8-K: Current report filing

(1)	The purchase price (the "Property Purchase Price") for each Property of the American Entities is the amount set forth opposite the description of each Property on Exhibit A-1.

(2)

The purchase price (the "Interest Purchase Price") for all of the Interests of each American Entity is the amount set forth opposite that Entity’s name on Exhibit A-1, adjusted by the Adjustment Amount. The "Adjustment Amount" (which may be a positive or negative number) will be equal to the Adjusted Owners’ Equity (as defined below) minus the Target Owners’ Equity (as defined below). The "Target Owners’ Equity" is the amount set forth opposite that American Entity’s name on Exhibit A-1 calculated as set forth on Exhibit A-2 (which calculation excludes Optionors’ Assumed Liabilities and Essex Liabilities). The Interest Purchase Price for each American Entity set forth on Exhibit A-1 takes into account the fact that Omega will not be assuming Excess Omega Mortgage Loan Indebtedness as provided in Section 3(a).

(3)

On the Closing Date, after review and discussion with Omega, AHCC will deliver to Omega a balance sheet for each of the American Entities, the Interests in which are being acquired hereunder, prepared as of the close of business ("Effective Time") on the immediately preceding day ("Effective Date") reflecting the Adjusted Owners’ Equity thereof ("Effective Date Balance Sheet"). "Adjusted Owners’ Equity" means the Owners’ equity of an American Entity, calculated in accordance with GAAP consistent with the calculation of Target Owner’s Equity for each American Entity on Exhibit A-2, except that (i) no depreciation or amortization deductions will be taken into account after June 30, 2004 and (ii) any Optionors’ Assumed Liabilities and Essex Liabilities will not be treated as Liabilities of an American Entity. Debt amortization by the Company will increase Adjusted Owner’s Equity and is not to be treated under the preceding sentence as an amortization deduction to be disregarded for purposes of determining Adjusted Owners’ Equity.

(4)

On or before May 1, 2005, AHCC and Omega will meet to determine whether any adjustments should be made to the Effective Date Balance Sheets and the Adjusted Owners’ Equity of the various American Entities to correct any errors and to reflect changes in circumstances or facts unknown at the time of Closing to determine the "Final Adjusted Owners’ Equity" as of the Effective Date. If Omega and AHCC are not able to agree on whether any adjustments should be made, or the nature or the amount of such adjustments, within 10 business days of such date, then the issues in dispute will be submitted for resolution to a certified public accounting firm mutually agreeable to AHCC and Omega, which firm does not have, and has not had, any relationship with AHCC or Omega or any company directly or indirectly controlled by them (the "Accountants"). If AHCC and Omega cannot agree upon the identity of the Accountants they will each choose a certified public accounting firm and the firms chosen by them will mutually agree upon the selection of the Accountants. If issues in dispute are submitted to the Accountants for resolution, (i) each party will furnish to the Accountants such workpapers and other documents and information relating to the disputed issues as the Accountants may request and are available to that party (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the determination and to discuss the determination with the Accountants; (ii) the determination by the Accountants, as set forth in a notice delivered to both parties by the Accountants, will be binding and conclusive on the parties; and (iii) Omega and Optionors will each bear 50% of the fees of the Accountants for such determination.

(5)

If the Final Adjusted Owners’ Equity is less than the Adjusted Owners’ Equity, then the Optionors shall pay Omega the amount of such shortfall. If the Final Adjusted Owners’ Equity is greater than the Adjusted Owners’ Equity, then Omega shall pay the appropriate Optionor the amount of such difference. All payments will be made together with interest at six percent (6%) compounded annually beginning on the Closing Date and ending on the date of payment. Payments must be made by wire transfer of immediately available funds within five business days following the final determination of the Final Adjusted Owners’ Equity.

(1)

Assumed Liabilities. On the Closing Date AHCC will assign to Omega and the Optionees, and Omega and the Optionees will assume, the Essex Lease by executing and delivering an Assignment and Assumption substantially in the form of Exhibit V-1. If any American Entity transfers its assets to a successor that becomes an American Entity, the Interest in which is acquired by an Optionee, the predecessor will assign the Essex Lease to the successor, and the successor will assume the Essex Lease by executing and delivering an Assignment and Assumption substantially in the form of Exhibit V-2. If on the Closing Date, any Properties are purchased by any of the Optionees, the Optionees shall not assume and shall not agree to discharge any Liabilities with respect to the American Entities, the Optionors, or the Property, other than the Omega Mortgage Loan (as reduced by the Excess Omega Mortgage Loan Indebtedness that will be assumed by AHCC and the Leathermans pursuant to Section 3(a) of this Agreement) for that particular Property and any Essex Liabilities. If on the Closing Date any Interests are purchased by any of the Optionees, the applicable American Entity shall assign to, and the Optionors shall assume, all of the Liabilities with respect to that American Entity, other than the Omega Mortgage Loan, the Permitted Encumbrances (including the Essex Lease) and accrued income taxes (to the extent set forth on the Effective Date Balance Sheets) (the "Optionors’ Assumed Liabilities").

(2)

Retained Liabilities. If on the Closing Date, any Properties are purchased by any of the Optionees, the American Entity selling the Property shall retain all of its Liabilities, other than the Omega Mortgage Loan (as reduced by the Excess Omega Mortgage Loan Indebtedness that will be assumed by AHCC and the Leathermans pursuant to Section 3(a) of this Agreement) for that particular Property and the Permitted Encumbrances, including the Essex Lease (collectively, the "Optionor Retained Liabilities"). The Optionor Retained Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by the American Entity selling the Property. If on the Closing Date any Interests are purchased by any of the Optionees, the only Liability that will be retained by the applicable American Entity shall be the Omega Mortgage Loan for the Property held by such entity and accrued income taxes.

(3)

Tax Liens and Encumbrances. The foregoing does not mean that the American Entities must assign, or that the Optionors must assume, liability for real estate taxes and assessments that are not yet due and payable, as well as the restrictions and encumbrances reflected on Exhibit F; the Optionees will acquire the Properties subject to all liens for real estate taxes and assessments that are not yet due and payable, as well as the restrictions and encumbrances reflected on Exhibit F.

(1)	afford Omega and its representatives (collectively, "Omega Representatives") full and free access to each American Entity’s Properties (so long as such access does not violate the Essex Lease), contracts, books and records and other documents and data, and

(2)	furnish Omega and Omega’s Representatives with such additional financial, operating and other data and information relating to the American Entities or the Properties as Omega may reasonably request.

(1)	sell, assign, transfer, pledge or otherwise in any manner dispose of, mortgage or encumber any of the Properties other than as contemplated by this Agreement;

(2)

engage in any transactions or activities or incur any liability other than in the ordinary course of the conduct of the Business or fail to preserve intact the present business organization of the American Entities (the payment of a management fee by the American Entities to AHCC of not more than 5% of gross revenues will not be deemed to be outside the ordinary course of Business, but such management fee will be terminated at the Closing);

(3)	create or incur any indebtedness for borrowed money (including, without limitation, obligations in respect of capital leases) to any Person other than Omega or assume, guarantee or otherwise become responsible for the obligations of any other Person;

(4)	modify, terminate or breach the lease between Essex, AHCC and the American Entities dated October 30, 1997, as amended (the "Essex Lease") or any other material contract;

(5)	grant or extend any power of attorney or appoint any agent;

(6)	loan money or assets to any Person;

(7)	adopt any new method of accounting or change any existing method of accounting;

(8)	make any change to the Articles of Incorporation or Code of Regulations of any of the American Entities that are corporations, or the partnership agreements or certificates of partnership of any American Entities that are partnerships;

(9)	fail to maintain their books, accounts and records relating to the business of the American Entities in the usual, regular and ordinary manner consistent with past practice;

(10)

issue, sell or deliver, redeem or purchase, any of their Interests, or grant or enter into any options, warrants, rights, agreements or commitments to purchase or to subscribe to any Interest in an American Entity or any securities or obligations convertible into an American Entity Interest or make any other changes in the capital structure of an American Entity or amend any terms of any such equity securities or agreements;

(11)	enter into any lease, tenancy, contract or other commitment affecting any of the Properties;

(12)

sell, lease, transfer or otherwise dispose of capital assets, real, personal or mixed (except that an American Entity may transfer its assets to another entity that is wholly owned, directly or indirectly, by AHCC and the Leathermans so long as (i) the corporate formation documents (including articles of incorporation, codes of regulations and bylaws) for such other entities are pre-approved and reasonably acceptable to the Optionees and (ii) the successor entity becomes a party hereto as an additional American Entity the Property or Interests of which must be sold to Omega as provided herein if the Put is exercised);

(13)

acquire or agree to acquire by merging or consolidating with, or by purchasing the stock or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to any of the American Entities (except that an American Entity may transfer its assets to another entity that is wholly owned, directly or indirectly, by AHCC and the Leathermans so long as (i) the corporate formation documents (including articles of incorporation, codes of regulations and bylaws) for such other entities are pre-approved and reasonably acceptable to the Optionees and (ii) the successor entity becomes a party hereto as an additional American Entity the Property or Interests of which must be sold to Omega as provided herein if the Put is exercised);

(14)	waive or release any rights of material value, or cancel, compromise, release or assign any material indebtedness owed to it or any material claims held by it;

(15)	cancel, terminate or permit to lapse any material insurance policy or coverage naming it as a beneficiary or a loss payable payee without obtaining comparable substitute insurance coverage; or

(16)	fail to comply in all material respects with applicable Laws and contractual obligations.

(1)	conduct its operations consistently with the business practices that would be followed by a reasonably prudent business Person and in accordance in all material respects with all applicable Laws;

(2)	confer with the Optionees concerning operational matters of a material nature; and

(3)	maintain in all material respects consistent accounting methods and reporting.

(1)

its Property and Liabilities to a successor entity (including a deemed transfer for income tax purposes as a result of a termination or revocation by an American Entity of its qualified Subchapter S election under IRC §1361(b)(3)(B) and a transfer to an Optionor who transfers the Property to a successor entity), so long as the successor entity becomes a party hereto as an additional American Entity the Property or Interests of which must be sold to Omega as provided herein if the Put is exercised;

(2)	any of its assets other than the Properties to one or more of the Optionors; and

(3)	to one or more of the Optionors, and one or more of the Optionors may assume and agree to pay and discharge, any of the Liabilities of the American Entities, subject to Section 3(a).

(1)	If the Optionors exercise their Put, the Optionors shall cause the documents and instruments required by the Purchase Agreements and the following documents to be delivered (or tendered subject only to Closing) to Omega:

(i)	an authority opinion of Optionors’ counsel, dated the Closing Date, substantially in the form of Exhibit J attached;

(ii)	the articles of incorporation (or other applicable organizational documents) and all amendments thereto of each of the American Entities, duly certified as of a recent date by the Secretary of State of the jurisdiction of their incorporation;

(iii)

releases of all encumbrances on the Properties, other than the Omega Mortgage Loans and those encumbrances listed on Exhibit F;

(iv)

certificates dated as of a date not earlier than the fifth business day prior to the Closing as to the good standing of each of the American Entities, executed by the appropriate officials of the State of Ohio and each jurisdiction in which each of the American Entities is licensed or qualified to do business as a foreign corporation; and

(v)

a certificate (1) of the accuracy and truthfulness of Optionors’ representations and warranties in this Agreement as of the Closing Date and identifying any inaccurate or false representations or warranties (2) of the performance by Optionors of, or the compliance by Optionors with, any covenant or obligation required to be performed or complied with by Optionors pursuant to this Agreement.

(2)

If the Optionors exercise their Put, Omega shall cause the documents and instruments required by the Purchase Agreements and the following documents to be delivered (or tendered subject only to Closing) to the Optionors: (i) an authority opinion of Omega’s counsel, dated the Closing Date, substantially in the form of Exhibit K attached, and (ii) a certificate (a) of the accuracy and truthfulness of Omega’s representations and warranties in this Agreement as of the Closing Date and identifying any inaccurate or false representations or warranties and (b) of the performance by Omega of, or the compliance by Omega with, any covenant or obligation required to be performed or complied with by Omega pursuant to this Agreement.

(1)	to the Knowledge of the Sellers, there has not been any damage, destruction or other casualty loss (whether or not covered by insurance), condemnation or other taking affecting the Property of an American Entity;

(2)	there has not been any change in any method of accounting or accounting practice by an American Entity; or

(3)

except as set forth on Exhibit M, no American Entity has engaged in any of the activities prohibited by Section 3(d), provided that for purposes of this Section 4(g), any references to timing in Section 3(d) should be interpreted to mean the period from December 31, 2003 to the date of this Agreement.

(1)	There are no outstanding Orders of any Governmental Body against or involving the American Entities or the Properties.

(2)

There are no actions, suits, claims or counterclaims or legal, administrative or arbitral proceedings or investigations (collectively, "Claims") (whether or not the defense thereof or liabilities in respect thereof are covered by insurance), pending or threatened against or involving the American Entities or any of the Properties.

(ii)

those exceptions that do not materially and adversely effect Omega’s use of the Properties;

(iii)

the Essex Lease, and all real estate taxes, assessments, water charges, requirements of municipal or other governmental authorities, or other covenants, agreements, matters or things which are the obligation of Essex to pay, comply with, conform to or discharge under the provisions of the Essex Lease, it being understood that no lien, encumbrance, violation, charge or condition shall be deemed to be a failure of this condition if the same is due to any act or omission of Essex, or if Essex is obligated to assume, discharge, dispose of, or rectify the same under any of the provisions of the Lease ("Essex Liabilities");

(iv)

standard exceptions to title set forth in the standard policy of title insurance in use in Ohio at the time of Closing, but only to the extent such exceptions relate to the acts or omissions of Essex; and

(ix)

any liens or other matters created by or arising out of the wrongful acts or negligence of Omega or Essex under the Essex lease.

(1)	By mutual consent of the parties;

(2)	By Omega if the conditions to Closing set forth in Section 7 have not been satisfied or waived by the Closing Date;

(3)	By AHCC if the conditions to Closing set forth in Section 6 have not been satisfied or waived by the Closing Date; and

(4)	By a non-defaulting party, in the event of a material Breach by the other party.

(1)	any Breach of any representation or warranty made by the Optionors or the American Entities;

(2)	any Breach of any covenant of the Optionors;

(3)

any Liability arising out of the ownership or operation of the American Entities, the Transfer Entities and the Properties prior to the Closing Date other than any Omega Mortgage Loans, liens for taxes and assessments not yet due and payable, and, in the case of a sale of an Interest, any Liability reflected on the Effective Date Balance Sheet for the American Entity the Interest in which was sold;

(4)

any brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding made, or alleged to have been made, by any Person with the Optionors or the American Entities (or any Person acting on their behalf) in connection with any of the transactions contemplated by this Agreement;

(5)	any services provided by the American Entities, in whole or in part, prior to the Closing Date;

(6)	any noncompliance with any bulk sales or similar laws or fraudulent transfer law in respect of the transactions contemplated by this Agreement or any transfer tax due as a result of the transactions contemplated by this Agreement; or

(7)	any Optionor Assumed Liabilities and any Optionor Retained Liabilities.

(1)	any Breach of any representation or warranty made by Omega;

(2)	any Breach of any covenant of Omega;

(3)	any claim by any Person for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by such Person with Omega (or any Person acting on Omega’s behalf) in connection with any of the transactions contemplated by this Agreement;

(4)	any Liabilities arising out of the ownership and operation of the Properties from and after the Closing Date, including a breach of the Essex Lease, other than any Retained Liabilities or Liabilities for which the Omega Indemnified Persons may be indemnified pursuant to Section 9(b); or

(5)	any Omega Mortgage Loan or other liability assumed by an Optionee and reflected on the Effective Date Balance Sheet.

(1)

The Optionors shall have no liability (for indemnification or otherwise) with respect to claims under Section 9(b) until the total of all Damages with respect to such matters exceeds $250,000 and then only for the amount by which such Damages exceed $250,000. However, this Section 9(d)(1) will not apply to a claim for Breach of the representations and warranties made in Section 4(a) as to the authorization, issuance and ownership of the Interests, claims under Section 9(b)(2), (3), (4), (6) and (7), or to any Breach of any Optionor representation and warranty of which the Optionors had Knowledge at any time prior to the date on which such representation and warranty is made and the Optionors will be jointly and severally liable for all Damages with respect to such Breaches.

(2)

Omega will have no liability (for indemnification or otherwise) with respect to claims under Section 9(c) until the total of all Damages with respect to such matters exceeds $250,000 and then only for the amount by which such Damages exceed $250,000. However, this Section 9(d)(2) will not apply to claims under Section 9(c)(2), (3), (4) and (5) or to any Breach of any Omega representation and warranty of which Omega had Knowledge at any time prior to the date on which such representation and warranty is made, and Omega will be liable for all Damages with respect to such Breaches.

(3)

After the Closing, the Optionors’ on the one hand, and the Optionees’ on the other hand, maximum liability for indemnification hereunder is limited to Twelve Million Five Hundred Thousand and 00/100 Dollars ($12,500,000.00), except that there will be no limit upon the Optionor’s liability for a Breach of the representations and warranties made in Section 4(a) as to the authorization, issuance and ownership of the Interests.

(1)	After the Closing, a party’s sole monetary remedy for a Breach, including a breach of the Purchase Agreements or any other instrument delivered hereunder, will be the indemnification provisions of this Section 9, except in the event of a fraudulent act or omission.

(2)

If the Closing occurs, Optionors will have liability (for indemnification) with respect to any Breach of (i) such matters specifically outlined in Section 9(b)(3) through (7) only if on or before the fifth anniversary of the Closing Date, Omega notifies Optionors of a claim for Breach thereof specifying the factual basis of the claim in reasonable detail to the extent then known by Omega or (ii) a covenant to be performed or complied with prior to the Closing Date or a representation or warranty, only if on or before the first anniversary of the Closing Date, Omega notifies Optionors of a claim for Breach thereof specifying the factual basis of the claim in reasonable detail to the extent then known by Omega, except that if the claim relates to a Breach of the representations and warranties made in Section 4(a) as to the authorization, issuance and ownership of the Interests, the claim may be made at any time.

(3)

If the Closing occurs, Omega will have liability for indemnification with respect to any Breach of (i) a covenant to be performed or complied with prior to the Closing Date or such other matters specifically outlined in Section 9(c)(2) through (5), only if on or before the fifth anniversary of the Closing Date, Optionors notify Omega of a claim for Breach thereof specifying the factual basis of the claim in reasonable detail to the extent then known by Optionors or (ii) a representation or warranty, only if on or before the first anniversary of the Closing Date, Optionors notify Omega of a claim for Breach thereof specifying the factual basis of the claim in reasonable detail to the extent then known by Optionors.

(1)

Promptly after receipt by a Person entitled to indemnity under Section 9(b) or 9(c) (an "Indemnified Person") of notice of the assertion of a third-party claim against it, such Indemnified Person shall give notice to the Persons obligated to indemnify under such Section (an "Indemnifying Person") of the assertion of such third-party claim, provided that the failure to notify an Indemnifying Person will not relieve the Indemnifying Person of any liability that it may have to any Indemnified Person, except to the extent that the Indemnifying Person demonstrates that the defense of such third-party claim is prejudiced by the Indemnified Person’s failure to give such notice.

(2)

If an Indemnified Person gives notice to the Indemnifying Person pursuant to Section 9(f)(1) of the assertion of a third-party claim, the Indemnifying Person shall be entitled to participate in the defense of such third-party claim and, to the extent that it wishes (unless (A) the Indemnifying Person is also a Person against whom the third-party claim is made and the Indemnified Person’s counsel opines in writing to the Indemnifying Person that joint representation would be inappropriate because of a conflict of interest or (B) the Indemnifying Person fails to provide reasonable assurance to the Indemnified Person of its financial capacity to defend such third-party claim (the Optionors will be deemed to provide reasonable assurance as to their financial capacity if they provide Omega with a financial statement prepared by AHCC’s regular independent pubic accounting firm demonstrating compliance with the $5 million Net Worth covenant contained in Section 3(a)), to assume the defense of such third-party claim with counsel reasonably satisfactory to the Indemnified Person. (Omega and the Optionees acknowledge that Buckingham, Doolittle & Burroughs, LLP is satisfactory to it as counsel for the defense of a claim hereunder and AHCC and the Optionors acknowledge that Dykema Gossett PLLC is acceptable to them as counsel to defend a third-party claim described herein.) After notice from the Indemnifying Person to the Indemnified Person of its election to assume the defense of such third-party claim, the Indemnifying Person shall not, so long as it diligently conducts such defense, be liable to the Indemnified Person under this Section 9 for any fees of other counsel or any other expenses with respect to the defense of such third-party claim, in each case subsequently incurred by the Indemnified Person in connection with the defense of such third-party claim. If the Indemnifying Person assumes the defense of a third-party claim, (A) such assumption will conclusively establish for purposes of this Agreement that the claims made in that third-party claim are within the scope of and subject to indemnification, and (B) if the settlement involves more than the payment of money by the Indemnifying Person or Persons and would adversely effect the Indemnified Person, no compromise or settlement of such a third-party claim may be effected by the Indemnifying Person without the Indemnified Person’s written consent, which will not be unreasonably withheld.

(3)

Notwithstanding the foregoing, if an Indemnified Person determines in good faith that there is a reasonable probability that a third-party claim may materially adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Person may, by notice to the Indemnifying Person, assume the exclusive right to defend, compromise or settle such third-party claim, but the Indemnifying Person will not be bound by any determination of any third-party claim so defended for the purposes of this Agreement or any compromise or settlement effected without its consent (which may not be unreasonably withheld).

(4)

Notwithstanding any other provision of this Agreement (including Section 10(l)), Optionors hereby consent to the nonexclusive jurisdiction of any court in which any action, arbitration, audit, hearing, investigation, litigation or suit (a "Proceeding") in respect of a third-party claim is brought against any Omega Indemnified Person for purposes of any claim that an Omega Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein and agree that process may be served on Optionors with respect to such a claim anywhere.

(5)	With respect to any third-party claim subject to indemnification under this Section 9:

(i)	both the Indemnified Person and the Indemnifying Person, as the case may be, shall keep the other Person fully informed of the status of such third-party claim and any related Proceedings at all stages thereof where such Person is not represented by its own counsel, and

(ii)	the parties agree (each at its own expense) to render to each other such assistance as they may reasonably require of each other and to cooperate in good faith with each other in order to ensure the proper and adequate defense of any third-party claim.

(1)	on the date delivered to that party, at the address for that party set forth above, regardless of the means of delivery; or

(2)	on the date sent by facsimile transmission (with electronic confirmation) to that party at the facsimile number for that party set forth above.

American Entities			Canton Health Care Land Partnership dba Canton Health Care Center			Hutton I Land Partnership dba Hutton Nursing Center I			Hutton II Land Partnership dba Hutton Nursing Center II			Hutton III Land Partnership dba Hutton Nursing Center III			Meridian Arms Land Partnership dba Meridian Arms Living Center			St. Mary’s Land Partnership dba St. Mary’s Living Center			Total
Excess Omega Mortgage Loan Indebtedness		$	1,000,000.00		$	800,000.00		$	1,200,000.00		$	300,000.00		$	600,000.00		$	1,100,000.00		$	5,000,000.00