EX-10.3 PURCHASE AND SALE AGREEMENT

 

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                                                                    EXHIBIT 10.3

                                                                             

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                            PURCHASE AND SALE AGREEMENT

                              (Oakridge, Tennessee)

                                                                              

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         This Purchase and Sale Agreement (the "Agreement") is made this 5th day

of July, 2005, by and between OSBORNE & WILSON DEVELOPMENT CORP., INC., an

Arkansas corporation authorized to do business in the State of Tennessee

(hereinafter "Seller"), and DIVERSICARE LEASING CORP., a Tennessee corporation

(hereinafter "Buyer ").

 

                              W I T N E S S E T H :

 

         WHEREAS, Seller is the owner of a 120 bed nursing care facility with an

address of 100 Elmhurst Drive, Oakridge, Tennessee 37830, and the furnishings

and equipment therein owned by Seller; and

 

         WHEREAS, Seller is currently leasing the nursing care facility to

Buyer, under a Lease Agreement (With Option to Purchase) dated on or effective

as of July 7,1989, between Seller, as the lessor therein, and Diversicare

Corporation of America ("DCA"), as the original lessee therein, as amended by

Addendum to Lease Agreement dated April 30, 1992, and Second Addendum to Lease

Agreement dated September 10, 1993 (the "Lease"), which was assigned by DCA to

and assumed by Buyer pursuant to an Assignment and Assumption of Lease dated May

10, 1994; and

 

         WHEREAS, Buyer is the current licensed operator of the nursing care

facility and is operating the same; and

 

          WHEREAS, Seller and Buyer have agreed that Seller shall sell and Buyer

shall purchase the nursing care facility upon terms and conditions herein

contained herein and at the closing the Lease shall terminate.

 

         NOW THEREFORE, in consideration of the mutual covenants herein

contained and intending to be legally bound hereby, the Seller and Buyer

covenant and agree with each other as follows:

 

         1. SALE.

 

                  Seller agrees to sell to Buyer and Buyer agrees to purchase

from Seller upon the terms and conditions contained herein the following (the

"Facility"):

 

                  (i) All of Seller's right, title, and interest in and to the

         real property with a street address of 100 Elmhurst Drive, Oakridge,

         Tennessee 37830, and more particularly described in EXHIBIT A attached

         hereto ("Land"), together with the improvements thereon consisting of a

         120 bed nursing care facility ("Building"), landscaping, fencing,

         paving and surfacing thereon (collectively the "Real Property");

 

                  (ii) All of Seller's right, title and interest in and to all

         equipment (whether movable or attached to the Facility), personal

         property, furniture, fixtures, office

 

 

 

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          equipment, diagnostic equipment apparatus, medical equipment,

         inventory, rugs, carpeting and drapes located therein that are owned by

         Seller and used in the operation and maintenance of the nursing home

         facility ("Personal Properly"').

 

                  (iii) To the extent they exist in Seller's name, all equipment

         leases, maintenance contracts, service contracts, suppliers contracts,

         leases, subleases, sublicenses, concessions and any other contracts

          listed on the attached EXHIBIT B ("Contracts"), and Buyer shall assume

         all obligations thereunder owing.

 

                  (iv) To the extent they exist in Seller's name and are

         assignable, all licenses, approvals, certificates of need,

         determinations of need, franchises, accreditation's, waiver beds,

         certificates, certifications, consents, permits and other

         authorizations benefiting, relating to or affecting the operation of

         the Facility or the operation of programs in connection with the

         Facility issued by or entered into with any third party payor program

         or accreditation body or any governmental unit or political subdivision

         (whether federal, state, county, district, municipal, city or

         otherwise, whether now or hereafter in existence) or any agency

         authority, body, board, commission, court, instrumentality, legislature

         or office thereof or created thereby, and all renewals, replacements

          and substitutions therefore ("Permits").

 

                  (v) All of Seller's right, title and interest in and to the

         name "Briarcliff Health Care Center" and any usage or derivative

         thereof.

 

         2. PURCHASE PRICE.

 

         Buyer agrees to pay for the purchase of the Facility and Seller agrees

to accept for the sale of the Facility the sum of Six Million Six Hundred

Thousand Dollars ($6,600,000.00), based upon $55,000 for each of the 120 nursing

beds, plus the rental that would have been owed and paid to Seller under the

Lease from the date of closing until December 31, 2005 had the Lease not been

canceled at closing ("Purchase Price").

 

         3. DEPOSIT.

 

         Within seven (7) days after the identification and approval of the

Title Company pursuant to Paragraph 5 hereof, Buyer will deliver a check in the

amount of Fifty Thousand Dollars ($50,000.00) as earnest money deposit (the

"Deposit") to the offices of the Title Company which shall act as escrow agent

("Escrow Agent") for the purposes of holding the Deposit under this Agreement.

The Deposit shall be held by the Escrow Agent and applied against the Purchase

Price at Closing unless paid to Seller or refunded to Buyer as otherwise

provided for in this Agreement.

 

         4. WARRANTY OF TITLE.

 

         (a) Seller warrants and represents that it owns the fee simple and

merchantable title to the Real Property, subject only to the Permitted

Exceptions (as defined herein), and the Personal Property.

 

         (b) Seller warrants and represents to Buyer that it shall convey to

Buyer at Closing title to the Facility as follows:

 

 

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                  (i) Title to Real Property shall be conveyed in fee simple by

         Warranty Deed, shall be good and marketable and free and clear of all

         liens, encumbrances or other matters affecting title, other than the

         Permitted Exceptions (as defined herein), and an Owner's title

         insurance policy for the full amount of the Purchase Price will be

         issued to Buyer at the Closing, which policy shall show and insure that

         legal title will be vested in Buyer subject only to the Permitted

         Exceptions.

 

                  (ii) Title to the Personal Property shall be conveyed by Bill

         of Sale free and clear of all liens, security interests and other

         encumbrances except as otherwise specified herein.

 

                  (iii) Seller's rights in the Contracts shall be transferred by

         an assignment with Buyer assuming Seller's obligations thereunder.

 

                  (iv) All of Seller's rights in the Permits, if any, shall be

         transferred by an assignment or other appropriate document.

 

         5. TITLE COMMITMENT AND SURVEY.

 

         (a) Within twenty (20) days of the execution hereof, Seller, at

Seller's expense, shall cause a nationally recognized title insurance company

reasonably acceptable to Buyer (the "Title Company") to issue and deliver to

Seller and Buyer a current commitment for title insurance ("Title Commitment")

dated on or after the effective date of this Contract, binding the title company

to issue an owner's policy of title insurance ("Owner's Title Policy") to Buyer

at Closing in the amount of the Purchase Price, and setting forth all matters

affecting title to the Property, together with copies of any recorded documents

referenced in or constituting exceptions under the Title Commitment. The Title

Commitment shall provide that the title policy, when issued, will have all

standard printed exceptions removed and will provide for such coverages and

endorsements as may be reasonably required by Buyer. Seller shall deliver at

Closing all affidavits, certificates or other documentation required by the

Title Company to issued the title policy as herein contemplated. Buyer, at

Buyer's expense, shall have the benefit of a simultaneous issue mortgagee title

policy for any lender of Buyer placing a deed of trust on the Facility in

connection with its purchase by Buyer. At Closing, Seller shall pay the cost of

the Owner's Title Policy up to the amount of the Purchase Price. Buyer shall be

responsible and pay for the cost of any mortgagee policy for Buyer's lender and

the costs of any endorsements or affirmative coverages required by Buyer or its

lender.

 

         (b) Within thirty (30) days after the execution hereof, Seller, shall

cause to be prepared and delivered to Buyer and the Title Company a current

as-built survey ("Survey") of the Real Property and improvements certified as to

a date after the effective date of this Contract prepared by a registered

professional surveyor acceptable to Seller, Buyer and the Title Company

("Surveyor"). The Survey shall be prepared in conformity with the Minimum

Standard Detail Requirements for an ALTA/ACSM Land Title Survey for improved

real property as adopted by ALTA, ACSM and NSPS in 1999 and including such Items

of Table A thereof as Buyer may request. The Survey shall be certified to the

Title Company, Seller, Buyer and Buyer's lender and shall include a Surveyor's

certificate in form and substance reasonably satisfactory to Seller, Buyer, the

Title Company and Buyer's lender. The Survey shall reflect the property boundary

lines, the location and existence of all improvements thereon, any easements and

any boundary line encroachments. The metes and bounds description of the Land

reflected in the Survey as approved by Buyer pursuant to Section 3(c) below

shall be substituted for the description of the Land set forth in EXHIBIT A

hereto and shall be included in the deed to be

 

 

 

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delivered at Closing. The Survey shall be sufficient in form and content to

remove the standard printed survey exceptions from the Owner's Title Policy to

be issued to Buyer at Closing. Seller shall pay for the cost and expense of the

Survey up to the amount of $4,620; Buyer shall pay and be responsible for the

cost and expense of the Survey, if any, in excess of such amount.

 

         (c) Buyer shall provide Seller with written notice of any objections to

matters set forth in the Title Commitment and/or Survey within fifteen (15) days

after receipt of the Title Commitment and Survey, whichever is last. All matters

set forth in the Title Commitment and Survey not objected to by Buyer shall be

deemed approved and shall constitute a permitted exception ("Permitted

Exceptions").

 

         (d) Seller shall within five (5) days after receipt of such notice from

Buyer, notify Buyer in writing either (i) that Seller is unable to correct such

unacceptable matters, or (ii) that Seller, at its sole cost and expense, shall

undertake promptly to eliminate or modify all such unacceptable matters to the

reasonable satisfaction of Buyer. In the event Seller elects (ii) above, Seller

agrees to use its best effort to satisfy promptly any such objections at its

sole cost and expense prior to the Closing Date. If required, Seller shall be

entitled to a reasonable adjournment of the Closing (not to exceed thirty (30)

days) for the purpose of satisfying such objections. In the event Seller is

unable, with the exercise of due diligence, through the payment of money or

legal proceedings, to satisfy said objections within thirty (30) days after said

notice from Buyer, Buyer may, at its option, either (i) accept title subject to

the objections raised by Buyer, with an adjustment in the Purchase Price

acceptable to both Buyer and Seller, in which event said objections shall be

deemed to be waived for all purposes or (ii) terminate this Agreement, whereupon

this Agreement shall be no further force and effect, the Deposit shall be

refunded to Buyer, and neither party shall have any further liability hereunder.

 

         (e) Seller shall discharge (or otherwise cause to be deleted) all

monetary liens and mechanic's and materialmen's liens against the Property at or

prior to Closing.

 

         6. CLOSING.

 

         (a) The closing and settlement ("Closing") shall take place on or

before August 31, 2005 ("Closing Date") at the offices of the Title Company or

at such other place as the parties agree.

 

         (b) At Closing, Seller shall deliver the executed documents required of

it hereunder for the conveyance and Closing.

 

         (c) At Closing, Buyer shall pay the Purchase Price and deliver the

executed documents required of it hereunder for the purchase and Closing.

 

         7. CONDITION PRECEDENT.

 

         This entire Agreement and the obligations of Buyer to purchase the

Facility shall be contingent upon the occurrence of all of the following events

(collectively, the "Contingencies"):

 

                  (i) Buyer shall approve the condition of title of the

         Facility; and

 

                  (ii) Buyer shall have received prior to closing from the

         applicable governmental authorities approval of the transfer of the

         Facility, if required, and the

 

 

 

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         issuance of the appropriate licenses and permits for the occupation and

         operation by Buyer of the Facility as a nursing care facility

         (collectively the "Approvals").

 

         8. ADMINISTRATION/MANAGEMENT.

 

         Seller shall have no obligation for the management or operation of the

Facility up to the Closing nor liable for any costs thereof or liabilities

arising therefrom. At and after Closing, Buyer shall be responsible for the

operation of the Facility without any liability to Seller.

 

         9. RESPONSIBILITIES AND INDEMNIFICATION AS TO LIABILITIES.

 

         (a) Buyer, upon Closing, shall indemnify and hold harmless Seller and

its officers, directors, members, shareholders, employees, agents and

controlling persons against any and all claims, demands, suits, damage,

liability, loss and expense, including, without limitation, reasonable

attorneys' fees (collectively "Losses"), which Seller may sustain or suffer or

to which Seller may become subject as a result of: (i) events which occurred

prior or subsequent to Closing arising out of the conduct of Buyer, its agents,

employee or guests and for which Buyer is liable, (ii) any misrepresentation,

breach of warranty, or non fulfillment of any agreement on the part of Buyer

under this Agreement or any other agreement used in the Closing, (iii) any,

breach or non fulfillment by of any term. covenant or provision of the Contracts

arising out of conduct of Buyer occurring prior to the Closing Date for which

Buyer is liable, and (iv) any misrepresentation in or omission from any

certificate or other instrument furnished or to be furnished by Buyer to Seller

hereunder. This indemnification shall be in addition to any indemnification owed

by Buyer to Seller under the Lease.

 

          (b) Seller, upon Closing, shall indemnify and hold harmless Buyer and

its officers, directors, members, shareholders, employees, agents and

controlling persons against any Losses which Buyer may sustain or suffer or to

which Buyer may become subject as a result of (i) events which occurred prior to

Closing arising out of the conduct of Seller for which Seller is liable, (ii)

any misrepresentation, breach of warranty, or non fulfillment of any agreement

on the part of Seller under this Agreement or any other agreement used in the

Closing, (iii) any, breach or non fulfillment by of any term, covenant or

provision of the Contracts arising out of conduct of Seller occurring prior to

the Closing Date for which Seller is liable, and (iv) any misrepresentation in

or omission from any certificate or other instrument furnished or to be

furnished by Seller to Buyer hereunder. This indemnification shall be in

addition to any indemnification owed by Seller to Buyer under the Lease.

 

         (c) The indemnity provisions of the Lease shall survive Closing.

 

         10. SELLER'S REPRESENTATIONS AND WARRANTIES.

 

         (a) Seller represents and warrants and covenants to Buyer as of the

execution of this Agreement and as of the Closing that:

 

                  (i) Seller is a duly organized and validly existing

         corporation and is in good standing under the laws of the State of

         Tennessee.

 

                  (ii) Seller is the owner of the Facility and has the requisite

         power and authority to own the Facility, and further has the power and

         authority to sell and dispose of the Facility upon the terms and

         conditions herein contained.

 

 

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                  (iii) The execution, delivery, and performance of this

         Agreement by Seller and the consummation of the transactions

         contemplated hereby will not violate the Articles of Incorporation or

         By-Laws of Seller, nor any indenture, mortgage, deed of trust or other

         instrument or agreement or any order, judgment or decree to which

         Seller is subject that will not be satisfied at or prior to closing.

 

                  (iv) The shareholders and directors of Seller, have been

         notified of the proposed execution of this Agreement and all members of

         each group have consented to the transactions contemplated hereby as

         required in Seller's By-Laws.

 

                  (v) The information and data set forth herein and on all

         exhibits attached hereto are accurate and complete as of the date

         hereof.

 

                  (vi) Seller has not received notice of violation of any

         applicable law, ordinance, regulation, order or requirement relating to

         the Facility or the operation of the Facility that has not been

         remedied and to the knowledge of Seller there are no such claims or

         proceedings pending or threatened.

 

                  (vii) The Facility is, to Seller's knowledge, structurally

         sound and the mechanical, electrical, heating, air conditioning,

         drainage, sewer, water and plumbing systems are in proper working

         order.

 

                  (viii) From the date of this Agreement to the Closing, Seller

         shall not sell, transfer or encumber the Facility nor engage in any

         conduct which would damage the Facility or the operation thereof.

 

                  (ix) Seller is not to the best of its knowledge subject of any

         pending or threatened investigation, regulatory action, or litigation

         with respect to the Facility.

 

                  (x) Seller shall cooperate as necessary to bring about the

         consummation of the transactions contemplated by this Agreement.

 

                  (xi) Without the prior written approval of Buyer, Seller shall

         not, from the date hereof until the Closing Date: (i) make any material

         physical changes or material physical alterations to or upon the

         Facility or any part thereof, except as the result of an emergency or

         governmental order; (ii) enter into or extend any agreements affecting

         all or any part of the Facility that will survive the Closing Date

         (other than in the ordinary course of business); (iii) assign,

         transfer, convey, hypothecate, pledge, create a security interest in or

         lien upon the Facility, unless same shall be removed prior to

         Settlement, or (iv) grant any easement or right-of-way across the

         Facility that would (aa) materially-adversely affect the title to the

         Facility as it exists on the date hereof; except to cure title

         objections raised by Buyer, or (bb) restrict limit or prohibit in any

         materially-adverse respect Buyer's use of the Facility.

 

                   (xii) Seller shall cause the lessee under the Lease to

         maintain the Facility in its present order and condition (ordinary wear

         and tear and damage by casualty excepted) until the Closing Date.

 

                  (xiii) Seller shall cause the lessee under the Lease to

         maintain property damage insurance policies relating to the Facility,

         or any part thereof, in full force and effect until the Closing Date.

 

 

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                  (xiv) Seller shall provide Buyer, to the extent not previously

         received, with a copy of any written governmental notice received by

         Seller after the date hereof and prior to the Closing Date related to

         any violations of any federal, state or municipal laws, ordinances,

         orders, regulations and requirements affecting the Facility.

 

                  (xv) The Facility is duly licensed Nursing Home Facility with

         120 Medicaid certified residential care beds pursuant to applicable

         Tennessee law. Seller has not been subject to nor received notice of

         any inquiries, surveys, audits or investigative demands by any

         Governmental Authority which would result in a material change,

         suspension or revocation of the licenses and permits to operate the

         Facility.

 

                  (xvi) To the best of Seller's knowledge, the Facility is

         qualified for participation in the Medicare and Medicaid programs, has

         a current and valid provider contract with the Medicare and Medicaid

         programs, and any deficiencies or noncompliance issues, if any, when

         taken in the aggregate, would not result in a suspension or termination

         of the Facility's participation in the Medicare or Medicaid Programs.

 

                   (xvii) To the best of Seller's knowledge, (aa)the Facility is

         in substantial compliance with the conditions of participation in such

         program, (bb) Seller has not received notice from the Medicare and

         Medicaid programs of any pending or threatened investigations or

         surveys resulti