ASSET PURCHASE AGREEMENT

PHJW DRAFT 9.25.2006

 

 

ASSET PURCHASE AGREEMENT

By and Between

PACER HEALTH MANAGEMENT CORPORATION OF GEORGIA

AS SELLER,

HEALTH SYSTEMS REAL ESTATE, INC.

AS PURCHASER

And

GREENE COUNTY NURSING CENTER, LLC

AS NEW OPERATOR

 

Dated as of

September ___, 2006

 

LEGAL_US_E # 71750244.3

 

TABLE OF CONTENTS

 

Page

 

 

ARTICLE 1

DEFINITIONS

2

1.1

Definitions

2

1.2

Interpretation

4

ARTICLE 2

PURCHASE AND SALE OF ASSETS

5

2.1

Purchase of Assets

5

2.2

Description of Assets

5

2.3

Information Systems

7

2.4

Certain Consents

7

2.5

Excluded Assets

7

2.6

General Limitation on Assumed Liabilities

9

2.7

Assumed Liabilities

9

ARTICLE 3

PURCHASE PRICE AND CLOSING

10

3.1

Purchase Price

10

3.2

Allocation of Purchase Price

10

3.3

The Closing

10

3.4

Further Assurances

11

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER

11

4.1

Organization

11

4.2

Qualification

11

4.3

Authority; Execution and Delivery

11

4.4

Title to Assets

12

4.5

Miscellaneous Representations Relating to Real Property

13

4.6

Environmental Matters

13

4.7

Litigation and Absence of Undisclosed Liabilities

15

4.8

Permits: Certificate of Need Exemption

15

4.9

Taxes

16

4.10

Employees; Employee Benefit Plan

16

4.11

Labor and Employment Matters

17

4.12

Insurance

17

4.13

Brokers and Finders

18

4.14

Related Party Transactions

18

4.15

Shared Services

18

4.16

Governmental Benefit Programs and other Third Party Payors

18

4.17

Nursing Home Staff

19

4.18

Motor Vehicles

19

4.19

Resident Trust Funds

19

4.20

Correctness of Representations

19

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF PURCHASER AND NEW OPERATOR

20

5.1

Organization and Qualification

20

5.2

Authority

20

5.3

Litigation

21

5.4

Brokers and Finders

21

5.5

Correctness of Representations

21

ARTICLE 6

ACTIONS PRIOR TO CLOSING

21

6.1

Covenants of the Parties Relating to Actions Prior to Closing

21

ARTICLE 7

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER

22

7.1

Accuracy of Representations and Warranties

22

7.2

Compliance

22

7.3

Failure to Satisfy Conditions

22

7.4

Litigation

22

7.5

Certified Resolutions

23

ARTICLE 8

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER

23

8.1

Accuracy of Representations and Warranties

23

8.2

Material Adverse Change Prior to Closing

23

8.3

Compliance

23

8.4

Consents and Waivers

23

8.5

Instruments of Transfer

23

8.6

Litigation

23

8.7

Title Insurance

24

8.8

Condition of Assets

24

8.9

Certificate of Need; Other Filings

24

8.10

Failure to Satisfy Conditions

24

8.11

Certified Resolutions

24

8.12

Due Diligence

25

ARTICLE 9

ADDITIONAL COVENANTS; POST CLOSING MATTERS

25

9.1

Maintenance of Books and Records

25

9.2

Employees

25

9.3

Post-closing Cost Reports and Terminating Cost Report

26

9.4

Existing Residents

26

9.5

Operational Transition

26

9.6

Purchaser’s Remittance of Funds

26

9.7

Release of Old Liens

26

ARTICLE 10

TERMINATION

26

10.1

Termination

26

10.2

Effect of Termination

27

ARTICLE 11

CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS

27

11.1

Confidentiality

27

11.2

Public Announcements

28

ARTICLE 12

DISPUTE RESOLUTION

28

ARTICLE 13

INDEMNIFICATION

28

13.1

Survival, Right to Indemnification

28

13.2

Indemnification by Seller

28

13.3

Indemnification by Purchaser

29

13.4

Procedure for Indemnification

29

13.5

Subrogation

31

13.6

Limitations on Indemnification

31

13.7

Indemnification as Exclusive Remedy

32

ARTICLE 14

GENERAL PROVISIONS

32

14.1

Bulk Sales Law Waiver

32

14.2

Fees and Expenses

32

14.3

Notice

33

14.4

Assignment

34

14.5

Headings and Counterparts

34

14.6

Integration of Agreement

34

14.7

Governing Law

34

14.8

Partial Invalidity

34

14.9

Access to Records

34

14.10

Third Party Beneficiaries

35

14.11

Attorneys’ Fees

35

14.12

Disposition of the Real Property

35

 

 

 

PHJW DRAFT 9.25.2006

 

 

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into this ___ day of September, 2006, by and between HEALTH SYSTEMS REAL ESTATE, INC. , a Georgia nonprofit corporation (“ Purchaser ”), GREENE COUNTY NURSING CENTER, LLC, a Georgia limited liability company (“ New Operator ”), and PACER HEALTH MANAGEMENT CORPORATION OF GEORGIA , a Georgia corporation (“ Seller ”).

STATEMENT OF BACKGROUND INFORMATION

1.

Seller owns and operates a 44-licensed bed general acute care hospital known as the Minnie G. Boswell Memorial Hospital (the “Hospital” ) and a 29-licensed bed skilled nursing facility known as the Boswell Parker Nursing Center (the “Nursing Home” ), both of which are located at 1201 Siloam Road, Greensboro, Greene County, Georgia 30642.

2.

Seller desires to sell and transfer to Purchaser certain of the Assets which are a part of, relate to or are used in the operation of the Hospital and all of the Assets which are a part of, relate to or are used in the operation of the Nursing Home.

3.

Seller’s decision to sell the Assets to Purchaser rather than to another potential purchaser is based on Purchaser’s representation that it will only acquire the real property used in the operation of the Hospital and, simultaneous with such purchase, will triple net lease such real property back to Seller so that Seller can continue to operate the Emergency Department and the Hospital, which Seller is obligated to continue operating pursuant to that certain Asset Purchase Agreement dated September 1, 2005, by and between Seller and the Greene County Hospital Authority (the “2005 Asset Purchase Agreement” ).

4.

Purchaser is a member of a nonprofit integrated health system administered by Community Health Systems, Inc., a Georgia nonprofit corporation which health system also includes Health Scholarships, Inc., a Georgia nonprofit corporation (“ HSI ”), which leases and operates skilled nursing facilities through a number of single member Georgia limited liability companies, each of which leases a single skilled nursing facility.

5.

Purchaser is in the business of owning and leasing nursing homes and its Affiliates are in the business of operating nursing homes and Purchaser desires to purchase and acquire from Seller all of the Assets which are a part of, relate to or are used in the operation of the Nursing Home.

6.

HSI has formed New Operator to lease the Nursing Home from the Purchaser and to operate the Nursing Home after the Closing.

7.

Purchaser, the New Operator and Seller desire to serve the health needs of the residents of Greene County, Georgia, and the communities served by the Hospital and the Nursing Home, and in the furtherance thereof, the parties have determined that the needs of the community will be promoted by Purchaser’s acquisition of the real property and all of the Assets which are a part of, relate to or are used in the operation of the Nursing Home on the terms set out herein.

STATEMENT OF AGREEMENT

NOW, THEREFORE, for and in consideration of the foregoing recitals (which are hereby made a part of this Agreement), the mutual representations, warranties, covenants, and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

Definitions

1.1

Definitions .  For purposes of this Agreement, in addition to other terms defined in this Agreement, the following terms shall have the meanings ascribed to such terms below:

“ Affiliate ” means, with respect to any Person, any other Person which Controls, is Controlled by or is under common Control with the first Person.

“Business of the Facilities” shall mean, collectively, the Hospital Business and the Nursing Home Business.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended, or any successor law; and regulations issued by the Internal Revenue Service pursuant to the Internal Revenue Code or any successor law.

“ Controls ” means, as applied to any Person, the possession, directly or indirectly, of the power to direct the management and policies of that Person, whether through ownership, voting control, by contract or otherwise.

“ Damages ” means, without duplication, all claims (including, but not limited to, negligence, strict or absolute liability, liability in tort and liabilities arising out of violation of laws or regulatory requirements of any kind), demands, actions, suits, damages, costs and expenses (including, without duplication, reasonable fees and disbursements of counsel), liabilities, liens, losses, fines, Taxes, penalties, interest charges and administrative, judicial and arbitration awards, judgments, settlement payments and deficiencies or other charges.

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor law; and regulations and rules issued pursuant to that act or any successor law.

“Facilities” shall mean, collectively, the Hospital and the Nursing Home.

“ Governmental Authority ” shall mean any federal, state, local, municipal, or other government or governmental or quasi-governmental authority of any nature, including any governmental agency, bureau, board, commission, branch, department, official, entity, or other instrumentality, and any court or other tribunal.

“Healthcare Legal Requirements” shall mean all federal, state and local laws, rules, regulations, interpretations, guidelines, judgments, injunctions, awards (including awards of arbitrators), ordinances and decrees relating to health care licenses, health care permits, Third Party Payor Programs, reporting and disclosure, the handling of medical waste, handling and dispensing of pharmaceutical products, fraud and abuse, anti-kickback, anti-referral, false claims, medical records and patient privacy, as now in effect, including, but not limited to, Titles XVIII and XIX of the Social Security Act, Health Care Fraud Act (18 U.S.C. § 1347), the Anti-Kickback Act of 1986 (41 U.S.C. § 51, et seq. ), the Ethics in Patient Referrals Act of 1989, as amended (Stark Law) (42 U.S.C. § 1395 nn), the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), the Federal Health Care Programs Anti-Kickback statute (42 U.S.C. § 1320a-7a(b)), the Stark Law (42 U.S.C. § 1395nn), the civil False Claims Act (31 U.S.C. §§ 3729, et seq. ), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d, et seq. ), the exclusion laws (42 U.S.C. § 1320a-7) and comparable state laws.

“ Hospital Business ” shall mean the business of providing inpatient and outpatient hospital services, skilled nursing services, and related medical, nursing, and healthcare services, as well as other operations of Seller conducted at or through the Hospital.

“Knowledge” shall mean, in the case of the Seller, the actual knowledge, as of the date of this Agreement, of the individuals listed on Schedule 1 .

“ Liens ” shall mean any and all liens, claims, charges, judgments, deeds to secure debt, security interests, and encumbrances of any kind or nature whatsoever.

“Material Adverse Effect” shall mean a material adverse effect upon (i) the physical condition of the Assets, or (ii) the ownership of and title to the Assets, or (iii) the present or future financial condition or results of operations of the Nursing Home Business.

“Medicaid” shall mean the medical assistance program established by Title XIX of the Social Security Act (42 U.S.C. §§ 1396, et seq. ) and any statute succeeding thereto.

“Medicare” shall mean the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§ 1395, et seq. ) and any statute succeeding thereto.

“Nursing Home Business” shall mean the business of providing skilled nursing services and related medical, nursing and healthcare services, as well as other operations of Seller conducted at or through the Nursing Home.

“Person” shall mean any individual, corporation (including any nonprofit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Authority.

“Provider Agreements” shall mean all participation, provider and reimbursement agreements for the benefit of Seller in connection with the operation of the Facilities relating to any right to payment or other claim arising out of or in connection with Seller’s participation in any Third Party Payor Program, whether such Provider Agreements are express, in writing or are evidenced by tie-in notices or other evidence.

“Reimbursement Source Obligations” shall mean (a) Medicaid, Medicare or Third Party Payor Program overpayments, recoupments, denials of payment or any other financial obligations arising from any adjustments or reductions specific to Seller in Medicaid, Medicare or Third Party Payor Program reimbursement; or (b) all other monetary obligations or liabilities of any kind or nature whatsoever that have arisen or may arise in any manner from Seller’s participation in Third Party Payor Programs.

“Schedule” shall mean those schedules annexed hereto and referenced herein which are incorporated in their entirety by reference in this Agreement.

“Tax Returns” shall mean any return, report, claim for refund, estimate, information return or statement or other similar document relating to or required to be filed with any Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Taxes” shall mean all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind and all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Authority with respect thereto.

“Third Party Payor Programs” shall mean all third party payor programs in which the Facilities have or currently participate in, including, without limitation, Medicare, Medicaid, CHAMPUS, TriCare, Blue Cross and/or Blue Shield, managed care plans, other private insurance programs and employee assistance programs.

“TriCare” shall mean the program of medical benefits concerning retirees and dependents of members or former members of a uniformed service provided, financed and supervised by the United States Department of Defense and established by 10 U.S.C. § 1071, et seq. , and formerly known as the Civilian Health and Medical Program of the Uniformed Services or CHAMPUS.

1.2

Interpretation .

(a)

When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.

(b)

The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

ARTICLE 2

Purchase and Sale of Assets

2.1

Purchase of Assets .  On and subject to the terms and conditions of this Agreement, at the Closing, Purchaser shall purchase and Seller shall sell, assign, transfer, and convey to Purchaser, or to New Operator as directed by Purchaser, the Assets as described in Section 2.2 hereof, free and clear of any and all Liens other than Permitted Exceptions.

2.2

Description of Assets .  As used herein, the term “ Assets ” means the following assets, properties and rights owned by Seller and used in the conduct of, or generated by or constituting, the Business of the Facilities, except for the “ Excluded Assets ” set forth in Section 2.5 hereof:

(a)

Good, marketable and indefeasible fee simple title to the real property on which the Facilities are located, as more particularly described in Schedule 2.2(a) hereto, including without limitation all easements appurtenant thereto and buildings and improvements thereon, plants, fixed assets, buildings, structures, fixtures (including fixed machinery and fixed equipment), mechanical systems, and parking areas located thereon and all rights, easements and appurtenances thereto and all air, mineral or other rights related thereto (collectively, the “ Real Property ”). The Real Property shall be conveyed to Purchaser by Seller in “as is” condition by a warranty deed, subject to no Liens, easements or restrictions except for the “ Permitted Exceptions ” which are listed in Schedule 2.2(a) ;

(b)

All tangible business and personal property; medical equipment, together with related parts, accessories and the like; and all other equipment, machinery, furniture, furnishings, fixtures, telephones and telephone systems, computer equipment (including hardware and software), copiers, facsimile machines, tools, instruments and other similar tangible personal property, which are owned by Seller and used or maintained or operated by Seller in connection with the Nursing Home Business, wherever located;

(c)

To the extent transferable under applicable laws and regulations, all certificates, certificates of need (or exemptions or waivers therefrom issued by the agency or other Governmental Authority), licenses, permits, accreditations, waivers, and governmental authorizations which are owned and used by Seller to operate the Nursing Home or otherwise use the Assets and to conduct the Nursing Home Business (the “ Nursing Home Permits and Licenses ”);

(d)

All financial, accounting and Tax-related books and records relating to the Assets and the operation of the Nursing Home, including computerized and other data and databases, files, papers, correspondence, purchase orders, warranties, resident and vendor lists, telephone numbers (including mobile and cellular telephone numbers and pager numbers), telecopier numbers, personnel records, manuals related to the Assets, resident medical records and other resident information records relating to Third Party Payor Programs and contracts, documents pertaining to financing of the Nursing Home or the Assets, and all other books, records, manuals, files and papers relating to the Assets and the Nursing Home Business;

(e)

All intangible assets associated with the Assets and the Nursing Home Business, including Seller’s rights, title and interest, if any, to trademarks, trade names, trade styles, service marks and copyrights, all trade secrets or processes, all confidential or proprietary information, and all other items of intellectual property, all to the extent either owned or licensed by Seller listed on Schedule 2.2(e) ; and rights, judgments, causes of action, claims and demands of Seller, whether or not liquidated, related to the Assets including, without limitation, rights or causes in action under express or implied warranties or product guarantees arising under or relating to the Assets, and goodwill of and associated with the Assets and the Nursing Home Business;

(f)

All rights of Seller, including deposits and prepayments, under the leases listed in Schedule 2.2(f) (individually an “ Assumed Lease ” and, collectively, the “ Assumed Leases ”);

(g)

The provider numbers, Provider Agreements and all rights under the contracts (including contracts for purchase or lease of real property, rights of first refusal, and options) attributable to the Nursing Home Business which are listed in Schedule 2.2(g) (individually an “Assumed Contract” and, collectively, the “Assumed Contracts” );

(h)

Any and all claims of Seller against third parties relating to the Assets, or the Nursing Home Business, known or unknown, contingent or otherwise;

(i)

The motor vehicles of Seller used in connection with the Nursing Home Business and that are listed in Schedule 2.2(i) ; and

(j)

Refunds, credits and rebates with respect to purchases made by Seller in connection with the Nursing Home under any of Seller’s purchasing programs or group purchasing contracts.

2.3

Information Systems .  The parties intend that Seller transfer to Purchaser to the extent practicable the existing information processing capabilities, including hardware and software used in connection with the Nursing Home Business. Subject to receipt of any necessary third party consents as described below, Seller agrees to assign and transfer information systems and associated licenses, maintenance and support agreements to Purchaser. To the extent that Seller’s rights to any of the affected information systems or associated licenses or contracts, or the use or benefit thereof, may not be assigned or transferred without the consent of another Person, Seller and Purchaser shall cooperate with each other in attempting to obtain such consents as are necessary to authorize the actions contemplated by this Agreement.

2.4

Certain Consents .   Schedule 2.4 lists the consents that Seller must obtain prior to Closing (the “ Required Consents ”). To the extent that Seller’s rights to any of the Assets to be assigned and transferred to Purchaser hereunder may not be assigned or transferred without the consent of another person or entity, which consent is not required to be obtained prior to Closing, or may not be assigned or transferred under applicable laws and regulations, this Agreement shall not constitute an agreement to assign or transfer the same if an attempted or actual assignment or transfer would constitute a breach thereof or be unlawful, and Seller, to the maximum extent permitted by law and any terms of or limitations relating to such Asset, shall use its best efforts to obtain for Purchaser the benefits thereunder, and shall cooperate with Purchaser in any reasonable arrangement designed to provide such benefits to Purchaser.

2.5

Excluded Assets .  Notwithstanding Section 2.2, the following assets shall be excluded from the Assets described in Section 2.2 and shall not be sold or transferred to Purchaser by Seller pursuant to this Agreement (the “Excluded Assets” ):

(a)

Organizational documents of Seller;

(b)

Ownership and other rights with respect to each Company Plan (as defined in Section 4.10) sponsored or maintained by Seller or its Affiliates with respect to the Business of the Facilities;

(c)

Any insurance policy insuring Seller with respect to the Hospital;

(d)

All accounts receivable, receipts, cash, bank accounts, negotiable securities, certificates, deposits and other cash equivalents or receivables (including receivables from any Third Party Payor Programs) of the Facilities;

(e)

Working capital, including: (i) prepaid items and prepaid expenses to the operations of the Facilities (including, without limitation, rents, subscriptions and the like); (ii) all inventories of supplies, purchased goods and other disposables or consumables used or maintained in connection with or located in the Facilities on the Closing Date, including, without limitation, food, cleaning materials, disposables, linens, consumables, office supplies, drugs and medical supplies;

(f)

Refunds, credits and rebates with respect to purchases made by Seller in connection with the Hospital under any of the Seller’s purchasing programs or group purchasing contracts;

(g)

Claims for refunds or refunds of Taxes and other charges imposed by any Governmental Authority;

(h)

All refunds or monies from settlement resulting from audits of the Facilities’ cost reports and from any other Third Party Payor Programs for the time period prior to the Effective Time;

(i)

All insurance proceeds (including deductibles, co-payments or self-insured requirements) arising in connection with damage to Assets;

(j)

Any funded depreciation;

(k)

All tangible business and personal property; medical equipment, together with related parts, accessories and the like; and all other equipment, machinery, furniture, furnishings, fixtures, telephones and telephone systems, computer equipment (including hardware and software), copiers, facsimile machines, tools, instruments and other similar tangible personal property, which are owned by Seller and used or maintained or operated by Seller in connection with the Hospital Business, wherever located;

(l)

all certificates, certificates of need (or exemptions or waivers therefrom issued by the agency or other Governmental Authority), licenses, permits, accreditations, waivers, and governmental authorizations which are owned and used by Seller to operate the Hospital and to conduct the Hospital Business;

(m)

All financial, accounting and Tax-related books and records relating to operation of the Hospital, including computerized and other data and databases, files, papers, correspondence, purchase orders, warranties, patient and vendor lists, telephone numbers (including mobile and cellular telephone numbers and pager numbers), telecopier numbers, personnel, employment and benefit records that relate to any of the former and current employees of the Hospital, manuals, patient medical records and other patient information records relating to Third Party Payor Programs and contracts, documents pertaining to financing of the Hospital, and all other books, records, manuals, files and papers relating to the Hospital Business;

(n)

All intangible assets associated with the Hospital and the Hospital Business, including Seller’s rights, title and interest, if any, to trademarks, trade names, trade styles, service marks and copyrights, all trade secrets or processes, all confidential or proprietary information, and all other items of intellectual property, all to the extent either owned or licensed by Seller; and rights, judgments, causes of action, claims and demands of Seller, whether or not liquidated, related to the Hospital including, without limitation, goodwill of and associated with the Hospital and the Hospital Business;

(o)

All provider numbers, Provider Agreements and contracts, agreements and contractual arrangements and rights therein, whether in writing or otherwise, related to the Hospital Business, including rights of third party licensors to licensed software;

(p)

Any and all claims of Seller against third parties relating to the Hospital, or the Hospital Business, known or unknown, contingent or otherwise;

(q)

The motor vehicles of Seller used in connection with the Hospital Business; and

(r)

The rent to be received from the medical office building (house) located on the Real Property, sold to Purchaser hereunder.

2.6

General Limitation on Assumed Liabilities .  Except for Permitted Exceptions and the Assumed Liabilities, Seller shall transfer the Assets to Purchaser and/or the New Operator free and clear of Liens.  Except as provided in Section 2.7 or as otherwise expressly provided in this Agreement, Purchaser shall not, by virtue of its purchase of the Assets, assume or become responsible for any liabilities or obligations of the Seller or any other Person with respect to Seller’s operation of the Facilities or the Business of the Facilities, including, without limitation, any liabilities or obligations of Seller under the 2005 Asset Purchase Agreement.  For purposes of this Section 2.6, the phrase “liabilities and obligations” shall include, without limitation, any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, expense, cost, obligation or responsibility, fixed or unfixed, known or unknown, asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured or unsecured.

2.7

Assumed Liabilities .  On the Closing Date, the New Operator shall only assume, perform and otherwise pay, satisfy and discharge the following assumed liabilities with respect to the Assets and the Nursing Home Business (the “Assumed Liabilities” ):

(a)

from and after the Effective Time, all payment obligations for the Hired Employees for the Nursing Home described in Section 9.2 hereof, including vacation, sick leave and PTO as set forth on Schedule 2.7 ; provided, however that New Operator shall only assume any such payment obligations up to an aggregate maximum of [$_____________], which amount shall be treated as a credit against the Purchase Price;

(b)

all obligations of Seller under each Assumed Contract and Assumed Lease that accrue and relate to the Assets or the operation of the Nursing Home by the New Operator from and after the Effective Time;

(c)

all obligations of Seller accruing from and after the Effective Time under the Nursing Home Permits and Licenses, provided that the rights thereunder have been duly and effectively assigned to Purchaser; and

(d)

any liabilities set forth on Schedule 2.7 .

ARTICLE 3

Purchase Price and Closing

3.1

Purchase Price .  On the Closing Date, provided that all conditions precedent to Closing as set out in this Agreement are met or are waived by the parties, and subject to the credit amount set forth in Section 2.7(a) hereof, the total purchase price due to Seller for the Assets shall be Two Million Six Hundred Thousand Dollars ($2,600,000) (the “ Purchase Price ”), which shall be payable by Purchaser to Seller on the Closing Date in immediately available funds, either by official bank check or wire transfer to an account designated by Seller in writing to Purchaser.

3.2

Allocation of Purchase Price .  The Purchase Price shall be allocated among the Assets as set forth in Schedule 3.2 , which has been prepared in compliance with Section 1060 of the Code.  Each of the parties agrees and covenants to report this transaction and, if applicable, file IRS Form 8594 with the Internal Revenue Service in accordance with this allocation and not to take a position before any Governmental Authority in any way inconsistent with the terms this allocation.

3.3

The Closing .  The closing of the purchase and sale of the Assets pursuant to this Agreement (the “ Closing ”) shall be held at 10:00 a.m. on September 28, 2006, or at such other time and date as is mutually acceptable to the parties (the “ Closing Date ”), at a mutually acceptable location, subject to the satisfaction or appropriate waiver of all conditions precedent as set forth in this Agreement.  The Closing shall be effective as of 12:01 a.m. on Sunday, October 1, 2006 or such other date and time as the parties may mutually designate in writing (the “Effective Time” ).  The Closing Date may be extended by the mutual agreement of Seller and Purchaser.  At the Closing, the parties shall deliver or cause to be delivered, or perform the following:

(a)

Seller shall convey or cause to be conveyed to Purchaser by limited warranty deed good and marketable fee simple title to the Real Property, in “as is” condition, without warranty of title except as to matters arising by, through or under Seller, but with full substitution and subrogation in and to all the rights and actions of warranty which Seller has or may have against all preceding owners, subject only to the Permitted Exceptions and the Assumed Liabilities.  Further, Seller shall deliver to Purchaser: (i) a Bill of Sale pursuant to which Seller sells, transfers, conveys, assigns and delivers to Purchaser or New Operator, as applicable, all of Seller’s right, title and interest in and to the Assets, in “as is” condition, together with all other instruments necessary or appropriate to convey good and marketable fee simple title to the Assets, free and clear of all Liens except the Permitted Exceptions and the Assumed Liabilities; (ii) the Release of Liens Agreement from Cornell Capital Partners, LP described in Section 4.4(a) and 4.4(c) hereof; (iii) possession of the Assets to the Purchaser or New Operator, as applicable; (iv) an Assignment and Assumption Agreement pursuant to which the New Operator agrees to assume the Assumed Liabilities, together with written consents and agreements to the assignment of the Assumed Leases and the Assumed Contracts, and such other consents, waivers, releases and other agreements pertaining to the Assets as required in this Agreement; (v) copies of all the Required Consents; (vi) copies of all personnel, employment and benefit records that relate to any former or current employees of the Nursing Home shall be delivered to New Operator; and (vii) such other certificates, instruments, affidavits and other documents as Purchaser, the New Operator or its counsel may reasonably request.

(b)

Seller shall pay any applicable Georgia property transfer tax.

(c)

Purchaser shall deliver (or cause to be delivered) to Seller: (i) the Purchase Price as set forth in Section 3.1; and (ii) such other documents as Seller or its counsel may reasonably request.

(d)

Any ad valorem, personal property, and excise taxes payable under Georgia law with respect to the Assets, which relate to the 2006 tax year, shall be pro-rated between Purchaser and Seller, and when actual information is available, the final adjustments and pro-rations shall be determined and settlement shall be made between the parties.

(e)

Seller, Purchaser and New Operator shall each bear their own fees and expenses for legal, financial, accounting and consulting, as well as any other fees and expenses incurred by such party, whether or not the Closing occurs.

3.4

Further Assurances .  From and after the Closing Date, Seller agrees, without further consideration, to execute and deliver promptly to Purchaser and New Operator such further consents, waivers, assignments, and other documents and instruments, and to take all such further actions as Purchaser may from time to time reasonably request with respect to the consummation in full of the transactions provided for herein. The foregoing covenants of the Seller shall survive the Closing.

ARTICLE 4

Representations and Warranties of Seller

Seller hereby represents and warrants to Purchaser the following:

4.1

Organization .  Seller is a corporation duly organized, validly existing, in good standing, and is qualified to do business in the State of Georgia.

4.2

Qualification .  Seller has the power and authority to own and operate the Nursing Home Business, to offer all of the services offered by the Nursing Home as of the date of execution of this Agreement, and to own, lease and otherwise use the Assets in the Business of the Facilities.

4.3

Authority; Execution and Delivery .

(a)

Seller has the power and authority to enter into this Agreement and all other agreements contemplated herein, including without limitation, those documents described in Sections 3.3 and 3.4 (collectively, the “ Closing Documents ”) to which it is a party and to consummate the transactions contemplated thereby. The execution, delivery, and performance of the Closing Documents by Seller has been authorized and approved, or will be authorized and approved as of the Closing, by all necessary action on the part of Seller and each of the Closing Documents executed by Seller is, or will be upon Seller’s execution and delivery thereof, the legal, valid, and binding obligation of Seller enforceable against Seller in accordance with its terms, except as enforceability may be limited by applicable equitable principles or by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, and to the exercise of judicial discretion in accordance with general equitable principles.

(b)

Neither the execution nor delivery of this Agreement or any of the other Closing Documents executed by Seller, nor the consummation or performance by Seller of any of the transactions contemplated hereby will, directly or indirectly (with or without notice or lapse of time or both):

(i)

violate the articles of incorporation, bylaws or other governing document or agreement of Seller;

(ii)

violate, contravene or conflict with, any federal, state, local, municipal or other administrative constitution, law, statute, ordinance, regulation, principle of common law, or policy, or any award, decision, injunction, judgment, order, subpoena or verdict entered, made or rendered by any court, administrative agency, department, official, or other Governmental Authority, to which Seller is subject or by which the Nursing Home or any of the Assets may be bound;

(iii)

contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Authority or other Person the right to challenge, revoke, withdraw, suspend, cancel, terminate, or modify, any permit, license or approval that is held by Seller relating to operation of, or the Nursing Home Business or to any of the Assets;

(iv)

conflict with, result in a breach of, or constitute a default under any indenture, mortgage, lease, agreement, or other instrument to which Seller is a party or by which Seller, the Nursing Home or any of the Assets may be bound;

(v)

result in the imposition or creation of any Lien upon any of the Assets; or

(vi)

violate any material term or provision of, or result in a default, give rise to any right of termination, cancellation or acceleration, or cause the loss of any right or option, under any of the Assumed Contracts.

4.4

Title to Assets .  Except as described in Section 3.3(a) hereof:

(a)

Seller has, and on the Closing Date will have, good and marketable title to the Assets, free and clear of any and all Liens, except for the Permitted Exceptions and the Assumed Liabilities; provided , further , at or prior to Closing, Seller shall have delivered an agreement to Purchaser whereby Cornell Capital Partners, LP shall have agreed to release any and all liens it may have on the Assets;

(b)

the Real Property is accurately described in Schedule 2.2(a) and includes all real estate owned by Seller;

(c)

Seller is the sole and exclusive legal and equitable owner of all right, title and interest in and has good and marketable title in fee simple, and is in possession of the Real Property, free and clear of any and all Liens; provided , further , at or prior to Closing, Seller shall have delivered an agreement to Purchaser whereby Cornell Capital Partners, LP shall have agreed to release any and all liens it may have on the Real Property.

4.5

Miscellaneous Representations Relating to Real Property .

(a)

To Seller’s Knowledge, no part of the Real Property is currently subject to condemnation proceedings, and no condemnation or taking is threatened or known by Seller to be contemplated.

(b)

There are no parties (other than Seller) in possession of any parcel of the Real Property, other than tenants under the Leases, full and complete copies of which have been provided by Seller to Purchaser prior to Closing.

(c)

To Seller’s Knowledge, all material components of all of the Real Property: (i) are free from material structural (including electrical and mechanical) defects; and (ii) are in good working order sufficient for maintaining the operations of the Facilities substantially at their current levels.  There are no physical conditions of the Real Property and improvements that violate the Healthcare Legal Requirements associated with operation of the Facilities or which Seller is aware that could have a material adverse effect on Purchaser or New Operator’s operation of the Nursing Home in the manner the Nursing Home is currently being used and operated.

(d)

Each of the Facilities has all easements and related rights necessary to continue operation of the Business of the Facilities as currently conducted.

4.6

Environmental Matters .

(a)

As used in this Agreement, the term “ Environmental Law(s) ” means any federal, state or local law, statute, ordinance, code, rule, regulation, license, authorization, decision, order, injunction, decree, or rule of common law, and any judicial interpretation of any of the foregoing, which pertains to (i) the protection of the environment or the public welfare from actual or potential exposure (or the effects of exposure) to any actual or potential release, discharge, disposal or emission (whether past or present) of any Hazardous Materials (including but not limited to ground, air, water or noise pollution or contamination, and underground or above-ground storage tanks) or (ii) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any Hazardous Materials and shall include without limitation: the Solid Waste Disposal Act, 42 U.S.C. §6901 et seq .; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §9601 et seq . (“ CERCLA ”), as amended by the Superfund Amendments and Reauthorization Act of 1986 (“ SARA ”); the Hazardous Materials Transportation Act, 49 U.S.C. §1801 et seq .; the Federal Water Pollution Control Act, 33 U.S.C. §1251 et seq .; the Clean Air Act, 42 U.S.C. §7401 et seq .; the Toxic Substances Control Act, 15 U.S.C. §2601 et seq .; the Safe Drinking Water Act, 42 U.S.C. §300f et seq . .and any other state or federal environmental statutes, and all rules, regulations, orders and decrees now promulgated under any of the foregoing.  The term “ Hazardous Material(s) ” means: (i) any petroleum or petroleum products, petroleum constituents, petroleum-derived substances or wastes, flammable materials, explosives, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs); and (ii) any other chemical or other material, constituent or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority under any Environmental Law, or which could give rise to liability under any Environmental Law.  “ Release ” means any release, spill, escaping, emission, leaking, pouring, dumping, seepage, filtration, pumping, disposal, discharge, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, groundwater, wetlands, land or subsurface strata.  “ On ” or “ In ” when used with respect to the Real Property or any property adjacent to the Real Property, means “on, in, under, upon, above or about.”

(b)

All operations or activities upon, or any use