liability to the Shareholders or any other Person for such action or inaction,
so long as such action or inaction does not constitute fraud or willful
misconduct.
12.3.    Capacity. All acts of the Shareholder Representative hereunder in his
capacity as such taken in accordance with the provisions of this Section 12.3
shall be deemed to be acts on behalf of the Shareholders and not of the
Shareholder Representative individually. The Shareholder Representative shall
not be liable to the Buyer in his capacity as the Shareholder Representative,
for any liability of a Shareholder or otherwise or for anything, which he may do
or refrain from doing in connection with this Agreement. The Shareholder
Representative shall not be liable to the Shareholders, in his capacity as the
Shareholder Representative, for any liability of a Shareholder or otherwise or
for any error of judgment, or any act done or step taken or omitted by him in
good faith or for any mistake in fact or law, or for anything which he may do or
refrain from doing in connection with this Agreement except in the case of the
Shareholder Representative’s fraud, gross negligence or willful misconduct. The
Shareholder Representative may seek the advice of legal counsel in the event of
any dispute or question as to the construction of any of the provisions of this
Agreement or its duties hereunder, and it shall incur no liability in its
capacity as the Shareholder Representative to the Buyer, the Consolidated
Companies or the Shareholders and shall be fully protected with respect to any
action taken, omitted or suffered by it in good faith in accordance with the
advice of such counsel and in accordance with the provisions of this Article 12.
The Shareholder Representative shall not by reason of this Agreement have a
fiduciary relationship in respect of any Shareholder, except in respect of
amounts received on behalf of the Shareholders.
12.4.    Expenses. Any reasonable expenses or taxable income incurred by the
Shareholder Representative in connection with the performance of his duties
under this Agreement shall not be the personal obligation of the Shareholder
Representative but shall be payable by and attributable to the Shareholders
based on each such Shareholder’s Pro Rata Share (determined as of the date on
which such expense or taxable income was incurred). Notwithstanding anything to
the contrary in this Agreement and without the requirement for any approval of
the Shareholders, the Shareholder Representative shall be entitled and is hereby
granted the right to set off and deduct any unpaid or non-reimbursed reasonable
expenses and unsatisfied liabilities incurred by the Shareholder Representative
in connection with the performance of his duties hereunder from amounts
delivered to the Shareholder Representative pursuant to this Agreement.
Additionally, in connection with any unpaid or non-reimbursed reasonable
expenses and unsatisfied liabilities incurred by the Shareholder Representative
in connection with the performance of his duties hereunder, the Shareholder
Representative, without the requirement for any approval of the Shareholders,
shall be entitled and is hereby granted the right to direct any funds that would
otherwise be payable to Shareholders from the Escrow Account to itself. The
Shareholder Representative may also from time to time submit invoices to
Shareholders covering such expenses and liabilities and, upon the request of any
Shareholder, shall provide such Shareholder with an accounting of all expenses
and liabilities paid. The Shareholder Representative shall, within twenty (20)
Business Days of the end of each calendar quarter in which any amounts have been
paid or received by the Shareholder Representative on behalf of the Shareholder,
deliver to each Shareholder a statement setting forth in reasonable detail and
with reasonable supporting documentation any amounts paid or received by the
Shareholder Representative on behalf of the Shareholders during such calendar
quarter.
12.5.    Notice. Notices or communications to or from the Shareholder
Representative provided in accordance with the terms of this Article 12 shall
constitute notice to or from each of the Shareholders. The Shareholder
Representative shall use commercially reasonable efforts to promptly deliver
copies of any written notices or written communications received or made by him
in his capacity as the Shareholder Representative to all Shareholders. All
decisions, acts, consents or instructions of the Shareholder Representative that
are made or taken in accordance with the provisions of this Section 12.5 shall
be deemed to be decisions, acts, consents or instructions of the Shareholders
and shall be final, binding and conclusive upon each of the Shareholders. The
Buyer may rely upon any decision, act, consent or instruction of the Shareholder
Representative as being the decision, act, consent or instruction of each and
every Shareholder. Notwithstanding anything in this Agreement to the contrary,
the rights and obligations between and among the Shareholders and the
Shareholder Representative set forth in this Article 12 are agreements between
and among the Shareholders and the Shareholder Representative, and the
Shareholders and the Shareholder Representative acknowledge and agree that the
Buyer shall have no obligations or liabilities with respect to such agreements
between and among the Shareholders and the Shareholder Representative.
12.6.    Indemnity. The Shareholders jointly and severally hereby agree to
indemnify and hold, harmless the Shareholder Representative against any
out-of-pocket loss, reasonable expense (including reasonable attorneys’ fees) or
other liability arising out of its service as Shareholder Representative under
this Agreement, other than for harm directly caused by his fraud or willful
misconduct.
ARTICLE 13.    MISCELLANEOUS
13.1.    Assignment. Except as otherwise provided below, neither Seller nor
Buyer may assign any rights or delegate any obligations under this Agreement
without the prior written consent of the other party, and any prohibited
assignment or delegation will be null and void. Notwithstanding the foregoing,
Buyer may assign some or all of its rights, including its right to take title to
some or all of the Assets at Closing, to one or more affiliates so long as Buyer
remains obligated hereunder. This Agreement shall be binding upon and shall
inure to the exclusive benefit of the parties hereto and their respective
permitted heirs, legal representatives, successors and assigns.
13.2.    Other Expenses. Except as otherwise provided in this Agreement, Seller
shall pay all of its expenses in connection with the negotiation, execution, and
implementation of the transactions contemplated by this Agreement and Buyer
shall pay all of its expenses in connection with the negotiation, execution, and
implementation of the transactions contemplated by this Agreement. Seller will
pay any applicable real estate documentary or transfer taxes and recording costs
for the recording of Buyer’s deed to the Real Estate. All costs associated with
any real property surveys, environmental reports, title insurance or document
recording fees incurred in connection with the transactions contemplated within
this Agreement shall be borne solely by Buyer and paid by Closing. Real estate
and personal property taxes and assessments (“Taxes”) imposed by any
governmental authority with respect to the Real Estate and Seller’s personal
property of the relevant tax year in which the Closing occurs and that are not
yet due and payable shall be prorated as of the Closing Date based upon the most
recent ascertainable assessed values and tax rates. Seller shall receive a
credit for any Taxes already paid by Seller and applicable to any period after
the Closing Date. Seller shall pay any unpaid Taxes for tax years prior to the
relevant tax year in which Closing occurs. All other costs incurred in
connection with the transactions contemplated within this Agreement shall be
prorated at Closing.
13.3.    Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (1) if delivered
personally or sent by facsimile, on the date received; (2) if delivered by
overnight courier, on the day after mailing; and (3) if mailed, five (5) days
after mailing with postage prepaid. Any such notice shall be sent as follows:
To Buyer:

c/o Diversicare Healthcare Services, Inc.
1621 Galleria Boulevard
Brentwood, Tennessee 37027
Attn: President
(615) 771-7409 (fax)

with a copy to:

Harwell Howard Hyne Gabbert & Manner, P.C.
333 Commerce Street, Suite 1500
Nashville, Tennessee 37201
Attn: Michael R. Hill
(615) 251-1059 (fax)

To Seller prior to the Closing:

Barren County Health Care Center
300 Westwood Street
Glasgow, KY 42141
Attn: Steve Brown, Administrator

with a copy to:

Thacker, Hodskins, Thacker, Searcy & Knight, LLP
209 W. 4th Street
PO Box 39
Owensboro, KY 42302
Attn: Terra W. Knight
(270) 926-4576 (fax)

To Shareholders, and to Seller after the Closing:

Steve Brown
105 Wingate
Glasgow, KY 42141

13.4.    Confidentiality; Public Announcements. All parties agree to maintain
the confidentiality of the existence of this Agreement and the transactions
contemplated hereunder, unless disclosure is required by law, except for
regulatory filings and except that Buyer shall be entitled to disclose the terms
of this Agreement to its attorneys, accountants, financing sources, third party
agents, investors, and other advisors, provided, such persons agree to keep the
terms of this Agreement confidential. Except as otherwise required by law, all
public announcements prior to and on the Closing Date relating to this Agreement
or the transactions contemplated hereby, including announcements to employees,
will be made only as may be agreed upon jointly by the parties.
13.5.    Controlling Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the Commonwealth of Kentucky without
regard to its choice or conflicts of law provisions. Seller and Buyer hereby
consent to the jurisdiction and venue of courts located in Owensboro, Kentucky,
for the resolution of any disputes arising under this Agreement for which a
dispute resolution mechanism has not been specified herein.
13.6.    Headings. Table of contents and Section headings in this Agreement are
for convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation.
13.7.    Partial Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
13.8.    Waiver. Neither the failure nor any delay on the part of any party
hereto in exercising any rights, power or remedy hereunder shall operate as a
waiver thereof, or of any other right, power or remedy; nor shall any single or
partial exercise of any right, power or remedy preclude any further or other
exercise thereof, or the exercise of any other right, power or remedy. No waiver
of any of the provisions of this Agreement shall be valid unless it is in
writing and signed by the party against which it is sought to be enforced.
13.9.    Counterparts. This Agreement may be executed simultaneously in two or
more counterparts each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.10.    Interpretation; Knowledge. All pronouns and any variation thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or entity, or the context, may require. Further,
it is acknowledged by the parties that this Agreement has undergone several
drafts with the negotiated suggestions of both; and, therefore, no presumptions
shall arise favoring either party by virtue of the authorship of any of its
provisions or the changes made through revisions. Whenever in this Agreement the
term “to the knowledge of Seller” or the like is used, Seller shall be deemed to
have the knowledge of Seller’s executive officers, managers and directors.
13.11.    Entire Agreement. This Agreement, including the Exhibits hereto,
constitutes the entire agreement between the parties hereto with regard to the
matters contained herein and it is understood and agreed that all previous
undertakings, negotiations, letters of intent and agreements between the parties
are merged herein. This Agreement may not be modified orally, but only by an
agreement in writing signed by Buyer and Seller.
13.12.    Legal Fees and Costs. In the event any party incurs legal expenses to
enforce or interpret any provision of this Agreement, the prevailing party will
be entitled to recover such legal expenses, including, without limitation,
attorney’s fees, costs and necessary disbursements, in addition to any other
relief to which such party shall be entitled.
13.13.    No Third Party Beneficiaries. The provisions of this Agreement are
solely for the benefit of the parties hereto. It shall create no rights in any
persons other than as set forth in the immediately preceding sentence.
13.14.    Exclusivity. Until and unless this Agreement is terminated by Buyer or
Seller as provided herein, Seller will not solicit any offers or proposals, or
enter into letters of intent, negotiations or contracts with any third-party
with respect to a transaction relating to the sale, transfer, conveyance, merger
or any other transaction of similar import with respect to Seller or any of the
Assets.
13.15.    Waiver of Jury Trial. EACH OF THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION BROUGHT ON OR WITH RESPECT TO
THIS AGREEMENT, INCLUDING TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER, AND AGREES
THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

The parties hereto have executed this Agreement as of the date first above
written.
BUYER:

DIVERSICARE OF GLASGOW, LLC

BY:    DIVERSICARE HOLDING COMPANY, LLC,     its sole member

By: /s/ Kelly J. Gill                
Name:    Kelly J. Gill    
Title:    President and Chief Executive Officer

SELLER:

BARREN COUNTY HEALTH CARE CENTER, INC.

By: /s/ Steve Brown                    

Title:    President                        

SHAREHOLDERS:

/s/ Steve Brown                        
STEVE BROWN

/s/ John L. Beam                        
JOHN L. BEAM

/s/ Linda Beam                        
LINDA BEAM

/s/ Nancy A. Mollett                    
NANCY A. MOLLETT

/s/ James B. Hurst                        
JAMES B. HURST

/s/ Thomas S. Hurst, Jr.                    
THOMAS S. HURST, JR.

/s/ Peggy Hurst Greenwell                
PEGGY HURST GREENWELL

/s/ Beth Hurst Hawkins                    
BETH HURST HAWKINS

/s/ Sallie Hurst Schrieber                    
SALLIE HURST SCHRIEBER