ASSET PURCHASE AGREEMENT

Exhibit 10.32

ASSET PURCHASE AGREEMENT

BY AND AMONG

EDGEWOOD MANOR OF LUCASVILLE, INC.
EDGEWOOD MANOR OF LUCASVILLE II, INC.
EDGEWOOD MANOR OF WELLSTON, INC.
EDGEWOOD MANOR OF WESTERVILLE, INC.; and
EDGEWOOD MANOR OF GREENFIELD, INC.

(AS “SELLER”)

AND

RE LUCASVILLE I, INC.
RE LUCASVILLE II, INC.
RE WELLSTON, INC.
RE WESTERVILLE, INC.
AND
RE GREENFIELD, INC.
(AS “BUYER”)

Dated as of December 30, 2004

TABLE OF CONTENTS

1. SALE OF ASSETS AND ASSUMPTION OF LIABILITIES			1
1.1 Assets			1
1.2 Excluded Liabilities			2
2. FINANCIAL ARRANGEMENTS			2
2.1 Deposit/Purchase Price			2
2.2 Allocation of Purchase Price			3
2.3 Purchase Price Adjustments			4
3. CLOSING			4
3.1 Closing			4
3.2 Prorations			5
3.3 Actions of Seller at Closing			5
3.4 Actions of Buyer at Closing			7
4. REPRESENTATIONS AND WARRANTIES OF SELLER			8
4.1 Capacity			8
4.2 Powers; Consents; Absence of Conflicts With Other Agreements			8
4.3 No Affiliates and FIRPTA			8
4.4 Binding Agreement			9
4.5 Licenses and Permits			9
4.6 Legal and Regulatory Compliance			9
4.7 The Contracts			9
4.8 Equipment			9
4.9 Real Property			10
4.10 Brokers and Finders			12
4.11 Insurance			12
4.12 No Employee Benefit Plans			12
4.13 No Employees and Employee Relations			12
4.14 Litigation or Proceeding			12
4.15 Taxes			13
4.16 Subsequent Events			13
4.17 Certain Affiliate Transactions			13
4.18 Environmental Matters			13
4.19 Reports, Statements and Copies			15
5. REPRESENTATIONS AND WARRANTIES OF BUYER			15
5.1 Corporate Capacity			15
5.2 Corporate Powers; Consents; Absence of Conflicts With Other Agreements, Etc			16
5.3 Binding Effect			16
5.4 Brokers and Finders			16
5.5 Operation of the Assets			16

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5.6 Real Property Transferred “AS IS”			17
5.7 Lease Compliance			17
6. COVENANTS OF SELLER			17
6.1 Access and Information			17
6.2 Operations			18
6.3 Negative Covenants			18
6.4 Governmental Approvals			18
6.5 Exclusive Agreement			19
6.6 Closing Conditions			19
6.7 Title and Survey Matters			19
6.8 Title Commitment			19
6.9 Cooperation			20
7. COVENANTS OF BUYER			20
7.1 Governmental Approval			20
7.2 Survey			20
7.3 Closing Conditions			20
7.4 Cooperation			20
7.5 Real Property			21
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER			21
8.1 Representations/Warranties			21
8.2 Opinion of Seller’s Counsel			21
8.3 Pre-Closing Confirmations			22
8.4 Action/Proceeding			22
8.5 No Adverse Change			22
8.6 Vesting/Recordation			22
8.7 Title to Real Estate			22
8.8 No Agreements and Commitments			22
8.9 Closing Documents			23
8.10 Casualty			23
8.11 Consents to Assignments			23
8.12 Appraisal			23
8.13 Environmental Survey and Physical Plant Inspections			24
8.14 Due Diligence			24
8.15 Allocation of Purchase Price			24
8.16 Financing			24
8.17 Condemnation			24
8.18 Approvals and Consents			25
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER			25
9.1 Representations/Warranties			25
9.2 Opinion of Buyer’s Counsel			25
9.3 Action/Proceeding			26
9.4 Pre-Closing Confirmations			26

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9.5 Extraordinary Liabilities/Obligation			26
9.6 Approvals and Consents			26
10. ADDITIONAL AGREEMENTS			26
10.1 Termination Prior to Closing			26
10.2 Post-Closing Access to Information			27
10.3 Press Releases			27
11. INDEMNIFICATION			27
11.1 Indemnification by Seller			27
11.2 Limitations/Seller			28
11.3 Indemnification by Buyer			29
11.4 Limitations/Buyer			29
11.5 Indemnification Procedure			29
11.6 Survival of Representations			30
11.7 Indemnity Notice; Fault			30
11.8 Exclusive Remedy			31
12. GENERAL			31
12.1 Interpretation			31
12.2 Schedules			32
12.3 Consented Assignment			32
12.4 Consents, Approvals and Discretion			33
12.5 Expenses; Legal Fees and Costs			33
12.6 Choice of Law; Arbitration			33
12.7 Benefit Assignment			34
12.8 Accounting Date			34
12.9 No Third-Party Beneficiaries			34
12.10 Waiver of Breach			34
12.11 Notices			34
12.12 Severability			35
12.13 Gender and Number			35
12.14 Divisions and Headings			35
12.15 Time of Essence			36
12.16 Confidentiality			36
12.17 Entire Agreement/Amendment			36
12.18 Drafting			36
12.19 Incorporated Reference			37

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (“Agreement”) is made and entered into as of December 30, 2004, by and among EDGEWOOD MANOR OF LUCASVILLE, INC., EDGEWOOD MANOR OF LUCASVILLE II, INC., EDGEWOOD MANOR OF WELLSTON, INC., EDGEWOOD MANOR OF WESTERVILLE, INC., and EDGEWOOD MANOR OF GREENFIELD, INC., each of which is an Ohio corporation, (collectively, as “Seller”) and RE LUCASVILLE I, INC., RE LUCASVILLE II, INC., RE WELLSTON, INC., RE WESTERVILLE, INC., and RE GREENFIELD, INC., (collectively as “Buyer”).

WITNESSETH:

     WHEREAS, Seller owns buildings that are nursing homes (the “Nursing Home”) and the related real estate as described on Exhibit A, (the “Premises”);

     WHEREAS, Seller currently leases the Premises to Tandem Health Care of Ohio, Inc., an Ohio corporation (“Tandem Ohio”), pursuant to that certain Assignment of Leases, dated March 1, 2000 (the “Assignment of Leases”), by and among Tandem Ohio, Sellers and the following “Renacci” parties: James Renacci (“Renacci”), LTC Management of Lucasville, Inc., LTC Management of Lucasville II, Inc., LTC Management of Westerville, Inc., LTC Management of Greenfield, Inc. and LTC Management of Wellston, Inc.;

     WHEREAS, the respective boards of directors, and shareholders of Seller have determined that it is in the best interest of Seller to sell the Assets (as defined in Section 1.1) 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) (collectively, the “Assets”): (i) fee simple absolute title to the real property described in Schedule 4.9 hereto, together with all improvements, buildings and fixtures located thereon or therein (collectively, the “Real Property”); (ii) all major, minor or other machinery, equipment, furniture, furnishings, appliances, signs and personal property located in, attached to or used in connection with Real Property owned by Seller including those listed on Schedule 4.9 hereto (the

“Personal Property”), if any; (iii) any books and records pertaining to the Warranties (as hereinafter defined), Licenses and Permits (as hereinafter defined), any Real Property or the operation of the Real Property (collectively, the “Books and Records”)); (iv) all written warranties and guaranties given to Seller made by or received from any person with respect to any building, building component, structure, fixture, machinery, equipment or material constituting part of the Real Property (collectively the “Warranties”); (v) (a) any preliminary, final or proposed building plans or specifications (including “as-built” plans and drawings) and plans and specifications for improvements, structures and fixtures, (b) existing surveys, architectural and structural drawings, and engineering, soils, seismic, environmental, geologic and architectural reports, studies and tests relating to the Real Property and (c) lock combinations, keys, operating manuals and technical data relating to the Real Property or any Personal Property ((a), (b) and (c) collectively, the “Reports and Plans”); and (vi) the Assignment of Leases, the Original Leases and all other agreements; (vii) all certificates of use or occupancy, zoning permits, building permits and other governmental permits, licenses, authorizations and approvals set forth on Schedule 4.5 (collectively, the “Licenses and Permits”) to the extent assignable, held by Seller relating to and/or necessary or useful for the lawful construction, the ownership, operation, management, use, occupancy, development and operations of the Nursing Home and the Assets (the “Assignable Licenses and Permits”). 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 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, except as otherwise permitted under this Agreement (all such liabilities, “Excluded Liabilities”).

2. FINANCIAL ARRANGEMENTS

2.1 Deposit/Purchase Price.

          2.1.1 Five thousand dollars ($5,000) has been paid to Seller by Buyer in cash in accordance with that certain Letter of Intent dated October 20, 2004 between Buyer and Seller as a good faith deposit in connection with the negotiation of this Agreement (the “Deposit”). Such Deposit shall be applied against the Purchase Price at Closing and shall not be refundable to Buyer; even in the event that this Agreement is terminated in accordance with Section 10.1.

          2.1.2 Subject to the terms and conditions hereof and subject to adjustment as set forth in Section 2.3, Buyer agrees to tender to Seller at Closing approximately ($15,161,627), (the “Purchase Price”), comprised of the following:

          (a) Estimated debt pay off (the “Bank Liabilities”) of $8,909,205, comprised as follows:

	(i)		Pay off of $8.6 Million National City loan in the amount of $6,966,200
	(ii)		Pay off of $4.0 Million National City loan in the amount of $3,384,800, reduced by $1,771,795 which constitutes the portion of such obligation being paid directly by Tandem Ohio to National City and excluded from the Purchase Price (the “Tandem Loan Portion”);
	(iii)		Early termination of swap contract liability in the amount of $330,000

	(b)		Estimated tax liability (the “Tax Liability”) of $2,902,422;
	(c)		Option fee (the “Option Fee”) of $2,000,000; and
	(d)		Subject to Section 2.3.3 herein, the lease termination premium (the “Lease Termination Premium”) of $1,250,000, based upon a Closing date of March 1, 2005.;

          2.1.3 The Purchase Price will be paid at Closing in cash or certified check for the Bank Liabilities, Tax Liability, the Option Fee, the Lease Termination Premium and the Rent Arrearages; provided, however that Tandem shall be given credit toward the payment of the Purchase Price in the amount of (1) $5,000 for the Deposit; and (2) lease deposits (the “Lease Deposits”) in the amount of $308,883.

          2.1.4 Buyer shall also tender to Seller at Closing the amount of accrued interest on the Bank Liabilities on and as of Closing (the “Accrued Interest”).

          2.1.5 Buyer shall also tender to Seller at Closing the Rent Arrearages and December Rent as set forth on Schedule 2.1.5.

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 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.

          2.3.1 The Bank Liabilities shall be adjusted to reflect the actual liability on and as of the Closing Date.

          2.3.2 The Tax Liability is based upon (and shall include) Seller’s accountant’s estimate of taxable gain on the $15,161,627 Purchase Price as of a December 31, 2004 Closing (i.e., the actual Purchase Price “grossed-up” to include all taxes on the transaction), and such amount shall be adjusted to reflect the “estimate” as of the actual Closing, subject to verification by Buyer’s accountants and, to the extent necessary, there will be a final computation of the precise amount of such liability within thirty (30) days after the Closing, based upon the “grossed-up” Purchase Price. The parties acknowledge and agree that it is their intent that the Purchase Price include all federal, state and local tax liabilities of any kind or nature incurred by Seller and/or its shareholders in connection with (and only in connection with) the consummation of the transactions contemplated hereby. The computation of the Tax Liability to be reimbursed by Buyer hereunder shall not include any net operating or capital loss carry forward, inter-company transfers or payments which Seller or its shareholders may possess with respect to any matter that is not directly related to the transaction contemplated herein. Any dispute regarding computation of the tax liabilities will be conclusively resolved by an independent certified public accountant reasonably acceptable to Seller and Buyer and the fees charged by the certified public accountant will be borne by the parties in the proportion that the computation by such party’s accountant shall be proven to be incorrect. For example, if Seller states that the tax reimbursement amount is $3,400,000 and Buyer states it is $3,000,000 but the certified public accountant states that the amount is $3,300,000, Seller shall pay 25% of the certified public accountant fees and Buyer shall pay 75%; if the certified public accountant determined that the amount is $3,500,000, the entire fee shall be borne by Buyer.

          2.3.3 Should the Closing occur prior to March 1, 2005, the Lease Termination Premium shall be increased as follows: by $50,000 to $1,300,000 if the Closing occurs on or after February 1, 2005 but before March 1, 2005, and by $100,000 to $1,350,000 if the Closing occurs on or after December 15, 2004 but before February 1, 2005, and the Purchase Price shall be increased accordingly.

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 March 1, 2005, such date to be determined based upon the timing of financing for the transaction, 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”); provided, however, that the Closing shall not occur on December 24-26, 2004 and provided that if Closing is to occur on January 1, 2005, the parties shall use their best efforts to have all documents executed and Closing deliverables exchanged before December 30, 2004. The Closing shall be effective as of 12:01 a.m. then prevailing Eastern time on the date following the Closing (the “Effective Time”).

3.2 Prorations.

     Except as set forth in Section 2.3, there shall be no other offsets, deductions, prorations or purchase price adjustments of any kind or nature. The parties acknowledge and agree that it is their intent that, after the payment by Seller of the final Bank Liabilities and the final Tax Liability, and after the payment to Seller of the Reimbursable Selling Expenses, Seller shall receive the Option Fee plus the Lease Termination Premium, in full, subject to no further or additional offsets, deductions, prorations or purchase price adjustments, provided that such total amount shall include the Deposit, and provided further that Seller shall be obligated to pay the Non-Reimbursable Selling Expenses (as defined in Section 11.5).

3.3 Actions of Seller at Closing.

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

          3.3.1 Deeds, duly executed, containing limited warranty of title substantially in the form attached hereto as Exhibit B, sufficient to vest in Buyer (or its nominee or assignee) full legal and equitable fee simple title to the Real Property, subject only to the liens and encumbrances permitted herein;

          3.3.2 General Bill of Sale and Assignment of Contracts, in substantially the form attached as Exhibit C (the “Bill of Sale”), duly executed by Seller, conveying to Buyer good and valid title to the tangible assets which are part of the Assets including the Warranties, Reports and Plans, Books and Records, Licenses and Permits and the Personal Property owned by Seller and any unpaid casualty claims or losses (if any) and unpaid condemnation awards or damages, if any, which title shall be free and clear of all liens, security interests, pledges, options, restrictions, encumbrances, and defects in title, except for current taxes not yet due and payable and except as provided or permitted herein;

          3.3.3 A FIRPTA Affidavit, substantially in the form attached hereto as Exhibit D;

          3.3.4 All documents required by this Agreement or the Title Company (as defined herein), which are reasonably necessary in order for the Title Company to issue the Title Policy to Buyer in accordance with this Agreement, including without limitation the Seller’s

affidavit prepared by the Title Company, provided such affidavit or other documents are in form acceptable to Seller in Seller’s reasonable discretion;

          3.3.5 A payoff letter with wire instructions setting forth the amount required to be paid in order to satisfy in full as of Closing any and all mortgages, including the Bank Liabilities, that encumber the Real Property;

          3.3.6 All Books and Records;

          3.3.7 All Licenses and Permits;

          3.3.8 All Reports and Plans

          3.3.9 All keys to the Real Property and Personal Property in possession of Seller;

          3.3.10 A duly executed counterpart of any certificates, affidavits, disclosures and reports required by applicable state and local law in connection with the conveyance of the Assets to Buyer;

          3.3.11 Copy of resolutions duly adopted by the respective boards of directors, and 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;

          3.3.12 Certificate of the President of Seller, 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;

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

          3.3.14 Certificates of Good Standing of Seller from the Ohio Secretary of State, dated no earlier than ten (10) business days prior to Closing;

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

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

          3.3.17 The cancellation and termination of any existing lease of the Real Property; and

          3.3.18 Such other instruments and documents, including consents to assignments of the Assignable Licenses and Permits, as Buyer reasonably deems necessary to effect the transactions contemplated hereby.

3.4 Actions of Buyer at Closing.

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

          3.4.1 The Purchase Price in same-day funds, less the Deposit;

          3.4.2 The payment of all accrued but unpaid rents and any and all other payments due Seller pursuant to the Original Leases (collectively, “Rent”). Rent will be prorated if the Closing takes place after January 1, 2005, but will not be prorated if the Closing takes place on or before January 1, 2005.

          3.4.3 The Accrued Interest in same-day funds;

          3.4.4 Copies of resolutions duly adopted by the respective boards 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;

          3.4.5 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;

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

          3.4.7 Certificates of Good Standing of Buyer from the Ohio Secretary of State, dated no earlier than ten (10) days prior to Closing;

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

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

          3.4.10 Payoff receipt evidencing payment by Tandem Ohio of the Tandem Loan Portion.

          3.4.11 Such other instruments and documents as are ordinarily required to effect the transactions that are reasonably 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 of several corporations duly organized, validly existing and in good standing 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 to own its properties and conduct its business in the place and manner now conducted.

4.2 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 organizational documents;

          4.2.3 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 will not create 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 or the Assets may be subject if such violation would have a material adverse affect on 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 or the Assets may be subject.

4.3 No Affiliates and FIRPTA.

          Except as set forth on Schedule 4.3, 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. Seller is not a foreign person within the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”).

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”). All persons who have any legal interest in the Assets, or whose joinder would be necessary to convey title to the Assets as required by this Agreement, are named herein as “Seller.”

4.5 Licenses and Permits.

          All Licenses and Permits held by Seller, as set forth on Schedule 4.5, are in full force and effect, unconditional, not currently under appeal, and not subject to appeal. Seller has previously delivered to Buyer true, correct and complete copies of all the Licenses and Permits. Except as otherwise provided herein, Seller holds all the Licenses and Permits in its own name, has not assigned them and has not received any notice that any of the Licenses and Permits may be suspended or not renewed or may not be assigned to Buyer.

4.6 Legal and Regulatory Compliance.

          Seller is in 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 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.

4.7 The Contracts.

          Other than the Original Leases (as defined in Section 5.5.2), the Assignment of Leases, and the National City loans described in Section 2.1(a)(i) and (ii) (the “National City Loans”), Seller is not a party to any contracts, commitments or agreements that affect the Assets.

4.8 Equipment.

          Attached hereto is a depreciation schedule as of fiscal year and December 31, 2004 (Schedule 4.8) by Nursing Home which lists all the Personal Property. Since the above-referenced date, Seller has not sold or otherwise disposed of any item of Personal Property constituting any part of the Assets. To Seller’s knowledge, all of the Assets consisting of the Personal Property are adequately maintained and in functional condition, except for reasonable wear and tear. Seller has good and valid title to such Personal Property Personal Property.

Seller will convey to Buyer at Closing all of Seller’s interest in all Personal Property free and clear of any lien or security interest or other encumbrance.

4.9 Real Property.

          Seller is vested with full legal and equitable fee simple absolute title to the Real Property. The legal description of the Premises is described in Schedule 4.9 hereto. The Real Property will be conveyed to Buyer at Closing by special 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) easements, conditions, or restrictions of record provided that none of the foregoing are violated by any existing improvements or the present use thereof; (iii) dedicated streets, roads, and rights-of-way; (iv) all applicable zoning and other laws which do not interfere with existing use; (v) matters disclosed on the Survey (as defined in Section 7.2) and (vi) other matters on the Title Commitment (as hereinafter defined) to which Buyer does not object. The Real Property comprises all of the real property necessary to operate the nursing home on the Premises.

          4.9.1 Seller has good, indefeasible and insurable fee simple absolute title to each parcel of Real Property, free and clear of any and all mortgages, liabilities, liens, charges, claims, collateral assignments, tenancies, leases, attachments, levies, judgments, easements, reservations, encroachments, pledges, rights-of-way, equities, restrictions, encumbrances, rights of first refusal, options to acquire, assessments, security interests, defects in title 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;

          4.9.2 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;

          4.9.3 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 or any utilities, sewers, roadways or other public improvements;

          4.9.4 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;

          4.9.5 The Real Property 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;

          4.9.6 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;

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

          4.9.8 There are no parties other than Tandem Ohio or its sublessee thereto in possession of the Real Property or any portion thereof as managers, lessees, tenants, or trespassers and the Real Property is not subject to any lease, license, form of use or occupancy agreement other than the Assignment of Leases to Tandem Ohio and any sublease by Tandem Ohio;

          4.9.9 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;

          4.9.10 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 located on the Premises. 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;

          4.9.11 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 buildings or improvements on the Premises that would adversely affect the insurability of the nursing home located on the Premises, or (ii) requesting the performance of any demolition, repairs, alteration or other work with respect to the nursing home located on the Premises;

          4.9.12 Seller has no knowledge and Seller has not received a notice of any public improvements which have been ordered to be made and/or which have not heretofore been assessed, and there are no special, general or other assessments pending, threatened against, affecting or to affect the buildings or improvements on the Premises; and

          4.9.13 No public or private nuisance condition concurrently exists or has existed prior to the date hereof on, or with respect to, the Real Property.

          4.9.14 Notwithstanding anything contained in this Agreement to the contrary, Seller shall have no obligation or liability (whether arising through representation, warranty or otherwise) regarding any lien, encumbrance, condition or other matter that either (a) was created

by or on behalf of Buyer or a related entity of Buyer, or (b) arose in connection with Buyer’s or a related entity of Buyer’s obligations under its lease of the Premises or any assignment of same.

4.10 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.

4.11 Insurance.

          Schedule 4.11 sets forth a true and complete list of all insurance policies or self-insurance funds of any nature whatsoever maintained by Seller, if any, 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.

4.12 No Employee Benefit Plans.

          None of the Assets is an asset, and the funds used by Seller to acquire the Assets were not assets, of any “employee benefit plan” within the meaning of the Employee Retirement Income Security Act of 1974, as amended, or of any entity the underlying assets of which constitute “plan assets” of one or more of such plans under applicable U.S. Department of Labor regulations.

4.13 No Employees and Employee Relations.

          Seller does not currently have, and since 1997 has not had any employees.

4.14 Litigation or Proceeding.

          There are no claims, judgments, orders, suits, actions, garnishments, attachments or proceedings of any nature by or before any court, commission, board or other governmental body pending, or to the knowledge of Seller threatened, which involve or affect, or could involve or affect: (a) the Assets, (b) the legal use of the Assets, (c) Seller’s title to the Assets, (d) the validity or enforceability of this Agreement, (e) any risk of any judgment or liability being imposed upon Seller which could materially adversely affect the financial condition of Seller or Seller’s ability, power or right to observe or perform fully its agreements and obligations hereunder, including without limitation the conveyance of the Assets to Buyer. Seller has filed a claim under a valid and adequate insurance policy for each and every matter contained in the Litigation (which insurance policy shall not require any deductible or other payment in connection with the filing, performance or payment of each such claim), if any, and each such

claim has been accepted by the applicable insurance company and the proper defense of such claim has been tendered at the sole cost and expense of such insurance company (including the cost of all attorneys’ fees).

4.15 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