ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (“Agreement”), is made effective as of September
30, 2015 , by and among FULTON INVESTORS, LLC, a Tennessee limited liability
company (“Seller”), DIVERSICARE OF FULTON, LLC, a Delaware limited liability
company (“Buyer”), and, solely for the purposes of Sections 5.18 and 11.2,
Aubrey B. Preston (the “Guarantor”).
A.    Seller owns and operates a certain skilled nursing facility located at
1004 Holiday Lane, Fulton, Kentucky 42041, known as “Haws Memorial Nursing &
Rehabilitation Center” (the “Facility”).
B.    Seller desires to sell and transfer the assets of the Facility and Buyer
(or an affiliate of Buyer) desires to purchase the same from Seller subject to
the terms and conditions of this Agreement.
C.    Guarantor is the sole member of Seller, and as such will benefit from the
transactions described herein.
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 in Section 6.1
below), 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 rights and claims related to the Assets or the
operation of the Facility, including the “Haws Memorial Nursing & Rehabilitation
Center” name;
(8)    All resident escrows, deposits and 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;
(10)    all unpaid insurance benefits, including rights and proceeds, arising
from or relating to the Facility and Assets prior to Closing;
(11)    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;
(12)    Seller’s Medicare provider number; and
(13)    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;
(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; and
(6)    Any other items listed on Exhibit 1.2 attached hereto.
1.3.    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 an
agreed 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.
1.4.    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 through
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 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
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. The purchase price payable by Buyer to Seller for the
Assets shall be Three Million Nine Hundred Thousand and No/100 Dollars
($3,900,000.00) (the “Purchase Price”).
(7)    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.
(8)    Within three (3) business days after the date of this Agreement, Buyer
shall deliver to the Deposit Escrow Agent (pursuant to its standard form escrow
agreement reasonably acceptable to Buyer and Seller) a good faith cash deposit
in the amount of One Hundred Thousand and No/100 Dollars ($100,000.00) (the
“Deposit”). Any accrued interest shall be transferred with the Deposit. In the
event the Closing occurs as contemplated under this Agreement, the Deposit shall
be applied against the Purchase Price and Buyer shall receive a credit therefor.
In the event that this Agreement is terminated under Section 6.2(2), Section 8.7
or Section 12.15 hereof or as a result of a default by Seller in its obligations
under this Agreement, Buyer and Seller shall deliver instructions to the Deposit
Escrow Agent within three (3) business days of such termination to return the
Deposit plus any accrued interest to Buyer. In the event that this Agreement is
terminated for any other reason whatsoever, Buyer and Seller shall deliver
instructions to the Deposit Escrow Agent within three (3) business days of such
termination to deliver the Deposit plus any accrued interest to Seller.
(9)    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 equal to one hundred percent (100%) of the accrued vacation time
(vested, but not unvested) plus fifty percent (50%) of the accrued sick leave
(vested, but not unvested), both as shown on the payroll records delivered from
Seller to Buyer at least three (3) business days before Closing, for the last
pay period ended at least five (5) business days before 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.
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 (as defined in Section 6.1 below)
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.
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.
(1)    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 Seller shall not initiate any litigation for collections against
parties who continue to be residents of the Facility after Closing without
Buyer’s consent, which consent shall not be unreasonably withheld or delayed,
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.
(2)    Within ten (10) business 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.
(3)    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 sixty (60) 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 sixty (60) 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.
(4)    Any payments received within sixty (60) 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.
(5)    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.
(6)    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) 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.
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 limited liability
company organized, validly existing and in good standing in the State of
Tennessee and is in good standing and qualified to do business as a foreign
limited liability company 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. Except as set forth on Exhibit 3.1, 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. 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 governing
documents of Seller; (2) any contract, lease, purchase order, agreement,
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; or (3) any judgment, decree, order, writ, injunction, law,
statute, rule, or regulation, of any court, 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 audited balance sheets for the Facility as of December 31,
2013 and 2014, and audited income statements for the years then ending, and the
interim unaudited balance sheet and income statement of the Facility for the six
(6) month period ended June 30, 2015 (collectively, the “Financial Statements”).
The Financial Statements are based on the books and records of Seller and
present fairly and accurately the financial position, the results of operation,
and all costs and expenses of the Facility 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,
consistently applied.
3.4.    Operations Since June 30, 2015. Except as set forth on Exhibit 3.4
attached hereto, to the knowledge of Seller, since June 30, 2015, there has been
no:
(5)    Material change in the condition, financial or otherwise, of Seller or
the Facility that has, or could reasonably be expected to have, a material
adverse effect on 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 to any
Assets;
(7)    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; or
(8)    Institution or settlement of any litigation, action or proceeding before
any court or governmental body relating to Seller, the Facility or the Assets.
3.5.    Employment Discrimination. Except as disclosed on 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 of need and other certificates and accreditations
(collectively, the “Licenses and Permits”) necessary for Seller to occupy and
operate the Facility as a skilled nursing and rehabilitation facility, all of
which are listed on Exhibit 3.6 attached hereto. True and correct copies of the
Licenses and Permits have previously been delivered to Buyer. There is no
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. The
licensed-bed capacity and the current effective capacity of the Facility are
also set forth on said Exhibit 3.6. No waivers of any laws, rules, regulations
or requirements (including, but not limited to, minimum square footage
requirements per bed) are required for the Facility to operate at the foregoing
licensed bed capacity.
3.7.    Compliance with Zoning, Land Use and Other Laws. Except as set forth on
Exhibit 3.7 attached hereto, to Seller’s knowledge none of the Real Estate is in
violation 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.
3.8.    Title to Assets.
(1)    Except as set forth on Exhibit 3.8(1) attached hereto, Seller is the sole
legal and beneficial owner of the personal property included in the Assets, free
and clear of all security interests, liens, leases, covenants, assessments,
easements, options, rights of refusal, restrictions, reservations, defects in
the title, encroachments and other encumbrances. To Seller’s knowledge 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.
(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.
Seller is the sole and exclusive holder of all right, title and interest in the
Real Estate, and at Closing will have, good, marketable and insurable fee simple
title to, and be in possession of, the Real Estate. At Closing, the Real Estate
shall be free and clear of all mortgages, liens, leases, assessments, easements,
covenants, options, rights of refusal, restrictions, reservations, defects in
title, encroachments and other encumbrances or claims of any other person or
party, except for (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 are acceptable to
Buyer, and (iv) matters shown by the Existing Title Work (as defined in Section
8.7(1)) deemed to be Permitted Exceptions under Section 8.7(3)hereof and those
additional matters described on Exhibit 3.8(2) attached hereto (the “Permitted
Exceptions”). Seller has 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 insurable fee simple
title and the lawful right to possess and use the Real Estate.
3.9.    Contracts.
(1)    Exhibit 3.9 attached hereto sets forth a complete and accurate list of
all contracts, agreements, purchase orders, leases, subleases, options 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 prior to the Closing Date, 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.
(2)    No event or condition has happened or presently exists that (i)
constitutes a default or breach by Seller or, to Seller’s knowledge, against any
other party thereto, or (ii) after notice or lapse of time or both, would
constitute a default or breach by Seller or, to Seller’s knowledge, 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. Except as set forth on Exhibit 3.10
attached hereto, to Seller’s knowledge all operations, use or occupancy of the
Real Estate 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 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. The Real Estate is free of any lien imposed
pursuant to Environmental Law.
(3)    No Investigation or Inquiry. Except as set forth on Exhibit 3.10 attached
hereto, Seller: (i) has neither received nor 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. Seller is in compliance with OSHA requirements respecting friable
asbestos, if any, located on the Real Estate, and in this regard Seller has
properly implemented an operations and maintenance training program where
required for certain of its employees in the proper handling and removal of
asbestos.
Seller shall promptly notify Buyer in writing of any order or notice of
violation or noncompliance with any Environmental Law, any threatened or pending
action by any regulatory agency or governmental authority, or any claims made by
any third party 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. 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. Except as set forth on Exhibit 3.12 attached hereto, 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. Except as set
forth on Exhibit 3.12 attached hereto, 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.
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
(collectively, the “Employees”), and rates of pay; (2) categorization of each
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. Except as provided in Exhibit 3.13, 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.
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 Seller
has been (i) excluded from participating in the Programs (as defined in Section
3.27 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 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, Letter of Understanding, or any other
arrangement, with any labor union or organization which obligates Seller to
compensate its employees at prevailing rates or union scale, nor are any of its
employees represented by any labor union or organization. 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 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. Seller has not employed and is not 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. Any motor vehicles used at the Facility, whether owned
or leased, are listed on Exhibit 3.17 attached hereto.
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.
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. Seller is in material 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 has filed all federal, state and local tax
returns and reports required by such authorities to be filed, and paid all
taxes, assessments, governmental charges, penalties, interest and fines due to
any federal, state or local authority. 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 have been (and with respect to the final returns will
be) 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 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).
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.    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 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.
3.24.    Intellectual Property. Exhibit 3.24 lists 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 (collectively, the
“Intellectual Property Assets”). The Intellectual Property Assets owned by
Seller 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.
3.25.    Workers’ Compensation. Seller is in compliance 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. 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.
3.26.    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 fully qualified as a provider of, and is in compliance,
in all material respects, with all conditions for participation in Medicare.
(2)    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
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)    Seller has timely filed all cost reports required to be filed in
connection with Medicare, Medicaid or any other third party payor program, 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.
(4)    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, Medicaid or any other third party payor program.
(5)    Neither Seller nor, to 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, Medicaid or any other
third party payor program.
(6)    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,
Medicaid or any other third party payor program.
(7)    Buyer shall not be subject to any fines or penalties that may be imposed
by regulatory authorities with respect to Seller’s operation of the Facility
prior to the Closing Date and Buyer’s license to operate the Facility shall not
be subject to revocation or suspension as a result of any action or omission of
Seller in connection with Seller’s operation of the Facility prior to Closing
Date.
3.27.    Condition of Property. To the best knowledge of Seller, there are no
interior or exterior, structural or other material defects in any portion of the
Real Estate. The Real Estate is and shall be on the Closing Date in good working
order, condition and repair, reasonable wear and tear excepted.
3.28.    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.
3.29.    Undisclosed Liabilities. All material liabilities of Seller related to
the Facility are identified on the Financial Statements, the Exhibits to this
Agreement or otherwise identified on the attached Exhibit 3.29 except for (a)
liabilities reflected or reserved against in the financial statement balance
sheets of Seller, or (b) current liabilities incurred in the ordinary course of
business of 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.
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 employ such number of Seller’s employees at the
Facility, and shall retain for a period of ninety (90) days following the
Closing Date 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 Facility during the period of ninety (90) days
immediately prior to the Closing Date 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 Date 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. 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. 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 the existing insurance on the Assets and the operations of
the Facility.
5.12.    Licensure and Certification. Buyer shall promptly 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.
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 the WARN Act. 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 the WARN Act or any similar state
law or regulation.
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, 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 Facility 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 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, Seller can provide all the
information needed to complete the Seller’s CMS 855A and a completed and signed
Section 15 or 16.
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 Seller and the Guarantor will receive under this Agreement, and to
protect Buyer’s legitimate business interests in the operation of the Facility,
Seller and the Guarantor 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.
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.
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.
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 as of the first day of the first month after
the Due Diligence Termination Date (i.e., on or before October 30, 2015,
effective as of 12:01 a.m. local time on November 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. Notwithstanding the foregoing, the Closing
Date shall be extended if and to the extent necessary to allow Buyer to obtain
the requisite health care licenses to operate the Facility or by mutual
agreement of Purchaser and Seller. For the avoidance of doubt, the Closing Date
shall not be conditioned on Purchaser’s ability to secure financing for the
transaction.
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; (c) in the event Buyer is dissatisfied with due
diligence review, in any respect, provided that such right of termination shall
expire on the Due Diligence Termination Date (as defined in Section 8.9 below);
(d) in the event Buyer notifies Seller prior to the Due Diligence Termination
Date that the Lender (as defined in Section 8.8) has not consented to the
transactions contemplated hereby, or (e) 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) 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), 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 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.
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
insurance policies in Seller’s possession or control insuring title to the Real
Estate listed on Exhibit 8.7 attached hereto (the “Existing Title Work”). Within
three (3) business days following the date of this Agreement, Buyer may, at
Buyer’s option and expense, order title insurance commitments (the “New Title
Work”) for the issuance at Closing of an Owner’s Policy of Title Insurance in
current ALTA form (the “Owner’s Policy”) to be issued through a title insurance
company selected by Buyer (the “Title Company”) and insuring good and marketable
fee simple title to the Real Estate in the Buyer in the amount of the Purchase
Price being allocated to the Real Estate. The New Title Work shall set forth the
state of title as of the commitment’s effective date 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 the 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 three (3) business days following the date
of this Agreement, Buyer may, at Buyer’s option and expense, order a current,
as-built survey for the Real Estate (the “New Survey”) 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. 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 ten (10) business days
after its receipt of the last of the Title Evidence (and in any event on or
before the Due Diligence Termination Date) 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. 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) business days of its receipt
of Buyer’s notice of Defects of its decision. Within ten (10) business 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)    Updates. Buyer shall have the right following the expiration of the Due
Diligence Termination Date and through Closing, to obtain updates of the New
Title Work and New Survey. If any Defect appears for the first time in any
update of the New Title Work or the New Survey issued after the Due Diligence
Termination Date and prior to Closing, Buyer shall have five (5) business days
after Buyer acquires knowledge of such Defect to give notice to Seller of an
objection in respect of such Defect and the provisions of this Section 8.7(3)
shall apply in determining election and rights of the parties with respect
thereto as if Buyer had delivered an objection notice with respect thereto prior
to the expiration of the Due Diligence Termination Date.
(5)    Removal and Cure. Anything herein to the contrary notwithstanding at or
prior to Closing, Seller shall take all action and execute and file for
recordation such instruments as are necessary in order to satisfy and cancel all
mortgages, liens, attachments, judgments or other encumbrances on the Real
Estate, whether in existence on the date hereof or arising after the date hereof
and through the Closing Date, that can be cancelled or satisfied by the payment
of money. The removal of all such matters by Seller, at or prior to Closing,
shall be a condition to Buyer’s obligation to close hereunder.
(6)    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(6). If required by Buyer’s
lender, Buyer shall have the benefits of and may obtain a simultaneous issue
mortgage title policy insuring the lien of the mortgage of such lender. Buyer
shall pay all premiums, costs and expenses of the Title Policy and the premiums,
costs and expenses of any mortgage title insurance required of any lender of
Buyer.
(7)    Environmental Inspections. For a period of twenty (20) days following the
execution of this Agreement (the “Environmental Inspection Period”), at Buyer’s
option and expense, 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 two (2) days after Buyer’s notice of Environmental Conditions. Within two
(2) 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.    Lender Consent. The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be conditioned on Buyer obtaining the
consent of its primary lender, The PrivateBank and Trust Company (the “Lender”).
8.9.    Due Diligence. On or before the thirtieth (30th) day following the
execution of this Agreement (the “Due Diligence Termination Date”), Buyer shall
have completed its due diligence investigations and review of the Facility
(including its review of any property condition reports, engineering reports and
other third party reports as Buyer may elect to obtain, at Buyer’s expense) with
results acceptable to Buyer, in Buyer’s sole discretion. So long as Buyer has
ordered all third party reports (including New Title Work, New Survey,
environmental assessments pursuant to Section 8.7(7), and any property condition
reports or other engineering reports desired by Buyer) within three (3) business
days following the execution of this Agreement, then in the event that Buyer has
not received any such report in final form reasonably acceptable to Buyer within
twenty-five (25) days following the execution of this Agreement, Buyer may
extend the Due Diligence Termination Date by up to fifteen (15) days by
providing written notice to Seller of such extension.
8.10.    Admission Agreements. Buyer and Seller will enter into an Assignment
and Assumption Agreement in form acceptable to Buyer, 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
Admission 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 Date 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:
(3)    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.
(4)    One or more Bill of Sale and Assignment Agreements, in form and substance
satisfactory to Buyer (and/or an affiliate of Buyer) and Seller, warranting and
conveying to 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.
(5)    Certificates of title to all vehicles that constitute Assets endorsed by
Seller together with completed originals of any forms required by all applicable
states to transfer the same.
(6)    Assignment of Admission Agreements, in the form and substance
satisfactory to Buyer and Seller.
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 State of Tennessee and the Commonwealth of
Kentucky, certified copy of the Articles 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 member(s) and any other
governing body 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:
(8)    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.
(9)    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.
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, and shall survive the Closing for eighteen (18) months from the
Closing Date, except for the representations and warranties set forth in
Sections 3.1, 3.2, 3.10, 3.12, 3.15, 3.18, 3.19, 3.20, 3.21, 3.23, 3.26, 3.28,
4.1, and 4.2 shall survive until thirty (30) days after the expiration of the
applicable statute of limitations with respect to the matters covered
thereunder.
11.2.    Indemnification by Seller and Guarantor. Subject to Section 11.4,
Seller and Guarantor shall, jointly and severally, promptly indemnify, defend,
and hold harmless Buyer, the directors, officers, shareholders, employees and
agents of Buyer, 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 or breach or untruth
of any representation, warranty, fact or conclusion 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 Date 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 and through
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.
(10)    Notice. 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.
(11)    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 fifteen (15) 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.
(12)    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.
(13)    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.
(14)    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 the
second anniversary of the Closing Date. The total aggregate amount of claims to
which any Indemnitor shall be subject hereunder shall be capped at One Million
Five Hundred Dollars ($1,500,000.00) (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).
(15)    Insurance Benefit. No Indemnitor shall have any liability for Claims
hereunder to the extent such Claim is covered by insurance 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.
(16)    Damages. Neither party, nor any of its affiliates, shall have any
liability hereunder for consequential, incidental, special or punitive damages.
(17)    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.    MISCELLANEOUS
12.1.    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.
12.2.    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.
12.3.    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)
mrh@h3gm.com

To Seller:

Fulton Investors, LLC
1973 New Highway 96 West
Franklin, TN 37064
Attn: Aubrey B. Preston
(615) 567-6721 (fax)

with a copy to:

Bradley Arant Boult Cummings LLP
1600 Division St., Suite 700
Nashville, TN 37203
Attn: Michael D. Brent, Esq.
(615) 252-6361 (fax)
mbrent@babc.com

To Guarantor:

Aubrey B. Preston
1973 New Highway 96 West
Franklin, TN 37064
(615) 567-6721 (fax)

12.4.    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.
12.5.    Controlling Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Tennessee without regard to
its choice or conflicts of law provisions. Seller and Buyer hereby consent to
the jurisdiction of courts located in Davidson County, Tennessee, for the
resolution of any disputes arising under this Agreement for which a dispute
resolution mechanism has not been specified herein.
12.6.    Headings. Section headings in this Agreement are for convenience only
and shall not be considered or referred to in resolving questions of
interpretation.
12.7.    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.
12.8.    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.
12.9.    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.
12.10.    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.
12.11.    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.
12.12.    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.
12.13.    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.
12.14.    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.
12.15.    Completion of Exhibits. Certain of the Exhibits have not been prepared
in their final form at the time of execution of this Agreement. Seller shall use
its best efforts to provide all such Exhibits within ten (10) days of the
execution of this Agreement; provided, however that Buyer and Seller shall work
together reasonably and in good faith to determine the allocation to be set
forth in Exhibit 2.3 at least three (3) business days prior to the Closing.
Submission of Exhibits shall be in writing delivered via hand delivery or email
to the other party’s counsel. The submitted Exhibits shall be deemed accepted
and thereby become an Exhibit to this Agreement unless: (i) such proposed
Exhibit would, individually or in aggregate with the effect of items disclosed
in other Exhibits which were first submitted after signing of this Agreement,
constitute a material adverse effect on the receiving party in the receiving
party’s sole discretion, and (ii) within five (5) business days after receipt of
such proposed Exhibit. Should the parties not be able to resolve written
objections within ten (10) business days thereafter, then either party may
withdraw from this Agreement and terminate it without any obligation or
liability of any sort and this Agreement shall be treated as never having been
executed or delivered. Acceptance of Exhibits shall not mean that the underlying
information (e.g., underlying claim, likelihood of successful defense and
adequacy of insurance coverage) is acceptable.
12.16.    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 FULTON, LLC

BY:
DIVERSICARE HOLDING COMPANY, LLC, its sole member

By: /s/ Kelly J. Gill

Title: President and Chief Executive Officer

SELLER:

FULTON INVESTORS, LLC

By: /s/ Aubrey B. Preston

Title: Sole Member

GUARANTOR:

/s/ Aubrey B. Preston
Aubrey B. Preston