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                                                                  EXHIBIT 10-122

                                                               SUTTONS REST HOME

                           PURCHASE AND SALE AGREEMENT

         THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made and entered
into as of the 14th day of November, 2003 (the "EFFECTIVE DATE") by and between
DIVERSICARE ASSISTED LIVING SERVICES NC II, LLC, a Delaware limited liability
company ("SELLER"), and MARGARET SUTTON, an individual resident of North
Carolina or her permitted assigns ("BUYER"), with reference to the following:

         A. Seller is the owner of the improved real property located at 4258 US
13 North, Goldsboro, Wayne County, North Carolina, formerly operated by Seller
as an adult care home facility known as Suttons Rest Home.

         B. Buyer desires to purchase from Seller, and Seller is willing to sell
and convey to Buyer, all of Seller's right, title and interest in and to said
real property, together with certain personal property located thereon and
certain other assets relating thereto, for the Purchase Price and subject to the
conditions contained in this Agreement.

         NOW, THEREFORE, in consideration of the Deposit (as hereinafter
defined) paid by Buyer hereunder, the mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

1.       PURCHASE AND SALE.

         1.1 PURCHASED ASSETS. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, assign, transfer and convey to Buyer and Buyer
agrees to accept and purchase from Seller, for the Purchase Price set forth in
Section 3 hereof, the following (collectively, the "PURCHASED ASSETS"):

             1.1.1 All of Seller's right, title and interest in and to (i) that
certain tract or parcel of land located in the City of Goldsboro, Wayne County,
North Carolina, and being more particularly described in Exhibit A attached
hereto and made a part hereof (the "LAND"), together with all rights, tenements,
heriditaments, easements, privileges and appurtenances belonging or pertaining
thereto, and (ii) all buildings, structures or other improvements located on the
Land, including without limitation the adult care home facility, single family
residence and storage house formerly operated and known as Suttons Rest Home
(the "FACILITY"), all sidewalks, landscaping, parking lots and structures, and
driveways located thereon, and all permanently affixed fixtures located on, in
or used in connection with, and permanently affixed or incorporated into, the
Land, together with all replacements, additions and accessions thereto
collectively, including the Facility, (the

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"IMPROVEMENTS") (the "Land" and Improvements" are sometimes hereinafter
collectively referred to as the "REAL PROPERTY");

             1.1.2 The following items of machinery, equipment, furniture,
furnishings, supplies, inventory and other movable tangible personal property
owned by Seller and located at or on the Real Property and formerly used in
connection with the operation of the Facility (the "PERSONAL PROPERTY"): two (2)
old hospital beds, one (1) upright piano (broken), and one (1) commercial gas
stove.

             1.1.3 All of Seller's right, title and interest in and to the name
"Suttons Rest Home" (the "FACILITY NAME");

         1.2 EXCLUDED ASSETS. There is specifically excluded from the Purchased
Assets, and anything herein to the contrary notwithstanding, Seller is not
selling, assigning or transferring to Buyer, and Buyer is not acquiring and
purchasing from Seller, any of the following: (a) any right to the use of the
names "Advocat" or "Diversicare" or any derivative thereof; (b) any items of
machinery, equipment, furniture, furnishings, supplies, inventory and other
movable tangible personal property owned by the Seller other than the Personal
Property (c) the dryer in the laundry room at the Facility which is leased from
Coinmach and which Seller will remove (or cause to be removed) prior to Closing;
(d) the Medicaid provider number of Seller for the Facility; and (e) the license
of Seller from the State of North Carolina to operate the Facility as an adult
care home. Buyer acknowledges and agrees that in the event it desires to use the
Facility as an adult care home after Closing, Buyer must, at its own cost and
expense, make application for and obtain from the State of North Carolina a new
license to operate the home as an adult care home and a new Medicaid provider
number for reimbursement under the applicable state and/or federal Medicaid
programs together with any other licenses, permits and certifications necessary
or required to operate the Facility as an adult care home. Buyer further
acknowledges and agrees that Buyer shall have no right to, and will not, have
the right to use the Medicaid provider number of Seller for any purpose on and
after the Closing Date. The provisions of this Section 1.2 shall survive the
Closing.

         1.3 DELIVERY OF PERSONAL PROPERTY. The presence of the Personal
Property at the Facility on the Closing Date shall constitute delivery thereof.
Any items of Personal Property containing the name or logo of "Diversicare" or
"Advocat", or any derivative thereof, shall be replaced by Buyer and either
destroyed or returned to Seller promptly following the Closing Date.

2.       PURCHASE PRICE AND DEPOSIT.

         2.1 PURCHASE PRICE. The purchase price payable at closing by wire
transfer of immediately available funds to the order of Seller for the Property
shall be Sixty Thousand Dollars ($60,000.00) (the "PURCHASE PRICE"), subject to
such adjustment as may be provided for in this Agreement.

         2.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable as
follows:

             2.2.1 Concurrently with the execution of this Agreement by Buyer
and Seller, and as a condition precedent to the effectiveness hereof, Buyer
shall deposit in escrow with Harwell Howard Hyne Gabbert & Manner, P.C.,
("ESCROW HOLDER"), in cash or by wire transfer of immediately available, same
day federal funds, the sum of Two Thousand Five Hundred Dollars

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($2,500.00) (the "DEPOSIT"). Immediately upon Escrow Holder's receipt of the
Deposit (the "OPENING OF ESCROW"), Escrow Holder shall deposit the same in a
federally insured non-interest-bearing account.

             2.2.2 Provided all the conditions in Section 7.1 hereof have been
satisfied or waived by Buyer, Buyer shall deposit with Seller by wire transfer
of immediately available, same day federal funds on the Closing Date an amount
equal to the Purchase Price less the Deposit plus or minus applicable prorations
pursuant to Section 9 hereof.

         2.3 DISPOSITION OF DEPOSIT UPON FAILURE TO CLOSE. If the Closing fails
to occur due to Buyer's default under this Agreement, then the disposition of
the Deposit shall be governed by Section 11.1 hereof; if the Closing fails to
occur due to Seller's default under this Agreement, then the Deposit shall
promptly be refunded to Buyer; and if the Closing fails to occur due to the
failure of any of the conditions set forth in Sections 7.1 or 7.2 hereof other
than as a result of Buyer's or Seller's default under this Agreement, then the
disposition of the Deposit and all interest accrued thereon shall be governed by
Section 7.3 hereof.

3.       CLOSING; CLOSING DATE.

         3.1 CLOSING; CLOSING DATE. The closing of the purchase and sale of the
Purchased Assets (the "CLOSING") shall occur on a date (the "CLOSING DATE") that
is mutually agreed upon by the parties but in all events not later than November
20, 2003. The Closing shall be held at the offices of Seller's attorney or the
Title Company (as defined in Section 4.2.1) in North Carolina (the "CLOSING
AGENT"), which at Seller's or Buyer's election may be effectuated by forwarding
all executed documents and other items necessary to effect the Closing to the
Closing Agent without the necessity of the parties actually being present for
the Closing.

4.       PROPERTY INFORMATION; TITLE REVIEW; INSPECTIONS AND DUE DILIGENCE.

         4.1 PROPERTY INFORMATION. Prior to Closing, Seller shall make available
to Buyer at the Facility, or will deliver to Buyer's representative as directed
by Buyer, if any, to the extent in Seller's possession, and control and readily
available, the following (the "PROPERTY INFORMATION"): the most current title
insurance policy issued to Seller with respect to the Real Property, the most
current surveys prepared for Seller with respect to the Real Property; any prior
environmental (including any Phase I or Phase II reports), engineering,
landscape, utility and other reports or studies made with respect to the Real
Property; any architectural plans and specifications and as built plans for the
Real Property; and such other information and documentation with respect to the
Real Property as Buyer shall reasonably request that Seller has in its
possession or control. Seller makes no representation or warranty as to the
truth, accuracy or completeness of any Property Information delivered by Seller
to Buyer in connection with the transaction contemplated hereby. Buyer
acknowledges and agrees that all Property Information delivered by Seller to
Buyer in connection with the transaction contemplated hereby are provided to
Buyer as a convenience only and that any reliance on or use of such materials,
data or information by Buyer shall be at the sole risk of Buyer.

         4.2 TITLE AND SURVEY REVIEW; TITLE POLICY.

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             4.2.1 TITLE REPORT. Buyer, at its option and sole cost and expense,
may obtain from a title insurance company acceptable to Buyer and authorized to
provide title insurance in the State of North Carolina (the "TITLE Company") a
preliminary report or title commitment for an owner's policy of title insurance
covering the Real Property (the "TITLE REPORT"), together with copies of all
documents (collectively, the "TITLE DOCUMENTS") referenced in the Title Report.
Buyer, at its option and sole cost and expense, may (a) obtain a new survey for
the Real Property or (b) cause an existing survey of the Real Property to be
updated or recertified (the "SURVEY"). Buyer understands and acknowledges that
if Buyer elects to obtain a Title Report and/or a Survey, the completion and/or
delivery of the Title Report and the Survey shall not be a condition precedent
to the Closing.

             4.2.2 TITLE REVIEW AND CURE. If Buyer elects to obtain a Title
Report or Survey, Buyer shall have the right to give Seller written notice of
any objections with respect to any defects in the condition of title or other
matters adversely affecting the Real Property shown on or by the Title Report
and/or the Survey ("DEFECTS"), Buyer shall deliver to Seller written notice
("BUYER'S TITLE NOTICE") of any Defects promptly following Buyer's receipt and
review of the Title Report and/or Survey but in all events not later than five
(5) days prior to Closing (the "TITLE REVIEW PERIOD"). Buyer shall provide
Seller with a copy of the Title Report, any Title Documents and the Survey
obtained by Buyer with Buyer's Title Notice. The failure of Buyer to deliver to
Seller Buyer's Title Notice on or before the expiration of the Title Review
Period shall be deemed to constitute Buyer's approval of the condition of title
and survey to the Real Property. If Buyer so gives Seller notice of any Defects,
then Seller may, but shall have no obligation to, eliminate the Defects to
Buyer's reasonable satisfaction on or before Closing by giving Buyer written
notice ("SELLER'S TITLE NOTICE") of those Defects, if any, which Seller agrees
to so eliminate by the Closing Date. If Seller does not elect to, or is unable
to, eliminate any Defects, or Buyer disapproves Seller's Title Notice, then
Buyer shall have the right, upon delivery to Seller, on or before Closing, of a
written notice to either: (a) waive its prior disapproval and notice of Defects,
and proceed with Closing, in which event the Defects shall be deemed approved;
or (b) terminate this Agreement. If Buyer elects to terminate this Agreement as
provided in clause (b) above, this Agreement shall automatically terminate, the
parties shall be released from all further obligations under this Agreement
(except pursuant to any provisions which by their terms survive a termination of
this Agreement), the Deposit shall be immediately returned to Buyer and Buyer
shall immediately return all Property Information to Seller. Buyer shall be
deemed to have approved any title exception shown on or by the Title Report
and/or the Survey to which either Buyer did not object as provided above, or to
which Buyer did object, but with respect to which Buyer did not terminate this
Agreement as provided above, and the same shall be deemed a Permitted Exception
(as hereinafter defined).

             4.2.3 DELIVERY OF TITLE POLICY AT CLOSING. If Buyer elects to
obtain a Title Report and this Agreement is not terminated before Closing as
elsewhere provided herein, then Buyer shall have the right, at its option and
sole cost and expense, to cause the Title Company to issue and deliver to Buyer
at the Closing, with respect to the Real Property, a ALTA Owner's Policy of
Title Insurance in current ALTA Form (the "TITLE POLICY"), or a pro forma policy
or marked commitment for the same, dated as of the date and time of the
recording of the Deed (as such term is defined in Section 6.1 hereof) for the
Real Property, in the amount of the Purchase Price, insuring Buyer as owner of
good and marketable title to the Real Property, subject to the Permitted
Exceptions (as hereinafter defined). For purposes of this Agreement, "PERMITTED
EXCEPTIONS" shall mean and include (a) any lien to secure payment of real estate
taxes, including special assessments, not

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delinquent, (b) all applicable laws, ordinances, rules and governmental
regulations (including, without limitation, those relating to building, zoning
and land use) affecting the development, use, occupancy or enjoyment of the Real
Property, and (c) all restrictions, protective and restrictive covenants, rights
of way, easements, reservations and other matters applicable to the Real
Property (except for those title or survey matters, if any, objected to, and not
waived or approved, by Buyer in accordance with Section 4.2.2, above).

         4.3 INSPECTIONS.

             4.3.1 INSPECTIONS. Buyer has had the opportunity to examine and
inspect the Purchased Assets and is satisfied with the physical condition,
quality and state of repair of the Purchased Assets and their suitability for
Buyer's intended use. Buyer acknowledges that the Real Property may not be in
compliance with certain building, fire, safety and health codes and
requirements, including without limitation, compliance with requirements
relating to the operation of the sewage treatment and disposal system located on
the Property, and that Buyer may be required to remediate the same in accordance
with applicable law after Closing. Until Closing, Buyer, its agents, and
employees shall have the right, at Buyer's sole risk, cost and expense, to
continue to examine and make physical studies, tests, inspections and
assessments of the Real Property and to conduct all other examinations,
inspections and investigations of the Real Property as Buyer deems reasonably
necessary. All physical tests, studies, inspections and assessments shall be
conducted at reasonable times during normal business hours, and after at least
twenty-four (24) hours prior notice to Seller or Seller's agent, and Seller or
Seller's agent shall have the right to accompany Buyer during any activities
performed by Buyer at the Facility or otherwise on the Real Property. Any
inspection, examination or test conducted by Seller will be conducted in a good
and workmanlike manner, promptly prosecuted to completion, and will not violate
any law or regulation of any governmental entity having jurisdiction over the
Purchased Assets. At Seller's request, Buyer shall provide Seller (at no cost to
Seller) with a copy of the results of any tests and inspections made by Buyer.
If any inspection or test disturbs the Real Property, Buyer will restore the
Real Property to the same condition as existed before the inspection or test.
Buyer shall defend, indemnify Seller and hold Seller, Seller's trustees,
officers, tenants, agents, contractors and employees and the Real Property
harmless from and against any and all losses, costs, damages, claims, or
liabilities, including but not limited to, mechanic's and materialmen's liens
and Seller's reasonable attorneys' fees, arising out of or in connection with
Buyer's, its agents, contractors, employees, or invitees entry upon or
inspection of the Real Property made pursuant to this Section 4.3.1. The right
provided herein may be revoked by Seller at any time if Buyer does not comply
with the provisions of this Section 4.3.1 and shall in any event be deemed
revoked upon termination without Closing of this Agreement. The provisions of
this Section 4.3.1 shall survive the Closing or the earlier termination of this
Agreement.

5.       RISK OF LOSS

         5.1 DAMAGE OR CONDEMNATION. Risk of loss resulting from any
condemnation or eminent domain proceeding, which is commenced or has been
threatened against the Real Property before the Closing Date, and risk of loss
to the Real Property due to fire, flood or any other cause before the Closing
Date, shall remain with Seller. If before the Closing Date the Real Property or
any portion thereof shall be materially damaged, or if the Real Property or any
material portion thereof shall be subjected to a bona fide threat of
condemnation or shall become the subject of any

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proceedings, judicial, administrative or otherwise, with respect to the taking
by eminent domain or condemnation, then Buyer may elect not to acquire the Real
Property by delivering written notice of such election to Seller within five (5)
days after Buyer learns of the damage or taking, in which event Buyer shall no
longer be obligated to purchase, and Seller shall no longer be obligated to
sell, sign, transfer or convey the Real Property, the Deposit shall be
immediately refunded to Buyer, Buyer shall immediately return all Property
Information to Seller and, except for those provisions of this Agreement which
expressly survive the termination of this Agreement, the parties hereto shall
have no further obligations hereunder. If the Closing Date is within the
aforesaid 5-day period, then the Closing shall be extended to the next business
day following the end of said 5-day period. If no such election is made, and in
any event if the damage is not material, this Agreement shall remain in full
force and effect, the assignment and purchase contemplated herein, less any
interest taken by eminent domain or condemnation, shall be effected with no
further adjustment, and upon the Closing, Seller shall assign, transfer and set
over to Buyer all of the right, title and interest of Seller in and to any
awards that have been or that may thereafter be made for such taking, and Seller
shall assign, transfer and set over to Buyer any insurance proceeds that may
thereafter be made for such damage or destruction, giving Buyer a credit at the
Closing for any deductible under such policies. For purposes of this Section
5.4, the phrase(s) (i) "MATERIAL DAMAGE" or "MATERIALLY DAMAGED" means damage
reasonably exceeding ten percent of the Purchase Price of the Real Property, and
(ii) "MATERIAL PORTION" means any portion of the Real Property that has a "fair
market value" exceeding 10% of the Purchase Price of the Real Property.

6.       SELLER'S AND BUYER'S DELIVERIES

         6.1 SELLER'S DELIVERIES. On or before the Closing Date, Seller shall
deliver (or cause to be delivered) the following:

             (a) DEED. A Special Warranty Deed (the "DEED") executed and
acknowledged by Seller and in recordable form, conveying to Buyer Seller's
interest in and to the Real Property, free and clear of all liens and
encumbrances made, suffered or created by Seller other than Permitted
Exceptions.

             (b) BILL OF SALE. Bill of Sale and Assignment transferring to
Buyer all of Seller's interest in the Personal Property;

             (c) FACILITY NAME. An Assignment of the Facility Name;

             (d) STATE LAW DISCLOSURES. Such disclosures and reports, if any, as
are required by applicable state and local law in connection with the conveyance
of Seller's interest of the Real Property.

             (e) FIRPTA. A Foreign Investment in Real Property Tax Act affidavit
executed by Seller, stating that Seller is not a "foreign person" as defined in
such Act.

             (f) CLOSING STATEMENT. An executed closing statement consistent
with this Agreement.

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             (g) ADDITIONAL ITEMS. To the extent in Seller's possession, all
keys, if any, used in the operation of the Real Property.

         6.2 BUYER'S DELIVERIES. On or before the Closing Date, Buyer shall
deliver (or cause to be delivered) the following:

             (a) PURCHASE PRICE. The Purchase Price, less the Deposit that is
applied to the Purchase Price, plus or minus applicable prorations, in
immediate, same-day federal funds wired for credit into the Escrow Holder's
escrow account and deposited in Escrow Holder's escrow account no later than
3:00 p.m. (EST) on the Closing Date.

             (b) STATE LAW DISCLOSURES. Such disclosures and reports, if any, as
are required by applicable state and local law in connection with the conveyance
of the Real Property.

             (c) CLOSING STATEMENT. An executed closing statement consistent
with this Agreement.

7.       CONDITIONS TO BUYER'S AND SELLER'S OBLIGATIONS.

         7.1 CONDITIONS TO BUYER'S OBLIGATIONS. The Closing and Buyer's
obligation to consummate the transaction contemplated by this Agreement are
subject to the satisfaction of the following conditions for Buyer's benefit (or
Buyer's waiver thereof, it being agreed that Buyer may waive any or all of such
conditions) on or prior to the Closing Date or on the dates designated below for
the satisfaction of such conditions:

             (a) As of the Closing Date, Seller shall have performed its
respective obligations hereunder and all deliveries to be made at Closing by
Seller shall have been tendered;

             (b) There shall exist no actions, suits, arbitrations, claims,
attachments, proceedings, assignments for the benefit of creditors, insolvency,
bankruptcy, reorganization or other proceedings, pending or threatened against
Seller that would materially and adversely affect Seller's ability to perform
its respective obligations under this Agreement;

             (c) There shall exist no pending or threatened action, suit or
proceeding with respect to Seller before or by any court or administrative
agency which seeks to restrain or prohibit, or to obtain damages or a discovery
order with respect to, this Agreement or the consummation of the transaction
contemplated hereby; and

         7.2 CONDITIONS TO SELLER'S OBLIGATIONS.

         The Closing and Seller's obligations to consummate the transaction
contemplated by this Agreement are subject to the satisfaction of the following
conditions for Seller's benefit (or Seller's waiver thereof, it being agreed
that Seller may waive any or all of such conditions) on or prior to the Closing
Date or the dates designated below for the satisfaction of such conditions:

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             (a) As of the Closing Date, Buyer has performed its obligations
hereunder and all deliveries to be made at Closing by Buyer shall have been
tendered including, without limitation, the Deposit;

             (b) There shall exist no actions, suits, arbitrations, claims,
attachments, proceedings, assignments for the benefit of creditors, insolvency,
bankruptcy, reorganization or other proceedings, pending or threatened against
Buyer that would materially and adversely affect Buyer's ability to perform its
obligations under this Agreement;

             (c) There shall exist no pending or threatened action, suit or
proceeding with respect to Buyer before or by any court or administrative agency
which seeks to restrain or prohibit, or to obtain damages or a discovery order
with respect to, this Agreement or the consummation of the transaction
contemplated hereby; and

             (d) Seller shall have received all consents and assignments
and approvals from all third parties from whom such consents to assignments or
approvals are necessary under all contracts, covenants and other agreements
relating to the Purchased Assets, including the consent of Seller's lenders,
General Motors Acceptance Corporation and AmSouth Bank, which currently have
liens on the Real Property and a security interest in the Personal Property.

         7.3 PROCEDURE UPON FAILURE OF CONDITION. If any condition set forth in
Sections 7.1 or 7.2 hereof is not satisfied or waived for a reason other than
the default of Buyer or Seller in the performance of their respective
obligations under this Agreement, then, at the written election of the party for
whose benefit the condition was imposed, which written election must be made (i)
within three (3) business days after the date such condition was to be satisfied
or (ii) the Closing Date, whichever first occurs, this Agreement shall
terminate, the Escrow holder shall promptly deliver the Deposit to Buyer, Buyer
shall return to Seller the Property Information and Closing Agent shall promptly
return to Buyer and to Seller all documents, if any, deposited with Closing
Agent.

8.       CHARGES AND EXPENSES.

         8.1 EXPENSES AND TITLE CHARGES.

             (a) Closing costs and charges shall be allocated between Seller and
Buyer as follows:

                 (i) Seller shall pay for: (1) preparation of the Deed; and (2)
the commission described in Section 12 hereof.

                 (ii) Buyer shall pay (1) the cost of the Title Policy, if any,
(2) the cost of the Survey, if any; and (3) all sales, gross receipts,
compensating, stamp, excise, documentary, transfer, deed or similar taxes or
fees (City, County and State) payable in connection with the consummation of the
transactions contemplated by this Agreement.

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                 (iii) Except to the extent otherwise specifically provided
herein, all other expenses incurred by Seller and Buyer with respect to the
negotiation, documentation and closing of this transaction, including, without
limitation, Buyer's and Seller's respective attorneys' fees, shall be borne and
paid by the party incurring same.

9.       PRORATIONS.

         9.1 TAXES AND ASSESSMENTS. Real estate and personalty taxes and
assessments ("TAXES") imposed by any governmental authority with respect to the
Real Property and Personal Property for 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 and based upon the number of days Buyer and Seller will have owned the
Real Property and Personal Property during such relevant tax year. Seller shall
receive a credit for any Taxes already paid by Seller and applicable to any
period after the Closing Date. Seller shall pay all Taxes for the years prior to
the year in which Closing occurs, if any. In the event any of the Taxes are
delinquent at the time of Closing, the same shall be paid at Closing.

         9.2 UTILITIES AND UTILITY DEPOSITS. Utilities for the Real Property, if
any, for which Seller is responsible including water, sewer, electric, and gas,
based upon the last reading of meters prior to the Closing Date, shall be
prorated. Seller shall be entitled to claim and be paid all security deposits
made by Seller and held by any of the utility companies providing service to the
Real Property. Buyer shall be responsible for making any security deposits
required by utility companies providing service to the Real Property. Seller
shall endeavor to obtain meter readings on the day before the Closing Date, and
if such readings are obtained, there shall be no proration of such items and
Seller shall pay at Closing the bills therefore for the period to the day
preceding the Closing, and Buyer shall pay the bills therefore for the period
subsequent thereto. If the utility company will not issue separate bills, Buyer
will receive a credit against the Purchase Price for Seller's portion and will
pay the entire bill prior to delinquency after Closing.

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10.      AS-IS.

         10.1 AS-IS. As of Closing, Buyer will have examined and inspected the
Purchased Assets, including the Real Property, and will know and be satisfied
with the physical condition, quality, quantity and state of repair of the
Purchased Assets in all respects (including, without limitation, the compliance
of the Real Property with the Americans With Disabilities Act of 1990 Pub.L.
101-336, 104 Stat. 327 (1990), and any comparable local or state laws
(collectively, the "ADA")); reviewed the Property Information and all
instruments, records and documents which Buyer deems appropriate or advisable to
review in connection with this transaction; reviewed all applicable laws,
ordinances, rules and governmental regulations (including, but not limited to,
those relating to building, zoning and land use) affecting the development, use,
occupancy or enjoyment of the Real Property; at its own cost and expense, made
its own independent investigation respecting the Purchased Assets and all other
aspects of this transaction, and shall have relied thereon and on the advice of
its consultants in entering into this Agreement; and Buyer, by proceeding with
the Closing of this transaction, shall be deemed to have determined that the
same are satisfactory to Buyer.

              BUYER HEREBY ACKNOWLEDGES THAT THE PURCHASED ASSETS ARE PROPERTY
USED FOR BUSINESS PURPOSES AND NOT RESIDENTIAL REAL PROPERTY AND AGREES THAT THE
REAL PROPERTY IS EXEMPT FROM, AND THAT SELLER IS NOT REQUIRED TO PROVIDE, ANY
RESIDENTIAL PROPERTY DISCLOSURES WITH RESPECT TO THE REAL PROPERTY.

              BUYER HEREBY ACKNOWLEDGES AND AGREES THAT THIS SALE IS MADE AND
WILL BE MADE WITHOUT REPRESENTATION, COVENANT, OR WARRANTY OF ANY KIND (WHETHER
EXPRESS, IMPLIED, OR, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
STATUTORY) BY SELLER. AS A MATERIAL PART OF THE CONSIDERATION FOR THIS
AGREEMENT, BUYER AGREES TO ACCEPT THE PURCHASED ASSETS, INCLUDING WITHOUT
LIMITATION THE REAL PROPERTY, ON AN "AS IS" AND "WHERE IS" BASIS, WITH ALL
FAULTS, AND WITHOUT ANY REPRESENTATION OR WARRANTY, ALL OF WHICH SELLER HEREBY
DISCLAIMS. NO WARRANTY OR REPRESENTATION IS MADE BY SELLER AS TO FITNESS FOR ANY
PARTICULAR PURPOSE, MERCHANTABILITY, DESIGN, QUALITY, CONDITION, OPERATION OR
INCOME, COMPLIANCE WITH DRAWINGS OR SPECIFICATIONS, ABSENCE OF DEFECTS, ABSENCE
OF HAZARDOUS OR TOXIC SUBSTANCES, ABSENCE OF FAULTS, FLOODING, OR COMPLIANCE
WITH LAWS AND REGULATIONS INCLUDING, WITHOUT LIMITATION, THOSE RELATING TO
HEALTH, SAFETY, AND THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, THE ADA).
BUYER ACKNOWLEDGES THAT BUYER HAS ENTERED INTO THIS AGREEMENT WITH THE INTENTION
OF MAKING AND RELYING UPON ITS OWN INVESTIGATION OF THE PHYSICAL, ENVIRONMENTAL,
ECONOMIC USE, COMPLIANCE, AND LEGAL CONDITION OF THE PURCHASED ASSETS, INCLUDING
WITHOUT LIMITATION THE REAL PROPERTY, AND THAT BUYER IS NOT NOW RELYING, AND
WILL NOT LATER RELY, UPON ANY REPRESENTATIONS AND WARRANTIES MADE BY SELLER OR
ANYONE ACTING OR CLAIMING TO ACT, BY, THROUGH OR UNDER OR ON SELLER'S BEHALF
CONCERNING THE PURCHASED ASSETS. ADDITIONALLY, BUYER AND

                                       10
<PAGE>

SELLER HEREBY AGREE THAT (A) BUYER IS TAKING THE REAL PROPERTY "AS IS" WITH ALL
LATENT AND PATENT DEFECTS AND THAT THERE IS NO WARRANTY BY SELLER THAT THE REAL
PROPERTY IS FIT FOR A PARTICULAR PURPOSE, (B) BUYER IS SOLELY RELYING UPON ITS
EXAMINATION OF THE REAL PROPERTY, AND (C) BUYER TAKES THE REAL PROPERTY UNDER
THIS AGREEMENT WITH THE EXPRESS UNDERSTANDING THAT THERE ARE NO EXPRESS OR
IMPLIED WARRANTIES. BUYER IS, OR WILL BE AS OF THE CLOSING, FAMILIAR WITH THE
REAL PROPERTY AND ITS SUITABILITY FOR BUYER'S INTENDED USE. THE PROVISIONS OF
THIS SECTION 10.2 SHALL SURVIVE THE CLOSING OR ANY TERMINATION OF THIS
AGREEMENT.

              WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER
ACKNOWLEDGES THAT THE REAL PROPERTY MAY OR MAY NOT CONTAIN ASBESTOS AND/OR LEAD
PAINT AND, THAT BUYER MAY OR MAY NOT BE REQUIRED TO REMEDIATE ANY ASBESTOS OR
LEAD PAINT CONDITION IN ACCORDANCE WITH APPLICABLE LAW.

11.      DEFAULT AND DAMAGES.

         11.1 DEFAULT BY BUYER. In the event the Closing fails to occur due to a
default on the part of Buyer of its obligations under this Agreement ("BUYER'S
DEFAULT") Seller may (a) terminate this Agreement by written notice to Buyer and
receive the Deposit as liquidated damages and Escrow Holder shall immediately
deliver the Deposit to Seller, or (b) bring a suit for the specific performance
of this Agreement, provided that any suit for specific performance must be
brought within thirty (30) days of Buyer's Default, Seller waiving and releasing
the right to bring suit at a later date. Such retention of the Deposit by Seller
is intended to constitute liquidated damages to Seller and shall not be deemed
to constitute a forfeiture or penalty.

         11.2 DEFAULT BY SELLER. In the event that the Closing fails to occur
due to a default on the part of Seller of its obligations under this Agreement
("SELLER'S DEFAULT"), Buyer's sole and exclusive remedy shall be to elect one of
the following: (a) to terminate this Agreement, in which event Buyer shall be
entitled to the return by the Escrow Holder to Buyer of the Deposit, or (b) to
bring a suit for the specific performance of this Agreement, provided that any
suit for specific performance must be brought within thirty (30) days of
Seller's Default, Buyer's waiving and releasing the right to bring suit at any
later date. This Agreement confers no present right, title or interest in the
Real Property to Buyer and Buyer agrees not to file a lis pendens or other
similar notice against the Real Property except in connection with, and after,
the proper filing of a suit for specific performance.

12.      BROKER'S COMMISSIONS.

         Neither party hereto has had any contact or dealing regarding the Real
Property, or any communication in connection with the subject matter of this
transaction, through any licensed real estate broker or other person who can
claim a right to a commission or finder's fee as a procuring cause of the sale
contemplated herein. In the event that any broker or finder perfects a claim for
a commission or finder's fee, the party responsible for the contact or
communication on which the broker or finder perfected such claim shall
indemnify, save harmless and defend the other party from said claim and all
costs and expenses (including reasonable attorneys' fees) incurred by the other

                                       11
<PAGE>

party in defending against the same. The provisions of this Section 12 shall
survive the Closing or any earlier termination of this Agreement.

13.      ACCESS TO PROPERTY AFTER CLOSING.

         13.1 REMEDIATION; ACCESS TO PROPERTY POST-CLOSING. Buyer acknowledges
that Seller is in the process of performing certain work on the property
necessary to obtain confirmation from the State of North Carolina that the prior
removal of an underground storage tank formerly located on the Real Property has
been accomplished in accordance with applicable law and that no further remedial
work needs to be performed in connection with such removal. Seller will endeavor
to complete such work prior to Closing. In the event that Seller is unable to do
so, then Seller shall have the right and obligation, from and after the Closing,
to enter the Real Property solely for the purpose of completing such work, which
Seller agrees to complete at its cost and expense. Seller agrees to indemnify
and hold Buyer harmless from any claims or damages caused by, arising out of, or
incurred by Buyer in connection with the exercise by Seller of its rights, or
Seller's failure to perform its obligation to complete such work in accordance
with applicable law, under this Section 15.1.

14.      MISCELLANEOUS PROVISIONS.

         14.1 NOTICES. All written notices or demands of any kind which either
party hereto may be required or may desire to serve on the other in connection
with this Agreement shall be served by personal service, by registered or
certified mail, recognized overnight courier service or facsimile transmission.
Any such notice or demand so to be served by registered or certified mail,
recognized overnight courier service or facsimile transmission shall be
delivered with all applicable delivery charges thereon fully prepaid and, if the
party so to be served be Buyer, addressed to Buyer as follows:

                           ------------------------

                           ------------------------

                           ------------------------
                           Tel. No:
                                   ----------------
                           Fax No:
                                   ----------------

and, if the party so to be served is Seller, addressed to Seller as follows:

                           277 Mallory Station Road
                           Suite 130
                           Franklin, Tennessee 37067
                           ATTN: Glynn Riddle
                           Tel. No: (615) 771-7575
                           Fax No: (615) 771-7409

         Service of any such notice or demand so made by personal delivery,
registered or certified mail, recognized overnight courier or facsimile
transmission shall be deemed complete on the date of actual delivery as shown by
the addressee's registry or certification receipt or, as to facsimile
transmissions, by "answer back confirmation" as applicable, or at the expiration
of the third (3rd) business day after the date of dispatch, whichever is earlier
in time. Either party hereto may from

                                       12
<PAGE>

time to time, by notice in writing served upon the other as aforesaid, designate
a different mailing address to which or a different person to whose attention
all such notices or demands are thereafter to be addressed.

         14.2 ASSIGNMENT; BINDING ON SUCCESSORS AND ASSIGNS. Buyer shall not
assign, transfer or convey its rights or obligations under this Agreement or
with respect to the Purchased Assets without the prior written consent of
Seller, which consent Seller may withhold in its sole, absolute and subjective
discretion; provided, however, Buyer may assign its rights under the Agreement
to an affiliated entity so long as (i) Buyer provides Seller with prior written
notice of its intentions to assign its rights under this Agreement, which
written notice shall include the name of the assignee and the assignee's
signature block, (ii) the assignee assumes in writing Buyer's obligations
hereunder and the assignee agrees in writing to be subject to all of the terms
and conditions set forth in this Agreement, (iii) Buyer shall not be released
from its obligations hereunder, and (iv) such assignment shall not delay the
closing of this transaction. Any attempted assignment without the prior written
consent of Seller which violates the provisions of this Section 16.2 shall be
void and Buyer shall be deemed in default hereunder. Any permitted assignments
shall not relieve the assigning party from its liability under this Agreement.
Subject to the foregoing, and except as provided to the contrary herein, the
terms, covenants, conditions and warranties contained herein and the powers
granted hereby shall inure to the benefit of and bind all parties hereto and
their respective heirs, executors, administrators, successors and assigns, and
all subsequent owners of the Purchased Assets.

         14.3 ATTORNEYS' FEES. If any legal action or any arbitration or other
proceeding is brought or if an attorney is retained for the enforcement of this
Agreement or any portion thereof, or because of any alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the prevailing party shall be entitled to recover from the other
reimbursement for the reasonable fees of attorneys and other costs (including
court costs and witness fees) incurred by it, in addition to any other relief to
which it may be entitled. The term "prevailing party" means the party obtaining
substantially the relief sought, whether by compromise, settlement or judgment.

         14.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding of the parties in respect to the subject matter hereof, and the
parties intend for the literal words of this Agreement to govern and for all
prior negotiations, drafts, and other extrinsic communications, whether oral or
written, to have no significance or evidentiary effect. The parties further
intend that neither this Agreement nor any of its provisions may be changed,
amended, discharged, waived or otherwise modified orally except only by an
instrument in writing duly executed by the party to be bound thereby.

         14.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of North Carolina.

         14.6 COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

         14.7 HEADINGS; CONSTRUCTION. The various headings of this Agreement are
included for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provision hereof. When the context and construction so
require, all words used in the singular herein

                                       13
<PAGE>

shall be deemed to have been used in the plural and the masculine shall include
the feminine and the neuter and vice versa. The use in this Agreement of the
term "including" and related terms such as "include" shall in all cases mean
"without limitation." All references to "days" in this Agreement shall be
construed to mean calendar days unless otherwise expressly provided and all
references to "business days" shall be construed to mean days on which national
banks are open for business.

         14.8 PARTIAL VALIDITY; SEVERABILITY. If any term or provision of this
Agreement or the application thereof to any person or circumstance shall, to any
extent, be held invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each such term and provision of this Agreement shall be valid and
be enforced to the fullest extent permitted by law.

         14.9 CALCULATION OF TIME PERIODS. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event after
which the designated period of time begins to run is not to be included and the
last day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday for national banks in the State of North
Carolina, in which event the period shall run until the end of the next day
which is neither a Saturday, Sunday, or legal holiday.

         14.10 OFFER AND ACCEPTANCE. Unless both parties hereto have executed
this Agreement on or before 5:00 p.m. CST on November 3, 2003, this Agreement,
and any offer it constitutes on the part of Seller to sell the Purchased Assets
to Buyer on the terms and condition set forth herein, shall automatically
terminate and shall be of no further force and effect.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.

"SELLER"                                     "BUYER"

DIVERSICARE ASSISTED LIVING                  MARGARET SUTTON
SERVICES NC II, LLC

By:      /s/ Glynn Riddle                    By:    /s/ Margaret Sutton
         --------------------------                 ---------------------------
Name:    Glynn Riddle
         --------------------------
Its:
Date:
         --------------------------

                                       14

<PAGE>
                                    EXHIBIT A

                          Description of Real Property

         That certain tract or parcel of land lying and being located in
Saulston Township, Wayne County, North Carolina, fronting on U.S. Highway #13
and bordering Gene R. Lancaster, being the same land described in deed book
1430, page 7, of the Wayne County Registry, containing 2.539 acres net and being
further described as follows:

         Beginning at a point in the south line of U.S. Highway #13, which point
is located N. 89' 38' 58" E. 692.39 feet from the Intersection of the
centerlines of U.S. Highway #13 and N.C. State Road #1568, running thence with
the south line of U.S. Highway #13, N. 87' 35' 00' E. 114.00 feet, N. 89' 05'
00" E. 122.30 feet, S. 85' 41' 00' E. 99.50 feet, S. 82' 22' 00' E. 99.50 feet
and S. 79' 14' 15' E. 30.07 feet to a point in a ditch, running thence with the
line of Gene R. Lancaster as follows, along said ditch S. 10' 53' 00" W. 289.26
feet and N. 78' 10' 00' W. 372.65 feet to an iron pipe, continuing N. 10' 53'
00' E. 90.00 feet to another ditch, thence along said ditch N. 78' 10' 00' W.
61.59 feet, thence along a fence N. 00' 25' 11' W. 126.16 feet to the point of
beginning, the property described herein being shown on a map by Irvin A.
Staton, Registered land Surveyor, entitled "Suttons Rest Home", dated Sept. 24,
1997.

<PAGE>

                     ADDENDUM TO PURCHASE AND SALE AGREEMENT

Buyer:            Margaret Sutton
Seller:           Diversicare Assisted Living Services NC II, LLC
Property:         Suttons Rest Home
                  4258 US 13 North
                  Goldsboro, Wayne County, NC

         This Addendum to Purchase and Sale Agreement ("Addendum") is attached
to and made a part of that certain Purchase and Sale Agreement dated as of
November 14, 2003 by and between the above-referenced Buyer and Seller (the
"Agreement") for the above-described real property (the "Property"). Capitalized
terms used herein and not otherwise defined herein shall have the meaning given
to them in the Agreement.

         In consideration of the Agreement, the covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:

         1. CLOSING DATE. The parties agree that the Closing Date for the
purchase and sale of the Purchased Assets shall be extended to and shall occur
on or before October 22, 2004. Paragraph 3.1 of the Agreement is hereby amended
by deleting the date of "November 20, 2003" from the first sentence thereof and
replacing it with the date of "October 22, 2004".

         2. MAINTENANCE OF DALS LICENSE FOLLOWING CLOSING; SURRENDER OF LICENSE.
In the event that Buyer closes its purchase of the Property in accordance with
the Agreement, then Seller shall continue to keep the DALS License in place, and
will not surrender the same, until the first to occur of (i) the issuance by
DHHS to Buyer of an Adult Care Home License for the facility ("Buyer's License")
authorizing Buyer, or its designated operating entity, to operate the facility
as a fully licensed Adult Care Home, or (ii) December 31, 2004 (the "End Date");
subject however to the following conditions:

                  a. Promptly following Closing, Buyer shall commence and shall
         thereafter prosecute with due diligence such renovation, refurbishment,
         improvement or other work (the "Renovation Work") to the Facility
         necessary for it to satisfy all state and local requirements to permit
         the Facility to be operated as an Adult Care Home and to obtain Buyer's
         License. All cost and expense associated with such Renovation Work
         shall be the sole responsibility of Buyer. Seller shall have no
         obligation to perform or pay for any of the Renovation Work.

                  b. Until the DALS License is surrendered, Buyer will name
         Seller as an additional insured on Buyer's general liability and
         workers compensation insurance covering the Facility. At Closing, Buyer
         will provide Seller with a certificate of insurance evidencing such
         coverage.

                  c. Buyer shall not admit or accept any residents or otherwise
         use or operate the facility as an Adult Care Home or other facility for
         the occupancy or treatment of persons at

<PAGE>

         any time prior to the effective date of Buyer's License. Buyer shall
         promptly notify, or cause DHHS to notify, Seller when Buyer's License
         has been issued to Buyer by DHHS and provide Seller with a copy of
         Buyer's license reflecting the effective date thereof.

                  d. There shall be no change on the part of DHHS from the
         understandings reached with the DHHS regarding the renewal of the DALS
         License, the Renovation Work to be performed by Buyer and the surrender
         of the License by Seller as set forth in the letters between Seller and
         DHHS dated December 15, 2003 and July 22, 2004, copies of each of which
         are attached hereto as Exhibit A.

                  e. In the event of a breach or failure of any one of the
         foregoing conditions, then Seller shall have the immediate right,
         without the necessity of any notice or demand to Buyer, to surrender
         the DALS License to DHHS and Seller shall be released from any further
         obligation hereunder to keep the DALS License in place.

                  f. In the event that for any reason whatsoever Buyer's License
         has not been issued by DHHS to Buyer in final form without any
         conditions by the End Date, then, unless the End Date and Seller's
         obligation to maintain the DALS License have been extended by mutual
         agreement of Buyer and Seller, as evidenced by a written instrument
         signed by each of them, and such extension has been approved by DHHS,
         on or before the End Date, Seller shall have the right immediately
         following the End Date, without the necessity of any notice or demand
         to Buyer, to surrender the DALS License to DHHS and Seller shall be
         released from any further obligation hereunder to keep the DALS License
         in place.

                  g. In the event that Buyer's License is issued to Buyer by
         DHHS prior to the End Date, then Seller's obligation to maintain the
         DALS License in effect shall cease and terminate effective as of the
         effective date of Buyer's License and Seller shall have the right,
         without the necessity of any notice or demand to Buyer, to immediately
         surrender the DALS License to DHHS.

         3. OPERATION. Buyer acknowledges and agrees that, notwithstanding the
fact that Seller shall be shown as the licensed operator of the Facility
following Closing until the surrender of the DALS License, Seller shall have no
responsibility whatsoever for any operation, repair, maintenance, insurance,
upkeep, or improvement of, to or otherwise in respect of the Facility. Seller's
agreement to keep the DALS License in place is solely for the purpose of
assisting Buyer in obtaining Buyer's License and not for any other purpose. From
and after the Closing, Buyer, as the owner of the Property, including the
Facility, shall have all responsibilities, obligations and liabilities with
respect to the Property and the Facility.

         4. INDEMNITY. Buyer shall and does hereby agree to hold harmless and
indemnify Seller from and against any and all claims, demands, liabilities,
damages, costs, fees or expenses whatsoever (including reasonable attorneys'
fees) suffered or incurred by, or asserted against, Seller and arising out of,
resulting from, relating to or in any way connected with, directly or
indirectly, (i) Seller maintaining and keeping the DALS license in effect
following the Closing or (ii) Buyer's breach or failure to observe, keep or
perform any of the terms, conditions, provisions, or obligations of this
Addendum.

<PAGE>

         5. BINDING EFFECT. This Addendum shall be binding upon and shall inure
to the benefit of Buyer, Seller and their respective heirs, legal
representatives, successors and assigns. The terms, provisions, agreements and
obligations contained and set forth in this Addendum shall survive the Closing.

         6. FACSIMILE SIGNATURES. Signatures to this Addendum may be transmitted
by facsimile or telecopy and such signatures shall be valid and effective to
bind the party so signing, it being expressly agreed that each party to this
Addendum shall be bound by his/her/its own facsimile or telecopied signature and
shall accept the facsimile or telecopied signature of the other party to this
Addendum.

         IN WITNESS WHEREOF the parties have executed this Addendum as of the
date last signed by the parties hereto as set forth beneath their signatures
below.

                                BUYER:

                                /s/ Margaret Sutton
                                --------------------------------------------
                                Margaret Sutton

                                Date:    October 11, 2004
                                         -----------------------------------

                                SELLER:

                                Diversicare Assisted Living Services NC II, LLC

                                By:      /s/ Glynn Riddle
                                         -----------------------------------
                                Its:     EVP & CFO
                                         -----------------------------------
                                Date:    October 14, 2004
                                         -----------------------------------<PAGE>

                                                                EXHIBIT 10.123

                               PURCHASE AGREEMENT
                   (INCLUDING OPERATIONS TRANSFER PROVISIONS)

         THIS PURCHASE AGREEMENT "AGREEMENT" is made and entered into as of the
14th day of January, 2005, by and between (i) Diversicare Leasing Corp., a
Tennessee corporation, hereinafter referred to as "SELLER" and (ii) Salt Creek
Holding Company, Inc., a Texas corporation, hereinafter referred to as
"PURCHASER" and Goliad Manor, Inc., a Texas corporation, hereinafter referred to
as "NEW OPERATOR".

                              W I T N E S S E T H:

                                    RECITALS

         A. Seller is the owner and licensed operator of that certain skilled
nursing facility consisting of certain real, personal and intangible property
more commonly known as Goliad Nursing and Rehabilitation Center, located at 161
N. Welch Street, Goliad, Texas 77963 (the "FACILITY").

         B. Purchaser desires to acquire the land and building where the
Facility is situated from the current owner and New Operator desires to acquire
control of the Facility and to enter into an agreement with the Purchaser
pursuant to which it will lease the Facility.

         C. Seller, Purchaser and New Operator desire to enter into this
Agreement in order to facilitate the sale of the Facility and the transition of
operational responsibility for the Facility from Seller to Purchaser and New
Operator.

         NOW, THEREFORE, for value received, and in consideration of the mutual
covenants, terms and conditions hereinafter set forth, it is agreed as follows:

         1. SALES CONTRACT. Seller agrees to sell to Purchaser and Purchaser
agrees to purchase from Seller, subject to the terms, covenants, conditions,
representations and warranties herein contained, the following:

                  (a) All of Seller's interest in the real property described as
Exhibit "A" (the "LAND");

                  (b) All buildings and improvements located on said property
(the "IMPROVEMENTS") and all machinery, equipment, fixtures, inventory,
supplies, groceries and other items of personal property owned by Seller and
used in the operation and maintenance of Seller's nursing center business at the
Facility (the "PERSONAL PROPERTY") (the "Land" and "Improvements" are sometimes
hereinafter collectively referred to as the "REAL PROPERTY");

                  (c) If and to the extent assignable, all of Seller's interest
in all assignable contract rights (not including accounts receivable and bank
account balances, instruments, documents of title, policies and certificates of
insurance, business records) and other items of

                                     Page 1
<PAGE>

intangible property used in the operation and maintenance of the Facility, all
of which may be accepted at Purchaser's option as provided herein (the
"CONTRACTS");

                  (d) All of Seller's right, title and interest in and to the
name "Goliad Nursing and Rehabilitation Center" (the "NURSING HOME NAME"); and

                  (e) All of the admission policy agreements, patient's rights
agreements and/or other patient or resident occupancy agreements with existing
residents or patients of the Facility (collectively, the "ADMISSIONS
AGREEMENTS"), which New Operator shall assume and take operational control of
the Facility subject to;

                  (f) All of which property, real, personal, tangible,
intangible and mixed shall hereinafter be referred to collectively as the
"PREMISES".

                  1.1 Excluded Assets. There is specifically excluded from the
Premises being sold, and anything herein to the contrary notwithstanding, Seller
is not selling, assigning or transferring to Purchaser or New Operator, and
Purchaser and New Operator are not acquiring from Seller, any of the following:
(a) cash, certificates of deposit, investments, notes receivable, amounts due
from officers or employees, prepaid expenses (subject to the prorations set
forth in this Agreement), interest receivable, life insurance, refunds, rebates
or dividends with respect to various insurance and self-insurance arrangements
or marketable securities of Seller; (b) Seller's accounts receivable from
services performed with respect to the business of the Facility prior to the
Closing Date (as hereinafter defined), including all amounts due from residents,
Medicaid, Medicare or other third party payors; (c) minute books, stock records
and related corporate records of Seller; (d) any leased property that is the
subject of a Declined Contract (as defined in Section 19); (e) the wide area
network and associated software provided on the Diversicare wide area network;
(f) Seller or its affiliate's continuous quality improvement programs, manuals
and materials, management in formation systems, policy, procedure and
educational manuals and materials, and similar proprietary property of Seller or
its affiliates; (g) the current management agreement for the management of the
Facility by Diversicare Management Services Co., an affiliate of Seller, which
will be terminated as of the Closing Date; (h) any right to the use of the names
"Advocat" or "Diversicare" or any derivative thereof; and (i) those additional
items listed on SCHEDULE A attached hereto (collectively, the "EXCLUDED
ASSETS").

                  1.2 Delivery of Personal Property. The presence of the
Personal Property at the Facility on the Closing Date shall constitute delivery
thereof. Any items of Personal Property containing the name or logo of
"Diversicare" or "Advocat", or any derivative thereof, discovered by Purchaser
after the Closing Date shall be replaced by Purchaser and either destroyed or
returned to Seller promptly following the Closing Date. As of the Closing Date,
Purchaser will discontinue the use of any stationary or other supplies at the
Facility which contain reference to the names "Advocat" or "Diversicare" or any
derivative thereof.

         2. PRICE. Purchaser agrees to pay to Seller for the Premises the total
sum of One Hundred Seventy-Five Thousand Dollars ($175,000.00) (the "PURCHASE
PRICE") to be paid as follows:

                                     Page 2
<PAGE>

                  2.1 One Hundred Seventy-Five Thousand Dollars ($175,000.00)
payable in cash or by wire transfer of immediately available funds to the order
of Seller at closing subject to prorations between parties according to the
terms as set forth in this Agreement.

                  2.2 Concurrently with the execution of this Agreement by
Purchaser and Seller, and as a condition precedent to the effectiveness hereof,
Purchaser shall deposit in escrow with the Title Company (as hereinafter
defined), in cash or by wire transfer of immediately available, same day federal
funds, the sum of Five Thousand Dollars ($5,000.00) (the "DEPOSIT"). If the
purchase and sale contemplated herein closes, the Deposit shall be credited
towards the total Purchase Price to be paid by Seller for the Premises. If the
purchase and sale contemplated herein fails to close, the Deposit shall be
returned to Purchaser or paid to Seller as provided elsewhere in this Agreement.

         3. CLOSING DOCUMENTS. Purchaser and Seller hereby agree that the
purchase herein contemplated shall be consummated through the following
instruments and according to the following terms:

                  3.1 Conveying Documents. Conveyance of the real and personal
property shall be affected by a special warranty deed and bill of sale, both in
forms as recommended by the State of Texas Bar Association and reasonably
acceptable to Seller. Fee Simple and marketable title to the Real Property and
good and valid title to the Personal Property shall be conveyed from Seller to
Purchaser free and clear of all liens, charges, easements, and encumbrances of
any kind other than the Permitted Exceptions (as hereinafter defined). If and to
the extent assignable, all assignable licenses, permits, warranties and other
privileges, if any, concerning the Premises or the operation thereof shall be
assigned by Seller to Purchaser at the closing, provided that Seller assumes the
obligations and responsibilities of the holder thereof.

                  3.2 Delivery of Title Commitments; Survey. Following the
execution of this Agreement, Purchaser at its option, shall cause the Title
Company to provide Purchaser with a current commitment for an owner's policy of
title insurance covering the Real Property (the "TITLE COMMITMENT"), together
with copies of all documents (collectively, the "TITLE DOCUMENTS") referenced in
the Title Commitment. Purchaser, at its option and sole cost and expense, may,
following the execution of this Agreement, obtain a new survey for the Real
Property (the "SURVEY"). Purchaser understands and acknowledges that if
Purchaser elects to obtain the Survey, the completion and/or delivery of the
Survey shall not be a condition precedent to the closing. Seller shall have no
responsibility with respect to the completion and delivery of the Survey or the
completeness of the Title Documents made available to Purchaser by the Title
Company.

                  3.3 Title Review and Cure. If Purchaser obtains the Title
Commitment and Survey, Purchaser shall have the right to approve or disapprove
the condition of title and survey to the Real Property. Not less than seven (7)
days prior to the Closing Date, Purchaser shall deliver to Seller written notice
of Purchaser's disapproval of any matters of title reflected in the Title
Commitment and the Survey that do not constitute Permitted Exceptions. Purchaser
shall provide Seller with a copy of the Title Commitment and Survey obtained by
Purchaser. The failure of Purchaser to deliver to such notice on or before such
date shall be deemed to constitute Purchaser's approval of the condition of
title and survey to the Real Property. If Purchaser so

                                     Page 3
<PAGE>

gives Seller notice of its disapproval of any matter of title shown in the Title
Commitment or the Survey, then Seller may, but shall have no obligation to,
elect to eliminate to Purchaser's reasonable satisfaction the disapproved title
matters by giving Purchaser written notice of those disapproved title matters,
if any, which Seller agrees to so eliminate by the Closing Date. If Seller does
not elect to, or is unable to, eliminate any disapproved title matters, then
Purchaser shall have the right, upon delivery to Seller of a written notice, to
either: (a) waive its prior disapproval and proceed to close its purchase of the
Premises, in which event said disapproved matters shall be deemed to be
Permitted Exceptions, or (b) terminate this Agreement. Failure to take either
one of the actions described in (a) and (b) above shall be deemed to be
Purchaser's election to take the action described in clause (a) above. If
Purchaser elects to terminate this Agreement as provided in clause (b) above,
this Agreement shall automatically terminate, the parties shall be released from
all further obligations under this Agreement (except pursuant to any provisions
which by their terms survive a termination of this Agreement), and the Deposit
shall be immediately returned to Purchaser. Purchaser shall be deemed to have
approved any title exception that Seller is not obligated to remove and to which
either Purchaser did not object as provided above, or to which Purchaser did
object, but with respect to which Purchaser did not terminate this Agreement as
provided above, and the same shall be deemed a Permitted Exception.

                  3.4 Delivery of Title Policy at Closing. Seller will furnish
funds at closing sufficient to cause the Title Company to issue and deliver to
Purchaser, with respect to the Real Property, an ALTA Owner's Policy of Title
Insurance in current ALTA Form or its reasonable equivalent in use in the State
of Texas (the "TITLE POLICY"), or a pro forma policy or marked commitment for
the same, dated as of the date and time of the recording of the deed for the
Real Property, in the amount of the Purchase Price allocated to the Real
Property, as improved, insuring Purchaser as owner of good and marketable title
to the Real Property, subject only to (i) the usual standard printed exceptions
contained in such standard form and (ii) the Permitted Exceptions. In the event
Purchaser requests, and at Purchaser's expense (and if Purchaser has obtained a
Survey satisfactory to the Title Company), the Title Policy (i) will provide for
coverage deleting the standard printed survey exception subject to "shortages in
area" and (ii) will provide for the issuance of a mortgage title policy in an
amount up to the Purchase Price which is allocated to the Real Property, as
improved, at simultaneous issue rates. The cost and expense, if any, of any
additional endorsements to the Title Policy requested by Purchaser or its lender
shall be the responsibility of Purchaser.

                  3.5 Permitted Exceptions. For purposes of this Agreement,
"PERMITTED EXCEPTIONS" shall mean and include (a) any lien to secure payment of
real estate taxes, including special assessments for the current year, not yet
due and payable, (b) all applicable laws, ordinances, rules and governmental
regulations (including, without limitation, those relating to building, zoning
and land use) affecting the development, use, occupancy or enjoyment of the Real
Property, (c) easements for the installation or maintenance of public utilities
serving the Real Property, (d) easements and restrictions of record that do not
hinder, interfere with or prohibit the use of the Real Property as skilled
nursing facility, and (e) all other exceptions disclosed by the Title Commitment
and which are approved or deemed approved by Purchaser in accordance with
Section 3.3 hereof.

                                     Page 4
<PAGE>

         4. CLOSING. The transaction provided for herein shall be consummated
through an escrow with Bedgood Abstract & Title, 3142 Stella Street, Port
O'Connor, Texas 77982 ( the "TITLE COMPANY"). The parties shall execute and
deliver to the Title Company instructions consistent with the terms of this
Agreement. Any discrepancy between the escrow instructions and the provisions of
this Agreement shall be controlled by the provisions of this Agreement unless
the instructions specifically provide otherwise. All funds and documents
provided for herein shall be delivered to the party entitled thereto upon close
of escrow. Closing shall take place on the same date (the "Closing Date") as the
Effective Date described in Section 11.2, below, but in all events not later
than March 1, 2005; unless extended beyond such time by mutual agreement of the
parties. All deeds, assignments, bills of sale and other instruments of title
sufficient to vest all title in the Premises to Purchaser at the time of closing
will be delivered to the Title Company on the Closing Date, and possession of
the Premises shall be given to Purchaser on the Closing Date, subject only to
the rights of patients in residence in the normal course of business.

         5. SELLER'S REPRESENTATIONS AND WARRANTIES. The Seller hereby
represents and warrants as follows:

                  5.1 Business Existence. That Seller is lawfully and duly
qualified and authorized to carry on the business heretofore and now conducted
by them within the State of Texas.

                  5.2 Possession. That Seller, on the Closing Date, will have no
lessee or other person (except patients in a residence in the normal course of
business) entitled to present or future possession of all or any part of the
Premises.

                  5.3 Litigation. Except as disclosed on SCHEDULE 5.3, as of the
date hereof, no action at law or in equity before any court or administrative
agency is now or on the closing date will be pending, or to the knowledge of
Seller, threatened against or affecting the Premises or the nursing center
business conducted thereon.

                  5.4 Title. That Seller, on the Closing Date, will have good
and marketable title (as defined by the Title Examination Standards adopted by
the Texas Bar Association) to the Premises free and clear from all defects in
title or encumbrances other than the Permitted Exceptions.

                  5.5 Undisclosed Liabilities. To the best of Seller's
knowledge, the execution and delivery of this Agreement and the consummation of
the transaction herein contemplated will not conflict or result in any breach of
any terms, provisions, conditions or any statute or administrative regulation
applicable to Seller or any order, writ, injunction, judgment or decree of any
court or governmental authority or any agreement or instrument to which Seller
is bound, or constitute a default thereunder.

                  5.6 Licensing. Seller currently possesses a license from the
State of Texas authorizing or certifying the Premises to operate as a 60-bed
long term care nursing facility health care facility. Seller further warrants
that such license is in good standing and that no

                                     Page 5
<PAGE>

action, administrative or otherwise, has been taken or is being taken to
decertify, remove, cancel or alter such License.

                  5.7 TDHS Contract. Seller warrants that the Vendor's Contract
with the Texas Department of Human Services ("VENDOR'S CONTRACT") concerning the
Facility is in full force and effect. Seller warrants that the Facility has not
been placed on "Vendor Hold" by the Texas Department of Human Services during
the twelve (12) months immediately preceding the date hereof. To the best of
Seller's knowledge, there are no outstanding deficiencies from prior surveys
that have not been corrected or waived.

         6. SELLER'S COVENANTS. Pending closing of the purchase hereby
contemplated, the Seller covenants and agrees as follows:

                  6.1 Information. To permit Purchaser and Purchaser's
authorized representatives to have access to and make reasonable examination of
the physical properties, furnishings, equipment, real estate titles, contracts,
and accounts of Seller, insofar as the operation of the Premises is concerned,
and to furnish such other information concerning the operation of the Premises
as may be reasonably required by Purchaser and is readily available to Seller.
Such inspections shall be made at a time and place reasonable to Purchaser and
Seller. All such inspections shall be subject to such limitations, protections
and safeguards as may be necessary to protect the privacy and security of all
patient-residents of the Facility.

                  6.2 Insurance Schedule. Seller will maintain substantially the
same insurance coverage it currently has in place for the Facility up to and
including the Closing Date; provided, however, that Purchaser understands that
such insurance coverage currently expires and is subject to renewal as of
February 1, 2005.

                  6.3 Further Assurances. To take whatever action and obtain
whatever other instruments or documents as may be reasonably necessary in order
to carry out the terms, covenants and conditions of this Agreement to be
performed by Seller.

         7. EXPENSES AND PRORATIONS.

                  7.1 Recording Fees. All recording and escrow fees, including
any deed recording tax or other charges, associated with the closing shall be
paid by Purchaser.

                  7.2 Taxes and Assessments. Real estate and personalty taxes
and assessments ("TAXES") imposed by any governmental authority with respect to
the Real Property and Personal Property for 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 and based upon the number of days Purchaser and Seller will have owned the
Real Property and Personal Property during such relevant tax year. Seller shall
receive a credit for any Taxes already paid by Seller and applicable to any
period after the Closing Date.

                  7.3 Utilities and Utility Deposits. Utilities for the Real
Property, if any, for which Seller is responsible including water, sewer,
electric, and gas, based upon the last reading of meters prior to the Closing
Date, shall be prorated. Seller shall be entitled to claim and be

                                     Page 6
<PAGE>

paid all security deposits made by Seller and held by any of the utility
companies providing service to the Real Property. From and after the Closing
Date, Purchaser shall be responsible for making any security deposits required
by utility companies providing service to the Real Property. Seller shall
endeavor to obtain meter readings on the day before the Closing Date, and if
such readings are obtained, there shall be no proration of such items and Seller
shall pay at closing the bills therefore for the period to the day preceding the
Closing Date, and Purchaser shall pay the bills therefore for the period
subsequent thereto. If the utility company will not issue separate bills,
Purchaser will receive a credit against the Purchase Price for Seller's portion
and will pay the entire bill prior to delinquency after the Closing Date. If
Seller has paid utilities no more than thirty (30) days in advance in the
ordinary course of business, then Purchaser shall be charged its portion of such
payment at closing.

                  7.4 Other Adjustments. All normal and customary items of
expense and income regarding the ownership and operation of the Facility shall
be prorated between Seller and Purchaser as of the Closing Date.

                  7.5 Final Adjustment After Closing. If final prorations cannot
be made at the closing for any item being prorated under this Section 7, then,
provided Purchaser or Seller identify any such proration ("POST CLOSING
PRORATION") in writing on or before the closing, Purchaser and Seller agree to
allocate such items on a fair and equitable basis as soon as invoices or bills
are available and applicable reconciliation with tenants have been completed,
with final adjustment to be made as soon as reasonably possible after the
closing (but in no event later than forty-five (45) days after the closing, 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 forty-five (45) days after
the closing. Seller shall have reasonable access to, and the right to inspect
and audit, Purchaser's books to confirm the final prorations for a period of one
(1) year after the Closing Date.

                  7.6 Survival. The provisions of this Section 7 shall survive
the termination of this Agreement or the Close of Escrow.

         8. DEFAULT AND REMEDIES. In the event of default in the performance or
observance of any representation, warranty or covenant of this agreement, it is
agreed as follows:

                  8.1 Purchaser's Default, Seller's Remedy. In the event
Purchaser refuses to perform the Purchaser's obligations hereunder, except as
excused by Seller's default, Seller shall make written demand upon Purchaser for
such performance and, if Purchaser fails to comply with such written demand
within ten (10) days after the receipt thereof, Seller shall have the right as
Seller's sole and exclusive remedy to terminate this Agreement and to receive
and keep the Deposit, which shall be promptly disbursed by the Title Company to
Seller, as liquidated damages. Seller shall have no other remedy available
pursuant to this Agreement, at law or in equity.

                  8.2 Seller's Default, Purchaser's Remedy. In the event Seller
shall default in the performance of Seller's obligations hereunder, except as
excused as Purchaser's default, Purchaser shall make written demand upon Seller
for such performance, and if Seller fails to comply with such demand within ten
(10) days after receipt thereof, Purchaser shall have the

                                     Page 7
<PAGE>

right as Purchaser's sole and exclusive remedy to either (i) terminate this
Agreement, in which event Purchaser shall be entitled to the return of the
Escrow Deposit, which the Title Company shall immediately deliver to Purchaser,
or (ii) seek specific performance of this Agreement; provided that any suit for
specific performance must be brought within thirty (30) days of such
termination, Purchaser hereby waiving the right to bring suit at any late date.

         9. CONDITIONS TO CLOSING.

                  9.1 The Closing of the transaction contemplated by this
Agreement is subject to the satisfaction of the following conditions on or prior
to the Closing Date:

                        (a) There shall exist no actions, suits, arbitrations,
claims, attachments, proceedings, assignments for the benefit of creditors,
insolvency, bankruptcy, reorganization or other proceedings, pending or
threatened against Seller, Purchaser or New Operator that would materially and
adversely affect their ability to perform its respective obligations under this
Agreement;

                        (b) There shall exist no pending or threatened action,
suit or proceeding with respect to Seller, Purchaser or New Operator before or
by any court or administrative agency which seeks to restrain or prohibit, or to
obtain damages or a discovery order with respect to, this Agreement or the
consummation of the transaction contemplated hereby;

                        (c) New Operator shall have obtained all licenses,
certificates of need, permits and approvals required of New Operator from the
State of Texas and any other applicable governmental authority having
jurisdiction required of New Operator to operate the Facility as a fully
licensed nursing home, including without limitation the Licensure Approvals and
New Provider Number described in Section 11, below, it being the intent of this
Agreement that the sale of the Premises to Purchaser and the transfer of the
nursing home operations of the Facility to New Operator shall take place
simultaneously; and

                        (d) Seller shall have received all consents and
assignments and approvals from all third parties from whom such consents to
assignments or approvals are necessary under all contracts, covenants and other
agreements relating to the Premises including the consent of Seller's lender,
AmSouth Bank, which currently has a lien on the Real Property and the Personal
Property.

         If any condition set forth above is not timely satisfied or waived for
a reason other than a default by Seller, Purchaser or New Operator in the
performance of its respective obligations under this Agreement, then this
Agreement may be terminated at the written election of any party made on or
before the Closing Date, in which event this Agreement shall terminate, the
Title Company shall promptly return the Escrow Deposit to Purchaser, and the
parties shall have no further obligations hereunder.

         10. AS-IS. PURCHASER HEREBY ACKNOWLEDGES AND AGREES THAT, TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THIS SALE IS MADE AND WILL BE MADE
WITHOUT REPRESENTATION, COVENANT, OR WARRANTY OF ANY KIND (WHETHER EXPRESS,
IMPLIED, OR, TO THE MAXIMUM

                                     Page 8
<PAGE>

EXTENT PERMITTED BY APPLICABLE LAW, STATUTORY) BY SELLER. AS A MATERIAL PART OF
THE CONSIDERATION FOR THIS AGREEMENT, PURCHASER AGREES TO ACCEPT THE REAL
PROPERTY AND PERSONAL PROPERTY ON AN "AS IS" AND "WHERE IS" BASIS, WITH ALL
FAULTS, AND WITHOUT ANY REPRESENTATION OR WARRANTY, ALL OF WHICH SELLER HEREBY
DISCLAIMS, NO WARRANTY OR REPRESENTATION IS MADE BY SELLER AS TO FITNESS FOR ANY
PARTICULAR PURPOSE, MERCHANTABILITY, DESIGN, QUALITY, CONDITION, OPERATION OR
INCOME, COMPLIANCE WITH DRAWINGS OR SPECIFICATIONS, ABSENCE OF DEFECTS, ABSENCE
OF HAZARDOUS OR TOXIC SUBSTANCES, ABSENCE OF FAULTS, FLOODING, OR COMPLIANCE
WITH LAWS AND REGULATIONS INCLUDING, WITHOUT LIMITATION, THOSE RELATING TO
HEALTH, SAFETY, AND THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, THE ADA).
PURCHASER ACKNOWLEDGES THAT PURCHASER HAS ENTERED INTO THIS AGREEMENT WITH THE
INTENTION OF MAKING AND RELYING UPON ITS OWN INVESTIGATION OF THE PHYSICAL,
ENVIRONMENTAL, ECONOMIC USE, COMPLIANCE, AND LEGAL CONDITION OF THE PURCHASED
REAL AND PERSONAL PROPERTY AND THAT PURCHASER IS NOT NOW RELYING, AND WILL NOT
LATER RELY, UPON ANY REPRESENTATIONS AND WARRANTIES MADE BY SELLER OR ANYONE
ACTING OR CLAIMING TO ACT, BY, THROUGH OR UNDER OR ON SELLER'S BEHALF CONCERNING
THE PURCHASED PROPERTY. ADDITIONALLY, PURCHASER AND SELLER HEREBY AGREE THAT (A)
PURCHASER IS TAKING THE REAL PROPERTY "AS IS" WITH ALL LATENT AND PATENT DEFECTS
AND THAT THERE IS NO WARRANTY BY SELLER THAT THE REAL PROPERTY IS FIT FOR A
PARTICULAR PURPOSE, (B) PURCHASER IS SOLELY RELYING UPON ITS EXAMINATION OF THE
REAL PROPERTY, AND (C) PURCHASER TAKES THE REAL PROPERTY UNDER THIS AGREEMENT
UNDER THE EXPRESS UNDERSTANDING THAT THERE ARE NO EXPRESS OR IMPLIED WARRANTIES.
PURCHASER IS, OR WILL BE AS OF THE CLOSE OF ESCROW, FAMILIAR WITH THE REAL
PROPERTY AND ITS SUITABILITY FOR PURCHASER'S INTENDED USE.

         11. CHANGE OF OWNERSHIP; LICENSURE AND CERTIFICATION; EFFECTIVE DATE.

                  11.1 New Operator has filed all applications and other
documents required by the State of Texas (the "STATE") for the issuance of the
licenses, certifications and approvals required by the State for the operation
of the Facility by New Operator (the "LICENSURE APPROVALS") and New Operator
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 and shall (A) from time
to time, upon request of Seller, advise Seller of the status of New Operator's
efforts to secure the Licensure Approvals and (B) promptly advise Seller once
the anticipated Effective Date is known to New Operator. New Operator shall be
solely responsible for any and all costs associated with the change of ownership
process including, but not limited to, any physical plant or other changes
required to bring the Facility into compliance with the currently effective
licensure and certification or other legal requirements if and to the extent it
is not currently in such compliance and such compliance is required as a matter
of state or federal law. Seller shall, upon request and at no cost to Seller,
cooperate with New Operator in the licensure application process by providing
New Operator

                                     Page 9
<PAGE>

with such information concerning Seller or the Facility as New Operator may
advise Seller, from time to time, is required for New Operator to file and/or
complete its licensure application. New Operator agrees that in no event shall
New Operator seek that a Licensure Approval be issued as of any date other than
the Effective Date as determined in accordance with this Agreement.

                  11.2 The transfer of operations of the Facility by Seller to
New Operator pursuant to this Agreement shall take place and be effective on the
first day of the first calendar month after New Operator receives the Licensure
Approvals and the New Provider Number described in Section 11.3, below (the
"EFFECTIVE DATE"), but not later than March 1, 2005; provided, however, that in
order for the Effective Date to be February 1, 2005, New Operator must notify
Seller in writing before 5:00 p.m. CST on January 24, 2005 that New Operator
will have the Licensure Approvals in place for February 1, 2005, and supply
reasonable assurances regarding same; and provided further, that in order for
the Effective Date to be March 1, 2005, then New Operator must notify Seller in
writing before 5:00 p.m. CST on the day that is fifteen (15) days prior to such
proposed Effective Date that New Operator will have the Licensure Approvals in
place for such Effective Date and supply such reasonable assurances. In no event
shall the Effective Date be prior to the date that Purchaser closes the purchase
of the Premises pursuant to this Agreement, it being the intent of this
Agreement that the Effective Date shall take place simultaneously with the
Closing Date.

                  11.3 New Operator shall not use or bill under any Medicaid
provider numbers used by Seller, and New Operator shall be responsible for
obtaining all such new Medicaid provider agreements and numbers and/or Medicaid
certification as may be necessary for the continued operations of the Facility
("NEW PROVIDER NUMBER"). Seller's provider account number for the Facility shall
remain the sole and exclusive property of Seller. New Operator shall be
responsible for obtaining all other payor or provider agreements (commercial,
governmental or otherwise) which may be necessary for the operation of the
Facility after the Effective Date.

                  11.4 If New Operator does not obtain the Licensure Approvals
and the New Provider Number on or before March 1, 2005 and Purchaser does not
simultaneously acquire the land and building where the Facility is situated on
or before such date, then this Agreement shall terminate and be of no further
force and effect unless otherwise agreed by the parties in writing.

         12. CONVEYANCE OF SELLER'S PROPERTY AND INVENTORY; ASSIGNMENT OF
ADMISSION AGREEMENTS.

                  12.1 For no additional consideration, Seller shall transfer
and convey to New Operator on the Effective Date, in its "AS IS" condition,
without representations or warranties, express or implied, the consumable
inventories of every kind and nature whatsoever (specifically including, but not
limited to, all pharmacy supplies, medical supplies, office supplies, other
supplies and foodstuffs) located at the Facility on the Effective Date (the
"INVENTORY"); provided, however, that Seller's only obligation shall be to
ensure that the level of Inventory at the Facility on the Effective Date meets
any minimum requirements established under applicable State law. Seller shall
have no obligation to deliver the Inventory to any location other than the
Facility, it being understood and agreed that the presence of the Inventory at
the Facility on the Effective Date shall constitute delivery thereof. Seller
shall execute a Bill of Sale in form and

                                    Page 10
<PAGE>

substance acceptable to Seller and New Operator that confirms the conveyance of
the Inventory provided for herein.

                  12.2 On the Effective Date, Seller shall also transfer and
convey to New Operator, in its "AS IS" condition, without representations or
warranties, express or implied, all of its right, title and interest, if any, in
and to the Personal Property (as hereinafter defined), provided that Lessor
consents to such transfer. It is understood and agreed that Seller is not making
any representation or warranty as to whether or to what extent there is, or on
the Effective Date will be, any Personal Property located at the Facility. For
purposes hereof, the Personal Property shall be defined as any and all
furniture, fixtures, improvements and other tangible personal property, if any,
which is owned by Seller and located at and used in connection with the
operation of the Facility, but specifically excluding the Excluded Assets;
provided, that if provided on said SCHEDULE A, Seller shall make certain
Excluded Assets available to New Operator on the terms set forth on said
SCHEDULE A.

                  12.3 On the Effective Date, Seller and New Operator will enter
into an Assignment and Assumption Agreement in form and substance reasonably
acceptable to Seller and New Operator pursuant to which Seller will assign to
New Operator and New Operator will assume all of Seller's right, title and
interest in and to and obligations under the Admissions Agreements with the
persons who are residing at the Facility on the Effective Date (the "ASSIGNED
ADMISSION AGREEMENTS"); provided, however, the Assignment and Assumption
Agreement shall specifically provide that nothing therein shall be construed as
imposing any liability on New Operator for the acts or omissions of Seller under
the Assigned Admission Agreements prior to the Effective Date.

         13. TRANSFER ON RESIDENT TRUST FUNDS.

                  13.1 On the Effective Date, Seller shall prepare and deliver
to New Operator a true, correct, and complete accounting and inventory (properly
reconciled) of any resident trust funds and residents' property held by Seller
as of the Effective Date in trust for residents at the Facility (collectively
the "RESIDENT TRUST FUNDS").

                  13.2 As of the Effective Date, Seller hereby agrees to
transfer to New Operator the Resident Trust Funds and New Operator 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

                  13.3 Within five (5) days after the Effective Date, Seller
shall prepare a final reconciliation comparing the actual Resident Trust Fund
balance on the Effective Date to the amount of the Resident Trust Funds
transferred to New Operator on the Effective Date and to the extent the former
exceeds the latter, Seller shall remit such excess to New Operator or to the
extent the latter exceeds the former, New Operator shall remit such excess to
Seller.

                  13.4 New Operator shall have no ongoing responsibility to the
applicable resident/responsible party and regulatory authorities in the event
the Resident Trust Funds delivered by Seller to New Operator pursuant to Section
13.2 are demonstrated to be less than

                                    Page 11
<PAGE>

the full amount of the Resident Trust Funds for such resident as of the
Effective Date, for inaccuracies in the accounting and inventory provided by
Seller, or for claims which arise from actions or omissions of Seller with
respect to the Resident Trust Funds prior to the Effective Date.

                  13.5 Seller shall have no responsibility to the applicable
resident/responsible party and regulatory authorities with respect to any
Resident Trust Funds delivered to New Operator.

         14. COST REPORTS. Seller shall timely prepare and file with the
appropriate Medicare and Medicaid agencies any final cost reports with respect
to its operation of the Facility which are required to be filed by law under the
terms of the Medicare and Medicaid Programs. Within five (5) business days of
request by New Operator, Seller shall provide New Operator with copies of such
cost reports, together with copies of any amendments thereto and correspondence
related to such final cost reports.

         15. EMPLOYEES. Seller shall discontinue employment of all the Facility
employees effective immediately prior to the Effective Date. Unless otherwise
agreed by Seller and New Operator, Seller shall pay directly to such employees
any unpaid wages and benefits which Seller is required by law or by the terms of
any applicable union contract to pay to the employees of the Facility as of the
Effective Date.

                  15.1 WARN Act. Anything in this Agreement to the contrary
notwithstanding, as of the Effective Date, New Operator shall employ such number
of Seller's employees at the Facility and shall retain for a period of ninety
(90) days following the Effective 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 State of Texas) 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 State of Texas). For purposes of determining
compliance by New Operator with the foregoing provisions, employees terminated
by Seller during the period of ninety (90) days immediately prior to the Closing
Date for other than cause, retirement or voluntary departure, all of who are
listed in SCHEDULE 15.1, shall be taken into consideration. New Operator shall
indemnify Seller from and against any liability for any WARN Act violations
resulting from the aggregation of the terminations of employment by Seller
during the ninety (90) days immediately preceding the Closing Date listed on
SCHEDULE 15.1 with the terminations of employment of Seller's employees at the
Facility on or after the Effective Date in violation of this Section 15.1.
However, the indemnification by New Operator referred to in the immediately
preceding sentence shall apply only to violations of WARN that relate solely to
employees of Seller who work at the Facility or who worked at the Facility
within the 90 day period preceding the Closing Date without reference to
Seller's employees at any other location. Nothing herein contained shall be
deemed either to affect or to limit in any way the management prerogatives of
New Operator 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. Between the date hereof and the Effective Date, Seller shall
not terminate any further employees at the Facility for other than cause,
retirement or voluntary departure, unless Seller has first obtained the consent
of New Operator, which consent will not be unreasonably withheld except where
such termination

                                    Page 12
<PAGE>

would have the effect of causing the parties to be in violation of the WARN Act
(or any similar law of the State of Texas). The provisions of this Section 15.1
shall survive the closing of the transactions contemplated herein.

         16. ACCOUNTS RECEIVABLE.

                  16.1 Seller shall retain whatever right, title and interest it
may have in and to all unpaid accounts receivable with respect to the Facility
which relate to the period prior to the Effective Date, including, but not
limited to, any accounts receivable arising from rate adjustments which relate
to the period prior to the Effective Date even if such adjustments occur after
the Effective Date ("SELLER'S A/R"). New Operator (i) shall do nothing to
interfere with any and all 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, (ii) agrees that if it
receives any proceeds with respect to the Seller's A/R, New Operator will hold
such proceeds in trust for Seller and shall promptly turn over those proceeds to
Seller (until directed otherwise by Seller in writing) without demand, in the
form received, and (iii) agrees to indemnify, defend and hold harmless Seller
from any and all losses, costs, damages and expenses, including, but not limited
to, reasonable attorneys fees, which Seller may incur in the event of a breach
by New Operator of its obligations under this Section 16.1.

                  16.2 Within ten (10) business days following the Effective
Date, Seller shall provide New Operator with a schedule setting forth by patient
its outstanding accounts receivable with respect to the Facility as of the
Effective Date.

                  16.3 In furtherance and not in limitation of the requirements
set forth in Section 16.1, payments received by New Operator from and after the
Effective Date from third party payors, including but not limited to Medicare,
Medicaid, managed care and health insurance, shall be handled as follows:

                        16.3.1 If such payments specifically indicate on the
accompanying remittance advice, or the parties otherwise agree, that they relate
to the period prior to the Effective Date, the payments shall be forwarded to
Seller by New Operator, along with the applicable remittance advice, promptly,
but in no event more than three (3) business days, after receipt thereof;

                        16.3.2 If such payments indicate on the accompanying
remittance advice, or the parties otherwise agree, that they relate to the
period on or after the Effective Date, they shall be retained by New Operator;
and

                        16.3.3 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 which such payments relate, the parties shall
assume that each payment 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 Effective Date shall be retained by New
Operator and the balance shall be remitted to Seller promptly, but in no event
more than three (3) business days, after receipt thereof.

                                    Page 13
<PAGE>

                  16.4 Any payments received by New Operator during the first
ninety (90) days after the Effective Date from or on behalf of private pay
patients with outstanding balances as of the Effective Date which fail to
designate the period to which they relate, will first be applied by New Operator
to reduce the patients' pre-Effective Date balances, with any excess applied to
reduce any balances due for services rendered by New Operator after the
Effective Date. Thereafter all non-designated payments will first be applied to
any post-Effective Date balances, with the excess, if any, applied to the extent
of any balances due for services rendered by Seller prior to the Effective Date.

                  16.5 Nothing herein shall be deemed to limit in any way
Seller's rights and remedies to recover accounts receivable due and owing Seller
under the terms of this Agreement.

                  16.6 In the event the parties mutually determine that they
misapplied any payment hereunder, the party that erroneously received the
payment shall remit it to the other party promptly, but in no event more than
three (3) business days, after the determination of misapplication is made.

                  16.7 For the six (6) month period following the Effective Date
or until Seller receives payment of all accounts receivable attributed to the
operation of the Facility prior to the Effective Date, whichever is sooner, New
Operator shall provide Seller with an accounting by the 20th day of each month
setting forth all amounts received by New Operator during the preceding month
with respect to Seller's A/R which are set forth in the schedule provided by
Seller pursuant to Section 16.2. New Operator shall deliver such accounting to
Seller at the address provided in Section 24.8(b). Seller shall have the right
to inspect all cash receipts of New Operator during weekday business hours in
order to confirm New Operator's compliance with the obligations imposed on it
under this Section.

                  16.8 The obligations of the parties to forward the accounts
receivable payments pursuant to this Section 16 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.

         17. COSTS AND PRORATIONS.

                  17.1 As between New Operator and Seller, revenues and expenses
(including any amount paid by Seller prior to the Effective Date for services to
be rendered on and after the Effective Date from social security payments,
private pay patients prepayments, applied income payments, resident trust
prepayments, etc), and other related items of revenue or expense attributable to
the Facility shall be prorated between Seller and New Operator as of the
Effective Date. In general, such prorations shall be made so that as between New
Operator and Seller, Seller shall be reimbursed for prepaid expense items to the
extent that the same are applied to expenses attributable to periods after the
Effective Date and Seller shall be charged for unpaid expenses to the extent
that the same are attributable to periods prior to the Effective Date. This
provision shall be implemented by New Operator remitting to Seller any invoices
(or the applicable portion thereof in the case of invoices which cover periods
both prior to and after the Effective Date) which describe goods or services
provided to the Facility before the Effective

                                     Page 14
<PAGE>

Date and by New Operator assuming responsibility for the payment of any invoices
which describe goods or services provided to the Facility on and after the
Effective Date.

                  17.2 All prorations shall be made on the basis of actual days
elapsed in the relevant accounting or revenue period and shall be based on the
most recent information available to Seller. Insurance premiums and payments
shall not be pro-rated and New Operator shall obtain its own insurance coverage
covering all periods commencing on and after the Effective Date.

                  17.3 All amounts which are subject to proration under the
terms of this Agreement and which require adjustment after the Effective Date
shall be settled within thirty (30) days after the Effective Date or, in the
event the information necessary for such adjustment is not available within such
thirty (30) day period, then within ten (10) business days of receipt of
information by either party necessary to settle the amounts subject to
proration.

                  17.4 This Agreement shall not affect, and Seller shall retain,
whatever right, title and interest it may have in and to any insurance proceeds
or condemnation awards which may be due and owing to Seller as a result of any
covered incidents of damage or destruction to, or takings of, the Facility or
any part thereof occurring prior to the Effective Date even if the same are not
paid until after the Effective Date. In furtherance of the foregoing, New
Operator agrees (i) upon reasonable advance notice and during normal business
hours to provide such access to the Facility as may be required by Seller or any
third party adjuster or representative of a condemning authority to settle any
such insurance claims/condemnation proceedings and (ii) in the event any such
insurance proceeds or condemnation awards are directed to New Operator or the
Facility rather than to Seller, to remit such insurance proceeds/condemnation
awards to Seller within ten (10) days after receipt thereof.

         18. ACCESS TO RECORDS.

                  18.1 On the Effective Date, Seller shall deliver to New
Operator all records necessary to the efficient, continued operation of the
Facility. Nothing herein shall be construed as precluding Seller from removing
from the Facility (a) the originals of the financial records which relate to its
operations at the Facility, (b) the originals of any proprietary materials
related to its overall corporate operations, (c) the originals of all
performance improvement data, (d) originals of employee records for all former
employees not employed by New Operator, (e) copies of retained employee records,
(f) originals of patient records for all former patients no longer residing at
the Facility, and (g) copies of records for all current patients residing at the
facility.

                  18.2 From and after the Effective Date, New Operator shall
allow Seller and its agents and representatives to have reasonable access to
(upon reasonable prior notice and during normal business hours), and to make
copies of, the books and records and supporting material of the Facility
relating to the period prior to and including the Effective Date, to the extent
reasonably necessary to enable Seller to among other things investigate and
defend malpractice, employee or other claims, to file or defend cost reports and
tax returns, to complete/revise, as needed, any patient assessments which may be
required for Seller to seek reimbursement for services rendered prior to the
Effective Date, to verify accounts receivable collections due Seller

                                     Page 15
<PAGE>

and to file exceptions to the Medicare routine cost limits for the cost
reporting periods prior to and including the Effective Date and to enable Seller
to complete, in accordance with Seller's policies and procedures, any and all
post Effective Date accounting, reconciliation and closing procedures,
including, but not limited to, a month end close out of all accounts, including
but not limited to accounts payable and Medicare billing.

                  18.3 Seller shall have the right, at Seller's sole cost and
expense, within five (5) days of the delivery of a request therefor to New
Operator to enter the Facility and remove originals or copies of any such
records delivered to New Operator; provided, however, if directed by Seller in
its request to New Operator, New Operator shall within such five day period,
forward such records to Seller to the address designated by Seller; and
provided, further, that if, for purposes of litigation involving a patient or
employee to whom such record relates, an officer of or counsel for Seller
certifies that an original of such record must be produced in order to comply
with applicable law or the order of a court of competent jurisdiction in
connection with such litigation then the records so delivered or removed shall
be an original. Any record so removed shall promptly be returned to New Operator
following its use, and nothing herein shall be interpreted to prohibit New
Operator from retaining copies of any such documents.

                  18.4 New Operator agrees to maintain such books, records and
other material comprising records of the Facility's operations prior to the
Effective Date that have been received by New Operator from Seller or otherwise,
including, but not limited to, patient records and records of patient funds, to
the extent required by law, but in no event less than seven (7) years, and
shall, at Seller's request, allow Seller a reasonable opportunity to remove such
documents, at Seller's expense, at such time after such record retention period
as may be required by law as New Operator shall decide to dispose of such
documents.

                  18.5 In the event of a further transfer of operations of the
Facility from New Operator to a subsequent operator of the Facility (each a
"SUBSEQUENT OPERATOR"), New Operator shall, as a condition to such transfer,
expressly require in the transfer documentation (each a "SUBSEQUENT OTA") that
(i) the Subsequent Operator comply with the provisions of preceding Sections
18.2, 18.3 and 18.4 (collectively, the "FACILITY RECORDS PROVISIONS") as if
Subsequent Operator were the New Operator hereunder and (ii) each Subsequent OTA
shall incorporate the Facility Records Provisions for the express benefit of
Seller such that Seller shall be an express third party beneficiary to the
Facility Records Provisions of each such Subsequent OTA.

                  18.6 New Operator acknowledges and agrees that the books,
records and other materials described in this Section 18 are unique, that in the
event of a breach by New Operator of its obligations under this Section 18,
Seller would suffer injury for which it would not be fully compensated with
monetary damages and accordingly that in the event of a breach by New Operator
of its obligations under this Section 18, Seller shall be entitled to seek to
enjoin a breach by New Operator of its obligations under this Section 18 and/or
to specifically enforce the obligations of New Operator hereunder.

         19. OPERATING CONTRACTS. Seller acknowledges and agrees that New
Operator has advised Seller that it is not assuming any vendor, service and
other agreements to which Seller is a party relating to the Facility except for
those assumed contracts listed on

                                     Page 16
<PAGE>

SCHEDULE B. New Operator shall advise Seller in writing no later than ten (10)
business days prior to the Effective Date of the contracts it intends to assume
for purposes of preparing the attached SCHEDULE B. Seller shall transfer and
assign to New Operator all of Seller's interest in, and New Operator shall
assume the obligations of Seller that accrue after the Effective Date under and
agree to perform and be bound by all of the terms and conditions and all of the
contracts with third parties for the sale, lease or provision of goods, services
or equipment in connection with the operation of the Facility listed on SCHEDULE
B (collectively, the "ASSUMED LIABILITIES"). Such assignment and assumption
shall be evidenced by an Assignment and Assumption Agreement to be executed by
Seller and New Operator on the Effective Date. Seller will notify all existing
vendors providing goods, services or equipment to the Facility under the
existing contracts not assumed by Purchaser (the "DECLINED CONTRACTS") of the
change in the operation of the Facility evidenced by this Agreement and as to
any vendors under any Declined Contracts the requirement to enter into new
agreements with the New Operator if they desire to continue to provide goods,
services and equipment to the Facility. Seller shall have no liability to New
Operator for any damages incurred by New Operator as a result of its failure or
inability to obtain any consent or waiver necessary to assume any contract. In
the event at the time of the execution of this Agreement, SCHEDULE B is not
attached hereto, Seller and Purchaser agree that the provisions of this Section
19 shall be effective and binding upon Seller and Purchaser provided that
SCHEDULE B is delivered and accepted by Purchaser and Seller and attached hereto
on or before ten (10) days prior to the Effective Date.

         20. PROPRIETARY INFORMATION AND MATERIALS. New Operator acknowledges
and agrees that any and all proprietary and confidential materials and
information located at and used in connection with the operation of the
Facility, including but not limited to, its policy and procedure manuals, shall
be and remain the property of Seller and accordingly that Seller shall remove
all of such materials and information from the Facility on or immediately before
the Effective Date.

         21. MEDICAID/MEDICARE INDEMNIFICATION. 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 Effective Date and is responsible for terminating cost reports that include
periods up to the Effective 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 Effective Date and further
agrees to indemnify New Operator against any loss, cost or expense arising from
such claims.

         22. DISCLAIMERS. New Operator acknowledges that, except as expressly
set forth in this Agreement, neither Seller nor any of its agents, employees,
officers, directors or other representatives (collectively, "SELLER'S
REPRESENTATIVES") has made and no such person makes any representation,
warranty, or covenant whatsoever with respect to any matter, thing or event.
Without limiting the generality of the foregoing, NEW OPERATOR SHALL ACCEPT THE
FACILITY AND ANY AND ALL PERSONAL PROPERTY TRANSFERRED BY SELLER TO NEW OPERATOR
IN CONNECTION WITH THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, THE PERSONAL
PROPERTY, AND THE INVENTORY IN THEIR "AS-IS" "WHERE-IS" CONDITION AS OF THE
EFFECTIVE DATE, WITHOUT ANY REPRESENTATION, WARRANTY OR RECOURSE WHATSOEVER
EXCEPT AS MAY EXPRESSLY BE SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE
FOREGOING, New Operator acknowledges on behalf of itself and

                                     Page 17
<PAGE>

its affiliates, that neither Seller nor any of Seller's Representatives have
made any representation or warranty to New Operator or to any of New Operator's
affiliates, except as specifically set forth in this Agreement. New Operator
agrees that, in entering into this Agreement and all of the documents
contemplated by this Agreement, it has conducted due diligence with respect to
the financial condition of the Facility, any provider agreements, or personal
property transferred in connection with this Agreement and the Facility
Employees and that New Operator has not relied on any express or implied
representation or warranty by Seller not expressly contained in this Agreement.

         23. FURTHER ASSURANCES. Each of the parties hereto agrees to execute
and deliver any and all further agreements, documents or instruments reasonably
necessary to effectuate this Agreement and the transactions referred to herein
or contemplated hereby or reasonably requested by the other party to perfect or
evidence their rights hereunder.

         24. MISCELLANEOUS. It is further understood and agreed as follows:

                  24.1 Severability. If any provisions of this Agreement shall
be held to be void or unenforceable for any reason, the remaining terms and
provisions hereof shall not be affected thereby.

                  24.2 Time. Time is of the essence of this Agreement. Unless
otherwise specified, in computing any period of time described herein, the day
of the act or event after which the designated period of time begins to run is
not to be included and the last day of the period so computed is to be included
at, unless such last day is a Saturday, Sunday or legal holiday for national
banks in the State of Texas, in which event the period shall run until the end
of the next day which is neither a Saturday, Sunday, or legal holiday.

                  24.3 Destruction. In the event the Premises shall be destroyed
or substantially damaged on or before the closing date by fire flood, accident,
civil commotion or any other cause or event beyond the reasonable control of
Seller, this Agreement shall terminate, and neither shall have any further
responsibility to the other.

                  24.4 Binding Effect. This Agreement shall inure to the
benefits of and bind the heirs, successors, and assigns of the parties thereto.

                  24.5 Survival of Representations. The representations and
warranties of the parties herein contained shall survive closing for a period of
two (2) years.

                  24.6 Brokerage Fees. The parties represent to each other that
there are no brokerage fees due or payable to any third party as a result of
this transaction.

                  24.7 Sale Tax. Should any sales tax become due and owing as a
result of this transaction contemplated herein Purchaser shall pay same.

                  24.8 Notices. All notices to be given by either party to this
Agreement to the other party hereto shall be in writing, and shall be (a) given
in person, (b) deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested, or (c) sent by

                                     Page 18
<PAGE>

national overnight courier service or by facsimile transmission with confirmed
receipt, each addressed as follows:

                    (a)  If to New Operator:   Goliad Manor, Inc.
                                               7610 N. Stemmons, Frwy, Suite 300
                                               Dallas, Texas 7524
                                               Attn: Lynne C. Renfro

                    (b)  If to Seller:         c/o Advocat Inc.
                                               277 Mallory Station, Suite 130
                                               Franklin, TN 37067
                                               Attn: President

                    (c)  If to Purchaser:      Salt Creek Holding Company, Inc.
                                               7610 N. Stemmons Frwy., Suite 300
                                               Dallas, Texas 75247

Any such notice shall be deemed delivered when actually received or when
delivery is first refused regardless of the method of delivery used. Any party
to whom notices are to be sent pursuant to this Agreement may from time to time
change its address for further communications thereunder by giving notice in the
manner prescribed herein to all other parties hereto. Although either party
shall have the right to change its address for notice purposes from time to
time, any notice delivered pursuant to this Section 24.8 to the address set
forth in this Section 24.8 or to such other address as may be hereafter
specified in writing in accordance with this Section 24.8 shall be effective
even if actual delivery cannot be made as a result of a change in the address of
the recipient of such notice and the party delivering the notice has not
received actual written notice in accordance with the provisions of this Section
24.8 of the current address to which notices are to be sent.

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

                  24.10 Entire Agreement; Amendment; Waiver. This Agreement,
together with the other agreements referred to herein, constitutes the entire
understanding between the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions and preliminary agreements. This
Agreement may not be modified or amended except in writing signed by the parties
hereto. No waiver of any term, provision or condition of this Agreement in any
one or more instances, shall be deemed to be or be construed as a further or
continuing waiver of any such term, provision or condition of this Agreement. No
failure to act shall be construed as a waiver of any term, provision, condition
or rights granted hereunder.

                  24.11 Assignment. Neither this Agreement nor the rights,
duties or obligations arising hereunder shall be assignable or delegable by
either party hereto.

                                     Page 19
<PAGE>

                  24.12 Captions. The section headings contained herein are for
convenience only and shall not be considered or referred to in resolving
questions of interpretation.

                  24.13 Counterparts. This Agreement may be executed and
delivered via facsimile and in one or more counterparts and all such
counterparts taken together shall constitute a single original Agreement.

                  24.14 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
principles of conflicts of law.

                  24.15 Costs and Attorneys' Fees. In the event of a dispute
between the parties hereto with respect to the interpretation or enforcement of
the terms hereof, the prevailing party shall be entitled to collect from the
other its reasonable costs and attorneys fees, including its costs and fees on
appeal.

                  24.16 Construction. Both parties acknowledge and agree that
they have participated in the drafting and negotiation of this Agreement.
Accordingly, in the event of a dispute between the parties hereto with respect
to the interpretation or enforcement of the terms hereof no provision shall be
construed so as to favor or disfavor either party hereto.

         25. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER AND NEW
OPERATOR. In consideration of Seller entering into this Agreement and as an
inducement to Seller to sell the Premises to Purchaser, Purchaser and New
Operator make the following representations, warranties and covenants to Seller:

                  25.1 Authority; No Conflict. Purchaser and New Operator each
have the legal right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby, and the execution, delivery and
performance of this Agreement have been duly authorized and no other action by
Purchaser or New Operator is requisite to the valid and binding execution,
delivery and performance of this Agreement. There is no statute, regulation,
judicial decree or order, agreement to which Purchaser or New Operator is a
party or, to their actual knowledge, binding on either of them, which would
prevent Purchaser from consummating the transaction contemplated by this
Agreement.

                  25.2 Confidentiality. All information, other than matters of
public record or matters generally known to the public, furnished to, or
obtained through inspection of the Premises by Purchaser, New Operator or their
authorized representatives will be treated by Purchaser, New Operator and their
authorized representatives as confidential, and will not be disclosed to anyone
(except as reasonably required in connection with their evaluation of the
Premises). Without limiting the generality of the foregoing all such information
shall be subject to, and Purchaser and New Operator agree at all times to comply
with, any prohibitions or limitations on disclosure of such information under
applicable laws or regulations, including without limitation, any duly enacted
"Patients Bill of Rights" or any similar legislation, and, as to information
deemed "protected health information", the Standard for Privacy of Individually
Identifiable Health Information adopted pursuant to the Health Insurance
Portability and Accountability Act of 1996. Purchaser and New Operator covenant
and agree to be responsible for any damage, loss, cost or liability (including
attorneys fees) arising out of the breach of the

                                     Page 20
<PAGE>

provisions of this Section 25.2. The confidentiality provisions of this Section
25.2 shall not apply to any disclosures made by Purchaser or New Operator as
required by law, by court order, or in connection with any subpoena served upon
Purchaser or New Operator; provided Purchaser or New Operator shall provide
Seller with written notice before making any such disclosure. The provisions of
this Section 25.2 shall survive the Closing or any sooner termination of this
Agreement.

         26. INDEMNIFICATION.

                  26.1 Seller. Seller does hereby agree to indemnify and to
defend and hold harmless New Operator and Lessor, their respective heirs,
personal representative, successors and assigns, from and against any and all
demands, claims, causes of action, fines, penalties, damages, liabilities, costs
and expenses (including, without limitation, reasonable attorneys' fees)
incurred or suffered by New Operator or Purchaser in connection with or arising
from (i) any default in the performance of any covenant on the part of Seller
contained in this Agreement or any document or instrument delivered by Seller
pursuant to this Agreement to be kept, observed or performed by from and after
the Closing Date and (ii) any claim made by or for any third party against
Purchaser or New Operator based upon the occupancy or operation of the Facility
by Seller prior to the Closing Date, including without limitation any claims,
liabilities, penalties and sanctions for overpayment made to Seller under any
Medicaid or other third party payor contract arising from services provided by
Seller prior to the Closing Date, or any claims for personal injury (including
death) resulting from the acts, omissions or negligence of Seller or the agents
or employees of Seller with respect to the Facility prior to the Closing Date;
provided, however, that nothing herein shall be construed as imposing any
liability on Seller to indemnify, defend or hold harmless Purchaser or New
Operator with respect to Purchaser's or New Operator's own acts or omissions
from and after the Closing Date.

                  26.2 Purchaser and New Operator. Purchaser and New Operator
hereby agree, jointly and severally, to indemnify and to defend and hold
harmless Seller, its successors and assigns, from and against any and all
demands, claims, causes of action, fines, penalties, damages, liabilities, costs
and expenses (including, without limitation, reasonable attorneys' fees)
incurred or suffered by Seller in connection with or arising from (i) any
default in the performance of any covenant on the part of Purchaser or New
Operator contained in this Agreement or any document or instrument delivered by
either Purchaser or New Operator pursuant to this Agreement to be kept, observed
or performed by Purchaser or New Operator from and after the Closing Date and
(ii) any claim made by or for any third party against Seller based upon the
occupancy or operation of the Facility by either Purchaser or New Operator from
and after the Closing Date, including but not limited to any claims,
liabilities, penalties and sanctions for overpayments made to New Operator under
any Medicaid or other third party payor contact arising from services provided
by New Operator from and after the Closing Date, or any claims for personal
injury (including death) resulting from the acts, omissions or negligence of
Purchaser or New Operator or the agents or employees of Purchaser or New
Operator with respect to the Facility from and after the Closing Date; provided,
however, that nothing herein shall be construed as imposing any liability on
Purchaser or New Operator to indemnify, defend or hold harmless Seller with
respect to Seller's own acts or omissions from and after the Closing Date.

                                     Page 21
<PAGE>

                  26.3 Survival. The indemnification provisions of this Section
26 shall survive the closing of the transactions contemplated herein.

                  26.4 Counterparts; Facsimile Signatures. This Agreement may be
executed in several counterparts, each of which shall be deemed an original, and
all of such counterparts together shall constitute one and the same instrument.
Signatures to this Agreement may be transmitted by facsimile or telecopy and
such signatures shall be valid and effective to bind the party so signing, it
being expressly agreed that each party to this Agreement shall be bound by its
own facsimile or telecopied signature and shall accept the facsimile or
telecopied signature of the other party to this Agreement.

         IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth above.

SELLER:                              DIVERSICARE LEASING CORP.

                                     By:  /s/ William R. Council III
                                          --------------------------------------
                                     Its: President
                                          --------------------------------------

PURCHASER:                           SALT CREEK HOLDING COMPANY, INC.

                                     By:  /s/ Gary R. Trebert
                                          --------------------------------------
                                     Its: CEO
                                          --------------------------------------

NEW OPERATOR:                        GOLIAD MANOR, INC.

                                     By:  /s/ Jeffrey Head
                                          --------------------------------------
                                     Its:  CFO
                                           -------------------------------------

                                     Page 22

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