ASSET PURCHASE AGREEMENT

Exhibit 10.36

ASSET PURCHASE AGREEMENT

VILLA HOMES WEST, INC., D/B/A WOODSIDEMANAGEMENT GROUP,
RIDGEWOOD MANOR, LLC,
PARKVIEW REAL ESTATE, LTD.,
WOODSIDE PROPERTIES I, LTD., AND
WOODSIDE PROPERTIES II, LTD.,

(COLLECTIVELY AS “SELLER”)

AND

(COLLECTIVELY AS “BUYER”)

Dated as of August 30, 2002

TABLE OF CONTENTS

1.		SALE OF ASSETS AND ASSUMPTION OF LIABILITIES					1
		1.1		Assets			1
		1.2		Excluded Assets			2
		1.3		Assumed Liabilities			3
		1.4		Excluded Liabilities			3
		1.5		Payments to Employees			3
2.		FINANCIAL ARRANGEMENTS					3
		2.1		Purchase Price			4
		2.2		Allocation of Purchase Price			4
		2.3		Purchase Price Adjustments			4
		2.4		[Intentionally Deleted]			4
		2.5		Security			4
3.		CLOSING					5
		3.1		Closing			5
		3.2		Actions of Seller at Closing			5
		3.3		Actions of Buyer at Closing			6
4.		REPRESENTATIONS AND WARRANTIES OF SELLER					7
		4.1		Capacity			7
		4.2		Corporate Powers; Consents; Absence of Conflicts With Other Agreements			8
		4.3		No Affiliates			8
		4.4		Binding Agreement			8
		4.5		Financial Statements			9
		4.6		Licenses			9
		4.7		Patents; Trademarks, Etc			9
		4.8		Medicare Participation/Accreditation			10
		4.9		Legal and Regulatory Compliance			10
		4.10		The Contracts			10
		4.11		Excluded Contracts			11
		4.12		Inventory and Supplies			11
		4.13		Equipment			12
		4.14		Real Property			12
		4.15		Condition of Assets			14
		4.16		Brokers and Finders			14
		4.17		Insurance			14
		4.18		Employee Benefit Plans			14
		4.19		Employees and Employee Relations			15
		4.20		Litigation or Proceeding			15
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		4.21		Condemnation and Assessments			16
		4.22		Taxes			16
		4.23		Post-Balance Sheet Results			16
		4.24		Payments			17
		4.25		Certain Affiliate Transactions			17
		4.26		Environmental Matters			17
		4.27		Construction in Progress			19
		4.28		Computer Software, Etc			19
		4.29		Immigration Act			19
		4.30		Reports, Statements and Copies			20
		4.31		Chief Executive Office			20
5.		REPRESENTATIONS AND WARRANTIES OF BUYER					20
		5.1		Corporate Capacity			20
		5.2		Corporate Powers; Consents; Absence of Conflicts With Other Agreements, Etc			20
		5.3		Binding Effect			21
		5.4		Brokers and Finders			21
6.		COVENANTS OF SELLER					21
		6.1		Access and Information			21
		6.2		Operations			22
		6.3		Negative Covenants			22
		6.4		Governmental Approvals			23
		6.5		Exclusive Agreement			23
		6.6		Closing Conditions			23
		6.7		Title and Survey Matters			23
		6.8		Employees			24
		6.9		Cooperation			25
7.		COVENANTS OF BUYER					25
		7.1		Governmental Approval			25
		7.2		Survey			25
		7.3		Closing Conditions			25
		7.4		Cooperation			26
8.		CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER					26
		8.1		Representations/Warranties			26
		8.2		Opinion of Seller’s Counsel			26
		8.3		Pre-Closing Confirmations			27
		8.4		Action/Proceeding			27
		8.5		No Adverse Change			27
		8.6		Vesting/Recordation			27
		8.7		Title to Real Estate			28
ii

		8.8		Recent Agreements and Commitments			28
		8.9		Closing Documents			28
		8.10		Casualty			28
		8.11		Consents to Assignments			28
		8.12		Appraisal			29
		8.13		Environmental Survey and Physical Plant Inspections			29
		8.14		Reviewed Financial Statements			29
		8.15		Due Diligence			29
		8.16		Allocation of Purchase Price			29
		8.17		Financing			29
		8.18		Liability Insurance			30
9.		CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER					30
		9.1		Representations/Warranties			30
		9.2		Opinion of Buyer’s Counsel			30
		9.3		Action/Proceeding			31
		9.4		Pre-Closing Confirmations			31
		9.5		Extraordinary Liabilities/Obligation			31
		9.6		Allocation of Purchase Price			31
		9.7		Appraisal			31
10.		NONCOMPETITION					31
		10.1		Restrictions			31
		10.2		Enforcement			32
11.		ADDITIONAL AGREEMENTS					32
		11.1		Termination Prior to Closing			32
		11.2		Post-Closing Access to Information			33
		11.3		Preservation and Access to Patient Records After the Closing			33
		11.4		Tax, Medicare, and Medicaid Effect			34
		11.5		Seller’s Cost Reports			34
		11.6		Employee Matters			34
		11.7		Press Releases			35
12.		INDEMNIFICATION					35
		12.1		Indemnification by Seller			35
		12.2		Limitations/Seller			36
		12.3		Indemnification by Buyer			36
		12.4		Limitations/Buyer			36
		12.5		Indemnification Set Off and Procedure			36
		12.6		[Intentionally Deleted]			37
		12.7		Survival of Representations			37
		12.8		Other Indemnities Included Herein			38
		12.9		Indemnity Notice			38
iii

		12.10		Indemnity Limit			38
13.		GENERAL					38
		13.1		Interpretation			38
		13.2		Schedules			39
		13.3		Consented Assignment			40
		13.4		Consents, Approvals and Discretion			40
		13.5		Expenses; Legal Fees and Costs			40
		13.6		Choice of Law; Arbitration			40
		13.7		Benefit Assignment			41
		13.8		Accounting Date			41
		13.9		No Third-Party Beneficiaries			41
		13.10		Waiver of Breach			41
		13.11		Notices			41
		13.12		Severability			42
		13.13		Gender and Number			42
		13.14		Divisions and Headings			43
		13.15		Time of Essence			43
		13.16		Confidentiality			43
		13.17		Entire Agreement/Amendment			43
		13.18		Drafting			44
		13.19		Transition Period			44
		13.20		Incorporation by Reference			44
		13.21		Signing Subject to Agreement Upon Schedules			44
iv

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (“Agreement”) is made and entered into as of August 30, 2002, by and among VILLA HOMES WEST, INC., D/B/A WOODSIDE MANAGEMENT GROUP, RIDGEWOOD MANOR, LLC, PARKVIEW REAL ESTATE, LTD., WOODSIDE PROPERTIES I, LTD., AND WOODSIDE PROPERTIES II, LTD. (collectively as “Seller”) and OP MAUMEE, INC., RE MAUMEE, INC., OP CAREY, INC., RE CAREY, INC., OP1 FREMONT, INC., RE1 FREMONT, INC., OP2 FREMONT, INC., RE2 FREMONT, INC., OP KENTON, INC. (collectively as “Buyer”).

WITNESSETH:

      WHEREAS , Seller owns and operates nursing homes located throughout Ohio, specifically identified on Exhibit “A” attached hereto, (collectively referred to as the “Nursing Home”);

      WHEREAS , the board of directors, members and the shareholders of Seller have determined that it is in the best interest of Seller to sell substantially all assets, real, personal and mixed, tangible and intangible, owned or leased by Seller and associated with or employed in the operations of the Nursing Home, and substantially all other related operations owned, leased or managed by Seller which are used in or utilized by the Nursing Home (other than the Excluded Assets as hereinafter defined and provided) (such transferred assets being referred to as the “Assets” and the Nursing Home and such other operations being referred to collectively as the “Business”) to Buyer;

      WHEREAS , subject to the terms and conditions hereof, Buyer desires to acquire the Assets under the terms and conditions set forth herein.

      NOW, THEREFORE , for and in consideration of the premises, and the agreements, covenants, representations and warranties hereinafter set forth, and other good and valuable consideration, the receipt and adequacy of all of which are forever acknowledged and confessed, the parties hereto, intending to be legally bound hereby, agree as follows:

1. SALE OF ASSETS AND ASSUMPTION OF LIABILITIES

     1.1 Assets .

          Subject to the terms and conditions of this Agreement, Seller agrees to sell, convey, transfer and deliver to Buyer and Buyer agrees to purchase as of Closing (as hereinafter defined) all assets, real, personal and mixed, tangible and intangible owned or used by Seller and associated with or employed in the operation of the Business, other than the Excluded Assets, which assets shall include the following (collectively, the “Assets”): (i) fee or leasehold title to the real property described in Schedule 4.14 hereto, together with all improvements, buildings and fixtures located thereon or therein (collectively, the “Real Property”); (ii) all major, minor or other equipment, furniture and furnishings, including those listed on Schedule 4.13 hereto (“Equipment Depreciation Schedule”); (iii) all supplies and inventory used in the normal course of business or required by regulation; (iv) all prepaid expenses to the extent useable by Buyer

which are not refundable to Seller; (v) claims of Seller for refunds against third parties and Seller’s rights to offset amounts against claims made by third parties with respect to Assumed Liabilities, all as of the Closing Date (as hereinafter defined); (vi) all current financial, patient, medical staff and personnel records (including, without limitation, all equipment records, medical/administrative libraries, medical records, documents, catalogs, books, records, files, operating manuals and current personnel records); (vii) all of the interest of Seller in all commitments, contracts, leases, and agreements outstanding in respect of the Assets which are described in Schedule 4.10 (collectively, the “Contracts”); (viii) all licenses and permits to the extent assignable, held by Seller relating to the ownership, development and operations of the Assets and the Business (including any pending or approved governmental approvals regarding the Business); (ix) all logos, names, trade names, trademarks and service marks (or variations thereof) associated with the Assets and the Business, all of which are set forth on Schedule 4.7 ; (“Intellectual Property”) (x) subject to the terms and conditions imposed by lessors and licensers, all computer software, programs and similar systems owned by or licensed to Seller or used in the conduct of the Business, all of which are set forth on Schedule 4.28 hereto (“Computer Software”); (xi) Seller’s goodwill in the Business, including the fictitious names; (xii) all telephone numbers associated with the Business; (xiii) all certificates of need and provider agreements; and (xiv) Seller’s interest in all property, real, personal and mixed, tangible and intangible, arising or acquired in the ordinary course of Seller’s Business between the date hereof and Closing which are not otherwise Excluded Assets subject to Section 1.2 below. Seller shall convey good title to the Assets and all parts thereof to Buyer free and clear of all liens, pledges, rights of first refusal, options, restrictions, encumbrances, liabilities, claims, assessments, security interests and defects in title, except as permitted or provided herein to the contrary.

     1.2 Excluded Assets .

          Any provision hereof to the contrary notwithstanding, the following items which are related to the Assets are not intended by the parties to be a part of the sale and purchase hereunder and are excluded from the Assets (collectively, the “Excluded Assets”): (i) assets reflected on the Financial Statements (as hereinafter defined) in the entries entitled: “Cash and cash equivalents,” “Accounts Receivable(as of the Closing Date) and “Investments”; (ii) rights to settlements and retroactive adjustments, if any, for cost reporting periods ending on or prior to the Closing Date arising from or against the United States government under the terms of the Medicare program and against the State of Ohio under the Medicaid program and against Blue Cross and Blue Shield and other third-party payor programs; (iii) all equipment, inventory and prepaid expenses disposed of or exhausted prior to Closing in the ordinary course of business; (iv) the Excluded Contracts (as hereinafter defined); (v) all suits, claims, judgments, and choses in action by and in favor of Seller; (vii) all refunds, rebates or other payments from the Bureau of Workers’ Compensation attributable to periods prior to Closing; (viii) all prepaid expenses, taxes, or other refunds and other claims or choses in action of the Seller, other than identified in Section 1.1(ii) above; (ix) any other refunds due from any person or entity, including governmental entities not set forth herein, the right to which arose prior to Closing; (x) all prepaid life insurance insuring the life of Patrick T. Kriner, and the policies evidencing such insurance; (xi) all prepayments of other insurance on the Assets pro-rated to the date of the Closing; (xii) any records, including Seller’s corporate minute books and any other records which Seller, by law, is required to retain in its possession, provided, however, that reasonable access

will be granted to the Buyer; (xiii) all personal items belonging to residents in the Nursing Home; and (xiv) such other assets, if any, as are set forth on Schedule 1.2 hereto, including all of the tangible personal property, including, but not limited to, equipment and fixtures, located at, and the leasehold interest for, Seller’s headquarters at 6228 Merger Drive, Holland, Ohio, 43528.

     1.3 Assumed Liabilities .

          As of the Closing Date, Buyer shall assume and agree to pay, perform and discharge the obligations of Seller under the Contracts arising subsequent to the Closing Date, plus those other liabilities disclosed on Schedule 1.3 (collectively, the “Assumed Liabilities”). Seller and Buyer agree that Buyer shall assume and perform the obligations of Seller arising subsequent to the Closing Date under each of the Contracts, regardless of whether consent to the assignment of each such Contract is required but not obtained; provided, however, that Seller shall indemnify and hold Buyer harmless from and against any claim related to failure to obtain consent made against Buyer by any party to a Contract that consent to the assignment of such Contract by Seller to Buyer is required but has not been obtained.

     1.4 Excluded Liabilities .

          Except for the Assumed Liabilities, Buyer shall not assume or be obligated to pay nor shall the Assets be subject to or bound by any liability of Seller, whether fixed or contingent, recorded or unrecorded, including the following (collectively, the “Excluded Liabilities”): (i) the accounts payable of Seller; (ii) accrued expenses of Seller; (iii) prorated portions of capital lease obligations of Seller attributable to periods before the Closing as set forth on Schedule 1.4 ; (iv) any gain on sale and any recapture that may be recognized under the Medicare, Medicaid and other third-party payor programs based on the transactions herein contemplated; (v) long-term debt of Seller (including the current portion thereof); (vi) liabilities associated with any pension plan, welfare benefit plan, or any other benefit plan or arrangement sponsored by Seller; (vii) third-party payor settlements and retroactive adjustments, if any, for cost reporting periods ending on or prior to the Closing Date arising under the Medicare Program, the Medicaid Program and other third-party payor programs; (viii) liabilities or obligations arising out of any breach by Seller of any Contract; (ix) the Excluded Contracts; (x) professional liability claims or other claims for acts or omissions of Seller occurring prior to Closing; and (xi) employee claims made by employees of Seller for acts or omissions on or prior to the Closing.

     1.5 Payments to Employees.

          At the Closing, Seller shall, if required by contract or policy consistent with its past practice, fund an amount to pay all of its employees all accrued salaries, wages, vacation, sick leave and other paid time off which has been earned up to the Closing Date, for those employees hired by Buyer pursuant to Section 6.8 herein. The funding of these payments, together with any additional operational transition issues between the parties, shall be set forth in more detail in an Operations Transfer Agreement in substantially the same form as attached as Exhibit 1.5 herein.

2. FINANCIAL ARRANGEMENTS

     2.1 Purchase Price .

           2.1.1 . Subject to the terms and conditions hereof, Buyer agrees to assume at Closing the Assumed Liabilities and tender to Seller Eleven Million Two Hundred Thousand Dollars ($11,200,000.00) (the “Purchase Price”). The Purchase Price will be paid at Closing as follows:

          (i) $500,000 in the form of a Note, payable to Villa Homes West, Inc. by Buyer, to accrue interest at 7% per annum, with interest payments only for a period of five years (“Note”). Said Note shall be secured by a guaranty of Tandem Health Care, Inc. (“Guarantor”), and/or a second mortgage, as those terms shall be acceptable to the first mortgage lender and accounts receivable financing lender of the Buyer.

          (ii) $10,700,000 payable in cash, certified funds, or wire transfer on the date of the Closing.

     2.2 Allocation of Purchase Price .

          Seller and Buyer shall agree prior to Closing to an allocation (the “Allocation”) of the Purchase Price among the various classes of Assets and the covenant not to compete set forth in Section 10 in accordance with and as provided by Section 1060 of the Internal Revenue Code of 1986, as amended and rules and regulations promulgated thereunder (collectively, the “Code”) and to be set forth in Schedule 2.2 hereto. In this regard, the parties agree that, if required, they will each properly prepare and timely file Form 8594 in accordance with Section 1060 of the Code consistent with the Allocation. The parties agree that any tax returns or other tax information they may file or cause to be filed with any governmental agency shall be prepared and filed consistently with the Allocation.

     2.3 Purchase Price Adjustments .

          In accordance with the terms of this Agreement, the Purchase Price shall be adjusted on the Closing Date for any amounts which are due and payable by either party to the other on the Closing Date or which are to become due and payable after the Closing Date which are attributable to services or goods received or taxes associated with the period prior to Closing, and any amounts which are paid prior to the Closing Date which are attributable to services or goods to be received or taxes associated with the period subsequent to Closing, with respect to (i) the Contracts; (ii) ad valorem taxes, if any, on the Assets; (iii) property taxes on the Assets; and (iv) utilities (the “Prorations”). Seller shall cancel all existing utility accounts and Buyer shall arrange for new accounts for all utilities on the Closing Date.

     2.4 [Intentionally Deleted]

     2.5 Security.

          Buyer’s obligations under the Note shall be secured by a guaranty of Tandem Health Care, Inc. (“Guarantor”) and by a mortgage as approved by the Lender in the form of Exhibit 2.5 hereto (the “Mortgage”) on all of the Real Property identified on Schedule 4.14 as

owned by Seller (the “Real Property”). Buyer will use its commercially reasonable efforts to obtain financing and to negotiate with its Lender to provide Seller with a mortgage on such terms and conditions as set forth herein. Buyer must not cause, permit, or suffer any act, omission, fact, or circumstance which would result in the Mortgage being inferior to any liens or encumbrances other than those in favor of the lender providing Buyer with financing for the acquisition of the Assets and/or accounts receivable financing, and securing such acquisition financing. At the Closing, Buyer must execute and deliver all documents and take such actions as requested by Seller to perfect its Mortgage.

3. CLOSING

     3.1 Closing .

          Subject to the satisfaction or waiver by the appropriate party of all the conditions precedent to Closing specified in Articles 8 and 9 hereof, the consummation of the transactions (the “Closing”) shall take place at the offices of Buchanan Ingersoll Professional Corporation, One Oxford Centre, 301 Grant Street, 20th Floor, Pittsburgh, Pennsylvania, 15219, at 8:30 a.m. on or before November 27, 2002 or at such later or earlier date and/or such other location as the parties hereto may mutually agree in writing or as otherwise provided in this Agreement (the “Closing Date”). The Closing shall be effective as of 12:01 a.m. then prevailing Eastern time on December 1, 2002 (the “Effective Time”).

     3.2 Actions of Seller at Closing .

          At the Closing and unless otherwise waived in writing by Buyer, Seller shall deliver to Buyer the following:

           3.2.1 Deeds containing special or limited warranty of title, duly executed by Seller in recordable form, conveying to Buyer good and marketable fee title to the Real Property described in Schedule 4.14 , subject only to the liens and encumbrances permitted herein;

           3.2.2 General Bills of Sale and Assignment duly executed by Seller, conveying to Buyer good and valid title to all tangible and intangible assets which are a part of the Assets and owned by Seller, which title shall be free and clear of all liens, security interests, pledges, rights of first refusal, options, restrictions, encumbrances, and defects in title, except for current taxes not yet due and payable and except as provided or permitted herein;

           3.2.3 Assignments of Contracts, duly executed by Seller conveying to Buyer Seller’s interest in the Contracts and in all Assets which are leased by Seller;

           3.2.4 Copy of resolutions duly adopted by the board of directors, members and the shareholders of Seller authorizing and approving the performance by Seller of the transactions set forth herein and the execution and delivery of this Agreement and the documents described herein, certified as true and of full force as of Closing by an appropriate officer of Seller;

           3.2.5 Certificate of the President of Seller, or authorized member of the applicable limited liability company, as the case may be, in his or her official capacity, certifying that (a) each covenant and agreement of Seller to be performed prior to or as of Closing pursuant to this Agreement has been performed in all material respects, and (b) as of Closing all of the respective representations and warranties by or on behalf of Seller contained in this Agreement are true and correct;

           3.2.6 Certificates of incumbency for the respective officers of Seller executing this Agreement or making certifications for Closing dated as of Closing;

           3.2.7 Certificate of existence and active status of Seller from the Ohio Secretary of State, dated no earlier than ten (10) business days prior to Closing;

           3.2.8 The opinion of Seller’s counsel as described in and provided by Section 8.2 hereof;

           3.2.9 Closing Statement that has been agreed to by each party;

           3.2.10 A current list of all employees of Seller, which shall include names, titles, rates of pay, vacation days, and any other compensation and benefits provided to such employees;

           3.2.11 Assignment of the fictitious trade name(s) in a form acceptable to the Ohio Secretary of State;

           3.2.12 Seller will, on the Closing Date, transfer to Buyer all patient and/or resident funds presently held by Seller. Buyer agrees to assume custody of, and total responsibility for such accounts and deal with them in the fiduciary capacity required by law. Seller will indemnify and hold Buyer harmless from all liabilities, claims and demands in the event that the amount of funds, if any, transferred or assigned to Buyer does not represent the full amount of the funds then or thereafter shown to have been delivered to Seller as custodian; and

           3.2.13 Such other instruments and documents, including consents to assignments of Contracts, as Buyer reasonably deems necessary to effect the transactions contemplated hereby.

     3.3 Actions of Buyer at Closing .

          At the Closing and unless otherwise waived in writing by Seller, Buyer shall deliver to Seller the following:

           3.3.1 The Purchase Price in same-day funds (which shall be delivered to Seller’s Agent);

           3.3.2 An Assumption Agreement, duly executed by Buyer, assuming the future payment and performance of the Assumed Liabilities;

           3.2.3 One or more down-dated Title Commitments covering the Real Property as described in and provided by Section 6.7 hereof;

           3.3.4 Copies of resolutions duly adopted by the board of directors of Buyer authorizing and approving Buyer’s performance of the transactions set forth herein and the execution and delivery of this Agreement and the documents described herein, certified as true and of full force as of Closing by an appropriate officer of Buyer;

           3.3.5 Certificate of the Chairman of Buyer, in his official capacity, certifying that (a) each covenant and agreement of Buyer to be performed prior to or as of Closing pursuant to this Agreement has been performed in all material respects, and (b) as of Closing all of the respective representations and warranties by or on behalf of Buyer contained in this Agreement are true and correct in all material respects;

           3.3.6 Certificates of incumbency for the respective officers of Buyer executing this Agreement or making certifications for Closing dated as of Closing;

           3.3.7 Certificate of existence and active status of Buyer from the Ohio Secretary of State, dated no earlier than ten (10) days prior to Closing;

           3.3.8 A certificate from the Secretary of State of Ohio, dated no earlier than 10 days prior to Closing, showing that Guarantor is qualified to conduct business in Ohio.

           3.3.9 Closing Statement that has been agreed to by each party;

           3.3.10 The Note, as defined herein, and all security documents described in Section 2.5 herein; and

           3.3.11 Buyer’s opinion letter as referenced in Section 9.2 herein.

           3.3.12 Such other instruments and documents as are ordinarily required to effect the transactions that are necessary and appropriate to consummate the transactions contemplated by this Agreement.

4. REPRESENTATIONS AND WARRANTIES OF SELLER

          As of the date hereof, Seller represents and warrants to Buyer that the following facts and circumstances are and, at the Closing Date, will be true and correct:

     4.1 Capacity .

          Seller consists in part of several corporations and limited liability companies duly organized, validly existing and of active status under the laws of the State of Ohio. Seller has the requisite power and authority to execute, deliver, and perform its obligations under this Agreement and all transactions contemplated hereby. Seller has taken all requisite action to authorize the execution, delivery, and performance of Seller’s obligations hereunder. Seller has the requisite power and authority to conduct its business as now being conducted. Seller is duly

authorized, qualified and licensed under all applicable laws, regulations, ordinances and orders of governmental authorities having jurisdiction over the Assets and operations of the Business to own its properties and conduct its business in the place and manner now conducted.

     4.2 Corporate Powers; Consents; Absence of Conflicts With Other Agreements .

          The execution, delivery and performance of this Agreement by Seller and all other agreements referenced in or ancillary hereto to which Seller is a party or is to become a party at the Closing and the consummation of the transactions set forth herein by Seller:

           4.2.1 are within Seller’s powers, are not in contravention of law and have been duly authorized by all necessary action of Seller;

           4.2.2 do not and will not conflict with any provision of Seller’s articles of incorporation or code of regulations, partnership agreements or operating agreements;

           4.2.3 except as otherwise expressly herein provided, do not require any approval or consent of, or filing with, any governmental agency or authority which is required by law or the regulations of any such agency or authority;

           4.2.4 except as otherwise expressly provided herein, including without limitation (and subject to) other Contracts which require consents to assignment, will neither conflict with nor result in any breach of or constitute a default (or an event which, with or without notice or lapse of time, or both, would constitute a default) under or contravention of, nor cause the acceleration of the maturity of the Contracts or the Assumed Liabilities, or the creation of any lien, charge or encumbrance affecting any of the Assets;

           4.2.5 will not violate any statute, law, rule or regulation of any governmental authority to which Seller, the Business, or the Assets may be subject if such violation would have a material adverse affect on the Business or the Assets; and

           4.2.6 will not violate any order, writ, injunction, decree, or judgment of any court or governmental authority to which Seller, the Business, or the Assets may be subject.

     4.3 No Affiliates .

          Seller does not own or control, is not owned or controlled by and is not under common ownership or control with any other Person and does not have any investments in any other entity.

     4.4 Binding Agreement .

          This Agreement and all agreements to which Seller is or will become a party hereunder or pursuant hereto are and will constitute the valid and legally binding obligation of Seller and are and will be enforceable against Seller, in accordance with the respective terms hereof or thereof, except as enforceability may be restricted, limited or delayed by applicable

bankruptcy or other laws affecting creditors’ rights generally and except as enforceability may be subject to general principles of equity (the “Enforceability Exceptions”).

     4.5 Financial Statements .

          Seller has delivered to Buyer copies of the following financial statements of Seller (collectively with the Interim Financial Statements, “Financial Statements”):

          (i) Financial Statements as of December 31, 2001, and additional Financial Statements as of June 30, 2002.

          The Financial Statements are true, complete and accurate and fairly present the financial condition and results of operations of Seller as at the respective dates thereof and for the periods therein referenced, have been prepared in accordance with GAAP; to Seller’s best knowledge and belief having made reasonable inquire, the unreviewed Financial Statements are true, complete and accurate and fairly present the financial condition and results of operations of Seller as at the respective dates thereof and for the periods therein referenced, have been prepared in accordance with GAAP, except as set forth on Schedule 4.5; and the Financial Statements reflect the consistent application of such accounting principles throughout the periods involved.

          Since the furnishing of the Financial Statements, no material adverse change has occurred. The Financial Statements do not contain any untrue statement or omission of a material fact and are not misleading in any regard. Seller is solvent and no bankruptcy, insolvency or similarly proceeding is pending against Seller.

     4.6 Licenses .

          Seller has all licenses and permits relating to the ownership of the Assets and the operation of the Business as are currently necessary and required for such ownership and operation, as currently conducted. Attached hereto is an accurate list and summary description of and copy (Schedule 4.6) of all licenses and permits, owned or held by Seller relating to the ownership or operations of the Nursing Home, the Business, or the Assets, including the number of beds currently licensed at each Nursing Home all of which are now and as of Closing shall be in good standing and not subject to meritorious challenge, i.e., a challenge that has merit. There are no provisions in, or agreements relating to, any such licenses or permits which would preclude or limit Buyer from operating the Nursing Home and using all the beds of the Nursing Home as they are currently classified. As of the Closing Date, there shall be no change in the number of beds listed on Schedule 4.6 with respect to any of the Nursing Homes.

4.7 Patents; Trademarks, Etc.

          Seller does not own, or have any interest whatsoever, in patents, patent applications, trade names, trademarks, trademark registrations, applications therefor, licenses (other than normal governmental licenses for operation of the Business), franchises or other assets of like kind, other than those listed on Schedule 4.7 (“Intellectual Property”). Seller has the right to use, free and clear of any royalty or payment obligations, claims of infringement of other liens of all such items.

     4.8 Medicare Participation/Accreditation .

          Seller is eligible to receive payment under Titles XVIII and XIX of the Social Security Act and is a “provider” under existing provider agreements with the Medicare and Medicaid Programs (the “Programs”) through the applicable intermediaries and the Ohio Department of Job and Family Services (“ODJFS”). The Nursing Home is in substantial compliance with the conditions of participation in the Programs. There is not pending, nor to the best knowledge of Seller threatened, any proceeding or investigation under the Programs involving the Nursing Home or any of the Assets. The cost reports of the Nursing Home for the Programs for the fiscal years through 2001, have been filed. The cost reports of the Nursing Home for the Programs for the fiscal year ending 2002 will be filed on or before their due dates, and Seller shall promptly provide Buyer with copies thereof. The cost reports of the Nursing Home were filed when due. Seller hereby agrees to indemnify and hold Buyer harmless for any Losses (as hereinafter defined) that result from the filing of any such cost reports. True and correct copies of all such reports for the three (3) most recent fiscal years of the Nursing Home have been furnished to Buyer. There are no claims, actions or appeals pending before ODJFS, any intermediary or carrier, the Provider Reimbursement Review Board or the Administrator of the Centers for Medicaid and Medicare Services, with respect to any federal or state Medicare or Medicaid cost reports or claims filed by Seller on or before the date hereof, or any disallowances in connection with any audit of such cost reports. Buyer shall have the right to review all cost reports that Seller is required to file after the date of this Agreement prior to Seller’s filing the same. All cost reports have been and shall be prepared in all material respect and shall be timely filed in accordance with and in compliance with all applicable government rules and regulations. Furthermore, Seller shall indemnify and hold Buyer harmless for all costs and damages incurred by Buyer with respect to the recoupment project currently being conducted by the ODJFS relating to periods on or before the Closing Date. The Nursing Home is in substantial compliance in all material respects with all rules, regulations and requirements of all governmental agencies having jurisdiction over the programs in which the Nursing Home participates.

     4.9 Legal and Regulatory Compliance .

          Seller is in substantial compliance with all applicable laws of federal, state and local authorities and all applicable rules, regulations and requirements of all federal, state and local commissions, boards, bureaus and agencies having jurisdiction over the Assets and of the operations of the Business; and Seller has timely filed all reports, data and other information required to be filed with such commissions, boards, bureaus and agencies except where a failure to file timely would not have a material adverse effect on the Assets or the Business operations of Seller.

     4.10 The Contracts .

          Attached hereto is a true and complete list (Schedule 4.10) of all Contracts. Notwithstanding the foregoing, all contracts between Seller and any nursing home resident are on one of the contracts that are attached hereto as a part of Schedule 4.10 and the name of each resident and the type of standard form contract in effect for such resident are listed on Schedule

4.10 . Other than the contracts between Seller and nursing home residents, Seller has delivered true and correct copies of all Contracts listed on Schedule 4.10 to Buyer.

          Except as disclosed in Schedule 4.10 :

           4.10.1 The Contracts constitute valid and legally binding obligations of Seller and, to Seller’s knowledge, are enforceable in accordance with their terms, subject to the Enforceability Exceptions;

           4.10.2 The copy of each of the Contracts delivered by Seller to Buyer constitutes the entire agreement by and between the respective parties thereto with respect to the subject matter thereof;

           4.10.3 All material obligations required to have been performed by Seller under the terms of the Contracts have been performed, and no act or omission has occurred or failed to occur which, with the giving of notice, the lapse of time, or both, would constitute a default or breach of any Contract by Seller, upon which a cause of action may be maintained in a court of competent jurisdiction;

           4.10.4 No other party or parties to any Contract is in material default thereunder, nor has any event occurred which with the giving of notice or the lapse of time, or both, would constitute a material default by any other party, with respect to any term or condition of any of the Contracts;

           4.10.5 Seller has not received notice to the effect that, nor has Seller any knowledge that, any party to any of the Contracts intends to cancel, terminate or amend any of the Contracts; and

           4.10.6 Schedule 4.10 accurately identifies all parties to the Contracts and, where applicable, specifies the relationship of each such party to Seller or any of Seller’s shareholders, board of directors, officers, or other affiliates.

     4.11 Excluded Contracts .

          Attached hereto is a true and complete list ( Schedule 4.11 ) of all commitments, contracts, leases and agreements which Seller shall not assign to Buyer and Buyer shall not assume as of Closing (the “Excluded Contracts”). True and complete copies of the Excluded Contracts have been furnished to Buyer. The Contracts listed on Schedule 4.10 and the Excluded Contracts collectively constitute all commitments, contracts, leases and agreements to which Seller is a party relating to the Assets and the Business.

     4.12 Inventory and Supplies .

          All items of supplies on hand on the date of this Agreement and to be on hand on the Closing Date consist and will consist of items of a quality usable or saleable in the ordinary course of the Business. The quantities of all supplies are, in Seller’s experience, reasonable and justified under the normal operations of the Nursing Home.

     4.13 Equipment .

          Attached hereto is a depreciation schedule as of July 31, 2002 ( Schedule 4.13 ) by Nursing Home which lists all the equipment owned or leased by Seller constituting any part of the Assets. Since the above-referenced date, Seller has not sold or otherwise disposed of any item of equipment constituting any part of the Assets except in the ordinary course of business and, in the case of any item of equipment having a value in excess of $5,000 per Nursing Home, without comparable replacement therefor. All of the Assets consisting of equipment are adequately maintained and in functional condition, except for reasonable wear and tear. Seller has good and valid title to such equipment (except for equipment leased to Seller as to which Seller has good and valid leasehold interest). Seller will convey to Buyer at Closing all of Seller’s interest in all equipment owned or leased by Seller free and clear of any lien or security interest or other encumbrance. No person other than Seller owns any equipment situated on the Real Property, except for items leased to Seller and disclosed in Schedule 4.10 .

     4.14 Real Property .

          Seller owns fee title to the real property described in Schedule 4.14 hereto, together with all buildings, improvements and fixtures thereon and all appurtenances and rights thereto (collectively, the “Real Property”). The Real Property will be conveyed to Buyer at Closing by special or limited warranty deed subject only to the following (collectively, the “Permitted Encumbrances”): (i) current taxes, that are a lien not yet due and payable on the Closing Date; (ii) rights of tenants in possession under leases or contracts described in Schedule 4.10 ; (iii) easements, conditions, or restrictions of record provided that none of the foregoing are violated by any existing improvements or the present use thereof; (iv) dedicated streets, roads, and rights of way; (v) all applicable zoning and other laws which do not interfere with existing use; (vi) matters disclosed on the Survey (as defined in Section 7.2) and (vii) other matters on the Title Commitment (as hereinafter defined) to which Buyer does not object. The Real Property comprises all of the real property in the Business.

           4.14.1 Seller has good, indefeasible and insurable fee simple title to each parcel of Real Property, free and clear of any and all mortgages, liens, charges, claims, collateral assignments, leases, attachments, levies, encroachments, rights-of-way, equities, restrictions, assessments, and all other title matters whatsoever, except those to be paid at the Closing and the Permitted Encumbrances, and will defend the same against the claims of all persons wrongfully claiming by, through or under Seller;

           4.14.2 Seller has not received notice of a violation of any applicable ordinance or other law, order, regulation or requirement (which violation has not been cured) relating to any part of the Real Property, including building, zoning, environmental laws and the Americans With Disabilities Act of 1990, as amended;

           4.14.3 There is not existing, and to the best knowledge of Seller, there is not presently contemplated or proposed, any eminent domain, condemnation or similar action, or zoning action or proceeding, with respect to any portion of the Real Property;

           4.14.4 Seller has no knowledge nor has received a notice of any contemplated or proposed moratorium or similar impediment to land development, building construction, or hook-up to usage of water or sewer or other utility services that could materially adversely affect the use of the Real Property as it is currently being utilized;

           4.14.5 The Real Property and its operation are in compliance with all applicable zoning ordinances, local building codes and ordinances or are operating under a valid zoning variance; the use and operation of the Nursing Home as a nursing home is a permitted use under the applicable zoning code(s); Seller has received no notice that the Nursing Home is in violation, which violation has not been cured, of local building codes, ordinances or zoning laws; and the consummation of the transactions set forth herein will not result in a violation of any applicable zoning ordinance or the termination of any applicable zoning variance now existing;

           4.14.6 Seller has not received any notice which currently remains uncured that indicates that Seller has failed to obtain any license, permit, approval, certificate or other authorizations required by applicable statutes, laws, ordinances or regulations for the use and occupancy of the Real Property;

           4.14.7 No part of the Real Property contains or is located within any tideland, wetland, or marshland;

           4.14.8 There are no parties in possession of the Real Property or any portion thereof as managers, lessees, tenants, or trespassers;.

           4.14.9 There is access to the Real Property from a dedicated public right-of-way. No fact or condition exists which would result in the termination or reduction of the current access to or from the Real Property to such right-of-way;

           4.14.10 There is available to the Real Property propane gas, water, sanitary sewer lines, storm sewers, electrical, and telephone services in operating condition which are adequate for use of the Real Property for the operation of the Nursing Home. The Real Property has access to utility lines located in a dedicated public right-of-way. There is no, and on the Closing Date, there will be no, pending or threatened governmental or third party proceeding which would impair or result in the termination of such utility availability;

           4.14.11 Seller has not received and has no actual knowledge of any notice or request, formal or informal, from any insurance company or board of fire underwriters (i) identifying any defects in the Nursing Home which would adversely affect the insurability of the Nursing Home, or (ii) requesting the performance of any work or alteration with respect to the Nursing Home; and

           4.14.12 Seller has no knowledge nor has received a notice of any public improvements which have been ordered to be made and/or which have not hereto fore been assessed, and there are no special, general or other assessments pending, threatened against, affecting or to affect the Nursing Home.

     4.15 Condition of Assets .

          All of the mechanical and electrical systems, heating and air conditioning systems, plumbing, water and sewer systems, and all other items of mechanical equipment or appliances and tangible personal property will be in good working order, condition, and repair, normal wear and tear excepted, of sufficient size and capacity to service the Nursing Home and to comply with all applicable ordinances and regulations, and with all building, zoning, fire, safety, and other codes, laws and orders. All buildings and improvements, including the roof and the foundation, as of the Closing Date, will be structurally sound and free from leaks and other defects, normal wear and tear excepted.

     4.16 Brokers and Finders .

          Seller has not and will not engage any broker or finder in connection with this Agreement and the transactions contemplated hereunder unless Seller notifies Buyer of such engagement, in which event Seller agrees to be solely responsible for all fees, charges, costs and expenses of any such broker or finder.

     4.17 Insurance .

           Schedule 4.17 sets forth a true and complete list of all insurance policies or self-insurance funds of any nature whatsoever maintained by Seller as of the date hereof covering the ownership and operation of the Assets, which Schedule reflects the policies’ numbers, terms, identity of insurers, amounts and coverages. Seller has not as of the date hereof (i) received any written notice from any such insurance company canceling or materially amending any of said insurance policies, or (ii) failed to give any required notice or present any claim which is still outstanding under any of said policies. Seller hereby represents and warrants that for the last five (5) years, Seller has had an occurrence-based professional liability insurance policy in place with coverage of at least $1,000,000.00 per occurrence.

     4.18 Employee Benefit Plans .

          Except as set forth on Schedule 4.18 , Seller does not currently, nor for the last five (5) years did Seller sponsor, maintain, or contribute to any “employee benefit plans” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder (“ERISA”) (other than Seller’s paid time-off policy) including, without limitation, any “multi-employer plan” as defined in Section 3(37) of ERISA. Neither Seller nor, to the best knowledge of Seller, any other person has engaged in a transaction with respect to any employee benefit plan listed or required to be listed on Schedule 4.18 which could subject any such plan or Buyer to a penalty for engaging in a prohibited transaction under ERISA or an excise tax under subtitle D, Chapter 43 of the Code. Each of the employee benefit plans listed or required to be listed on Schedule 4.18 has been operated and administered in compliance with applicable law, except for any such failure which would not subject Buyer to any penalty or other liability and except for any such failure which would not have an adverse effect upon the applicable plan or any participant therein. Seller has not incurred nor presently expects to incur any liability under Title IV of ERISA that could result in liability to Buyer. Each

employee benefit plan listed or required to be listed on Schedule 4.18 that is a group health plan within the meaning of Section 5000(b)(1) of the Code is in compliance with the provisions of Section 4980B(f) of the Code, except for any such noncompliance which would not subject Buyer to any penalty or liability and except for any such failure which would not have a material adverse effect upon the applicable plan or any participant therein. Except as disclosed on Schedule 4.18 , there is not any pending or, to the best knowledge of Seller, threatened claim by or on behalf of any employee benefit plan, by any employee covered under any such plan, or otherwise involving any employee benefit plan (other than routine noncontested claims for benefits).

     4.19 Employees and Employee Relations .

           Schedule 4.19 attached hereto sets forth a complete list (as of the date set forth therein) of names and positions, of all full-time and part-time employees of Seller employed in the Business and indicating whether such employee is a part-time or full-time employee. There is no pending or, to the best knowledge of Seller, threatened employee strike, work stoppage or labor dispute. Except as otherwise disclosed in Schedule 4.19 , no union representation question exists respecting any employees of Seller, no collective bargaining agreement exists or is currently being negotiated by Seller, no demand has been made for recognition by a labor organization by or with respect to any employees of Seller, to the best knowledge of Seller, no union organizing activities by or with respect to any employees of Seller are taking place, and none of the employees of Seller are represented by any labor union or organization. There is no unfair labor practice claim against Seller before the National Labor Relations Board, or any strike, dispute, slowdown, or stoppage pending or threatened against or involving the Business. Seller is in compliance with all federal and state laws respecting employment and employment practices, terms and conditions of employment, and wages and hours. Seller is not engaged in any unfair labor practices. Except as set forth on Schedule 4.20 , there are no claims or charges pending with any Federal, State, or local agency, or, to the best knowledge of Seller, threatened claims or charges which relate to Equal Employment Opportunities, wage and hour claims, unemployment compensation claims, workers’ compensation claims or the like against Seller.

     4.20 Litigation or Proceeding .

          Attached hereto is an accurate list and summary description ( Schedule 4.20 ) of all litigation or proceedings with respect to the Business or the Assets to which Seller is a party, including charges of discrimination and administrative agency complaints. Except to the extent set forth on Schedule 4.20; (i) there are no claims, actions, suits, proceedings or investigations by any governmental agency or regulatory body pending or, to the best knowledge of Seller, threatened against or affecting Seller; (ii) Seller has not received notice of any threatened actions, suits, proceedings or investigations against Seller, the Business, or the Assets, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality wherever located; (iii) there are no outstanding judgments against Seller, the Business or the Assets; (iv) there is no labor dispute affecting the Business; and (v) Seller has no knowledge of any facts or circumstances which might reasonably form the basis for any such action, suit or proceeding.

     4.21 Condemnation and Assessments .

          Seller has not received notice of, and there are no pending or, to the best knowledge of Seller, threatened, condemnation, assessment, or similar proceeding affecting or relating to the Real Property, or any portion thereof, any utilities, sewers, roadways or other public improvements.

     4.22 Taxes .

          Seller has, within the time and in the manner prescribed by law, filed or properly requested extensions for all federal, state and local tax and other information return and reports (“Tax Returns”) required to be filed by it and has collected and remitted all payroll taxes required by federal and state law, and, if required, has paid in full or made adequate provisions for the payment of all known taxes (including income, franchise, sales and use, excise, severance, property, gross receipts and payroll taxes, together with any interest, penalties, assessments or deficiencies, hereinafter referred to collectively as “Taxes” or singularly as a “Tax”), for all periods ending on or before the date hereof and on or before the Closing Date. All such Tax Returns are and will be true, correct and complete in all material respects and in compliance in all material respects with the laws, rules and regulations applicable to such Tax Returns. Seller is not a party to any action or proceeding by a government authority for the assessment or collection of Taxes which may adversely affect Seller, the Business, or the Assets or affect future rights in or use of the Assets, and no such claim against Seller for additional Taxes, penalties or interest is pending or, to the best of Seller’s knowledge, threatened.

     4.23 Post-Balance Sheet Results .

          Except as otherwise disclosed herein (including the Schedules hereto) or as disclosed on Schedule 4.23 hereto, since December 31, 2001 to the date of this Agreement, there has not been:

           4.23.1 any material adverse change in the financial condition, assets, liabilities (contingent or otherwise), working capital reserves, income or business of Seller or the Business;

           4.23.2 any material damage, destruction or loss (whether or not covered by insurance) affecting the Assets;

           4.23.3 any increase in the compensation payable or to become payable by Seller to any of its employees, or any bonus payment or arrangement made to or with any employees, except in the ordinary course of business in accordance with existing personnel policies, and Seller has not employed any additional senior management personnel;

           4.23.4 any labor dispute, law or regulation or any event or condition of any character materially and adversely affecting the Business;

           4.23.5 any sale, assignment, transfer or disposition of any item of plant, property or equipment having a value in excess of Five Thousand Dollars ($5,000) (other than supplies), except in the ordinary course of business or with comparable replacement thereof;

           4.23.6 the occurrence of any material liability or obligation of any nature (whether absolute, accrued, contingent or otherwise) except in the ordinary and regular course of the Business;

           4.23.7 the payment, discharge or satisfaction of any liability or obligation (whether absolute, accrued, contingent or otherwise) other than by payment, discharge or satisfaction in the ordinary and regular course of the Business;

           4.23.8 any change in any method of accounting or accounting practice;

           4.23.9 any incurring or assumption of indebtedness by Seller for borrowed money, any guarantee of Seller, directly or indirectly, of indebtedness or others, except in the ordinary course of the Business; or

           4.23.10 the payment of any amount to any fede