Asset Purchase Agreement (2006)Full Document 

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                            ASSET PURCHASE AGREEMENT

      This Asset Purchase Agreement (the "AGREEMENT") is entered into as of
January 31, 2006 by and among Skilled Healthcare Group, Inc., a Delaware
corporation, (the "PURCHASER"), each of the entities listed on SCHEDULE 2.1
hereto (individually, a "COMPANY" and collectively, the "COMPANIES"), M. Terence
Reardon and M. Sue Reardon individually and, as Trustees of the M. TERENCE
REARDON TRUST U.T.A. dated 6/26/2003 and M. Sue Reardon and M. Terence Reardon,
as Trustees of the M.SUE REARDON TRUST U.T.A. dated 6/26/2003 (together the
"BENEFICIAL OWNERS," and together with the Companies, the "SELLERS"). The
parties acknowledge that the Purchaser may assign its rights hereunder to one or
more Affiliates, and references herein to "Purchaser" shall include any such
assignees.

                                  INTRODUCTION

      The Beneficial Owners collectively own all of the outstanding membership
and equity interests (the "EQUITY INTERESTS") of the Companies. The Sellers wish
to sell, and the Purchaser wishes to buy, substantially all of the assets of the
Companies, on the terms and conditions set forth herein. The Beneficial Owners
are the direct and indirect owners of the Companies, will derive substantial
benefits from such sale and purchase, and wish to cause such sale and purchase
to be consummated. Such sale and purchase and each other related transaction
referred to herein are sometimes collectively referred to herein as the
"TRANSACTIONS".

      This Agreement is being made contemporaneously with the Consulting
Agreement between Carmel Hills Healthcare and Rehabilitation Center, LLC., a
Delaware limited liability company; Holmesdale Healthcare and Rehabilitation
Center, LLC, a Delaware limited liability company; Liberty Terrace Healthcare
and Rehabilitation Center, LLC, a Delaware limited liability company; Purchaser;
Sunset Healthcare, Inc., a Missouri corporation; and, with respect to certain
sections only, Edward J. Reardon (the "CONSULTING AGREEMENT").

      An index of defined terms used herein is set forth in ARTICLE 10.

      NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

                                   ARTICLE 1.
                           THE TRANSACTIONS; CLOSING

      1.1   PURCHASE AND SALE OF PURCHASED ASSETS. In reliance upon the
representations and warranties contained herein, and subject to the terms and
conditions hereof, each of the Companies shall sell, convey, transfer, assign
and deliver to the Purchaser at the Closing (as hereinafter defined), free and
clear of all liens, security interests, deeds or indentures of trust, mortgages,
encumbrances and restrictions, all of its assets and properties of every kind,
nature and description except as otherwise provided below (all of such assets
being referred to herein as the "PURCHASED ASSETS"), including without
limitation the following assets of the Companies:

            (a)   all Owned Property (as defined);

            (b)   all tangible assets, including without limitation machinery
and equipment, furniture, office equipment, leasehold improvements, fixtures and
other improvements on real estate (collectively, the "IMPROVEMENTS"), and all
inventories (including without limitation linens and purchased parts and
supplies);

            (c)   originals or duplicate copies of all financial, accounting and
operating data and records, including without limitation all books, records,
notes, sales and sales promotional data, advertising materials, credit
information, cost and pricing information, customer and supplier lists, business
plans, projections, reference



catalogs, payroll and personnel records to the extent allowed by law, and other
similar property, rights and information;

            (d)   all Company Intellectual Property (as hereinafter defined) to
the extent assignable or transferable; and

            (e)   all rights under all leases, license agreements, contracts,
agreements, sale orders, purchase orders, open bids and other commitments, but
only to the extent they pertain to the operating contracts specifically assumed
by the Purchaser under the Operations Transfer Agreement (the "ASSUMED OPERATING
CONTRACTS").

      1.2   EXCLUDED ASSETS. Notwithstanding the foregoing, the Companies shall
not transfer to the Purchaser, and the Purchased Assets shall not include (i)
the Companies' rights under this Agreement; (ii) cash, (iii) accounts
receivables, (iv) any contracts other than the Assumed Operating Contracts and
(v) any assets set forth on SCHEDULE 1.2 (collectively, the "EXCLUDED ASSETS").

      1.3   PURCHASE PRICE.

            (a)   The term "PURCHASE PRICE" means an aggregate of Thirty-One
Million Dollars ($31,000,000).

            (b)   At the Closing, Seller has and will transfer to Purchaser good
and marketable fee simple title to all Owned Real Property free and clear of all
encumbrances, except for (i) minor liens which in the aggregate are not
substantial in amount, do not materially detract from the value or
transferability of the property or assets subject thereto or interfere with the
present use and have not arisen other than in the ordinary course of business,
and (ii) those items listed on Schedule 1.3(b) (collectively "PERMITTED
ENCUMBRANCES").

            (c)   PAYMENT AT SIGNING. Upon the execution of this Agreement by
all of the parties, an earnest money deposit in the amount of Five Hundred

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